Frontline Ltd. signed a term sheet today with the Golden Ocean Group Limited (“Golden Ocean”), under which the parties have agreed to propose a joint plan for a financial restructuring of Golden Ocean (the “Golden Ocean Plan”). Golden Ocean holds interest in 14 VLCCs, 3 VLCC newbuilding contracts and 10 bulk carriers and filed for a Chapter 11 restructuring in the Bankruptcy Court for the District of Delaware on January 14, 2000. Upon the effective date of the Golden Ocean Plan, Golden Ocean shall become a wholly owned subsidiary of Frontline. The Official Committee of Unsecured Creditors of Golden Ocean fully supports and will be a co-proponent of the Joint Plan.

The Joint Plan includes a payment to all unsecured creditors in Golden Ocean including the bondholders. Frontline has committed to pay up to USD 33 million in cash, or to issue up to 4.1 million shares and 1.9 million warrants in Frontline valued to USD 48 million to take over all unsecured debt and all upstream guarantees. These numbers do not include a takeout of the USD 78 million Golden Ocean bonds currently controlled by Frontline. The payment gives the bondholders a payment of between 15 % and 22 % of their claim dependent on which alternative they take. Other unsecured claims will receive approximately 5 %.

The issue price for the Frontline shares is set to USD 10.00 while the strike price for the warrants is set to USD 12.21. If the Frontline share price in the fifteen day period prior to closing is lower than USD 10.00 or higher than USD 12.21 certain price adjustments will be made. The old share capital in Golden Ocean will according to the plan be cancelled while new share capital will be injected by Frontline. In addition, the Joint Plan will provide for the release of upstream guarantees in favour of the bondholders.

Chairman of Frontline Ltd., John Fredriksen, says in a comment to the deal: ” We are pleased about the plan to consolidate Golden Ocean into Frontline. The Golden Ocean fleet, which includes interest in 14 VLCCs, all built after 1995 and 3 VLCC newbuilding contracts, fits nicely into Frontline’s existing fleet of 41 modern VLCCs and Suezmaxes. The combined strength in the chartering market will give the new Frontline group a unique opportunity to offer an even more flexible service to our clients. It is Frontline’s idea to absorb the whole of Golden Ocean under the existing Frontline administration. We anticipate that a co-ordination with the Frontline fleet will reduce the Golden Ocean cost structure with approximately USD 10 million per year through a reduction in overhead and ship operating cost. Golden Ocean’s existing charter portfolio, the planned reduction in cost plus the existing mortgage financing should secure the future financial stability of Golden Ocean. The combination of a limited equity investment, and an asset exposure in excess of USD 1 billion makes this into a very interesting investment opportunity in today’s market.”