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Commission File No. 0-29106
FORM 6-K
SECURITIES AND EXCHANGE COMMISSION
Washington, D. C. 20549
Report of Foreign Private Issuer
Pursuant to Rule 13a-16 or 15d-16 of
the Securities Exchange Act of 1934
For the month of October, 1998
KNIGHTSBRIDGE TANKERS LIMITED
(Translation of registrant's name into English)
Cedar House
41 Cedar Avenue
Hamilton HM 12
Bermuda
(Address of principal executive offices)
Indicate by check mark whether the registrant files or will
file annual reports under cover Form 20-F or Form 40-F.
Form 20-F____X____ Form 40-F____X____
Indicate by check mark whether the registrant by furnishing
the information contained in this form is also thereby furnishing
the information to the commission pursuant to Rule 12g3-2(b)
under the Securities Exchange Act of 1934.
Yes___________ No_____X_____
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Stockholm, October 22, 1998
To the Shareholders of Knightsbridge Tankers Limited:
Enclosed is our third report for year 1998. The report
contains selected unaudited financial information accompanied by
a Management's Discussion and Analysis of Financial Condition and
Results of Operations for the period ended September 30, 1998.
On February 27, 1997, the Company's ship owning
subsidiaries purchased five very large crude carriers ("VLCC's")
from their previous owners and delivered them to Shell
International Petroleum Company Limited ("Shell International"),
as charterer, under separate "hell and high water" bareboat
charters. Under those charters, the Company's ship owning
subsidiaries receive the greater of a Base Rate of hire in the
amount of $ 22,069 per day per VLCC or a spot market related
rate. After inclusion of a component for operating expenses of $
10,500 per day, the spot market related rate must exceed $ 32,569
per day for the Company's subsidiaries to receive any additional
charter hire over the Base Rate.
Based upon the determination by the London Tanker
Brokers Panel the spot market related rate, after inclusion of
the component for operating expenses, totaled $ 35,585 per day
for the period July 1 through September 30, 1998. (The
corresponding spot market related rate for the period July 1
through September 30, 1997, was determined to be $39,374).
Accordingly, on October 15, 1998, Shell International
paid to the Companys vessel owning subsidiaries charter hire at
the base rate in the aggregate amount of $ 10,151,740 and
additional hire in the aggregate amount of $ 1,387,360 for the
period July 1 through September 30, 1998.
On October 15, 1998, the Board of Directors of the
Company declared a distribution to share-holders of record as of
October 26, 1998, payable on or about November 10, 1998, in the
amount of $ 0.53 per share for the period July 1 through
September 30, 1998. (For the period July 1 through September 30,
1997, the distribution was $ 0.64 per share.)
The Company has agreed to provide information to
shareholders that are United States income tax payers by February
15, 1999, so that they may make the appropriate tax reporting and
elections with the United States tax authorities with respect to
the Company's status as a "Passive Foreign Investment Company".
Under present United States tax rules, the amount of income
reported by a shareholder is based on the Company's income on an
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annual basis. Therefore, the Company will provide information
enabling shareholders to determine the tax consequences of their
investment in the Company, including the treatment of
distributions received from the Company, for the entire year
ending December 31, 1998.
We are pleased to answer any inquiries that shareholders
may have. Our investor relations contact is: Karl Molander, the
Company's Chief Financial Officer, Tel: Int + 46-8-613 30 30,
fax: Int + 46-8-613 99 09. The Nasdaq National Market symbol for
the Company's Common Shares is "VLCCF".
Very truly yours,
Ola Lorentzon
Vice Chairman and
Chief Executive Officer
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Management's Discussion and Analysis of
Financial Condition and Results of Operations
Knightsbridge Tankers Limited (the "Company") was
incorporated in Bermuda on September 18, 1996. In February, 1997,
the Company offered and sold to the public 16,100,000 common
shares at an initial offering price of $ 20 per share.
Simultaneously, the Company sold 1,000,000 common shares at a
price of $ 20 per share to ICB International Limited, an indirect
wholly-owned subsidiary of ICB Shipping Aktiebolag (publ)
("ICB"), a Swedish publicly traded ship owning and operating
company. The Company used the proceeds of these offerings,
together with advances under a $ 145.6 million credit facility
from an international syndicate of lenders, primarily to fund the
purchase by the Company's subsidiaries of five recently
constructed very large crude carrier oil tankers ("VLCC's"). Upon
their purchase from their previous owners, the VLCC's were
delivered on February 27, 1997, to Shell International Petroleum
Company Limited ("Shell International"), a company of the Royal
Dutch/Shell Group of Companies, under separate "Hell and high
water" bareboat charters. The term of these charters is a minimum
of seven years, with an option for Shell International to extend
the period for each VLCC for an additional seven-year term, to a
maximum of 14 years per VLCC. Under the charters, Shell pays the
greater of a Base Rate of hire of $ 22,069 per day or a spot
market related rate, determined quarterly by the London Tankers
Brokers Panel. After taking into account a component for
operating costs of $ 10,500 per day, Shell International pays the
higher rate if the award exceeds $ 32,569 per day. In addition,
for the first three years of the charters, Shell International
pays "Supplemental Hire" as described below.
Results of Operations - 9 months 1998
Revenues
The Company's revenues consist of charter hire of $ 34.9
million for the period commencing January 1, 1998 and ending
September 30, 1998. The charter hire revenue for the period
commencing February 27, 1997, when the vessels were delivered,
and ending September 30, 1997, amounted to $ 26.9 million.
Operating Expenses
The Company's operating expenses consist of (i) fees due
to the Company's manager, ICB Shipping (Bermuda) Ltd, an indirect
wholly-owned subsidiary of ICB (the "Manager"), (ii)
depreciation of the vessels and (iii) administration expenses
consisting of payments of insurance premiums for directors and
officers liability insurance. There can be no assurance, however,
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that the Company will not have other expenses or contingent
liabilities for which reserves will be required.
Interest income and expense
Interest income of $ 124,456 was earned during the
period. In addition the Company received interest income of $
585,262 on the principal balance of the receivable note from
Shell International.
The Company's borrowings under its credit facility have
been effectively converted to a fixed rate pursuant to a swap
arrangement to which the Company is a party. Interest on the
credit facility has effectively been fixed at 7.05 %, which
resulted in interest expenses of $ 7,306,533 for the period.
Liquidity and Capital Resources
Total shareholders equity of the Company at September
30, 1998, was $ 298.0 million compared to $ 315.2 million at
December 31, 1997. The decrease was due to net income for the
period January 1 through September 30, 1998, in the amount of $
14,149,208 less distributions to shareholders for the fourth
quarter of 1997 and for the first half 1998 in the aggregate
amount of $ 31,293,000. On March 27, 1998, the Company's
shareholders voted to reallocate from share premium to
contributed capital surplus account the amount of $ 315.0
million. This reallocation according to which additional paid in
capital has been reduced to zero and contributed capital surplus
increased to $ 305.2 million has been reflected in the Company's
balance sheet since March 31, 1998. The reallocation has no
effect on the Company's liquidity. The Company believes that its
present liquidity is adequate to its needs.
The Company's long-term debt as of September 30, 1998,
consists of the principal amounts borrowed under its credit
facility in the aggregate amount of $ 135.5 million. Of this
amount, $ 10.1 million represents the "Amortizing Loan" which is
payable in eight equal quarterly installments ending on January
15, 2000. Supplemental Hire payable by Shell International is
equal to amounts payable by the Company on account of the
Amortizing Loan. The balance of the credit facility matures seven
years and six months from February 27, 1997. Interest on this
balance is payable quarterly in arrears.
Currency Exchange Rates
The international shipping industry's functional
currency is the United States Dollar and virtually all of the
Company's operating revenues and expenses are expected to be
denominated in United States Dollar. Accordingly, the company's
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operating results, following expiration or termination of the
charters with Shell International, are not expected to be
significantly affected by movements in currency exchange rates.
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CONSOLIDATED BALANCE SHEETS (UNAUDITED)
(in U.S. Dollars)
ASSETS
Current assets Sep 30, 1998 Dec 31, 1997
Cash 249,318 217,374
Current installments of note
receivable 6,726,152 6,726,151
Charter hire receivable 11,679,578 15,449,599
Prepaid expenses 49,000 14,000
Total current assets 18,704,048 22,407,124
Notes receivable 3,363,076 8,407,690
Vessels under capital lease 411,770,707 424,965,352
Capitalized financing fees
and expenses 2,008,399 2,287,056
TOTAL ASSETS 435,846,230 458,067,222
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LIABILITIES AND SHAREHOLDERS EQUITY
Current liabilities
Accrued expenses and other
current liabilities 2,345,149 2,377,736
Current instalments of
credit facility 6,726,152 6,726,151
Total current liabilities 9,071,301 9,103,887
Credit facility 128,760,475 133,805,088
Shareholders' equity
Common shares, par value
$0.01 per share:
Authorized and outstanding
17,100,000 171,000 171,000
Additional paid-in capital - 314,987,247
Contributed capital surplus
account 297,843,454 -
Total shareholders equity 298,014,454 315,158,247
TOTAL LIABILITIES AND
SHAREHOLDERS' EQUITY 435,846,230 458,067,222
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CONSOLIDATED INCOME STATEMENTS (UNAUDITED)
(in U.S. Dollars)
Jan 1, 1998 Sept 18, 1996
-Sep 30, 1998 -Sep 30, 1997
Charter hire revenue 34,887,645 26,899,301
Operating expenses:
Depreciation of vessels
under capital leases -13,194,645 -10,533,311
Management fee -562,500 -442,808
Administration expenses -68,320 -55,061
Operating income 21,062,180 15,868,121
Interest income 709,718 1,433,942
Interest expense and
other financial costs -7,622,690 -6,227,985
Net income 14,149,208 11,074,078
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CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)
(in U.S. Dollars)
Jan 1, 1998 Sep 18, 1996
Operating activities -Sep 30, 1998 -Sep 30, 1997
Net income 14,149,208 11,074,078
Depreciation 13,194,645 10,533,311
Amortization of capitalized
fees and expenses 278,658 220,864
Changes in operating assets
and liabilities:
Receivables 8,779,634 -20,278,823
Accrued expenses and other
current liabilities -32,587 9,251,389
Net cash provided by operating
activities 36,369,558 10,800,819
Investing activities
Notes receivable from Shell
International - -16,815,377
Purchase of vessels under
capital lease - -439,821,548
Net cash used in investing activities - -456,636,925
Financing activities
Loan proceeds - 142,975,049
Repayments of loan -5,044,614 -3,363,076
Net proceeds from share
offerings - 317,224,950
Redemption of original
share capital - -12,000
Distribution to shareholders -31,293,000 -10,602,000
Net cash provided by financing
activities -36,337,614 446,222,923
Net increase/decrease in cash
and cash equivalents 31,944 386,817
Cash and cash equivalents at
beginning of period 217,374 12,000
Cash and cash equivalents at
end of period 249,318 398,817
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CONSOLIDATED STATEMENT OF SHAREHOLDERS EQUITY (UNAUDITED)
(in U.S. Dollars)
<TABLE>
<CAPTION>
Contributed
Additional capital
Share paid-in surplus Retained
Capital capital account earning Total
<S> <C> <C> <C> <C> <C>
Original issue
Sept 18, 1996 12,000 - - - 12,000
Net proceeds from
share issuance 171,000 317,053,950 - - 317,224,950
Original share
redemption -12,000 - - - -12,000
Net income - - - 19,479,297 19,479,297
Distribution to
the shareholders - -2,066,703 - -19,479,297 -21,546,000
_________________________________________________________________________________________________
Balance at
Dec 31, 1997 171,000 314,987,247 - - 315,158,247
Reallocation
Share Premium - -314,987,247 314,987,247 - -
Net income - - - 14,149,208 14,149,208
Distribution to
the shareholders - - -17,143,793 -14,149,208 -31,293,001
_________________________________________________________________________________________________
Balance at
Sep 30, 1998 171,000 - 297,843,454 - 298,014,454
=================================================================================================
</TABLE>
Contributed capital surplus account
At the General Meeting March 27, 1998, a resolution was taken to
reallocate Share Premium Additional paid-in capital to
Contributed capital surplus account.
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SIGNATURES
Pursuant to the requirements of the Securities Exchange
Act of 1934, the registrant has duly caused this report to be
signed on its behalf by the undersigned, thereunto duly
authorized.
KNIGHTSBRIDGE TANKERS LIMITED
(registrant)
Dated: October 20, 1998 By: /s/ Ola Lorentzon
___________________________
Ola Lorentzon
Director, Deputy Chairman
and Treasurer
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01655002.AE9
