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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 20-F
Registration statement pursuant to Section 12(b) or (g) of
the Securities Exchange Act of 1934
OR
X Annual Report pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934
For the fiscal year ended December 31, 1999
OR
Transition Report pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934
Commission File number: 33-79220
33-56377
Calpetro Tankers (Bahamas II) Limited
(Exact name of Registrant as specified in its charter)
Nassau, Bahamas
(Jurisdiction of incorporation or organization)
Room 6/9 One International Place
Boston, Massachusetts
(Address or principal executive offices)
Securities registered or to be registered pursuant to Section
12(b) of the Act.
Title of each class Name of each exchange on which registered
None Not applicable
Securities for which there is a reporting obligation pursuant to
Section 15(d) of the Act.
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Serial First Preferred Mortgage Notes
maturing serially from 1996 to 2006.
8.52% First Preferred Mortgage Notes Due 2015.
Indicate by check mark whether the registrant (1) has filed
all reports required to be filed by Section 13 or 15(d) of the
Securities Exchange Act of 1934 during the preceding 12 months
(or for such shorter period that the registrant was required to
file such reports), and (2) has been subject to such filing
requirements for the past 90 days.
Yes X No
Indicate by check mark which financial statement item the
registrant has elected to follow.
Item 17 Item 18 X
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TABLE OF CONTENTS
PART I
Item 1. Description of Business ..........................1
The Company..................................1
Overview of Operations.......................1
The Management...............................2
The International Tanker Market .............2
Environmental and Other Regulations..........3
Risk of Loss and Liability; Insurance........4
Item 2. Description of Property...........................5
Item 3. Legal Proceedings.................................5
Item 4. Control of Registrant ............................5
The Company...................................5
Item 5. Nature of Trading Market .........................5
Item 6. Exchange Controls and Other Limitations Affecting
Security-Holders .................................5
Item 7. Taxation..........................................5
Item 8. Selected Financial Data...........................6
Item 9. Management's Discussion and Analysis of Financial
Condition and Results of Operations ..............6
Item 9 (A) Quantitative and Qualitative disclosure about
Market Risk.......................................8
Item 10 Directors and Officers of Registrant .............9
Item 11. Compensation of Directors and Officers 9
Item 12. Options to Purchase Securities from Registrant or
Subsidiaries .....................................9
Item 13. Interest of Management in Certain Transactions ...9
PART II
Item 14 Inapplicable
PART III
Item 15. Defaults Upon Senior Securities .................10
Item 16. Changes in Securities and Changes in Security for
Registered Securities and Use of Proceeds .......10
PART IV
Item 17 Inapplicable
Item 18. Financial Statements ............................10
Item 19. Financial Statements and Exhibits ...............10
Signatures .................................11
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PART I
ITEM 1. DESCRIPTION OF BUSINESS
THE COMPANY
CalPetro Tankers (Bahamas II) Limited ("Bahamas II" or the
"Company") was incorporated in the Bahamas on May 13, 1994
together with three other companies: CalPetro Tankers (Bahamas I)
Limited and CalPetro Tankers (Bahamas III), each of which is
incorporated in the Bahamas, and CalPetro Tankers (IOM) Limited
which is incorporated in the Isle of Man (together the
"Companies"). Each of the Companies was organized as a special
purpose company for the purpose of acquiring one of four oil
tankers (each a "Vessel", together the "Vessels") from Chevron
Transport Corporation. California Petroleum Transport
Corporation, a Delaware corporation, acting as agent on behalf of
the Companies, issued as full recourse obligations $167,500,000
Serial First Preferred Mortgage Notes and $117,900,000 8.52%
First Preferred Mortgage Notes due 2015 (together the "Notes").
The proceeds from the sale of the Notes were applied by way of
long-term loans, being Serial Loans in respect of the Serial
First Preferred Mortgage Notes and Term Loans in respect of the
First Preferred Mortgage Notes due 2015, to the Companies to fund
the acquisition of the Vessels from the Chevron Transport
Corporation. The Company was allocated $46,620,000 of the Serial
Loans and $35,052,000 of the Term Loans and acquired its Vessel,
the CONDOLEEZA RICE, as described below. The Company engages in
no business other than the ownership and chartering of its Vessel
and activities resulting from or incidental to such ownership and
chartering.
The Company is wholly-owned by California Tankers Investments
Limited, a company organized under the laws of the Bahamas, which
is in turn a wholly-owned subsidiary of CalPetro Holdings
Limited, an Isle of Man company.
On May 12, 1998, ownership of CalPetro Holdings Limited was
transferred to Independent Tankers Corporation, a Cayman Islands
company ("ITC"). On the same date, all of the issued and
outstanding shares of ITC were sold to Frontline Ltd.
("Frontline"), a publicly listed Bermuda company.
Pursuant to a share purchase agreement dated December 23, 1998,
as amended on March 4, 1999, Frontline has sold, effective as of
July 1, 1999, all of the issued and outstanding shares of ITC to
Hemen Holding Limited, a Cyprus company ("Hemen"). Hemen is the
principal shareholder of Frontline and is indirectly controlled
by Mr. John Fredriksen, the Chairman and Chief Executive Officer
of Frontline.
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OVERVIEW OF OPERATIONS
The Company owns one 150,000 deadweight tonne ("dwt") Suezmax oil
tanker, the CONDOLEEZA RICE, which was acquired from Chevron
Transport Corporation (the "Vessel"). Suezmax tankers are
medium-sized vessels ranging from approximately 120,000 to
200,000 dwt, and of maximum length, breadth and draft capable of
passing fully loaded through the Suez Canal. The Vessel has been
chartered back to Chevron Transport Corporation (the "Initial
Charterer" or "Chevron Transport") on bareboat charter (the
"Initial Charter"). The Initial Charter has a term expiring on
April 1, 2015, subject to the Initial Charterer's right to
terminate the Initial Charter on certain specified dates.
Chevron Transport is principally engaged in the marine
transportation of oil and refined petroleum products. Chevron
Transport's primary transportation routes are from the Middle
East, Indonesia, Mexico, West Africa and the North Sea to ports
in the United States, Europe, the United Kingdom and Asia.
Chevron Transport has advised the Company that it expects to use
the Vessel worldwide as permitted under the Initial Charter. The
obligations of the Initial Charterer under the Initial Charter
are guaranteed by Chevron Corporation ("Chevron"), a major
international oil company, pursuant to a guarantee (the "Chevron
Guarantee"). Chevron Transport is an indirect, wholly-owned
subsidiary of Chevron.
The Vessel is a double-hull oil carrier of approximately 150,000
deadweight tons and is presently registered under the Bahamian
flag. The Vessel was constructed under the supervision of the
Initial Charterer and designed to the Initial Charterer's
specifications to enhance safety and reduce operating and
maintenance costs, including such features as high performance
rudders, extra steel (minimal use of high tensile steels),
additional fire safety equipment, redundant power generation
equipment, extra coating and electrolytic corrosion monitoring
and protection systems, additional crew quarters to facilitate
added manning and a double-hull design patented by one of
Chevron's subsidiaries. The builder of CONDOLEEZA RICE was
Ishikawajima do Brasil Estaleiros S.A.
THE MANAGEMENT
The Company entered into a management agreement (the "Management
Agreement") with P.D. Gram & Co, a.s. (in such capacity, the
"Manager") to provide administrative, management and advisory
services to the Company and arrange for remarketing services, if
necessary, for the Vessel. On March 31, 1999, P.D.Gram & Co,
a.s. resigned as Manager and Barber Ship Management resigned as
Technical Advisor and on the same date each was replaced by
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Frontline Limited, pursuant to an assignment of the Management
Agreement.
The Initial Charterer may elect to terminate the Initial Charter
on specified termination dates commencing in 2003. If the
Initial Charter is terminated by the Initial Charterer, the
Manager, acting on behalf of the Company, will attempt to find an
acceptable replacement charter for the Vessel. If an acceptable
replacement charter is commercially unavailable, the Manager will
solicit bids for the sale or recharter of the Vessel. The
Manager's ability to obtain an acceptable replacement charter, to
sell the Vessel or recharter the Vessel will depend on market
rates for new and used vessels, both of which will depend on the
supply of and demand for tanker capacity for oil transportation,
and the advantages or disadvantages of the Vessel compared with
other vessels available at the time.
THE INTERNATIONAL TANKER MARKET
International seaborne oil and petroleum products transportation
services are mainly provided by two types of operator: major oil
company captive fleets (both private and state-owned) and
independent shipowner fleets. Both types of operators transport
oil under short-term contracts (including single-voyage "spot
charters") and long-term time charters with oil companies, oil
traders, large oil consumers, petroleum product producers and
government agencies. The oil companies own, or control through
long-term time charters, approximately one third of the current
world tanker capacity, while independent companies own or control
the balance of the fleet. The oil companies use their fleets not
only to transport their own oil, but also to transport oil for
third-party charterers in direct competition with independent
owners and operators in the tanker charter market.
The oil transportation industry has historically been subject to
regulation by national authorities and through international
conventions. Over recent years, however, an environmental
protection regime has evolved which could have a significant
impact on the operations of participants in the industry in the
form of increasingly more stringent inspection requirements,
closer monitoring of pollution-related events, and generally
higher costs and potential liabilities for the owners and
operators of tankers.
In order to benefit from economies of scale, tanker charterers
will typically charter the largest possible vessel to transport
oil or products, consistent with port and canal dimensional
restrictions and optimal cargo lot sizes. The oil tanker fleet
is generally divided into the following five major types of
vessels, based on vessel carrying capacity: (i) ULCC-size range
of approximately 320,000 to 450,000 dwt; (ii) VLCC-size range of
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approximately 200,000 to 320,000; (iii) Suezmax-size range of
approximately 120,000 to 200,000 dwt; (iv) Aframax-size range of
approximately 60,000 to 120,000 dwt; and (v) small tankers of
less than approximately 60,000 dwt. ULCCs and VLCCs typically
transport crude oil in long-haul trades, such as from the Arabian
Gulf to Rotterdam via the Cape of Good Hope. Suezmax tankers
also engage in long-haul crude oil trades as well as in medium-
haul crude oil trades, such as from West Africa to the East Coast
of the United States. Aframax-size vessels generally engage in
both medium-and short-haul trades of less than 1,500 miles and
carry crude oil or petroleum products. Smaller tankers mostly
transport petroleum products in short-haul to medium-haul trades.
The shipping industry is highly cyclical, experiencing volatility
in profitability, vessel values and charter rates. In
particular, freight and charterhire rates are strongly influenced
by the supply and demand for shipping capacity. The tanker
market in general has been depressed for a number of years,
largely as a result of an excess of tonnage supply over demand.
In 1999, the Suezmax sector of the tanker market continued to
fluctuate and in the third quarter of 1999 fell to the lowest
level since 1994. This was also the result of substantially lower
volumes of oil transported due to the adherence by OPEC to their
agreed oil production cuts introduced at the start of 1999, the
fact that a high proportion of these cuts involved long-haul
Middle East oil, increased competition from the VLCC sector and
the draw of oil inventories. At the start of 2000, the Suezmax
market has seen some improvement as scrapping of older tonnage
has increased due to high bunker cost and the difficulties
finding cargoes for old tonnage. Tanker scrapping activity is
expected to continue at high levels given the current tanker
market weakness, the relatively high orderbook, the tanker fleet
age demographic, an expensive fifth special survey and stricter
environmental regulations. Continued improvement in Suezmax
freight rates will be largely dependent on improvement in the
Asian economies, increased output from the OPEC countries and an
increase in the rate of scrapping older vessels.
There is no guarantee that Suezmax rates would be sufficient to
meet the debt service required if the bareboat charters entered
into with Chevron are not extended. However, Suezmax rates are
still sufficient to meet the debt service required if the
bareboat charters entered into with Chevron are not extended.
The average daily time charter equivalent rates earned by modern
Suezmaxes in 1999 was $16,000 on a single voyage basis.
ENVIRONMENTAL AND OTHER REGULATIONS
The oil transportation industry has historically been subject to
regulation by national authorities and through international
conventions. Over recent years however, an environmental
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protection regime has evolved which has had a significant impact
on the operations of participants in the industry in the form of
increasingly more stringent inspection requirements, closer
monitoring of pollution-related events, and generally higher
costs and potential liabilities for the owners and operators of
tankers.
The Vessel and the operation of the Vessel must comply with
extensive and changing environmental protection laws and
regulations. Compliance with these laws and regulations may
entail significant expenses, including expenses for ship
modifications and changes in operating procedures. These laws
and regulations could have a material adverse effect on the
business and the operations of the Company and any charterer of
the Vessel. In particular, the United States Oil Pollution Act
of 1990, as amended ("OPA 90"), provides for strict liability for
owners, operators and demise charterers of any vessel for certain
oil pollution accidents in the waters of the United States.
OPA 90 established an extensive regulatory and liability regime
for the protection and cleanup of the environment from oil
spills. OPA 90 affects all owners and operators whose vessels
trade to the United States or its territories or possessions or
whose vessels operate in United States waters, which include the
United States territorial sea and the two hundred nautical mile
exclusive economic zone of the United States.
Under OPA 90, vessel owners, operators and demise charterers are
"responsible parties" and are jointly, severally and strictly
liable (unless the spill results solely from the act or omission
of a third party (subject to certain statutory qualifications the
effects of which have not been determined by any judicial
interpretation), an act of God or an act of war) for all oil
spill containment and clean-up costs and other damages arising
from oil spills pertaining to their vessels. These other damages
are defined broadly to include (i) natural resources damage and
the costs of assessment thereof, (ii) real and personal property
damages, (iii) net loss of taxes, royalties, rents, fees and
other lost revenues, (iv) lost profits or impairment of earning
capacity due to property or natural resources damage, (v) net
cost of public services necessitated by a spill response, such as
protection from fire, safety or health hazards, and (vi) loss of
subsistence use of natural resources. OPA 90 limits the
liability of responsible parties to the greater of $1,200 per
gross tonne or $10 million per tanker (subject to possible
adjustment for inflation). These limits of strict liability
would not apply if the incident were proximately caused by
violation of applicable United States federal safety,
construction or operating regulations or by the responsible
party's gross negligence or willful misconduct, or if the
responsible party fails or refuses to report the incident or to
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cooperate and assist in connection with oil removal activities.
Additionally, under OPA 90, the liability of responsible parties,
United States or foreign, with regard to oil pollution damage in
the United States is not preempted by any international
convention.
Under OPA 90, with certain limited exceptions, all newly built or
converted tankers operating in United States waters must be built
with double hulls conforming to particular specifications.
Existing vessels which do not comply with the double hull
requirement must be phased out over a 20-year period (1995-2015)
based on size, age and place of off-loading, unless retrofitted
with double hulls.
Notwithstanding the phase-in period, OPA 90 currently permits
existing single hull tankers to operate until the year 2015 if
(i) their operations within United States waters are limited to
discharging at the Louisiana Offshore Oil Port ("LOOP") or off-
loading by means of lightering activities within authorized
lightering zones more than 60 miles off-shore and (ii) they are
otherwise in compliance with applicable laws and regulations.
OPA 90 expands the pre-existing financial responsibility
requirements for vessels operating in United States waters and
requires owners and operators of vessels to establish and
maintain with the US Coast Guard evidence of insurance or of
qualification as a self-insurer or other evidence of financial
responsibility sufficient to meet their potential strict
liability limit under OPA 90. The US Coast Guard has adopted
regulations which require evidence of financial responsibility
equal to the strict liability limit demonstrated by insurance,
surety bond, self-insurance or guaranty.
The US Coast Guard's regulations concerning certificates of
financial responsibility provide, in accordance with OPA 90, that
claimants may bring suit directly against an insurer or guarantor
that furnishes certificates of financial responsibility; and, in
the event that such insurer or guarantor is sued directly, it is
prohibited from asserting any defense that it may have had
against the responsible party and is limited to asserting those
defenses available to the responsible party and the defense that
the incident was caused by the willful misconduct of the
responsible party. The Initial Charterer is responsible for
furnishing and maintaining evidence of financial responsibility
with respect to the Company's Vessel.
Owners or operators of tankers operating in United States waters
must file vessel response plans with the US Coast Guard and their
tankers must operate in compliance with their US Coast Guard
approved plans. Such response plans must, among other things,
(i) identify and ensure, through contract or other approved
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means, the availability of necessary private response resources
to respond to a "worst case" discharge, (ii) describe crew
training and drills, and (iii) identify a qualified individual
with full authority to implement removal actions. The Initial
Charterer is responsible for providing such a plan to the US
Coast Guard. The Company believes that the Initial Charterer is
in compliance with that requirement.
OPA 90 specifically permits individual states to impose their own
liability regimes with regard to oil pollution incidents
occurring within their boundaries, and many states have enacted
legislation providing for unlimited liability for oil spills. In
some cases, states which have enacted such legislation have not
yet issued implementing regulations defining tanker owners'
responsibilities under these laws.
The International Maritime Organization, an agency of the United
Nations (the "IMO"), has adopted regulations designed to reduce
oil pollution in international waters. In complying with OPA 90,
the IMO regulations and other regulations that may be adopted,
the Company and any charterer of the Vessel may be forced to
incur additional costs in meeting new maintenance and inspection
requirements, in developing contingency arrangements for
potential spills and in obtaining insurance coverage.
RISK OF LOSS AND LIABILITY; INSURANCE
The operation of any ocean-going vessel carries an inherent risk
of catastrophic marine disasters, environmental mishaps, cargo
and property losses or damage and business interruptions caused
by adverse weather and ocean conditions, mechanical failures,
human error, political action in various countries, war,
terrorism, piracy, labour strikes and other circumstances or
events. Pursuant to the Initial Charter the Vessel may be
operated throughout the world in any lawful trade for which the
Vessel is suitable, including carrying oil and its products. In
the past, political conflicts in many regions, particularly in
the Arabian Gulf, have included attacks on tankers, mining of
waterways and other efforts to disrupt shipping in the area.
Vessels trading in such regions have also been subject to acts of
terrorism and piracy. In addition, the carriage of petroleum
products is subject to the risk of spillage and leakage. Any
such event may result in increased costs or the loss of revenues
or assets, including the Vessel.
Under the Initial Charter, the Initial Charterer is entitled to
self-insure against marine and war risks relating to the Vessel
and against protection and indemnity risk relating to the Vessel
during the term of the Initial Charter and, accordingly,
investors in the Notes cannot rely on the existence of third-
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party insurance. There can be no assurance that all risks will
be adequately insured against, that any particular loss will be
covered or that the Company will be able to procure adequate
insurance coverage at commercially reasonable rates in the
future. In particular, stricter environmental regulations may
result in increased costs for, or the lack of availability of,
insurance against environmental damage or pollution.
The Initial Charterer, pursuant to the Initial Charter,
indemnifies the Company for a failure to maintain any financial
responsibility requirements relating to oil or other pollution
damage. To the extent that the insurance is inadequate,
unavailable or not acquired (self-insured), the Initial Charterer
also indemnifies the Company to the extent losses, damages or
expenses are incurred by the Company relating to oil or other
pollution damage as a result of the operation of the Vessel by
the Initial Charterer.
Under OPA 90, vessel owners, operators and demise charterers are
"responsible parties" with strict liability on a joint and
several basis (subject to certain exceptions and qualifications)
for all oil spill containment and clean-up costs and other
damages arising from actual or threatened oil spills pertaining
to these vessels. Although OPA 90 does not by its terms impose
liability on lenders or the holders of mortgages on vessels,
there is no specific exclusion for such entities under OPA 90.
In addition, if the Collateral Trustee of any Holder exercises
remedies and becomes an "owner'" or "operator" or "demise
charterer" of the Vessel following a Mortgage Event of Default,
such person or entity may be subject to liability as responsible
parties under OPA 90. OPA 90 limits the liability of responsible
parties to the greater of $1,200 per gross ton or $10 million per
tanker (subject to possible adjustment for inflation); however,
that limit would not apply if the incident were proximately
caused by violation of applicable United States federal safety,
construction or operating regulations or by the responsible
party's gross negligence or willful misconduct, or if the
responsible party fails or refuses to report the incident or to
cooperate and assist in connection with oil removal activities.
ITEM 2. DESCRIPTION OF PROPERTY
Other than the Vessel described above, the Company does not have
any property.
ITEM 3. LEGAL PROCEEDINGS
The Company is not party to any legal proceedings, nor are there
any legal proceedings threatened against the Company, which are
material to its assets or businesses.
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ITEM 4. CONTROL OF REGISTRANT
CalPetro Tankers (Bahamas II) Limited is a wholly-owned
subsidiary of California Tankers International Limited, a company
organized under the laws of the Bahamas, which is a wholly-owned
subsidiary of CalPetro Holdings Limited, an Isle of Man company.
The Company is ultimately controlled by Hemen as described in
Item 1. "The Company". All the issued and outstanding shares of
capital stock of the Company are beneficially owned by CalPetro
Holdings Limited and have been pledged to the Chemical Trust
Company of California (the "Collateral Trustee") as part of the
collateral for the Notes. The parent company has full voting
control over the Company subject to the rights of the Collateral
Trustee.
ITEM 5. NATURE OF TRADING MARKET
There is no established trading market for the Serial First
Preferred Mortgage Notes and 8.52% First Preferred Mortgage Notes
due 2015.
ITEM 6. EXCHANGE CONTROLS AND OTHER LIMITATIONS AFFECTING
SECURITY-HOLDERS
The Company was registered under the International Business
Companies Act, 1989 of the Commonwealth of the Bahamas (the "IBC
Act") in May 1994. As a result of such registration the Company
is exempt from the provisions of the Exchange Control Regulations
Act of the Bahamas. Interests in the Registered Securities may
be freely transferred among non-residents of The Bahamas under
Bahamian Law.
There are no restrictions upon the payment of foreign (non-
Bahamian) currency dividends, interest or other payments in
respect of the Registered Securities.
The Company is not permitted to deal in the currency of the
Bahamas except in an external Bahamian dollar account which can
be funded only with foreign currency funds or funds the Company
has permission to convert.
None of the Company's Articles of Association, Memorandum of
Association or any other document, nor any Bahamian law nor, to
the knowledge of the Company, any foreign law, imposes
limitations on the right of non-residents or foreign owners to
hold the Company's Common Stock.
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ITEM 7. TAXATION
BAHAMAS
No Bahamian income or withholding taxes are imposed on the
payment by the Company of any principal or interest to any holder
of Notes who is either an individual citizen or resident of the
United States or an entity formed under the laws of the United
States. There is no income tax treaty currently in effect
between the United States and Bahamas.
ITEM 8. SELECTED FINANCIAL DATA
The selected income statement data of the Company with respect to
the fiscal years ended December 31, 1999, 1998 and 1997, and the
selected balance sheet data with respect to the fiscal years
ended December 31, 1999 and 1998, have been derived from the
Company's audited financial statements included herein and should
be read in conjunction with such statements and the notes
thereto. The selected balance sheet data with respect to the year
ended December 31, 1997 and the selected income statement and
balance sheet data with respect to the year ended December 31,
1996 and the period ended December 31, 1995 has been derived from
audited financial statements of the Company not included herein.
The following table should also be read in conjunction with Item
9 "Management's Discussion and Analysis" and the Company's
audited financial statements and notes thereto included herein.
The Company's accounts are maintained in US dollars.
Period
Year ended April 1,
December 31, to December 31,
_________________________________
1999 1998 1997 1996 1995
__________________________________
(US Dollars in thousands)
INCOME STATEMENT DATA
Total income 5,348 5,767 6,178 6,611 5,128
Net income 193 221 281 349 318
BALANCE SHEET DATA
Total assets 63,727 68,845 73,901 78,918 83,590
Long-term loans,
including current 61,102 66,312 71,522 76,732 81,672
portion
Shareholders' equity 1,362 1,169 948 667 318
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ITEM 9. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
BUSINESS STRATEGY
The Company's strategy has been to acquire its Vessel and charter
it to the Initial Charterer under a bareboat charter which is
expected to provide (a) charterhire payments which the Issuer and
the Company expect will be sufficient to pay, so long as the
Initial Charter is in effect (i) the Company's obligations under
the Term Loans and Serial Loans for acquiring the Vessel (ii)
management fees and the technical advisor's fees (iii) estimated
recurring fees and taxes, and (iv) any other costs and expenses
incidental to the ownership and chartering of the Vessel that are
to be paid by the Company, (b) termination payments sufficient to
make sinking fund and interest payments on the Term Loans and
Serial Loans for acquiring the Vessel to the extent allocable to
the Vessel for which the related Initial Charter has been
terminated, for at least two years following any such
termination, during which time the Vessel may be sold or
rechartered and (c) that the Vessel will be maintained in
accordance with the good commercial maintenance practices
required by the Initial Charter; and to arrange for vessel
management and remarketing services to be available in case the
Initial Charter is terminated by the Initial Charterer or the
Vessel is for any other reason returned to the possession and use
of the Company.
The Vessel is under charter to the Initial Charterer for a period
ending April 1, 2015. The Initial Charter contains a right of
termination that the Initial Charterer may exercise on any of the
four optional termination dates, beginning on April 1, 2003. The
Initial Charter is a bareboat charter, pursuant to which the
Company is not liable for any expense in repairing or maintaining
the Vessel and the charterhire rate continues to be payable
notwithstanding, among other things, any loss or damage to the
Vessel (not amounting to a total loss).
RESULTS OF OPERATIONS
YEAR ENDED DECEMBER 31, 1999 COMPARED WITH THE YEAR ENDED
DECEMBER 31, 1998
TOTAL REVENUES
Finance lease interest receivable for the year ended December 31,
1999 amounted to $5,171,000, compared with $5,592,000 for the
year ended December 31, 1998.
EXPENSES
Interest payable on the Term Loans and the Serial Loans amounted
to $5,030,000 for the year ended December 31, 1999. The
amortization of discount on loans for the period amounted to
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$75,000. The company amortises the discount over the life of the
loans. The corresponding figures for the period to December 31,
1998 were $5,408,000 and $75,000, respectively.
YEAR ENDED DECEMBER 31, 1998 COMPARED WITH THE YEAR ENDED
DECEMBER 31, 1997
TOTAL REVENUES
Finance lease interest receivable for the year ended December 31,
1998 amounted to $5,592,000, compared with $6,008,000 for the
year ended December 31, 1997.
EXPENSES
Interest payable on the Term Loans and the Serial Loans amounted
to $5,408,000 for the year ended December 31, 1998. The
amortization of discount on loans for the period amounted to
$75,000. The company amortises the discount over the life of the
loans. The corresponding figures for the period to December 31,
1997 were $5,778,000 and $75,000, respectively.
LIQUIDITY AND CAPITAL RESOURCES
As set forth above, revenues from the Initial Charter are
sufficient to pay the Company's obligations under the Term Loans
and the Serial Loans. The Initial Charterer may elect to
terminate the Initial Charter on specified termination dates
commencing in 2003. If the Initial Charter is terminated by the
Initial Charterer, the Manager, acting on behalf of the Company,
will attempt to find an acceptable replacement charter for the
Vessel. If an acceptable replacement charter is commercially
unavailable, the Manager will solicit bids for the sale or
recharter of the Vessel. The Manager's ability to obtain an
acceptable replacement charter, to sell the Vessel or recharter
the Vessel will depend on market rates for new and used vessels,
both of which will depend on the supply of and demand for tanker
capacity for oil transportation, and the advantages or
disadvantages of the Vessel compared with other vessels available
at the time.
YEAR 2000
The Vessels are provided with computers and have computerized
control systems. Further the Vessels have equipment such as for
example navigational aids, communications systems, machinery
equipment, cargo measuring equipment and alarm systems that rely
on computers or embedded computer chips for proper function.
The initial terms of the Charters extend beyond the year
2000. The initial Charterer has assured the Company that it is
very aware of the year 2000 problem. The Initial Charterer has
confirmed that in the dealings with the Vessels it has taken, and
12
<PAGE>
will continue to take, all reasonable steps to allow business
continuity into the year 2000 and beyond.
The Owners have not incurred and do not expect to incur any
year 2000 related expenses. At this stage no year 2000 problems
have been reported and should any problems arise the Initial
Charterer's obligation to pay charter hire is absolute. This
absolute obligation includes circumstances where a Vessel should
be unfit for use due to computer related problems, should such
occur in spite of the Initial Charterer's diligent approach to
the preparations for the year 2000. In addition, the Initial
Charterer is obliged to indemnify the relevant Owner and the
Company in respect of events arising through the term of the
Charters with respect to, among other things, all liabilities
claims and proceedings arising in any manner out of the operation
of the Vessels by the Initial Charterer with no exclusion of
events relating to computers or problems that could affect
computers at certain dates. The Initial Charterer's obligations
as described above are guaranteed by the Chevron Guarantees.
Additionally the Owners rely on the services of
internationally recognised banks and other institutions to make
payments and provide management services. There have been no
year 2000 effects on these services to date, and any future
problems will be covered by normal commercial arrangements. The
owners do not expect to incur any costs in this area.
13
<PAGE>
ITEM 9 (A) QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT
MARKET RISK
(a) QUANTITATIVE INFORMATION ABOUT MARKET RISK
Quantitative information about market risk instruments
at December 31, 1999 is as follows:
i) Serial Loans:
The principal balances of the Serial Loans bear interest
at rates ranging from 7.35% to 7.57% and mature over a
five year period beginning April 1, 2000. The loans are
reported net of the related discounts which are
amortized over the term of the loans.
The outstanding serial loans have the following
characteristics:
Principal due Interest rate Maturity date
$ 000
5,210 7.35% April 1, 2000
5,210 7.44% April 1, 2001
5,210 7.49% April 1, 2002
5,210 7.55% April 1, 2003
5,210 7.57% April 1, 2004
_____
26,050
_____
ii) Term Loans:
The Term Loans bear interest at a rate of 8.52% per
annum. Interest is payable semi-annually. Principal is
repayable on the Term Loans in accordance with a twelve
year sinking fund schedule.
The table below provides the revised scheduled sinking
fund redemption amounts and final principal payment of
the Allocated Principal Amount of the Term Loans
following termination of the related Initial Charter on
each of the optional termination dates.
14
<PAGE>
Payment Charter Not Charter Charter Charter Charter
Date Terminated Terminated Terminated Terminated Terminated
2004 2006 2008 2010
$000 $000 $000 $000 $000
April 1, 2005 3,187 1,640 3,187 3,187 3,187
April 1, 2006 3,187 1,780 3,187 3,187 3,187
April 1, 2007 3,187 1,930 1,700 3,187 3,187
April 1, 2008 3,187 2,090 1,840 3,187 3,187
April 1, 2009 3,187 2,270 2,000 1,690 3,187
April 1, 2010 3,187 2,470 2,170 1,830 3,187
April 1, 2011 3,187 2,680 2,360 1,990 1,510
April 1, 2012 3,187 2,910 2,560 2,160 1,630
April 1, 2013 3,187 3,150 2,770 2,340 1,770
April 1, 2014 3,187 3,420 3,010 2,540 1,930
April 1, 2015 3,182 10,712 10,268 9,754 9,090
______ ______ ______ ______ ______
35,052 35,052 35,052 35,052 35,052
______ ______ ______ ______ ______
(b) QUALITATIVE INFORMATION ABOUT MARKET RISK
The Company was organised solely for the purpose of the
acquisition of one Vessel and subsequently entered into
a long-term agreement between the Company and Chevron
Transport Corporation.
ITEM 10. DIRECTORS AND OFFICERS OF REGISTRANT
DIRECTORS AND EXECUTIVE OFFICERS OF CALPETRO TANKERS (BAHAMAS II)
LIMITED
Age Position
Tor Olav Troim 37 Director and President
Alexandra Kate Blankenship 35 Director and Secretary
Tor Olav Troim has been a Director of Calpetro Tankers (Bahamas
II) Limited since 1998. Mr. Troim serves as a Director and Vice
President of Frontline. Mr. Troim also serves as a director of
Frontline AB, a wholly-owned subsidiary of Frontline, and is the
Chief Executive Officer of Frontline Management AS, which company
supports Frontline in the implementation of decisions made by the
Board of Directors.
Kate Blankenship has been a Director of Calpetro Tankers (Bahamas
II) Limited since 1998. Mrs. Blankenship joined Frontline in
1994 and serves as Chief Accounting Officer and Secretary. Prior
to joining Frontline she was a Manager with KPMG Peat Marwick in
15
<PAGE>
Bermuda. Mrs. Blankenship is a member of the Institute of
Chartered Accountants in England and Wales.
ITEM 11. COMPENSATION OF DIRECTORS AND OFFICERS
During the year ended December 31, 1999, the Company paid to its
directors and officers, total compensation of $3,000.00.
ITEM 12. OPTIONS TO PURCHASE SECURITIES FROM REGISTRANT OR
SUBSIDIARIES
None.
ITEM 13. INTEREST OF MANAGEMENT IN CERTAIN TRANSACTIONS
None.
16
<PAGE>
PART II
ITEM 14. DESCRIPTION OF SECURITIES TO BE REGISTERED
Inapplicable
PART III
ITEM 15. DEFAULTS UPON SENIOR SECURITIES
None.
ITEM 16. CHANGES IN SECURITIES AND CHANGES IN SECURITY FOR
REGISTERED SECURITIES AND USE OF PROCEEDS
None.
PART IV
ITEM 17. FINANCIAL STATEMENTS
Inapplicable.
ITEM 18. FINANCIAL STATEMENTS
See pages F-1 through F-7, incorporated herein by reference.
ITEM 19. FINANCIAL STATEMENTS AND EXHIBITS
The following financial statements, together with the report
thereon of Ernst & Young, are filed as part of this Annual
Report:
Page
Report of Independent Auditors F-1
Statement of Income for the years ended December 31, 1999, F-2
1998 and 1997
Balance Sheet as at December 31, 1999 and 1998 F-3
Statement of Cash Flows for the years ended December 31, F-4
1999, and 1997
17
<PAGE>
Notes to the Financial Statements F-5
18
<PAGE>
CALPETRO TANKERS (BAHAMAS II) LIMITED
REPORT OF INDEPENDENT AUDITORS
THE SHAREHOLDERS AND BOARD OF DIRECTORS OF CALPETRO TANKERS
(BAHAMAS II) LIMITED
We have audited the accompanying balance sheet of Calpetro
Tankers (Bahamas II) Limited as of December 31, 1999 and 1998 and
the related statements of income and cash flows for each of the
three years in the period ended December 31. These financial
statements are the responsibility of the Company's management.
Our responsibility is to express an opinion on these financial
statements based on our audits.
We conducted our audits in accordance with United Kingdom
auditing standards which do not differ in any significant respect
from United States generally accepted auditing standards. Those
standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statement are
free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in
the financial statements. An audit also includes assessing the
accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement
presentation. We believe that our audits provide a reasonable
basis for our opinion.
In our opinion, the financial statements referred to above
present fairly, in all material respects, the financial position
of Calpetro Tankers (Bahamas II) Limited at December 31, 1999 and
1998, and the results of its operations and its cash flows for
each of the three years in the period ended December 31, 1999 in
conformity with accounting principles generally accepted in the
United States.
Ernst & Young
Douglas, Isle of Man Chartered Accountants
June 21, 2000
<PAGE>
CALPETRO TANKERS (BAHAMAS II) LIMITED
STATEMENT OF INCOME
Year ended
December 31,
(US Dollars in thousands) Notes 1999 1998 1997
INCOME
Finance lease interest 2(b) 5,171 5,592 6,008
Bank interest 102 100 95
Recognition of unearned finance
lease income 2(b) 75 75 75
_____ _____ _____
5,348 5,767 6,178
EXPENSES
Interest expense 3 (5,030) (5,408) (5,778)
General and administrative expenses (50) (63) (44)
Amortization of discount on loans 2(d) (75) (75) (75)
_____ _____ _____
INCOME BEFORE TAXES 193 221 281
Provision for taxes 2(e) - - -
_____ _____ ____
NET INCOME FOR THE YEAR 193 221 281
===== ===== =====
<PAGE>
CALPETRO TANKERS (BAHAMAS II) LIMITED
BALANCE SHEET
December 31,
(US Dollars in thousands) Notes 1999 1998
ASSETS
Current assets:
Cash and cash equivalents 2,824 2,769
Current portion of net investment
in direct financing leases 2(b) 5,109 5,067
Interest receivable 1,242 1,348
Other current assets 46 46
_____ _____
TOTAL CURRENT ASSETS 9,221 9,230
Net investment in direct financing leases 2(b) 53,855 58,889
Discount on loans less amortization 2(d) 651 726
______ ______
TOTAL ASSETS 63,727 68,845
======= =======
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accrued interest 1,248 1,338
Current portion of serial loans 4 5,210 5,210
Other liabilities 15 26
_____ _____
TOTAL CURRENT LIABILITIES 6,473 6,574
Long-term loans 4 55,892 61,102
______ ______
TOTAL LIABILITIES 62,365 67,676
______ ______
Stockholders' equity:
Common stock: 1,000 shares authorized;
100 shares of $1 par value
issued and outstanding - -
______ _____
Retained earnings 1,362 1,169
_____ ______
TOTAL STOCKHOLDERS' EQUITY 1,362 1,169
______ _____
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY 63,727 68,845
====== ======
<PAGE>
CALPETRO TANKERS (BAHAMAS II) LIMITED
STATEMENT OF CASH FLOWS
Year ended
December 31,
1999 1998 1997
(US Dollars in thousands)
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income 193 221 281
Adjustments to reconcile net income to
net cash provided by operating activities:
Amortization of discount on loans 75 75 75
Recognition of unearned income (75) (75) (75)
Changes in assets and liabilities
Accounts receivable 106 103 104
Accounts payable (101) (67) (88)
____ ____ ____
Net cash provided by operating activities 198 257 297
____ ____ ____
Cash Flows from Investing Activities:
Repayment of direct finance leases 5,067 5,025 4,978
_____ _____ _____
Net cash from investing activities 5,067 5,025 4,978
_____ _____ _____
Cash Flows from Financing Activities
Serial loans redeemed (5,210) (5,210) (5,210)
_____ _____ _____
Net cash used in financing activities (5,210) (5,210) (5,210)
_____ _____ _____
Net increase in cash and cash equivalents 55 72 65
Cash and cash equivalents at start of year 2,769 2,697 2,632
_____ _____ _____
Cash and cash equivalents at end of year 2,824 2,769 2,697
====== ====== ======
<PAGE>
CALPETRO TANKERS (BAHAMAS II) LIMITED
NOTES TO THE FINANCIAL STATEMENTS
1. BASIS OF PREPARATION
The company, which was incorporated in the Bahamas on May 13,
1994 is one of four companies: Calpetro Tankers (Bahamas I)
Limited, Calpetro Tankers (Bahamas III) Limited each of which
is incorporated in the Bahamas and Calpetro Tankers (IOM)
Limited which is incorporated in the Isle of Man. Each of
the Companies (the "Owners") has been organized as a special
purpose company for the purpose of acquiring one of the four
recently constructed oil tankers from Chevron Transport
Corporation (the "Initial Charterer") and for which long-term
charter agreements have been signed with the Initial
Charterer. California Petroleum Transport Corporation acting
as agent on behalf of the Owners issued as full recourse
obligations Term Mortgage Notes and Serial Mortgage Notes.
These statements reflect the net proceeds from the sale of
the Term Mortgage Notes together with the net proceeds from
the sale of the Serial Mortgage Notes having been applied by
way of long-term loans to the Owners to fund the acquisition
of the Vessels from the Initial Charterer.
2. PRINCIPAL ACCOUNTING POLICIES
The financial statements have been prepared in accordance
with generally accepted accounting principles in the United
States. A summary of the more important accounting policies,
which have been consistently applied, is set out below.
(a) ACCOUNTING CONVENTION
The financial statements are prepared under the
historical cost convention.
(b) FINANCE LEASES
The long-term charter agreement between the Company and
Chevron Transport Corporation subsequently transfers all
the risks and rewards associated with ownership, other
than legal title and contains bargain purchase options
and as such is classified as a direct financing lease in
accordance with Statement of Financial Accounting
Standards No. 13.
Primary rental income from finance leased contracts
after setting aside amounts for amortization of the
<PAGE>
investment in finance leases over the primary period of
the lease is apportioned between the finance element
which is determined by spreading interest and charges
over the period of repayment in proportion to the net
cash investment and is allocated to the Statement of
Income and the capital element which reduces the
outstanding obligations for future instalments.
(c) INTEREST PAYABLE RECOGNITION
Interest payable on the Term Loans and on the Serial
Loans is accrued on a daily basis.
(d) DISCOUNT ON LOANS
Discount on issue of the long-term debt which comprises
the Term Loans and Serial Loans is being amortized over
the respective periods to maturity of the debt as
described in Note 4.
(e) INCOME TAXES
The company is not liable to income taxes in the
Bahamas.
(f) CASH EQUIVALENTS
The company considers all highly liquid investments with
a maturity date of three months or less when purchased
to be cash equivalents.
(g) REPORTING CURRENCY
The reporting currency is United States dollars. The
functional currency is United States dollars.
3. INTEREST EXPENSE
Year ended
December 31,
1999 1998 1997
$ 000 $ 000 $ 000
Long-term loans 5,030 5,408 5,778
====== ====== ======
4. LONG-TERM LOANS
1999 1998
$ 000 $000
Opening balance 61,1026 6,312
Less: current portion 5,210 5,210
______ ______
<PAGE>
Long-term loans 55,892 61,102
======= =======
The fair value of the long-term loans approximates to
their carrying value.
(a) SERIAL LOANS
The serial loans have the following characteristics:
Principal due Interest Rate Maturity Date
on maturity
$ 000
5,210 7.35% April 1, 2000
5,210 7.44% April 1, 2001
5,210 7.49% April 1, 2002
5,210 7.55% April 1, 2003
5,210 7.57% April 1, 2004
______
26,050
=======
Interest is payable semi-annually.
<PAGE>
CALPETRO TANKERS (BAHAMAS II) LIMITED
NOTES TO THE FINANCIAL STATEMENTS
(CONTINUED)
(b) TERM LOANS
The Term Loans bear interest at a rate of 8.52% per
annum. Interest is payable semi-annually. Principal
is repayable on the Term Loans in accordance with a
twelve year sinking fund schedule.
The tables below provide the revised scheduled sinking
fund redemption amounts and final principal payment of
the Allocated Principal Amount of the Term Loans
following termination of the related Initial Charter on
each of the optional termination dates.
Payment Charter Not Charter Charter Charter Charter
Date Terminated Terminated Terminated Terminated Terminated
2004 2006 2008 2010
$000 $000 $000 $000 $000
April 1, 2005 3,187 1,640 3,187 3,187 3,187
April 1, 2006 3,187 1,780 3,187 3,187 3,187
April 1, 2007 3,187 1,930 1,700 3,187 3,187
April 1, 2008 3,187 2,090 1,840 3,187 3,187
April 1, 2009 3,187 2,270 2,000 1,690 3,187
April 1, 2010 3,187 2,470 2,170 1,830 3,187
April 1, 2011 3,187 2,680 2,360 1,990 1,510
April 1, 2012 3,187 2,910 2,560 2,160 1,630
April 1, 2013 3,187 3,150 2,770 2,340 1,770
April 1, 2014 3,187 3,420 3,010 2,540 1,930
April 1, 2015 3,182 10,712 10,268 9,754 9,090
______ ______ ______ ______ ______
35,052 35,052 35,052 35,052 35,052
______ ______ ______ ______ ______
Total Long-Term
Loans 61,102 61,102 61,102 61,102 61,102
======= ======= ======= ======= =======
The Term and Serial Loans are collateralized by first
preference mortgage on the Vessel to California
Petroleum. The earnings and insurance relating to the
Vessel have been collaterally assigned pursuant to an
Assignment of Earnings and Insurance to California
Petroleum which in turn has assigned such Assignment of
Earnings and Insurance to the Collateral Trustee. The
<PAGE>
Initial Charter and Chevron Guarantee relating to the
Vessel has been collaterally assigned pursuant to the
Assignment of Initial Charter and Assignment of Initial
Charter Guarantee to California Petroleum, which in turn
has assigned such Assignment to the Collateral Trustee.
The Capital Stock of the company has been pledged to
California Petroleum pursuant to the Stock Pledge
Agreement.
<PAGE>
SIGNATURES
Subject to the requirements of Section 13 or 15(d) 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.
CALPETRO TANKERS (BAHAMAS II) LIMITED
Registrant
/s/ Alexandra Kate Blankenship
Alexandra Kate Blankenship
Director
Date: June 26, 2000
10
02089006.AC4
