First Ship Lease Trust says it will distribute US$5.7 million ($7.8 million) or US0.95¢ per unit to its unitholders second quarter ended 30 June 2010 (2Q FY10).

The 2Q FY10 DPU of US0.95¢ represents an annualised tax-exempt yield of 12.4% and will be paid on 26 August 2010 to all unitholders on record as of 3 August 2010.

The 2Q FY10 DPU of US0.95¢ is 61% lower than the DPU of US2.45¢ in 2QFY09 and is 37% lower than the guidance of US1.50¢ provided by FSL Trust Management in April.

First Ship Lease Trust announced on May 11, 2010 that it had placed the DPU guidance for 2Q FY10 and beyond under review, following the request from the charterers of Nika I (to be renamed FSL Hamburg) and Verona I (now renamed FSL Singapore) to take re-delivery of the vessels.

Revenue for 2Q FY10 rose 14.8% (+US$3.7 million) year-on-year to US$28.5 million. The 2Q FY10 revenue includes a one-off US$6.0 million recognition of cash security pursuant to the re-delivery of the vessels Nika I and Verona I. Excluding this US$6.0 million, revenue was 9.3% lower (–US$2.3 million), primarily due to the premature termination of the bareboat lease arrangements relating to the two vessels.

Net cash generated from operation for 2Q FY10 (before loan amortisation) amounted to US$17.3 million, which was 1% higher compared with US$17.1 million in 2Q FY09. The 2Q FY10 distribution of US$5.7 million represents a payout of 33% of the net cash generated for the quarter, compared with a payout of 55% in 1Q FY10 and 74% in 2Q FY09.

Due to the re-delivery of the two vessels and resulting termination of the long-term bareboat charters, a non-cash impairment charge of US$7.9 million was recognised this quarter. As a result, the Trust recognised a loss of US$6.1 million in 2Q FY10.

Philip Clausius, Chief Executive Officer of FSL Trust Management, says: “Our business focus on long-term bareboat leasing remains unchanged notwithstanding the re-delivery of two vessels in June. The revenue from the 21 bareboat leases in our vessel portfolio will continue to underpin the stability of our long-term cash flow. Our strategic focus on growing and further diversifying the portfolio remains unchanged. Given market fundamentals, we believe the outlook for the tanker and containership sectors are quite positive, but less so for the dry bulk sector. We expect to trade ‘Nika I’ and “FSL Singapore’ in the product tanker spot market in the near-term. There is no rush to lock them into medium to long-term charters now but we will do so as and when the tanker market continues to improve.”

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