Oslo-listedFrontline needs the tanker market to improve if it is to meet a $225m bond payment in2015 without selling assets or issuing fresh equity, it told investors thismorning.

“Sucha situation might force a restructuring of the company, including modificationsof charter lease obligations and debt agreements,” said the owner a year afterspinning off Frontline 2012.

Itscautious note led to a morning dip in its share price but the stock is nowtrading only a fraction down.

ErikNikolai Stavseth of Arctic Securities says the guidance is weak, suggesting theowner will need to issue equity by the end of 2014.

“While thecompany might be able to sell its $90m stake in Frontline 2012, it will stilllikely require an equity injection at some point over the next two years,” hesaid noting it has a $200m issue on the shelf in the US.  

“While the Frontline 2012 stake could be sold offeasily, it will still leave Frontline short,” Stavseth added.

Analysts at RS PlatouMarkets were more upbeat, upgrading Frontline to neutral from sell and explainingthe stake in Frontline 2012 is sufficient to keep the lights on.

“We perceive the challenging market outlook to bereflected in the share price while the shareholding of its spin-off, Frontline2012, should bridge the funding gap until the market recovers,” Platou Marketssaid.

“The spin-off of Frontline2012 (FRNT) allowed Frontline to avoid bankruptcy, and has since more thandoubled the value of the investment in FRNT,” they added.  

“We also believe Frontlinewill terminate the [two] suezmax newbuilds at Rongsheng which should return$26m of cash to the company.”

Platou Markets says today’supgrade came as Frontline’s share price had reached its target price of $2.5per share.

Frontline’s fourth quarterloss of $30.1m was better than the $34.5m red number the market had feared.

It came after revenue of$113m beat the $96m average bet thanks to an above market showing from itsVLCCs.

The ships commanded $19,300daily in the quarter, well ahead of the $12,800 reported by Euronav for thesame period.

Frontline’s fourth quarter report said: “The tanker markethas shown a strong negative development in the last four years.

“Currentlycrude tankers are going through one of the worst winters ever with VLCC ratesclose to zero, limited number of fixtures and very high availability of VLCCtonnage.

“Severaltanker companies are already experiencing severe problems and if the weakmarket continues it is likely to lead to significant financial problems for thewhole tanker industry.

“Consensusis that the tanker market will not experience sustained recovery untilovercapacity is removed.”