TORM has been in discussions with its tonnage providers, including FSL Trust, to realign its charter-in agreements. These discussions resulted in a proposed long-term comprehensive financing solution with all its tonnage providers to address its current financial difficulties. For FSL Trust, bare-boat charter rates for the Vessels are to be realigned to variable rates TORM achieves in the market. The early original bare-boat agreements are to be cancelled, and FSL Trust will be allocated equity in TORM in exchange for the rate concessions. FSL Trust also has the option to terminate the charters in the event that actual rates achieved by TORM for the Vessels underperform the market benchmark by a pre-agreed margin, tested semi-annually.

The above proposed terms require approval from FSL Trust’s lenders. While some lenders have already given their consent, formal approval is still pending.

Given the variable nature of the renegotiated rates and the allocated equity stake in TORM, FSL Trust is positioned to participate in the benefits of the eventual market recovery.

Current market rates for the Vessels are significantly lower than the original bare-boat charter rates. However, this is not expected to have a material impact on the net tangible assets per unit of FSL Trust for the year ending 31 December 2012. Barring unforeseen circumstances, the renegotiated terms will not cause FSL Trust to be unable to continue to service the debt obligations under its loan agreement.

The renegotiated charter-in agreements, which are part of TORM’s long-term financing solution, are still subject to boards, lenders and shareholders’ approvals of the respective stakeholders. To facilitate the finalisation of the agreement, all relevant charter parties have agreed to realign rates to the current market level until April 30, 2012.