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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 6-K
 REPORT OF FOREIGN PRIVATE ISSUER
PURSUANT TO RULE 13A-16 OR 15D-16 UNDER
THE SECURITIES EXCHANGE ACT OF 1934
For the month of August 2020
Commission File Number: 001-32199
SFL Corporation Ltd.
(Translation of registrant’s name into English)
 Par-la-Ville Place
14 Par-la-Ville Road
Hamilton, HM 08, Bermuda
(Address of principal executive office)
Indicate by check mark whether the registrant files or will file annual reports under cover of Form 20-F or Form 40-F.
Form 20-F   x             Form 40-F   ¨
Indicate by check mark if the registrant is submitting the Form 6-K in paper as permitted by Regulation S-T Rule 101(b)(1):             .
Note: Regulation S-T Rule 101(b)(1) only permits the submission in paper of a Form 6-K if submitted solely to provide an attached annual report to security holders.
Indicate by check mark if the registrant is submitting the Form 6-K in paper as permitted by Regulation S-T Rule 101(b)(7):             .
Note: Regulation S-T Rule 101(b)(7) only permits the submission in paper of a Form 6-K if submitted to furnish a report or other document that the registrant foreign private issuer must furnish and make public under the laws of the jurisdiction in which the registrant is incorporated, domiciled or legally organized (the registrant’s “home country”), or under the rules of the home country exchange on which the registrant’s securities are traded, as long as the report or other document is not a press release, is not required to be and has not been distributed to the registrant’s security holders, and, if discussing a material event, has already been the subject of a Form 6-K submission or other Commission filing on EDGAR.




INFORMATION CONTAINED IN THIS FORM 6-K REPORT
Attached hereto are the unaudited condensed interim financial statements and related Management’s Discussion and Analysis of Financial Condition and Results of Operations of SFL Corporation Ltd. ("SFL" or "the Company”) for the six months ended June 30, 2020.

This report on Form 6-K is hereby incorporated by reference into the Company’s Registration Statement on Form F-3ASR (Registration No. 333-237971) and the Company’s Registration Statement on Form F-3D (Registration No. 333-237970) each filed with the U.S. Securities and Exchange Commission (the “SEC”) on May 1, 2020.





SFL CORPORATION LTD.

REPORT ON FORM 6-K FOR THE SIX MONTHS ENDED JUNE 30, 2020

INDEX
 
Unaudited Condensed Consolidated Statements of Operations for the six months ended June 30, 2020 and June 30, 2019
Page 4
Unaudited Condensed Consolidated Statements of Comprehensive Income for the six months ended June 30, 2020 and June 30, 2019
Page 5
Unaudited Condensed Consolidated Balance Sheets as of June 30, 2020 and December 31, 2019
Page 6
Unaudited Condensed Consolidated Statements of Cash Flows for the six months ended June 30, 2020 and June 30, 2019
Page 7
Unaudited Condensed Consolidated Statements of Changes in Stockholders’ Equity for the six months ended June 30, 2020 and June 30, 2019
Page 8
Notes to the Unaudited Condensed Consolidated Financial Statements
Page 9
Management’s Discussion and Analysis of Financial Condition and Results of Operations
Page 35
Cautionary Statement Regarding Forward-Looking Statement
Page 47
Signatures
Page 49

3

SFL Corporation Ltd.

UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
for the six months ended June 30, 2020 and June 30, 2019
(in thousands of $, except per share amounts) 
Six months ended
 June 30,
 20202019
Operating revenues
Interest income related parties – direct financing leases
946 1,932 
Interest income other – sales-type, direct financing leases and leaseback assets33,275 26,484 
Service revenue related parties – direct financing leases3,591 4,887 
Profit sharing revenues - related parties10,358 1,547 
Profit sharing income - other1,218  
Time charter revenues - related parties26,663 25,752 
Time charter revenues - other132,011 143,225 
Bareboat charter revenues - other6,437 12,494 
Voyage charter revenues - other23,775 9,428 
Other operating income2,087 1,696 
Total operating revenues240,361 227,445 
Gain on sale of assets and termination of charters, net 2,250  
Operating expenses
Vessel operating expenses - related parties15,250 16,453 
Vessel operating expenses - other63,514 49,059 
Depreciation55,298 58,648 
Vessel impairment charge80,511  
Administrative expenses - related parties587 894 
Administrative expenses - other5,458 5,011 
Total operating expenses220,618 130,065 
Net operating income21,993 97,380 
Non-operating income/(expense)
Interest income - related parties, long term loans to associated companies7,064 7,064 
Interest income - related parties, other179 850 
Interest income - other1,043 2,376 
Interest expense - other(71,273)(72,165)
Gain on repurchase of bonds 1,081 1,802 
Gain on settlement of related party loan notes4,446  
(Loss)/gain on investments in debt and equity securities(18,236)27,323 
Dividend income - related parties3,884 2,164 
Other financial items, net(31,583)(14,072)
Net (loss)/income before equity in earnings of associated companies(81,402)52,722 
Equity in earnings of associated companies6,246 8,991 
Net (loss)/income(75,156)61,713 
Per share information:
Basic (loss)/earnings per share$(0.70)$0.57 
Diluted (loss)/earnings per share$(0.70)$0.56 
The accompanying notes are an integral part of these condensed consolidated financial statements.
4

SFL Corporation Ltd.
UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
for the six months ended June 30, 2020 and June 30, 2019
(in thousands of $)
 
Six months ended
 June 30,
20202019
Net (loss)/income(75,156)61,713 
Fair value adjustments to hedging financial instruments(20,071)(11,648)
Earnings reclassification of previously deferred fair value adjustments to
hedging financial instruments
6,369  
Fair value adjustments to investment securities classified as available-for-sale1,177 (296)
Other comprehensive (loss)/income(107)22 
Other comprehensive loss, net of tax(12,632)(11,922)
Comprehensive (loss)/income(87,788)49,791 
The accompanying notes are an integral part of these condensed consolidated financial statements.


5

SFL Corporation Ltd.
UNAUDITED CONDENSED CONSOLIDATED BALANCE SHEETS
as at June 30, 2020 and December 31, 2019
(in thousands of $, except share data)
June 30, 2020December 31,
2019
ASSETS
Current assets
Cash and cash equivalents152,124 199,521 
Restricted cash7,994 3,495 
Investments in debt and equity securities35,320 74,079 
Due from related parties13,138 22,399 
Trade accounts receivable6,001 4,583 
Other receivables22,071 20,132 
Inventories9,280 7,934 
Prepaid expenses and accrued income10,326 1,635 
Investment in sales-type leases, direct financing leases and leaseback assets, current portion62,808 56,189 
Financial instruments at fair value, current portion 520 
Total current assets319,062 390,487 
Vessels and equipment, net1,317,073 1,404,705 
Vessels under finance lease, net717,417 714,476 
Investment in sales-type leases, direct financing leases and leaseback assets, long-term portion936,496 938,198 
Investments in associated companies34,642 42,161 
Loans and long term receivables from related parties including associates306,398 327,616 
Financial instruments at fair value, long-term portion 3,479 
Other long-term assets80,024 64,248 
Total assets3,711,112 3,885,370 
LIABILITIES AND STOCKHOLDERS’ EQUITY
Current liabilities
Short-term debt and current portion of long-term debt298,300 253,059 
Finance lease liability, current portion70,944 68,874 
Due to related parties950 3,980 
Trade accounts payable1,726 3,445 
Financial instruments at fair value, current portion563 6,067 
Accrued expenses16,008 17,132 
Other current liabilities12,549 13,279 
Total current liabilities401,040 365,836 
Long-term liabilities
Long-term debt1,292,759 1,355,029 
Finance lease liability, long-term portion1,002,558 1,037,553 
Financial instruments at fair value, long-term portion67,437 20,579 
Deficit in associated companies13,260  
Other long-term liabilities 4 4 
Total liabilities2,777,058 2,779,001 
Commitments and contingent liabilities
Stockholders’ equity
Share capital ($0.01 par value; 200,000,000 shares authorized; 120,629,455 shares issued and outstanding at June 30, 2020). ($0.01 par value; 200,000,000 shares authorized; 119,391,310 shares issued and outstanding at December 31, 2019).
1,206 1,194 
Additional paid-in capital482,412 469,426 
Contributed surplus583,877 648,764 
Accumulated other comprehensive loss(25,647)(13,015)
Accumulated deficit(107,794) 
Total stockholders’ equity934,054 1,106,369 
Total liabilities and stockholders’ equity3,711,112 3,885,370 
The accompanying notes are an integral part of these condensed consolidated financial statements.
6

SFL Corporation Ltd.
UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
for the six months ended June 30, 2020 and June 30, 2019
(in thousands of $)
Six months ended
 June 30,
 20202019
Net cash provided by operating activities122,426 113,977 
Investing activities
Additions to direct financing leases and leaseback assets(65,030)(1,065)
Purchase of vessels, capital improvements and other additions(40,278)(1,099)
Proceeds from sales of vessels and termination of charters34,581  
Net amounts received from associated companies15,941 22,984 
Proceeds from sale of shares21,055  
Other investments and long term assets, net(32,527)(6,092)
Net cash (used in)/provided by investing activities(66,258)14,728 
Financing activities
Shares issued, net of issuance costs12,659  
Principal settlements of cross currency swaps, net(11,706)(41,769)
Payment for early settlements of interest rate swaps, net(4,539) 
Repurchase of bonds(64,795)(80,749)
Proceeds from issuance of short-term and long-term debt347,231 217,338 
Repayments of short-term and long-term debt(275,905)(115,739)
Discounts received on debt repurchased 1,654 
Debt fees paid(4,199)(3,210)
Repayment of lease obligation liability(32,925)(30,899)
Cash dividends paid(64,887)(75,325)
Net cash used in by financing activities(99,066)(128,699)
Net change in restricted cash and cash and cash equivalents(42,898)6 
Cash, restricted cash and cash equivalents at start of the period203,016 212,394 
Cash, restricted cash and cash equivalents at end of the period160,118 212,400 
The accompanying notes are an integral part of these consolidated condensed financial statements.
7

SFL Corporation Ltd.
UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS’ EQUITY
for the six months ended June 30, 2020 and June 30, 2019

(in thousands of $, except number of shares)
 
Six months ended
 June 30,
 20202019
Number of shares outstanding
At beginning of period119,391,310 119,373,064 
Shares issued1,238,145 2,461 
At end of period120,629,455 119,375,525 
Share capital
At beginning of period1,194 1,194 
Shares issued 12  
At end of period1,206 1,194 
Additional paid-in capital
At beginning of period469,426 468,844 
Amortization of stock-based compensation496 409 
Stock-based compensation forfeitures(30)(49)
Shares issued 12,646  
Adjustment to equity component of convertible bonds due 2021 and 2023 arising from reacquisition of bonds(126)(231)
At end of period482,412 468,973 
Contributed surplus
At beginning of period648,764 680,703 
Dividends declared(64,887) 
At end of period583,877 680,703 
Accumulated other comprehensive loss
At beginning of period(13,015)(220)
Earnings reclassification of previously deferred fair value adjustments to hedging financial instruments6,369  
Fair value adjustments to hedging financial instruments(20,071)(11,648)
Reclassification of ineffective portion of designated hedging instruments upon adoption of ASU 2017-12 (32)
Fair value adjustments to available-for-sale securities1,177 (296)
Other comprehensive (loss)/income(107)22 
At end of period (25,647)(12,174)
(Accumulated deficit)/retained earnings
At beginning of period 29,511 
Impact of adoption of ASU 2016-13(32,638) 
Reclassification of ineffective portion of designated hedging instruments upon adoption of ASU 2017-12 32 
Net (loss)/income(75,156)61,713 
Dividends declared (75,325)
At end of period(107,794)15,931 
Total stockholders’ equity934,054 1,154,627 
The accompanying notes are an integral part of these condensed consolidated financial statements.
8


SFL CORPORATION LTD.
Notes to the Unaudited Condensed Consolidated Financial Statements
 

1.INTERIM FINANCIAL DATA

The unaudited condensed interim financial statements of SFL Corporation Ltd. (“SFL” or the “Company”) have been prepared on the same basis as the Company’s audited financial statements and, in the opinion of management, include all material adjustments, consisting only of normal recurring adjustments considered necessary in order to make the interim financial statements not misleading, in accordance with accounting principles generally accepted in the United States of America (“US GAAP”). The accompanying unaudited condensed interim financial statements do not include all of the disclosures required in annual and interim consolidated financial statements and should be read in conjunction with the annual financial statements and notes included in the Annual Report on Form 20-F for the year ended December 31, 2019, which was filed with the Securities and Exchange Commission on March 27, 2020. The results of operations for the interim period ended June 30, 2020 are not necessarily indicative of the results for the entire year ending December 31, 2020.

Basis of accounting

The condensed consolidated financial statements are prepared in accordance with US GAAP. The condensed consolidated financial statements include the assets and liabilities and results of operations of the Company and its subsidiaries including variable interest entities in which SFL is deemed to be the primary beneficiary. All inter-company balances and transactions have been eliminated on consolidation.

The condensed consolidated financial statements are prepared in accordance with the accounting policies described in the Company’s Annual Report on Form 20-F for the year ended December 31, 2019.

Recently Issued Accounting Standards

On April 10, 2020, FASB issued a question-and-answer document regarding accounting for lease concessions and other effects of the coronavirus (“COVID-19”) pandemic. The document clarifies that entities may elect to not evaluate whether lease-related relief that lessors provide to mitigate the economic effects of COVID-19 on lessees is a lease modification under Leases ASC 842. The Company will evaluate this additional guidance based on the facts and circumstances of any future lease concessions.

Recently Adopted Accounting Standards

In June 2016, the Financial Accounting Standards Board (or FASB) issued Accounting Standards Update 2016-13, Financial Instruments - Credit Losses: Measurement of Credit Losses on Financial Instruments (or ASU 2016-13). ASU 2016-13 introduces a new credit loss methodology, which requires earlier recognition of potential credit losses, while also providing additional transparency about credit risk. This new credit loss methodology utilizes a lifetime “expected credit loss” measurement objective for the recognition of credit losses for loans, held-to-maturity debt securities and other receivables at the time the financial asset is originated or acquired. The expected credit losses are subsequently adjusted each period for changes in expected lifetime credit losses. This methodology replaces multiple impairment methods under previous GAAP for these type of assets, which generally required that a loss be incurred before it was recognized.

The Company and its 100% owned subsidiaries accounted as "Investments and Deficit in Associated Companies" adopted this update on January 1, 2020 using the modified-retrospective approach, whereby a cumulative effect adjustment was made to reduce retained earnings on January 1, 2020 without any retroactive application to prior periods. On adoption, the Company recognized a cumulative adjustment of $32.6 million to its retained earnings with corresponding decreases in the carrying value of equity-accounted investments of $27.0 million (see Note 9 Investment and deficit in Associated Companies), and decreases the carrying value of Trade receivables, Other receivables, Related party receivables, Other long term assets and Investments in sales-type leases, direct financing leases and leaseback assets totaling $5.6 million (see Note 17: Allowance for expected credit losses).
9




Significant Accounting Policies - Update

Our significant accounting policies are described in "Note 2: Accounting Policies" of our Annual Report on Form 20-F for the year ended December 31, 2019. Our updated significant accounting policies described below reflect the impact of adopting ASU 2016-13.

Allowances for losses on certain financial assets

The Company and its 100% wholly owned subsidiaries accounted for as associates has established an allowances for credit losses on financing receivables, namely trade accounts receivable, other receivables, related party receivables, investments in sales-type leases, direct financing leases and vessel leaseback assets and other long term assets in an amount equal to the current expected credit losses. The estimation of these allowances is assessed quarterly and is based on an analysis of factors including, but not limited to, historical loss experience, age of the receivable, customer credit ratings, management's assessment of current conditions and expectation of future conditions and collateral exposures. The Company assesses collectability by pooling receivables where similar characteristics exist and evaluates receivables individually when specific customer balances no longer share those risk characteristics. We assign internal credit ratings for customers and determine the creditworthiness of each customer based upon publicly available information where available.

Collateral exposure for investments in sales-type leases, direct financing leases and leaseback assets is the excess of the carrying value of the receivable over the fair value of the related collateral. A receivable with an estimated fair value in excess of the carrying value is considered to have no collateral exposure. The value of the collateral is closely tied to the international seaborne transportation industry, offshore drilling sector and overall market conditions and may be subject to reduced valuation with market decline. Declines in collateral values could result in an increase in the allowance for expected credit losses.

The expense associated with the allowance for expected credit losses is recognized in 'other financial items' and included in 'equity in earnings of associated companies' in the Condensed Consolidated Statement of Operations.

Use of Estimates

The preparation of financial statements in conformity with US GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. We believe that the accounting estimates and assumptions made by management are appropriate given the increased uncertainties surrounding the severity and duration of the impacts of the COVID-19 pandemic, however actual results could differ materially from those estimates.



10


2.GAIN/(LOSS) ON SALE OF ASSETS AND TERMINATION OF CHARTERS

A summary of vessels sold and charters terminated during the six months ended June 30, 2020 is as follows:
(in thousands of $)Vessel TypeNet ProceedsTermination PaymentGain/(Loss) on Sale of Asset
Front Hakata VLCC33,465 (3,186)1,373 
Sea Cheetah Offshore Support1,450  275 
Sea JaguarOffshore Support1,452  277 
Sea HalibutOffshore Support700  175 
Sea Pike Offshore Support700  175 
Sea LeopardOffshore Support144  (25)
Total37,911 (3,186)2,250 

All of the vessels sold in the six months ended June 30, 2020 were sold to unrelated third parties; the Front Hakata and Sea Leopard were previously accounted for as investments in direct financing leases and Sea Cheetah, Sea Jaguar, Sea Halibut and Sea Pike were previously accounted for as operating lease assets.

No vessels were sold or charters terminated during the six months ended June 30, 2019.



3.(LOSS)/EARNINGS PER SHARE
The computation of basic earnings per share (“EPS”) is based on the weighted average number of shares outstanding during the period and the consolidated net income or loss of the Company. Diluted EPS includes the effect of the assumed conversion of potentially dilutive instruments.

The components of the numerator for the calculation of basic and diluted EPS are as follows: 
Six months ended
(in thousands of $)June 30, 2020June 30, 2019
Basic earnings per share:
Net (loss)/income available to stockholders(75,156)61,713 
Diluted earnings per share:
Net (loss)/income available to stockholders(75,156)61,713 
Interest and other expenses attributable to dilutive convertible bonds 11,319 
Net (loss)/income assuming dilution(75,156)73,032 

The components of the denominator for the calculation of basic and diluted EPS are as follows:
Six months ended
(in thousands)June 30, 2020June 30, 2019
Basic earnings per share:
Weighted average number of common shares outstanding*107,776 107,608 
Diluted earnings per share:
Weighted average number of common shares outstanding*107,776 107,608 
Effect of dilutive share options 50 
Effect of dilutive convertible bonds 21,677 
Weighted average number of common shares outstanding assuming dilution107,776 129,335 

11


Six months ended
June 30, 2020June 30, 2019
Basic (loss)/earnings per share:$(0.70)$0.57 
Diluted (loss)/ earnings per share:$(0.70)$0.56 

*The weighted average number of common shares outstanding excludes 8,000,000 shares issued as part of a share lending arrangement relating to the Company's issuance of 5.75% senior unsecured convertible bonds in October 2016. It also excludes 3,765,842 shares issued as of June 30, 2020 from up to 7,000,000 shares issuable under a share lending arrangement relating to the Company's issuance of 4.875% senior unsecured convertible bonds in April and May 2018. These lent shares are owned by the Company and will be returned on or before maturity of the bonds in 2021 and 2023, respectively.

As of June 30, 2020, the outstanding balance on the 4.875% senior unsecured convertible bonds issued in April and May 2018, the 5.75% senior unsecured convertible bonds issued in October 2016 and the share options were antidilutive.

4.OTHER FINANCIAL ITEMS

Other financial items, net comprise the following items: 
Six months ended
(in thousands of $)June 30, 2020June 30, 2019
Net cash movement on non-designated derivatives and swap settlements(5,756)702 
Net (decrease)/increase in fair value of non-designated derivatives(25,864)(6,316)
Allowance for expected credit losses(68) 
Impairment of loan notes (8,225)
Other items105 (233)
Total other financial items, net(31,583)(14,072)

The net movement in the fair values of non-designated derivatives and net cash payments thereon relate to non-designated, terminated or de-designated interest rate swaps and cross currency interest rate swaps. Changes in the fair values of the effective portion of interest rate swaps that are designated as cash flow hedges are reported under "Other comprehensive income". Following the adoption of ASU 2017-12 from January 1, 2019, the Company now recognizes all changes in the fair value of swaps designated as accounting hedges in other comprehensive income. The adoption of the standard resulted in an opening balance adjustments of $32,000 to retained earnings and other comprehensive income on January 1, 2019.

Net cash movement on non-designated derivatives and swap settlements for the six months ended June 30, 2020, includes $4.5 million related to the settlement of interest rate swaps following the refinancing of debt. ( six months ended June 30, 2019: $0.0 million).

Following the adoption of ASU 2016-13 "Financial Instruments - Credit Losses" from January 2020, the Company now recognizes among, other things a measurement of expected credit losses, for financial assets held at the reporting date which are within the scope of the ASU, based on historical experience, current conditions and reasonable supportable forecasts. See Note 1: Interim Financial Data and Note 17: Allowance for expected credit losses.

During the six months ended June 30, 2019, the Company recorded an impairment loss of $8.2 million on the Sea Bear loan note after it concluded that the loan note may no longer be recoverable.

Other items in the six months ended June 30, 2020 include a net gain of $0.9 million arising from foreign currency translations (in the six months ended June 30, 2019: gain of $0.1 million). Other items included in other financial items include bank charges and fees relating to loan facilities.



12


5.INVESTMENTS IN DEBT AND EQUITY SECURITIES

Investment securities held by the Company consist of the following investments in corporate bonds and equity securities:
(in thousands of $)June 30, 2020December 31, 2019
Corporate Bonds15,216 12,753 
Shares20,104 61,326 
Total Investment in Debt and Equity Securities35,32074,079
Corporate Bonds
The corporate bonds are classified as available-for-sale securities and are recorded at fair value, with unrealized gains and losses recorded as a separate component of "Other comprehensive income".
Six months ended June 30, 2020Year ended December 31, 2019
(in thousands of $)Amortized CostUnrealized gains/(losses)Fair valueAmortized CostUnrealized gains/(losses)Fair value
Corporate bonds:
NorAm Drilling Bond4,131 536 4,667 4,132 558 4,690 
Oro Negro 7.5%566 827 1,393 5,705  5,705 
Oro Negro 12%   2,281 77 2,358 
NT Rig Holdco 12%3,568 403 3,971    
NT Rig Holdco 7.5%5,139 46 5,185    
Total corporate bonds13,404 1,812 15,216 12,118 635 12,753 

In 2020, the existing Oro Negro 12% Bonds and Oro Negro 7.5% Bonds completed a conversion that resulted in the recognition of NT Rig Holdco Liquidity 12% Bonds and NT Rig Holdco 7.5% Bonds, and redemption of all the Oro Negro 12% Bonds and a substantial proportion of the Oro Negro 7.5% Bonds. The Company recorded no gain or loss on redemption of the bonds. The Company also acquired an additional 1.3 million of the NT Rig Holdco 12% bonds in the six months ended June 30, 2020.

Shares
Following the adoption of ASU 2016-01 from January 2018, the Company now recognizes any changes in the fair value of equity investments in net income.
(in thousands of $)June 30, 2020December 31, 2019
Frontline10,107 43,775
NorAm Drilling1,949 4,326
ADS Crude Carriers8,048 13,225
Total shares20,104 61,326
Equity Securities pledged to creditors10,107 43,775 
Equity Securities Pledged to Creditors
As of June 30, 2020 the Company held approximately 1.4 million shares (December 31, 2019: 3.4 million shares) in Frontline Ltd ("Frontline") (see Note 16: Related Party Transactions).
13



In December 2019, the Company entered into a forward contract to repurchase 3.4 million shares of Frontline in June 2020 for $36.8 million.

During the six months ended June 30, 2020, the Company repurchased and subsequently sold approximately 2.0 million shares in Frontline for total proceeds of $21.1 million and recorded gains of $2.3 million in the statement of operations in respect of the sales.

In June 2020, the Company rolled forward the forward contract related to the remaining approximately 1.4 million shares until September 30, 2020 at a repurchase price of $16.1 million including deemed interest. The transaction has been accounted for as secured borrowing, with the shares retained in 'Marketable Securities pledged to creditors' and a liability recorded at June 30, 2020 within debt for $15.6 million (See also Note 11: Short-Term and Long-Term Debt).

        
6.VESSELS AND EQUIPMENT, NET

Movements in the six months ended June 30, 2020 summarized as follows:

(in thousands of $)CostAccumulated DepreciationVessels and Equipment, net
Balance at December 31, 2019
1,867,873 (463,168)1,404,705 
Depreciation  (36,072)(36,072)
Capitalized costs32,119  32,119 
Vessel disposals(7,362)3,963 (3,399)
Impairment loss(137,946)57,666 (80,280)
Balance at June 30, 2020
1,754,684 (437,611)1,317,073 

The Company capitalized costs of $32.1 million related to exhaust gas cleaning systems ("EGCS" or "scrubbers") and ballast water treatment systems ("BWTS") installed on ten vessels during the six months ended June 30, 2020.

During the six months ended June 30, 2020, the Company disposed of four offshore support vessels (Sea Cheetah, Sea Jaguar, Sea Halibut and Sea Pike). A net gain of $0.9 million was recorded arising from the disposal of these vessels. Refer to Note 2: Gain on sale of assets and termination of charters.

An impairment charge of $80.3 million was recorded in the six months ended June 30, 2020 against the carrying value of seven Handysize bulk carriers (six months ended June 30, 2019: $0.0 million). The impairment charge arose in the six months ended June 30, 2020 as a result of revised future cashflow estimates following uncertainty over future demand combined with negative implications for global trade of dry bulk commodities as a result of the COVID-19 outbreak.






14




7.VESSELS UNDER FINANCE LEASE, NET

Movements in the six months ended June 30, 2020 summarized as follows:

(in thousands of $)CostAccumulated DepreciationVessels under Finance Lease, net
Balance at December 31, 2019
755,058 (40,582)714,476 
Depreciation  (19,226)(19,226)
Capitalized costs22,167  22,167 
Balance at June 30, 2020
777,225 (59,808)717,417 

As at June 30, 2020 seven vessels were accounted for as vessels under finance lease, made up of four 13,800 TEU container vessels and three 10,600 TEU container vessels.
The Company capitalized costs of $22.2 million in respect of three container vessels, related to the installation of scrubbers and BWTS.




8. INVESTMENTS IN SALES-TYPE LEASES, DIRECT FINANCING LEASES AND LEASEBACK ASSETS

As at June 30, 2020 the Company had a total of twenty-four vessel charters accounted for as sales-type and direct financing leases (December 31, 2019: twenty-six vessels) and seven vessel charters classified as leaseback assets (December 31, 2019: six vessels).

Investments in sales-type and direct financing leases

The VLCC Front Hakata was sold to an unrelated third party in February 2020. A gain on sale of $1.4 million was recognized in the Consolidated Statement of Operations (refer to Note 2: Gain on sale of assets and termination of charters and Note 16: Related party transactions).
 
In February 2020, the Company entered into a Memorandum of Agreement to sell the offshore support vessel Sea Leopard for recycling to Green Yard AS, an unrelated third party. The vessel was delivered in May 2020. The Company recorded an impairment loss of $0.2 million in the six months ended June 30, 2020 prior to disposal and a loss on sale of $0.03 million was recognized in the Consolidated Statement of Operations (refer to Note 2: Gain on sale of assets and termination of charters and Note 16: Related party transaction).

Investments in leaseback assets

When a sale and leaseback transaction does not qualify for sale accounting, the Company does not recognize the transferred vessels and instead accounts for the purchase as a leaseback asset.

In May 2020, SFL acquired a newbuild very large crude carrier ("VLCC") from Landbridge Universal Limited ("Landbridge") where control was not deemed to have passed to the Company due to the existence of repurchase options in the lease on acquisition and therefore was classified as a leaseback asset. Upon delivery, the vessel immediately commenced a seven year bareboat charter back to Landbridge. The charterer has purchase options throughout the term of the charters and there is a purchase obligation at the end of the seven year period.

15


In 2019, SFL acquired six vessels which have been classified as 'leaseback assets'. These comprise of three second-hand feeder size container vessels, which were acquired in a purchase and leaseback transaction with subsidiaries of Mediterranean Shipping Company S.A. ("MSC"). The vessels were chartered back for approximately six years on a bareboat basis. The charterer has purchase options throughout the term of the charters and the Company has a put option at the end of the six year period. The three other vessels are newbuilding VLCCs, which were acquired from an affiliate of Hunter Group ASA ("Hunter Group") and leased back to the Hunter Group on five year bareboat charters. In June 2020, SFL were notified by the Hunter Group that they would exercise purchase options on two of the VLCCs which were subsequently delivered in August 2020 (refer to Note 19: Subsequent events).

The following lists the components of investments in sales-type leases, direct financing leases and leaseback assets as at June 30, 2020 and December 31, 2019:
(in thousands of $)
June 30, 2020
Sales-Type Leases and Direct Financing Leases Leaseback AssetsTotal
Total minimum lease payments to be received985,258 179,282 1,164,540 
Less: amounts representing estimated executory costs including profit thereon, included in total minimum lease payments
(44,010) (44,010)
Net minimum lease payments receivable941,248 179,282 1,120,530 
Estimated residual values of leased property (un-guaranteed)178,471 171,000 349,471 
Less: unearned income
(383,847)(82,017)(465,864)
Total investment in sales-type lease, direct financing lease and leaseback assets735,872 268,265 1,004,137 
Allowance for expected credit losses*(4,104)(729)(4,833)
Total investment in sales-type lease, direct financing lease and leaseback assets731,768 267,536 999,304 
Current portion44,683 18,125 62,808 
Long-term portion687,085 249,411 936,496 

(in thousands of $)December 31, 2019
Sales-Type Leases and Direct Financing LeasesLeaseback AssetsTotal
Total minimum lease payments to be received1,085,642 134,073 1,219,715 
Less: amounts representing estimated executory costs including profit thereon, included in total minimum lease payments(64,222) (64,222)
Net minimum lease payments receivable1,021,420 134,073 1,155,493 
Estimated residual values of leased property (un-guaranteed)192,429 139,500 331,929 
Less: unearned income(427,251)(65,784)(493,035)
Total investment in sales-type lease, direct financing lease and leaseback assets786,598 207,789 994,387 
Allowance for expected credit losses*   
Total investment in sales-type lease, direct financing lease and leaseback assets786,598 207,789 994,387