The Group’s Treasury function arranges financing by leveraging the Group’s balance sheet to optimise the availability of
cash resources of the Group. The aggregate borrowings of the Group at 31 December 2016, which comprised secured
borrowings and the liability component of convertible bonds, amounted to US$839.2 million (2015: US$926.0 million) and
are denominated in United States Dollars.
Secured Borrowings – US$ 723.8 million (2015: US$593.5 million)
Secured borrowings are in the functional currency of the business segment to
which they relate. The overall increase in secured borrowings is mainly due to the
drawdowns under our Japanese export credit facilities and other borrowings, partially
offset by scheduled loan amortisation.
During the year, we drew down US$171.4 million secured on nine vessels under our
committed Japanese export credit facilities, leaving loans of US$139.7 million which
are expected to be drawn in the first half of 2017 upon the delivery of our remaining
seven newbuildings. In addition, we drew down other borrowings of US$34.1 million
secured on our owned vessels during the second half of 2016 and further drew down
US$18.2 million in February 2017 in respect of two owned vessels.
The Group monitors the loans-to-asset value requirements on its bank borrowings. If
the market values of the Group’s mortgaged assets fall below the level prescribed by
our lenders, the Group may pledge additional cash or offer other additional collateral
unless the banks offer waivers for technical breaches.
As at 31 December 2016:
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The Group’s secured borrowings were secured by 88 vessels with a total net book
value of US$1,498.9 million and an assignment of earnings and insurances in
respect of these vessels.
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Our unmortgaged vessels included two dry bulk vessels.
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The Group was in compliance with all its loans-to-asset value requirements.
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Our undrawn committed borrowing facilities were US$157.9 million, comprising
US$139.7 million of Japanese export credit facilities expected to be drawn down in
the first half of 2017 and US$18.2 million of other secured borrowings which were
drawn down in February 2017.
P/L impact:
The increase in interest (after
capitalisation) to US$22.1 million
(2015: US$21.5 million) was
mainly due to an increase in
average secured borrowings
to US$564.2 million (2015:
US$525.6 million). Certain
secured borrowings are subject
to floating interest rates but
the Group manages these
exposures by using interest
rate swap contracts.
Convertible Bonds – Liability Component is US$115.4 million (2015: US$332.5 million)
During the year, we fully repaid two convertible bonds, namely the 1.75% p.a. coupon
2016 convertible bonds with an outstanding principal of US$105.6 million in April upon
maturity and the 1.875% p.a. coupon 2018 convertible bonds with an outstanding
principal of US$123.8 million in October following the exercise by all bondholders
of their right to redeem the bonds at 100% of the principal amount. The former was
funded by the Group’s then cash reserves, whilst the latter was funded by the cash
raised through the issue of rights shares in June.
As at 31 December 2016, there remained the 3.25% p.a. coupon July 2021
convertible bonds with an outstanding principal of US$125.0 million and a liability
component of US$115.4 million. As at 31 December 2015, the liability components of
the 2016 convertible bonds, 2018 convertible bonds and 2021 convertible bonds were
US$105.1 million, US$113.9 million and US$113.5 million respectively.
P/L impact:
The US$12.4 million (2015:
US$17.1 million) interest
expense of the convertible
bonds is calculated at an
effective interest rate of 5.2%
(2015: 4.9%).