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Borrowings

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:

  • 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.

  • Our unmortgaged vessels included two dry bulk vessels.

  • The Group was in compliance with all its loans-to-asset value requirements.

  • 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%).


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