Schedule of Repayments and Vessel Capital Commitments
The Group’s Treasury function arranges financing by leveraging the Group’s balance sheet to optimise the availability of cash resources of the Group. Borrowings comprise:
- bank borrowings;
- the liability component of convertible bonds; and
- finance lease liabilities.
The aggregate borrowings of the Group amounted to US$926.0 million (2014: US$999.7 million) and are denominated in United States Dollars.
Bank Borrowings – US$593.5 million
(2014: US$668.0 million)
Bank borrowings are in the functional currency of the business segment to which they relate. The overall reduction in bank borrowings is mainly due to loan amortisation.
In the first half of 2015, we put in place total new bank borrowing facilities of US$134.4 million – secured on 22 vessels – which included the refinancing of US$89 million of loans that became due in the same period. These new bank borrowings have consistent terms with our existing facilities, including the requirement to satisfy the loans-to-asset value requirements and for the Company to remain listed on the Stock Exchange of Hong Kong Limited.
In the second half of 2015, we drew down US$39.1 million secured on two vessels under our committed Japanese export credit facilities, leaving loans of US$171.4 million and US$139.7 million which are expected to be drawn in 2016 and 2017 respectively.
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 2015:
- The Group’s bank borrowings were secured by mortgages over 84 (2014: 69) vessels with a total net book value of US$1,470.2 million (2014: US$1,246.1 million) and an assignment of earnings and insurances in respect of these vessels.
- Our unmortgaged vessels comprised towage assets with a net book value of US$33.2 million and two dry bulk vessels.
- The Group was in compliance with all its loans-to-asset value requirements.
- Our undrawn committed bank borrowing facilities were US$375.1 million (2014: US$350.2 million).
The decrease in interest (after capitalisation) to US$21.5 million (2014: US$27.8 million) was mainly due to a decrease in average bank borrowings to US$525.6 million (2014: US$647.3 million). Certain bank 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$332.5 million
(2014: US$313.4 million)
In June 2015, the Group issued US$125 million, 3.25% p.a. coupon, guaranteed convertible bonds maturing in July 2021. The new bonds are convertible into ordinary shares of the Company at a current conversion price of HK$4.08. The issue of the new convertible bonds enabled the Group to pro-actively manage its upcoming liabilities, including the potential exercise by bondholders of the 2018 convertible bonds in October 2016 of their rights to redeem the bonds at 100% of the principal amount.
At 31 December 2015, the liability components of the 1.75% p.a. coupon April 2016 convertible bonds, 1.875% p.a. coupon October 2018 convertible bonds and the 2021 convertible bonds are US$105.1 million, US$113.9 million and US$113.5 million respectively (2014: US$202.8 million, US$110.6 million and nil). The decrease in the liability component of the 2016 convertible bonds is mainly due to the buyback and cancellation with an aggregate face value of US$104.0 million at a discount to face value saving US$2.3 million of principal repayments and related coupon payments in the period before maturity. At 31 December 2015, the remaining outstanding principal amount of the 2016 convertible bonds was US$105.6 million.
The US$17.1 million (2014: US$15.0 million) interest expense of the convertible bonds is calculated at an effective interest rate of 4.9% (2014: 4.8%).
Finance Lease Liabilities – Nil (2014: US$18.3 million)
Finance lease liabilities in relation to three Handysize vessels were extinguished upon the expiry of the bareboat charters and return of these vessels to the lessors in December 2015. The vessels were treated as disposed of by the Group at their net book values and no disposal gains or losses were recorded.
Finance charges of US$1.0 million
(2014: US$1.4 million) represent interest payments on Handysize vessels under finance leases.