Debt
Published

 

 

 

As of 31 December 2016, BW Offshore had gross interest-bearing debt of USD 1,741.8 million. Net debt amounted to USD 1,634.9 million.

Total available liquidity as of 31 December 2016 was USD 323.1 million.

Loans and facilities 

USD 2.4 billion credit facility

On 15 March 2011 BW Offshore concluded a USD 2.4 billion seven year senior secured credit facility. The facility was split in term loans in an amount of USD 1,700 million and a USD 700 million revolving credit facility. The final maturity date was 9 March 2018.

On 21 July 2016, the facility was amended and the final maturity date was extended to 9 March 2020. The current semi-annual instalments on the credit facility is USD 55.6 million. The semi-annual instalments will increase to USD 111 million from March 2019.

Financial covenants

  • Available liquidity > USD 75 million (incl undrawn and available resources)
  • Equity to total assets > 20%
  • Leverage < 6.0x (Adj gross debt / adj EBITDA, adjusted for ongoing conversions and new units)
  • Interest coverage ratio < 3.0x

BW Catcher facility

During the third quarter of 2014, the Group entered into a USD 800 million senior secured pre-and post-delivery term loan facility being a project specific bank financing in relation to construction of a FPSO to operate on the Catcher oil field in the UK North Sea. The facility has a margin of 250 basis points above USD LIBOR during construction period and 225 basis points thereafter. The facility is available for drawing during the contstruction period and will be repaid with a seven-year tenor after completion. The facility is subject to financial covenants similar to the covenants under the USD 2.4 billion facility.

BW Joko Tole facility

During the third quarter of 2013 the Group entered into a USD 284.6 million financing facility relating to the FPSO BW Joko Tole. The financing was split between a USD 250 million term loan facility and a USD 34.6 million guarantee facility. The term loan will be repaid in quarterly instalments and has final maturity in 2018. The facility has a margin of 250 basis point above USD LIBOR, and is subject to financial covenants similar to the covenants under the USD 2.4 billion facility.

Petroleo Nautipa facility

In March 2015, BW Offshore signed the facility documentation for a new USD 80 million senior secured credit facility in respect of the FPSO Petroleo Nautipa. The loan has a tenor of 7.5 years and will be used for general corporate purposes. The facility has a margin of 170 basis points above USD LIBOR, and is subject to financial covenants similar to the covenants under the USD 2.4 billion facility. 

Umuroa facility

The Umuroa facility is a senior secured reducing revolving credit facility agreement entered into on 30 October 2009, with a total initial availability of USD 130 million. The availability on the facility was initially reduced quarterly by USD 4.2 million until it reached the balloon of USD 30.0 million in November 2015. The facility was then extended to March 2018 with quarterly reductions of USD 1 million. The balloon in March 2018 will be USD 22 million. The facility has a margin of 200 basis points above USD LIBOR, and is subject to financial covenants similar to the covenants under the USD 2.4 billion facility. 

Bond loans

BW Offshore has four bond loans listed on the Oslo Stock Exchange; BWO01, BWO02, BWO03 and BWO04. The loans are senior unsecured with a floating rate of 3 month NIBOR + margin. Interests are paid on a quarterly basis.

The four bonds were amended in July 2016. The amendments include extension of maturity, partial redemptions, changes to the equity ratio covenant and alignment of margin (450bps) from original maturity date to new maturity date on all four bonds.

Financial covenants

  • Available liquidity > USD 75 million (incl undrawn and available resources)
  • Equity to total assets > 20%

BWO01: NOK 500 million, March 2012 - March 2020, NIBOR 3M +425 bps

  • Maturity extended from March 2017 to March 2020
  • Partial redemption of NOK 140 million in March 2017
  • NIBOR 3M + 450bps from March 2017 to March 2020
  • Registration document
  • Securities note

BWO02: NOK 500 million, March 2013 - September 2020, NIBOR 3M +415 bps

BWO03: NOK 750 million, March 2014 - March 2021, NIBOR 3M +350 bps 

  • Maturity extended from March 2019 to March 2021
  • Partial redemtion of NOK 150 million in September 2020
  • NIBOR 3M + 450bps from March 2019 to March 2021
  • Registration document
  • Securities note

BWO04: NOK 900 million, June 2015 - September 2022, NIBOR 3M +425bs

  • Maturity extended from June 2020 to March 2022
  • Partial redemption of NOK 90 million in March 2021
  • Partial redemption of NOK 180 million in December 2021
  • NIBOR 3M + 450bps from March 2020 to March 2022
  • Registration document
  • Securitites note

 

CAPITAL STRUCTURE AND FINANCIAL STRATEGY

The primary focus of BW Offshore’s financial strategy is to ensure a healthy capital structure to support its business, fulfil all financial obligations and maximise shareholder values.

BW Offshore (“Group”/”Company”) also monitors and manages its capital structure in light of changes in the economic conditions. To maintain or adjust the capital structure, the Group may adjust dividend payments to its shareholders, return capital to shareholders or issue new shares.

Construction and Conversion projects will normally be funded through current loan facilities and/or specific project loan facilities equalling 70-80% of the cost of the project. Project loan facilities can be established either before a contract for the conversion project is signed, during the conversion phase of a project or when the FPSO commence operation.

The Group has also since 2012 issued bonds in NOK. Going forward the Group will consider to continue issuing bonds if it provide competitive funding as an alternative to traditional bank financing.

The Company has no specific targeted equity ratio. However, the loan facilities of the Group have certain covenants related to equity and equity ratio, both closely monitored by the Company.

RISK MANAGEMENT

BW Offshore’s risk exposure is analysed and evaluated to ensure sound internal control and appropriate risk management based on BW Offshore’s values, policies and code of ethics. The Group is exposed to a variety of financial risks: market risk (including currency risk and price risk), credit risk, liquidity risk and interest rate risk. The Group’s overall risk management program focuses on the unpredictability of financial markets and seeks to minimise potential adverse effects on the Group’s financial performance. The most important operational risk factors are related to the operation of FPSOs and the execution of projects, accidents on the units and oil spills to the environment.

On a fleet wide basis, the Company takes out insurance cover for its crew and support staff, pollution and clean up, damage to vessels, on some units loss of income and third-party liabilities. The insurance also covers losses resulting from acts of war and terrorism. Cover for oil pollution and oil pollution caused by war and war-like actions are limited per incident. BW Offshore’s operational activities are subject to tax in a number of jurisdictions. As contracts with clients are long term in nature, the Group’s results are exposed to risk of changes to tax legislation. Risk management is described more comprehensively in the notes to the consolidated financial statements.

Activities expose BW Offshore to a variety of financial risks: Price risk (including currency risk and market risk), credit risk, liquidity risk and interest rate risk. Historically, demand for offshore exploration, development and production has been volatile and closely linked to the oil price. Low oil prices typically lead to a reduction in exploration as the oil companies scale down their own investment budgets. Most of the Group’s units at 31 December 2014 are fixed on long-term contracts, and this, to some extent, reduces the Group’s exposure against intermediate oil and gas price fluctuations. Nevertheless, a decrease in the oil prices may have an adverse impact on the financial position of the Group.

BW Offshore’s central finance division has the responsibility of financing, treasury management and financial risk management. The overall risk management program focuses on the unpredictability of financial markets and seeks to minimise potential adverse effects on the Group’s financial performance.

A finance management team, lead by the Chief Financial Officer, identifies and evaluates financial risks in close co-operation with the Group’s operating units. The finance management teams activities are governed by policies approved by the Board of Directors for overall risk management, as well as policies covering specific areas such as foreign exchange risk, interest rate risk, credit risk, and investing excess liquidity. The finance management team will report to the Group’s Senior Management, the Audit Committee and the Board of Directors on the status on activities on a regular basis.
BW Offshore does not use financial instruments, including financial derivatives, for trading purposes.