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The BW Offshore Financial Strategy

Loans and Facilities

USD 672.5 million Corporate Facility

During the second quarter of 2019, BW Offshore refinanced the previous USD 2,400 million facility into a five-year senior secured USD 672.5 million revolving credit facility. The facility is priced at a margin of 225 basis points above USD LIBOR and if the facilities utilisation exceeds 50%, the margin increases by another 25 basis points. The facility is reduced semi-annually with USD 52.5 million.

The new USD 672.5 million Corporate Facility is subject to certain covenants, including:

  • Minimum book equity of at least 25% of total assets
  • Debt to EBITDA of maximum 5.5
  • Minimum USD 75 million available liquidity including undrawn amounts
  • Interest coverage of minimum 3.0

 

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 an FPSO to operate on the Catcher oil field in the UK North Sea. The facility has a margin of 225 basis points above USD LIBOR and is subject to financial covenants similar to the covenants under the USD 672.5 million Corporate Facility.

Petroleo Nautipa facility

During the first quarter of 2015, the Group entered into a USD 80 million senior secured loan facility in respect of the FPSO Petróleo Nautipa. The loan has a tenor of 7.5 years and will be used for general corporate purposes. The facility is subject to financial covenants similar to the covenants under the USD 672.5 million Corporate Facility.

 

Bond Loans

BWO01 - NOK 500 MILLION BOND

During the first quarter of 2012, BW Offshore Limited successfully completed the placement of a NOK 500 million senior unsecured bond with maturity date on 15 March 2017. The maturity was extended to 15 March 2020 with NOK 140 million partial redemption on 15 March 2017 as part of the amendment exercise. The proceeds from the Bond loan can be used for general corporate purposes. As per 31 December 2019 NOK 237.6 million was outstanding. Upon placement of BW005 and the convertible bond, the remaining balance was repaid mid-January 2020 upon expiry of the 60 days Call Notice period.

BWO02 - NOK 500 MILLION BOND

During the first quarter of 2013, BW Offshore Limited successfully completed the placement of a NOK 500 million senior unsecured bond with maturity date on 21 March 2018. The maturity was extended to 21 September 2020 with NOK 100 million partial redemption on 23 March 2020. The proceeds from the Bond loan can be used for general corporate purposes. As per 31 December 2019 NOK 91.5 million was outstanding. Upon placement of BW005 and the convertible bond, the remaining balance was repaid mid-January 2020 upon expiry of the 60 days Call Notice period.

BWO03 - NOK 750 MILLION BOND

During the first quarter of 2014, BW Offshore Limited successfully completed the placement of a NOK 750 million senior unsecured bond with maturity date on 11 March 2019. The maturity was extended to 11 March 2021 with NOK 150 million partial redemption on 11 September 2020. The proceeds from the Bond loan can be used for general corporate purposes. As per 31 December 2019 NOK 329 million was outstanding. Upon placement of BW005 and the convertible bond, the remaining balance was repaid mid-January 2020 upon expiry of the 60 days Call Notice period.

BWO04 - NOK 900 MILLION BOND

During the second quarter of 2015, BW Offshore Limited successfully completed the placement of a NOK 900 million senior unsecured bond with maturity date on 16 June 2020. The maturity was extended to 16 March 2022 with NOK 90 million partial redemption on 16 March 2021 and NOK 180 million partial redemption on 16 December 2021. The pro­ceeds from the Bond loan can be used for general corporate purposes. As per 31 December 2019 NOK 220 million was outstanding. Upon placement of BW005 and the convertible bond, the remaining balance was repaid mid-January 2020 upon expiry of the 60 days Call Notice period.

BWO05 – NOK 900 million Bond

During the fourth quarter 2019, BW Offshore Limited successfully completed the placement of a NOK 900 million senior unsecured bond with maturity date on 4 December 2023. The proceeds from the Bond loan was used to partly repay existing bond loans. The bond loan is subject to certain covenants, including minimum book equity of at least 25% of total assets and minimum USD 75 million available liquidity including undrawn amounts available for utilisation by the Group.

Convertible bonds

During the fourth quarter 2019, BW Offshore Limited issued a USD 297.4 million convertible bond with a five-year tenor and coupon of 2.50% per annum, payable semi-annually in arrears. The convertible bond has no regular repayments and matures in full on 12 November 2024. There are no financial covenants in the convertible bond agreement. The proceeds from the convertible bond loan is used to refinance the existing bond loans and general corporate purposes. The initial conversion price of USD 10.24 corresponds to a conversion premium of 37.5% over the volume weighted average price of the shares on the Oslo Stock Exchange at 5 November 2019 (converted at the prevailing USD:NOK spot rate equal to NOK 9.1921 / USD 1.00).

 

Capital Structure and Equity

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 issued bonds in NOK and will consider to continue to do so when the market is attractive and if it provides competitive funding as an alternative to traditional bank financing. The Group placed a convertible bond in 2019 and has now more diversified sources of funding.

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.

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.