The focus of BW LPG’s financial strategy is to ensure that the company has adequate liquidity appropriate to its goals, strategy and risk profile. LPG shipping is a seasonal and cyclical industry that requires the company to have a robust capital structure.
BW LPG aims for leverage ratio of 40-60% in order to maximise shareholder value, subject to maintaining sufficient financial flexibility to provide reasonable assurance as to the ability to meet financial obligations taking into consideration the potential for changing economic conditions. BW LPG regularly monitors and manages its capital requirements in light of changes to economic and industry conditions.
In determining financing appropriate to business growth and investments, BW LPG considers a range of financing options typically available from the private or public debt and equity markets, giving consideration to the overall business strategy, the appropriateness of products to the specific financing need and the broader context of the organization and its balance sheet and capital commitments, and also considering economic conditions at that time and projected into the future.
Current Loan Facilities
In 2013, the Group entered into a seven-year US$700.0 million Senior Secured Term Loan and Revolving Credit Facility (“US$700 million Facility”), which comprised a term loan facility of US$500.0 million and revolving credit facility of US$200.0 million to repay a shareholder loan and to provide general corporate and working capital. The term loan is amortised quarterly with a bullet payment at the end of the facility. The revolving credit of US$200.0 million was increased to US$300.0 million in 2016.
In 2015, the Group signed a 12-year Facility Agreement for a debt facility of up to US$400.0 million (“US$400 million Facility”) to provide post-delivery financing for seven VLGC newbuilds. The facility is amortised quarterly with a bullet payment at the end of the facility.
In 2016, the Group signed a 12-year debt facility of up to US$220.8 million (“US$221 million Facility”) to provide post-delivery financing for four VLGC newbuilds. The facility is amortised quarterly with a bullet payment at the end of the facility.
In 2017, the Group signed a 11-year Facility Agreement of US$290.0 million (“US$290 million Facility”) for the re-financing of six 2016 built ex-Aurora vessels. The facility is amortised quarterly with a bullet payment at the end of the facility.
In February 2018, the Group signed a five-year Senior Secured Term Loan of US$150 million with a syndication of five banks to replace the unsecured US$150 million Revolving Credit Facility due on 31 March 2018. The facility is amortised quarterly with a bullet payment at the end of the facility.
The Company is required to comply with loan-to-value covenants and a number of financial covenants.
The key covenants that are to be maintained under both the Facilities are as follows:
1. Fair Market Value of the Security Vessels to be equal to or is higher than 125% of the outstanding loan amount;
2. Adjusted Equity Ratio to be equal to or higher than 35%;
3. Adjusted Equity to be equal to or more than USD 350 million; and
4. Cash and Cash Equivalents added to available credit lines under existing facilities to be at all times more than US$50 million.
(i) Adjusted Equity Ratio is Adjusted Equity expressed as a percentage of the sum of Liabilities and Adjusted Equity.
(ii) Adjusted Equity is the total equity as presented in the company’s consolidated financial statements after adjusting the vessels’ values to their Fair Market Values.
(iii) Cash and Cash Equivalents are as presented in the Company’s consolidated financial statements.
None the Facilities prohibits the Company from paying dividends so long as an event of default has not occurred and the Company is not, and after payment of dividend would not be, in breach of any covenant. All the Facilities also do not contain restrictions beyond the financial covenants against incurring further external financing.
The Company has at all times the option to be released from all obligations under the Facilities by repaying and cancelling all amounts under the Facilities..