5.3.24Loans and Borrowings

Bank interest-bearing loans and other borrowings

The movement in the bank interest bearing loans and other borrowings is as follows:

The Company has no ‘off-balance sheet’ financing through special purpose entities. All long-term debt is included in the consolidated statement of financial position.    

Further disclosures about the fair value measurement are included in Note 5.3.29 ‘Financial Instruments – Fair values and risk management’.

The bank interest-bearing loans and other borrowings, excluding transaction costs and amortised costs amounting to US$ 137 million (2015: US$ 158 million), have the following forecasted repayment schedule:

The bank interest-bearing loans and other borrowings by entity are as follows:

Loans and borrowings per entity

• ¹ % interest per annum on the remaining loan balance

Annual interest rates include the interest rate impact of hedging financial derivatives. The ‘Other debt’ mainly includes loans received from partners in subsidiaries.

For the project finance facilities, the respective vessels are mortgaged to the banks or to note holders. Interest expense on long-term debt during 2016 amounted to US$ 254 million (2015: US$ 184 million) and interest capitalized amounted to US$ 37 million (2015 : US$ 48 million). The average cost of debt was 4.6% in 2016 (2015: 4.0%).

On January 12, 2017, the pre-completion guarantees and undertakings related to FPSO Cidade de Saquarema project finance facility have been released.

The Company has available short-term credit lines and borrowing facilities resulting from the undrawn part of the Revolving Credit Facility (RCF). The expiry date of the undrawn facilities and unused credit lines are:

Expiry date of the undrawn facilities and unused credit lines

The Revolving Credit Facility (RCF) was renewed on December 16, 2014 and will mature on December 16, 2021 after the last one-year extension option was exercised in December 2016. The US$ 1 billion facility was secured with a select group of 13 core relationship banks and replaces the previous facility of US$ 750 million. In the last year of its term (from December 17, 2020 to December 16, 2021) the RCF is reduced by US$ 50 million. The RCF can be increased by US$ 250 million on three occasions up to a total amount of US$ 1,250 million (US$ 1,200 million in the last year), subject to the approval of the RCF lenders. The RCF commercial conditions are based on LIBOR and a Margin adjusted in accordance with the applicable Leverage Ratio ranging from a bottom level of 0.50% p.a. to a maximum of 1.90% p.a.

Covenants

The Company, together with its core relationship banks, has signed an amendment of its Revolving Credit

Facility (RCF) on April 18, 2016, providing headroom improvements to the leverage and interest coverage

ratios. The interest coverage ratio threshold has been lowered from 5.0x to 4.0x from December 31, 2016

through maturity of the RCF at the end of 2021. The leverage covenant is temporarily being adjusted upwards

to 4.25x in December 2016, 4.50x in June 2017 and 4.25x in December 2017 before reverting back to the

originally agreed level of 3.75x through to maturity of the facility.

The agreed upon amendments, combined with a strong cash position, provide the Company with a larger

degree of flexibility given the current industry downturn.

The following key financial covenants apply to the RCF as agreed with the respective lenders, and, unless stated otherwise, relate to the Company’s consolidated financial statements:

• Solvency ratio: Tangible Net Worth divided by Total Tangible Assets > 25%

• Leverage Ratio: Consolidated Net Borrowings divided by adjusted EBITDA < 4.25 in December 2016, 4.5 in June 2017, 4.25 in December 2017 and 3.75 onwards

• Interest Cover Ratio: Adjusted EBITDA divided by Net Interest Payable > 4.0

For the purpose of covenants calculations, the following simplified definitions apply:

• Tangible Net Worth: Total Equity (including non-controlling interests) of the Company in accordance with IFRS, excluding the mark to market valuation of currency and interest derivatives undertaken for hedging purposes by the Company through Other Comprehensive Income.

• Total Tangible Assets: The Company total assets (excluding intangible assets) in accordance with IFRS Consolidated Statement of Financial position less the mark to market valuation of currency and interest derivatives undertaken for hedging purposes by the Company through Other Comprehensive Income

• Adjusted EBITDA: Consolidated earnings before interest, tax and depreciation of assets and impairments of The Company in accordance with IFRS except for all lease and operate joint ventures being then proportionally consolidated, adjusted for any exceptional or extraordinary items, and by adding back the capital portion of any finance lease received by The Company during the period

• Consolidated Net Borrowings: Outstanding principal amount of any moneys borrowed or element of indebtedness aggregated on a proportional basis for the Company’s share of interest less the consolidated cash and cash equivalents available

• Net Interest Payable: All interest and other financing charges paid up, payable (other than capitalized interest during a construction period and interest paid or payable between wholly owned members of the Company) by the Company less all interest and other financing charges received or receivable by the Company, as per IFRS and on a proportional basis for the Company’s share of interests in all lease and operate joint ventures

Covenants

None of the loans and borrowings in the statement of financial position were in default as at the reporting date or at any time during the year. During 2016 and 2015 there were no breaches of the loan arrangement terms and hence no default needed to be remedied, or the terms of the loan arrangement renegotiated, before the financial statements were authorized for issue.