credit facility of up to $50,000 for the purpose of refinancing the facility of GAS-two Ltd. with DnB Nor Bank ASA, National Bank of Greece and UBS AG which was due to mature in March 2014 (“existing facility”) and for general corporate purposes. The revolving credit facility is available for drawing on a fully revolving basis provided the total facility amount drawn post drawdown does not exceed 72.5% of the vessel’s value, drawings must be in minimum amounts of $5,000 and can be made until three months prior to the maturity date in May 2018. On May 28, 2013, GAS-two Ltd. drew down $110,000 from the term loan facility and repaid the outstanding amount of the existing facility of $101,443. On September 25, 2013, GAS-two Ltd. drew down $39,494 from the revolving credit facility. On January 27, 2014, GAS-two Ltd. drew down $2,681 from the revolving credit facility with DNB Bank ASA, acting through its London Branch, UBS AG, National Bank of Greece S.A., Commonwealth Bank of Australia and Skandinaviska Enskilda Banken AB (publ). As of December 31, 2015, the undrawn amount from the revolving facility was $7,825 and the balance outstanding was $42,175 which is classified under current liabilities. The balance outstanding as of December 31, 2015 of the term loan was $85,000 and is repayable in 10 consecutive quarterly installments of $2,500 together with a final balloon payment of $60,000 payable concurrently with the last installment in May 2018. The loan bears interest at LIBOR plus a margin. GAS-two Ltd. is also required to maintain at all times minimum liquidity of $1,500 and was in compliance as of December 31, 2015.
As of December 31, 2015, GAS-two Ltd. has classified in restricted cash an amount of $718 representing the 90% of its free cash pursuant to a specific clause in its loan agreement requiring such restricted cash in the event that the charterer has not exercised its option to extend the charter, with effect on and from 12 months prior to expiry of the charter. The amount held is classified as a current asset and will be restricted until GAS-two Ltd. enters into a replacement charter (Note 7).
bears interest at LIBOR plus a margin. The borrower is required to have a minimum liquidity of $1,500 following the loan drawdown date and was in compliance as of December 31, 2015.
(e) Credit Suisse AG
On January 18, 2012, GAS-seven Ltd. entered into a loan agreement of up to $144,000 with Credit Suisse AG, for the purpose of financing one of the newbuilding vessels. The agreement provides for a single tranche that was drawn on December 4, 2013 for the financing of theGasLog Seattle.The loan bears interest at LIBOR plus a margin. The balance outstanding as of December 31, 2015 was $128,000 and is repayable in 20 consecutive quarterly installments of $2,000 together with a final balloon payment of $88,000 payable concurrently with the last installment in December 2020.
(f) DnB Bank ASA, Commonwealth Bank of Australia, Danish Ship Finance A/S, ING Bank N.V. and Skandinaviska Enskilda Banken AB (publ)
On December 23, 2011, GAS-eight Ltd., GAS-nine Ltd. and GAS-ten Ltd. entered into a loan agreement (the “Principal Agreement”) for a senior secured credit facility of up to $435,000 with DnB Bank ASA, Commonwealth Bank of Australia, Danish Ship Finance A/S, ING Bank N.V. and Skandinaviska Enskilda Banken AB (publ) for the purpose of financing three of the newbuilding vessels. The loan agreement provides for three tranches, to be drawn upon delivery of each newbuilding vessel. On June 24, 2014, GAS-eight Ltd. drew down $143,000 from the loan facility, to partially finance the delivery of theSolaris, on December 10, 2014, GAS-nine Ltd. drew down $146,000 from the loan facility to partially finance the delivery of theGasLog Saratogaand on April 24, 2015, GAS-ten Ltd. drew down $146,000 from the loan facility to partially finance the delivery of theGasLog Salem.The balance outstanding as of December 31, 2015 of the GAS-eight Ltd. tranche was $131,060 and is repayable in 22 consecutive quarterly installments of $1,990 with balloon payments of $87,280, the balance outstanding as of December 31, 2015 of the GAS-nine Ltd. tranche was $137,880 and is repayable in 24 consecutive quarterly installments of $2,030 with balloon payments of $89,160 and the balance outstanding as of December 31, 2015 of the GAS-ten Ltd. tranche was $141,940 and is repayable in 26 consecutive quarterly installments of $2,030 with balloon payments of $89,160. The loan bears interest at LIBOR plus a margin. Each of the borrowers is required to have a minimum liquidity of $1,500 following the loan drawdown date and was in compliance as December 31, 2015.
On October 23, 2014, GasLog received a waiver letter from DNB Bank ASA, acting as agent of the loan facility of GAS-eight Ltd., GAS-nine Ltd. and GAS-ten Ltd., relating to the failure of GAS-nine Ltd. and GAS-ten Ltd. to secure relevant charter parties as required by the aforementioned loan facility. The waiver permits (subject to proper documentation being executed) the drawdown of the relevant tranches notwithstanding that the charter arrangements have not been secured. Subsequent to the waiver letter, on December 2, 2014 a supplemental deed was signed with the lenders which among other amendments to the Principal Agreement requested for an amount of $21,000 per vessel to be maintained in blocked accounts until the time that an acceptable charter party agreement has been entered into after the delivery date of the respective vessels. As of December 31, 2015, the amounts held in blocked accounts of $42,000 were classified as restricted cash under current assets (Note 7).
As the aforementioned waiver did not result in substantially different terms to the Principal Agreement, the amendments are considered a modification of the existing terms. Consequently the additional fees incurred during the year ended December 31, 2014 which amounted to $250 have been accounted as deferred financing fees and will be amortized over the remaining term of the loan facility.
(g) Citibank N.A., London Branch, Citibank International Plc. and DVB America N.V.
On September 25, 2013, GAS-fifteen Ltd. signed a loan agreement with Citibank N.A., London Branch and Citibank International Plc., for a term loan facility of $100,000 to partially finance the
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acquisition of theGasLog Chelseadrawn on September 26, 2013. In October 2013, Citibank International Plc., the existing lender of the GAS-fifteen Ltd. facility, transferred $50,000 of the outstanding facility to DVB Bank America N.V. There was no other change to the terms of the original agreement. The balance outstanding as of December 31, 2015 was $86,660 and is repayable in six semi-annual installments of $3,335 together with a final balloon payment of $66,650 payable concurrently with the last installment in September 2018. The loan bears interest at LIBOR plus a margin. GAS-fifteen Ltd. is also required to maintain at all times minimum liquidity of $1,500 and was in compliance as of December 31, 2015.
(h) Citibank, N. A. London Branch
On April 1, 2014, in connection with the acquisition of the three LNG carriers from BG Group (Note 6), GAS-sixteen Ltd., GAS-seventeen Ltd. and GAS-eighteen Ltd. signed a loan agreement of $325,500 with Citibank, N.A. London Branch acting as security agent and trustee for and on behalf of the other finance parties. The loan had a two year maturity without intermediate payments bearing interest at LIBOR plus a margin and was drawn on April 9, 2014, to partially finance the deliveries of theMethane Rita Andrea,theMethane Jane Elizabethand theMethane Lydon Volney.In connection with the closing of the Partnership’s acquisition of the two entities that own theMethane Rita Andreaand theMethane Jane Elizabethon September 29, 2014, GasLog entered into a supplemental deed to the facility agreement dated April 1, 2014 that, among other things, permitted the Partnership (or its subsidiary) to acquire GAS-sixteen Ltd. and GAS-seventeen Ltd. from GasLog and required, as a condition precedent to such acquisition, the Partnership and GasLog Partners Holdings LLC to guarantee the obligors obligations under the facility. The debt of $217,000 was assumed by the Partnership for the acquisition of GAS-sixteen Ltd. and GAS-seventeen Ltd. On October 9, 2014, the Partnership prepaid $25,000 from the proceeds of the follow-on equity offering. The assumed balance of $192,000 was fully repaid on November 19, 2014. The balance outstanding as of December 31, 2015 related to GAS-eighteen Ltd. was $108,500 and is repayable in full in April 2016 without intermediate payments. GAS-eighteen Ltd, is also required to maintain at all times minimum liquidity of $1,500 and was in compliance as of December 31, 2015.
On May 14, 2014, in connection with the acquisition of the three additional LNG carriers from BG Group (Note 6), GAS-nineteen Ltd., GAS-twenty Ltd. and GAS-twenty one Ltd. signed a loan agreement of $325,500 with Citibank N.A. London Branch, acting as security agent and trustee for and on behalf of the other finance parties. The loan has a two year maturity without intermediate payments bearing interest at LIBOR plus a margin and $108,500 was drawn on June 3, 2014, on June 10, 2014 and on June 24, 2014 to partially finance the deliveries of theMethane Shirley Elisabeth,the Methane Heather Sallyand theMethane Alison Victoriarespectively. In connection with the closing of the Partnership’s acquisition of the three entities that own theMethane Shirley Elisabeth,theMethane Heather Sallyand theMethane Alison Victoriaon July 1, 2015, GasLog Partners and GasLog Partners Holdings LLC were added as corporate guarantors in addition to GasLog, for the respective loan facility, replacing a previous guarantor, GasLog Carriers Ltd. The debt of $325,500 was assumed by the Partnership of GAS-nineteen Ltd., GAS-twenty Ltd. and GAS-twenty one Ltd. Using the proceeds of the equity offering completed in June 2015, GasLog Partners prepaid $10,000 of the GAS-nineteen Ltd. tranche on September 4, 2015, $5,000 of the GAS-twenty Ltd. tranche on December 10, 2015 and $5,000 of the GAS-twenty one Ltd. tranche on December 29, 2015. The aggregate balance outstanding under the facility as of December 31, 2015, was $305,500 and repayable in full in June 2016 without intermediate payments. Each of the borrowers is required to have a minimum liquidity of $1,500 following the loan drawdown date and was in compliance as of December 31, 2015.
(i) Citibank, Nordea Bank Finland plc, London Branch, DVB Bank America N.V., ABN Amro Bank N.V., Skandinaviska Enskilda Banken AB and BNP Paribas
On November 12, 2014, GAS-three Ltd., GAS-four Ltd., GAS-five Ltd., GAS-sixteen Ltd., GAS-seventeen Ltd, GasLog Partners and GasLog Partners Holdings LLC entered in a loan agreement with Citibank acting as security agent and trustee for and on behalf of the other finance
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parties mentioned above, for a credit facility for up to $450,000 (the “GasLog Partners’ Credit Facility”) for the purpose of refinancing in full the existing debt facilities. The agreement provides for a single tranche that was drawn on November 18, 2014. The credit facility bears interest at LIBOR plus a margin. The aforementioned refinancing was considered an extinguishment of the existing debt facilities. Consequently, the unamortized loan fees of $9,019 were written off to profit or loss for the year ended December 31, 2014. The balance outstanding as of December 31, 2015 was $427,500 and is repayable in 16 equal quarterly installments of $5,625 each and a final balloon payment of $337,500 payable concurrently with the last quarterly installment in November 2019.
On May 8, 2015, the Partnership entered into a supplemental deed relating to its Citibank N.A. loan facility, in which the lenders unanimously approved such changes to the facility agreement as were required to reflect the changes to the charters of three vessels agreed with BG Group on April 21, 2015. As the aforementioned deed did not result in substantially different terms to the original loan agreement, the amendments were considered a modification of the existing terms. Consequently, the additional fees of $515 incurred during the year ended December 31, 2015 have been accounted for as deferred financing fees and will be amortized over the remaining term of the loan facility with the effective interest method.
(j) ABN Amro Bank N.V., Commonwealth Bank of Australia, Credit Agricole Corporate and Investment Bank, Deutsche Bank AG Filiale Deutschlandgeschäft and DNB Bank ASA, London Branch and ING Bank N.V., London Branch
On March 25, 2015, GAS-twenty six Ltd. and GAS-twenty seven Ltd., entered into a senior secured term loan facility of up to $325,000 with ABN Amro Bank N.V., Commonwealth Bank of Australia, Credit Agricole Corporate and Investment Bank, Deutsche Bank AG Filiale Deutschlandgeschäft, DNB Bank ASA, London Branch and ING Bank N.V., London Branch, and a subordinated term loan facility of up to $135,000 with ABN Amro Bank N.V., Credit Agricole Corporate and Investment Bank, Deutsche Bank AG Filiale Deutschlandgeschäft and DNB Bank ASA, London Branch for the purpose of financing the acquisition of theMethane Becki Anneand theMethane Julia Louise(Note 6). The available amounts were fully drawn on March 31, 2015. Both facilities bear interest at LIBOR plus a margin and each of the borrowers is required to have a minimum liquidity of $1,500 following the loan drawdown date and was in compliance as of December 31, 2015. The balance outstanding as of December 31, 2015 of the senior secured term loan facility was $325,000 and is repayable in one bullet installment on the final maturity date in March 2017. The balance outstanding as of December 31, 2015 of the subordinated term loan facility was $135,000 and is repayable in four consecutive quarterly installments of $33,750, beginning 15 months after the signing date (June 2016).
Securities covenants and guarantees
The obligations under the aforementioned facilities, with the exception of the subordinated term loan facility, are or with respect to the undrawn facility will be secured by a first priority mortgage over the vessels, a pledge of the share capital of the respective vessel owning companies and a first priority assignment of earnings related to the vessels, including charter revenue, management revenue and any insurance and requisition compensation. In relation to the subordinated term loan facility drawn with Gas-twenty six Ltd. and GAS-twenty seven Ltd., this is secured by second priority mortgage and assignments. Obligations under the GasLog Partners’ Credit Facility are facilities guaranteed by the Partnership and GasLog Partners Holdings LLC, obligations under the GAS-nineteen Ltd., GAS-twenty Ltd. and GAS-twenty one Ltd. loan agreement are guaranteed by GasLog, the Partnership and GasLog Partners Holdings LLC, while obligations under the remaining facilities are guaranteed by GasLog and GasLog Carriers Ltd. The facilities include customary respective covenants, and among other restrictions the facilities include a fair market value covenant pursuant to which the majority lenders may request additional security under the facilities if the aggregate fair market value of the collateral vessels (without taking into account any charter arrangements) were to fall below 120% of the aggregate outstanding principal balance under the facilities and any negative marked-to market value arising under any hedging transaction. The Group was in compliance with the required minimum security coverage as of December 31, 2015 with the
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exception of a marginal breach of $375 in relation to GAS-eighteen Ltd. (the owner of theMethane Lydon Volney). The majority lenders under the relevant facility have confirmed that they have no intention to exercise their right to request additional security.
Committed Loan Facilities
On October 16, 2015, GasLog entered into a debt financing agreement with 14 international banks for $1,311,356 to partially finance the delivery of the eight newbuildings expected to be delivered in 2016, 2018 and 2019. The financing is backed by the Export Import Bank of Korea (“KEXIM”) and the Korea Trade Insurance Corporation (“K-Sure”), who are either directly lending or providing cover for over 60% of the facility.
The loan agreement provides for four tranches of $412,458, $201,094, $206,115 and $491,690. The facility will be also sub-divided into eight loans, one loan per newbuilding vessel, to be provided for each of the vessels on a pro rata basis under each of the four tranches. Each drawing under the first three tranches shall be repaid in 24 consecutive semi-annual equal installments commencing six months after the actual delivery of the relevant vessel according to a 12-year profile. Each drawing under the fourth tranche shall be repaid in 20 consecutive semi-annual equal installments commencing six months after the actual delivery of the relevant vessel according to a 20-year profile, with a balloon payment together with the final installment. Amounts drawn will bear interest at LIBOR plus a margin. The obligations under the aforementioned facilities will be secured by a first priority mortgage over the vessels, a pledge of the share capital of the respective vessel owning companies and a first priority assignment of earnings related to the vessels, including charter revenue, management revenue and any insurance and requisition compensation. Obligations under the facilities are guaranteed by GasLog and GasLog Carriers Ltd. The facilities include customary respective covenants, and among other restrictions the facilities include a fair market value covenant pursuant to which an event of default could occur under the facilities if the aggregate fair market value of the collateral vessels (without taking into account any charter arrangements) were to fall below 115% of the aggregate outstanding principal balance for the first two years after each drawdown and below 120% at any time thereafter. The financial covenants are applicable on a Group level and are substantially the same as those of the remaining GasLog facilities.
As of December 31, 2015, commitment, arrangement, coordination, agency, bookrunner and legal fees of $17,874 for obtaining the financing are classified under Deferred financing cost in the statement of financial position and will be reclassified contra to debt on the drawdown dates.
Senior Unsecured Notes
On June 27, 2013, GasLog issued a senior unsecured bond of NOK 500,000 (or $83,206 based on the exchange rate on June 27, 2013) that will mature on June 27, 2018. On May 2, 2014, GasLog closed a follow-on issue of the Norwegian bond of NOK 500,000 (or $83,612 based on the exchange rate on closing date) at a premium of $4,180 (based on the exchange rate on closing date). The total outstanding balance of the Norwegian bond, including the follow-on issue (the “Bond”) amounts to NOK 1 billion.
The Bond bears interest at NIBOR plus margin. Interest payments shall be made in arrears on a quarterly basis. GasLog may redeem the Bond in whole or in part as follows (Call Option): (a) with settlement date at any time from June 27, 2016 to but not including June 27, 2017 at 105.00% of par plus accrued interest on redeemed amount, (b) with settlement date at any time from June 27, 2017 to but not including December 27, 2017 at 103.00% of par plus accrued interest on redeemed amount, and (c) with settlement date at any time from December 27, 2017 to but not including the maturity date at 101.75% of par plus accrued interests on redeemed amount.
The carrying amount of the Bond, net of unamortized financing costs and unamortized premium, as of December 31, 2015 was $112,185, while its fair value was $115,406 based on a NOK/USD exchange rate of 0.1137 as of December 31, 2015.
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Corporate guarantor financial covenants
GasLog Partners’ financial covenants
GasLog Partners as corporate guarantor for the GasLog Partners Credit Facility is subject to specified financial covenants on a consolidated basis. These financial covenants include the following as defined in the agreements:
|
| | (i) | | the aggregate amount of all unencumbered cash and cash equivalents must be not less than the higher of 3% of total indebtedness or $15,000; |
|
| | (ii) | | total indebtedness divided by total assets must be less than 60%; |
|
| | (iii) | | the ratio of EBITDA over debt service obligations (including interest and debt repayments) on a trailing 12 months’ basis must be not less than 110%; and |
|
| | (iv) | | the Partnership is permitted to declare or pay any dividends or distributions, subject to no event of default having occurred or occurring as a consequence of the payment of such dividends or distributions. |
The GasLog Partners Credit Facility also imposes certain restrictions relating to GasLog Partners, including restrictions that limit its ability to make any substantial change in the nature of its business or to change the corporate structure without approval from the lenders.
Compliance with the financial covenants is required on a semi-annual basis. GasLog Partners was in compliance with the respective financial covenants as of December 31, 2015.
GasLog’s financial covenants
GasLog, as corporate guarantor for the loan facilities listed above except for the GasLog Partners Credit Facility, is subject to specified financial covenants on a consolidated basis. GasLog Carriers Ltd. is not subject to any financial covenants.
The financial covenants include the following:
|
| | (i) | | net working capital (excluding the current portion of long-term debt) must be not less than $0; |
|
| | (ii) | | total indebtedness divided by total assets must not exceed 75%; |
|
| | (iii) | | the ratio of EBITDA over debt service obligations (including interest and debt repayments) on a trailing 12 months basis must be not less than 110%; |
|
| | (iv) | | the aggregate amount of all unencumbered cash and cash equivalents must be not less than the higher of 3% of total indebtedness or $20,000 after the first drawdown; |
|
| | (v) | | GasLog is permitted to pay dividends, provided that the Group holds unencumbered cash and cash equivalents equal to at least 4% of its total indebtedness subject to no event of default having occurred or occurring as a consequence of the payment of such dividends; and |
|
| | (vi) | | the Group’s market value adjusted net worth must at all times be not less than $350,000. |
The credit facilities also impose certain restrictions relating to GasLog, including restrictions that limit its ability to make any substantial change in the nature of its business or to engage in transactions that would constitute a change of control, as defined in the relevant credit facility, without repaying all of the Group’s indebtedness in full, or to allow the Group’s largest shareholders to reduce their shareholding in GasLog below specified thresholds.
GasLog as issuer of the Bond is required to comply with the financial covenants (ii), (iii), (iv) and (vi) listed above. In addition, the NOK denominated bond agreement signed on June 25, 2013, between GasLog and the bond trustee, as amended, or the “Bond Agreement”, includes a dividend restriction according to which the Group may not (i) declare or make any dividend payment or distribution, whether in cash or in kind, (ii) repurchase any of the Group’s shares or undertake other similar transactions (including, but not limited to, total return swaps related to the Group’s shares), or (iii) grant any loans or make other distributions or transactions constituting a transfer of value to the Group’s shareholders (items (i), (ii) and (iii) collectively referred to as the “Distributions”) that
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in aggregate exceed during any calendar year 50% of the Group’s consolidated net profit after taxes based on the audited annual accounts for the previous financial year (any unutilized portion of the permitted dividend pursuant to the above may not be carried forward). On November 14, 2014, GasLog signed an amendment to its Bond Agreement to revise the covenants to reflect GasLog’s growth and the anticipated growth of GasLog Partners. Under the amended agreement (a) GasLog is permitted to make Distributions up to an aggregate maximum per share, for the years 2015, 2016, 2017 and 2018 of $1.00/share, $1.10/share, $1.20/share and $1.30/share, respectively, provided that total indebtedness divided by total assets (giving pro forma effect for the Distribution) does not exceed 67.5% immediately after the Distribution is made, the ratio of EBITDA over debt service obligations on a trailing 12 months basis ending the quarter immediately prior to that in which the Distribution is made is not less than 115.0% and no event of default would result from such Distribution, (b) the amount of debt or committed debt availability that GasLog provides to GasLog Partners cannot exceed $75,000, and (c) GasLog has agreed to pay a one-time fee of 1.0% of the face value of the Bond.
As the above mentioned amendments to the covenants did not result in substantially different terms to the Bond Agreement, the amendments are considered a modification of the terms of the Bond Agreement. Consequently, the additional fees incurred during the year ended December 31, 2014 which amounted to $2,557 have been accounted as deferred financing fees and will be amortized over the remaining term of the Bond Agreement.
Compliance with the loan financial covenants is required on a semi-annual basis while compliance for the Bond covenants is required at all times. The Group was in compliance with all financial covenants as of December 31, 2015.
Loan Repayment Schedule
The maturity table below reflects the principal repayments of the loans outstanding as of December 31, 2015 based on the repayment schedule of the respective loan facilities (as described above):
| | | |
| | As of December 31,
2015 |
Not later than one year | | | | 645,193 | |
Later than one year and not later than three years | | | | 769,678 | |
Later than three year and not later than five years | | | | 703,022 | |
Later than five years | | | | 289,880 | |
| | |
Total | | | | 2,407,773 | |
| | |
The weighted average interest rate for the outstanding loan facilities as of December 31, 2015 was 3.32% (December 31, 2014: 3.30%) excluding the fixed interest rate for the interest rate swaps where hedge accounting is not applicable (Note 24).
After excluding the unamortised deferred loan issuance costs the carrying amount of the Group’s bank debt recognized in the consolidated financial statements approximates its fair value since the debt bears interest at a variable interest rate.
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13. Other Payables and Accruals
An analysis of other payables and accruals is as follows:
| | | | |
| | As of December 31, |
| | 2014 | | 2015 |
Social contributions | | | | 1,297 | | | | | 1,085 | |
Unearned revenue | | | | 24,180 | | | | | 30,159 | |
Accrued legal and professional fees | | | | 1,511 | | | | | 1,030 | |
Accrued board of directors’ fees | | | | 585 | | | | | 593 | |
Accrued employee costs | | | | 4,141 | | | | | 4,955 | |
Accrued off-hire | | | | 10,913 | | | | | 3,781 | |
Accrued crew costs | | | | 3,030 | | | | | 5,244 | |
Accrued purchases | | | | 4,523 | | | | | 6,207 | |
Accrued financing cost | | | | 476 | | | | | 76 | |
Accrued interest | | | | 6,087 | | | | | 7,713 | |
Accrued brokerage commission on vessels’ acquisition | | | | — | | | | | 4,600 | |
Other accruals | | | | 904 | | | | | 1,641 | |
| | | | |
Total | | | | 57,647 | | | | | 67,084 | |
| | | | |
The unearned revenue represents charter hires received in advance in December 2015 relating to hire period of January 2016, for 14 vessels (December 2014: 11 vessels).
14. Vessel Operating and Supervision Costs
An analysis of vessel operating and supervision costs is as follows:
| | | | | | |
| | For the year ended December 31, |
| | 2013 | | 2014 | | 2015 |
Employee costs | | | | 5,178 | | | | | 7,789 | | | | | 8,771 | |
Crew wages | | | | 16,019 | | | | | 36,577 | | | | | 49,254 | |
Technical maintenance expenses | | | | 5,344 | | | | | 12,753 | | | | | 20,364 | |
Provisions and stores | | | | 1,966 | | | | | 3,199 | | | | | 4,962 | |
Insurance expenses | | | | 1,864 | | | | | 4,882 | | | | | 7,407 | |
Management fees | | | | — | | | | | 188 | | | | | 375 | |
Vessels’ tax | | | | 702 | | | | | 2,645 | | | | | 3,010 | |
Other operating expenses | | | | 985 | | | | | 2,699 | | | | | 4,409 | |
| | | | | | |
Total | | | | 32,058 | | | | | 70,732 | | | | | 98,552 | |
| | | | | | |
15. Voyage Expenses and Commissions
An analysis of voyage expenses and commissions is as follows:
| | | | | | |
| | For the year ended December 31, |
| | 2013 | | 2014 | | 2015 |
Brokers’ commissions on revenue | | | | 1,385 | | | | | 3,554 | | | | | 4,678 | |
Bunkers consumption | | | | 1,476 | | | | | 4,184 | | | | | 9,577 | |
Adjustment for net pool allocation (Note 19) | | | | — | | | | | — | | | | | 35 | |
| | | | | | |
Total | | | | 2,861 | | | | | 7,738 | | | | | 14,290 | |
| | | | | | |
Bunkers consumption represents mainly bunkers consumed during vessels unemployment and off-hire.
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16. General and Administrative Expenses
An analysis of general and administrative expenses is as follows:
| | | | | | |
| | For the year ended December 31, |
| | 2013 | | 2014 | | 2015 |
Employee costs | | | | 13,276 | | | | | 16,344 | | | | | 17,276 | |
Board of directors’ fees | | | | 1,266 | | | | | 1,926 | | | | | 2,439 | |
Share-based compensation | | | | 493 | | | | | 1,856 | | | | | 2,872 | |
Rent and utilities | | | | 1,167 | | | | | 1,780 | | | | | 2,180 | |
Travel and accommodation | | | | 1,202 | | | | | 2,277 | | | | | 2,161 | |
Legal and professional fees | | | | 2,996 | | | | | 7,578 | | | | | 11,014 | |
Foreign exchange differences, net | | | | (661 | ) | | | | | (271 | ) | | | | | 689 | |
Directors’ and officers’ liability insurance | | | | 557 | | | | | 1,142 | | | | | 729 | |
Other expenses | | | | 1,302 | | | | | 1,522 | | | | | 1,922 | |
| | | | | | |
Total | | | | 21,598 | | | | | 34,154 | | | | | 41,282 | |
| | | | | | |
17. Net Financial Income and Costs
An analysis of financial income and costs is as follows:
| | | | | | |
| | For the year ended December 31, |
| | 2013 | | 2014 | | 2015 |
Financial Income | | | | | | |
Interest income | | | | 411 | | | | | 274 | | | | | 427 | |
| | | | | | |
Total financial income | | | | 411 | | | | | 274 | | | | | 427 | |
| | | | | | |
Financial Costs | | | | | | |
Amortization and write-off of deferred loan issuance costs and premium | | | | 3,620 | | | | | 15,362 | | | | | 11,355 | |
Interest expense on loans and realized loss on cash flow hedges | | | | 20,415 | | | | | 43,743 | | | | | 68,253 | |
Interest expense on Bond and realized loss on cross currency swaps | | | | 3,204 | | | | | 9,533 | | | | | 11,331 | |
Other financial costs | | | | 612 | | | | | 2,941 | | | | | 1,017 | |
| | | | | | |
Total financial costs | | | | 27,851 | | | | | 71,579 | | | | | 91,956 | |
| | | | | | |
During the year ended December 31, 2014, an amount of $9,019 representing the write-off of the unamortized deferred loan issuance costs in connection with the refinancing of the Partnership’s credit facilities (Note 12) is included in Amortization and write-off of deferred loan issuance costs.
18. Contingencies
Various claims, suits and complaints, including those involving government regulations, arise in the ordinary course of the shipping business. In addition, losses may arise from disputes with charterers, environmental claims, agents and insurers and from claims with suppliers relating to the operations of the Group’s vessels. Currently, management is not aware of any such claims or contingent liabilities requiring disclosure in the consolidated financial statements.
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19. Related Party Transactions
The Group had the following balances with related parties which have been included in the consolidated statements of financial position:
Dividends receivable and due from related parties
| | | | |
| | As of December 31, |
| | 2014 | | 2015 |
Dividends receivable from associate (Note 5) | | | | 1,000 | | | | | 925 | |
Commission for newbuildings | | | | 789 | | | | | — | |
Due from Cool Pool Limited | | | | — | | | | | 249 | |
Other receivables | | | | 80 | | | | | 171 | |
| | | | |
Total | | | | 1,869 | | | | | 1,345 | |
| | | | |
Pursuant to a commission agreement with Samsung, commissions due from the shipyard in relation to the newbuilding orders was paid by Samsung to DryLog Investments Ltd., an affiliate of Ceres Shipping. Upon receipt of the commissions, DryLog Investments Ltd. forwared the payments to the vessel-owning subsidiaries, after deducting handling fees for each payment. The outstanding receivable as of December 31, 2015 is $0 (December 31, 2014: $789). Following the delivery ofGasLog Salemin April 2015, this agreement is no longer in effect.
The amount due from Cool Pool Limited represents net revenue invoiced to GasLog which has not yet been collected.
Current Liabilities
| | | | |
| | As of December 31, |
| | 2014 | | 2015 |
Ship management creditors | | | | 97 | | | | | 60 | |
Amounts due to related parties | | | | 181 | | | | | 163 | |
Ship management creditors’ liability comprises cash collected from Egypt LNG Shipping Ltd. to cover the obligations of its vessel under the Group’s management.
Amounts due to related parties of $163 (December 31, 2014: $181) are expenses paid by a related party on behalf of the Group and payables to other related parties for the office lease and other operating expenses.
The Group had the following transactions with related parties which have been included in the consolidated statements of profit or loss for the years ended December 31, 2013, 2014 and 2015:
| | | | | | | | | | | | |
| | Company | | Details | | Statement of
income account | | 2013 | | 2014 | | 2015 |
(a) | | Egypt LNG Shipping Ltd. | | Vessel management | | Revenues | | | | 714 | | | | | 731 | | | | | 607 | |
(b) | | Nea Dimitra Property | | Office rent and utilities | | General and administrative expenses | | | | 687 | | | | | 758 | | | | | 704 | |
(b) | | Nea Dimitra Property | | Other office services | | General and administrative expenses | | | | — | | | | | 57 | | | | | — | |
(c) | | Ceres Monaco S.A.M. | | Office rent and utilities | | General and administrative expenses | | | | 27 | | | | | — | | | | | — | |
(d) | | Euronav (UK) Agencies Ltd. | | Office rent and utilities | | General and administrative expenses | | | | — | | | | | 150 | | | | | 646 | |
(d) | | Euronav (UK) Agencies Ltd. | | Professional services | | General and administrative expenses | | | | — | | | | | 109 | | | | | — | |
(e) | | Seres S.A. | | Catering | | General and administrative expenses | | | | 151 | | | | | 195 | | | | | 196 | |
(e) | | Seres S.A. | | Consultancy services | | General and administrative expenses | | | | 53 | | | | | 53 | | | | | 42 | |
(f) | | C Transport Maritime S.A.M. | | Claims and insurance fee | | General and administrative expenses | | | | 86 | | | | | 110 | | | | | 54 | |
(g) | | Seaflight Aviation Limited | | Travel expenses | | General and administrative expenses | | | | 36 | | | | | — | | | | | — | |
(g) | | Chartwell Management Inc. | | Travel expenses | | General and administrative expenses | | | | 134 | | | | | 348 | | | | | 163 | |
(h) | | Unisea Maritime Ltd. | | Office rent and utilities | | General and administrative expenses | | | | — | | | | | 50 | | | | | — | |
(i) | | Blenheim Holdings Ltd. | | Professional services | | General and administrative expenses | | | | — | | | | | — | | | | | 38 | |
(j) | | Cool Pool Limited | | Pool gross revenues | | Revenues | | | | — | | | | | — | | | | | 2,469 | |
(j) | | Cool Pool Limited | | Pool gross bunkers | | Voyage expenses and commissions | | | | — | | | | | — | | | | | 1,838 | |
(j) | | Cool Pool Limited | | Adjustment for net pool allocation | | Voyage expenses and commissions | | | | — | | | | | — | | | | | 35 | |
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|
| | (a) | | One of the Group’s subsidiaries, GasLog LNG Services Ltd. provides vessel management services to Egypt LNG Shipping Ltd., the LNG vessel owning company, in which another subsidiary, GasLog Shipping Company Ltd., holds a 25% ownership interest. |
|
| | (b) | | Through its subsidiary GasLog LNG Services Ltd., the Group leases office space in Piraeus, Greece, from an entity controlled by Ceres Shipping, Nea Dimitra Ktimatikh Kai Emporikh S.A. During the year ended December 31, 2014, the Group reimbursed Nea Dimitra for part of the renovation costs of the Piraeus office spaces. |
|
| | (c) | | Through its subsidiary GasLog Monaco S.A.M., the Group makes payments to Ceres Monaco S.A.M., an affiliate of Ceres Shipping, for its office space in Monaco. Ceres Monaco S.A.M. leases operating space pursuant to a service agreement with a third-party property owner, and the Group occupies a portion of the leased space. In connection with the office space arrangements, the subsidiary GasLog Monaco S.A.M. has entered into a service level agreement with Ceres Monaco S.A.M. The service level agreement was terminated in April 2012 when GasLog Monaco S.A.M. signed a rent agreement directly with the third party property owner. The amount charged in the year ended December 31, 2013 relates to reimbursement of some expenses paid by Ceres Monaco S.A.M. on behalf of GasLog Monaco S.A.M. During the year ended December 31, 2014, no expenses were paid by Ceres Monaco S.A.M. |
|
| | (d) | | Through its subsidiary GasLog Services (UK) Ltd., the Group makes payments to Euronav (UK) Agencies Ltd. (“Euronav UK”), a subsidiary of Euronav NV, whose major shareholder was Mr. Livanos until November 2015, for the use of its office space in London. Euronav UK leases operating space pursuant to a service agreement with a third-party property owner and the Group occupies a portion of the leased space. The Group pays Euronav UK £223 per year for the office space plus a stamp duty, which reflects a pro rata portion of the fees payable to the third-party property owner determined based on the amount of occupied space. In addition, as of December 31, 2014, the Group reimbursed Euronav UK for part of the legal fees and other professional charges relating to the execution of the lease agreement. |
|
| | (e) | | GasLog LNG Services has also entered into an agreement with Seres S.A., an entity controlled by the Livanos family, for the latter to provide catering services to the staff based in the Piraeus office. Amounts paid pursuant to the agreement are generally less than Euro 10 per person per day, but are slightly higher on special occasions. In addition, GasLog LNG Services has entered into an agreement with Seres S.A. for the latter to provide human resources, telephone and documentation services for the staff based in Piraeus. |
|
| | (f) | | The Group through one of its subsidiaries, GasLog LNG Services Ltd., procured insurance for the vessels through C Transport Maritime SAM, an affiliate of Ceres Shipping, which has a dedicated insurance function. From July 1, 2011, this relationship is covered by a service agreement under which GasLog LNG Services Ltd. pays C Transport Maritime S.A.M. $10 per owned vessel per annum and $3 per managed vessel per annum. The service agreement was terminated in 2015. |
|
| | (g) | | Seaflight Aviation Limited and Chartwell Management Inc. are entities controlled by the Livanos family, which provide travel services to GasLog’s directors and officers. |
|
| | (h) | | Through GasLog the Group made payments to Unisea Maritime Ltd. (“Unisea Maritime”), an affiliate of Ceres Shipping, for the use of its office space in London. Unisea Maritime leased operating space pursuant to a service agreement with a third-party property owner and the Group occupied a portion of the leased space from January to August 2014. The Group paid Unisea Maritime £4 per month for its office space in London, which reflects a pro rata portion of the fees payable to the third-party owner determined based on the amount of occupied space. |
|
| | (i) | | Blenheim Holdings Ltd. that is controlled by Ceres Shipping (Note 1), requested reimbursement of professional expenses provided in 2015. |
|
| | (j) | | GasLog recognized gross revenues and voyage expenses of $2,469 and $1,838, respectively, from the operation of its vessels to the Cool Pool during the year ended December 31, 2015. The aforementioned pool results were further adjusted by $35 to include the net allocation from the pool in accordance with the profit sharing terms specified in the Pool Agreement. |
Compensation of key management personnel
The remuneration of directors and key management was as follows:
| | | | | | |
| | For the year ended December 31, |
| | 2013 | | 2014 | | 2015 |
Remuneration | | | | 4,979 | | | | | 6,140 | | | | | 6,627 | |
Short-term benefits | | | | 118 | | | | | 50 | | | | | 94 | |
Expense recognized in respect of share-based compensation | | | | 349 | | | | | 1,245 | | | | | 1,173 | |
| | | | | | |
Total | | | | 5,446 | | | | | 7,435 | | | | | 7,894 | |
| | | | | | |
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20. Share-Based Compensation
Omnibus Incentive Compensation Plan
On May 17, 2013, GasLog granted to executives, managers and certain employees of the Group, Restricted Stock Units (“RSU”) and Stock Appreciation Rights or Stock Options (collectively, the “SARs”) in accordance with its 2013 Omnibus Incentive Compensation Plan (the “Plan”). The RSUs will vest on April 29, 2016 while the SARs will vest incrementally with one-third of the SARs vesting on each of April 29, 2014, 2015 and 2016. The compensation cost for the SARs is recognized on an accelerated basis as though each separately vesting portion of the SARs is a separate award. Prior to the exercise date the holders will not have any voting rights and will not be entitled to dividends or other distributions.
The grant date was determined to be May 17, 2013, being the date the Group provided each concerned employee with the relevant agreements, which include information about the grant date, vesting and exercise periods, number of RSUs and SARs awarded, the exercise price in the case of SARs, and other information and which were signed by the employee as evidence of acceptance.
| | | | | | | | | | |
Awards | | Number | | Grant date | | Expiry date | | Exercise price | | Fair value at
grant date |
RSUs | | | | 64,792 | | | | | May 17, 2013 | | | n/a | | n/a | | | | 11.95 | |
SARs | | | | 325,943 | | | | | May 17, 2013 | | | April 29, 2023 | | 13.26 | | | | 2.3753 | |
On April 1, 2014, GasLog granted to executives, managers and certain employees of the Group, 76,251 RSUs and 286,746 SARs in accordance with the Plan. The RSUs will vest on March 31, 2017 while the SARs will vest incrementally with one-third of the SARs vesting on each of March 31, 2015, 2016 and 2017. The compensation cost for the SARs is recognized on an accelerated basis as though each separately vesting portion of the SARs is a separate award. Prior to the exercise date the holders will not have any voting rights and will not be entitled to dividends or other distributions.
| | | | | | | | | | |
Awards | | Number | | Grant date | | Expiry date | | Exercise price | | Fair value at
grant date |
RSUs | | | | 76,251 | | | | | April 1, 2014 | | | n/a | | n/a | | | | 22.58 | |
SARs | | | | 286,746 | | | | | April 1, 2014 | | | March 31, 2024 | | 24.00 | | | | 6.0035 | |
On April 1, 2015, GasLog granted to executives, managers and certain employees of the Group, 88,492 RSUs and 305,859 SARs in accordance with the Plan. The RSUs will vest on March 31, 2018 while the SARs will vest incrementally with one-third of the SARs vesting on each of March 31, 2016, 2017 and 2018. The compensation cost for the SARs is recognized on an accelerated basis as though each separately vesting portion of the SARs is a separate award. Prior to the exercise date the holders will not have any voting rights and will not be entitled to dividends or other distributions.
| | | | | | | | | | |
Awards | | Number | | Grant date | | Expiry date | | Exercise price | | Fair value at
grant date |
RSUs | | | | 88,492 | | | | | April 1, 2015 | | | n/a | | n/a | | | | 19.48 | |
SARs | | | | 305,859 | | | | | April 1, 2015 | | | March 31, 2025 | | 19.48 | | | | 5.6352 | |
In accordance with the terms of the Plan, there are only service condition requirements. The awards will be settled in cash or in shares at the sole discretion of the compensation committee of the board of directors. These awards have been treated as equity settled because the Group has no present obligation to settle in cash. The amount to be settled for each SAR exercised is computed in each case, as the excess, if any, of the fair market value (the closing price of shares) on the exercise date over the exercise price of the SAR.
Fair value
The fair value of the SARs has been calculated based on the Modified Black-Scholes-Merton method. Expected volatility was based on historical share price volatility for the period since the Group’s initial public offering. The expected dividend is based on management’s expectations of
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future payments on the grant date. The significant assumptions used to estimate the fair value of the SARs are set out below:
| | | | | | |
Inputs into the model | | 2013 | | 2014 | | 2015 |
Grant date share closing price | | | $ | | 13.26 | | | | $ | | 24.00 | | | | $ | | 19.48 | |
Exercise price | | | $ | | 13.26 | | | | $ | | 24.00 | | | | $ | | 19.48 | |
Expected volatility | | | | 29.31 | % | | | | | 29.42 | % | | | | | 39.3 | % | |
Expected term | | | | 6 years | | | | | 6 years | | | | | 6 years | |
Risk-free interest rate for the period similar to the expected term | | | | 1.08 | % | | | | | 2.03 | % | | | | | 1.48 | % | |
The fair value of the RSUs in accordance with its 2013 Plan was determined by using the grant date closing price of $13.26 per share and adjusting for the effect of the expected dividends to which holders of RSUs are not entitled using a risk-free interest rate of 0.4% for the three years until the expiry of the RSUs, which resulted in a fair value of $11.95 per RSU.
The fair value of the RSUs in accordance with its 2014 Plan was determined by using the grant date closing price of $24.00 per share and adjusting for the effect of the expected dividends which holders of RSUs are not entitled using a risk-free interest rate of 0.91% for the three years until the expiry of the RSUs which resulted in a fair value of $22.58 per RSU.
The fair value of the RSUs in accordance with its 2015 Plan was determined by using the grant date closing price of $19.48 per share and was not further adjusted since the holders are entitled to dividends.
Movement in RSUs and SARs
The summary of RSUs and SARs is presented below:
| | | | | | | | | | |
| | Number of
awards | | Weighted
average
exercise price
per share | | Weighted
average share
price at the
date of exercise | | Weighted
average
contractual life | | Aggregate
fair value |
RSUs | | | | | | | | | | |
Outstanding as of January 1, 2014 | | | | 64,792 | | | | | — | | | | | — | | | | | 2.33 | | | | | 774 | |
Granted during the year | | | | 76,251 | | | | | — | | | | | — | | | | | — | | | | | 1,722 | |
Forfeited during the year | | | | (1,374 | ) | | | | | — | | | | | — | | | | | — | | | | | (31 | ) | |
| | | | | | | | | | |
Outstanding as of December 31, 2014 | | | | 139,669 | | | | | — | | | | | — | | | | | 1.82 | | | | | 2,465 | |
| | | | | | | | | | |
Granted during the year | | | | 88,492 | | | | | — | | | | | — | | | | | — | | | | | 1,724 | |
Vested during the year | | | | (3,373 | ) | | | | | — | | | | | — | | | | | — | | | | | (54 | ) | |
Forfeited during the year | | | | (7,820 | ) | | | | | — | | | | | — | | | | | — | | | | | (149 | ) | |
| | | | | | | | | | |
Outstanding as of December 31, 2015 | | | | 216,968 | | | | | — | | | | | — | | | | | 1.38 | | | | | 3,986 | |
| | | | | | | | | | |
SARs | | | | | | | | | | |
Outstanding as of January 1, 2014 | | | | 325,943 | | | | | 13.26 | | | | | — | | | | | 9.33 | | | | | 774 | |
Granted during the year | | | | 286,746 | | | | | 24.00 | | | | | — | | | | | — | | | | | 1,722 | |
Exercised during the year | | | | (20,614 | ) | | | | | 13.26 | | | | | 26.89 | | | | | — | | | | | (49 | ) | |
Forfeited during the year | | | | (1,722 | ) | | | | | 24.00 | | | | | — | | | | | — | | | | | (10 | ) | |
| | | | | | | | | | |
Outstanding as of December 31, 2014 | | | | 590,353 | | | | | 18.45 | | | | | — | | | | | 8.78 | | | | | 2,437 | |
| | | | | | | | | | |
Granted during the year | | | | 305,859 | | | | | 19.48 | | | | | — | | | | | — | | | | | 1,724 | |
Expired during the year | | | | (7,247 | ) | | | | | 15.98 | | | | | — | | | | | — | | | | | (24 | ) | |
Forfeited during the year | | | | (15,737 | ) | | | | | 19.47 | | | | | — | | | | | — | | | | | (81 | ) | |
| | | | | | | | | | |
Outstanding as of December 31, 2015 | | | | 873,228 | | | | | 18.81 | | | | | — | | | | | 8.28 | | | | | 4,056 | |
| | | | | | | | | | |
As of December 31, 2015, 291,676 SARs have vested but not been exercised.
On April 1, 2015, GasLog Partners granted to its executives, Restricted Common Units (“RCUs”) and Performance Common Units (“PCUs”) in accordance with its 2015 Long-Term Incentive Plan (the “GasLog Partners’ Plan”). The RCUs and PCUs will vest on March 31, 2018
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subject to the recipients’ continued service; vesting of the PCUs is also subject to the achievement of certain performance targets in relation to total unitholder return. Specifically, the performance measure is based on the total unitholder return (“TUR”) achieved by the Partnership during the performance period, benchmarked against the TUR of a selected group of peer companies. TUR above the 75th percentile of the peer group results in 100% of the award vesting; TUR between the 50th-75th percentile of the peer group results in 50% of award vesting; TUR below the 50th percentile of the peer group results in none of the award vesting. The holders are entitled to cash distributions that are accrued and will be settled on vesting.
| | | | | | |
Awards | | Number | | Grant date | | Fair value at
grant date |
RCUs | | | | 16,999 | | | | | April 1, 2015 | | | | $ | | 24.12 | |
PCUs | | | | 16,999 | | | | | April 1, 2015 | | | | $ | | 24.12 | |
In accordance with the terms of the GasLog Partners’ Plan, the awards will be settled in cash or in common units at the sole discretion of the board of directors or such committee as may be designated by the board to administer the GasLog Partners’ Plan. These awards have been treated as equity settled because the Partnership has no present obligation to settle them in cash.
Fair value
The fair value of the RCUs and PCUs in accordance with the GasLog Partners’ Plan was determined by using the grant date closing price of $24.12 per common unit and was not further adjusted since the holders are entitled to cash distribution.
Movement in RCUs and PCUs
The summary of RCUs and PCUs is presented below:
| | | | | | |
| | Number of
awards | | Weighted
average
contractual life | | Aggregate
fair value |
RCUs | | | | | | |
Outstanding as of January 1, 2015 | | | | — | | | | | — | | | | | — | |
Granted during the year | | | | 16,999 | | | | | — | | | | | 410 | |
| | | | | | |
Outstanding as of December 31, 2015 | | | | 16,999 | | | | | 2.25 | | | | | 410 | |
| | | | | | |
PCUs | | | | | | |
Outstanding as of January 1, 2015 | | | | — | | | | | — | | | | | — | |
Granted during the year | | | | 16,999 | | | | | — | | | | | 410 | |
| | | | | | |
Outstanding as of December 31, 2015 | | | | 16,999 | | | | | 2.25 | | | | | 410 | |
| | | | | | |
The total expense recognized in respect of share-based compensation for the year ended December 31, 2015 was $2,872 (December 31, 2014: $1,856 and December 31, 2013: $493). The total accrued cash distribution as of December 31, 2015 is $81 (December 31, 2014: $0) and is included under “Other non-current liabilities”.
21. Commitments
(a) On December 31, 2014 and 2015 the Group had the following commitments as lessee relating to buildings under operating leases:
| | | | |
| | As of December 31, |
| | 2014 | | 2015 |
Not later than one year | | | | 1,005 | | | | | 1,804 | |
Later than one year and not later than three years | | | | 1,134 | | | | | 2,614 | |
Later than three years and not later than five years | | | | 694 | | | | | 1,239 | |
More than five years | | | | 1,154 | | | | | 778 | |
| | | | |
Total operating lease commitment | | | | 3,987 | | | | | 6,435 | |
| | | | |
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The rental expense relating to operating leases for the year ended December 31, 2015 was $1,493 (December 31, 2014: $1,081 and December 31, 2013: $623).
(b) Commitments relating to the vessels under construction (Note 6) on December 31, 2014 and 2015 payable to Samsung and Hyundai were as follows:
| | | | |
| | As of December 31, |
| | 2014 | | 2015 |
Not later than one year | | | | 239,285 | | | | | 720,753 | |
Later than one year and not later than three years | | | | 1,437,433 | | | | | 566,750 | |
Later than three years and not later than five years | | | | — | | | | | 163,600 | |
| | | | |
Total vessel construction commitment | | | | 1,676,718 | | | | | 1,451,103 | |
| | | | |
GasLog has issued performance guarantees in favor of Samsung and Hyundai for the outstanding commitments relating to the vessels under construction.
(c) Future gross minimum revenues upon collection of hire under non-cancellable time charter agreements for vessels in operation as of December 31, 2014 and December 31, 2015 are as follows (30 off-hire days are assumed when each vessel will undergo scheduled drydocking; in addition early delivery of the vessels by the charterers or any exercise of the charterers’ options to extend the terms of the charters are not accounted for):
| | | | |
| | As of December 31, |
| | 2014 | | 2015 |
Not later than one year | | | | 356,320 | | | | | 399,093 | |
Later than one year and not later than three years | | | | 639,118 | | | | | 679,971 | |
Later than three years and not later than five years | | | | 472,672 | | | | | 449,594 | |
Later than five years | | | | 156,710 | | | | | 277,653 | |
| | | | |
Total future gross minimum charter hire | | | | 1,624,820 | | | | | 1,806,311 | |
| | | | |
Future gross minimum lease revenues disclosed in the above table excludes the revenues of the vessels that are under construction as of December 31, 2015 (Note 6). For these vessels, the following charter party agreements have been signed:
|
| | • | | In January 2013, GAS-eleven Ltd. and GAS-twelve Ltd. signed time charter agreements with a subsidiary of BG Group for the employment of the vessels for ten years starting from the date of their delivery, with charterer options to extend the agreements for additional periods. |
|
| | • | | In August 2013, GAS-thirteen Ltd. and GAS-fourteen Ltd. signed time charter agreements with a subsidiary of BG Group for the employment of the vessels for seven years starting from the date of their delivery, with charterer options to extend the agreements for additional periods. |
|
| | • | | In April 2015, GAS-twenty two Ltd., GAS-twenty three Ltd. and GAS-twenty four Ltd. signed time charter agreements with a subsidiary of BG Group for the employment of the vessels for average initial terms of approximately 9.5 years, commencing mid-2018 and early 2019. |
(d) Related to the acquisition of the six vessels from a subsidiary of BG Group in 2014 and another two vessels in 2015, the Group is committed to purchase depot spares from BG Group with an aggregate value of $8,000, of which depot spares with value $660 have been purchased and paid as of December 31, 2015 and are included in Tangible fixed assets (Note 6). The remaining spares should be acquired before the end of the initial term of the charter party agreements.
(e) On November 2, 2015, following execution of a letter agreement between GasLog and MSL reimbursing MSL the sum of $2,654 for value as of November 1, 2015, adjusted for future value through January 2020 up to $3,801, allowing for the future use of the reimbursement amount against the funding of specific MSL projects, such as costs associated with change orders on LNG newbuildings and or modifications of existing vessels as agreed between the parties. As of December 31, 2015, the outstanding commitment is $2,673.
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(f) Other Guarantees:
As of December 31, 2015, GasLog LNG Services Ltd. has provided bank guarantees as follows:
|
| | • | | Up to $1,250 (December 31, 2014: $1,250) to third parties relating to the satisfactory performance of its ship management activities; |
|
| | • | | $789 (December 31, 2014: $878) relating to the social security fund for Greek seamen; and |
|
| | • | | Bank guarantee of $10 (December 31, 2014: $10) to the Greek Ministry of Finance relating to the satisfactory performance of the obligations arising under Greek laws 89/1967, 378/1968 as amended by law 814/1978. |
22. Financial Risk Management
The Group’s activities expose it to a variety of financial risks, including market price risk, liquidity risk and credit risk. The Group’s overall risk management program focuses on the unpredictability of financial markets and seeks to minimize potential adverse effects on the Group’s financial performance. The Group makes use of derivative financial instruments such as interest rate swaps to moderate certain risk exposures.
Market risk
Interest rate risk:Interest rate risk is the risk that interest costs will fluctuate due to changes in market interest rates. The Group’s financial income and operating cash flows fluctuate based on changes in market interest rates as the Group has loans that bear interest at floating rates. The Group uses interest rate swaps to manage its exposure to interest rate movements on bank borrowings. At December 31, 2015, the Group has hedged 43.61% of its variable rate interest exposure relating to its existing loan facilities and the Bond by swapping the variable rate to a fixed rate (December 31, 2014: 53.90%).
The fair value of the interest rate swaps as of December 31, 2015 was estimated as a net liability of $16,561 (December 31, 2014: $15,444). The effective movement in the fair value of the interest rate swaps designated as cash flow hedging instruments (Note 24) amounting to $979 loss (December 31, 2014: $6,515 loss and December 31, 2013: $6,083 gain) was recognized directly in equity.
Interest rate sensitivity analysis:The interest rate swap agreements described below are subject to market risk as they are recorded at fair value in the statement of financial position at year end. The fair value of interest rate swaps liabilities increases when interest rates decrease and decreases when interest rates increase. As of December 31, 2015, if interest rates had increased or decreased by 10 basis points with all other variables held constant, the positive/(negative) impact, respectively, on the fair value of the interest rate and cross currency swaps would have amounted to approximately $3,349 (December 31, 2014: $4,405 and December 31, 2013: $4,520). This amount would have affected other comprehensive income by $1,483 (December 31, 2014: $2,192 and December 31, 2013: $1,526) and the loss on swaps by $1,866 (December 31, 2014: $2,213 and December 31, 2013: $2,994). During the year ended December 31, 2015, if interest rates had increased or decreased by 10 basis points with all other variables held constant, the increase/(decrease), respectively, in interest expense on the un-hedged portion of the Group’s loans would have amounted to approximately $1,315 (December 31, 2014: $678 and December 31, 2013: $221).
Other price risk:The decrease in the fair value of Egypt LNG Shipping Ltd., in response to unfavorable market conditions resulting in a decrease in charter rates and vessel values, could negatively impact the value of the Group’s investment in associate. Therefore, management might conclude that impairment is necessary in the future.
Currency risk:Currency risk is the risk that the value of financial instruments will fluctuate due to changes in foreign exchange rates. Currency risk arises when future commercial transactions and recognized assets and liabilities are denominated in a currency that is not the Group’s functional currency. The Group is exposed to foreign exchange risk arising from various currency exposures
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primarily with respect to general and crew costs denominated in Euros. The Group has entered into cross currency swaps (Note 24) to hedge its currency exposure from the Bond. In addition, management monitors the exchange rate fluctuations on a continuous basis. As an indication of the extent of the Group’s sensitivity to changes in exchange rate, a 10% increase in the average euro/dollar exchange rate would have decreased the Group’s profit and cash flows during the year ended December 31, 2015 by $7,813, based upon its expenses during the year (December 31, 2014: $6,893 and December 31, 2013: $4,118).
Liquidity risk
Liquidity risk is the risk that arises when the maturity of assets and liabilities does not match. An unmatched position potentially enhances profitability, but can also increase the risk of losses. The Group minimizes liquidity risk by maintaining sufficient cash and cash equivalents and by having available adequate amounts of undrawn credit facilities. The Group is not significantly exposed to liquidity risk resulting from the commitments under the vessel construction contracts as bank facilities have been contracted to meet the obligations.
The following tables detail the Group’s expected cash flows for its non-derivative financial liabilities. The tables have been drawn up based on the undiscounted cash flows of financial liabilities based on the earliest date on which the Group can be required to pay. The table includes both interest and principal cash flows. Variable future interest payments were determined based on an average LIBOR plus the margins applicable to the Group’s loans at the end of each year presented.
| | | | | | | | | | | | | | |
| | Weighted
average
effective
interest
rate | | Less
than 1
month | | 1-3 months | | 3-12 months | | 1-5 years | | 5+ years | | Total |
December 31, 2014 | | | | | | | | | | | | | | |
Trade and other accounts payable | | | | | | 7,134 | | | | | 961 | | | | | 1,573 | | | | | — | | | | | — | | | | | 9,668 | |
Due to related parties | | | | | | 181 | | | | | — | | | | | — | | | | | — | | | | | — | | | | | 181 | |
Other payables and accruals* | | | | | | 3,065 | | | | | 29,167 | | | | | 1,235 | | | | | — | | | | | — | | | | | 33,467 | |
Other non-current liabilities | | | | | | — | | | | | — | | | | | — | | | | | — | | | | | 977 | | | | | 977 | |
Variable interest loans | | | | 2.71 | % | | | | | 4,954 | | | | | 65,272 | | | | | 93,886 | | | | | 1,400,500 | | | | | 399,054 | | | | | 1,963,666 | |
Bond | | | | | | — | | | | | 2,314 | | | | | 7,427 | | | | | 159,282 | | | | | — | | | | | 169,023 | |
| | | | | | | | | | | | | | |
Total | | | | | | 15,334 | | | | | 97,714 | | | | | 104,121 | | | | | 1,559,782 | | | | | 400,031 | | | | | 2,176,982 | |
| | | | | | | | | | | | | | |
December 31, 2015 | | | | | | | | | | | | | | |
Trade and other accounts payable | | | | | | 11,877 | | | | | 322 | | | | | 192 | | | | | — | | | | | — | | | | | 12,391 | |
Due to related parties | | | | | | 163 | | | | | — | | | | | — | | | | | — | | | | | — | | | | | 163 | |
Other payables and accruals* | | | | | | 7,584 | | | | | 28,370 | | | | | 971 | | | | | — | | | | | — | | | | | 36,925 | |
Other non-current liabilities | | | | | | — | | | | | — | | | | | — | | | | | 518 | | | | | 760 | | | | | 1,278 | |
Variable interest loans | | | | 2.97 | % | | | | | 7,223 | | | | | 68,141 | | | | | 624,498 | | | | | 1,467,432 | | | | | 297,551 | | | | | 2,464,845 | |
Bond | | | | | | — | | | | | 2,763 | | | | | 8,480 | | | | | 130,717 | | | | | — | | | | | 141,960 | |
| | | | | | | | | | | | | | |
Total | | | | | | 26,847 | | | | | 99,596 | | | | | 634,141 | | | | | 1,598,667 | | | | | 298,311 | | | | | 2,657,562 | |
| | | | | | | | | | | | | | |
|
| | * | | Excludes Unearned revenue as it is not a financial liability. |
The amounts included above for variable interest rate instruments is subject to change if changes in variable interest rates differ from those estimates of interest rates determined at the end of the reporting period.
The following tables detail the Group’s expected cash flows for its derivative financial liabilities. The table has been drawn up based on the undiscounted contractual net cash inflows and outflows on derivative instruments that are settled on a net basis. When the amount payable or receivable is not fixed, the amount disclosed has been determined by reference to the projected interest rates as
F-48
illustrated by the yield curves existing at the end of the reporting period. The undiscounted contractual cash flows are based on the contractual maturities of the derivatives.
| | | | | | | | | | | | | |
| | Less
than 1
month | | 1-3 months | | 3-12 months | | 1-5 years | | 5+ years | | Total |
December 31, 2014 | | | | | | | | | | | | |
Interest rate swaps | | | | 540 | | | | | 3,010 | | | | | 10,693 | | | | | 3,954 | | | | | (1,274 | ) | | | | | 16,923 | |
Cross currency swaps | | | | — | | | | | 448 | | | | | 1,858 | | | | | 35,221 | | | | | — | | | | | 37,527 | |
| | | | | | | | | | | | |
Total | | | | 540 | | | | | 3,458 | | | | | 12,551 | | | | | 39,175 | | | | | (1,274 | ) | | | | | 54,450 | |
| | | | | | | | | | | | |
December 31, 2015 | | | | | | | | | | | | |
Interest rate swaps | | | | 152 | | | | | 2,266 | | | | | 7,053 | | | | | 7,355 | | | | | (47 | ) | | | | | 16,779 | |
Cross currency swaps | | | | — | | | | | 883 | | | | | 3,102 | | | | | 53,960 | | | | | — | | | | | 57,945 | |
| | | | | | | | | | | | |
Total | | | | 152 | | | | | 3,149 | | | | | 10,155 | | | | | 61,315 | | | | | (47 | ) | | | | | 74,724 | |
| | | | | | | | | | | | |
The Group expects to be able to meet its current obligations resulting from financing and operating its vessels using the liquidity existing at year end, the refinancing signed in February 2016 (Note 28), the proceeds from the sale and leaseback transaction completed in February 2016 (Note 28) and cash generated by operating activities. The Group expects to be able to meet its long-term obligations resulting from financing its vessels through cash generated from operations.
Credit risk
Credit risk is the risk that a counterparty will fail to discharge its obligations and cause a financial loss. The Group is exposed to credit risk in the event of non-performance by any of its counterparties. To limit this risk, the Group deals exclusively with financial institutions and customers with high credit ratings.
| | | | |
| | As of December 31, |
| | 2014 | | 2015 |
Cash and cash equivalents | | | | 211,974 | | | | | 302,988 | |
Short-term investments | | | | 28,103 | | | | | 6,000 | |
Trade and other receivables | | | | 14,317 | | | | | 16,079 | |
Dividends receivable and due from related parties | | | | 1,869 | | | | | 1,345 | |
Restricted cash | | | | 22,826 | | | | | 62,718 | |
Derivative financial instruments | | | | 1,174 | | | | | 61 | |
For the year ended December 31, 2015, 83.1% of the Group’s revenue was earned from BG Group and 11.8% from Royal Dutch Shell plc (“Shell”). For the year ended December 31, 2014, 80.1% of the Group’s revenue was earned from BG Group and 11.7% from Shell and for the year ended December 31, 2013, approximately all of the Group’s revenue was mainly earned from BG Group and accounts receivable were not collateralized; however, management believes that the credit risk is partially offset by the creditworthiness of the Group’s counterparties. BG Group was acquired by Shell on February 15, 2016. This acquisition does not impact the contractual obligations under the existing charter party agreements. The Group did not experience significant credit losses on its accounts receivable portfolio during the three years ended December 31, 2015. The carrying amount of financial assets recorded in the consolidated financial statements represents the Group’s maximum exposure to credit risk. Management monitors exposure to credit risk, and they believe that there is no substantial credit risk arising from the Group’s counterparties.
The credit risk on liquid funds and derivative financial instruments is limited because the counterparties are banks with high credit ratings assigned by international credit-rating agencies.
23. Capital Risk Management
The Group’s objectives when managing capital are to safeguard the Group’s ability to continue as a going concern, to ensure that it maintains a strong credit rating and healthy capital ratios in order to support its business and maximize shareholders value.
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The Group monitors capital using a gearing ratio, which is total debt divided by total equity plus total debt. The gearing ratio is as follows:
| | | | |
| | As of December 31, |
| | 2014 | | 2015 |
Borrowings, current portion | | | | 116,431 | | | | | 636,897 | |
Borrowings, non-current portion | | | | 1,778,845 | | | | | 1,737,500 | |
| | | | |
Total debt | | | | 1,895,276 | | | | | 2,374,397 | |
Total equity | | | | 1,253,037 | | | | | 1,507,920 | |
| | | | |
Total debt and equity | | | | 3,148,313 | | | | | 3,882,317 | |
| | | | |
Gearing ratio | | | | 60.20 | % | | | | | 61.16 | % | |
24. Derivative Financial Instruments
The fair value of the derivative assets is as follows:
| | | | |
| | As of December 31, |
| | 2014 | | 2015 |
Derivative assets designated and effective as hedging instruments carried at fair value | | | | |
Interest rate swaps | | | | 87 | | | | | — | |
Derivative assets carried at fair value through profit or loss (FVTPL) | | | | |
Interest rate swaps | | | | 1,087 | | | | | 61 | |
| | | | |
Total | | | | 1,174 | | | | | 61 | |
| | | | |
Derivative financial instruments, non-current asset | | | | 1,174 | | | | | 61 | |
| | | | |
Total | | | | 1,174 | | | | | 61 | |
| | | | |
The fair value of the derivative liabilities is as follows:
| | | | |
| | As of December 31, |
| | 2014 | | 2015 |
Derivative liabilities designated and effective as hedging instruments carried at fair value | | | | |
Interest rate swaps | | | | 8,327 | | | | | 8,410 | |
Cross currency swaps | | | | 35,282 | | | | | 56,152 | |
Derivative liabilities carried at fair value through profit or loss (FVTPL) | | | | |
Interest rate swaps | | | | 8,291 | | | | | 8,212 | |
| | | | |
Total | | | | 51,900 | | | | | 72,774 | |
| | | | |
Derivative financial instruments, current liability | | | | 16,149 | | | | | 14,243 | |
Derivative financial instruments, non-current liability | | | | 35,751 | | | | | 58,531 | |
| | | | |
Total | | | | 51,900 | | | | | 72,774 | |
| | | | |
Interest rate swap agreements
The Group enters into interest rate swap agreements which convert the floating interest rate exposure into a fixed interest rate in order to hedge a portion of the Group’s exposure to fluctuations in prevailing market interest rates. Under the interest rate swaps, the bank counterparty effects quarterly floating-rate payments to the Group for the notional amount based on the three-month U.S. dollar LIBOR, and the Group effects quarterly payments to the bank on the notional amount at the respective fixed rates.
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Interest rate swaps designated as cash flow hedging instruments
The principal terms of the interest rate swaps designated as cash flow hedging instruments were as follows:
| | | | | | | | | | | | | | |
Subsidiary | | Counterparty | | Trade
Date | | Effective
Date | | Termination
Date | | Fixed
Interest
Rate | | Notional Amount |
| | December 31,
2014 | | December 31,
2015 |
GAS-two Ltd. | | DNB Bank ASA | | | | Sept 2013 | | | | | Feb 2014 | | | | | April 2018 | | | 1.69% | | | | 31,667 | | | | | — | |
GAS-two Ltd. | | SEB(1) | | | | Sept 2013 | | | | | Feb 2014 | | | | | April 2018 | | | 1.66% | | | | 31,667 | | | | | — | |
GAS-six Ltd. | | Nordea Bank Finland | | | | Nov 2011 | | | | | July 2013 | | | | | July 2018 | | | 2.04% | | | | 69,485 | | | | | 65,074 | |
GAS-nine Ltd. | | CBA(2) | | | | April 2014 | | | | | Dec 2014 | | | | | Dec 2019 | | | 2.23% | | | | 62,500 | | | | | 59,024 | |
GAS-nine Ltd. | | DNB Bank ASA | | | | April 2014 | | | | | Dec 2014 | | | | | Dec 2019 | | | 2.24% | | | | 62,500 | | | | | 59,024 | |
GAS-ten Ltd. | | SEB(1) | | | | April 2014 | | | | | Feb 2015 | | | | | Feb 2020 | | | 2.25% | | | | 62,500 | | | | | 59,893 | |
GAS-ten Ltd. | | ING Bank N.V. | | | | May 2014 | | | | | Feb 2015 | | | | | Feb 2020 | | | 2.23% | | | | 62,500 | | | | | 59,893 | |
GAS-fifteen Ltd.(3) | | Citibank | | | | July 2014 | | | | | Sept 2014 | | | | | Sept 2018 | | | 0.66%/2.89% | | | | 93,330 | | | | | 86,660 | |
| | | | | | | | | | | | | | |
| | | | | | | | | | | | | | 476,149 | | | | | 389,568 | |
| | | | | | | | | | | | | | |
|
| | (1) | | Skandinavinska Enskilda Banken AB (publ) |
|
| | (2) | | Commonwealth Bank of Australia |
|
| | (3) | | The fixed interest rate is agreed at 0.66% until September 2016 and at 2.89% from September 2016 to September 2018. |
The derivative instruments listed above qualified as cash flow hedging instruments for accounting purposes as of December 31, 2015.
For the year ended December 31, 2015, the effective portion of changes in the fair value of derivatives designated as cash flow hedging instruments amounting to $7,279 loss has been recognized in Other comprehensive income (December 31, 2014: $9,885 loss, December 31, 2013: $2,459 gain). For the year ended December 31, 2015, a loss of $6,300, was recycled to profit or loss representing the realized loss on interest rate swaps in relation to the interest expenses component of the hedge (December 31, 2014: $3,370 loss, December 31, 2013: $3,624 loss).
Interest rate swaps held for trading
The principal terms of the interest rate swaps held for trading were as follows:
| | | | | | | | | | | | | | |
Subsidiary | | Counterparty | | Trade
Date | | Effective
Date | | Termination
Date | | Fixed
Interest
Rate | | Notional Amount |
| | December 31,
2014 | | December 31,
2015 |
GAS-eight Ltd. | | SEB | | | | Feb 2012 | | | | | Mar 2014 | | | | | Mar 2021 | | | 2.26% | | | | 41,684 | | | | | 39,263 | |
GAS-eight Ltd. | | ING Bank N.V. | | | | Feb 2012 | | | | | Mar 2014 | | | | | Mar 2021 | | | 2.26% | | | | 41,684 | | | | | 39,263 | |
GAS-eight Ltd. | | SEB | | | | May 2012 | | | | | Mar 2014 | | | | | Mar 2021 | | | 2.05% | | | | 13,416 | | | | | 12,636 | |
GAS-eight Ltd. | | ING Bank N.V. | | | | May 2012 | | | | | Mar 2014 | | | | | Mar 2021 | | | 2.05% | | | | 13,416 | | | | | 12,636 | |
GAS-eight Ltd. | | DNB Bank ASA | | | | May 2012 | | | | | Mar 2014 | | | | | Mar 2021 | | | 2.05% | | | | 13,416 | | | | | 12,636 | |
GAS-eight Ltd. | | CBA | | | | May 2012 | | | | | Mar 2014 | | | | | Mar 2021 | | | 2.06% | | | | 13,416 | | | | | 12,636 | |
GAS-one Ltd.(1) | | Danish Ship Finance | | | | Oct 2011 | | | | | Nov 2011 | | | | | May 2020 | | | 2.10% | | | | 68,516 | | | | | 64,095 | |
GAS-one Ltd.(1) | | Danish Ship Finance | | | | June 2013 | | | | | Aug 2013 | | | | | May 2020 | | | 2.03% | | | | 59,385 | | | | | 55,554 | |
GAS-six Ltd.(1) | | ABN-AMRO Bank | | | | May 2012 | | | | | July 2013 | | | | | July 2019 | | | 1.72% | | | | 58,831 | | | | | 55,096 | |
GAS-seven Ltd.(1) | | Credit Suisse AG | | | | Mar 2012 | | | | | Nov 2013 | | | | | Nov 2020 | | | 2.23% | | | | 102,000 | | | | | 96,000 | |
GAS-seven Ltd.(1) | | Credit Suisse AG | | | | April 2014 | | | | | May 2014 | | | | | May 2019 | | | 1.77% | | | | 34,000 | | | | | 32,000 | |
GAS-two Ltd.(1) | | CBA | | | | Sept 2013 | | | | | Feb 2014 | | | | | April 2018 | | | 1.69% | | | | 31,667 | | | | | 28,333 | |
GAS-two Ltd.(2) | | DNB Bank ASA | | | | Sept 2013 | | | | | Feb 2014 | | | | | April 2018 | | | 1.69% | | | | — | | | | | 28,333 | |
GAS-two Ltd.(2) | | SEB | | | | Sept 2013 | | | | | Feb 2014 | | | | | April 2018 | | | 1.66% | | | | — | | | | | 28,333 | |
| | | | | | | | | | | | | | |
| | | | | | | | | | | | | | 491,431 | | | | | 516,814 | |
| | | | | | | | | | | | | | |
|
| | (1) | | During the year ended December 31, 2015, the amount of the cumulative loss from the period that these hedges were effective that was recycled to profit or loss was $1,129 (December 31, 2014: $6,641, including the effect from the interest rate swaps of GAS-three Ltd., GAS-four Ltd. and GAS-five Ltd. terminated in 2014, December 31, 2013: $2,293). |
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|
| | (2) | | In 2015, hedge accounting for these interest rate swaps was discontinued because the effectiveness criteria were not met. The amount of the cumulative loss from the period that the hedges were effective, that was recycled to profit or loss for the year ended December 31, 2015 was $161. |
The derivative instruments listed above were not designated as cash flow hedging instruments. The change in the fair value of these contracts for the year ended December 31, 2015 amounted to a net loss of $149 (December 31, 2014: $7,873 loss, December 31, 2013: $19,829 gain), which was recognized against profit or loss in the period incurred and is included in Gain/(loss) on swaps. During the year ended December 31, 2015, the net loss of $149 derived mainly from the fact that the LIBOR yield curve, which was used to calculate the present value of the estimated future cash flows, was lower than the agreed fixed interest rates resulting in an increase in derivative liabilities from interest rate swaps held for trading.
Cross currency swap agreements
The Group enters into CCSs which convert the floating interest rate exposure and the variability of the USD functional currency equivalent cash flows into a fixed interest rate and principal on maturity, in order to hedge the Group’s exposure to fluctuations deriving from its senior unsecured notes.
In June 2013, GasLog entered into three CCSs to exchange interest payments and principal on maturity on the same terms as the NOK Bond (Note 12), thereby hedging the variability of the USD functional currency equivalent cash flows on the Bond.
In April 2014, GasLog entered into three CCSs to exchange interest payments and principal on maturity on the same terms as the additional NOK Bond (Note 12), thereby hedging the variability of the USD functional currency equivalent cash flows on the Bond.
The CCSs qualified as cash flow hedging instruments for accounting purposes.
The principal terms of the CCSs designated as cash flow hedging instruments were as follows:
| | | | | | | | | | | | | | | |
Company | | Counterparty | | Trade
Date | | Effective
Date | | Termination
Date | | Fixed
Interest
Rate | | Notional Amount |
| | December 31,
2014 | | December 31,
2015 |
GasLog Ltd. | | DNB Bank ASA | | | | June 2013 | | | | | June 2013 | | | | | June 2018 | | | 7.40% | | | | 27,732 | | | | | 27,732 | |
GasLog Ltd. | | SEB | | | | June 2013 | | | | | June 2013 | | | | | June 2018 | | | 7.41% | | | | 27,731 | | | | | 27,731 | |
GasLog Ltd. | | Nordea Bank Finland | | | | June 2013 | | | | | June 2013 | | | | | June 2018 | | | 7.43% | | | | 27,743 | | | | | 27,743 | |
GasLog Ltd. | | DNB Bank ASA | | | | April 2014 | | | | | May 2014 | | | | | June 2018 | | | 5.99% | | | | 27,871 | | | | | 27,871 | |
GasLog Ltd. | | SEB | | | | April 2014 | | | | | May 2014 | | | | | June 2018 | | | 5.99% | | | | 27,871 | | | | | 27,871 | |
GasLog Ltd. | | Nordea Bank Finland | | | | April 2014 | | | | | May 2014 | | | | | June 2018 | | | 5.99% | | | | 27,871 | | | | | 27,871 | |
| | | | | | | | | | | | | | |
| | | | | | | | | | | | | | 166,819 | | | | | 166,819 | |
| | | | | | | | | | | | | | |
For the year ended December 31, 2015, the effective portion of changes in the fair value of CCSs amounting to a loss of $23,584 has been recognized in Other comprehensive income (December 31, 2014: $37,722 loss, December 31, 2013: $2,388 loss). For the year ended December 31, 2015, a loss of $2,714 was recycled to profit or loss representing the realized loss on CCSs in relation to the interest expenses component of the hedge (December 31, 2014: $60 gain, December 31, 2013: $106 loss). Additionally, for the year ended December 31, 2015, a gain of $21,000, was recognized in Other comprehensive income in relation to the retranslation of the Bond in U.S. dollars as of December 31, 2015 (December 31, 2014: $31,106 gain, December 31, 2013: $972 gain).
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An analysis of Gain/(loss) on swaps is as follows:
| | | | | | |
| | For the year ended
December 31, |
| | 2013 | | 2014 | | 2015 |
Inception loss for cash flow hedges | | | | (318 | ) | | | | | — | | | | | — | |
Unrealized gain/(loss) on interest rate swaps held for trading | | | | 19,829 | | | | | (7,873 | ) | | | | | (149 | ) | |
Realized loss on interest rate swaps held for trading | | | | (5,729 | ) | | | | | (10,310 | ) | | | | | (8,904 | ) | |
Recycled loss of cash flow hedges reclassified to profit or loss | | | | (2,293 | ) | | | | | (6,641 | ) | | | | | (1,290 | ) | |
Ineffective portion of cash flow hedges | | | | 9 | | | | | 37 | | | | | 11 | |
| | | | | | |
Total | | | | 11,498 | | | | | (24,787 | ) | | | | | (10,332 | ) | |
| | | | | | |
Fair value measurements
The fair value of the Group’s financial assets and liabilities approximate to their carrying amounts at the reporting date.
The fair value of the interest rate swaps at the end of reporting period was determined by discounting the future cash flows using the interest rate yield curves at the end of reporting period and the credit risk inherent in the contract. The fair value of the CCSs at the end of the reporting period was determined by discounting the future cash flows that are estimated based on forward exchange rates and contract forward rates, discounted at a rate that reflects the credit risk of the counterparties. The Group uses its judgment to make assumptions that are primarily based on market conditions for the estimation of the counterparty risk and the Group’s own risk that are considered for the calculation of the fair value of the interest rate and cross currency swaps. The interest rate swaps and CCSs meet Level 2 classification, according to the fair value hierarchy as defined by IFRS 13Fair Value Measurement. There were no financial instruments in Levels 1 or 3 and no transfers between Levels 1, 2 or 3 during the periods presented. The definitions of the levels, provided by IFRS 13 are based on the degree to which the fair value is observable:
|
| | • | | Level 1 fair value measurements are those derived from quoted prices in active markets for identical assets or liabilities; |
|
| | • | | Level 2 fair value measurements are those derived from inputs other than quoted prices included within Level 1 that are observable for the asset or liability, either directly (i.e., as prices) or indirectly (i.e., derived from prices); and |
|
| | • | | Level 3 fair value measurements are those derived from valuation techniques that include inputs for the asset or liability that are not based on observable market data (unobservable inputs). |
25. Non-cash Items on Statements of Cash Flows
As of December 31, 2015, there were capital expenditures for vessels and vessels under construction of $12,576 that have not been paid during the year ended December 31, 2015 and were included in current liabilities (December 31, 2014: $7,999, December 31, 2013: $691, net receivable).
As of December 31, 2015, there were equity raising costs of $59 that have not been paid during the year ended December 31, 2015 and were included in current liabilities (December 31, 2014: $174, December 31, 2013: $0).
As of December 31, 2015, there were loan issuance costs of $247 that have not been paid during the year ended December 31, 2015 and were included in current liabilities (December 31, 2014: $903, December 31, 2013: $2,494).
26. Taxation
Under the laws of the countries of the Group’s domestication/incorporation and/or vessels’ registration, the Group is not subject to tax on international shipping income. However, it is subject
F-53
to registration and tonnage taxes, which are included in vessel operating and supervision costs in the consolidated statement of profit or loss.
Under the United States Internal Revenue Code of 1986, as amended (the “Code”), the U.S. source gross transportation income of a ship-owning or chartering corporation, such as GasLog, is subject to a 4% U.S. Federal income tax without allowance for deduction, unless that corporation qualifies for exemption from tax under Section 883 of the Code and the Treasury Regulations promulgated thereunder. U.S. source gross transportation income consists of 50% of the gross shipping income that is attributable to transportation that begins or ends, but that does not both begin and end, in the United States.
The Group did not qualify for this exemption for the three years ended December 31, 2015; however, the effect on the results is insignificant.
27. Earnings per share (“EPS”)
Basic earnings per share was calculated by dividing the net profit for the year attributable to the owners of the common shares by the weighted average number of common shares issued and outstanding during the year.
Diluted EPS is calculated by dividing the profit for the year attributable to the owners of the Group by the weighted average number of all potential ordinary shares assumed to have been converted into common shares, unless such potential ordinary shares have an antidilutive effect.
The following reflects the earnings and share data used in the basic and diluted earnings per share computations:
| | | | | | |
| | For the year ended December 31, |
| | 2013 | | 2014 | | 2015 |
Basic earnings per share | | | | | | |
Profit for the year attributable to owners of the Group | | | | 56,929 | | | | | 42,161 | | | | | 10,829 | |
Less: Dividends on preferred stock | | | | — | | | | | — | | | | | 7,379 | |
| | | | | | |
Profit for the year available to owners of the Group | | | | 56,929 | | | | | 42,161 | | | | | 3,450 | |
Weighted average number of shares outstanding, basic | | | | 62,863,665 | | | | | 78,633,820 | | | | | 80,496,314 | |
| | | | | | |
Basic earnings per share | | | | 0.91 | | | | | 0.54 | | | | | 0.04 | |
| | | | | | |
Diluted earnings per share | | | | | | |
Profit for the year available to owners of the Group used in the calculation of diluted EPS | | | | 56,929 | | | | | 42,161 | | | | | 3,450 | |
Weighted average number of shares outstanding, basic | | | | 62,863,665 | | | | | 78,633,820 | | | | | 80,496,314 | |
Dilutive potential ordinary shares | | | | — | | | | | 166,372 | | | | | 114,106 | |
| | | | | | |
Weighted average number of shares used in the calculation of diluted EPS | | | | 62,863,665 | | | | | 78,800,192 | | | | | 80,610,420 | |
| | | | | | |
Diluted earnings per share | | | | 0.91 | | | | | 0.54 | | | | | 0.04 | |
| | | | | | |
The Group excluded the dilutive effect of 576,014 SARs and 83,751 RSUs in calculating diluted EPS for the year ended December 31, 2015, as they were anti-dilutive (December 31, 2014: 285,024 SARs and 74,877 RSUs).
28. Subsequent Events
On February 18, 2016, GasLog entered into a credit agreement to refinance the existing indebtedness on five of its contracted vessels of up to $576,500 (the “Five Vessel Refinancing”) for debt maturities which were due in 2016 and 2017. It is comprised of a five-year senior tranche facility of up to $396,500 and a two-year bullet junior tranche of up to $180,000. The vessels covered by the Five Vessel Refinancing are the GasLog-ownedMethane Lydon VolneyandMethane Becki Anneand the GasLog Partners-ownedMethane Alison Victoria,Methane Shirley ElisabethandMethane Heather Sally. ABN AMRO Bank N.V. and DNB (UK) Ltd. were mandated lead arrangers
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to the transaction. The other banks in the syndicate are: DVB Bank America N.V., Commonwealth Bank of Australia, ING Bank N.V., London Branch, Credit Agricole Corporate and Investment Bank and National Australia Bank Limited.
On February 24, 2016, GasLog’s subsidiary, GAS-twenty six Ltd., completed the ship sale and leaseback transaction with a subsidiary of Mitsui Co. Ltd. (“Mitsui”) for the sale and leaseback of theMethane Julia Louise. Mitsui has the right to on-sell and lease back the vessel. The vessel was sold to Mitsui for a total consideration approximately equivalent to its current book value. GasLog has leased back the vessel under a bareboat charter from Mitsui for a period of up to 20 years. GasLog has the option to re-purchase the vessel on pre-agreed terms no earlier than the end of year ten and no later than the end of year 17 of the bareboat charter. GasLog Partners retains its option to purchase the special purpose entity that controls the charter revenues of this vessel. This entity, together with the revenues from the charter, continues to be eligible for dropdown into GasLog Partners. The vessel remains on its eleven year charter with MSL. This transaction does not meet the held for sale classification criteria under IFRS 5Non-current assets held for sale. Following the completion of this transaction, the outstanding debt of GAS-twenty six Ltd. of $230,000 was prepaid.
In connection to the aforementioned sale and leaseback transaction, GasLog entered into a consulting agreement with Unisea Maritime (Note 19), under the terms of which GasLog agreed to pay a brokerage commission fee equal to 0.25% of the agreed charter rates under the sale and leaseback transaction plus reasonable expenses (incurred in line with the Group policies). The brokerage commission fee was paid in advance for the full 20-year period of the bareboat charter, discounted to the date of the agreement at an annual discount rate of 7.5%.
On February 24, 2016, the board of directors declared a quarterly cash dividend of $0.14 per common share paid on March 17, 2016 to shareholders of record as of March 7, 2016.
On February 25, 2016, a supplemental deed was signed with the lenders of the GAS-eight Ltd., GAS-nine Ltd. and GAS-ten Ltd. loan facility, permitting GasLog to withdraw the $21,000 maintained in blocked accounts for each of GAS-nine Ltd. and GAS-ten Ltd. (Note 12), provided GasLog has an executed guarantee or letter of credit with a minimum duration of six months. In connection to this, on February 26, 2016, GasLog entered into two bank guarantees, issued by BNP Paribas S.A. for GAS-nine Ltd. and GAS-ten Ltd. of $21,000 each. The bank guarantees bear interest at a margin and are available for a period of up to two years. Consequently, $42,000 was reclassified from Restricted cash to Cash and cash equivalents.
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