Earnings Release • Feb 28, 2018
Earnings Release
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Songa Bulk ASA Financial Report Q4 2017
| SONGA BULK 3 | |
|---|---|
| FOURTH QUARTER 2017 HIGHLIGHTS 3 | |
| FOURTH QUARTER 2017 EVENTS 3 | |
| FOURTH QUARTER 2017 RESULTS 4 | |
| THE FLEET 5 | |
| MARKET 6 | |
| DRY BULK MARKET IN Q4 2017 6 | |
| OUTLOOK AND STRATEGY 7 | |
| FORWARD-LOOKING STATEMENTS 7 | |
| RISK FACTORS 8 | |
| MAIN RISK FACTORS 8 | |
| FINANCIAL INFORMATION 9 | |
| CONDENSED STATEMENT OF COMPREHENSIVE INCOME 9 | |
| CONDENSED STATEMENT OF FINANCIAL POSITION 10 | |
| CONDENSED STATEMENT OF CHANGES IN EQUITY 11 | |
| CONDENSED STATEMENT OF CASH FLOWS 12 | |
| NOTES 13 |
The Company's (Songa Bulk ASA with subsidiaries) net result in Q4 2017 increased compared to Q3 2017 as the Company took delivery of three vessels in the current quarter and vessels were chartered out on higher time charter (TC) rates. The highlights below are a comparative summary of Q4 2017 versus Q3 2017.
VESSEL DELIVERIES:
1 Please see Note 8
| in \$ thousands | ||
|---|---|---|
| Financial performance | Q4 2017 | Q3 2017 |
| Operating revenue | 13 880 | 8 118 |
| Other operating income (-expenses) | 283 | -37 |
| Operating expenses | 9 715 | 7 333 |
| Operating profit | 4 448 | 748 |
| Net profit (-loss) | 3 049 | -716 |
| Earnings per share, \$ per share | 0.085 | -0.020 |
| Financial position | 31 December 2017 | 30 September 2017 |
| Total assets | 316 888 | 314 327 |
| Cash and cash equivalents | 41 017 | 60 338 |
| Total equity | 174 171 | 171 834 |
| Cash flow statement | Q4 2017 | Q3 2017 |
| Net cash flow from operating activities | 2 475 | 743 |
| Net cash flow used in investing activities | -20 929 | -112 727 |
| Net cash flow from financing activities | -867 | 62 871 |
The Company increased operating profit by \$3.7 million, from \$0.7 million in Q3 2017 to \$4.4 million in Q4 2017. The Company reports a net profit of \$3.0 million in Q4 2017, compared to a net loss in Q3 2017 of \$0.7 million. The Company sold one vessel in Q4 2017 with a recognized gain of \$2.0 million. In addition, delivery of three more vessels led to an increase in operating days which contributes positively on net profit.
Operating revenue increased from \$8.1 million in Q3 2017 to \$13.9 million in Q4 2017. During Q4 2017, the Company took delivery of three vessels, adding to the twelve vessels previously delivered. TC out days2 increased from 891 in Q3 2017 to 1 173 in Q4 2017. TCE was \$10 391 per day in Q4 2017, compared to \$9 069 per day in Q3 2017.
Due to the fleet growth in Q4 2017, the operating expenses were \$9.7 million compared to \$7.3 million in Q3 2017. The rise in operating expenses relates mainly to ship operating expenses and depreciation, since operating days increased from 903 in Q3 2017 to 1 190 in Q4 2017.
Net financial expenses were \$2.1 million in Q4 2017, up from net financial expenses of \$1.5 million in Q3 2017. Q4 2017 was the first quarter where interests were calculated on the entire bond amount for a full quarter, which explains the increase in financial expenses.
The Company's total assets amounted to \$316.9 million at 31 December 2017, up from \$314.3 million at 30 September 2017. Non-current assets, which comprise of vessels delivered, held for sale and paid deposits on vessels for future deliveries, increased from \$232.7 million at 30 September 2017 to \$269.8 million at 31 December 2017. This was mainly due to the Company's net fleet growth of two vessels.
Total equity and total interest-bearing debt were stable during the quarter.
2 Please see Note 8
Net cash flow from operating activities was \$2.5 million in Q4 2017. Net cash flow from financing activities was - \$0.9 million. \$20.9 million were used in investment activities this quarter, being the net spend on purchase and sale of vessels. Net change in cash and cash equivalents from 30 September 2017 to 31 December 2017 was -\$19.3 million. Cash and cash equivalents at the end of Q4 2017 were \$41.0 million.
By the end of the fourth quarter 2017, the fleet consisted of 14 bulk carriers:
| Vessel Name | Ex Name | Type | DWT | Built | Yard |
|---|---|---|---|---|---|
| Songa Glory | Equinox Glory | Supramax | 58 680 | 2012 | Nantong Cosco |
| Songa Wave | Xing Fu Hai | Ultramax | 61 491 | 2017 | Dalian Cosco |
| Songa Delmar | Delmar | Kamsarmax | 81 501 | 2011 | Hyundai Samho HI |
| Songa Devi | Goddess Santosh Devi Kamsarmax | 81 918 | 2014 | Tsuneishi Japan | |
| Songa Flama | Flama | Kamsarmax | 80 448 | 2011 | STX South Korea |
| Songa Genesis | Maverick Genesis | Kamsarmax | 80 705 | 2010 | STX South Korea |
| Songa Grain | Nord Navigator | Kamsarmax | 82 672 | 2008 | Tsuneishi Japan |
| Songa Hadong | Hanjin Hadong | Kamsarmax | 82 158 | 2012 | Tsuneishi Japan |
| Songa Hirose | Harbor Hirose | Kamsarmax | 83 494 | 2011 | Sanoyas |
| Songa Maru | Ten Maru | Kamsarmax | 82 687 | 2008 | Tsuneishi Zhoushan |
| Songa Moon | Atlantic Moon | Kamsarmax | 82 188 | 2012 | Tsuneishi Japan |
| Songa Sky | Midland Sky | Kamsarmax | 81 466 | 2010 | Universal Shipbuilding |
| Songa Mountain | Mount Meru | Capesize | 179 147 | 2009 | Hyundai HI Korea |
| Songa Opus | Golden Opus | Capesize | 180 716 | 2010 | STX South Korea |
Total TC out days during fourth quarter 2017, were 1 173 days. There were 11 handover days in Q4 2017. Handover days is the time from delivery of the vessels to the Company until vessels delivery to charterers.
At the date of this report, the Company has acquired 16 vessels of which all have been delivered and 1 vessel (Songa Marlin) has been sold.
The positive development witnessed during the third quarter of 2017 continued through the last quarter of 2017. Strong demand for all major bulk commodities combined with increased sailing distances and more waiting time in port contributed favourably. This combined with a slower pace of newbuilding deliveries ensured higher utilization of the dry bulk fleet and subsequent higher earnings.
Again, the biggest impact was on the bigger sizes where cape spot rates peaked in the middle of December at USD 30 475 per day. The average spot rate for the fourth quarter was USD 22 995 an improvement of 57% compared with the previous quarter. Panamax and Supramax also witnessed improved levels although at a lesser pace with quarterly gains of around 17% and 16% respectively.
China imported a total of 258 million tons of iron ore during fourth quarter 2017. This was slightly below the previous quarter, however, in terms of ton mile demand this was more than compensated for by increased Brazilian exports which reached the highest quantity ever during this quarter. Same picture was witnesses on coal with healthy increase in US and Colombian exports to the Far East.
Grain shipments from the major export countries was just 1 million tons short of the third quarter figure mainly due to delay in the shipments from the US. However, the year on year increase posted a solid gain of 9,4%.
Below are the average Q4 TC spot rates per day gross compared with the previous quarter:
Q4 represented another period of very modest fleet growth with only 1.7 million dwt added to the fleet. This was less than half of the rate compared to the previous quarter. Overall the dry bulk fleet grew by 3,1 % in 2017 of which more than 75% was delivered during first half year.
Compared to the previous quarter, Q4 demand grew by 3.1 %. Year on year growth was about 4.7%. The utilization rate of the dry bulk fleet gained another 2% and reached 86,1% during the quarter. Looking into the main commodities, this can be broken down as follows:
Despite the positive development in freight earnings, vessel values are still lagging behind. Supramaxes have seen more buying interest which has pushed secondhand price marginally up. Panamaxes/Kamsarmaxes are basically unchanged whereas capesize values have dropped slightly.
A five-year-old Supramax (56 000 dwt) was worth \$17.0 million by the end of fourth quarter compared to \$16.5 million at the end of third quarter.
A five-year-old Panamax (76 000 dwt) was worth \$18.5 million by the end of fourth quarter unchanged from the previous quarter.
A five-year-old Capesize (180 000 dwt) was worth \$33.0 million at the end of fourth quarter, a drop of USD 1.0 million from the previous quarter.
More ordering has taken place and the overall order book now stands around 9.6% of the existing fleet. This is still very low seen in a historic perspective.
From the time of the startup of the Company through the initial equity raise back in November 2016 the pronounced strategy was to actively manage the cyclicality of the dry bulk market by investing at historically low levels and subsequently focus on returning capital to shareholders through asset sales and/or dividends as the market recovers. Further it was stated that Songa Bulk should use the first 12 months to invest in modern and liquid assets through a lean and low cost management structure.
Following the delivery of three kamsramaxes during fourth quarter of 2017, the sale of one supramax same quarter plus the delivery of one capesize in January 2018 the Company is pleased with the composition of its fleet for now.
It was important for Songa Bulk to put money at work sooner than initially anticipated due to the fact the market improved at a steady pace and with greater strength than most analysts following the dry bulk market forecasted.
During 2017 demand growth surprised on the upside and outperformed supply growth with a healthy premium and was the main reason for the fundamental change
With a sailing fleet of 15 vessels with an average age of seven years, Songa Bulk is well positioned with its robust business model and low cash break even. For 2018 the cash breakeven is estimated to be around \$7 350 per day. This includes Opex, G&A and interest expenses, but does not include dry dockings.
The chartering strategy was initially to employ the majority of the fleet at fixed TC rates for short to medium periods with duration up to a year. Given the improved market environment Songa Bulk has gradually increased its spot exposure.
Out of the 15 vessels, 3 vessels are employed on index related rates, with two more entering the same scheme in March/April this year. In addition, the 3 Capesizes are all employed trading spot in the CCL Pool.
For the first quarter of 2018 the Company has covered 82% of its original capacity at an average rate of \$10 830 net per day. From second quarter onwards Songa Bulk has limited coverage.
The focus going forward will be on earnings rather than growth unless there are accretive opportunities.
Forward-looking statements presented in this report are based on various assumptions. The assumptions were reasonable when made, but are subject to uncertainties and contingencies that are difficult or impossible to predict. Songa Bulk ASA cannot give assurances that expectations regarding the outlook will be achieved or accomplished.
Risk Factors
The Company is through its operations exposed to a variety of market, operational and financial risks.
The most significant risk for the Company is the market risk related to the cyclical dry bulk market. Changes in national and international economic conditions, including for example interest rate levels, inflation, employment levels, may influence the valuation of real and financial assets. In turn, this may impact the demand for goods, services and assets globally and thereby the macro economy. The current macroeconomic situation is uncertain and there is a risk of negative developments. Such changes and developments – none of which will be within the control of the Company – may negatively impact the Company's investment activities, realization opportunities and overall investor returns.
The demand for, and the pricing of the underlying assets are outside of the Company's control and depend, among other things, on the global economy, the global trade growth, as well as the prices of oil and gas. On the supply side there are uncertainties tied to the ordering of new vessels and scope of future scrapping. The actual residual value of the vessels in the underlying investments, and/or their earnings after expiration of the fixed contract terms, may be lower than the Company estimates.
In view of operational risk, the Company is considering different factors such as misdelivery of cargoes, cargo claims, off hire due to technical reasons, as well as arrests and/or hijacking of vessels. However, the Company is taking measures to minimize the exposure and the probability of such risks.
The Company is exposed to credit risk and time charter contract risk in the case that receivables from customers and other parties are not paid and time charter contracts are early terminated. The customers are in general large companies with excellent credit rating. For new customers, a credit evaluation is performed.
Liquidity risk may arise if the Company is not able to pay its financial obligations at due date. The Company applies cash flow forecasting to ensure that the activities are adequately financed at all times. Cash flows from operations and from financing activities are considered sufficient to settle all financial obligations.
| in \$ thousands | Note | Q4 2017 | YTD Q4 2017 | Q4 2016 / YTD Q4 2016 |
|---|---|---|---|---|
| (Unaudited) | (Unaudited) | (Audited) | ||
| Voyage charter revenue | 670 | 1 577 | - | |
| Time charter revenue | 11 236 | 24 822 | 117 | |
| Gain from sale of vessels and other revenue | 1 975 | 2 036 | - | |
| Total operating income | 13 880 | 28 435 | 117 | |
| Other operating income (-expenses) | 283 | 246 | - | |
| Voyage expenses | - | 220 | 45 | |
| Ship operating expenses | 6 887 | 16 629 | 117 | |
| General and administrative expenses | 620 | 2 488 | 779 | |
| Depreciation | 3 | 2 208 | 5 450 | 37 |
| Total operating expenses | 9 715 | 24 787 | 978 | |
| Operating profit (-loss) | 4 448 | 3 894 | -861 | |
| Interest income | 190 | 562 | 24 | |
| Interest expenses | -2 305 | -3 967 | -3 | |
| Other financial income (-expenses) | 5 | -94 | -325 | |
| Net financial income (-expenses) | -2 110 | -3 500 | -304 | |
| Profit (-loss) before taxes | 2 338 | 394 | -1 165 | |
| Tax expense | -712 | - | 870 | |
| Net profit (-loss) | 3 049 | 394 | -2 036 | |
| Total comprehensive income (-loss) | 3 049 | 394 | -2 036 | |
| Basic and diluted earnings – \$ per share | 0.085 | 0.012 | -0.349 |
| in \$ thousands | Note | 31 December 2017 | 31 December 2016 |
|---|---|---|---|
| (Unaudited) | (Audited) | ||
| Vessels | 266 775 | 11 108 | |
| Deposit vessels | 3 055 | 3 855 | |
| Total non-current assets | 3 | 269 830 | 14 963 |
| Inventories | 2 233 | 26 | |
| Trade receivables | 1 312 | 3 | |
| Other receivables | 2 496 | 133 | |
| Cash and cash equivalents | 41 017 | 57 688 | |
| Total current assets | 47 058 | 57 850 | |
| TOTAL ASSETS | 316 888 | 72 813 | |
| Share capital | 21 620 | 9 085 | |
| Share premium | 153 619 | 63 756 | |
| Other paid-in capital | 574 | 400 | |
| Retained earnings | -1 642 | -2 036 | |
| Total equity | 4 | 174 171 | 71 205 |
| Interest-bearing debt | 6 | 136 776 | - |
| Financial liabilities at fair value through profit or loss | 490 | 327 | |
| Total non-current liabilities | 137 266 | 327 | |
| Trade payables | 1 745 | 682 | |
| Income taxes payable | - | 393 | |
| Other liabilities | 3 706 | 206 | |
| Total current liabilities | 5 451 | 1 281 | |
| Total liabilities | 142 717 | 1 608 | |
| TOTAL EQUITY AND LIABILITIES | 316 888 | 72 813 |
| in \$ thousands | Share capital |
Share premium |
Other paid-in capital |
Retained earnings |
Total equity |
|---|---|---|---|---|---|
| (Unaudited) | (Unaudited) | (Unaudited) | (Unaudited) | (Unaudited) | |
| Incorporation | 3 | - | - | - | 3 |
| Share issuance | 9 082 | 65 188 | - | - | 74 270 |
| Share issuance costs | - | -1 432 | - | - | -1 432 |
| Warrants issued to employees | - | - | 400 | - | 400 |
| Net loss | - | - | - | -2 036 | -2 036 |
| Equity 31 December 2016 | 9 085 | 63 756 | 400 | -2 036 | 71 205 |
| Share issuance | 12 535 | 92 711 | - | - | 105 246 |
| Share issuance costs | - | -2 848 | - | - | -2 848 |
| Warrants issued to employees | - | - | 174 | - | 174 |
| Net loss | - | - | - | 394 | 394 |
| Equity 31 December 2017 | 21 620 | 153 619 | 574 | -1 642 | 174 171 |
| in \$ thousands | YTD Q4 2017 | YTD Q4 2016 |
|---|---|---|
| (Unaudited) | (Audited) | |
| Profit (-loss) before taxes | 394 | -1 166 |
| Depreciation | 5 450 | 37 |
| Gain on sale of vessel | -1 968 | - |
| Change in inventories | -2 207 | -26 |
| Net change in trade receivables/payables | -247 | 679 |
| Employee benefit expenses in connection with issuance of warrants | 174 | 400 |
| Change in financial liabilities at fair value through profit or loss | 163 | 327 |
| Net change in other current items | 1 454 | -404 |
| Net cash flow from operating activities | 3 214 | -153 |
| Sale of vessel | 13 615 | - |
| Purchase of vessels | -268 512 | -10 000 |
| Paid deposit on vessels | -3 055 | -3 855 |
| Dry-docking paid | -397 | - |
| Net cash flow used in investment activities | -258 349 | -13 855 |
| Proceeds from share issuance | 105 246 | 73 129 |
| Share issuance costs | -2 848 | -1 432 |
| Proceeds from issuance of debt | 137 625 | - |
| Debt issuance costs | -1 559 | - |
| Net cash flow from financing activities | 238 464 | 71 697 |
| Net change in cash and cash equivalents | -16 671 | 57 688 |
| Cash and bank deposits at beginning of period | 57 688 | - |
| Cash and bank deposits at end of period | 41 017 | 57 688 |
These interim financial statements are prepared in accordance with IAS 34 Interim Financial Reporting.
The condensed consolidated interim financial reporting should be read in conjunction with the annual financial statements for the year ended 31 December 2016, which have been prepared in accordance with IFRS, as adopted by the EU.
Interest-bearing debt is initially recognized at its fair value less transaction costs. After initial recognition, interest-bearing debt is measured at amortized cost using the effective interest method.
Non-current assets are classified as held for sale if their carrying amount will be recovered principally through a sale transaction rather than through continuing use and a sale is considered highly probable. They are measured at the lower of their carrying amount and fair value less costs to sell.
Non-current assets (including those that are part of a disposal group) are not depreciated or amortized while they are classified as held for sale.
Net income as a result of the revenue sharing agreement for the Capesize vessel is presented as other operating income (expenses).
The following new or amendments to standards and interpretations have been issued and become effective during the current period. These include:
The above pronouncements did not have a material impact on the financial statements of the Company, beyond disclosures.
The following new or amendments to standards and interpretations have been issued and become effective in years beginning on or after 1 January 2018, assuming European Union adoption. The Company is evaluating the impact of these changes on the financial statements of the Company:
expectation is that if all vessels are on time charter during and at the period end Q4 2017, there will not be any effect on adoption of IFRS 15.
The Company operates within one single segment, which is the shipping dry-bulk segment.
| in \$ thousands | Q4 | YTD Q4 | 2016 |
|---|---|---|---|
| 2017 | 2017 | ||
| Closing balance previous period total non-current assets | 232 740 | 14 963 | - |
| Purchase price vessels delivered in the period | 59 493 | 272 375 | 11 145 |
| Paid deposits previous periods on vessels delivered in the period | -11 595 | -3 855 | - |
| Paid deposits on vessels for delivery in future periods | 3 055 | 3 055 | 3 855 |
| Book value of vessels sold in the period | -11 655 | -11 655 | - |
| Dry-docking in the period | - | 397 | - |
| Depreciation in the period | -2 208 | -5 450 | -37 |
| Closing balance total non-current assets | 269 830 | 269 830 | 14 963 |
As of 31 December 2017, the Company is the owner of a total of fourteen bulk carrier vessels. During fourth quarter 2017, the Company took delivery of three vessels and entered into a memorandum of agreement for the purchase of one more bulk carrier vessel. The vessel was delivered in first quarter of 2018.
In fourth quarter 2017, the Company sold one vessel. The recognized gain from the sale was \$2.0 million which is classified as other revenue.
As of 31 December 2017, management has assessed impairment indicators and concluded that there are no impairment indicators for any vessel.
As of 31 December 2017, the Company's share capital consists of 35 860 000 shares, each at a nominal value of \$0.60 (NOK 5). All issued shares are fully paid.
In a board meeting on 31 January 2017, the Board of Directors resolved to issue 1 000 000 new shares under a proxy from the general meeting. Total gross proceeds from the share issuance were \$5 million. It was also resolved to issue 75 000 warrants to the founding shareholders. For further information, see note 5.
In an extraordinary general meeting on 17 February 2017, it was resolved to issue 20 000 000 new shares. Total gross proceeds from the share issuance were \$100.2 million (the subscription price was fixed at NOK 42 per share). It was also resolved to issue 325 000 warrants to the founding shareholders. For further information, see note 5.
In connection with the two share issuances taking place in first half year 2017, as mentioned in note 4, warrants have been granted to the founding shareholders. Warrants are granted under the same warrant agreement as mentioned in note 8 to the annual report.
| Tranche 1 | Tranche 2 | Tranche 3 | |||||||
|---|---|---|---|---|---|---|---|---|---|
| Value | Value | Value | Value | Value | Value | ||||
| per | per | per | per | per | per | ||||
| No of | warrant | warrant | No of | warrant | warrant | No of | warrant | warrant | |
| Share issue | warrants | (NOK) | (USD) | warrants | (NOK) | (USD | warrants | (NOK) | (USD) |
| 4 November 2016 | 201 094 | 5.87 | 0.72 | 201 094 | 5.84 | 0.71 | 201 094 | 4.54 | 0.56 |
| 31 January 2017 | 13 750 | 7.53 | 0.90 | 13 750 | 7.87 | 0.94 | 13 750 | 6.37 | 0.76 |
| 17 February 2017 | 59 583 | 6.85 | 0.82 | 59 583 | 6.99 | 0.84 | 59 583 | 5.52 | 0.66 |
Granted warrants as at 31 December 2017 to shareholders that are also employed by the Company:
Valuation date is on the date of the respective share issuance. Subscription price is NOK 40.89 for warrants issued on 4 November 2016, NOK 41.63 for warrants issued on 31 January 2017 and NOK 42.00 for warrants issued on 17 February 2017. Warrants are accounted for as employee benefit expenses with a corresponding increase in equity. Total recognized amount in 2017 was \$174 thousand, the amount in fourth quarter 2017 was \$0.
| Tranche 1 | Tranche 2 | Tranche 3 | |||||||
|---|---|---|---|---|---|---|---|---|---|
| Value | Value | Value | Value | Value | Value | ||||
| per | per | per | per | per | per | ||||
| No of | warrant | warrant | No of | warrant | warrant | No of | warrant | warrant | |
| Share issue | warrants | (NOK) | (USD) | warrants | (NOK) | (USD | warrants | (NOK) | (USD) |
| 4 November 2016 | 164 531 | 6.48 | 0.79 | 164 531 | 6.29 | 0.79 | 164 531 | 5.18 | 0.63 |
| 31 January 2017 | 11 250 | 6.24 | 0.76 | 11 250 | 6.26 | 0.76 | 11 250 | 4.88 | 0.59 |
| 17 February 2017 | 48 750 | 6.13 | 0.75 | 48 750 | 6.12 | 0.75 | 48 750 | 4.74 | 0.58 |
Granted warrants as at 31 December 2017 to shareholder that is not employed by the Company:
Valuation date is 31 December 2017. These warrants are recognized as financial liabilities, since the strike price is not in the functional currency of the entity, and valued at fair value through profit or loss. The fair value of all issued warrants to shareholder not employed by the Company as of 31 December 2017, was \$490 thousand. The recognized net expense in 2017 was \$163 thousand. The amount in Q4 2017 was an expense of \$7 thousand. The items are classified as other financial income.
On 30 May 2017, the Company issued a \$75 million senior secured bond with a total borrowing limit of \$150 million. The bond has floating interest rate, of LIBOR plus a margin of 4.50%. Settlement was 13 June 2017 and the bond shall be repaid in full on the maturity date which is 13 June 2022.
On 23 August 2017, the Company completed a tap issue of \$45 million. The total nominal amount outstanding in the bond following the tap issue will be \$120 million of the borrowing limit of \$150 million. The bond has a floating interest rate of LIBOR plus a margin of 4.50%, and the final maturity is 13 June 2022.
On 29 September 2017, the Company completed a tap issue of \$18 million. The total nominal amount outstanding in the bond following the tap issue will be \$138 million of the borrowing limit of \$150 million. The bond has a floating interest rate of LIBOR plus a margin of 4.50%, and the final maturity 13 June 2022.
| in \$ thousands | 31 December | 31 December |
|---|---|---|
| 2017 | 2016 | |
| Nominal value of issued bond | 138 000 | - |
| Debt issuance cost | -1 224 | - |
| Interest-bearing debt | 136 776 | - |
The following financial covenants exist under the bond terms:
In addition, the earliest distribution is in 2018. Distribution is permitted if the Vessel LTV Ratio is below 50% and is also limited to the Issuer's consolidated adjusted net Profit of the previous calendar year. Depreciation made on the vessels and sale of vessels is not included in adjusted net Profit.
Set out below is a comparison by category for carrying amounts and fair values of all of the Company's financial instruments that are carried in the financial statements. The estimated fair value amounts of the financial instruments have been determined using appropriate market information and valuation techniques.
| 31 December 2017 | 31 December 2016 | |||||
|---|---|---|---|---|---|---|
| In USD | Carrying amount | Fair value | Carrying amount | Fair Value | ||
| Financial assets: | ||||||
| Trade receivables | 1 312 | 1 312 | 3 | 3 | ||
| Other receivables* | 1 741 | 1 741 | 78 | 78 | ||
| Cash and cash equivalents | 41 017 | 41 017 | 57 688 | 57 688 | ||
| Financial liabilities: | ||||||
| Interest-bearing debt** | 138 000 | 138 000 | - | - | ||
| Financial liabilities at fair value through | ||||||
| profit or loss | 490 | 490 | 327 | 327 | ||
| Trade payables | 1 745 | 1 745 | 682 | 682 | ||
| Income taxes payable | - | - | 393 | 393 | ||
| Other current liabilities* | 2 665 | 2 665 | 115 | 115 |
*The difference between the balance sheet item other receivables and other receivables in the table above is prepaid expenses which are not considered a financial instrument. The difference between the balance sheet item other current liabilities and other current liabilities in the table above is prepaid revenues which are not considered a financial instrument.
**The difference between the balance sheet item Interest-bearing debt and the table above is the debt issuance costs as detailed in note 6.
The different levels for fair value estimation have been defined as follows:
Level 1: Quoted prices in active markets for identical assets or liabilities
Level 2: Inputs other than quoted prices included within level 1 that are observable for the asset or liability, either directly or indirectly
Level 3: Unobservable input for the asset or liability
Fair value equals carrying value for all financial instruments. Cash and cash equivalents are valued at level 1, Financial liabilities at fair value through profit or loss, which are warrants issued to shareholder, are valued at level 3.
| Financial performance | Q4 2017 | Q3 2017 |
|---|---|---|
| Time charter equivalent revenue1 , \$ in thousands |
12 189 | 8 081 |
| Time charter out days (TC Out days2 ) |
1 173 | 891 |
| Time charter equivalent (TCE3 ), \$ per day |
10 394 | 9 069 |
| Net ship operating expenses4 , \$ in thousands |
6 646 | 4 676 |
| Operating days5 | 1 190 | 903 |
| Net ship operating expenses per day (OPEX6 ), \$ per day |
5 585 | 5 178 |
1 Time charter equivalent revenue is voyage charter revenue, time charter revenue and other operating income ( expenses).
2 Time Charter Out days (TC Out days) are calculated on a vessel by vessel basis and represent operating days less handover days, dry-dock and unscheduled repairs.
3 Time Charter Equivalent (TCE) is calculated by dividing time charter equivalent revenue by TC Out days during a reporting period.
4 Net Ship Operating Expenses are the ship operating expenses less startup costs and tonnage tax. Startup costs are expenses related to delivery of new vessels, which cannot be activated.
5 Operating days are the number of days calculated from the day the Company takes delivery of the vessel, until end of the reporting period.
6Net Ship Operating Expenses per day (OPEX) is calculated by dividing net ship operating expenses by operating days during a reporting period.
The Company has purchased corporate services from Arne Blystad AS under the corporate service agreement as mentioned in the annual report for 2016.
The Company has purchased technical management services from Songa Shipmanagement Ltd for the vessel Songa Maru under the technical management agreement as mentioned in the annual report for 2016. In addition, the Company has entered into technical management agreements with Songa Shipmanagement Ltd for the rendering of technical management services for the vessels Songa Genesis, Songa Marlin, Songa Delmar, Songa Hadong, Songa Opus, Songa Devi, Songa Mountain, Songa Sky and Songa Claudine.
The Capesize bulk carrier Songa Claudine was delivered 25 January 2018. The difference between the purchase price and deposit paid, \$27.45 million, was settled prior to delivery of the vessel.
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