Quarterly Report • Nov 30, 2017
Quarterly Report
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Songa Bulk ASA Financial Report Q3 2017
| SONGA BULK 3 THIRD QUARTER 2017 HIGHLIGHTS 3 |
|
|---|---|
| THIRD QUARTER 2017 EVENTS 3 | |
| THIRD QUARTER 2017 RESULTS 5 | |
| THE FLEET 6 | |
| MARKET 7 | |
| DRY BULK MARKET IN Q3 2017 7 | |
| OUTLOOK AND STRATEGY 8 | |
| FORWARD-LOOKING STATEMENTS 8 | |
| RISK FACTORS 9 | |
| MAIN RISK FACTORS 9 | |
| RESPONSIBILITY STATEMENT 10 | |
| FINANCIAL INFORMATION 11 | |
| CONDENSED STATEMENT OF COMPREHENSIVE INCOME 11 | |
| CONDENSED STATEMENT OF FINANCIAL POSITION 12 | |
| CONDENSED STATEMENT OF CHANGES IN EQUITY 13 | |
| CONDENSED STATEMENT OF CASH FLOWS 14 | |
| NOTES 15 |
The Company's (Songa Bulk ASA with subsidiaries) net result in Q3 2017 increased compared to Q2 2017 as the Company took delivery of four vessels in the current quarter and vessels were chartered out on higher time charter (TC) rates. The highlights below are a comparative summary of Q3 2017 versus Q2 2017.
VESSEL DELIVERIES:
1 Please see Note 9
vessel was built at Sanoyas in 2011 and has a deadweight of 83 494 tons. The vessel was delivered on 15 November 2017.
| in \$ thousands | ||
|---|---|---|
| Financial performance | Q3 2017 | Q2 2017 |
| Operating revenue | 8 118 | 4 866 |
| Other operating income (-expenses) | -37 | - |
| Operating expenses | 7 333 | 5 207 |
| Operating profit (-loss) | 748 | -341 |
| Net loss | -716 | -126 |
| Earnings per share, \$ per share | -0.020 | -0.003 |
| Financial position | 30 September 2017 | 30 June 2017 |
| Total assets | 314 327 | 250 283 |
| Cash and cash equivalents | 60 338 | 109 451 |
| Total equity | 171 834 | 172 550 |
| Cash flow statement | Q3 2017 | Q2 2017 |
| Net cash flow from operating activities | 743 | 466 |
| Net cash flow used in investing activities | -112 727 | -81 858 |
| Net cash flow from financing activities | 62 871 | 74 062 |
The Company increased operating profit by \$1.1 million in Q3 2017, from a loss of \$0.3 million in Q2 2017 to a profit of \$0.7 million in Q3 2017. The Company reports a net loss of \$0.7 million in Q3 2017, compared to a net loss in Q2 2017 of \$0.1 million. The decline is a result of higher interest expenses due to bond issued in the last four months.
Operating income increased from \$4.9 million in Q2 2017 to \$8.1 million in Q3 2017. During Q3 2017, the Company took delivery of four vessels, adding to the eight vessels previously delivered. TC out days2 increased from 605 in Q2 2017 to 891 in Q3 2017. TCE was \$9 069 per day in Q3 2017, compared to \$8 043 per day in Q2 2017.
Due to the fleet growth in Q3 2017, the operating expenses were \$7.3 million compared to \$5.2 million in Q2 2017. The rise in operating expenses relates mainly to ship operating expenses and depreciation, since operating days increased from 627 in Q2 2017 to 903 in Q3 2017.
Net financial loss was \$1.5 million in Q3 2017, down from a net financial income of \$0.2 million in Q2 2017. The increase in financial expenses relates mainly to interest of bonds issued during Q2 2017 and Q3 2017.
The Company's total assets amounted to \$314.3 million at 30 September 2017, up from \$250.3 million at 30 June 2017. Non-current assets, which comprise of vessels delivered, held for sale and paid deposits on vessels for future deliveries, increased from \$138.2 million at 30 June 2017 to \$232.7 million at 30 September 2017. This was mainly due to the Company taking delivery of four vessels in the third quarter.
Total equity remained stable during the quarter, while interest-bearing debt increased from \$74.1 million at 30 June 2017 to \$136.5 million at 30 September 2017 through issuance of bond.
Net cash flow from operating activities was \$0.7 million in Q3 2017. Net cash flow from financing activities was \$62.9 million, which were the net proceeds from debt issuance during the quarter. \$112.7 million were used in investment activities this quarter, hereunder the purchase of additional vessels. Net change in cash and cash equivalents from 30 June 2017 to 30 September 2017 was -\$49.1 million. Cash and cash equivalents at the end of Q3 2017 were \$60.3 million.
2 Please see Note 9
By the end of the third quarter 2017, the delivered fleet consists of 12 bulk carriers:
| Vessel Name | Ex Name | Type | DWT | Built | Yard |
|---|---|---|---|---|---|
| Songa Glory | Equinox Glory | Supramax | 58 680 | 2012 | Nantong Cosco |
| Songa Marlin | Tenki Maru | Supramax | 58 693 | 2009 | Tsuneishi Zhoushan |
| 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 Maru | Ten Maru | Kamsarmax | 82 687 | 2008 | Tsuneishi Zhoushan |
| 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 third quarter 2017, were 891 days. There were 12 handover days in Q3 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 12 have been delivered and 1 vessel (Songa Marlin) has been sold.
Market, Outlook, Strategy and Forward-Looking Statements
Following a slow start at the beginning of July the dry cargo market developed positively during third quarter. Healthy demand for both iron ore and coal combined with a significant reduction in newbuilding delivery rate ensured improvement in freight rates for all segments. As always, volatility was most pronounced in the cape segments where TC rates increased from \$6 300 per day (10 July) to \$22 450 per day on 25 September.
World steel production performed well in third quarter generating demand for iron as well as coking coal. At the same time also steam coal shipments increased, of which long haul trade from Atlantic to Far East gave a further boost to overall demand. China, the major importer of iron ore, posted record levels in September with 102 million tons iron ore, the highest figure ever. In addition, coal imports recorded healthy growth in third quarter with September reaching 27.1 million tons, the highest import figure since December 2014. Grain shipments was seasonally weaker during this quarter and helped to explain the relatively modest increase in Supramax rates.
Below are the average TC spot rates per day gross compared with the previous quarter:
Third quarter represented another period of very modest fleet growth. Whereas second quarter saw the dry bulk fleet grow by a net figure of 6.6 million dwt, the corresponding figure for the third quarter was only 2.7 million dwt net.
Compared to the previous quarter, the third quarter demand grew by 1.4%, year on year growth was about 6.2%. The utilization of the dry bulk remained steady at 84%. Looking into the main commodities, this can be broken down as follows:
| - | Iron ore: | + 2.8% compared to the previous quarter and + 2.7 % year on year |
|---|---|---|
| --- | ----------- | ------------------------------------------------------------------ |
Despite the positive development in spot freight levels, this has not translated into the same improvement in the longer term TC levels. Subsequently, secondhand values have been relatively static posting only minor improvements so far.
A five-year-old Supramax (56 000 dwt) was worth \$16.5 million by the end of third quarter compared to \$16 million at the end of second quarter.
A five-year-old Panamax (76 000 dwt) was worth \$18.5 million by the end of third quarter compared to \$18 million at the end of second quarter.
A five-year-old Capesize (180 000 dwt) was worth \$34 million at the end of third quarter, up \$0.5 million from the previous quarter.
Even though ordering of new vessels has accelerated during the last few months, the official order book still makes up for only 8% of the existing fleet. This is very low sseen in a historic perspective.
Third quarter was an active quarter for Songa Bulk ASA. The Company took delivery of two Kamsarmax vessels and two Capesize vessels. In addition, the Company entered into purchase agreements for three Kamsarmax vessels and one Capesize vessel. Furthermore, one Supramax vessel was sold, which enabled the Company to purchase the last Capesize vessel, the Cape Claudine. When this vessel is delivered, which is expected to take place during January 2018, the Company will own a fleet of 15 vessels with an average age of 6 years.
Following the last tap issue, the Company has a loan to value (LTV) of 40% based on latest valuation. The low cash breakeven of about \$7 000 per day based on 15 sailing vessels excluding dry docking costs, will make the Company profitable ahead of Management's expectations.
The FFA market (synthetic freight market) is still in backwardation. This is mainly due to seasonality related to first quarter 2018 and uncertainty in connection with environmental measures in China. The increased focus on pollution from the Chinese Authorities is not necessarily negative for the seagoing transportation of dry bulk commodities from a quality perspective. The price spread between high and low quality iron ore has widened lately which will favor Brazilian iron ore with three times the sailing distance compared with Australia. (The majority of potential added capacity of high quality iron ore over the next three years is coming from Brazil with long sailing distances.)
Even though the Company has witnessed more orders being placed lately, it is still at comfortable levels compared to the existing fleet. The nominal order book stands at 8%, but in reality some analysts believe it could be just below 7% and in line with number of vessels older than 20 years.
The Company has 1 170 available days3 in fourth quarter out of which 77% is covered at \$9 715 TC net4 per day. Two Kamsarmaxes are fixed on index charters (Songa Grain and Songa Genesis) against the daily Panamax 4 TC published by the Baltic Exchange. These two vessels and Songa Mountain participating in the CCL Spot Pool are not considered as covered. From second quarter of 2018, Songa Bulk ASA has presently full exposure to the prevailing spot market.
The Company will continue its present market strategy with a majority of its fleet employed at fixed TC rates with durations depending on the prevailing market at any given time.
The Board of Songa Bulk is pleased with the rapid growth of the Company. Going forward the focus is on earnings and in combination with its low costs, simple structure and alignment the main objective is to create shareholder values.
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.
3 Available days are all days the vessels are generating income and calculated on basis of total operating days less any off-hire during the period.
4 Total expected income divided by available days.
Risk Factors and Responsibility Statement
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.
We confirm, to the best of our knowledge, that the condensed set of financial statements for the period 1 January to 30 September 2017 have been prepared in accordance with IAS 34 – Interim Financial Reporting, and gives a true and fair view of the Company's assets, liabilities, financial position and profit as a whole.
We also confirm, to the best of our knowledge, that the interim management report includes a fair review of important events that have occurred during the second quarter of the financial year and their impact on the set of financial statements, and a description of the main risks and uncertainties going forward.
Oslo, 30 November 2017
The Board of Directors of Songa Bulk ASA
Chairman CEO Director
Arne Blystad Herman Alf Billung Magnus Leonard Roth
Director Director
Christine Rødsæther Vibeke Gwendoline Fængsrud
| in \$ thousands | Note | Q3 2017 | YTD Q3 2017 |
|---|---|---|---|
| (Unaudited) | (Unaudited) | ||
| Voyage charter revenue | 906 | 906 | |
| Time charter revenue | 7 212 | 13 587 | |
| Other revenue | - | 62 | |
| Total operating income | 8 118 | 14 555 | |
| Other operating income (-expenses) | -37 | -37 | |
| Voyage expenses | 124 | 220 | |
| Ship operating expenses | 4 909 | 9 742 | |
| General and administrative expenses | 543 | 1 868 | |
| Depreciation | 3 | 1 757 | 3 242 |
| Total operating expenses | 7 333 | 15 072 | |
| Operating profit (-loss) | 748 | -554 | |
| Interest income | 146 | 373 | |
| Interest expenses | -1 451 | -1 662 | |
| Other financial income (-expenses) | -159 | -100 | |
| Net financial income | -1 464 | -1 389 | |
| Loss before taxes | -716 | -1 943 | |
| Tax expense | - | 712 | |
| Net loss | -716 | -2 655 | |
| Total comprehensive loss | -716 | -2 655 | |
| Basic and diluted earnings – \$ per share | -0.020 | -0.082 |
| in \$ thousands | Note | 30 September 2017 | 31 December 2016 |
|---|---|---|---|
| (Unaudited) | |||
| Vessels | 209 490 | 11 108 | |
| Deposit vessels | 11 595 | 3 855 | |
| Vessels held for sale | 8 | 11 655 | - |
| Total non-current assets | 3 | 232 740 | 14 963 |
| Inventories | 2 724 | 26 | |
| Trade receivables | 75 | 3 | |
| Other receivables | 18 450 | 133 | |
| Cash and cash equivalents | 60 338 | 57 688 | |
| Total current assets | 81 587 | 57 850 | |
| TOTAL ASSETS | 314 327 | 72 813 | |
| Share capital | 21 620 | 9 085 | |
| Share premium | 154 331 | 63 756 | |
| Other paid-in capital | 574 | 400 | |
| Retained earnings | -4 691 | -2 036 | |
| Total equity | 4 | 171 834 | 71 205 |
| Interest-bearing debt | 6 | 136 477 | - |
| Financial liabilities at fair value through profit or loss | 483 | 327 | |
| Total non-current liabilities | 136 960 | 327 | |
| Trade payables | 1 529 | 682 | |
| Income taxes payable | 425 | 393 | |
| Other liabilities | 3 579 | 206 | |
| Total current liabilities | 5 533 | 1 281 | |
| Total liabilities | 142 493 | 1 608 | |
| TOTAL EQUITY AND LIABILITIES | 314 327 | 72 813 |
| in \$ thousands | Share | Share | Other paid-in | Retained | Total equity |
|---|---|---|---|---|---|
| capital | premium | capital | earnings | ||
| (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 | - | -2 136 | - | - | -2 136 |
| Warrants issued to employees | - | - | 174 | - | 174 |
| Net loss | - | - | - | -2 655 | -2 655 |
| Equity 30 September 2017 | 21 620 | 154 331 | 574 | -4 691 | 171 834 |
| in \$ thousands | YTD Q3 2017 |
|---|---|
| (Unaudited) | |
| Loss before taxes | -1 943 |
| Depreciation | 3 242 |
| Change in inventories | -2 698 |
| Net change in trade receivables/payables | 775 |
| Employee benefit expenses in connection with issuance of warrants | 174 |
| Change in financial liabilities at fair value through profit or loss | 156 |
| Net change in other current items | 1 033 |
| Net cash flow from operating activities | 739 |
| Purchase of vessels | -212 882 |
| Paid deposit and prepayments of vessels | -24 141 |
| Dry-docking paid | -397 |
| Net cash flow used in investment activities | -237 420 |
| Proceeds from share issuance | 105 244 |
| Share issuance costs | -2 846 |
| Proceeds from issuance of debt | 137 625 |
| Debt issuance costs | -692 |
| Net cash flow from financing activities | 239 331 |
| Net change in cash and cash equivalents | 2 650 |
| Cash and bank deposits at beginning of period | 57 688 |
| Cash and bank deposits at end of period | 60 338 |
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 | Q3 | YTD Q3 | 2016 |
|---|---|---|---|
| 2017 | 2017 | ||
| Closing balance previous period vessels and deposit vessels | 138 171 | 14 963 | - |
| Purchase price vessels delivered in the period | 94 628 | 212 882 | 11 145 |
| Paid deposits previous periods on vessels delivered in the period | -9 897 | -3 855 | - |
| Paid deposits on vessels for delivery in future periods | 11 595 | 11 595 | 3 855 |
| Reclassification of vessel held for sale | -11 655 | -11 655 | - |
| Dry-docking in the period | - | 397 | - |
| Depreciation in the period | -1 757 | -3 242 | -37 |
| Closing balance vessel and deposit vessels | 221 085 | 221 085 | 14 963 |
| Vessel held for sale | 11 655 | 11 655 | - |
| Closing balance vessel held for sale | 11 655 | 11 655 | - |
| Closing balance total non-current assets | 232 740 | 232 740 | 14 963 |
As of 30 September 2017, the Company is the owner of a total of twelve bulk carrier vessels. During third quarter 2017, the Company took delivery of four vessels, and entered into a memorandum of agreements for purchase of another four bulk carrier vessels. Three of the vessels will be delivered in fourth quarter of 2017, and one vessel in first quarter of 2018.
As of 30 September 2017, management has assessed impairment indicators and concluded that there are no impairment indicators for any vessel.
For specifications of vessels held for sale, see note 8.
As of 30 September 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 30 September 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 first three quarters of 2017 was \$174 thousand, the amount in third 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 | 6.25 | 0.78 | 164 531 | 6.29 | 0.79 | 164 531 | 4.93 | 0.62 |
| 31 January 2017 | 11 250 | 6.02 | 0.76 | 11 250 | 5.99 | 0.75 | 11 250 | 4.65 | 0.58 |
| 17 February 2017 | 48 750 | 5.91 | 0.74 | 48 750 | 5.84 | 0.73 | 48 750 | 4.49 | 0.56 |
Granted warrants as at 30 September 2017 to shareholder that is not employed by the Company:
Valuation date is 30 September 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 30 September 2017, was \$483 thousand. The recognized net expense in first three quarters of 2017 was \$156 thousand. The amount in Q3 2017 was an expense of \$129 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 | 30 September | 31 December |
|---|---|---|
| 2017 | 2016 | |
| Nominal value of issued bond | 138 000 | - |
| Debt issuance cost | -1 523 | - |
| Interest-bearing debt | 136 477 | - |
The following financial covenants exist under the bond terms:
In addition, the earliest distribution is in 2018, and distribution is permitted if the Vessel LTV Ratio are below 50% and are 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.
| 30 September 2017 | 31 December 2016 | |||
|---|---|---|---|---|
| In USD | Carrying amount | Fair value | Carrying amount | Fair Value |
| Financial assets: | ||||
| Trade receivables | 75 | 75 | 3 | 3 |
| Other receivables* | 711 | 711 | 78 | 78 |
| Cash and cash equivalents | 60 338 | 60 338 | 57 688 | 57 688 |
| Financial liabilities: | ||||
| Interest-bearing debt** | 138 000 | 138 000 | - | - |
| Financial liabilities at fair value through | ||||
| profit or loss | 483 | 483 | 327 | 327 |
| Trade payables | 1 529 | 1 529 | 682 | 682 |
| Income taxes payable | 425 | 425 | 393 | 393 |
| Other current liabilities* | 2 902 | 2 902 | 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.
| in \$ thousands | 30 September | 31 December |
|---|---|---|
| 2017 | 2016 | |
| Vessels | 11 655 | - |
| Total assets classified as held for sale | 11 665 | - |
On 22 September 2017, the Company signed a Memorandum of Agreement to sell Songa Marlin, a Supramax bulk carrier. The Supramax will be delivered to its new owner within 15 November 2017.
As of 30 September 2017, the Company classified the Supramax as held for sale. The vessel is valued at the lower of the carrying amount and fair value less costs to sell, which in this case is the carrying amount.
The vessel is not depreciated or amortized while it is classified as held for sale.
The estimated gain on sale is \$2 million, which will be recognized in Q4 2017.
| Financial performance | Q3 2017 | Q2 2017 |
|---|---|---|
| Time charter equivalent revenue1 , \$ in thousands |
8 081 | 4 866 |
| Time charter out days (TC Out days2 ) |
891 | 605 |
| Time charter equivalent (TCE3 ), \$ per day |
9 069 | 8 043 |
| Net ship operating expenses4 , \$ in thousands |
4 676 | 3 126 |
| Operating days5 | 903 | 627 |
| 6 Net ship operating expenses per day (OPEX ), \$ per day |
5 178 | 4 987 |
1 Time charter equivalent revenue is operating income 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. Startup costs are expenses related to delivery of new vessels, which can not 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.
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