What you need to know about BW Group's plans: Moody's

Very interesting analysis of a Singapore shipper’s financial situation.

By way of background, Moody's notes that on 30 September 2011, BW Group, a diversified shipping firm based in Singapore, said it is seeking bondholders’ consent to amend certain terms of its bonds due in 2017. The company is offering bondholders a priority claim over an exclusive pool of vessels having fair market value of 125% of the face value of the bond outstanding. Bondholders’ consent would allow BW to incur more secured debt at the level of either the parent company or a subsidiary/ joint-venture and to enter into sale and leaseback transactions.

BW also said it is arranging a seven-year, US$1.5 billion, senior, secured, revolving credit facility that will give creditor banks a priority claim over a separate pool of vessels. The proposed arrangements will not have an impact on BW’s bond ratings. Below, Moody’s answers some frequently asked questions from investors and intermediaries concerning BW’s announcement.

Assuming a full drawdown of the RCF, the amount of unencumbered assets to total assets is expected to fall to 46% of total assets from about 90% now.

The proceeds from the new banking facility will be used to repay the drawn amount of US$640 million and US$75 million from its existing senior unsecured revolving credit facilities due in December 2011 and April 2013, respectively.

BW also plans to utilize the new facility for a 50% down-payment of nearly US$200mm for 2 new LNG vessels for delivery in 2014 and 2015, respectively.

Even though it could delay the refinancing exercise by drawing under its existing balance from its credit facility for all its funding needs, Moody's views management's pro-active refinancing as prudent, given the weak visibility of credit market conditions.

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