98-99 / 116
99
98
KUWAIT ENERGY plc
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
For the year ended 31 December 2014
39
23.
BORROWINGS
2014
2013
USD 000’s
USD 000’s
USD 000’s
USD 000’s
Non-current
Current
Non-current
Current
Senior guaranteed notes (a)
242,459
-
-
-
Long-term loans (b)
-
-
88,867
75,649
242,459
-
88,867
75,649
(a)
Senior guaranteed notes
The details of Senior guaranteed notes are as follows:
2014
USD 000’s
Par value payable on maturity
250,000
Initial transaction fees
(8,201)
Fees amortised and included in finance cost during 2014
660
Non-current portion of Senior guaranteed notes
242,459
Interest accrued and payable within 12 months (included in trade and other payables)
9,896
Carrying value as at 31 December 2014
252,355
During 2014, the Group issued USD 250 million aggregate principal amount of 9.5% Senior guaranteed notes due
2019 (the “Notes”). Interest on the Notes will be paid semi
-annually in arrears on 4 February and 4 August,
commencing on 4 February 2015. The Notes have been admitted by the Irish Stock Exchange for listing and trading
on the Global Exchange Market. The proceeds received from the Notes was net of amounts used to repay the
outstanding balances under the Reserve Based Facilities and the Arab Bank Facility (see below). The remaining
proceeds, after fees, are being
used to fund capital expenditure of the Group, particularly in respect of the Group’s
assets in Iraq and for general corporate purposes.
The Notes are callable in whole, or, in part, at the option of the Group prior to maturity (subject to certain conditions
being satisfied).
(b) Long-term loans
The details of the loans are as follows:
2014
2013
USD 000’s
USD 000’s
USD 165 million facility from Deutsche Bank Syndicate that bears a floating
interest rate of LIBOR plus 5% per annum.
-
104,516
USD 60 million facility from Arab Bank that bears an interest rate of LIBOR
plus 5% per annum.
-
60,000
-
164,516
The reserve based facility from the Deutsche Bank Syndicate of USD 165 million was secured by pledges on the
assets of the subsidiary Kuwait Energy Egypt Ltd. The facility from Arab Bank was secured by assigning the rights,
title, benefits and interest in the shares of JHOC Limited to the bank as security. Further, receipts under the crude oil
sales agreement with Exxon Worldwide Trading Company were assigned to the bank as security.
The amounts outstanding under the Reserve Based Facilities from the Deutsche Bank Syndicate and the Arab Bank
Facility were repaid in full on 4 August 2014 from the proceeds of the Notes (see above).
Initial transaction costs were capitalised as other non-current assets and amortised using effective the effective interest
rate applicable. The balance outstanding at 31 December 2013 of USD 6,455 thousand, has been charged in full to the
income statement as a finance cost in 2014 on the settlement of the loans and closure of the facilities.
KUWAIT ENERGY plc
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
For the year ended 31 December 2014
40
24.
CONVERTIBLE LOANS
2014
2013
USD 000’s
USD 000
’s
Non-current portion
111,740
105,807
Current portion
6,089
6,744
117,829
112,551
Movement in convertible loan
31.12.2014
31.12.2013
USD 000’s
USD 000’s
As at 1 January
112,551
87,244
Amount drawdown
-
17,000
Change in fair value
13,747
15,683
Payment of coupon interest
(8,469)
(7,376)
As at end of the year
117,829
112,551
During 2012, the Group entered into unsecured financing arrangements with Abraaj Capital and Qatar First Bank for
USD 150 million each (total value of USD 300 million). Under the arrangements, the group has drawn down an
amount of USD 100 million, of which USD 83 million was drawn down in 2012 and USD 17 million was drawn
down in 2013. Of the USD 200 million remaining undrawn on the loans USD 50 million has expired and the residual
USD 150 million is subject to certain additional conditions precedent. The loans are repayable in three equal
instalments payable at every six month interval starting from 66
th
month from the first draw down date.
A variety of conversion options exist: if the Group undertakes a public offering of shares raising at least $150 million
of equity (a “Qualifying IPO”), there is mandatory conversion; if no such offering has occurred in the 3
6 month year
following the first draw down of each loan, the Company has the option for early repayment together with prepayment
premium; alternatively the loans may run to term.
The loans carry a coupon interest of 10.5%/ 8% and if the options are not exercised, the outstanding loans, without
additional interest, are repaid in cash as per the repayment schedule.
Should a conversion option be exercised, the outstanding loans, the coupon interest and an additional interest uplift
will be converted into the equity shares of the Company. The additional interest uplift is 8% if conversion is within
36 months of the first draw down and 12% if conversion is after this time (total effective interest rate of 12.5% /
11.4% respectively).
If the conversion options are exercised, the outstanding loans, together with the additional interest uplift outlined
above, are convertible into shares of the Company based on the fair value of the shares on the conversion date. These
embedded options are in the nature of embedded derivatives which have been determined not to be closely related to
the loan arrangements. The group has opted to recognise the convertible loans as financial liabilities at fair value
through the income statement
based on the Company’s best estimate at
the balance sheet date of the relative
likelihood of the occurrence of each conversion or prepayment option.
The change in fair value since the prior year arises as a result of changes in the forecasted cash flows. Of this amount
USD 3,816 thousand (2013: USD 3,612 thousand) has been capitalised to qualifying assets in the year, see note 14,
resulting in a net charge to the income statement of USD 9,931 thousand (2013: USD 12,071 thousand).
The convertible loans are classified as Level 3 in the fair value hierarchy in all the years presented. Level 3 fair value
measurements are those derived from inputs that are not based on observable market data (unobservable inputs). The
group uses a discounted cash flow technique to determine the fair value of the loans. The significant inputs considered
in the valuation are likelihood and timing of an equity offering and the discount rate. The discount rate used was in
the range of 15-16%. Changing the likelihood and timing assumptions in the fair value measurement could have a
maximum impact of increasing the liability by USD 6,319 thousand or reducing the liability by USD 13,026
thousand.