(30-07-2013, 08:50 AM)tanjm Wrote: I just quickly re read their 2012 financial statement. Their bank loan interest expense was only 13.7 million while the interest expense on their swaps was 20 million.
Their swap interest expense (a real cashflow) was twice their dividend payout last year!
So that's the bad news. The good news is when their swaps expire, their cashflow will rise by about 2.2 us cents per share (diluted). The problem is that RMT isn't revealing when.
Oh page 50
A derivative fi nancial instrument is initially recognised at its fair value on the date the contract is entered into and is
subsequently carried at its fair value. The method of recognising the resulting gain or loss depends on whether the
derivative is designated as a hedging instrument, and if so, the nature of the item being hedged.
The Group documents at the inception of the transaction the relationship between the hedging instruments and hedged
items, as well as its risk management objective and strategies for undertaking various hedge transactions. The Group
also documents its assessment, both at hedge inception and on an ongoing basis, of whether the derivatives designated
as hedging instruments are highly effective in offsetting changes in fair value or cash fl ows of the hedged items.
The carrying amount of a derivative designated as a hedge is presented as a non-current asset or liability if the remaining
maturity of the hedged item is more than 12 months, and as a current asset or liability if the remaining expected life of
the hedged item is less than 12 months.
Cash fl ow hedge – Interest rate swaps
The Group has entered into interest rate swaps that are cash flow hedges for the Group’s exposure to interest rate risk
on its borrowings. The interest rate swaps entitle the Group to receive interest at fl oating rates on notional principal
amounts and oblige the Group to pay interest at fixed rates on the same notional principal amounts, thus allowing the
Group to raise non-current borrowings at floating rates and swap them into fixed rates that are lower than those available
if it borrowed at fixed rates directly.
The fair value changes on the effective portion of the interest rate swaps designated as cash fl ow hedges are recognised
in other comprehensive income and transferred to profi t or loss when the interest expense on the borrowings are
recognised in profi t or loss. The fair value changes on the ineffective portion of the interest rate swaps are recognised
immediately in profit or loss.
Wouldnt the above imply that the interest paid on swaps should also be part of the interest Rickmers pay for their loans? If thats the case, there is nothing wrong with the interest on the swaps being twice the dividend paid. The dividend was cut down simply because the Rickmers needed to conserve cash at the Group level to maintain the VTL ratio requirement as a condition for the loans secured against the vessels.
(29-07-2013, 11:15 PM)opmi Wrote: If can be so chun on container shipping cycle, buy NOL or MISC liao. Better bet than RIckmers
NOL has 4billion in outstanding loans and cant pay dividends out of cashflow.
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