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Announcement:

Moody's: BW Offshore's proposed dividend suspension and rights offering is credit negative for BW Group

03 Jun 2016

Singapore, June 03, 2016 -- Moody's Investors Service says BW Offshore's (unrated) proposed restriction on dividends and its planned rights offering are credit negative for 49.8%-owner BW Group Ltd (Ba1 stable), but will not impact the company's ratings.

"BW Offshore's proposed restriction on dividend payments as part of its plan to amend and extend existing debts and planned rights offering will reduce projected cash levels at BW Group through 2022, but does not have a material impact on BW Group's overall liquidity profile," says Brian Grieser, a Moody's Vice President and Senior Analyst.

In early June, BW Offshore bondholders and lenders will vote on the components of a comprehensive and proactive refinancing plan that proposes to amend and extend both bonds and loans, increase interest rates, reduce loan amortization requirements, loosen certain financial maintenance covenants, and add a covenant restricting dividends.

At the same time, shareholders are expected to participate in a $100 million rights offering. BW Group is expected to subscribe to its pro rata $49.8 million share of the rights offering.

BW Offshore anticipates the exercise will raise liquidity levels by $500 million through 2020.

"BW Group's participation in the rights offering is consistent with Moody's expectation that the company would be a supportive shareholder for its key investments during periods of cyclical weakness or financial need, as is currently the case for BW Offshore," adds Grieser.

BW Group does not provide any guarantees for the debt of BW Offshore.

The proposed restriction on dividends will lower cash flows to BW Group, but Moody's was not expecting BW Offshore dividends to meaningfully contribute to BW Group's cash flows in 2016 or 2017. Dividends received by BW Group from BW Offshore in 2015 were around $17 million.

Moody's had anticipated dividends to fall in 2016 given the weakness in the offshore oil and gas production industry, driven by low oil prices and reduced capital spending by integrated and national oil companies.

In recent years, BW Group has significantly improved its capital structure and established a strong liquidity profile, giving it the financial flexibility to comfortably support BW Offshore at this time.

BW Group maintained roughly $937 million of cash and has $400 million committed credit facility with up to $260 million availability at 31 December 2015.

We expect existing cash to be bolstered by BW Group's ongoing cash from operations derived from its fleet of crude, product and chemical tankers, liquefied natural gas (LNG) carriers and floating storage and regasification units as well as dividends from its other key investments, primarily BW LPG (unrated), BW Gas Juju LNG Limited (unrated) and BW Pavilion LNG Pte Ltd (unrated).

These cash flows are projected to fund BW Group's roughly $515 million of committed capital spending in 2016 leaving ample cash balances heading into 2017.

BW Group is a global maritime transportation group involved in oil and gas transportation, floating gas infrastructure, environmental technologies and deepwater production.

Its key investments include a 49.8% stake in BW Offshore, a floating production, storage, and offloading unit owner and operator, a 46.7% stake in BW LPG Limited, a very large gas carrier owner and operator, a 51% stake in BW Gas Juju LNG Limited, a joint venture with Marubeni that owns 8 LNG carriers, a 51% stake in BW Pavilion LNG Pte Ltd that owns 3 LNG vessels, a joint venture with Temasek owned Pavilion Energy, and a 51% stake in a partnership with GDF Suez owning one LNG vessel.

This publication does not announce a credit rating action. For any credit ratings referenced in this publication, please see the ratings tab on the issuer/entity page on www.moodys.com for the most updated credit rating action information and rating history.

Brian Grieser
Vice President - Senior Analyst
Corporate Finance Group
Moody's Investors Service Singapore Pte. Ltd.
50 Raffles Place #23-06
Singapore Land Tower
Singapore 48623
Singapore
JOURNALISTS: (852) 3758 -1350
SUBSCRIBERS: (852) 3551-3077

Laura Acres
MD - Corporate Finance
Corporate Finance Group
JOURNALISTS: (852) 3758 -1350
SUBSCRIBERS: (852) 3551-3077

Releasing Office:
Moody's Investors Service Singapore Pte. Ltd.
50 Raffles Place #23-06
Singapore Land Tower
Singapore 48623
Singapore
JOURNALISTS: (852) 3758 -1350
SUBSCRIBERS: (852) 3551-3077

Moody's: BW Offshore's proposed dividend suspension and rights offering is credit negative for BW Group
No Related Data.
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