Financial market risk
The functional currency of the company is USD and the presentation currency is NOK. Balance sheet items in USD are converted to NOK at currency rate of 8.8090, which was Norges Bank’s exchange rate at 31 December 2015 (2014: 7.4332). The company’s revenue has the recent years been limited. Revenues consist primarily of management fees, dividends and group contributions from subsidiaries. Operating revenues and expenses in the subsidiaries are primarily in USD. The income and expenses related to the ship are in USD. At year end the company had a cash balance in NOK of approximately 3.8 million (2014: NOK 12 million).
To hedge payments of the administrative expenses in Norway, the company entered in December 2014 into 2 forward contracts to sell USD corresponding NOK 10 million at a currency rate of USD 7.5122 in June 2015 and further to sell USD corresponding NOK 10 million at a currency rate of USD 7.5222 in December 2015. The net loss related to these hegdings amounted to 1 538 in 2015.
Due to limited risk, no further hedging agreement towards NOK has been concluded.
The company does not use hedge accounting.
Interest swap agreement
An interest swap agreement with forward start in September 2015 was entered into in June 2015 at a rate of 1.9% and with a duration of 5 years covering USD 20 million, reducing by USD 2 million per year. Market value of this agreement amounts to -2 400 at year-end. The market value of the agreement are recorded as long-term liability.
There will always exist a credit risk related to the company’s business. Belships monitors this risk and the strategy is to carefully select counterparts. Historical losses have been limited.