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8. Goodwill
OTTO MARINE LIMITED AND ITS SUBSIDIARIES
Cost:
At December 31, 2007. ...................................................... 5,101
Arising on acquisition of additional interest in a subsidiary. ........................... 35,269
At May 31, 2008 ........................................................... 40,370
Carrying amount:
At May 31, 2008 ........................................................... 40,370
At December 31, 2007. ...................................................... 5,101
During the five months financial period ended May 31, 2008, the Group acquired an additional
44% equity interest in a subsidiary, PT Batamec, from a related party for a consideration of $34,460,000
resulting in an increase in goodwill by S$35,269,000. The goodwill represents the excess of consideration
over the carrying amount of minority interest acquired.
The Group tests goodwill annually for impairment, or more frequently if there are indications that
goodwill might be impaired. The goodwill relates primarily to two cash generating units (“CGU”).
In 2007, in determining the recoverable amounts of the CGUs, management used value in use for
one CGU and market value for another CGU.
During the five months financial period ended May 31, 2008, the management used the fair value
of the identifiable assets of the subsidiaries, market value to assess the impairment of goodwill in
relation to both CGUs.
9. Property, Plant and Equipment
During the five months financial period ended May 31, 2008, the Group spent approximately
$16,782,000 on construction-in-progress and on additions to its machinery and equipment.
There was property, plant and equipment with carrying value amounting to $12,000 written off
during the five months financial period ended May 31, 2008.
10. Loans and Finance Leases
(a) Loans
During the five months financial period ended May 31, 2008, the Group:
(i) obtained three new bank loans amounting to $3,000,000, US$9,367,000 (approximately
$12,768,000) and US$4,985,000 (approximately $6,795,000) respectively, of which
$150,000 was repaid during the five-month financial period;
(ii) drew down US$14,050,000 (approximately $19,152,000) from existing banking facilities,
of which US$1,000,000 (approximately $1,363,000) was repaid during the five months
financial period; the remaining amount is repayable within 12 months from May 31,
2008; and
(iii) repaid loan of US$26,668,000 (approximately $36,351,000) upon delivery of a mortgaged
vessel and repaid US$900,000 (approximately $1,227,000) of its bank loan drawn down
in 2007.
The bank loan amounting to $3,000,000 is arranged at floating interest rates which are subject
to change at the bank’s discretion and exposes the Group to cash flow interest rate risk. The bank
loan bears interest at the bank’s prime lending rate and is repayable in 60 monthly instalments of
$50,000. This loan is secured by a personal guarantee from a director, all monies legal mortgages
over the vessels under finance (“mortgaged vessels”), an assignment of charter agreement and
insurances taken over the mortgaged vessels and a deed of corporate guarantee of the Company.
The bank loan amounting to US$9,367,000 is arranged at floating interest rates which are
subject to change at the bank’s discretion. The bank loan bears interest at floating rate at 1.85%
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