Analyzing Debt Terms, Yields, Prices, and Credit Ratings Statoil ASA, headquartered in Stavanger, Norway, is a fully integrated petroleum company. The company uses IFRS to prepare its financial statements. Reproduced below is the long-term debt note from its 2015 annual report.

Carrying amount in NOK billion Fair value in NOK billion 2015 2014 2015 2014 Total finance debt. . . . . . . . . . . . . . . . . . . . . . . . . . . 273.6 217.4 289.9 241.6 Less current portion . . . . . . . . . . . . . . . . . . . . . . . . . 9.7 12.3 9.7 12.3 Non-current finance debt . . . . . . . . . . . . . . . . . . . . . 264.0 205.1 280.2 229.3 Unsecured bonds Weighted average interest rates in %
Carrying amount in NOK billion at 31 December Fair value in NOK billion at 31 December 2015 2014 2015 2014 2015 2014 US dollar (USD) . . . . . . . . . . . 3.51 3.50 182.9 154.4 190.5 165.0 Euro (EUR) . . . . . . . . . . . . . . . 2.28 3.99 63.4 37.6 66.0 43.8 Great Britain pound (GBP). . . . 6.08 6.08 18.0 15.9 23.8 22.3 Norwegian kroner (NOK) . . . . 4.18 4.18 3.0 3.0 3.3 3.5 Total 267.3 210.9 283.7 234.7 Non-current finance debt maturity profile (in NOK billion)
At 31 December 2015 2014 Year 2 and 3 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 54.9 27.3 Year 4 and 5 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 43.0 44.2 After 5 years . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 166.1 133.5 Total repayment of non-current finance debt. . . . . . . . . . . . . . . . . 264.0 205.1 Weighted average maturity (year). . . . . . . . . . . . . . . . . . . . . . . . . . 9 9 Weighted average annual interest rate (%) . . . . . . . . . . . . . . . . . . 3.39 3.78 Reproduced below is a summary of the market values, at December 2016, of the Statoil ASA bonds maturing from 2017 to 2043.
Currency Maturity Date Amount Outstanding Current Price Coupon Yield Statoil Asa USD . . . . . . . . 08/15/2019 1,500.0 107.4 5.250 2.02 Statoil Asa USD . . . . . . . . 11/08/2043 750.0 105.7 4.800 4.43 Statoil Asa USD . . . . . . . . 08/17/2017 1,250.0 101.3 3.125 1.32 Required

a. What is the amount of total finance debt reported on Statoil’s 2015 balance sheet? Of the total financial liabilities, what proportion is due within one year?

b. In what currencies has Statoil issued unsecured bonds? Why do companies borrow money in foreign currencies?

c. What are the scheduled maturities for Statoil’s indebtedness? Why is information relating to a company’s scheduled maturities of debt useful in analyzing financial condition?

d. Statoil’s long-term debt is rated A1 by Standard and Poor’s and rated Aa3 by Moody’s. What factors would be important to consider in quantifying the relative riskiness of Statoil compared to other borrowers?
Explain.

e. Statoil’s $1,500 million, 5.25% notes traded at 107.4 or 107.4% of par, as of December 2016. What is the market value of these notes on that date? How is the difference between this market value and the $1,500 million face value reflected on Statoil’s financial statements? What does the 107.4 price tell you about the general trend in interest rates since Statoil sold this bond issue? Explain.

f. Examine the yields to maturity of the bonds in the previous table. What relation do we observe between these yields and the maturities of the bonds? Explain why this relation applies in general.