Forward-Looking Statements
This report contains certain forward-looking statements made pursuant to the safe harbor provisions of the Private Securities Litigation Reform Act of 1995. Forward-looking statements include, but
are not limited to, statements regarding our or our management’s expectations, hopes, beliefs, intentions or strategies regarding the future and other statements that are other than statements of historical fact. In addition, any statements that
refer to projections, forecasts or other characterizations of future events or circumstances, including any underlying assumptions, are forward-looking statements. The words “anticipate,” “believe,” “continue,” “could,” “estimate,” “expect,”
“intend,” “may,” “might,” “plan,” “possible,” “potential,” “predict,” “project,” “should,” “would” and similar expressions may identify forward-looking statements, but the absence of these words does not mean that a statement is not
forward-looking.
The forward-looking statements in this report are based upon various assumptions, many of which are based, in turn, upon further assumptions, including without limitation, management’s examination
of historical operating trends, data contained in our records and other data available from third parties. Although we believe that these assumptions were reasonable when made, because these assumptions are inherently subject to significant
uncertainties and contingencies that are difficult or impossible to predict and are beyond our control, we cannot assure you that we will achieve or accomplish these expectations, beliefs or projections. As a result, you are cautioned not to rely
on any forward-looking statements.
Many of these statements are based on our assumptions about factors that are beyond our ability to control or predict. Any of these factors or a combination of these factors could materially affect
our future results of operations and the ultimate accuracy of the forward-looking statements. In addition to these important factors and matters discussed elsewhere herein and in the documents incorporated by reference herein, important factors
that, in our view, could cause actual results to differ materially from those discussed in the forward-looking statements include, among other things:
| |
• |
changes in shipping industry trends, including charter rates, vessel values and factors affecting vessel supply and demand;
|
| |
• |
changes in seaborne and other transportation patterns;
|
| |
• |
changes in the supply of or demand for drybulk commodities, including drybulk commodities carried by sea, generally or in particular regions;
|
| |
• |
changes in the number of newbuildings under construction in the drybulk shipping industry;
|
| |
• |
changes in the useful lives and the value of our vessels and the related impact on our compliance with loan covenants;
|
| |
• |
the aging of our fleet and increases in operating costs;
|
| |
• |
changes in our ability to complete future, pending or recent acquisitions or dispositions;
|
| |
• |
our ability to achieve successful utilization of our expanded fleet;
|
| |
• |
changes to our financial condition and liquidity, including our ability to pay amounts that we owe and obtain additional financing to fund capital expenditures, acquisitions and other
general corporate activities;
|
| |
• |
risks related to our business strategy, areas of possible expansion or expected capital spending or operating expenses;
|
| |
• |
changes in the availability of crew, number of off-hire days, classification survey requirements and insurance costs for the vessels in our fleet;
|
| |
• |
changes in our ability to leverage the relationships and reputation in the drybulk shipping industry of V.Ships Greece Ltd., or V.Ships Greece, our technical manager, Anglo-Eastern Crew
Management (Asia) Limited and Global Seaways S.A., our crew managers, and Fidelity Marine Inc., or Fidelity, our commercial manager;
|
| |
• |
changes in our relationships with our contract counterparties, including the failure of any of our contract counterparties to comply with their agreements with us;
|
| |
• |
loss of our customers, charters or vessels;
|
| |
• |
potential liability from future litigation and incidents involving our vessels;
|
| |
• |
our future operating or financial results;
|
| |
• |
acts of terrorism, other hostilities, pandemics or other calamities;
|
| |
• |
risks associated with the worldwide coronavirus, or COVID-19, including its effects on demand for dry bulk products, crew changes and the transportation thereof;
|
| |
• |
changes in global and regional economic and political conditions, including without limitation, increased inflationary pressures and increases in the interest rates set by central
banks;
|
| |
• |
general domestic and international political conditions or events, including “trade wars”, the war between Russia and Ukraine and related sanctions;
|
| |
• |
changes in governmental rules and regulations or actions taken by regulatory authorities, particularly with respect to the drybulk shipping industry;
|
| |
• |
our ability to continue as a going concern; and
|
| |
• |
other factors listed from time to time in registration statements, reports or other materials that we have filed with or furnished to the U.S. Securities and Exchange Commission,
including our most recent annual report on Form 20-F.
|
Should one or more of the foregoing risks or uncertainties materialize, or should any of our assumptions prove incorrect, actual results may vary in material respects from those projected in these
forward-looking statements. Consequently, there can be no assurance that actual results or developments anticipated by us will be realized or, even if substantially realized, that they will have the expected consequences to, or effects on, us.
Given these uncertainties, prospective investors are cautioned not to place undue reliance on such forward-looking statements.
We undertake no obligation to publicly update or revise any forward-looking statements, whether as a result of new information, future events or otherwise, except as may be required under applicable
laws. If one or more forward-looking statements are updated, no inference should be drawn that additional updates will be made with respect to those or other forward-looking statements.
MANAGEMENT’S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
The following management’s discussion and analysis should be read in conjunction with our unaudited interim consolidated financial statements and related notes included herein. Unless the context
indicates otherwise, references to the “Company”, “we” or “our” include Seanergy Maritime Holdings Corp. and its subsidiaries. This discussion contains forward-looking statements that reflect our current views with respect to future events and
financial performance. Our actual results may differ materially from those anticipated in these forward-looking statements.
Operating Results
Factors Affecting our Results of Operations Overview
We are an international shipping company specializing in the worldwide seaborne transportation of dry bulk commodities, primarily iron ore and coal. We currently operate 16
Capesize vessels with a cargo-carrying capacity of approximately 2,846,965 dwt and an average fleet age of 12.4 years. Upon delivery of a Newcastlemax dry bulk vessel (expected between August and December 2023) which we have agreed to charter in,
our operating fleet will consist of 17 vessels with an aggregate cargo-carrying capacity of 3,054,820 dwt. We are the only pure-play Capesize shipping company publicly listed in the U.S.
Important Measures for Analyzing Results of Operations
We use a variety of financial and operational terms and concepts. These include the following:
Ownership days. Ownership days are the total number of calendar days in a period during which we owned or chartered in
on bareboat basis each vessel in our fleet. Ownership days are an indicator of the size of our fleet over a period and affect both the amount of revenues and the amount of expenses recorded during that period.
Available days. Available days are the number of ownership days less the aggregate number of days that our vessels are
off-hire due to major repairs, dry-dockings, lay-up or special or intermediate surveys. The shipping industry uses available days to measure the aggregate number of days in a period during which vessels are available to generate revenues.
Operating days. Operating days are the number of available days in a period less the aggregate number of days that our
vessels are off-hire due to unforeseen circumstances. Operating days include the days that our vessels are in ballast voyages without having fixed their next employment. The shipping industry uses operating days to measure the aggregate number of
days in a period during which vessels could actually generate revenues.
Fleet utilization. Fleet utilization is the percentage of time that our vessels were generating revenues and is
determined by dividing operating days by ownership days for the relevant period.
Off-hire. The period a vessel is not being chartered or is unable to perform the services for which it is required
under a charter.
Dry-docking. We periodically dry-dock each of our vessels for inspection, repairs and maintenance and any
modifications to comply with industry certification or governmental requirements.
Time charter. A time charter is a contract for the use of a vessel for a specific period of time (period time charter)
or for a specific voyage (trip time charter) during which the charterer pays substantially all of the voyage expenses, including port charges, bunker expenses, canal charges and other commissions. The vessel owner pays the vessel operating
expenses, which include crew costs, provisions, deck and engine stores and spares, lubricants, insurance, maintenance and repairs. The vessel owner is also responsible for each vessel’s dry-docking and intermediate and special survey costs. Time
charter rates are usually fixed during the term of the charter. Prevailing time charter rates do fluctuate on a seasonal and year-to-year basis and may be substantially higher or lower from a prior time charter agreement when the subject vessel
is seeking to renew the time charter agreement with the existing charterer or enter into a new time charter agreement with another charterer. Fluctuations in time charter rates are influenced by changes in spot charter rates.
Bareboat charter. A bareboat charter is generally a contract pursuant to which a vessel owner provides its vessel to
a charterer for a fixed period of time at a specified daily rate. Under a bareboat charter, the charterer assumes responsibility for all voyage and vessel operating expenses and risk of operation.
Voyage charter. A voyage charter is generally a contract to carry a specific cargo from a load port to a discharge
port for an agreed-upon total amount. Under voyage charters, voyage expenses, such as port charges, bunker expenses, canal charges and other commissions, are paid by the vessel owner, who also pays vessel operating expenses.
TCE. Time charter equivalent, or TCE, rate is defined as our net revenue less voyage expenses during a period divided
by the number of our operating days during the period. Voyage expenses include port charges, bunker expenses, canal charges and other commissions.
Daily Vessel Operating Expenses. Daily Vessel Operating Expenses are calculated by dividing vessel operating expenses
less pre-delivery expenses by ownership days for the relevant time periods. Vessel operating expenses include crew costs, provisions, deck and engine stores, lubricants, insurance, maintenance and repairs. Vessel operating expenses before
pre-delivery expenses exclude one-time pre-delivery and pre-joining expenses associated with initial crew manning and supply of stores of Company’s vessels upon delivery.
Principal Factors Affecting Our Business
The principal factors that affect our financial position, results of operations and cash flows include the following:
| |
• |
number of vessels owned and operated;
|
| |
• |
time charter trip rates;
|
| |
• |
period time charter rates;
|
| |
• |
the nature and duration of our voyage and time charters;
|
| |
• |
vessel operating expenses and voyage costs;
|
| |
• |
maintenance and upgrade work;
|
| |
• |
the age, condition and specifications of our vessels;
|
| |
• |
issuance of our common shares and other securities;
|
| |
• |
amount of debt obligations; and
|
| |
• |
financing costs related to debt obligations.
|
We are also affected by the types of charters we enter into. Vessels operating on fixed-rate period time charters and bareboat time charters provide more predictable cash flows,
but can yield lower profit margins than vessels operating in the spot charter market, either on trip time charters or voyage charters, during periods characterized by favorable market conditions.
Vessels operating in the spot charter market or on index-linked time charters generate revenues that are less predictable, but can yield increased profit margins during periods of
improvements in dry bulk rates. Spot charters also expose vessel owners to the risk of declining dry bulk rates and rising fuel costs in the case of voyage charters. In the first half of 2023, all of our vessels were chartered under index-linked
time charter arrangements, reflecting similar employment patterns as observed in the six-month period ended June 30, 2022.
The coronavirus global pandemic outbreak temporarily decreased the demand and supply for the raw materials we transport and the rates that
we are paid to carry them; any unpredictable consequences of this pandemic could adversely affect our business, results of operations, or financial condition.
In March 2020, the World Health Organization declared the outbreak of a novel coronavirus first identified in China and its subsequent spread around the world (COVID-19) a global
pandemic. The measures taken by governments worldwide in response to the outbreak, which included numerous factory closures and restrictions on travel, as well as labor shortages resulting from the outbreak, have reduced production of goods
worldwide and decreased the amount of dry bulk commodities exported and imported worldwide. In addition, the increase in coronavirus cases in areas that constituted the main iron ore and coal exporters, such as Brazil, resulted in lower demand
for our services, leading to lower revenues, cash flow and profitability. While the majority of the economies have re-opened, a significant part of the world population has been vaccinated and the WHO has declared that the COVID-19 no longer
constitutes a public health emergency, it is still difficult to predict its future impact on the global economy, since significant uncertainties remain around potential evolution of the virus and the governments’ response to further waves of the
virus.
If economic conditions throughout the world decline, it will negatively impact our results of operations, financial condition and cash
flows, and could cause the market price of our common shares to decline.
Economic, political and market conditions can adversely affect our business, results of operations and financial condition, including our revenue and profitability, which in turn
could adversely affect our stock price. Our business is influenced by a range of factors that are beyond our control and that we have no comparative advantage in forecasting.
Macroeconomic developments such as the global or regional economic effects resulting from increasing inflation rates, limited liquidity, adverse developments affecting financial
institutions, the current Russia-Ukraine war and related economic curtailment initiatives, evolving trade policies between the U.S. and international trade partners, or the occurrence of similar events in other countries that lead to uncertainty
or instability in economic, political or market conditions could negatively affect our business, operating results, financial condition and outlook, which, in turn, could adversely affect our stock price.
Any general weakening of worldwide manufacturing output or any weakening specifically related to China’s steel output could potentially cause a reduction in current or prospective
demand for dry bulk transportation, which would worsen the supply and demand fundamentals in the dry bulk shipping sector and lead to lower revenues and profits for our vessels.
In addition, international, regional or domestic political unrest and the related potential impact on global stability, terrorist attacks and the potential for other
hostilities in various parts of the world, public health crises and natural disasters continue to contribute to a climate of economic and political uncertainty that could adversely affect our results of operations and financial condition,
including our revenue growth and profitability.
Recently, the continuing war in Ukraine led to increased economic uncertainty amidst fears of a more generalized military conflict or significant inflationary pressures, due to
the increases in fuel and grain prices following the sanctions imposed on Russia. Whether the present dislocation in the markets and resultant inflationary pressures will transition to a long-term inflationary environment is uncertain, and the
effects of such a development on charter rates, vessel demand and operating expenses in the sector in which we operate are uncertain.
Results of Operations
Six months ended June 30, 2023 as compared to six months ended June 30, 2022
(In thousands of U.S. Dollars, except for share and per share data)
| |
|
Six months ended
June 30,
|
|
|
Change
|
|
| |
|
2023
|
|
|
2022
|
|
|
Amount
|
|
|
%
|
|
|
Revenues:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Vessel revenue, net
|
|
|
45,030
|
|
|
|
62,513
|
|
|
|
(17,483
|
)
|
|
|
(28
|
)%
|
|
Fees from related parties
|
|
|
1,324
|
|
|
|
-
|
|
|
|
1,324
|
|
|
|
-
|
|
|
Revenue, net
|
|
|
46,354
|
|
|
|
62,513
|
|
|
|
(16,159
|
)
|
|
|
(26
|
)%
|
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Expenses:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Voyage expenses
|
|
|
(1,308
|
)
|
|
|
(2,646
|
)
|
|
|
1,338
|
|
|
|
(51
|
)%
|
|
Vessel operating expenses
|
|
|
(21,089
|
)
|
|
|
(20,441
|
)
|
|
|
(648
|
)
|
|
|
3
|
%
|
|
Management fees
|
|
|
(374
|
)
|
|
|
(753
|
)
|
|
|
379
|
|
|
|
(50
|
)%
|
|
General and administrative expenses
|
|
|
(10,681
|
)
|
|
|
(8,520
|
)
|
|
|
(2,161
|
)
|
|
|
25
|
%
|
|
Depreciation and amortization
|
|
|
(14,180
|
)
|
|
|
(13,299
|
)
|
|
|
(881
|
)
|
|
|
7
|
%
|
|
Loss on forward freight agreements, net
|
|
|
(144
|
)
|
|
|
(72
|
)
|
|
|
(72
|
)
|
|
|
(100
|
)%
|
|
Gain on sale of vessels, net
|
|
|
8,094
|
|
|
|
-
|
|
|
|
8,094
|
|
|
|
-
|
|
|
Operating income
|
|
|
6,672
|
|
|
|
16,782
|
|
|
|
(10,110
|
)
|
|
|
(60
|
)%
|
|
Other expenses:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest and finance costs
|
|
|
(10,395
|
)
|
|
|
(6,172
|
)
|
|
|
(4,223
|
)
|
|
|
68
|
%
|
|
Loss on extinguishment of debt
|
|
|
(540
|
)
|
|
|
(1,285
|
)
|
|
|
745
|
|
|
|
(58
|
)%
|
|
Interest and other income
|
|
|
882
|
|
|
|
159
|
|
|
|
723
|
|
|
|
455
|
%
|
|
Other, net
|
|
|
(126
|
)
|
|
|
122
|
|
|
|
(248
|
)
|
|
|
(203
|
)%
|
|
Total other expenses, net:
|
|
|
(10,179
|
)
|
|
|
(7,176
|
)
|
|
|
(3,003
|
)
|
|
|
42
|
%
|
|
Net (loss) / income
|
|
|
(3,507
|
)
|
|
|
9,606
|
|
|
|
(13,113
|
)
|
|
|
(137
|
)%
|
|
Dividends to non-vested participating securities
|
|
|
(76
|
)
|
|
|
-
|
|
|
|
(76
|
)
|
|
|
-
|
|
|
Net (loss) / income attributable to common shareholders
|
|
|
(3,583
|
)
|
|
|
9,606
|
|
|
|
(13,189
|
)
|
|
|
(137
|
)%
|
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net (loss) / income per common share, basic
|
|
|
(0.20
|
)
|
|
|
0.56
|
|
|
|
|
|
|
|
|
|
|
Net (loss) / income per common share, diluted
|
|
|
(0.20
|
)
|
|
|
0.54
|
|
|
|
|
|
|
|
|
|
|
Weighted average number of common shares outstanding, basic
|
|
|
18,196,521
|
|
|
|
17,243,721
|
|
|
|
|
|
|
|
|
|
|
Weighted average number of common shares outstanding, diluted
|
|
|
18,196,521
|
|
|
|
17,807,487
|
|
|
|
|
|
|
|
|
|
Vessel Revenue, Net – The decrease is attributable mainly to the decrease in prevailing charter rates during the comparable periods. Our
time charter equivalent rate for the first half of 2023 is 30% lower than that of 2022. Please see the reconciliation below of TCE rate to net revenues from vessels, the most directly comparable U.S. GAAP measure. The decrease was partially
offset by the increase in operating days as well as from the increased compensation we received from our charterers for the fuel cost savings produced by the use of scrubbers on our vessels. We had 2,963 operating days for the first six months of
2023 as compared to 2,823 operating days for the first six months of 2022.
Voyage Expenses – The decrease was primarily attributable to the decrease of bunkers consumption as a result of the decrease of
repairs and off-hire days. We had 32 repairs and off-hire days for the six month period ended June 30, 2023 as compared to 259 repairs and off-hire days during the first six months of 2022.
Vessel Operating Expenses – The increase was primarily attributable to increased inflation rates that affected mainly store supplies and
increased crew costs. The increase was partially offset by the decrease in ownership days. We had 2,995 ownership days for the first six months of 2023 as compared to 3,081 ownership days for the first six months of 2022.
Management Fees – The decrease was attributable to the change in the volume of management services outsourced. As of June 30, 2023, we had
2 vessels under third party management compared to 7 vessels as of June 30, 2022.
General and Administrative Expenses – The increase is mainly attributable to an increase in staff costs, and mainly concerns stock based
compensation amortization, a non-cash item, which was $6.1 million in the first six months of 2023 for shares granted pursuant to our 2011 Equity Incentive Plan, compared to $3.7 million in the first six months of 2022. This increase in staff
costs derives from the increase of the Company’s headcount in order to support the growing needs of the in-house management for both Seanergy and the services provided to United Maritime Corporation.
Depreciation and Amortization – The increase was mainly attributable to the increased amortization of drydock expenses in 2023 as
compared to 2022. Four vessels performed their scheduled drydocks in 2022. The increase in drydock amortization expense is partially offset by the decrease in ownership days. We had 2,995 ownership days for the first six months of 2023 as
compared to 3,081 ownership days for the first six months of 2022.
Interest and Finance Costs – The increase is primarily attributable to the increase in the average interest rate on our outstanding
indebtedness, mainly driven by the increased Libor and SOFR rates for our interest bearing securities. The weighted average interest rate on our outstanding debt and convertible note for the six months ended 2023 and 2022 was approximately 7.85%
and 4.14%, respectively. Finally, non-cash interest expense of amortization of deferred finance costs and debt discounts for the six-month periods ended June 30, 2023 and 2022 was $1.5 million and $1.2 million, respectively.
Loss on extinguishment of debt – The loss for the six-month period ended June 30, 2023 is mainly attributable to the write-off of
unamortized deferred finance costs and debt discounts upon the full settlement of the outstanding balance of the Hanchen Sale and Leaseback, the ABB Loan Facility, the Championship Cargill Sale and Leaseback and the partial prepayment of the
August 2021 Alpha Bank Loan Facility (described below). The loss for the six-month period ended June 30, 2022, is due to $1.2 million related to the Second JDH Note and $0.1 million related to the February 2019 ATB Loan.
Performance Indicators
The figures shown below are non-GAAP statistical ratios used by management to measure performance of our vessels. For the “Fleet Data” figures, there are no comparable U.S. GAAP
measures.
| |
|
Six months ended June 30,
|
|
|
Fleet Data:
|
|
2023
|
|
|
2022
|
|
| |
|
|
|
|
|
|
Ownership days
|
|
|
2,995
|
|
|
|
3,081
|
|
|
Available days(1)
|
|
|
2,995
|
|
|
|
2,845
|
|
|
Operating days(2)
|
|
|
2,963
|
|
|
|
2,823
|
|
|
Fleet utilization
|
|
|
98.9
|
%
|
|
|
91.6
|
%
|
| |
|
|
|
|
|
|
|
|
|
Average Daily Results:
|
|
|
|
|
|
|
|
|
|
TCE rate(3)
|
|
$
|
14,756
|
|
|
$
|
21,207
|
|
|
Daily Vessel Operating Expenses(4)
|
|
$
|
6,921
|
|
|
$
|
6,510
|
|
| (1) |
During the six months ended June 30, 2023, we incurred nil off-hire days for scheduled dry-dockings. During the six months ended June 30, 2022, we incurred 236 off-hire days for scheduled dry-dockings.
|
| (2) |
During the six months ended June 30, 2023, we incurred 32 off-hire days due to other unforeseen circumstances. During the six months ended June 30, 2022, we incurred 22 off-hire days due to other unforeseen
circumstances.
|
| (3) |
We include TCE rate (a measure of the average daily revenue performance), a non-GAAP measure, because it assists our management in making decisions regarding the deployment and use of our vessels and in
evaluating their financial performance. Our calculation of TCE rate may not be comparable to that reported by other companies. The following table reconciles our net revenues from vessels to TCE rate.
|
| |
|
Six months ended June 30,
|
|
| |
|
2023
|
|
|
2022
|
|
|
(In thousands of US Dollars, except operating days and TCE rate)
|
|
|
|
|
|
|
| |
|
|
|
|
|
|
|
Vessel revenue, net
|
|
$
|
45,030
|
|
|
$
|
62,513
|
|
|
Voyage expenses
|
|
$
|
(1,308
|
)
|
|
$
|
(2,646
|
)
|
|
Time charter equivalent revenues
|
|
$
|
43,722
|
|
|
$
|
59,867
|
|
|
Operating days
|
|
|
2,963
|
|
|
|
2,823
|
|
|
Daily time charter equivalent rate
|
|
$
|
14,756
|
|
|
$
|
21,207
|
|
| (4) |
We include Daily Vessel Operating Expenses, a non-GAAP measure, as we believe it provides additional meaningful information and assists management in making decisions regarding the deployment and use of our
vessels and because we believe that it provides useful information to investors regarding our financial performance. Our calculation of Daily Vessel Operating Expenses may not be comparable to that reported by other companies. The
following table reconciles our vessel operating expenses to Daily Vessel Operating Expenses.
|
| |
|
Six months ended June 30,
|
|
| |
|
2023
|
|
|
2022
|
|
|
(In thousands of US Dollars, except ownership days and Daily Vessel Operating Expenses)
|
|
|
|
|
|
|
| |
|
|
|
|
|
|
|
Vessel operating expenses
|
|
$
|
21,089
|
|
|
$
|
20,441
|
|
|
Less: Pre-delivery expenses
|
|
|
(362
|
)
|
|
|
(384
|
)
|
|
Vessel operating expenses before pre-delivery expenses
|
|
$
|
20,727
|
|
|
$
|
20,057
|
|
|
Ownership days
|
|
|
2,995
|
|
|
|
3,081
|
|
|
Daily Vessel Operating Expenses
|
|
$
|
6,921
|
|
|
$
|
6,510
|
|
EBITDA and Adjusted EBITDA
| |
|
Six months ended June 30,
|
|
| |
|
2023
|
|
|
2022
|
|
|
EBITDA and Adjusted EBITDA reconciliation:
|
|
|
|
|
|
|
|
Net (loss) / income
|
|
$
|
(3,507
|
)
|
|
$
|
9,606
|
|
|
Interest and finance cost, net
|
|
|
10,203
|
|
|
|
6,150
|
|
|
Depreciation and amortization
|
|
|
14,180
|
|
|
|
13,299
|
|
|
Taxes
|
|
|
-
|
|
|
|
(28
|
)
|
|
EBITDA(1)
|
|
$
|
20,876
|
|
|
$
|
29,027
|
|
|
Stock based compensation
|
|
|
6,127
|
|
|
|
3,842
|
|
|
Loss on extinguishment of debt
|
|
|
540
|
|
|
|
1,285
|
|
|
Loss on forward freight agreements, net
|
|
|
144
|
|
|
|
72
|
|
|
Gain on sale of vessels, net
|
|
|
(8,094
|
)
|
|
|
-
|
|
|
Adjusted EBITDA(1)
|
|
$
|
19,593
|
|
|
$
|
34,226
|
|
(1) Earnings before interest, taxes, depreciation and amortization (“EBITDA”) represents the sum of net income/(loss), net interest and finance costs, depreciation and amortization and, if
any, income taxes during a period. EBITDA is not a recognized measurement under U.S. GAAP. Adjusted EBITDA represents EBITDA adjusted to exclude stock based compensation, loss on forward freight agreements, net, and loss on extinguishment of
debt, which the Company believes are not indicative of the ongoing performance of its core operations. EBITDA and adjusted EBITDA are presented as we believe that these measures are useful to investors as a widely used means of evaluating
operating profitability. EBITDA and adjusted EBITDA as presented here may not be comparable to similarly titled measures presented by other companies. These non-GAAP measures should not be considered in isolation from, as a substitute for, or
superior to, financial measures prepared in accordance with U.S. GAAP.
Liquidity and Capital Resources
Our principal source of funds have been our operating cash inflows, long-term borrowings from banks, sale and leaseback transactions and equity provided by the capital markets.
Our principal use of funds has primarily been capital expenditures to establish our fleet, maintain the quality of our dry bulk vessels, comply with international shipping standards and environmental laws and regulations, fund working capital
requirements, and make principal repayments and interest payments on our outstanding debt obligations.
Our funding and treasury activities are conducted in accordance with corporate policies to maximize investment returns while maintaining appropriate liquidity for both our short
and long-term needs. This includes arranging borrowing facilities on a cost-effective basis. Cash and cash equivalents are held primarily in U.S. dollars, with minimal amounts held in Euros.
As of June 30, 2023, we had cash and cash equivalents of $16.9 million, as compared to $26 million as of December 31, 2022.
Working capital is equal to current assets minus current liabilities, including the current portion of long-term debt. As of June 30, 2023, we had a working capital deficit of
$24.9 million as compared to a deficit of $33.0 million as of December 31, 2022. As of June, 30, 2023, the deficit is primarily due to planned loan and convertible note repayments for the next 12 months, amounting to $36.7 million. The Company’s
cash flow projections for the period after one year after the date that the financial statements are issued indicate that cash on hand and cash provided by operating activities will be sufficient to cover the liquidity needs that become due in
the twelve-month period ending one year after the financial statements’ issuance.
As of June 30, 2023, the Company was in compliance with all covenants relating to its loan facilities as at that date.
As of June 30, 2023, we had outstanding borrowings of $234.7 million (including long-term debt and other financial liabilities and
convertible note). Our primary known and estimated liquidity needs for the twelve-month period ending one year after the financial statements’ issuance include obligations related to scheduled principal payments of outstanding borrowings and
respective interest expenses payments and estimated drydocking expenditures. Additional information on our annual scheduled obligations under our long-term debt and other financial liabilities are described in “Loan Arrangements” below and in
Note 7 (“Long-Term Debt and Other Financial Liabilities”) and Note 8 (“Convertible Notes”) of our interim condensed financial statements included below. Generally, we expect that, in addition to the cash generated from our operations, our
long-term funding sources will include bank borrowings, lease financings and the issuance of debt and equity securities.
Cash Flows
| |
|
Six months ended June
30,
|
|
| |
|
2023
|
|
|
2022
|
|
|
Cash Flow Data:
|
|
|
|
|
|
|
|
Net cash provided by operating activities
|
|
$
|
1,604
|
|
|
$
|
18,939
|
|
|
Net cash provided by / (used in) investing activities
|
|
$
|
21,425
|
|
|
$
|
(35,815
|
)
|
|
Net cash (used in) / provided by financing activities
|
|
$
|
(33,054
|
)
|
|
$
|
12,607
|
|
Six months ended June 30, 2023 as compared to six months ended June 30, 2022
Operating Activities: Net cash provided by operating activities amounted to $1.6 million for the six-month period ended June 30, 2023,
compared to net cash provided by operating activities of $18.9 million for the six-month period ended June 30, 2022. The change is attributed to the decreased charter rates prevailed in the market for the six-month period ended June 30, 2023 as
compared to the respective period in 2022.
Investing Activities: The 2023 cash inflow is related to $23.9 million of proceeds from the sale of two vessels, $1.3 million of release
of deposits, $0.1 million for payments related to vessel improvements, $3.5 million finance lease prepayment and $0.2 million for payments of other fixed assets. The 2022 cash outflow is related to a $34.6 million payment for the acquisition of
one vessel, $2.6 million for payments related to vessel improvements plus $1.5 million decrease in term deposits.
Financing Activities: The 2023 cash outflow resulted from debt and other financial liabilities repayments of $70.9 million, convertible
notes repayments of $8.0 million, dividend payments of $5.0 million, payments for repurchase of common shares of $1.6 million and $1.3 million of loan finance fees payments in respect with the loan amendments. The 2023 cash inflow resulted from
proceeds of $53.8 million from secured long-term debt and other financial liabilities. The 2022 cash inflow resulted from proceeds of $80.3 million from secured long-term debt and $0.1 million proceeds from Class E warrant exercises. The 2022
cash inflow was offset by debt repayments of $47.9 million, convertible notes repayments of $10.0 million, dividend payments of $8.9 million and $1.0 million of loan finance fees payments in respect with the loan amendments.
Description of Indebtedness
Senior Facilities
Pre - Existing Loan Facilities
Sinopac Loan Facility
On December 20, 2021, we entered into a $15.0 million secured loan facility with Sinopac Capital International (HK) Limited for the purpose of refinancing the outstanding
indebtedness of the Geniuship. The facility bears interest at LIBOR plus a margin of 3.5% and is repayable by four quarterly installments of $0.5 million, followed by sixteen quarterly installments of
$0.4 million and a balloon installment of $6.7 million payable together with the final installment. In addition, the borrower shall ensure that the market value of the vessel plus any additional security shall not be less than 130% of the total
facility outstanding.
As of June 30, 2023, $12.1 million was outstanding under the facility.
June 2022 Alpha Bank Loan Facility
On June 21, 2022, we entered into a facility agreement with Alpha Bank S.A. (“Alpha Bank”) for a $21.0 million term loan secured by the Dukeship.
The loan facility bears interest of SOFR plus a margin of 2.95% and is repayable through four quarterly installments of $1.0 million followed by twelve quarterly installments of $0.5 million and a balloon of $11.0 million payable together with
the final installment. The June 2022 Alpha Bank Loan Facility is cross collateralized with the August 2021 Alpha Bank Loan Facility. The Company is required to ensure that the security requirement ratio (as defined therein) shall not be less than
125% and the borrower is required to maintain minimum liquidity of $0.5 million in its operating account.
As of June 30, 2023, $17.0 million was outstanding under the facility.
December 2022 Alpha Bank Loan Facility
On December 15, 2022, the Company entered into a facility agreement with Alpha Bank for a $16.5 million term loan for the purpose of partly financing the acquisition cost of the Paroship. The interest rate of the facility is equal to term SOFR, for periods of 1, 3 months or any other available period subject to agreement between the parties of the agreement, plus a margin of 2.90%.
The term of the loan facility is four years. The repayment schedule comprises four quarterly installments of $0.5 million followed by twelve quarterly installments of $0.4 million and a balloon of $9.6 million payable together with the final
installment. In addition, the Company is required to maintain a security requirement (as defined therein) of not less than 125%, while the borrower is required to maintain minimum liquidity of $0.5 million in its operating account.
As of June 30, 2023, $15.5 million was outstanding under the facility.
Loan Facilities amended during the six-month period ended June 30, 2023
October 2022 Danish Ship Finance Loan Facility
On October 10, 2022, we entered into a $28.0 million loan facility with Danish Ship Finance A/S to refinance the existing UniCredit Bank Loan Facility secured by the Premiership and Fellowship. The facility was divided in two equal tranches, has a term of five years, while the interest rate is 2.5% plus SOFR per annum. The
repayment schedule of each tranche comprises six quarterly installments of $0.8 million followed by fourteen quarterly installments of $0.5 million and a balloon of $2.1 million payable together with the final installment. Pursuant to the terms
of the facility, the Company is required to maintain a security cover higher than 133%, at any time the corporate leverage ratio (as defined therein) is equal to or less than 65%. If the corporate leverage ratio is higher than 65%, the Company is
required to maintain a security cover ratio (as defined therein) higher than 143%. The Company is required to maintain a leverage ratio (as defined therein), that will not be higher than 85% until June 29, 2023 and 70% thereafter until the
maturity of the loan. Each borrower is required to maintain minimum liquidity of $0.65 million in its retention account.
On April 18, 2023, the Company entered a deed of accession, amendment and restatement to the October 2022 Danish Ship Finance facility to
refinance the existing Championship Cargill Sale and Leaseback secured by the Championship. Pursuant to the terms of the agreement the Championship acceded to the
facility as an additional borrower under a new tranche for $15.8 million. The new tranche is payable through eight quarterly installments of $0.7 million followed by 12 quarterly instalments of $0.6 million and a balloon of $2.9 million payable
together with the final installment bearing an interest rate of 2.65% plus 3-month Term SOFR per annum. Pursuant to the terms of the agreement, the minimum liquidity amount for the new tranche will be equal to $0.7 million while the security
cover ratio and all other covenants continue to apply per the terms of the October 2022 Danish Ship Finance facility. Furthermore, a new sustainability linked margin adjustment mechanism was introduced to all three tranches of the October 2022
Danish Ship Finance facility, whereby the interest margin can be increased or decreased by 0.05% based on the achievement of certain emission reduction thresholds.
As of June 30, 2023, $40.6 million was outstanding under the facility.
June 2022 Piraeus Bank Loan Facility
On June 22, 2022, the Company entered into a facility agreement with Piraeus Bank S.A. for a $38.0 million sustainability-linked term loan. The purpose of the loan was to partly
finance the acquisition cost of the Honorship, while also refinancing the November 2021 Piraeus Bank Loan Facility, which was secured by the Worldship. On July 3,
2023, the Company entered into an overriding agreement to replace the LIBOR with Term SOFR as reference rate which is effective following the upcoming interest payment. The facility bears interest at Term SOFR plus a margin of 3.00% and a credit
adjustment spread (as defined therein) and is repayable through four quarterly installments of $2.0 million, two quarterly installments of $1.5 million, followed by fourteen quarterly installments of $0.8 million and a balloon of $16.5 million
payable together with the final installment. The margin is subject to a sustainability pricing adjustment whereby it may be decreased by up to 0.10% upon meeting certain emission reduction targets during the term of the facility. The Company is
required to maintain a security cover ratio (as defined therein) of not less than 125% until December 24, 2023, and 130% thereafter until the maturity of the loan. As per the supplemental agreement entered into on July 3, 2023, the corporate
leverage ratio (as defined in the facility agreement) required by the Company was reduced from 85% to 70% effective from June 30, 2023 until the maturity of the loan. The borrowers are required to maintain an aggregate minimum liquidity of $2.0
million in their operating accounts.
As of June 30, 2023, $30.0 million was outstanding under the facility.
August 2021 Alpha Bank Loan Facility
On August 9, 2021, we entered into a $44.1 million secured loan facility with Alpha Bank for the purposes of (i) refinancing of a previous loan facility entered with Alpha Bank in
May 2021 and (ii) financing of the previously unencumbered Friendship, effectively replacing the Leadership with the Friendship
in the security structure and increasing the loan amount. The August 2021 Alpha Bank Loan Facility is divided in two tranches, which were fully drawn on August 11, 2021: the first tranche of $31.1 million was used to partly refinance the
outstanding indebtedness over the Squireship and Lordship and the second tranche of $13.0 million was used to partly finance the acquisition cost of the Friendship. Following the transition from LIBOR to SOFR discussed below, the first tranche bears interest at Term SOFR plus a margin of 3.55% and the second tranche bears interest at Term SOFR plus a margin of
3.30%.
On April 28, 2023, the Company prepaid $12.0 million using the proceeds from the Village Seven Sale and Leaseback and as a result all the securities regarding the Lordship have been released. Following the prepayment of the Lordship, the first tranche is repayable by seven quarterly
instalments of $0.6 million each and a balloon of $10.3 million payable together with the final instalment. The second tranche is repayable by eight quarterly instalments of $0.3 million each and a balloon of $3.9 million payable together with
the final instalment. The repayment of instalments for both tranches will commence from the fourth quarter of 2023.
Furthermore, on May 22, 2023, the Company received a notice from Alpha Bank replacing the LIBOR with Term SOFR to be finalized through a supplemental agreement.
The August 2021 Alpha Bank Loan Facility is cross collateralized with the June 2022 Alpha Bank Loan Facility. In addition, the borrowers shall ensure that the security requirement
ratio (as defined therein) shall not be less than 125%.
As of June 30, 2023, $20.5 million was outstanding under the facility.
All the facilities above are secured by first preferred mortgages on the financed vessels and guaranteed by the Company. Certain of our loan facilities discussed above are secured
by first and second priority general assignments covering the respective vessels’ earnings, charter parties, insurances and requisition compensation; account pledge agreements covering the vessels’ earnings accounts; specific charterparty
assignments, usually for charterparties exceeding twelve months in duration; technical and commercial managers’ undertakings; pledge agreements covering the shares of the applicable vessel-owning subsidiaries; and hedging assignment agreements.
Loan Facilities repaid during the six-month period ended June 30, 2023
ABB Loan Facility
On April 22, 2021, we entered into a $15.5 million secured loan facility with Aegean Baltic Bank S.A. (“ABB”). The loan was divided in two tranches of $7.5 million (“Tranche A”)
and $8.0 million (“Tranche B”) to partly finance the acquisition cost of the Goodship and the Tradership, respectively. Each tranche bore an interest at LIBOR
plus a margin 4.0% and was repayable in eighteen consecutive quarterly installments of $0.2 million each, commencing three months after the drawdown of each tranche, with a final balloon payment of $3.9 million due in October 2025, for Tranche A
and $4.4 million due in December 2025, for Tranche B. On February 9, 2023, in connection with the disposal of the Goodship, the Company fully prepaid the outstanding loan amount of $6.1 million under the
facility. On February 24, 2023, in connection with the disposal of the Tradership, the company fully prepaid the remaining outstanding loan amount of $6.8 million. Following the full prepayment of the ABB
Loan Facility, all securities created in favor of ABB were irrevocably and unconditionally released.
Other Financial Liabilities: Sale and Leaseback Transactions
New Sale and Leaseback Activities during the six-month period ended June 30, 2023
Evahline Sale and Leaseback
On March 29, 2023, we entered into a $19.0 million sale and leaseback agreement with a subsidiary of Evahline Inc. (“Evahline”) for the refinancing of the Hanchen Sale and
Leaseback. The agreement became effective on April 6, 2023, upon the delivery of the Knightship to the lessor. The Company sold and chartered back the vessel from Evahline on a bareboat basis for a
six-year period. The financing’s applicable interest rate is 3-month Term SOFR plus 2.80% per annum. Following the second anniversary of the bareboat charter, the Company has continuous options to repurchase the vessel at predetermined prices as
set forth in the agreement. At the end of the six-year bareboat period, the ownership of the vessel will be transferred to the Company at no additional cost. The Company is required to maintain a minimum value (as defined therein) of at least
120% of the charterhire principal. The charterhire principal amortizes in seventy-two consecutive monthly installments paid in advance averaging approximately $0.3 million.
As of June 30, 2023, $18.2 million was outstanding under the facility.
Village Seven Sale and Leaseback
On April 24, 2023, we entered into a $19.0 million sale and leaseback agreement for the Lordship with Village Seven Co., Ltd and V7 Fune
Inc. (collectively, “Village Seven”) to partially refinance the August 2021 Alpha Bank Loan Facility. The Company sold and chartered back the vessel from Village Seven on a bareboat basis for a period of four years and five months. The
financing’s applicable interest rate is 3-month term SOFR plus 3.00% per annum. Following the second anniversary of the bareboat charter, the Company has continuous options to repurchase the vessel at predetermined prices as set forth in the
agreement. At the end of the bareboat period, the Company has the option to repurchase the vessel at $7.8 million, which the Company expects to exercise. The sale and leaseback agreement does not include any financial covenants or security value
maintenance provisions. The charterhire principal amortizes in fifty-three consecutive monthly installments paid in advance of approximately $0.2 million.
As of June 30, 2023, $18.4 million was outstanding under the facility.
Existing Sale and Leaseback Activities
Flagship Cargill Sale and Leaseback
On May 11, 2021, we entered into a $20.5 million sale and leaseback agreement with Cargill International SA (“Cargill”) to partly finance the acquisition of the Flagship. The Company sold and chartered back the vessel from Cargill on a bareboat basis for a five-year period, having a purchase obligation at the end of the fifth year. The implied average applicable
interest rate is equivalent to 2% per annum. The sale and leaseback agreement does not include any financial covenants or security value maintenance provisions. The Company has continuous options to buy back the vessel during the whole five-year
sale and leaseback period at predetermined prices as set forth in the agreement and at the end of such period it has a purchase obligation at $10.0 million. Additionally, at the time of repurchase, if the market value of the vessel exceeds
certain threshold prices, as set out in the agreement, the Company will pay to Cargill 15% of the difference between the market price and such threshold prices. The charterhire principal amortizes in sixty monthly installments averaging
approximately $0.2 million each along with a balloon payment of $10.0 million payable together with the final installment.
The charterhire principal, as of June 30, 2023, was $16.3 million.
CMBFL Sale and Leaseback
On June 22, 2021, we entered into a $30.9 million sale and leaseback agreement with CMB Financial Leasing Co., Ltd., or CMBFL, to partly finance the acquisition of the Hellasship and the Patriotship. The Company sold and chartered back the vessels from two affiliates of CMBFL on a bareboat basis for a five-year period. The financings
bear interest of LIBOR plus a margin of 3.5%. The Company is required to maintain a corporate leverage ratio (as defined therein) that will not exceed 85% until the maturity of the agreement. Each of the bareboat charterers are required to
maintain a value maintenance ratio (as defined therein) of at least 120% of the charterhire principal. The Company has continuous options to buy back the Hellasship and Patriotship
at any time following the second anniversary until the maturity of the bareboat charter at predetermined prices as defined in the agreement. At the end of the bareboat period, the Company expects to exercise the purchase option. The charterhire
principal amortizes in twenty consecutive equal quarterly installments of $0.8 million along with a balloon of $15.3 million payable together with the final installment.
The charterhire principal, as of June 30, 2023, was $24.7 million.
Chugoku Sale and Leaseback
On February 25, 2022 the Company entered into a $21.3 million sale and leaseback agreement with Chugoku Bank, Ltd. (“Chugoku”) to refinance the loan facilities secured by the Partnership. The Company sold and chartered back the vessel from Chugoku on a bareboat basis for an eight-year period starting from March 9, 2022. The financing’s applicable interest rate is SOFR plus 2.90%
per annum. Following the second anniversary of the bareboat charter, the Company has continuous options to repurchase the vessel at predetermined prices as set forth in the agreement. At the end of the eight-year bareboat period, the Company has
the option to repurchase the vessel for $2.4 million, which the Company expects to exercise. The Company is required to maintain a minimum market value (as defined therein) of at least 120% of the charterhire principal. The charterhire principal
amortizes in thirty-two consecutive quarterly installments averaging approximately $0.6 million along with a balloon payment of $2.4 million at the expiry of the bareboat charter.
As of June 30, 2023, $18.4 million was outstanding under the facility.
Sale and Leasebacks Transactions repaid during the six-month period ended June 30, 2023
Hanchen Sale and Leaseback
On June 28, 2018, we entered into a $26.5 million sale and leaseback agreement for the Knightship with Hanchen Limited (“Hanchen”), an
affiliate of AVIC International Leasing Co., Ltd. The Company sold and chartered back the vessel on a bareboat basis for an eight-year period, having a purchase obligation at the end of the eighth year. The charterhire principal bore interest at
LIBOR plus a margin of 4.0%. Of the $26.5 million purchase price, $18.6 million were cash proceeds, $6.6 million were withheld by Hanchen as an upfront charterhire, and an amount of $1.3 million was paid by the charterer to Hanchen as security of
the due observance and performance by the charterer of its obligations and undertakings as per the sale and leaseback agreement, or the Charterer’s Deposit. The Charterer’s Deposit could be set off against the balloon payment at maturity. The
Charterer was required to maintain a value maintenance ratio (as defined in the additional clauses of the bareboat charter) of at least 120% of the charterhire principal minus the amount of the Charterer’s Deposit. The Company had continuous
options to buy back the Knightship at any time following the second anniversary of the bareboat charter and a purchase obligation of $5.3 million at the end of the leaseback period. The charterhire
principal was repayable in thirty-two consecutive equal quarterly installments of approximately $0.5 million along with a balloon payment of $5.3 million payable together with the final installment. On April
6, 2023, the facility was refinanced by the Evahline Sale and Leaseback and the outstanding amount of $11.2 million was repaid in full.
Championship Cargill Sale and Leaseback
On November 7, 2018, we entered into a $23.5 million sale and leaseback agreement for the Championship with Cargill. The Company sold and
chartered back the vessel from Cargill on a bareboat basis for a five-year period, having a purchase obligation at the end of the fifth year. The cost of the financing was equivalent to an expected fixed interest rate of 4.71% for five years. The
Company was required to maintain an amount of $1.6 million from the $23.5 million proceeds as a performance guarantee, which amount of $1.6 million was used at the vessel’s repurchase. Moreover, under the subject sale and leaseback agreement, an
additional tranche was provided to the Company for an amount of up to $2.8 million for the purpose of financing the cost associated with the acquisition and installation on board the Championship of an
open loop scrubber system. The sale and leaseback agreement did not include any financial covenants or security value maintenance provisions. The Company had continuous options to buy back the vessel during the whole five-year sale and leaseback
period at the end of which it had a purchase obligation of $14.1 million. Additionally, at the time of repurchase, if the market value of the vessel was greater than certain threshold prices (as set out in the agreement), the Company would pay to
Cargill 20% of the difference between the market price and such threshold price. The charterhire principal was repayable in sixty monthly installments averaging approximately $0.2 million each along with a balloon payment of $14.1 million,
including the additional scrubber tranche, at maturity in November 2023. On April 24, 2023, the facility was refinanced by the October 2022 Danish Ship Finance Loan Facility and the total repayment amount stood at $16.5 million.
Convertible Note
Second JDH Note
On September 7, 2015, we issued an up to $6.8 million, revolving convertible note to Jelco Delta Holding Corp. (“JDH”). The Second JDH Note was amended and supplemented on various
occasions and along with the other convertible notes and facilities between the Company and JDH, was subject to a comprehensive restructuring that became effective on December 31, 2020. Following the restructuring, the applicable interest rate
was amended to a fixed rate of 5.5% per annum and the outstanding balance at that time was $21.2 million. On January 26, 2022, March 10, 2022 and January 3, 2023, the Company made three cash prepayments of
$5.0 million, $5.0 million and $8.0 million, respectively.
As of June 30, 2023, $3.2 million was outstanding under the Second JDH Note.
We may by giving a five business days prior written notice to JDH at any time, prepay the whole or any part of the Second JDH Note in cash or, subject to JDH’s prior written
agreement on the price per share, in a number of fully paid and nonassessable shares of the Company equal to the amount of the note(s) being prepaid divided by the agreed price per share. At JDH’s option, our obligation to repay the principal
amount(s) under the Second JDH Note or any part thereof may be paid in common shares at a conversion price of $12.0 per share. JDH also has received customary registration rights with respect to any shares to be received upon conversion of the
Second JDH Note.
Emperor has provided a guarantee, dated September 27, 2017, to JDH for the Company’s obligations under the Second JDH Note.