STAR BULK CARRIERS CORP.
Consolidated Statements of Comprehensive Income/ (Loss)
For the years ended December 31, 2016, 2017 and 2018
(Expressed in thousands of U.S. dollars except for share and per share data unless otherwise stated)
|
|
|
|
|
Years ended December 31,
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2016
|
|
|
2017
|
|
|
2018
|
|
Net income / (loss)
|
|
$
|
(154,228
|
)
|
|
$
|
(9,771
|
)
|
|
$
|
58,397
|
|
Other comprehensive income / (loss):
|
|
|
|
|
|
|
|
|
|
|
|
|
Unrealized gains / losses from cash flow hedges:
|
|
|
|
|
|
|
|
|
|
|
|
|
Unrealized gain / (loss) from hedging interest rate swaps recognized in Other comprehensive
income/(loss) before reclassifications (Note 18)
|
|
|
(372
|
)
|
|
|
47
|
|
|
|
106
|
|
Less:
|
|
|
|
|
|
|
|
|
|
|
|
|
Reclassification adjustments of interest rate swap gain/(loss) (Note 18)
|
|
|
1,294
|
|
|
|
852
|
|
|
|
(711
|
)
|
Other comprehensive income / (loss)
|
|
|
922
|
|
|
|
899
|
|
|
|
(605
|
)
|
Total comprehensive income / (loss)
|
|
$
|
(153,306
|
)
|
|
$
|
(8,872
|
)
|
|
$
|
57,792
|
|
The accompanying notes are an integral part of these consolidated financial statements.
STAR BULK CARRIERS CORP.
Consolidated Statements of Shareholders’ Equity
For the years ended December 31, 2016, 2017 and 2018
(Expressed in thousands of U.S. dollars except for share and per share data unless otherwise stated)
|
|
Common Stock
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
# of Shares
|
|
|
Par Value
|
|
|
Additional Paid-
in Capital
|
|
|
Accumulated Other
Comprehensive
income/(loss)
|
|
|
Accumulated deficit
|
|
|
Treasury
stock
|
|
|
Total
Stockholders'
Equity
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
BALANCE, January 1, 2016
|
|
|
43,821,114
|
|
|
$
|
438
|
|
|
$
|
2,008,440
|
|
|
$
|
(1,216
|
)
|
|
$
|
(872,304
|
)
|
|
$
|
-
|
|
|
$
|
1,135,358
|
|
Net income / (loss)
|
|
|
-
|
|
|
$
|
-
|
|
|
$
|
-
|
|
|
$
|
-
|
|
|
$
|
(154,228
|
)
|
|
$
|
-
|
|
|
$
|
(154,228
|
)
|
Other comprehensive income / (loss)
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
922
|
|
|
|
-
|
|
|
|
-
|
|
|
|
922
|
|
Issuance of vested and non-vested shares and amortization of share-based compensation (Note 12)
|
|
|
692,595
|
|
|
|
7
|
|
|
|
4,159
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
4,166
|
|
Issuance of shares for commission to Oceanbulk Maritime
|
|
|
138,453
|
|
|
|
1
|
|
|
|
733
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
734
|
|
Issuance of common stock (Note 9)
|
|
|
11,976,745
|
|
|
|
120
|
|
|
|
50,158
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
50,278
|
|
BALANCE, December 31, 2016
|
|
|
56,628,907
|
|
|
$
|
566
|
|
|
$
|
2,063,490
|
|
|
$
|
(294
|
)
|
|
$
|
(1,026,532
|
)
|
|
$
|
-
|
|
|
$
|
1,037,230
|
|
Net income / (loss)
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
(9,771
|
)
|
|
|
-
|
|
|
|
(9,771
|
)
|
Other comprehensive income / (loss)
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
899
|
|
|
|
-
|
|
|
|
-
|
|
|
|
899
|
|
Issuance of vested and non-vested shares and amortization of share-based compensation (Note 12)
|
|
|
1,220,825
|
|
|
|
13
|
|
|
|
9,254
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
9,267
|
|
Issuance of common stock, net of issuance costs (Note 9)
|
|
|
6,310,272
|
|
|
|
63
|
|
|
|
50,364
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
50,427
|
|
BALANCE, December 31, 2017
|
|
|
64,160,004
|
|
|
$
|
642
|
|
|
$
|
2,123,108
|
|
|
$
|
605
|
|
|
$
|
(1,036,303
|
)
|
|
$
|
-
|
|
|
$
|
1,088,052
|
|
Cumulative effect of accounting change (Note 2)
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
(2,259
|
)
|
|
|
-
|
|
|
|
(2,259
|
)
|
Net income / (loss)
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
58,397
|
|
|
|
-
|
|
|
|
58,397
|
|
Other comprehensive income / (loss)
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
(605
|
)
|
|
|
-
|
|
|
|
-
|
|
|
|
(605
|
)
|
Issuance of vested and non-vested shares and amortization of share-based compensation (Note 12)
|
|
|
868,975
|
|
|
|
8
|
|
|
|
8,064
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
8,072
|
|
Acquisition of OCC vessels (Note 1 and 9)
|
|
|
3,304,735
|
|
|
|
33
|
|
|
|
42,929
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
42,962
|
|
Acquisition of Songa Vessels (Note 1 and 9)
|
|
|
13,725,000
|
|
|
|
137
|
|
|
|
182,543
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
182,680
|
|
Acquisition of Augustea Vessels (Note 1 and 9)
|
|
|
10,277,335
|
|
|
|
103
|
|
|
|
143,780
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
143,883
|
|
Acquisition of E.R Vessels (Note 1 and 9)
|
|
|
291,300
|
|
|
|
3
|
|
|
|
4,037
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
4,040
|
|
Purchase of treasury stock (Note 9)
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
(3,145
|
)
|
|
|
(3,145
|
)
|
Offering expenses (Note 9)
|
|
|
-
|
|
|
|
-
|
|
|
|
(2,032
|
)
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
(2,032
|
)
|
BALANCE, December 31, 2018
|
|
|
92,627,349
|
|
|
$
|
926
|
|
|
$
|
2,502,429
|
|
|
$
|
-
|
|
|
$
|
(980,165
|
)
|
|
$
|
(3,145
|
)
|
|
$
|
1,520,045
|
|
The accompanying notes are an integral part of these consolidated financial statements.
STAR BULK CARRIERS CORP.
Consolidated Statements of Cash Flows
For the years ended December 31, 2016, 2017 and 2018
(Expressed in thousands of U.S. dollars except for share and per share data unless otherwise stated)
|
|
Years ended December 31,
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2016
|
|
|
2017
|
|
|
2018
|
|
Cash Flows from Operating Activities:
|
|
|
|
|
|
|
|
|
|
Net income / (loss)
|
|
$
|
(154,228
|
)
|
|
$
|
(9,771
|
)
|
|
$
|
58,397
|
|
Adjustments to reconcile net income/(loss) to net cash provided by/(used in)
operating activities:
|
|
|
|
|
|
|
|
|
|
|
|
|
Depreciation
|
|
|
81,935
|
|
|
|
82,623
|
|
|
|
102,852
|
|
Amortisation of fair value of above market time charters (Note 7)
|
|
|
254
|
|
|
|
-
|
|
|
|
-
|
|
Amortization of debt issuance costs (Note 8)
|
|
|
2,855
|
|
|
|
2,660
|
|
|
|
3,253
|
|
Loss on debt extinguishment (Note 8)
|
|
|
2,375
|
|
|
|
1,257
|
|
|
|
2,383
|
|
Amortisation of fair value of below market time charters (Note 7)
|
|
|
-
|
|
|
|
-
|
|
|
|
(1,820
|
)
|
Impairment loss (Note 5)
|
|
|
29,221
|
|
|
|
-
|
|
|
|
17,784
|
|
Loss / (gain) on sale of vessels (Note 5)
|
|
|
15,248
|
|
|
|
(2,598
|
)
|
|
|
-
|
|
Provision for doubtful debts
|
|
|
-
|
|
|
|
-
|
|
|
|
722
|
|
Share-based compensation (Note 12)
|
|
|
4,166
|
|
|
|
9,267
|
|
|
|
8,072
|
|
Non-cash effects of derivative financial instruments (Note 18)
|
|
|
(4,182
|
)
|
|
|
(1,821
|
)
|
|
|
(1,230
|
)
|
Fair value hedge adjustment (Note 18)
|
|
|
-
|
|
|
|
-
|
|
|
|
(1,609
|
)
|
Change in fair value of forward freight derivatives (Note 18)
|
|
|
(41
|
)
|
|
|
(36
|
)
|
|
|
1,339
|
|
Other non-cash charges
|
|
|
112
|
|
|
|
144
|
|
|
|
108
|
|
Amortization of deferred gain (Note 5)
|
|
|
(75
|
)
|
|
|
(52
|
)
|
|
|
-
|
|
Write-off of claim receivable
|
|
|
225
|
|
|
|
-
|
|
|
|
-
|
|
Gain on hull and machinery claims
|
|
|
(1,472
|
)
|
|
|
(456
|
)
|
|
|
(309
|
)
|
Equity in income of investee
|
|
|
(126
|
)
|
|
|
(93
|
)
|
|
|
(45
|
)
|
Changes in operating assets and liabilities:
|
|
|
|
|
|
|
|
|
|
|
|
|
(Increase)/Decrease in:
|
|
|
|
|
|
|
|
|
|
|
|
|
Trade accounts receivable
|
|
|
(1,683
|
)
|
|
|
(5,949
|
)
|
|
|
(22,266
|
)
|
Inventories
|
|
|
(184
|
)
|
|
|
(4,811
|
)
|
|
|
(8,091
|
)
|
Prepaid expenses and other receivables
|
|
|
3,142
|
|
|
|
(43
|
)
|
|
|
(7,545
|
)
|
Due from related parties
|
|
|
287
|
|
|
|
745
|
|
|
|
(1,091
|
)
|
Due from managers
|
|
|
(1,430
|
)
|
|
|
1,430
|
|
|
|
(284
|
)
|
Other non-current assets (charterers' receivable amount)
|
|
|
-
|
|
|
|
-
|
|
|
|
(1,972
|
)
|
Increase/(Decrease) in:
|
|
|
|
|
|
|
|
|
|
|
|
|
Accounts payable
|
|
|
(4,236
|
)
|
|
|
4,709
|
|
|
|
10,288
|
|
Due to related parties
|
|
|
(66
|
)
|
|
|
(127
|
)
|
|
|
1,420
|
|
Accrued liabilities
|
|
|
(2,633
|
)
|
|
|
(863
|
)
|
|
|
3,827
|
|
Due to managers
|
|
|
(2,291
|
)
|
|
|
1,420
|
|
|
|
2,337
|
|
Deferred revenue
|
|
|
(405
|
)
|
|
|
5,169
|
|
|
|
2,489
|
|
Net cash provided by / (used in) Operating Activities
|
|
|
(33,232
|
)
|
|
|
82,804
|
|
|
|
169,009
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash Flows from Investing Activities:
|
|
|
|
|
|
|
|
|
|
|
|
|
Advances for vessels under construction and acquisition of vessels and other fixed assets
|
|
|
(396,154
|
)
|
|
|
(143,684
|
)
|
|
|
(328,634
|
)
|
Cash proceeds from vessel sales (Note 5)
|
|
|
380,193
|
|
|
|
15,153
|
|
|
|
-
|
|
Hull and machinery insurance proceeds
|
|
|
2,536
|
|
|
|
1,430
|
|
|
|
3,307
|
|
Net cash provided by / (used in) Investing Activities
|
|
|
(13,425
|
)
|
|
|
(127,101
|
)
|
|
|
(325,327
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash Flows from Financing Activities:
|
|
|
|
|
|
|
|
|
|
|
|
|
Proceeds from bank loans, leases and notes
|
|
|
151,763
|
|
|
|
160,780
|
|
|
|
987,980
|
|
Loan and lease prepayments and repayments
|
|
|
(181,201
|
)
|
|
|
(86,262
|
)
|
|
|
(875,037
|
)
|
Financing fees paid
|
|
|
(474
|
)
|
|
|
(2,910
|
)
|
|
|
(13,818
|
)
|
Proceeds from issuance of common stock
|
|
|
50,589
|
|
|
|
51,454
|
|
|
|
-
|
|
Offering expenses paid
|
|
|
(311
|
)
|
|
|
(1,027
|
)
|
|
|
(532
|
)
|
Repurchase of common shares
|
|
|
-
|
|
|
|
-
|
|
|
|
(3,145
|
)
|
Refund of financing premia
|
|
|
-
|
|
|
|
-
|
|
|
|
1,247
|
|
Net cash provided by / (used in) Financing Activities
|
|
|
20,366
|
|
|
|
122,035
|
|
|
|
96,695
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net increase/(decrease) in cash and cash equivalents and restricted cash
|
|
|
(26,291
|
)
|
|
|
77,738
|
|
|
|
(59,623
|
)
|
Cash and cash equivalents and restricted cash at beginning of period
|
|
|
222,053
|
|
|
|
195,762
|
|
|
|
273,500
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash and cash equivalents and restricted cash at end of period
|
|
$
|
195,762
|
|
|
$
|
273,500
|
|
|
$
|
213,877
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
SUPPLEMENTAL CASH FLOW INFORMATION:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash paid during the year for:
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest
|
|
$
|
47,997
|
|
|
$
|
50,227
|
|
|
$
|
65,158
|
|
Non-cash investing and financing activities:
|
|
|
|
|
|
|
|
|
|
|
|
|
Shares issued in connection with vessel acquisitions
|
|
|
-
|
|
|
|
-
|
|
|
|
373,565
|
|
The accompanying notes are an integral part of these consolidated financial statements.
STAR BULK CARRIERS CORP.
Notes to Consolidated Financial Statements
December 31, 2018
(Expressed in thousands of U.S. dollars except for share and per share data unless otherwise stated)
1.
|
Basis of Presentation and General Information:
|
The consolidated financial statements as of and for the years ended December 31, 2016, 2017 and 2018, include the accounts of Star Bulk Carriers
Corp. (“Star Bulk”) and its wholly owned subsidiaries as set forth below (collectively, the “Company”).
Star Bulk was incorporated on December 13, 2006 under the laws of the Marshall Islands and maintains offices in Athens, Oslo, New York, Limassol
and Geneva. The Company is engaged in the ocean transportation of dry bulk cargoes worldwide through the ownership and operation of dry bulk carrier vessels. Since December 3, 2007, Star Bulk shares trade on the NASDAQ Global Select Market
under the ticker symbol “SBLK” (primary listing). Following, and in connection with, the Songa Vessel Purchase Transaction, as defined below, Star Bulk’s common shares also trade on the Oslo Stock Exchange (secondary listing) under the same
ticker.
Effective June 20, 2016, the Company effected a 5-for-1 reverse split of its issued and outstanding common shares (the “2016 Reverse Split”) (Note
9). All share and per share amounts disclosed in the consolidated financial statements give effect to this reverse stock split retroactively, for all periods presented.
On June 28, 2018, the Company completed the acquisition of three newbuilding Newcastlemax dry bulk vessels (“OCC Vessels”), from Oceanbulk
Container Carriers LLC (“OCC”), an entity affiliated with Oaktree Capital Management, L.P. (“Oaktree”) and with family members of the Company’s CEO, Mr. Petros Pappas, for an aggregate 3,304,735 of Company’s common shares (“OCC Vessel Purchase
Transaction”) (Note 3 and 6).
On July 6, 2018 the Company completed the acquisition of 15 operating dry bulk vessels (the “Songa Vessels”) from Songa Bulk ASA (“Songa”) for an
aggregate of 13,725,000 of the Company’s common shares (the “Songa Consideration Shares”) and $145.0 million in cash (collectively the “Songa Vessel Purchase Transaction”). The cash portion of the consideration was financed through proceeds from
a five-year capital lease of $180.0 million with China Merchants Bank Leasing (Note 5). Following the closing of the Songa Vessel Purchase Transaction, Mr. Arne Blystad was appointed to the Company’s Board of Directors as a Class C Director, and
Mr. Herman Billung joined the Company’s management team as Senior Vice President.
On August 3, 2018, the Company completed the acquisition of 16 operating dry bulk vessels (the “Augustea Vessels”) from entities affiliated with
Augustea Atlantica SpA and York Capital Management in an all-share transaction for an aggregate of 10,277,335 of Company’s common shares (the “Augustea Vessel Purchase Transaction”). Following the completion of this transaction, Mr. Raffaele
Zagari was appointed to the Company’s Board of Directors as a Class C Director. As part of this transaction, the Company also assumed debt of approximately $308.3 million (Note 8).
On August 27, 2018, the Company entered into a definitive purchase agreement with entities affiliated with E.R. Capital Holding GmbH & Cie. KG
(“E.R.”), pursuant to which the Company approved the acquisition of three operating dry bulk vessels (the “Step 1 Vessels”) in 2018 ( the “Step 1 Acquisition”) and received an option to acquire four additional operating dry bulk vessels (the
“Step 2 Vessels”) and, together with the Step 1 Vessels, the “E.R. Vessels” in 2019 (the “Step 2 Acquisition”). The consideration for the Step 1 Vessels was approximately 1.34 million common shares of the Company (the “Step 1 Consideration
Shares”) and $41.7 million in cash, subject to certain pre-delivery adjustments. The first of the Step 1 Vessels,
Star Bright
, was delivered to
the Company in October 2018 in exchange for 291,300 common shares and $9.2 million cash. The remaining two of the Step 1 Vessels,
Star Marianne
and
Star Janni
were delivered to the Company in January 2019 in exchange for 999,336 common shares and $32.5 million cash. The cash portion of
the consideration for the Step 1 Vessels was financed through proceeds from a new five-year term loan agreement for an amount of up to $115.0 million with ABN AMRO Bank N.V (Note 8).
STAR BULK CARRIERS CORP.
Notes to Consolidated Financial Statements
December 31, 2018
(Expressed in thousands of U.S. dollars except for share and per share data unless otherwise stated)
1.
|
Basis of Presentation and General Information – (continued):
|
E.R. granted the Company a separate call option to acquire each Step 2 Vessel at an exercise price of $28.85 million per Step 2 Vessel (the
“Call Options”), exercisable on April 1, 2019.
Concurrently, the Company granted E.R. a separate put option to acquire each Step 2 Vessel at an exercise price of $26.35 million per Step 2
Vessel (the “Put Options”) exercisable by E.R. from April 2, 2019 to April 4, 2019 (inclusive), if the Company does not exercise the Call Options. The aggregate exercise price of the Call and Put Options is payable at the Company’s option in
either 2/3 cash and 1/3 common shares (the “Step 2 Consideration Shares”) or 100% cash. The number of Step 2 Consideration Shares to be issued to E.R. (if any) will be determined on the basis of the Company’s net asset value, which will be based
on the average vessel valuations by independent vessel appraisers as of March 31, 2019 and will be subject to certain pre-delivery adjustments. This transaction is collectively referred to as “E.R. Vessel Purchase Transaction”.
The OCC Vessel Purchase Transaction, Songa Vessel Purchase Transaction, Augustea Vessel Purchase Transaction and E.R. Vessel Purchase Transaction
are collectively herein defined as the “2018 Transactions.”
As of December 31, 2018, the Company owned a modern fleet of 107 dry bulk vessels consi
sting of Newcastlemax, Capesize, Mini Capesize, Post Panamax, Kamsarmax, Panamax, Ultramax and Supramax vessels with a carrying capacity between 52,055
deadweight tonnage
(“dwt”)
and 209,537 dwt
, and
a combined carrying capacity of 11.7 million dwt. Additionally, through its subsidiary, Star Logistics Management S.A. (or “Star Logistics”), which was formed in October 2017 and is based in Geneva, Switzerland, the
Company
charters-in a number of third-party vessels on a short- to medium- term basis (usually not exceeding one year) to increase its
operating capacity in order to satisfy its clients’ needs.
Below is the list of the Company’s wholly owned subsidiaries as of December 31, 2018:
STAR BULK CARRIERS CORP.
Notes to Consolidated Financial Statements
December 31, 2018
(Expressed in thousands of U.S. dollars except for share and per share data unless otherwise stated)
1.
|
Basis of Presentation and General Information - continued:
|
Subsidiaries owning vessels in operation at December 31, 2018:
|
Wholly Owned Subsidiaries
|
Vessel Name
|
DWT
|
Date
Delivered to Star Bulk
|
Year Built
|
1
|
Sea Diamond Shipping LLC
|
Goliath
|
209,537
|
July 15, 2015
|
2015
|
2
|
Pearl Shiptrade LLC
|
Gargantua
|
209,529
|
April 2, 2015
|
2015
|
3
|
Star Ennea LLC
|
Star Poseidon
|
209,475
|
February 26, 2016
|
2016
|
4
|
Coral Cape Shipping LLC
|
Maharaj
|
209,472
|
July 15, 2015
|
2015
|
5
|
Star Castle II LLC
|
Star Leo
(1)
|
207,939
|
May 14, 2018
|
2018
|
6
|
ABY Eleven Ltd
|
ABOY Laetitia
(1)
|
207,896
|
August 3, 2018
|
2017
|
7
|
Domus Shipping LLC
|
Star Ariadne
(1)
|
207,812
|
March 28, 2017
|
2017
|
8
|
Star Breezer LLC
|
Star Virgo
(1)
|
207,810
|
March 1, 2017
|
2017
|
9
|
Star Seeker LLC
|
Star Libra
(1)
|
207,765
|
June 6, 2016
|
2016
|
10
|
ABY Nine Ltd
|
ABOY Sienna
(1)
|
207,721
|
August 3, 2018
|
2017
|
11
|
Clearwater Shipping LLC
|
Star Marisa
(1)
|
207,709
|
March 11 2016
|
2016
|
12
|
ABY Ten Ltd
|
ABOY Karlie
(1)
|
207,566
|
August 3, 2018
|
2016
|
13
|
Star Castle I LLC
|
Star Eleni
(1)
|
207,555
|
January 3, 2018
|
2018
|
14
|
Festive Shipping LLC
|
Star Magnanimus
(1)
|
207,490
|
March 26, 2018
|
2018
|
15
|
Cape Ocean Maritime LLC
|
Leviathan
|
182,511
|
September 19, 2014
|
2014
|
16
|
Cape Horizon Shipping LLC
|
Peloreus
|
182,496
|
July 22, 2014
|
2014
|
17
|
Star Nor I LLC
|
Star Claudine
(1)
|
181,258
|
July 6, 2018
|
2011
|
18
|
Star Nor II LLC
|
Star Ophelia
(1)
|
180,716
|
July 6, 2018
|
2010
|
19
|
Christine Shipco LLC
|
Star Martha
|
180,274
|
October 31, 2014
|
2010
|
20
|
Sandra Shipco LLC
|
Star Pauline
|
180,233
|
December 29, 2014
|
2008
|
21
|
Pacific Cape Shipping LLC
|
Pantagruel
|
180,181
|
July 11, 2014
|
2004
|
22
|
Star Borealis LLC
|
Star Borealis
|
179,678
|
September 9, 2011
|
2011
|
23
|
Star Polaris LLC
|
Star Polaris
|
179,546
|
November 14, 2011
|
2011
|
24
|
Star Nor III LLC
|
Star Lyra
(1)
|
179,147
|
July 6, 2018
|
2009
|
25
|
Star Trident V LLC
|
Star Angie
|
177,931
|
October 29, 2014
|
2007
|
26
|
Sky Cape Shipping LLC
|
Big Fish
|
177,662
|
July 11, 2014
|
2004
|
27
|
Global Cape Shipping LLC
|
Kymopolia
|
176,990
|
July 11, 2014
|
2006
|
28
|
Star Trident XXV Ltd.
|
Star Triumph
|
176,343
|
December 8, 2017
|
2004
|
29
|
ABY Fourteen Ltd
|
ABY Scarlett
|
175,800
|
August 3, 2018
|
2014
|
30
|
ABY Fifteen Ltd
|
Star Audrey
|
175,125
|
August 3, 2018
|
2011
|
31
|
Sea Cape Shipping LLC
|
Big Bang
|
174,109
|
July 11, 2014
|
2007
|
32
|
Star Aurora LLC
|
Star Aurora (Note 5)
|
171,199
|
September 8, 2010
|
2000
|
33
|
ABY I LLC
|
Paola (tbr Star Paola)
|
115,259
|
August 3, 2018
|
2011
|
34
|
ABM One Ltd
|
ABML Eva (tbr Star Eva)
|
106,659
|
August 3, 2018
|
2012
|
35
|
Nautical Shipping LLC
|
Amami
|
98,681
|
July 11, 2014
|
2011
|
36
|
Majestic Shipping LLC
|
Madredeus
|
98,681
|
July 11, 2014
|
2011
|
37
|
Star Sirius LLC
|
Star Sirius
|
98,681
|
March 7, 2014
|
2011
|
38
|
Star Vega LLC
|
Star Vega
|
98,681
|
February 13, 2014
|
2011
|
39
|
ABY II LLC
|
Star Aphrodite
|
92,006
|
August 3, 2018
|
2011
|
40
|
Augustea Bulk Carrier Ltd
|
Star Piera
|
91,952
|
August 3, 2018
|
2010
|
41
|
Augustea Bulk Carrier Ltd
|
Star Despoina
|
91,945
|
August 3, 2018
|
2010
|
42
|
Star Nor IV LLC
|
Star Electra
(1)
|
83,494
|
July 6, 2018
|
2011
|
43
|
Star Alta I LLC
|
Star Angelina
|
82,981
|
December 5, 2014
|
2006
|
44
|
Star Nor VI LLC
|
Star Luna (1)
|
82,687
|
July 6, 2018
|
2008
|
45
|
ABY Seven Ltd
|
ABY Jeannette (tbr Star Jeanette)
|
82,567
|
August 3, 2018
|
2014
|
46
|
Star Alta II LLC
|
Star Gwyneth
|
82,790
|
December 5, 2014
|
2006
|
47
|
Star Trident I LLC
|
Star Kamila
|
82,769
|
September 3, 2014
|
2005
|
48
|
Star Nor V LLC
|
Star Bianca
(1)
|
82,672
|
July 6, 2018
|
2008
|
49
|
Grain Shipping LLC
|
Pendulum
|
82,619
|
July 11, 2014
|
2006
|
50
|
Star Trident XIX LLC
|
Star Maria
|
82,598
|
November 5, 2014
|
2007
|
(1)
|
Subject to a bareboat charter
with purchase obligation at the expiration of the bareboat charter term (Note 5)
|
STAR BULK CARRIERS CORP.
Notes to Consolidated Financial Statements
December 31, 2018
(Expressed in thousands of U.S. dollars except for share and per share data unless otherwise stated)
1.
|
Basis of Presentation and General Information - continued:
|
Subsidiaries owning vessels in operation at December 31, 2018:
|
Wholly Owned Subsidiaries
|
Vessel Name
|
DWT
|
Date
Delivered to Star Bulk
|
Year Built
|
51
|
Star Trident XII LLC
|
Star Markella
|
82,594
|
September 29, 2014
|
2007
|
52
|
Star Trident IX LLC
|
Star Danai
|
82,574
|
October 21, 2014
|
2006
|
53
|
Star Trident XI LLC
|
Star Georgia
|
82,298
|
October 14, 2014
|
2006
|
54
|
Star Trident VIII LLC
|
Star Sophia
|
82,269
|
October 31, 2014
|
2007
|
55
|
Star Trident XVI LLC
|
Star Mariella
|
82,266
|
September 19, 2014
|
2006
|
56
|
Star Trident XIV LLC
|
Star Moira
|
82,257
|
November 19, 2014
|
2006
|
57
|
Star Trident XVIII LLC
|
Star Nina
|
82,224
|
January 5, 2015
|
2006
|
58
|
Star Trident X LLC
|
Star Renee
|
82,221
|
December 18, 2014
|
2006
|
59
|
Star Trident II LLC
|
Star Nasia
|
82,220
|
August 29, 2014
|
2006
|
60
|
Star Trident XIII LLC
|
Star Laura
|
82,209
|
December 8, 2014
|
2006
|
61
|
Star Trident XV LLC
|
Star Jennifer
|
82,209
|
April 15, 2015
|
2006
|
62
|
Star Nor VIII LLC
|
Star Mona
(1)
|
82,188
|
July 6, 2018
|
2012
|
63
|
Star Trident XVII LLC
|
Star Helena
|
82,187
|
December 29, 2014
|
2006
|
64
|
Star Nor VII LLC
|
Star Astrid
(1)
|
82,158
|
July 6, 2018
|
2012
|
65
|
Waterfront Two Ltd
|
ABY Asia (tbr Star Alessia)
(1)
|
81,944
|
August 3, 2018
|
2017
|
66
|
Star Nor IX LLC
|
Star Calypso (1)
|
81,918
|
July 6, 2018
|
2014
|
67
|
Star Gaia LLC
|
Star Charis
|
81,711
|
March 22, 2017
|
2013
|
68
|
Star Elpis LLC
|
Star Suzanna
|
81,711
|
May 15, 2017
|
2013
|
69
|
Mineral Shipping LLC
|
Mercurial Virgo
|
81,545
|
July 11, 2014
|
2013
|
70
|
Star Nor X LLC
|
Stardust
(1)
|
81,502
|
July 6, 2018
|
2011
|
71
|
Star Nor XI LLC
|
Songa Sky (tbr Star Sky)
(1)
|
81,466
|
July 6, 2018
|
2010
|
72
|
ABY III LLC
|
Star Lydia
|
81,187
|
August 3, 2018
|
2013
|
73
|
ABY IV LLC
|
Star Nicole
|
81,120
|
August 3, 2018
|
2013
|
74
|
ABY Three Ltd
|
ABY Virginia (tbr Star Virginia)
|
81,061
|
August 3, 2018
|
2015
|
75
|
Star Nor XII LLC
|
Star Genesis
(1)
|
80,705
|
July 6, 2018
|
2010
|
76
|
Star Nor XIII LLC
|
Star Flame
(1)
|
80,448
|
July 6, 2018
|
2011
|
77
|
Star Trident III LLC
|
Star Iris
|
76,466
|
September 8, 2014
|
2004
|
78
|
Star Trident XX LLC
|
Star Emily
|
76,417
|
September 16, 2014
|
2004
|
79
|
Orion Maritime LLC
|
Idee Fixe
(1)
|
63,458
|
March 25, 2015
|
2015
|
80
|
Primavera Shipping LLC (ex- Spring Shipping LLC)
|
Roberta
(1)
|
63,426
|
March 31, 2015
|
2015
|
81
|
Success Maritime LLC
|
Laura
(1)
|
63,399
|
April 7, 2015
|
2015
|
82
|
Ultra Shipping LLC
|
Kaley
(1)
|
63,283
|
June 26, 2015
|
2015
|
83
|
Blooming Navigation LLC
|
Kennadi
|
63,262
|
January 8, 2016
|
2016
|
84
|
Jasmine Shipping LLC
|
Mackenzie
|
63,226
|
March 2, 2016
|
2016
|
85
|
Star Uranus LLC
|
Star Anna
|
63,038
|
November 16, 2018
|
2015
|
86
|
Star Nor XV LLC
|
Star Wave
(1)
|
61,491
|
July 6, 2018
|
2017
|
87
|
Star Challenger I LLC
|
Star Challenger
|
61,462
|
December 12, 2013
|
2012
|
88
|
Star Challenger II LLC
|
Star Fighter
(1)
|
61,455
|
December 30, 2013
|
2013
|
89
|
Star Axe II LLC
|
Star Lutas
|
61,347
|
January 6, 2016
|
2016
|
90
|
Aurelia Shipping LLC
|
Honey Badger
|
61,320
|
February 27, 2015
|
2015
|
91
|
Rainbow Maritime LLC
|
Wolverine
|
61,292
|
February 27, 2015
|
2015
|
92
|
Star Axe I LLC
|
Star Antares
|
61,258
|
October 9, 2015
|
2015
|
93
|
Star Asia I LLC
|
Star Aquarius
|
60,916
|
July 22, 2015
|
2015
|
94
|
Star Asia II LLC
|
Star Pisces
|
60,916
|
August 7, 2015
|
2015
|
95
|
ABY Five Ltd
|
ABY Monica (tbr Star Monica)
|
60,935
|
August 3, 2018
|
2015
|
96
|
Star Nor XIV LLC
|
Songa Glory (tbr Star Glory)
(1)
|
58,680
|
July 6, 2018
|
2012
|
97
|
Star Trident VII LLC
|
Diva
|
56,582
|
July 24, 2017
|
2011
|
98
|
Glory Supra Shipping LLC
|
Strange Attractor
|
55,742
|
July 11, 2014
|
2006
|
99
|
Star Regg III LLC
|
Star Bright
|
55,783
|
October 10, 2018
|
2010
|
100
|
Star Omicron LLC
|
Star Omicron
|
53,489
|
April 17, 2008
|
2005
|
101
|
Star Gamma LLC
|
Star Gamma
|
53,098
|
January 4, 2008
|
2002
|
102
|
Star Zeta LLC
|
Star Zeta
|
52,994
|
January 2, 2008
|
2003
|
103
|
Star Delta LLC
|
Star Delta (Note 5)
|
52,434
|
January 2, 2008
|
2000
|
104
|
Star Theta LLC
|
Star Theta
|
52,425
|
December 6, 2007
|
2003
|
105
|
Star Epsilon LLC
|
Star Epsilon
|
52,402
|
December 3, 2007
|
2001
|
106
|
Star Cosmo LLC
|
Star Cosmo
|
52,247
|
July 1, 2008
|
2005
|
107
|
Star Kappa LLC
|
Star Kappa (Note 5)
|
52,055
|
December 14, 2007
|
2001
|
|
|
Total dwt
|
11,748,687
|
|
|
STAR BULK CARRIERS CORP.
Notes to Consolidated Financial Statements
December 31, 2018
(Expressed in thousands of U.S. dollars except for share and per share data unless otherwise stated)
1.
|
Basis of Presentation and General Information - continued:
|
Subsidiaries owning vessels under construction at December 31,
2018:
|
Wholly Owned Subsidiaries
|
Newbuildings Name
|
Type
|
DWT
|
Expected
Delivery
Date
|
1
|
New Era I Shipping LLC
|
HN 1388 (tbn Katie K) (1)
|
Newcastlemax
|
208,000
|
Mar-19
|
2
|
New Era II Shipping LLC
|
HN 1389 (tbn Debbie H) (1)
|
Newcastlemax
|
208,000
|
Apr-19
|
3
|
New Era III Shipping LLC
|
HN 1390 (tbn Ocean Ayesha) (1)
|
Newcastlemax
|
208,000
|
Jun-19
|
|
|
Total dwt
|
|
624,000
|
|
|
(1)
|
Subject to a bareboat charter
with purchase obligation at the expiration of the bareboat charter term (Note 6)
|
STAR BULK CARRIERS CORP.
Notes to Consolidated Financial Statements
December 31, 2018
(Expressed in thousands of U.S. dollars except for share and per share data unless otherwise stated)
1.
|
Basis of Presentation and General Information - (continued):
|
Second-hand vessels agreed to be acquired at December 31, 2018:
|
|
Wholly Owned Subsidiaries
|
Vessel Name
|
Type
|
|
DWT
|
|
|
Year Built
|
|
Delivery
Date
|
1
|
|
Star Regg II LLC
|
Star Janni (ex - ER Bradenburg) (Note 1 and 19)
|
Capesize
|
|
|
178,978
|
|
|
|
2010
|
|
7-Jan-19
|
2
|
|
Star Regg I LLC
|
Star Marianne (ex - ER Bourgogne) (Note 1 and 19)
|
Capesize
|
|
|
178,906
|
|
|
|
2010
|
|
14-Jan-19
|
|
|
|
|
|
|
|
357,884
|
|
|
|
|
|
|
Non-vessel owning subsidiaries at December 31, 2018:
|
Wholly Owned Subsidiaries
|
|
|
1
|
Star Bulk Management Inc.
|
30
|
Star Regina LLC
|
2
|
Starbulk S.A.
|
31
|
Star Logistics Management S.A.
|
3
|
Star Bulk Manning LLC
|
32
|
Gravity Shipping LLC
|
4
|
Star Bulk Shipmanagement Company (Cyprus) Limited
|
33
|
White Sand Shipping LLC
|
5
|
Optima Shipping Limited
|
34
|
Premier Voyage LLC
|
6
|
Star Omas LLC
|
35
|
L.A. Cape Shipping LLC
|
7
|
Star Synergy LLC
|
36
|
Cape Confidence Shipping LLC
|
8
|
Oceanbulk Shipping LLC
|
37
|
Cape Runner Shipping LLC
|
9
|
Oceanbulk Carriers LLC
|
38
|
Olympia Shiptrade LLC
|
10
|
International Holdings LLC
|
39
|
Victory Shipping LLC
|
11
|
Star Ventures LLC
|
40
|
Star Cape I LLC
|
12
|
Star Logistics LLC (ex Dry Ventures LLC)
|
41
|
Star Cape II LLC
|
13
|
Unity Holding LLC
|
42
|
Positive Shipping Company
|
14
|
Star Bulk (USA) LLC
|
43
|
OOCape1 Holdings LLC
|
15
|
Star Trident XXI LLC
|
44
|
Oday Marine LLC
|
16
|
Star Trident XXIV LLC
|
45
|
Searay Maritime LLC
|
17
|
Star Trident XXVII LLC
|
46
|
Lowlands Beilun Shipco LLC
|
18
|
Star Trident XXXI LLC
|
47
|
Star Trident VI LLC
|
19
|
Star Trident XXIX LLC
|
48
|
KMSRX Holdings LLC
|
20
|
Star Trident XXVIII LLC
|
49
|
Dioriga Shipping Co.
|
21
|
Star Trident XXVI LLC
|
50
|
Star Trident XXX LLC
|
22
|
Star Trident XXII LLC
|
51
|
Star Trident IV LLC
|
23
|
Star Trident XXIII LLC
|
52
|
Pacific Ventures Holdings LLC
|
24
|
Star Alpha LLC
|
53
|
Star Mare LLC
|
25
|
Star Bulk Norway AS
|
54
|
Star Regg IV LLC
|
26
|
Star New Era LLC
|
55
|
Star Regg V LLC
|
27
|
Star Thor LLC
|
56
|
Star Regg VI LLC
|
28
|
Star ABY LLC
|
57
|
Star Regg VII LLC
|
29
|
ABY Group Holding Ltd
|
58
|
Star Sege Ltd
|
STAR BULK CARRIERS CORP.
Notes to Consolidated Financial Statements
December 31, 2018
(Expressed in thousands of U.S. dollars except for share and per share data unless otherwise stated)
1.
|
Basis of Presentation and General Information - (continued):
|
Charterers who individually accounted for more than 10% of the Company’s voyage revenues during the years ended December 31, 2016, 2017 and 2018
are as follows:
|
|
|
|
|
|
|
|
|
|
|
|
A
|
|
|
|
N/A
|
|
|
|
N/A
|
|
|
|
15
|
%
|
|
B
|
|
|
|
13
|
%
|
|
|
14
|
%
|
|
|
N/A
|
|
The outstanding accounts receivable balance as at December 31, 2018 of this charterer (A) was $1,367.
2.
|
Significant Accounting policies:
|
a)
|
Principles of consolidation:
The
consolidated financial statements have been prepared in accordance with generally accepted accounting principles in the United States of America (“U.S. GAAP”), which include the accounts of Star Bulk and its wholly owned subsidiaries
referred to in Note 1 above. All intercompany balances and transactions have been eliminated on consolidation.
|
Star Bulk as the holding company determines whether it has controlling financial interest in an entity by first evaluating
whether the entity is a voting interest entity or a variable interest entity. Under ASC 810 “Consolidation”, a voting interest entity is an entity in which the total equity investment at risk is sufficient to enable the entity to finance itself
independently and provides the equity holders with the obligation to absorb losses, the right to receive residual returns and make financial and operating decisions. Star Bulk consolidates voting interest entities in which it owns all, or at
least a majority (generally, greater than 50%), of the voting interest.
Following the provisions of ASC 810 “Consolidation”, the Company evaluates all arrangements that may include a variable
interest in an entity to determine if it may be the primary beneficiary, and would be required to include assets, liabilities and operations of a variable interest entity (“VIE”) in its consolidated financial statements. Company’s evaluation did
not result in an identification of variable interest entities for the years 2016, 2017 and 2018.
b)
|
Equity method investments:
Investments in the equity of entities over which the Company exercises significant influence, but does not exercise control are accounted
for by the equity method of accounting. Under this method, the Company records such an investment at cost and adjusts the carrying amount for its share of the earnings or losses of the entity subsequent to the date of investment and
reports the recognized earnings or losses in income. The Company also evaluates whether a loss in value of an investment that is other than a temporary decline should be recognized. Evidence of a loss in value might include absence
of an ability to recover the carrying amount of the investment or inability of the investee to sustain an earnings capacity that would justify the carrying amount of the investment. Dividends received reduce the carrying amount of
the investment. When the Company’s share of losses in an entity accounted for by the equity method equals or exceeds its interest in the entity, the Company does not recognize further losses, unless the Company has made advances,
incurred obligations and made payments on behalf of the entity.
|
c)
|
Use of estimates:
The preparation of the consolidated financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect the
reported amounts of assets and liabilities, the disclosures of contingent assets and liabilities at the date of the consolidated financial statements and the reported amounts of revenues and expenses during the reporting period.
Actual results could differ from those estimates under different assumptions or conditions.
|
STAR BULK CARRIERS CORP.
Notes to Consolidated Financial Statements
December 31, 2018
(Expressed in thousands of U.S. dollars except for share and per share data unless otherwise stated)
2.
|
Significant Accounting policies - (continued):
|
d)
|
Comprehensive income/(loss):
The statement of comprehensive income/(loss) presents the change in equity (net assets) during a period from transactions and other
events and circumstances from non-owner sources. It includes all changes in equity during a period except those resulting from investments by shareholders and distributions to shareholders. Reclassification adjustments are presented
out of accumulated other comprehensive income/(loss) on the face of the statement in which the components of other comprehensive income/(loss) are presented or in the notes to the financial statements. The Company follows the
provisions of ASC 220 “Comprehensive Income”, and presents items of net income/(loss), items of other comprehensive income/(loss) and total comprehensive income/(loss) in two separate and consecutive statements.
|
e)
|
Concentration of credit risk:
Financial
instruments, which potentially subject the Company to significant concentrations of credit risk, consist principally of cash and cash equivalents and restricted cash, trade accounts receivable and derivative contracts (including
freight derivatives, bunker derivatives and interest rate swaps). The Company’s policy is to place cash and cash equivalents, and restricted cash with financial institutions evaluated as being creditworthy. Cash and cash equivalents
and restricted cash are therefore exposed to minimal credit risk. The Company may be exposed to credit risk in the event of non-performance by counter parties to derivative contracts. To manage this risk, the Company has adopted a
policy of no exposure in over-the-counter transactions by selecting freight derivatives and bunker swaps that clear through reputable clearing houses, including the London Clearing House (“LCH”). The Company performs periodic
evaluations of the relative credit standing of those financial institutions with which the Company transacts. In addition the Company limits its credit risk with accounts receivable by performing ongoing credit evaluations of its
customers’ financial condition.
|
f)
|
Foreign currency transactions:
The
functional currency of the Company is the U.S. Dollar since its vessels operate in the international shipping markets, and therefore primarily transact business in U.S. Dollars. The Company’s books of accounts are maintained in U.S.
Dollars. Transactions involving other currencies during the period are converted into U.S. Dollars using the exchange rates in effect at the time of the transactions. At the consolidated balance sheet dates, monetary assets and
liabilities, which are denominated in other currencies, are converted into U.S. Dollars at the period-end exchange rates. Resulting gains/(losses) are included in “Interest and other income/(loss)” in the consolidated statements of
operations.
|
g)
|
Cash and cash equivalents:
The Company
considers highly liquid investments such as time deposits and certificates of deposit with an original maturity of three months or less or from which cash is readily available without penalty, to be cash equivalents.
|
h)
|
Restricted cash
:
Restricted cash represents minimum cash deposits or cash collateral deposits required to be maintained with certain banks under the Company’s borrowing
arrangements or derivative contracts, which are legally restricted as to withdrawal or use. In the event that the obligation to maintain such deposits is expected to be terminated within the next twelve months, these deposits are
classified as current assets. Otherwise, they are classified as non-current assets.
|
STAR BULK CARRIERS CORP.
Notes to Consolidated Financial Statements
December 31, 2018
(Expressed in thousands of U.S. dollars except for share and per share data unless otherwise stated)
2.
|
Significant Accounting policies - (continued):
|
i)
|
Trade accounts receivable, net:
The amount shown as Trade accounts receivable, net, at each balance sheet date, includes receivables from customers, net of any
provision for doubtful debts. At each balance sheet date, the Company provides for doubtful accounts on the basis of specific identified doubtful receivables. .
|
j)
|
Inventories:
Inventories consist of
lubricants and bunkers, which are stated at the lower of cost or net realizable value, which is the estimated selling prices less reasonably predictable costs of disposal and transportation. Cost is determined by the first in, first
out method.
|
k)
|
Vessels, net:
Vessels are stated at cost, which consists of the purchase price and any material expenses incurred upon acquisition, such as initial repairs,
improvements, delivery expenses and other expenditures to prepare the vessel for its initial voyage. Any subsequent expenditure, when it does not extend the useful life of the vessel, increase the earning capacity or improve the
efficiency or safety of the vessel, is expensed as incurred.
|
The cost of each of the Company’s vessels is depreciated beginning when the vessel is ready for its intended use, on a
straight-line basis over the vessel’s remaining economic useful life, after considering the estimated residual value (vessel’s residual value is equal to the product of its lightweight tonnage and estimated scrap rate per ton). Management
estimates the useful life of the Company’s vessels to be 25 years from the date of initial delivery from the shipyard. When regulations place limitations over the ability of a vessel to trade on a worldwide basis, its remaining useful life is
adjusted at the date such regulations are adopted. The estimated salvage value of each vessel is $0.3 per light weight ton as of December 31, 2018 and 2017, which is based on the historical average demolition prices.
l)
|
Advances for vessels under construction and
acquisition of vessels:
Advances made to shipyards or sellers of shipbuilding contracts during construction periods or advances made to sellers of secondhand vessels to be acquired are classified as “Advances for vessels
under construction and acquisition of vessels” until the date of delivery and acceptance of the vessel, at which date they are reclassified to “Vessels and other fixed assets, net.” Advances for vessels under construction also
include supervision costs, amounts paid under engineering contracts, and other expenses directly related to the construction of the vessel or the preparation of the vessel for its initial voyage. Interest cost incurred during the
construction period of the vessels are also capitalized and included in the vessels’ cost.
|
m)
|
Fair value of above/below market acquired time
charters:
The Company values any asset or liability arising from the market value of the time charters assumed when a vessel is acquired. The value of above or below market acquired time charters is determined by comparing
the existing charter rates in the acquired time charter agreements with the market rates for equivalent time charter agreements prevailing at the time the vessels are delivered. Such intangible asset or liability is recognized
ratably as an adjustment to revenues over the remaining term of the assumed time charter.
|
n)
|
Impairment of long-lived assets:
The Company follows guidance under ASC 360 “Property, Plant, and Equipment” related to the impairment or disposal of long-lived assets
which addresses financial accounting and reporting for the impairment or disposal of long-lived assets. The standard requires that long-lived assets held and used by an entity be reviewed for impairment whenever events or changes in
circumstances indicate that the carrying amount of the assets may not be recoverable. When the estimate of future undiscounted net operating cash flows, excluding interest charges, expected to be generated by the use and eventual
disposition of the asset is less than its carrying amount, the Company should record an impairment loss to the extent the asset’s carrying value exceeds its fair value. The Company determines the fair value of its assets based on
management estimates and assumptions and by making use of available market data and taking into consideration agreed sale prices and third party valuations.
|
STAR BULK CARRIERS CORP.
Notes to Consolidated Financial Statements
December 31, 2018
(Expressed in thousands of U.S. dollars except for share and per share data unless otherwise stated)
2.
|
Significant Accounting policies - (continued):
|
In this respect, management regularly reviews the carrying amount of the vessels, including newbuilding contracts, on a
vessel-by-vessel basis, when events and circumstances indicate that the carrying amount of the vessels or newbuilding contracts might not be recoverable (such as vessel sales and purchases, business plans, obsolescence or damage to the asset and
overall market conditions). When impairment indicators are present, the Company compares future undiscounted net operating cash flows to the carrying values of the Company’s vessels to determine if the asset is required to be impaired. In
developing its estimates of future undiscounted net operating cash flows, the Company makes assumptions and estimates about vessels’ future performance, with the significant assumptions being related to charter rates, ship operating expenses,
vessels’ residual value, fleet utilization and the estimated remaining useful lives of the vessels, assumed to be 25 years from the delivery of the vessel from the shipyard. These assumptions are based on current market conditions, historical
industry and Company’s specific trends, as well as future expectations.
The future undiscounted net operating cash flows are determined by considering the charter revenues from existing time charters
for the fixed vessel days and an estimated daily time charter equivalent rate for the unfixed days over the estimated remaining economic life of each vessel, net of brokerage and address commissions. Estimates of the daily time charter
equivalent for the unfixed days are based on the current Forward Freight Agreement (“FFA”) rates, for the first three-year period, average of FFA rates and historical rate levels for the fourth year and historical average rate levels of similar
size vessels for the period thereafter. The expected cash inflows from charter revenues are based on an assumed fleet utilization rate of approximately 98% for the unfixed days over available days, taking also into account expected technical
off-hire days. In assessing expected future cash outflows, management forecasts vessel operating expenses, which are based on the Company’s internal budget for the first annual period and thereafter assume an annual inflation rate of up to 3%
(escalating during the first three-year period) and are capped at the thirteenth year thereafter, vessel expected maintenance costs (for dry docking and special surveys), management fees, as well as expected costs for the procurement and
installation of Ballast Water Management System where applicable in order to comply with the relevant IMO regulations. The estimated salvage value of each vessel is $0.3 per light weight ton, in accordance with the Company’s vessel depreciation
policy. The Company uses a probability weighted approach for developing estimates of future cash flows used to test its vessels for recoverability when alternative courses of action are under consideration (i.e. sale or continuing operation of a
vessel). If the Company’s estimate of future undiscounted net operating cash flow for any vessel is lower than the vessel’s carrying value, the carrying value is written down to the vessel’s fair market value with a charge recorded under
“Impairment loss” in the consolidated statement of operations.
STAR BULK CARRIERS CORP.
Notes to Consolidated Financial Statements
December 31, 2018
(Expressed in thousands of U.S. dollars except for share and per share data unless otherwise stated)
2.
|
Significant Accounting policies - (continued):
|
o)
|
Vessels held for sale:
The Company
classifies a vessel as being held for sale when all of the following criteria, enumerated under ASC 360 “Property, Plant, and Equipment”, are met: (i) management has committed to a plan to sell the vessel; (ii) the vessel is available
for immediate sale in its present condition; (iii) an active program to locate a buyer and other actions required to complete the plan to sell the vessel have been initiated; (iv) the sale of the vessel is probable, and transfer of
the asset is expected to qualify for recognition as a completed sale within one year; (v) the vessel is being actively marketed for sale at a price that is reasonable in relation to its current fair value; and (vi) actions required to
complete the plan indicate that it is unlikely that significant changes to the plan will be made or that the plan will be withdrawn.
|
Vessels classified as held for sale are measured at the lower of their carrying amount or fair value less cost to sell. The
resulting difference, if any, is recorded under “Impairment loss” in the consolidated statement of operations. The vessels are not depreciated once they meet the criteria to be classified as held for sale
p)
|
Financing costs:
Fees paid to lenders or
required to be paid to third parties on the lenders’ behalf for obtaining new loans, senior notes, for refinancing or amending existing loans or securing leases, are required to be presented on the balance sheet as a direct deduction
from the carrying amount of that debt liability, similar to debt discounts. These costs are amortized as interest and finance costs using the effective interest rate method over the duration of the related debt. Any unamortized
balance of costs relating to debt repaid or refinanced that meet the criteria for Debt Extinguishment (see Subtopic 470-50), is expensed in the period in which the repayment is made or refinancing occurs
.
Any unamortized balance of costs relating to debt refinanced that do not meet the criteria for Debt Extinguishment, are amortized over the term of the
refinanced debt. Other fees incurred for obtaining loan facilities whose committed loans have not been drawn on or before the balance sheet date are recorded under “Other non-current assets”, and are reclassified as a direct deduction
from the carrying amount of the loan facilities once financing takes place.
|
q)
|
Debt Modifications and extinguishments:
The Company follows the provisions of ASC 470-50, “Modifications and Extinguishments” to account for all modifications or extinguishments
of debt instruments, except debt that is extinguished through a troubled debt restructuring (see Subtopic 470-60) or a conversion of debt to equity securities of the debtor pursuant to conversion privileges provided in terms of the
debt at issuance (see Subtopic 470-20). This Subtopic also provides guidance on whether an exchange of debt instruments with the same creditor constitutes an extinguishment and whether a modification of a debt instrument should be
accounted for in the same manner as an extinguishment. In circumstances where an exchange of debt instruments or a modification of a debt instrument does not result in extinguishment accounting, this Subtopic provides guidance on the
appropriate accounting treatment.
|
r)
|
Share based compensation:
Share based compensation represents the cost of shares and share options granted to employees, executive officers and to directors, for
their services, and is included in “General and administrative expenses” in the consolidated statements of operations. The shares are measured at their fair value equal to the market value of the Company’s common shares on the grant
date. The shares that do not contain any future service vesting conditions are considered vested shares and the total fair value of such shares is expensed on the grant date. Guidance related to shares compensation describes two
generally accepted methods of recognizing expense for non-vested share awards with a graded vesting schedule for financial reporting purposes: 1) the “accelerated method’’, which treats an award with multiple vesting dates as multiple
awards and results in a front-loading of the costs of the award and 2) the “straight-line method’’ which treats such awards as a single award and results in recognition of the cost ratably over the entire vesting period. The shares
that contain a time-based service vesting condition are considered non-vested shares on the grant date and a total fair value of such shares is recognized using the accelerated method. Further, the Company accounts for restricted
share award forfeitures upon occurrence.
|
STAR BULK CARRIERS CORP.
Notes to Consolidated Financial Statements
December 31, 2018
(Expressed in thousands of U.S. dollars except for share and per share data unless otherwise stated)
2.
|
Significant Accounting policies - (continued):
|
Awards of
restricted shares, restricted share units or share options that are subject to performance conditions are also measured at their fair value, which is equal to the market value of the Company’s common shares on the grant date. If the award is
subject only to performance conditions, compensation cost is recognized only if the performance conditions are satisfied (essentially, the requisite service is not considered to have been provided if the performance condition is not achieved).
For awards that are subject to performance conditions and future service conditions, if it is probable that the performance condition for these awards will be satisfied, the compensation cost in respect of these awards is recognized over the
requisite service period. If it is initially determined that it is not probable that the performance condition will be satisfied and it is later determined that the performance conditions are likely to be satisfied (or vice versa), the effect
of the change in estimate is retroactively accounted for in the period of change by recording a cumulative catch-up adjustment to retroactively apply the new estimate. If the award is forfeited because the performance condition is not
satisfied, any previously recognized compensation cost is reversed.
The fair value of share options grants is determined with reference to option pricing models, and depends on the terms of the
granted options. The fair value is recognized (as compensation expense) over the requisite service period for all awards that vest.
s)
|
Dry docking and special survey expenses:
Dry docking and special survey expenses are expensed when incurred.
|
t)
|
Accounting for revenue and related expenses:
The
Company generates its revenues from charterers for the charter hire of its vessels under time charter agreements or voyage charter agreements. Under a time charter agreement a contract is entered into for the use of a vessel for a
specific period of time and a specified daily charter hire rate. Under a voyage charter agreement, a contract is made in the spot market for the use of a vessel for a specific voyage to transport a specified agreed upon cargo at a
specified freight rate per ton
or occasionally a lump sum amount
.
Under a
voyage charter agreement,
the charter party generally has a minimum amount of cargo and the charterer is liable for any short loading of cargo or "dead" freight.
|
Under time charter agreements, voyage costs, such as fuel and port charges are borne and paid by the charterer. The Company’s
time charter agreements are classified as operating leases pursuant to ASC 840 “Leases”,
a
ccording which revenues under operating lease arrangements are recognized
when a charter agreement exists, the charter rate is fixed and determinable, the vessel is made available to the lessee and collection of the related revenue is reasonably assured. Revenues are recognized ratably on a straight line basis over
the period of the respective charter agreement in accordance with guidance ASC 840 related to leases.
For the year ended December 31, 2017 Voyage revenues included revenues from i) time charter agreements of $240,529, ii) voyage
charter agreements of $102,977 and iii) pool arrangements of $574. For the year ended December 31, 2016 Voyage revenues included revenues from i) time charter agreements of $148,012, ii) voyage charter agreements of $82,306 and iii) pool
arrangements of ($588). In addition address commissions for the years ended December 31, 2017 and 2016 were ($12,104) and ($7,743) and are also included under “Voyage revenues” in the consolidated statement of operations.
In May 2016, the FASB issued their final standard on revenue from contracts with customers. The standard, which was issued as
ASU 2014-09 (Topic 606 or ASC 606) by the FASB, as amended, outlines a single comprehensive model for entities to use in accounting for revenue from contracts with customers and supersedes most legacy revenue recognition guidance. The core
principle of the guidance in ASC 606 is that an entity should recognize revenue to depict the transfer of promised goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange
for those goods or services by applying the following steps: (1) identify the contract(s) with a customer; (2) identify the performance obligations in each contract; (3) determine the transaction price; (4) allocate the transaction price to the
performance obligations in each contract; and (5) recognize revenue when (or as) the entity satisfies a performance obligation.
The Company adopted the provisions of ASC 606 on January 1, 2018.
STAR BULK CARRIERS CORP.
Notes to Consolidated Financial Statements
December 31, 2018
(Expressed in thousands of U.S. dollars except for share and per share data unless otherwise stated)
2.
|
Significant Accounting policies - (continued):
|
Voyage charter agreements do not contain a lease and are therefore considered service contracts that fall under the provisions
of ASC 606. The majority of revenue from voyage charter agreements is usually collected in advance. The Company has determined that there is one single performance obligation for each of its voyage contracts, which is to provide the charterer
with an integrated transportation service within a specified time period. In addition, the Company has concluded that a contract for a voyage charter meets the criteria to recognize revenue over time because the charterer simultaneously receives
and consumes the benefits of the Company’s performance as the Company performs. Therefore, since the Company’s performance obligation under each voyage contract is met evenly as the voyage progresses, revenue is recognized on a straight line
basis over the voyage days from the loading of cargo to its discharge. Prior to the adoption of ASC 606, revenue from voyage contracts was recognized from the later of the discharge of the prior voyage or the contract date of the current voyage,
until the discharge of the current voyage. The effect of this change is presented further below in this note.
Demurrage income, which is considered a form of variable consideration, is included in voyage revenues, and represents payments
by the charterer to the vessel owner when loading or discharging time exceeds the stipulated time in the voyage charter agreements. Demurrage income for the years ended December 31, 2016, 2017 and 2018 was not material.
The following table shows the voyage revenues earned from time charters, voyage charters and pool agreements for the year ended
December 31, 2018, as presented in the consolidated statement of operation:
|
|
Twelve Months Ended
December 31, 2018
|
|
|
|
|
|
Time charters
|
|
$
|
397,499
|
|
Voyage charters
|
|
|
253,812
|
|
Pool revenues
|
|
|
250
|
|
|
|
$
|
651,561
|
|
Under voyage charter agreements, all voyage costs are borne and paid by the Company. Voyage expenses consist primarily of
brokerage commissions, bunker consumption, port and canal expenses and agency fees related to the voyage. Before the adoption of ASC 606, brokerage commissions were expensed over the related charter period, while the remaining voyage expenses
were expensed as incurred. Charter-in hire expense and the related commissions for chartering-in the respective vessels were expensed ratably on a straight line basis over the period of the respective charter agreement. Following the adoption of
ASC 606 and the implementation of ASC 340-40
Other assets and deferred costs
- Contracts with customers
for contract costs, all voyage costs are considered contract fulfilment costs because they are directly related to the performance of the voyage contract. Those costs are
expensed as incurred, with the exception of those contract fulfilment costs incurred prior to the commencement of loading the cargo on the relevant vessel, which are capitalized to the extent the Company, in its reasonable judgement, determines
that they (i) are directly related to a contract, (ii) will be recoverable and (iii) enhance the Company’s resources by putting the Company’s vessel in a location to satisfy its performance obligation under a contract. These capitalized contract
fulfilment costs are recorded under “Other current assets” and are amortized on a straight-line basis as the related performance obligations are satisfied.
The Company adopted ASC 606 using the modified retrospective approach, and has been applied to all voyage contracts not
completed as of the date of the initial application. As such, the comparative information has not been restated and continues to be reported under the accounting standards in effect for periods prior to January 1, 2018.
STAR BULK CARRIERS CORP.
Notes to Consolidated Financial Statements
December 31, 2018
(Expressed in thousands of U.S. dollars except for share and per share data unless otherwise stated)
2.
|
Significant Accounting policies - (continued):
|
Following the adoption of the new revenue standard in 2018, as of December 31, 2018, the Company has deferred revenue of $4,202
and has deferred expenses of $2,067 (consisting of $1,455 of voyage expenses and $612 of charter-in expenses), each of which will be reflected in the Company’s earnings as the corresponding voyages are performed, which are expected to be
recognized in the first fiscal quarter of 2019.
The following table presents the impact of the adoption of ASC 606 on the Company’s consolidated balance sheet as at December
31, 2018:
|
|
As of December 31, 2018
|
|
|
|
As Reported
|
|
|
Balances without Adoption of
ASC 606
|
|
|
Effect of
Change
|
|
Assets
|
|
|
|
|
|
|
|
|
|
Trade accounts receivable
|
|
$
|
38,402
|
|
|
$
|
40,792
|
|
|
$
|
(2,390
|
)
|
Other current assets
|
|
|
7,046
|
|
|
|
4,992
|
|
|
|
2,054
|
|
Liabilities
|
|
|
|
|
|
|
|
|
|
|
|
|
Deferred revenue
|
|
|
10,855
|
|
|
|
9,043
|
|
|
|
(1,812
|
)
|
Accrued liabilities
|
|
|
16,854
|
|
|
|
16,867
|
|
|
|
13
|
|
As of December 31, 2018, trade accounts receivable, net increased by $22,264, and deferred revenue increased by $2,489 compared
to December 31, 2017. These changes were mainly attributable to the increase in the number of the Company’s vessels, the timing of collections and revenue recognition.
Further, as of December 31, 2018, deferred assets related to revenue contracts (included within “Other current assets”)
increased by $791 compared to December 31, 2017. This change was mainly attributable to the increase in the number of the voyage contracts in progress as of December 31, 2018 and the timing of commencement of revenue recognition.
The following table presents the impact of the adoption of ASC 606 on the Company’s consolidated statement of operations for
the year ended December 31, 2018:
|
|
For the twelve months ended December 31, 2018
|
|
|
|
As Reported
|
|
|
Balances without
Adoption of ASC 606
|
|
|
Effect of
Change
|
|
Voyage revenues
|
|
$
|
651,561
|
|
|
$
|
652,228
|
|
|
$
|
(667
|
)
|
Voyage expenses
|
|
|
121,596
|
|
|
|
122,037
|
|
|
|
441
|
|
Charter-in hire expenses
|
|
|
92,896
|
|
|
|
93,508
|
|
|
|
612
|
|
Net income/(loss)
|
|
|
58,397
|
|
|
|
58,011
|
|
|
|
386
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Earnings/(Loss) per share, basic
|
|
$
|
0.76
|
|
|
$
|
0.75
|
|
|
$
|
0.01
|
|
Earnings/(Loss) per share, diluted
|
|
$
|
0.76
|
|
|
$
|
0.75
|
|
|
$
|
0.00
|
|
STAR BULK CARRIERS CORP.
Notes to Consolidated Financial Statements
December 31, 2018
(Expressed in thousands of U.S. dollars except for share and per share data unless otherwise stated)
2.
|
Significant Accounting policies - (continued)
|
The adoption of ASC 606 had no impact on net cash provided by operating activities, investing activities and financing
activities for the year ended December 31, 2018.
The following table presents the cumulative effect of changes made to the Company’s opening consolidated balance sheet on
January 1, 2018 from the adoption of ASC 606:
|
|
December 31, 2017
|
|
|
Effect of Adoption
of ASC 606
|
|
|
January 1,
2018
|
|
Assets
|
|
|
|
|
|
|
|
|
|
Trade accounts receivable
|
|
$
|
18,521
|
|
|
$
|
(2,383
|
)
|
|
$
|
16,138
|
|
Other current assets
|
|
|
5,157
|
|
|
|
1,263
|
|
|
|
6,420
|
|
Liabilities
|
|
|
|
|
|
|
|
|
|
|
|
|
Deferred revenue
|
|
|
7,229
|
|
|
|
(1,137
|
)
|
|
|
8,366
|
|
Accrued liabilities
|
|
|
10,521
|
|
|
|
(2
|
)
|
|
|
10,523
|
|
Stockholders' Equity
|
|
|
|
|
|
|
|
|
|
|
|
|
Accumulated deficit
|
|
|
(1,036,303
|
)
|
|
|
(2,259
|
)
|
|
|
(1,038,562
|
)
|
Under ASC 606, unearned voyage charter revenue represents the consideration received for undelivered performance obligations.
The Company recorded $4,579 as unearned revenue and $1,263 as deferred expenses related to voyages in progress as of January 1, 2018, which were recognized in earnings in the year ended December 31, 2018 as the performance obligations were
satisfied in that period.
u)
|
Fair value measurements:
The Company
follows the provisions of ASC 820, “Fair Value Measurements and Disclosures” that defines and provides guidance as to the measurement of fair value. ASC 820 creates a hierarchy of measurement and indicates that, when possible, fair
value is the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants. The fair value hierarchy gives the highest priority (Level 1) to quoted prices in
active markets and the lowest priority (Level 3) to unobservable data, for example, the reporting entity’s own data. Under the standard, fair value measurements are separately disclosed by level within the fair value hierarchy (Note
18).
|
v)
|
Earnings/ (loss) per share:
Earnings or
loss per share are computed in accordance with guidance related to Earnings per Share. Basic earnings or loss per share are calculated by dividing net income or loss available to common shareholders by the basic weighted average
number of common shares outstanding during the period. Diluted earnings per share is computed by the treasury stock method whereby all of the Company’s dilutive securities are assumed to be exercised and the proceeds used to
repurchase common shares are calculated at the weighted average market price of the Company’s common shares during the relevant periods. The incremental shares (the difference between the number of shares assumed issued and the
number of shares assumed purchased) are included in the denominator of the diluted earnings per share computation (Note 13).
|
w)
|
Segment reporting
:
The Company reports financial information and evaluates its operations and operating results by total charter revenues and not by the type of vessel,
length of vessel employment, customer or type of charter. As a result, management, including the Chief Executive Officer, who is the chief operating decision maker, reviews operating results solely by revenue per day and operating
results of the fleet, and thus, the Company has determined that it operates under one reportable segment, that of operating dry bulk vessels. Furthermore, when the Company charters a vessel to a charterer, the charterer is free to
trade the vessel worldwide, subject to restrictions as per the charter agreement, and, as a result, the disclosure of geographic information is impracticable.
|
STAR BULK CARRIERS CORP.
Notes to Consolidated Financial Statements
December 31, 2018
(Expressed in thousands of U.S. dollars except for share and per share data unless otherwise stated)
2.
|
Significant Accounting policies - (continued):
|
x)
|
Accounting for leases:
The Company follows the provisions under ASC 840 “Leases” for accounting for its lease arrangements. Leases of assets under which
substantially all the risks and rewards of ownership are effectively retained by the lessor are classified as operating leases. Lease payments under an operating lease are recognized as an expense on a straight-line method over the
lease term.
|
Leases of vessels are classified as capital leases when they satisfy the criteria for capital lease classification under ASC
840, “Leases.” When the ownership of a vessel is transferred at the end of the lease, or there is a bargain purchase option, the vessel is depreciated on a straight-line basis over its useful life as if the vessel was owned. Otherwise, vessels
under capital lease are depreciated on a straight-line basis over the term of the lease. Capital leases are capitalized at the inception of the lease at the lower of the fair value of the leased assets and the present value of the minimum
lease payments. Each lease payment is allocated between liability and finance charges to achieve a constant rate on the capital balance outstanding. The interest incurred under a capital lease is included within “Interest and finance costs” in
the consolidated statement of operations. The amortization of vessels under recognized lease is included within “Depreciation” in the consolidated statement of operations.
Pursuant to the provisions of the ASC 840, “Leases”, in cases of changes in the contractual terms, the Company reassesses its
conclusions for the accounting of the subject leases.
y)
|
Derivatives & Hedging:
|
|
i)
|
Derivative Financial Instruments:
|
The Company enters into derivative and nonderivative financial instruments to manage risks related to fluctuations of interest
rates and foreign currency exchange rates.
All derivatives are recorded on the Company’s balance sheet as assets or liabilities and are measured at fair value. The
valuation of interest rate swaps is based on Level 2 observable inputs of the fair value hierarchy, such as interest rate curves. The changes in the fair value of derivatives not qualifying for hedge accounting are recognized in earnings. Cash
inflows/outflows attributed to derivative instruments are reported within cash flows from operating activities in the consolidated statements of cash flows.
For the purpose of hedge accounting, hedges are classified as:
|
·
|
fair value hedges, when hedging the exposure to changes in the fair value of a recognized asset or liability or an unrecognized firm commitment, which in each
case is attributable to a particular risk, including foreign currency risk;
|
|
·
|
cash flow hedges, when hedging exposure to variability in cash flows that is either attributable to a particular risk associated with a recognized asset or
liability or a highly probable forecast transaction that could affect earnings; or
|
|
·
|
hedges of a net investment in a foreign operation. This type of hedge is not used by the Company.
|
STAR BULK CARRIERS CORP.
Notes to Consolidated Financial Statements
December 31, 2018
(Expressed in thousands of U.S. dollars except for share and per share data unless otherwise stated)
2.
|
Significant Accounting policies - (continued):
|
In case the instruments are eligible for hedge accounting, at the inception of a hedge relationship, the Company formally
designates and documents the hedge relationship to which the Company wishes to apply hedge accounting and the risk management objective and strategy undertaken for the hedge. The documentation includes identification of the hedging instrument,
the hedged item or transaction, the nature of the risk being hedged and how the Company will assess the hedging instrument’s effectiveness in offsetting exposure to changes in the hedged item’s cash flows or fair value attributable to the hedged
risk. Such hedges are expected to be highly effective in achieving offsetting changes in cash flows or fair value and are assessed at each reporting date to determine whether they actually have been highly effective throughout the financial
reporting periods for which they were designated.
Fair value hedges
A fair value hedge is a hedge of the exposure to changes in the fair value of a recognized asset or liability, or of an
unrecognized firm commitment, which in each case is attributable to a particular risk.
The change in the fair value of a hedging instrument is recognized in the consolidated statement of operations. The change in
the fair value of the hedged item attributable to the risk hedged is recorded as part of the carrying value of the hedged item and is also recognized in the consolidated statement of operations.
For fair value hedges, in which a nonderivative is used as hedging instrument for foreign currency risk of unrecognized firm
commitments, the hedging instrument is re- measured based on the movement in functional currency cash flows attributable to the change in spot exchange rates between the functional currency and the currency in which the nonderivative hedging
instrument is denominated. An asset or liability is recorded for the unrecognized firm commitment, which equals the foreign exchange gain or loss that is recorded in earnings as a result of the hedge relationship. The resulting asset or
liability will eventually be treated as part of the consideration when the firm commitment is recognized.
Cash Flow hedges
A cash flow hedge is a hedge of the exposure to variability in cash flows that is attributable to a particular risk associated
with a recognized asset or liability or a highly probable forecasted transaction that could affect earnings.
For derivatives designated as cash flow hedges, the effective portion of the changes in their fair value is recorded in
“Accumulated other comprehensive income / (loss)” and is subsequently recognized in earnings when the hedged items impact earnings, while the ineffective portion, if any, is recognized immediately in current period earnings under “Gain / (Loss)
on derivative financial instruments, net.”
Discontinuation of hedge relationships
The Company discontinues prospectively fair value or cash flow hedge accounting if the hedging instrument expires or is sold,
terminated or exercised and it no longer meets all the criteria for hedge accounting or if the Company de-designates the instrument as a cash flow or fair value hedge. As part of a cash flow hedge, at the time the hedging relationship is
discontinued, any cumulative gain or loss on the hedging instrument recognized in equity remains in equity until the forecasted transaction occurs or until it becomes probable of not occurring. When the forecasted transaction occurs, any
cumulative gain or loss on the hedging instrument is recognized in earnings. If a hedged transaction is no longer expected to occur, the net cumulative gain or loss recognized in equity is reclassified and recognized in earnings for the year.
Similarly, as part of a fair value hedge, if the hedged item is derecognized, the unamortized fair value is recognized immediately in earnings.
STAR BULK CARRIERS CORP.
Notes to Consolidated Financial Statements
December 31, 2018
(Expressed in thousands of U.S. dollars except for share and per share data unless otherwise stated)
2.
|
Significant Accounting policies - (continued):
|
|
ii)
|
Forward Freight Agreements and Bunker Swaps:
|
In addition, from time to time, the Company may take positions in derivative instruments including forward freight agreements,
or FFAs. Generally, FFAs and other derivative instruments may be used to hedge a vessel owner’s exposure to the charter market for a specified route and period of time. Upon settlement, if the contracted charter rate is less than the average of
the rates for the specified route and time period, as reported by an identified index, the seller of the FFA is required to pay the buyer the settlement sum, being an amount equal to the difference between the contracted rate and the settlement
rate, multiplied by the number of days in the specified period covered by the FFA. The Company measures the fair value of all open positions at each reporting date on this basis (Level 2). Conversely, if the contracted rate is greater than the
settlement rate, the buyer is required to pay the seller the settlement sum. FFAs are intended to serve as an economic hedge for the Company’s vessels that are being chartered in the spot market, effectively locking-in an approximate amount of
revenue that the Company expects to receive from such vessels for the relevant periods. All of the FFAs are settled on a daily basis through reputable exchanges such as LCH, Singapore Exchange (SGX) or Nasdaq. The Company’s FFAs do not qualify
for hedge accounting and therefore gains or losses are recognized in the consolidated statements of operations under “(Gain)/Loss on forward freight agreements and bunker swaps.”
Also, from time to time, the Company enters into bunker swap contracts to manage its exposure to fluctuations of bunker prices
associated with the consumption of bunkers by its vessels. Bunker swaps are agreements between two parties to exchange cash flows at a fixed price on bunkers, where volume, time period and price are agreed in advance. The Company’s bunker swaps
do not qualify for hedge accounting and are settled through reputable clearing houses, including LCH. The fair value of bunker swaps is the estimated amount that the Company would receive or pay to terminate the swaps at the reporting date
(Level 2). Bunker price differentials paid or received under the swap agreements are recognized under “(Gain)/Loss on forward freight agreements and bunker swaps”.
z)
|
Taxation
:
The Company follows the provisions of ASC 740-10, “Accounting for Uncertainty in Income Taxes” which clarifies the accounting for uncertainty in income taxes by
prescribing the minimum recognition threshold a tax position is required to meet before being recognized in the financial statements. ASC 740-10 also provides guidance on de-recognition, classification, interest and penalties,
accounting in interim periods, disclosure and transition.
|
STAR BULK CARRIERS CORP.
Notes to Consolidated Financial Statements
December 31, 2018
(Expressed in thousands of U.S. dollars except for share and per share data unless otherwise stated)
2.
|
Significant Accounting policies - (continued):
|
aa)
|
Offering costs
:
Expenses directly attributable to an equity offering are deferred and presented against paid-in capital, unless the offering is aborted, in which case they
are written-off and charged to earnings.
|
ab)
|
Share repurchases
:
The Company records the repurchase of its common shares at cost based on the settlement dates of repurchase transactions. These common shares are
classified as treasury stock, which is a reduction to shareholders’ equity. Treasury shares are included in authorized and issued shares but excluded from outstanding shares.
|
ac)
|
Evaluation of purchase transactions
:
W
hen the Company enters into an acquisition transaction, it determines whether the acquisition transaction was the purchase of an asset or a business based on the facts and circumstances of the transaction. In
accordance with
ASU No. 2017-01,
Business
Combinations (Topic 805): Clarifying the Definition of a Business
, if substantially all of the fair value of the gross assets acquired in an acquisition
transaction are concentrated in a single identifiable asset or group of similar identifiable assets, then the set is not a business. To be considered a business, a set must include an input and a substantive process that together
significantly contributes to the ability to create an output. All assets acquired and liabilities assumed in a business combination are measured at their acquisition-date fair values. For asset acquisitions, the cost of the
acquisition is allocated to individual assets and liabilities on a relative fair value basis. Acquisition costs associated with business combinations are expensed as incurred. Acquisition costs associated with asset acquisitions are
capitalized.
|
Other Recent accounting pronouncements - adopted:
Statement of
Cash Flows (230):
In August 2016, the FASB issued ASU No. 2016-15, “Statement of Cash Flows (Topic 230) – Classification of
Certain Cash Receipts and Cash Payments”
addressing specific cash flow issues with the objective of reducing the existing diversity in practice. The pronouncement
was effective for fiscal years beginning after December 15, 2017, and interim periods within those fiscal years. The Company adopted this ASU on January 1, 2018. The impact of the adoption of this amended guidance did not result in any changes
in the classification of cash receipts and cash payments.
In November 2016, the FASB issued ASU 2016-18, “Statement of Cash Flows (230): Restricted Cash”. The amendments in this update
require that a statement of cash flows explains the change during the period in the total amount of cash, cash equivalents, and amounts generally described as restricted cash or restricted cash equivalents. Therefore, amounts generally described
as restricted cash and restricted cash equivalents should be included with cash and cash equivalents when reconciling the beginning-of-period and end-of-period total amounts shown on the statement of cash flows. The Company adopted this
accounting standard update as of January 1, 2018, and this presentation was applied retrospectively to all periods presented as required by the guidance. The prior periods have been adjusted to conform to current period presentation, which
resulted in a) a decrease in cash flows used in operating activities by $216 and an increase in cash flows used in investing activities of $209 for the year ended December 31, 2016 compared to the amounts previously reported of ($33,448) and
($13,216), respectively and b) an increase in cash flows provided by operating activities by $1,834 and an increase in cash flows used in investing activities of $249 for the year ended December 31, 2017 compared to the amounts previously
reported of $80,970 and ($126,852), respectively, related to changes in restricted cash amounts. Moreover, the beginning period and the ending period cash balances now include restricted cash. The following table provides a reconciliation of (a)
cash and cash equivalents, and restricted cash reported within the consolidated balance sheets to (b) the total amount of such items reported in the statements of cash flows:
STAR BULK CARRIERS CORP.
Notes to Consolidated Financial Statements
December 31, 2018
(Expressed in thousands of U.S. dollars except for share and per share data unless otherwise stated)
2.
|
Significant Accounting policies - (continued):
|
|
|
December 31,
|
|
|
|
2016
|
|
|
2017
|
|
|
2018
|
|
Cash and cash equivalents
|
|
$
|
181,758
|
|
|
|
257,911
|
|
|
|
204,921
|
|
Restricted cash, current (Note 8)
|
|
|
5,121
|
|
|
|
7,169
|
|
|
|
6,435
|
|
Restricted cash, non-current (Note 8)
|
|
|
8,883
|
|
|
|
8,420
|
|
|
|
2,521
|
|
Cash and cash equivalents and restricted cash at end of period shown in the statement of cash flows
|
|
$
|
195,762
|
|
|
|
273,500
|
|
|
|
213,877
|
|
Recent accounting pronouncements - not yet adopted:
Leases:
In
February 2016, the FASB issued Accounting Standards Update No. 2016-02, “Leases (Topic 842).” According to the new Accounting Standard, lessees will be required to recognize assets and liabilities on the balance sheet for the rights and
obligations created by all leases with term of more than 12 months. For lessees, leases will be classified as either capital or operating, with classification affecting the pattern of expense recognition in the income statement. ASU 2016-02
requires lessors to classify leases as a sales-type, direct financing, or operating lease. A lease is a sales-type lease if any one of five criteria included in Topic 842 are met, each of which indicates that the lease, in effect, transfers
control of the underlying asset to the lessee. If none of those five criteria are met, and two other criteria included also in Topic 842 are both met, indicating that the lessor has transferred substantially all of the risks and benefits of the
underlying asset to the lessee and a third party, the lease would be classified as a direct financing lease. All leases that are not sales-type leases or direct financing leases are operating leases. ASU 2016 - 02 is effective for fiscal years
beginning after December 15, 2018, including interim periods within those fiscal years, with early adoption permitted. The FASB issued additional accounting standards updates in July and December 2018 that made further amendments to accounting
for leases and provide for, among other things, (a) an optional new transition method for adoption that results in initial recognition of a cumulative effect adjustment to retained earnings in the year of adoption and (b) a practical expedient
for lessors, under certain circumstances, to combine the lease and non-lease components of revenues for presentation purposes. The Company will adopt this ASU for the reporting period commencing on January 1, 2019 and elected the optional new
transitional approach and the practical expedient for lessors described above. Its adoption will not have a material effect on the Company’s consolidated financial statements for the reasons discussed below:
Company acting
as Lessor:
The Company’s revenues from time charter contracts are governed by ASU 2016-02 “Leases”, effective from January 1, 2019. Upon
adoption of ASC 842, the timing and recognition of earnings from time charter contracts to which the Company is party did not change from previous practice. The Company has determined to recognize lease revenue as a combined single lease
component for all time charter contracts (operating leases) as the related lease component and non-lease component will have the same timing and pattern of transfer and the predominant component is the lease. The performance obligations in a time
charter contract are satisfied over the term of the contract, beginning when the vessel is delivered to the charterer and ending when it is delivered back to the Company. As a result, the adoption of this standard is not expected to have an
effect on the Company’s opening retained earnings, consolidated balance sheets and consolidated statements of operations for these types of contracts (time charter contracts), except for the additional disclosure requirements of this ASU.
Company acting as Lessee:
|
a)
|
All charter-in operating leases that the Company had entered into and were effective as of December 31, 2018 are short term leases, i.e less than 12 months.
|
STAR BULK CARRIERS CORP.
Notes to Consolidated Financial Statements
December 31, 2018
(Expressed in thousands of U.S. dollars except for share and per share data unless otherwise stated)
2.
|
Significant Accounting policies - (continued):
|
|
b)
|
The adoption of this new leasing guidance did not change the accounting for the capital leases already recognized on the balance sheet.
|
|
c)
|
Each sale and lease back transaction that the Company had entered into as of December 31, 2018, involved a purchase obligation and was therefore treated as
failed sale or merely a financing arrangement under both leasing standards (old and new), and therefore is and will not be within the scope of sale and leaseback accounting.
|
|
d)
|
Rights and obligations created by office rental arrangements that the Company is party to, are immaterial to the Company’s consolidated financial statements.
|
Financial
Instruments - Credit Losses (Topic 326)
: In June 2016, the FASB issued ASU No. 2016-13- “Financial Instruments - Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments.” This standard, including the
codification improvements issued in November 2018, requires entities to measure all expected credit losses of financial assets held at a reporting date based on historical experience, current conditions, and reasonable and supportable forecasts
in order to record credit losses in a more timely manner. ASU 2016-13 also amends the accounting for credit losses on available-for-sale debt securities and purchased financial assets with credit deterioration. In November 2018, FASB issued ASU
2018-19 “Codification Improvements to topic 326, Financial Instruments-Credit Losses”. The amendments in this update clarify that operating lease receivables are not within the scope of ASC 326-20 and should instead be accounted for under the new
leasing standard, ASC 842. For public entities, the amendments of this update are effective for fiscal years beginning after December 15, 2019, including interim periods within those fiscal years. Early application is permitted. The adoption of
this ASU is not expected to have a material effect on the Company’s consolidated financial statements and accompanying notes.
Financial
Instruments - Derivatives Held or Issued (subsequent to the adoption of ASU 2017-12,
Targeted Improvements to Accounting for
Hedging Activities
): In August 2017, the FASB issued ASU 2017-12,
Targeted Improvements to Accounting for Hedging Activities
. ASU
2017-12 amends the current hedge accounting model and requires certain new or modified disclosures to enable entities to better portray the economics of their risk management activities in their financial statements. For public business
entities, the amendments in ASU 2017-12 are effective for financial statements issued for fiscal years beginning after 15 December 2018, and interim periods within those fiscal years. For all other entities, the amendments in ASU 2017-12 are
effective for financial statements issued for fiscal years beginning after 15 December 2019, and interim periods within fiscal years beginning after 15 December 2020. Early adoption is permitted, including adoption in an interim period. The
adoption of this ASU is not expected to have a material effect on the Company’s consolidated financial statements and accompanying notes.
Fair Value Measurement (Topic 820):
In August 2018, the FASB issued ASU 2018-13, “Fair Value
Measurement (Topic 820): Disclosure Framework – Changes to the disclosure requirements for fair value measurement.”
The amendments in this update modify the disclosure requirements on fair value measurements in Topic 820, Fair Value
Measurement, including the consideration of costs and benefits
.
The amendments in this update are effective for all entities
for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2019. The amendments on changes in unrealized gains and losses, the range and weighted average of significant unobservable inputs used to develop Level
3 fair value measurements, and the narrative description of measurement uncertainty should be applied prospectively for only the most recent interim or annual period presented in the initial fiscal year of adoption. All other amendments should be
applied retrospectively to all periods presented upon their effective date. Early adoption is permitted upon issuance of this update. An entity is permitted to early adopt any removed or modified disclosures upon issuance of this update and delay
adoption of the additional disclosures until their effective date.
The adoption of this ASU is not expected to have a material effect
on the Company’s consolidated financial statements and accompanying notes.
STAR BULK CARRIERS CORP.
Notes to Consolidated Financial Statements
December 31, 2018
(Expressed in thousands of U.S. dollars except for share and per share data unless otherwise stated)
3.
|
Transactions with Related Parties:
|
Transactions and balances with related parties are analyzed as follows:
Balance Sheet
|
|
December 31,
2017
|
|
|
December 31,
2018
|
|
Due from related parties
|
|
|
|
|
|
|
Oceanbulk Maritime S.A. and its affiliates (d)
|
|
$
|
107
|
|
|
$
|
85
|
|
Sydelle Marine Limited (h)
|
|
|
44
|
|
|
|
-
|
|
Starocean Manning Philippines Inc. (i)
|
|
|
80
|
|
|
|
65
|
|
Sellers of the Augustea Vessels (f)
|
|
|
-
|
|
|
|
867
|
|
Songa Shipmanagement Ltd. (g)
|
|
|
-
|
|
|
|
305
|
|
Due from related parties
|
|
$
|
231
|
|
|
$
|
1,322
|
|
|
|
|
|
|
|
|
|
|
Due to related parties
|
|
|
|
|
|
|
|
|
Management and Directors Fees (b)
|
|
$
|
229
|
|
|
$
|
236
|
|
Sydelle Marine Limited (h)
|
|
|
-
|
|
|
|
302
|
|
Augustea Technoservices Ltd. (f)
|
|
|
-
|
|
|
|
1,111
|
|
Due to related parties
|
|
$
|
229
|
|
|
$
|
1,649
|
|
Statements of Operations
|
|
2016
|
|
|
2017
|
|
|
2018
|
|
Voyage expenses-Interchart (a)
|
|
$
|
(3,300
|
)
|
|
$
|
(3,300
|
)
|
|
|
(3,400
|
)
|
Consultancy fees (b)
|
|
|
(496
|
)
|
|
|
(493
|
)
|
|
|
(534
|
)
|
Directors compensation (b)
|
|
|
(148
|
)
|
|
|
(145
|
)
|
|
|
(159
|
)
|
Office rent - Combine Marine Ltd. & Alma Properties (c )
|
|
|
(34
|
)
|
|
|
(39
|
)
|
|
|
(41
|
)
|
Voyage revenues - profit sharing agreement-Sydelle Marine Limited (h)
|
|
|
-
|
|
|
|
(329
|
)
|
|
|
(875
|
)
|
Management fees- Augustea Technoservices Ltd. (f)
|
|
|
-
|
|
|
|
-
|
|
|
|
(2,309
|
)
|
Management fees- Songa Shipmanagement Ltd. (g)
|
|
|
-
|
|
|
|
-
|
|
|
|
(376
|
)
|
General and administrative expenses - Oceanbulk Maritime S.A. and its affiliates (d)
|
|
|
(270
|
)
|
|
|
(284
|
)
|
|
|
(322
|
)
|
a)
|
Interchart Shipping Inc. or Interchart:
The Company holds
33% of the total outstanding common shares of Interchart. The ownership interest was purchased in 2014 from an entity affiliated with
family members of Company’s Chief Executive Officer. This investment is accounted for as an equity method investment and is presented within “Long term investment” in the consolidated balance sheets.
|
In November 2014, the Company entered into a services agreement with Interchart for chartering, brokering and commercial
services for all of the Company’s vessels for a monthly fee of $275, with a term until March 31, 2015, which following consecutive renewals was effective until December 31, 2018. In November 2018, the Company entered into a new service agreement
with Interchart, with effect from November 1, 2018 until December 31, 2019, pursuant to which the monthly fee was increased to $325.
During the years ended December 31, 2016, 2017 and 2018 the brokerage commissions charged by Interchart were $3,300, $3,300 and
$3,400, respectively, and are included in “Voyage expenses” in the consolidated statements of operations.
STAR BULK CARRIERS CORP.
Notes to Consolidated Financial Statements
December 31, 2018
(Expressed in thousands of U.S. dollars except for share and per share data unless otherwise stated)
3.
|
Transactions with Related Parties - (continued):
|
b)
|
Management and Directors Fees:
The Company has entered into
consulting agreements with companies owned and controlled by each one of its Chief Operating Officer and co-Chief Financial Officers. Pursuant to the corresponding agreements, these entities are entitled to receive an annual
discretionary bonus, as determined by the Company’s Board of Directors in its sole discretion. Pursuant to these agreements, the Company is required to pay an aggregate base fee of $544 per year (this amount includes certain fees
determined in Euros), using the exchange rate as of December 31, 2018, which was $1.15 per euro).
|
The expenses related to the aforementioned consulting agreements for the years ended December 31, 2016, 2017 and 2018, were
$496, $493 and $534, respectively, and are included under “General and administrative expenses” in the consolidated statements of operations. The related expenses of Company’s directors for the years ended December 31, 2016, 2017 and 2018 were
$148, $145 and $159, respectively, and are included under “General and administrative expenses” in the consolidated statements of operations. As of December 31, 2017 and 2018, the Company had outstanding payables of $229 and $236, respectively,
to its executive officers and directors and non-executive directors, representing unpaid consulting fees and unpaid fees for their participation in the Company’s Board of Directors and other special committees.
c)
|
Office rent:
On January 1, 2012, Starbulk S.A., entered into
a lease agreement for office space with Combine Marine Ltd., a company controlled by Mrs. Milena - Maria Pappas and by Mr. Alexandros Pappas, both of whom are children of the Company’s Chief Executive Officer. The lease agreement
provides for a monthly rental of €2,500 (approximately $2.9, using the exchange rate as of December 31, 2018, which was $1.15 per euro). Unless terminated by either party, the agreement will expire in January 2024. The related rent
expense for the years ended December 31, 2016, 2017 and 2018 was $34, $35 and $37, respectively, and is included under “General and administrative expenses” in the consolidated statements of operations.
|
In addition, on December 21, 2016 Starbulk S.A., entered into a six year lease agreement for office space with Alma Properties,
a company controlled by Mrs. Milena - Maria Pappas. The lease agreement provides for a monthly rental of €300 (approximately $0.3, using the exchange rate as of December 31, 2018, which was $1.15 per euro). The related rent expense for the
years ended December 31, 2017 and 2018 was $4 and $4 and is included under “General and administrative expenses” in the consolidated statement of operations.
d)
|
Oceanbulk Maritime S.A.:
Oceanbulk Maritime S.A. (“Oceanbulk
Maritime”) is a ship management company controlled by Mrs. Milena-Maria Pappas. A company affiliated to Oceanbulk Maritime provides the Company certain financial corporate development services. The related expenses for the years ended
December 31, 2016, 2017 and 2018 was $270, $284 and $322 and are included under “General and administrative expenses” in the consolidated statement of operations. As of December 31, 2017 and 2018, the Company had outstanding
receivables of $107 and $85 from Oceanbulk Maritime and its affiliates, respectively for payments made on their behalf regarding certain administrative items.
|
STAR BULK CARRIERS CORP.
Notes to Consolidated Financial Statements
December 31, 2018
(Expressed in thousands of U.S. dollars except for share and per share data unless otherwise stated)
3.
|
Transactions with Related Parties - (continued):
|
e)
|
Oaktree Shareholder Agreement:
On July 11, 2014, the Company
and Oaktree Dry Bulk Holding LLC (including affiliated funds, “Oaktree”), one of the Company’s major shareholders, entered into a shareholders agreement (the “Oaktree Shareholders Agreement”). Under the Oaktree Shareholders
Agreement, Oaktree has the right to nominate four of the Company’s nine directors so long as it beneficially owns 40% or more of the Company’s outstanding voting securities. The number of directors able to be designated by Oaktree is
reduced to three directors if Oaktree beneficially owns 25% or more but less than 40% of the Company’s outstanding voting securities, to two directors if Oaktree beneficially owns 15% or more but less than 25%, and to one director if
Oaktree beneficially owns 5% or more but less than 15%. Oaktree’s designation rights terminate if it beneficially owns less than 5% of the Company’s outstanding voting securities.
|
The three directors currently designated by Oaktree are Messrs. Pappas and Balakrishnan and Ms. Stephens, Under the Oaktree
Shareholders Agreement, with certain limited exceptions, Oaktree effectively cannot vote more than 33% of the Company’s outstanding common shares (subject to adjustment under certain circumstances).
f)
|
Augustea Technoservices Ltd.
:
Following the completion of the
Augustea Vessel Purchase Transaction, the Company appointed Augustea Technoservices Ltd., an entity affiliated with certain of the sellers of the corresponding transaction and specifically with one of the Company’s
directors, Mr. Zagari as further described in Note 1 above, as the technical manager of certain of its vessels. The management fees incurred since the completion of the Augustea Vessel Purchase Transaction, on August 3, 2018 and
until December 31, 2018 were $2,309 and are included in “Management fees” in the consolidated statement of operations. The outstanding balance due to Augustea Technoservices Ltd as of December 31, 2018 is $1,111 and is included in
Due to related parties in the consolidated balance sheet. In addition, pursuant to the post-closing adjustments set forth in the underlying purchase agreement, as of December 31, 2018 the Company had an outstanding receivable of
$867 from the sellers of the Augustea Vessels, which is included in Due from related parties in the consolidated balance sheet.
|
g)
|
Songa Shipmanagement Ltd
.:
Following the completion of the
Songa Vessel Purchase Transaction, the Company appointed Songa Shipmanagement Ltd, an entity affiliated with certain of the sellers of the corresponding transaction and specifically with one of the Company’s directors,
Mr.
Blystad
as further described in Note 1 above, as the technical manager of certain of its vessels. The
management fees incurred since the completion of the Songa Vessel Purchase Transaction, on July 7, 2018 and until December 31, 2018 were $376 and are included in “Management fees” in the consolidated statement of operations. The
outstanding balance due from Songa Shipmanagement Ltd as of December 31, 2018 is $305 and is included in Due from related parties in the consolidated balance sheet.
|
h)
|
Sydelle profit sharing agreement:
In April 2017, Sydelle
Marine Limited (“Sydelle”), a company controlled by members of the family of Mr. Petros Pappas, entered into a pooling agreement (the “Sydelle Agreement”) with the Company’s fully owned subsidiary Domus Shipping LLC, owner of the
vessel
Star Ariadne,
whereby the net revenues of
Star Ariadne
and the vessel owned by Sydelle will be equally split between the two companies. Pursuant to the Sydelle Agreement, the pool adjustment for the years ended December 31, 2017 and 2018 was ($329) and
($875)
, respectively, which is recorded in “Voyage revenues” in the consolidated statement of operations. As of
December 31, 2017 and 2018, the Company had an outstanding receivable amount of $44 and a payable amount of $302, respectively
,
in connection with the Sydelle Agreement. The pooling agreement was terminated, effective December 31, 2018.
|
STAR BULK CARRIERS CORP.
Notes to Consolidated Financial Statements
December 31, 2018
(Expressed in thousands of U.S. dollars except for share and per share data unless otherwise stated)
3.
|
Transactions with Related Parties - (continued):
|
i)
|
StarOcean Manning Philippines Inc.:
The Company has 25%
ownership interest in Starocean Manning Philippines, Inc. (“Starocean”), a company that is incorporated and registered with the Philippine Securities and Exchange Commission, which provides crewing agency services. The remaining 75%
interest is held by local entrepreneurs. This investment is accounted for as an equity method investment, which as of December 31, 2017 and 2018 is $21 and $50 and is included in “Other Current Assets” in the consolidated balance
sheets. As of December 31, 2017 and 2018 the Company has an outstanding receivable of $80 and
$65, respectively,
from
Starocean relating to advances paid for working capital purposes.
|
j)
|
Oceanbulk Container Carriers LLC.:
On June 28, 2018, the
Company completed the acquisition of three newbuilding Newcastlemax vessels (the “OCC Vessels”) from Oceanbulk Container Carriers LLC (“OCC”), an entity affiliated with Oaktree Capital Management L.P. and with family members of the
Company’s CEO, (the “OCC Vessel Acquisition”), for an aggregate consideration of 3,304,735 common shares.
|
The amounts shown in the consolidated balance sheets are analyzed as follows:
|
|
December 31,
2017
|
|
|
December 31,
2018
|
|
Lubricants
|
|
$
|
7,604
|
|
|
$
|
12,071
|
|
Bunkers
|
|
|
11,741
|
|
|
|
15,365
|
|
Total
|
|
$
|
19,345
|
|
|
$
|
27,436
|
|
|
|
|
|
|
|
|
|
|
5.
|
Vessels and other fixed assets, net:
|
The amounts in the consolidated balance sheets are analyzed as follows:
|
|
December 31,
2017
|
|
|
December 31,
2018
|
|
Cost
|
|
|
|
|
|
|
Vessels
|
|
$
|
2,184,841
|
|
|
$
|
3,147,072
|
|
Other fixed assets
|
|
|
2,015
|
|
|
|
2,201
|
|
Total cost
|
|
|
2,186,856
|
|
|
|
3,149,273
|
|
Accumulated depreciation
|
|
|
(411,775
|
)
|
|
|
(493,165
|
)
|
Vessels and other fixed assets, net
|
|
$
|
1,775,081
|
|
|
$
|
2,656,108
|
|
As of December 31, 2018, 75 of the Company’s 107 owned vessels, having a net carrying value of $1,649,497, were subject to first-priority
mortgages as collateral to their loan facilities (Note 8). In addition, all 31 of the Company’s bareboat chartered vessels, having a net carrying value of $992,777, were cross-collateralized under the Company’s bareboat lease agreements.
Vessels acquired / disposed of during the year ended December 31,
2016
Delivery of newbuilding vessels:
(i)
|
On January 6, 2016, the Company took delivery of the vessel
Star
Lutas
(ex-HN NE 197). The delivery installment of $19,770 was partially financed by $14,813 drawn down under the Sinosure Facility (Note 8).
|
STAR BULK CARRIERS CORP.
Notes to Consolidated Financial Statements
December 31, 2018
(Expressed in thousands of U.S. dollars except for share and per share data unless otherwise stated)
5.
|
Vessels and other fixed assets, net – (continued):
|
(ii)
|
On January 8, 2016, the Company took delivery of the vessel
Kennadi
(ex-HN 1080). The delivery installment of $21,229 was partially financed by $14,478 drawn down under the Sinosure Facility (Note 8).
|
(iii)
|
On February 26, 2016, the Company took delivery of the vessel
Star
Poseidon
(ex-HN NE 198). The delivery installment of $33,390 was partially financed by $23,400 drawn down under the DNB-SEB-CEXIM $227,500 Facility (Note 8).
|
(iv)
|
On March 2, 2016, the Company took delivery of the vessel
Mackenzie
(ex-HN 1081). The delivery installment of $18,221 was partially financed by $12,720 drawn down under the Sinosure Facility (Note 8).
|
(v)
|
On March 11, 2016 and June 6, 2016, the Company took delivery of the vessels
Star Marisa
(ex-HN 1359) and
Star Libra
(ex-HN 1372), which are each subject to a separate bareboat
charter agreement with CSSC (Hong Kong) Shipping Company Limited (“CSSC”). Each of these bareboat charter agreements is recognized in the Company’s consolidated financial statements as a fixed asset, as further described below.
|
Sale of operating vessels and newbuilding vessels upon their delivery from the shipyards in 2016:
In late 2015, the Company entered into various separate agreements with third parties to sell four of its operating vessels (
Indomitable, Magnum Opus, Tsu Ebisu and Deep Blue
) and five of its newbuilding vessels (
Behemoth, Bruno Marks, Jenmark, Star Aries and Star Taurus
) upon their delivery from the shipyards. In addition, in 2016, the Company entered into various separate agreements with third parties to sell
the operating vessels
Obelix, Star Michele, Star Monisha, Star Aline
and
Star Despoina
and the newbuilding vessel
Megalodon (ex-HN 5056)
upon its delivery from the shipyard.
All these vessels were delivered to their purchasers during the year ended December 31, 2016, and the Company recognized an aggregate net loss on sale of $15,248.
In connection with the sale of the vessels
Tsu
Ebisu, Deep Blue, Magnum Opus, Obelix, Indomitable, Star Michele, Star Monisha, Star Aline
and
Star Despoina
described above, during the
year ended December 31, 2016 the Company prepaid an aggregate amount of $130,062 outstanding under several loan agreements which had a mortgage over the sold vessels.
Vessels acquired / disposed of during the year ended December 31,
2017
Delivery of newbuilding and secondhand vessels:
(i)
|
On March 1, 2017 and March 28, 2017, the Company took delivery of the Newcastlemax vessels
Star Virgo
(ex-HN 1371) and
Star Ariadne
(ex-HN 1360), respectively, which, as further
described below, are financed under bareboat charters from CSSC and are recognized in the Company’s consolidated financial statements as fixed assets, as further described below.
|
(ii)
|
On March 2, 2017, the Company entered into agreements to acquire two modern Kamsarmax dry bulk vessels from a third party for $15,150 each. Each of the vessels
has a carrying capacity of 81,711 deadweight tons and was built with high specifications at Jiangsu New Yangzijiang in 2013.
Star Charis
was delivered to the Company on March 22, 2017, and
Star Suzanna
was delivered to the Company on May 15, 2017. On June 23, 2017, the
Company executed a loan agreement with ABN AMRO Bank N.V. for an aggregate principal amount of $30,844, $16,000 of which was drawn in June 2017, in order to partially finance the two vessels (Note 8).
|
(iii)
|
On June 2, 2017, the Company entered into an agreement to acquire
Diva
,
a Supramax vessel with carrying capacity of 56,582 deadweight tons, built at Jiangsu Hantong Ship Heavy Industry co Ltd China in 2011, for a purchase price of $10,500. The vessel was delivered to the Company on July 24, 2017 and
replaced the sold vessel
Star Eleonora
, as a pledged vessel under the DNB $120,000 Facility (Note 8).
|
STAR BULK CARRIERS CORP.
Notes to Consolidated Financial Statements
December 31, 2018
(Expressed in thousands of U.S. dollars except for share and per share data unless otherwise stated)
5.
|
Vessels and other fixed assets, net – (continued):
|
(iv)
|
On October 25, 2017, the Company entered into an agreement to acquire
Star Triumph
, a Capesize vessel with carrying capacity of 176,343 deadweight tons, built at Universal Shipbuilding Shipyard, Japan in 2004, for a purchase price of $14,200. The vessel was delivered to the Company on
December 8, 2017 and replaced the sold vessel
Star Vanessa
, as a pledged vessel under the Deutsche Bank AG $39,000 Facility (Note 8).
|
Sale of vessels:
On February 9, 2017, the Company entered into an agreement with a third party to sell the vessel
Star Eleonora
. The vessel was delivered to its new owner in March 2017. In addition, on September 15, 2017, the Company entered into an agreement with a third party to sell the vessel
Star Vanessa
. The vessel was delivered to its new owners on November 1, 2017. In connection with these sales, the Company recognized an aggregate
net gain on sale of $2,598.
Vessels acquired/delivered during the year ended December 31,
2018
Delivery of newbuilding and secondhand vessels:
(i)
|
On January 3, 2018, March 26, 2018 and May 14,
2018, the Company took delivery of the Newcastlemax vessels
Star Eleni
(ex HN 1342),
Star Magnanimus
(ex HN 1361) and
Star Leo
(ex HN 1343) which,
as further described below,
were
financed under bareboat leases with CSSC. These leases, among other things, require the Company to acquire each underlying vessel at a specified price upon the completion of its bareboat term and are therefore recognized
in
the Company’s consolidated financial statements as fixed assets, as further described below
.
|
(ii)
|
As further described in Note 1, the Company
acquired the 16 Augustea Vessels and the 15 Songa Vessels during the third quarter of 2018.
The Augustea Vessel Purchase Transaction and the Songa Vessel Purchase Transaction were accounted for as asset acquisitions,
in accordance with
ASU No. 2017-01,
Business Combinations (Topic 805): Clarifying the Definition of a Business
,
with
the cost of the vessels acquired totaling $452,661 and $327,680, respectively, being reflected, in “Vessels and other fixed assets, net” in the consolidated balance sheet. The cost of the shares issued as consideration in these
transactions was determined by reference to the Company’s closing share market price on the corresponding closing dates, which was $13.31 per share on July 6, 2018 and $14.00 per share on August 3, 2018.
|
(iii)
|
On October 10, 2018, the Company took delivery of
the Supramax vessel
Star Bright
as part of the
Step 1 Acquisition of the E.R. Vessels
further discussed in Note 1. The vessel was delivered to the Company in exchange for 291,300 shares and cash consideration of $9,167 with the total acquisition cost being $13,073. The cash consideration of the vessel acquisition was
partially financed through the second tranche of the ABN $115,000 Facility (Note 8).
The cost of the shares issued in connection with this acquisition was determined by reference to the Company’s closing share market price
on the delivery date, October 10, 2018, of $13.87 per share.
|
(iv)
|
On November 16, 2018, the Company took delivery
of the Ultramax vessel
Star Anna
, which has been acquired from a third party
for a purchase price of $19,800.
|
STAR BULK CARRIERS CORP.
Notes to Consolidated Financial Statements
December 31, 2018
(Expressed in thousands of U.S. dollars except for share and per share data unless otherwise stated)
5.
|
Vessels and other fixed assets, net - (continued):
|
Sale of vessels/ Vessel held for sale:
On November 20, 2018, the
Company entered into an agreement with a third party to sell the vessel
Star Delta
. The vessel was delivered to its new owner on January 8, 2019. The Company decided to sell the respective vessel as part of its strategic
goal to dispose the older vessels in its fleet. As of December 31, 2018, the vessel met the criteria for classification as held for sale and is therefore separately presented within “Vessels held for sale” in the consolidated balance sheet, at
agreed selling price less cost to sell.
In addition, as of December 31,
2018, as part of its strategic goal to dispose the older vessels in its fleet, the Company was in negotiations for the sale of the vessels
Star Kappa
and
Star Aurora.
The Company executed the respective sale
agreements entered with third parties in February 2019. The vessels were delivered to their new owners in March 2019. None of these two vessels met the criteria to be classified as held for sale as of December 31, 2018.
Financing through bareboat leases:
The Company is party to separate bareboat charter party contracts with affiliates of New Yangzijiang shipyard regarding the Ultramax vessels
Idee Fixe
,
Roberta
,
Laura
and
Kaley
. Pursuant to the terms of each bareboat charter,
the Company pays New Yangzijiang a pre-agreed daily bareboat charter hire rate on a 30-days advance basis. In addition, the Company has monthly purchase options to acquire each vessel at a pre-determined, amortizing-during-the-charter-period
price. On the eighth anniversary of the delivery of each vessel, the Company has the obligation to purchase the vessel at a purchase price of $6,000. Upon the earlier of the exercise of the purchase options or the expiration of the bareboat
charters, the Company will own the four vessels and
these are therefore recognized
in the Company’s consolidated financial
statements as fixed assets at historical cost. The Company took delivery of these four vessels during the year ended December 31, 2015.
As of December 31, 2018 the Company is also party to separate bareboat charter party contracts with affiliates of CSSC regarding the
Newcastlemax vessels
Star Marisa
,
Star Libra
,
Star Virgo
,
Star Ariadne
(Note 19), and
Star Magnanimus
. Pursuant to the terms of the bareboat charter, the Company is required to pay CSSC a daily bareboat charter hire rate payable
monthly plus a variable amount. In addition, the Company has monthly purchase options to acquire each vessel at a pre-determined, amortizing-during-the-charter-period price. On the tenth anniversary of the delivery of each vessel, the Company
has the obligation to purchase each vessel at a purchase price ranging from approximately $11,990 to $12,960. Upon the earlier of the exercise of the purchase options or the expiration of the bareboat charters, the Company will own the vessels
and
these
are
therefore recognized
in the Company’s consolidated financial statements as fixed assets at historical cost. As further described above, the Company took delivery of
Star Marisa and Star Libra
during the year ended December 31, 2016,
Star Virgo
and
Star Ariadne
during the year ended December 31, 2017, while
Star Magnanimus
was delivered in March 2018.
In order to finance the delivery installments of vessels
Star Eleni and Star Leo
, discussed above, on December 13, 2017 and May 2, 2018, respectively, the Company sold the vessels and simultaneously entered into two bareboat charter party contracts with an affiliate of CSSC to
bareboat charter each vessel for ten years. Pursuant to the terms of the bareboat charters, an amount of $30,000, for each vessel, , was financed by CSSC, to which the Company pays a daily bareboat charter hire rate payable monthly plus a
variable amount Under the terms of each bareboat charter, the Company has the option to purchase each vessel at any time after the vessel’s delivery, such option being exercisable on a monthly basis against a pre-determined,
amortizing-during-the-charter-period price, while it has an obligation to purchase each vessel at the expiration of the bareboat term at a purchase price of approximately $9,000. Upon the earlier of the exercise of the purchase option or the
expiration of each bareboat charter, the Company will own the vessels.
The vessels are therefore recognized
in the Company’s
consolidated financial statements as fixed assets. As further described above, the Company took delivery of the vessel
Star Eleni
(ex-HN 1342) on
January 3, 2018 and the vessel
Star Leo
(ex-HN 1343) on May 14, 2018. In September 2018, the Company exercised its purchase options and paid the
outstanding amount of $28,744 for
Star Eleni
and $29,368 for
Star Leo
under the respective lease agreements with CSSC, using proceeds from two sale and lease back agreements with China Merchants Bank Leasing (“CMBL”) described below.
STAR BULK CARRIERS CORP.
Notes to Consolidated Financial Statements
December 31, 2018
(Expressed in thousands of U.S. dollars except for share and per share data unless otherwise stated)
5.
|
Vessels and other fixed assets, net - (continued):
|
In order to finance the cash
portion of the
consideration related to the Songa Vessel Purchase Transaction
, discussed above, in July 2018, the Company
entered, for each of the subject vessels, into an agreement to sell each such vessel and simultaneously entered into a bareboat charter party contract with affiliates of CMBL to bareboat charter the vessel for five years upon delivery of the
vessel from Songa. CMBL agreed to provide an aggregate finance amount of $180,000, $19,600 of which still remains available to be drawn to finance the acquisition and installation of scrubber equipment for the respective vessels. Pursuant to
the terms of each bareboat charter, the Company pays CMBL a fixed bareboat charter hire rate in quarterly installments plus interest. Under the terms of the bareboat charter, the Company has options to purchase each vessel starting on the
second anniversary of such vessel’s delivery to the Company, at a pre-determined, amortizing purchase price, while it has an obligation to purchase each vessel at the expiration of the bareboat term at a purchase price ranging from $2,200 to
$8,400. Upon the earlier of the exercise of the purchase option or the expiration of
the bareboat charter, the Company will own the vessels. The vessels are therefore recognized in the Company’s consolidated financial statements as
fixed assets.
On September 27, 2018, the Company entered, into an agreement to sell the vessels
Star Eleni
and
Star Leo
and simultaneously entered into two bareboat charter party contracts with
affiliates of CMBL to bareboat charter each one of the respective vessels for five years. CMBL provided in aggregate a finance amount of $57,346. Pursuant to the terms of the bareboat charters, the Company pays CMBL a fixed bareboat
charter hire rate in quarterly installments plus interest. Under the terms of the bareboat charters, the Company has options to purchase
the vessels from year two onwards each at a pre-determined, amortizing purchase price, while it has an obligation to purchase the vessel at the expiration of the bareboat term at a purchase price of $18,231 for vessel
Star Eleni
and $20,000 for vessel
Star Leo
. Upon the earlier of the exercise of the purchase option or the expiration of the bareboat charters, the Company will own the vessels. Therefore the vessels are recognized
in
the Company’s consolidated financial statements as fixed assets.
Three of the Augustea Vessels
ABOY Sienna, ABOY
Laetitia
and
ABOY Karlie
, are also subject to bareboat charter party contracts with affiliates of CSSC, one of which matures in early
2026, while two mature in early 2027. Pursuant to the terms of the bareboat charters, the Company pays a daily bareboat charter hire rate payable monthly plus a variable amount. In addition, the Company has the option to purchase each vessel at a
pre-determined, amortizing price, while it has an obligation to purchase the vessels at the expiration of the bareboat term at a purchase price ranging between $12,000 and $12,960. Upon the earlier of the exercise of the purchase options or the
expiration of the bareboat charters, the Company will own the vessels. The vessels are
therefore recognized
in the Company’s
consolidated financial statements as fixed assets. In January 2019, the Company exercised its purchase options and paid all outstanding amounts under the lease agreements with CSSC for two of the three Augustea Vessels, using the proceeds from a
new financing agreement (Note 19).
In addition one of the Augustea Vessel,
ABY Asia
,
is also subject to a bareboat charter party contract with an affiliate of Mitsui & Co., Ltd., which matures in June 2019. The Company intends to refinance the outstanding amount under the respective lease agreement using proceeds from a new
financing agreement (Note 19).
STAR BULK CARRIERS CORP.
Notes to Consolidated Financial Statements
December 31, 2018
(Expressed in thousands of U.S. dollars except for share and per share data unless otherwise stated)
5.
|
Vessels and other fixed assets, net - (continued):
|
In December 2018, the Company sold and simultaneously
entered into a bareboat charter party contract with an affiliate of Kyowa Sansho to bareboat charter the vessel
Star Fighter
(Note 8) for ten years. Pursuant to the terms of the bareboat charter, the
Company pays a daily bareboat charter hire rate payable monthly plus a variable amount. Under the terms of the bareboat charter, the Company has an option to purchase the vessel starting on the third anniversary of the vessel’s delivery to the
Company at a pre-determined, amortizing purchases price, while it has an obligation to purchase the vessel at the expiration of the bareboat term at a purchase price of $2,450. Upon the earlier of the exercise of the purchase option or the
expiration of the bareboat charter, the Company will own the vessel. The vessel is therefore recognized
in the Company’s consolidated financial statements as a fixed asset.
Based on applicable accounting guidance, the Company determined that the bareboat charters described above should be classified as capital
leases or that the sale and lease back transactions are in substance merely financing arrangements due to the accompanying purchase obligations included in the Company’s bareboat agreements. As a result, in accordance with the applicable capital
lease accounting guidance, the Company has recorded a financial liability and a financial asset equal to the lower of the fair value of the asset at the inception of the lease and the present value of the minimum lease payments at the beginning
of the lease term. On the other hand, the Company continues to record on the balance sheet at historical cost all vessels sold and leased back for which the leasing arrangement includes a purchase obligation and as discussed above are in
substance merely financing arrangements and therefore not within the scope of sale and lease back accounting. The net book value of these vessels as of December 31, 2017 and 2018, for which the Company does not have ownership title but are
recognized on the balance sheet as discussed above, is reflected within “Vessels and other fixed assets, net” in the consolidated balance sheet. The amortization of these leased assets is included within “Depreciation expense” in the
consolidated statement of operations. The corresponding interest expense on the financial liability related to all aforementioned bareboat leases for the years December 31, 2016, 2017 and 2018 was $7,477, $12,590 and $26,825, respectively, and
is included within “Interest and finance costs” in the consolidated statement of operations. As of December 31, 2017 and 2018 the net book value of the bareboat chartered vessels was $325,301 and $992,777, respectively, with accumulated
amortization of $21,264 and $51,956, respectively.
STAR BULK CARRIERS CORP.
Notes to Consolidated Financial Statements
December 31, 2018
(Expressed in thousands of U.S. dollars except for share and per share data unless otherwise stated)
5.
|
Vessels and other fixed assets, net - (continued):
|
The payments required to be made after December 31, 2018, for the outstanding bareboat lease obligations recognized on the balance sheet as of
December 31, 2018, as described above, are as follows:
Twelve month periods ending
|
|
Amount
|
|
December 31, 2019
|
|
$
|
94,352
|
|
December 31, 2020
|
|
|
82,228
|
|
December 31, 2021
|
|
|
79,889
|
|
December 31, 2022
|
|
|
76,930
|
|
December 31, 2023
|
|
|
180,771
|
|
December 31, 2024 and thereafter
|
|
|
216,024
|
|
Total bareboat lease minimum payments
|
|
$
|
730,194
|
|
Unamortized debt issuance costs
|
|
|
2,975
|
|
Total bareboat lease minimum payments, net
|
|
$
|
727,219
|
|
Excluding bareboat lease interest
|
|
|
120,457
|
|
Lease commitments – short term
|
|
|
65,837
|
|
Lease commitments – long term
|
|
|
540,925
|
|
Impairment Analysis
In light of the continued economic downturn and the prevailing conditions in the shipping industry, as of December 31, 2016, 2017 and 2018, the
Company performed an impairment analysis for each of its operating vessels whose carrying value was above its market value and for each newbuilding whose cost, on a fully delivered basis, was above its market value.
In connection with the termination of two shipbuilding contracts and the sale of two operating vessels and by reference to their agreed sale
prices (Level 2), the Company recognized during the year ended December 31, 2016, an impairment loss of $18,537. In addition, based on the Company’s impairment analysis, using the same framework that was used in the previous years, which is
described in Note 2(n) and taking also into consideration the probability of vessel sales, the Company recognized an additional impairment loss of $10,684. The total impairment charge of $29,221, for the year ended December 31, 2016 is
separately reflected in the consolidated statement of operations (Note 18).
The Company’s annual impairment analysis for the year ended December 31, 2017 did not result in any impairment charges due to improvements in the
dry bulk market.
As part of the agreed and intended sales in 2018, as described above, and by reference to their agreed or negotiated sale prices (Level 2), the
Company recognized an impairment loss of $17,784, for the year ended December 31, 2018, which is separately reflected in the consolidated statement of operations (Note 18). Further to that, based on the Company’s impairment analysis framework
described in Note 2(n), taking also into consideration the probability of vessel sales, no further impairment loss was considered necessary for the year ended December 31, 2018.
STAR BULK CARRIERS CORP.
Notes to Consolidated Financial Statements
December 31, 2018
(Expressed in thousands of U.S. dollars except for share and per share data unless otherwise stated)
6.
|
Advances for vessels under construction and acquisition of vessels:
|
The amounts shown in the consolidated balance sheets are analyzed as follows:
|
|
December 31,
2017
|
|
|
December 31,
2018
|
|
|
|
|
|
|
|
|
Pre-delivery yard installments
|
|
$
|
30,402
|
|
|
$
|
8,700
|
|
Fair value of the share consideration for OCC Vessels
|
|
|
-
|
|
|
|
42,962
|
|
Bareboat capital leases – upfront hire
|
|
|
10,460
|
|
|
|
-
|
|
Capitalized interest
|
|
|
4,753
|
|
|
|
1,307
|
|
Other capitalized costs
|
|
|
2,959
|
|
|
|
2,034
|
|
Advances for secondhand vessels
|
|
|
-
|
|
|
|
4,897
|
|
Total
|
|
$
|
48,574
|
|
|
$
|
59,900
|
|
As further described in Note 1 with respect to the recently completed OCC Vessel Purchase Transaction, which was accounted for as an
acquisition of assets,
in accordance with
ASU No. 2017-01,
Business Combinations (Topic 805): Clarifying the Definition of a Business,
CSSC (Hong Kong) Shipping Company Limited has agreed to provide in aggregate a finance
amount of up to $104,400 to finance the remaining, at the time of the transaction, $103,844 construction cost for three OCC Vessels via a ten-year bareboat charter. Pursuant to the terms of each bareboat charter, CSSC will provide an amount of up
to $34,800 for each of the three newbuilding vessels, which will be applied to the third and the fourth (delivery) installment of the OCC Vessels. The Company will pay CSSC each month a daily bareboat charter hire rate consisting of a fixed and a
variable amount. Under the terms of the bareboat charter, the Company has the option to purchase each of the vessels at any time after each vessel’s delivery, such option being exercisable on a monthly basis against a pre-determined, amortizing
price while it has a respective obligation of purchasing each of the vessels at the expiration of each bareboat charter term at a purchase price of approximately $10,440. Upon the earlier of the exercise of the purchase option or the expiration
of each bareboat charter, the Company will acquire the vessels. During the fourth quarter of 2018, the Company paid the third installments for two of the OCC Vessels, of $4,350 each, which was financed through a pre-delivery financing from CSSC,
as discussed above. The total aggregate remaining contracted price for these three newbuilding vessels, as of December 31, 2018 plus agreed extras was $95,700 and will be financed through the CSSC financing arrangements described above.
In connection with the Step 1 Acquisition of the E.R. Vessels,
Star Marianne
and
Star Janni
, which were delivered to the Company in January 2019 as further described in Note 1,
the Company as of December 31, 2018, has paid an amount of $4,880 which is included in “Advances for vessels under construction and acquisition of vessels” in the consolidated balance sheet.
7.
|
Fair value of Above / Below Market Acquired Time Charters:
|
As part of the merger with Oceanbulk Shipping LLC (“Oceanbulk Shipping”) and Oceanbulk Carriers LLC (collectively, “Oceanbulk”) in July 2014 (the
“Merger”), a $1,967 intangible asset was recognized corresponding to a fair value adjustment for two favorable time charters under which Oceanbulk was the lessor at the time of acquisition, with respect to the vessels
Amami and Madredeus
. This intangible asset was fully amortized in 2016 and the amortization of $254 for the year ended December 31, 2016, is included under “Voyage
revenues” in the consolidated statements of operations.
STAR BULK CARRIERS CORP.
Notes to Consolidated Financial Statements
December 31, 2018
(Expressed in thousands of U.S. dollars except for share and per share data unless otherwise stated)
7.
|
Fair value of Above / Below Market Acquired Time Charters – (continued):
|
In addition, for two Augustea Vessels, which were transferred to the Company with time charter agreements attached, the Company recognized a liability of $5,373, since it determined that the respective charter rates were below market rates on the
date of the transfers (Level 2). For the year ended December 31, 2018, the amortization of fair value of the below market acquired time charters was $1,820 and is included under “Voyage revenues” in the consolidated statement of operations. The
accumulated amortization of these below market time charters as of December 31, 2018 was $1,820.
The unamortized balance of this intangible liability as of December 31, 2018 of $3,553 is expected to be amortized over the weighted average
period of 3.02 years as follows:
Twelve month periods ending
|
|
|
|
December 31, 2019
|
|
$
|
1,337
|
|
December 31, 2020
|
|
|
927
|
|
December 31, 2021
|
|
|
924
|
|
December 31, 2022
|
|
|
365
|
|
Total Fair value of below market time charters acquired
|
|
|
|
|
STAR BULK CARRIERS CORP.
Notes to Consolidated Financial Statements
December 31, 2018
(Expressed in thousands of U.S. dollars except for share and per share data unless otherwise stated)
New Financing Activities during the year ended December 31, 2018
On April 19, 2018, the Company entered into a loan agreement with the National Bank of Greece (the “NBG $30,000 Facility”),
for the refinancing of the then existing agreement with Commerzbank (the “Commerzbank $120,000 Facility”). On May 3, 2018 the Company drew $30,000 under the NBG $30,000 Facility, which was used along with cash on hand to fully repay the
outstanding amount of $34,726 under the Commerzbank $120,000 Facility. The NBG $30,000 Facility is secured by a first priority mortgage on the vessels
Star
Gamma
,
Star Delta
,
Star Epsilon
,
Star Theta, Star Iris
and
Star Aurora
. The NBG
$30,000 Facility matures on December 31, 2022 and is repayable in 19 equal quarterly installments of $950 each, commencing in August 2018, and a final balloon payment of $11,950, payable together with the last installment.
|
ii)
|
Credit Agricole $43,000 Facility:
|
On August 21, 2018, the Company entered into a loan agreement with Credit Agricole Corporate and Investment Bank (the
“Credit Agricole $43,000 Facility”) for the financing of an aggregate amount of $43,000, to refinance the outstanding amount of $44,100 under the then existing agreement with Credit Agricole (the “Credit Agricole $70,000 Facility”). The amount of
$43,000 was drawn on August 23, 2018, in two equal tranches of $21,500, each being repayable in 20 equal quarterly installments of $625 and a balloon payment of $9,000, payable together with the last installment. The facility is secured by the
vessels
Star Borealis
and
Star Polaris
.
|
iii)
|
HSBC $80,000 Facility:
|
On September 26, 2018, the Company entered into a loan agreement with HSBC Bank plc (the “HSBC $80,000 Facility”) to refinance the aggregate outstanding amount of $74,647 under the agreement with HSH Nordbank (the “HSH Nordbank $64,500 Facility”)
and with HSBC (the “HSBC $86,600 Facility”). The amount of $80,000 was drawn on September 28, 2018, and is repayable in 20 equal quarterly installments of $2,380 and a balloon payment of $32,400, payable together with the last installment. The
facility is secured by the vessels
Kymopolia
,
Mercurial
Virgo
,
Pendulum
,
Amami
,
Madredeus
,
Star Emily, Star Cosmo, Star Kappa, Star
Omicron
, and
Star Zeta
.
|
iv)
|
DNB $310,000 Facility:
|
On September 27, 2018, the Company entered into a loan agreement with DNB Bank ASA (the “DNB $310,000 Facility”), for an
amount of up to $310,000, available in two tranches. The first tranche of $240,000 was used to refinance the aggregate outstanding amount of $240,440 under the then existing facilities with (i) ABN AMRO (the “ABN $87,458 Facility”), (ii) DNB, SEB
and CEXIM (the “DNB-SEB-CEXIM $227,500 Facility”), (iii) DNB (the “DNB $120,000 Facility”), (iv) Deutsche Bank AG (the “Deutsche Bank AG $39,000 Facility”) and (v) ABN AMRO Bank N.V.(the “ABN AMRO Bank N.V $30,844 Facility”). The loan is secured
by a first priority mortgage on
Big Bang, Strange Attractor, Big Fish
,
Pantagruel
,
Gargantua
,
Goliath
,
Maharaj
,
Star Poseidon
,
Star Nasia
,
Diva
, Star Danai, Star Renee, Star Markella, Star Laura, Star Moira, Star Jennifer
,
Star Mariella, Star Helena
,
Star Maria
,
Star Sirius
,
Star Vega
,
Star Triumph
,
Star Charis
,
Star Suzanna
,
Star Angelina
and
Star Gwyneth
. The first tranche was drawn down on September 28,
2018 and is repayable in 20 equal quarterly installments of $8,696 and a balloon payment of $66,087 payable together with the last installment. The second tranche of $70,000 will be used to finance the acquisition and installation of scrubber
equipment for the mortgaged vessels under the DNB $310,000 Facility, is expected to be drawn in 2019, and will be repayable in 12 quarterly installments, each equal to $3,885 and the remaining balance will be repaid in the form of a balloon
installment at the final repayment date of the first tranche.
STAR BULK CARRIERS CORP.
Notes to Consolidated Financial Statements
December 31, 2018
(Expressed in thousands of U.S. dollars except for share and per share data unless otherwise stated)
8.
|
Long-term debt - (continued):
|
New Financing Activities during the year ended December 31, 2018 – (continued):
On September 28, 2018, the Company entered into a loan agreement with ING Bank N.V., London Branch (the “ING $47,800
Facility”) for an aggregate amount of $47,800, available in four tranches. The first two tranches of $45,000 in aggregate were used to refinance the outstanding amount of $51,876 under the then existing agreement with Deutsche Bank (the “Deutsche
Bank $85,000 Facility”) and were both drawn on October 2, 2018. The two equal tranches of $22,500 are each repayable in 28 equal quarterly installments of $469 and a balloon payment of $9,375 payable together with the last installment. The
remaining two tranches of $1,400 each will be used to finance the acquisition and installation of scrubber equipment for the two mortgaged vessels under the ING $47,800 Facility, are expected to be drawn in 2019, and will be repayable in 16
quarterly installments, of $88 each. The facility is secured by a first priority mortgage on
Peloreus
and
Leviathan
.
|
vi)
|
Citi $130,000 Facility:
|
On October 18, 2018, the Company entered into a loan agreement with Citibank N.A., London Branch (the “Citi $130,000
Facility”) for an amount of up to $130,000, to refinance the aggregate outstanding amount of $100,075 under the then existing agreement with Citibank N.A., London Branch (the “Citi Facility”) and the existing indebtedness of five of the Augustea
Vessels (as described below). The amount under Citi $130,000 Facility was available in two equal tranches of $65,000, which were drawn on October 23, 2018 and November 5, 2018. Each tranche is repayable in 20 equal quarterly installments of
$1,825, commencing in January 2019, and a balloon payment along with the last installment in an amount of $28,500. The Citi $130,000 Facility is secured by a first priority mortgage on
Star Pauline
,
Star Angie
,
Star Sophia
,
Star Georgia
,
Star Kamila
and
Star Nina
and five of the Augustea Vessels
ABML Eva
,
Paola
.,
Star Aphrodite
,
Star Lydia
and
Star
Nicole.
|
vii)
|
ABN $115,000 Facility:
|
On December 17, 2018, the Company entered into a loan agreement with ABN AMRO BANK (the “ABN $115,000 Facility”), for an
amount of up to $115,000 available in four tranches. The first and the second tranches of $69,525 and $7,900, respectively, were drawn on December 20, 2018. The first tranche was used to refinance the then existing indebtedness of four of the
Augustea Vessels
ABY Virginia, ABY Scarlett, ABY Jeannette
and
Star Audrey
(as described below) and the second was used to partially finance the acquisition cost of the
Star Bright
(Note 5). The first and the second tranche are repayable in 20 equal quarterly installments of $1,705 and $282 respectively, and balloon payments are due along with the last installment in an amount of $35,428 and $2,260, respectively. The
remaining two tranches of $17,875 each were drawn in January 2019 and were used to partially finance the acquisition cost of the
Star Marianne
and
Star Janni
. The loan is secured by a first priority mortgage on the four Augustea vessels and the Step 1 Vessels.
Assumed debt as part of the acquisition of Augustea Vessels:
As further described in Note 1, as part of the acquisition of the Augustea Vessels the Company assumed debt of approximately $308,279 including
capital lease obligations of $127,101 through bareboat leases for four of the Augustea vessels (Note 5). During the fourth quarter of 2018, the Company used proceeds from (i) the second tranche of Citi $130,000 Facility to refinance the aggregate
outstanding amount of $60,790 under the then existing agreement with Credit Suisse for five Augustea Vessels and (ii) the first tranche of ABN $115,000 Facility to refinance the aggregate outstanding amount of $69,907 under the then existing
agreement with ABN AMRO for four Augustea Vessels. The remaining three Augustea vessels are financed under the two loan agreements described below:
STAR BULK CARRIERS CORP.
Notes to Consolidated Financial Statements
December 31, 2018
(Expressed in thousands of U.S. dollars except for share and per share data unless otherwise stated)
8.
|
Long-term debt - (continued):
|
Assumed debt as part of the acquisition of Augustea Vessels – (continued):
BNP Paribas provided financing under secured term loan agreement in two tranches, for the vessels
Star Despoina
and
Pierra
(the “BNP Facility”). On August 3, 2018,
the date of the acquisition of the Augustea Vessels, the outstanding amount of the first and the second tranche was $15,914 and $14,977, respectively. The outstanding balance of the first tranche is repayable in 16 remaining quarterly
installments, the first 15 of which are in an amount of $500 and the sixteenth is in an amount of $8,414. The outstanding balance of the second tranche is repayable in 17 remaining quarterly installments, the first 16 of which of $500 and the
seventeenth is in an amount of $6,977 .The loan is secured by a first priority mortgage on the two Augustea vessels.
|
ii)
|
Bank of Tokyo Facility:
|
Bank of Tokyo provided financing under secured term loan agreement for the vessel
Star Monica
(the “Bank of Tokyo Facility”). On August 3, 2018, the date of the acquisition of the Augustea Vessels, the outstanding amount of the Bank of Tokyo Facility was
$16,000 and is repayable in 17 remaining quarterly installments, the first sixteen of which are in the amount of $346 and the seventeenth is in an amount of $10,464. The loan is secured by a first priority mortgage on the
Star Monica
.
Pre -
Existing Loan Facilities:
i)
|
HSH Nordbank AG $35,000 Facility:
|
On February 6, 2014, the Company entered into a new $35,000 secured term loan agreement (the “HSH Nordbank $35,000
Facility”) with HSH Nordbank AG. The borrowings under this new loan agreement were used to partially finance the acquisition cost of the vessels
Star
Challenger and Star Fighter.
The HSH Nordbank $35,000 Facility is secured by a first priority mortgage over the financed vessels. This facility matures in February 2021 and is repayable in 28 equal, consecutive, quarterly installments,
commencing in May 2014, of $312.5 and $291.7 for the
Star Challenger
and the
Star Fighter
, respectively, and a final balloon payment of $8,750 and $9,332.4, payable together with the last installments, for the
Star Challenger and the Star Fighter,
respectively.
Please see below for information regarding the related Supplemental Agreement executed pursuant to the Restructuring Letter
Agreements.
In December 2018, the Company refinanced the tranche relating to
Star Fighter
through proceeds from a sale and lease back transaction with Kyowa Sansho Co. Ltd. described in Note 5.
ii)
|
NIBC $32,000 Facility:
|
On November 7, 2014, the Company and NIBC Bank N.V. entered into an agreement with respect to a credit facility (the “NIBC
$32,000 Facility”) for the financing of an aggregate amount of up to $32,000, which is available in two tranches of $16,000, to partially finance the construction cost of two vessels,
Star Aquarius
and
Star Pisces
. An amount of $15,237 for each vessel was drawn in July and August
2015, concurrently with the delivery of the respective vessels to the Company. Each tranche is repayable in consecutive quarterly installments of $255, plus a balloon payment of $9,633 and $9,888, for each of the two vessels, both due in
November 2020. The NIBC $32,000 Facility is secured by a first priority cross collateralized mortgage over the financed vessels.
STAR BULK CARRIERS CORP.
Notes to Consolidated Financial Statements
December 31, 2018
(Expressed in thousands of U.S. dollars except for share and per share data unless otherwise stated)
8.
|
Long-term debt - (continued):
|
Please see below for information regarding the related Supplemental Agreement executed pursuant to the Restructuring Letter
Agreements.
Pre -
Existing Loan Facilities – (continued):
iii)
|
DVB $24,750 Facility:
|
On October 30, 2014, the Company and DVB Bank SE, Frankfurt entered into an agreement with respect to a credit facility (the
“DVB $24,750 Facility”), to partially finance the acquisition of 100% of the equity interests of Christine Shipco LLC, which is the owner of the vessel
Star
Martha
. On October 31, 2014, the Company drew $24,750 which is repayable in 24 consecutive, quarterly principal payments of $900 for each of the first four quarters and of $450 for each of the remaining 20 quarters, and a balloon payment
of $12,150 payable simultaneously with the last quarterly installment, which is due in October 2020. The DVB $24,750 Facility is secured by a first priority pledge of the membership interests of the Christine Shipco LLC.
Please see below for information regarding the related Supplemental Agreement executed pursuant to the Restructuring Letter
Agreements.
On February 11, 2015, the Company and Deutsche Bank (China) Co., Ltd. Beijing Branch and HSBC Bank plc entered into six
seperate agreements with respect to credit facilities (the “Sinosure Facility”) for the financing of an aggregate amount of $98,165 to partially finance the construction cost of the newbuilding vessels,
Honey Badger
,
Wolverine
,
Star Antares
,
Star Lutas
,
Kennadi
,
Mackenzie
, (the “Sinosure Financed Vessels”). The financing under the Sinosure Facility was available in
six separate tranches, one for each of the Sinosure Financed Vessels, and is credit insured (95%) by China Export & Credit Insurance Corporation. Each tranche matures twelve years after each drawdown date and is repayable in 48 equal and
consecutive quarterly installments. The Sinosure Facility is secured by a first priority cross collateralized mortgage over the Sinosure Financed Vessels. The vessels
Honey Badger
and
Wolverine
were delivered to the Company in February 2015. The vessel
Star Antares
was delivered to the Company in
October 2015
.
The vessels
Star Lutas and Kennadi
were
delivered to the Company in early January 2016 and the vessel
Mackenzie
was delivered to the Company in March 2016 (Note 5)
.
Please see below for information regarding the related Supplemental Agreement executed pursuant to the Restructuring Letter
Agreements.
v)
|
Issuance of 8.30% 2022 Notes:
On November 9, 2017 the Company
completed a public offering of $50,000 aggregate principal amount of senior unsecured notes due in 2022 (the “2022 Notes”). The 2022 Notes will mature on November 15, 2022. The 2022 Notes are not guaranteed by any of the Company’s
subsidiaries and bear interest at a rate of 8.30% per year, payable quarterly in arrears on the 15th day of February, May, August and November commencing on February 15, 2018. The Company may redeem the 2022 Notes at its option, in
whole or in part, at any time after May 15, 2019, at a redemption price equal to 100% of the principal amount of the 2022 Notes to be redeemed plus accrued and unpaid interest. Prior to May 15, 2019, the Company may redeem the 2022
Notes, in whole or in part, at a price equal to 100% of the principal amount plus a make-whole premium and accrued interest to the date of redemption. In addition, the Company may redeem the 2022 Notes in whole, but not in part, at
any time at its option, at a redemption price equal to 100% of the principal amount to be redeemed, plus accrued and unpaid interest to, but excluding, the redemption date, if certain events occur involving changes in taxation.
|
In December 2017 the Company used the proceeds from the sale of the 2022 Notes to redeem in full the $50,000 aggregate
principal amount of 8.00% Senior Notes due in 2019 (the “2019 Notes”) that had been issued in November 2014.
STAR BULK CARRIERS CORP.
Notes to Consolidated Financial Statements
December 31, 2018
(Expressed in thousands of U.S. dollars except for share and per share data unless otherwise stated)
8.
|
Long-term debt - (continued):
|
Supplemental Agreements executed during the year ended December 31, 2016
As of August 31, 2016, the Company entered into restructuring letter agreements (the “Restructuring Letter Agreements”) with all the banks and
export credit agencies providing its senior credit facilities to, among other things, (i) defer principal payments owed from June 1, 2016 through June 30, 2018 to the due date of the balloon installments of each facility (the “ Deferred
Amounts”), (ii) waive in full or substantially relax the financial covenants, effective during the period until and including December 31, 2019 and (iii) implement a cash sweep mechanism pursuant to which excess cash at consolidated level will be
applied towards the payment of Deferred Amounts, payable
pro rata
based on each loan facility’s and lease agreement’s outstanding Deferred
Amounts relative to the total Deferred Amounts at the end of each quarter. In exchange, the Company agreed to raise additional equity of not less than $50.0 million by September 30, 2016 (which condition was satisfied after the completion of the
Company’s equity offering in September 2016) and impose restrictions on paying dividends until all Deferred Amounts have been repaid (the “Restructuring”). In July 2017, the Company finalized the Restructuring through the execution of all
corresponding Supplemental Agreements (the “Supplemental Agreements”).
In accordance with the terms of the Supplemental Agreements, in 2017 the Company distributed pro rata to all parties under the Restructuring
(including the lease provider): an amount of $9,768. During the year ended December 31, 2018 the Company made the following payments: (i) in February 2018, an amount of $35,632, representing the excess cash resulting from the cash sweep mechanism
as of December 31, 2017, (ii) in May and July 2018 an amount of $30,000 and $22,723, respectively, representing the repayments that were in total at least equivalent to the amortization payments scheduled prior to the commencement of debt
amortization holidays for the first and second quarter 2018, as decided by the Company in light of its then improved performance and the improved dry bulk market in general and (iii) in October 2018, the Company repaid all outstanding Deferred
Amounts that had been accumulated from June 1, 2016 through September 30, 2018 and were still outstanding.
All of the Company’s aforementioned facilities are secured by a first-priority ship mortgage on the financed vessels under each facility and
general and specific assignments and guaranteed by Star Bulk Carriers Corp except for the Citi $130,000 Facility and BNP Facility which are also guaranteed by Star ABY LLC and the Bank of Tokyo Facility which is only guaranteed by Star ABY LLC.
Credit Facility and Senior Notes Covenants:
The Company’s outstanding credit facilities and senior notes generally contain customary affirmative and negative covenants, on a subsidiary
level, including limitations to:
|
·
|
pay dividends if there is an event of default under the Company’s credit facilities;
|
|
·
|
incur additional indebtedness, including the issuance of guarantees, refinance or prepay any indebtedness, unless certain conditions exist;
|
|
·
|
create liens on Company’s assets, unless otherwise permitted under Company’s credit facilities;
|
|
·
|
change the flag, class or management of Company’s vessels or terminate or materially amend the management agreement relating to each vessel;
|
|
·
|
acquire new or sell vessels, unless certain conditions exist;
|
|
·
|
merge or consolidate with, or transfer all or substantially all Company’s assets to, another person; or
|
STAR BULK CARRIERS CORP.
Notes to Consolidated Financial Statements
December 31, 2018
(Expressed in thousands of U.S. dollars except for share and per share data unless otherwise stated)
8.
|
Long-term debt - (continued):
|
|
·
|
enter into a new line of business.
|
Furthermore, the Company’s credit facilities and senior notes contain financial covenants requiring the Company to maintain various financial
ratios, including:
|
·
|
a minimum percentage of aggregate vessel value to secured loans (security cover ratio or “SCR”);
|
|
·
|
a maximum ratio of total liabilities to market value adjusted total assets;
|
|
·
|
a minimum EBITDA to interest coverage ratio;
|
|
·
|
a minimum liquidity; and
|
|
·
|
a minimum market value adjusted net worth.
|
As of December 31, 2017 and 2018, the Company was required to maintain minimum liquidity, not legally restricted, of $51,359 and $53,500,
respectively, which is included within “Cash and cash equivalents” in the balance sheets. In addition, as of December 31, 2017 and 2018, the Company was required to maintain minimum liquidity, legally restricted, of $15,589 and $8,956,
respectively, which is included within “Restricted cash” current and non-current, in the consolidated balance sheets.
As of December 31, 2018, the Company was in compliance with the applicable financial and other covenants contained in its debt agreements,
including the 2022 Notes.
The weighted average interest rate (including the margin) related to the Company’s existing debt, 2019 and 2022 Notes and bareboat leases as of
December 31, 2016, 2017 and 2018 was 4.13%, 4.72% and 5.59% respectively. The commitment fees incurred during the years ended December 31, 2016, 2017 and 2018, with regards to the Company’s unused credit facilities were $472, $6 and $1,049,
respectively.
The principal payments required to be made after December 31, 2018, are as follows:
Twelve month periods ending
|
|
Amount
|
|
December 31, 2019
|
|
$
|
101,007
|
|
December 31, 2020
|
|
|
129,395
|
|
December 31, 2021
|
|
|
101,380
|
|
December 31, 2022
|
|
|
115,544
|
|
December 31, 2023
|
|
|
293,802
|
|
December 31, 2024 and thereafter
|
|
|
56,695
|
|
Total Long term debt
|
|
$
|
797,823
|
|
Unamortized debt issuance costs
|
|
|
10,997
|
|
Total Long term debt, net
|
|
$
|
786,826
|
|
Current portion of long term debt
|
|
|
101,007
|
|
Long term debt, net
|
|
|
685,819
|
|
The current portion of long term debt as of December 31, 2018, includes the scheduled loan repayments for the twelve month period ended
December 31, 2018 according to the outstanding loan agreements adjusted also in connection with the new refinancing agreements as described in Note 19 and an amount of $3,537 prepaid in January 2019 under NBG $30,000 Facility in connection with
the sale of the
Star Delta (Note 5).
STAR BULK CARRIERS CORP.
Notes to Consolidated Financial Statements
December 31, 2018
(Expressed in thousands of U.S. dollars except for share and per share data unless otherwise stated)
8.
|
Long-term debt - (continued):
|
The 2022 Notes mature in November, 2022 and are presented in the consolidated balance sheets as of December 31, 2018 net of unamortized debt
issuance costs of $1,590.
All of the Company’s bank loans and applicable bareboat leases bear interest at LIBOR plus a margin. The amounts of “Interest and finance costs”
included in the consolidated statements of operations are analyzed as follows:
|
|
2016
|
|
|
2017
|
|
|
2018
|
|
Interest on long term debt and bareboat leases
|
|
$
|
40,449
|
|
|
$
|
48,814
|
|
|
$
|
69,977
|
|
Less: Interest capitalized
|
|
|
(3,940
|
)
|
|
|
(2,423
|
)
|
|
|
(1,753
|
)
|
Reclassification adjustments of interest rate swap loss/(gain) transferred to Interest and finance costs
from Other Comprehensive Income (Note 18)
|
|
|
1,252
|
|
|
|
852
|
|
|
|
(3
|
)
|
Amortization of debt issuance costs
|
|
|
2,855
|
|
|
|
2,660
|
|
|
|
3,253
|
|
Other bank and finance charges
|
|
|
601
|
|
|
|
555
|
|
|
|
2,241
|
|
Interest and finance costs
|
|
$
|
41,217
|
|
|
$
|
50,458
|
|
|
$
|
73,715
|
|
During the years ended December 31, 2016, 2017 and 2018, in connection with the prepayments described above following (i) the sale of mortgaged
vessels, (ii) the cancellation of certain loan commitments, (iii) the termination of two newbuilding contracts, (iv) the refinancing agreements entered into in 2018 and (v) the redemption of the 2019 Notes, as applicable, $2,375, $1,257 and
$2,383 of unamortized debt issuance costs were written off and included under “Loss on debt extinguishment” in the consolidated statements of operations.
9.
|
Preferred, Common Shares and Additional paid in capital:
|
Preferred Shares:
Star Bulk is authorized to
issue up to 25,000,000 preferred shares, $0.01 par value with such designations, as voting, and other rights and preferences, as determined by the Board of Directors. As of December 31, 2017 and 2018 the Company had not issued any preferred
shares.
Common Shares:
As per the Company’s Amended and
Restated Articles of Incorporation, Star Bulk is authorized to issue 300,000,000 registered common shares, par value $0.01 per share.
Each outstanding share of the Company’s common shares entitles the holder to one vote on all matters submitted to a vote of shareholders. Subject
to preferences that may be applicable to any outstanding preferred shares, holders of common shares are entitled to ratably receive all dividends, if any, declared by the Company’s Board of Directors out of funds legally available for dividends.
Holders of common shares do not have conversion, redemption or preemptive rights to subscribe to any of the Company’s securities. All outstanding common shares are fully paid and non-assessable. The rights, preferences and privileges of holders
of common shares are subject to the rights of the holders of any preferred shares which the Company may issue in the future.
On April 13, 2016, the Company issued 131,545 common shares (adjusted for the 2016 Reverse Split) in connection with its 2015 Equity Incentive
Plan and 3,000 common shares (adjusted for the 2016 Reverse Split) to two of the Company’s directors, which had been granted and vested on July 11, 2014 (as described in Note 12). In addition, during the fourth quarter of 2016, the Company
issued 558,050 common shares in connection with its 2016 Plan.
STAR BULK CARRIERS CORP.
Notes to Consolidated Financial Statements
December 31, 2018
(Expressed in thousands of U.S. dollars except for share and per share data unless otherwise stated)
9.
|
Preferred, Common Shares and Additional paid in capital – (continued):
|
On September 20, 2016, the Company completed a primary underwritten public offering of 11,976,745 of its common shares, at a price of $4.30 per
share. The aggregate proceeds to the Company, net of underwriters’ commissions and offering expenses, were $50,278.
On February 2, 2017, the Company
completed a private placement of 6,310,272 common shares, at a price of $8.154 per share (the “February 2017 Private Placement”), raised for general corporate purposes. The aggregate proceeds to the Company, net of private placement agent’s
fees and expenses, were approximately $50,427. One of the Company’s significant shareholders, Oaktree and its affiliates, purchased a total of 3,244,292 of the common shares in the February 2017 Private Placement.
During the year ended December 31, 2017 the Company issued 1,220,825 common shares to the Company’s directors and employees in connection with its
equity incentive plans.
On June 29, 2018, a fund affiliated
with Oaktree Capital Management, L.P. completed an underwritten secondary sale of 5,000,000 common shares of the Company at a price of $13.10 per share. The Company did not sell any common shares and did not receive any proceeds as a result of
this secondary sale. In addition, in September 2018, the Company filed a new shelf registration statement, which included all selling shareholders that had registration rights. In connection with these transactions the Company incurred and
accrued aggregate offering expenses of $2,032, which are separately presented in the
consolidated statement of shareholders’ equity for the year ended December 31, 2018
.
As further discussed in Note 1, during the year ended December 31, 2018, the Company issued 3,304,735 common shares, 13,725,000 common shares and
10,331,313 common shares in connection with the
OCC Vessel Purchase Transaction, Songa Vessel Purchase Transaction and Augustea Vessel
Purchase Transaction, respectively. In addition, pursuant to the post-closing adjustments set forth in the underlying agreement, in October 2018, the Company cancelled 53,978 common shares out of those issued as part of the consideration for
the Augustea Vessel Purchase Transaction, reducing the total shares consideration issued in connection with the Augustea Vessel Purchase Transaction to 10,277,335. Lastly, in October 2018 the Company issued 291,300 common shares in connection
with the acquisition of the
Star Bright (Note 5)
.
In addition during the year ended December 31, 2018 the Company issued 868,975 common shares to the Company’s directors and employees in
connection with its equity incentive plans.
On November 29, 2018, the Company announced a share repurchase program to purchase up to an aggregate of $50.0 million of the Company’s common
shares. The timing and amount of any repurchases will be in the sole discretion of the Company’s management team, and will depend on legal requirements, market conditions, share price, alternative uses of capital and other factors. The Company is
not obligated under the terms of the program to repurchase any of its common shares. The repurchase program has no expiration date and may be suspended or terminated by the Company at any time without prior notice. Common shares repurchases as
part of this program will be cancelled by the Company. Pursuant to this share repurchase program, during the fourth quarter of 2018, the Company repurchased 341,363 of its common shares in open market transactions at an average price of $9.17 for
an aggregate consideration of $3.1 million. All the aforementioned repurchased shares were canceled and removed from the Company’s share capital on January 3, 2019.
10.
|
Other operational gain:
|
For the year ended December 31, 2016, other operational gain of $1,565, was recognized, mainly consisting of gain from hull and machinery
insurance claims. For the year ended December 31, 2017, other operational gain of $2,918 was recognized mainly consisting of an amount of $2,139, resulting from a cash settlement of a commercial dispute and gain from hull and machinery insurance
claims.
STAR BULK CARRIERS CORP.
Notes to Consolidated Financial Statements
December 31, 2018
(Expressed in thousands of U.S. dollars except for share and per share data unless otherwise stated)
As of January 1, 2015, the Company engaged Ship Procurement Services S.A. (“SPS”), a third party company, to provide to its fleet certain
procurement services. During the year ended December 2018, the Company entered into the following management agreements with: i) Augustea Technoservices Ltd and Songa Shipmanegement Ltd to provide technical management to certain of its vessels,
following the completion of the Augustea Vessel Purchase Transaction and Songa Vessel Purchase Transaction (Note 3) and ii) Equinox Maritime Ltd, Zeaborn GmbH & Co. KG and Technomar Shipping Inc to provide certain management services to
certain of its vessels. Total management fees under the aforementioned management agreements in effect for the years ended December 31, 2016, 2017 and 2018, were $7,604, $7,543 and $11,321, respectively, and are included in “Management fees” in
the consolidated statement of operations.
12.
|
Equity Incentive Plans:
|
On April 13, 2015, the Company’s Board of Directors adopted the 2015 Equity Incentive Plan (the “2015 Plan”) and reserved for issuance 280,000
common shares thereunder. The terms and conditions of the 2015 Plan are substantially similar to the terms and conditions of Company’s previous equity incentive plans. On the same date, the Company granted 135,230 restricted common shares to
certain directors, former directors, officers and employees, which vested on April 13, 2016. The fair value of each restricted share was $17.75, which was determined by reference to the closing price of the Company’s common shares on the grant
date.
In addition, on the same date, the Board of Directors granted share purchase options of up to 104,250 common shares to certain executive officers,
at an option exercise price of $27.50 per share. These options are exercisable in whole or in part between the third and the fifth anniversary of the grant date, subject to the respective individuals remaining employed by the Company at the time
the options are exercised.
The fair value of all share option awards was calculated based on the modified Black-Scholes method. A description of the significant assumptions
used to estimate the fair value of the share option awards is set out below:
|
·
|
Option type:
Bermudan call option
|
|
·
|
Grant Date:
April 13, 2015
|
|
·
|
Expected term:
Given the absence at the grant date of
expected dividend payments (described below), the Company expected that it is optimal for the holders of the granted options to avoid early exercise of the options. As a result, the Company assumed that the expected term of the
options is their contractual term (i.e. five years from the grant date).
|
|
·
|
Expected volatility:
The Company used the historical
volatility of the common shares to estimate the volatility of the price of the shares underlying the share option awards. The final expected volatility estimate, which was based on historical volatility for the two years preceding
the grant date, was 59.274%.
|
|
·
|
Expected dividends:
The Company does not currently pay any
dividends to its shareholders, and the Company’s loan agreements contain restrictions and limitations on dividend payments. Based on the foregoing, the outstanding newbuilding orderbook of the Company and the market conditions
prevailing in the dry bulk industry at the time of valuation, the Company’s management determined that for purposes of this calculation the Company is not expected to pay dividends before the expiration of the share options.
|
|
·
|
Dilution adjustment:
Compared to the number of common
shares outstanding, the Company’s management considers the overall number of shares covered by the options as immaterial, and no dilution adjustment was incorporated in the valuation model.
|
STAR BULK CARRIERS CORP.
Notes to Consolidated Financial Statements
December 31, 2018
(Expressed in thousands of U.S. dollars except for share and per share data unless otherwise stated)
12.
|
Equity Incentive Plans - (continued):
|
|
·
|
Risk-free rate:
The Company has elected to employ the
risk-free yield-to-maturity rate to match the expected term of the options (which as explained above is expected to be five years from the grant date). As of the grant date, the yield-to-maturity rate of five-year U.S. Government
bonds was approximately 1.3%.
|
On May 9, 2016, the Company’s Board of Directors adopted the 2016 Equity Incentive Plan (the “2016 Plan”) and reserved for issuance 940,000 common
shares thereunder. The terms and conditions of the 2016 Plan are substantially similar to the terms and conditions of Company’s previous equity incentive plans. On the same date, 690,000 restricted common shares were granted to certain
directors, officers, employees of the Company, 650,000 of which vested in July, 2016 while the remaining 40,000 vested on March 1, 2018. The fair value of each share was $3.75, based on the closing price of the Company’s common shares on the
grant date.
On September 12, 2016, the Company’s Board of Directors granted 345,000 restricted common shares to certain of its directors and officers, for
their participation in the negotiations with the Company’s lenders related to the Restructuring. Out of these shares, 305,000 vested on March 30, 2017, and the remaining 40,000 vested on March 1, 2018. The fair value of each share was $4.94,
based on the closing price of the Company’s common shares on the grant date.
On February 22, 2017, the Company’s Board of Directors adopted the 2017 Equity Incentive Plan (the “2017 Plan”) and reserved for issuance 950,000
common shares thereunder. The terms and conditions of the 2017 Plan are substantially similar to the terms and conditions of the Company’s previous equity incentive plans. On the same date, 944,000 restricted common shares were granted to
certain of our directors, officers and employees, of which 744,000 shares vested on August 22, 2017. The remaining 200,000 restricted common shares vested on August 22, 2018. The fair value of each share was $9.59, based on the closing price of
the Company’s common shares on the grant date.
On February 27, 2018, the Company’s Board of Directors adopted the 2018 Equity Incentive Plan (the “2018 Plan”) and reserved for issuance
700,000 common shares thereunder. The terms and conditions of the 2018 Plan are substantially similar to the terms and conditions of the Company’s previous equity incentive plans. On the same date, 396,500 restricted common shares were granted to
certain of the Company’s directors and officers of which 253,500 restricted common shares vested on August 27, 2018, 71,500 restricted common shares vested on February 27, 2019 and the remaining 71,500 restricted common shares vest on February
27, 2021. The fair value of each share was $12.49, based on the closing price of the Company’s common shares on February 27, 2018. In addition, on April 9, 2018, 276,000 restricted common shares were granted to the Company’s employees, all of
which vested on August 27, 2018. The fair value of each share was $10.51, based on the closing price of the Company’s common shares on April 9, 2018.
All non-vested shares and options vest according to the terms and conditions of the applicable award agreements. The grantee does not have the
right to vote the non-vested shares or exercise any right as a shareholder of the non-vested shares, although the issued and non-vested shares pay dividends as declared. The dividends with respect to these shares are forfeitable if the service
conditions are not fulfilled. Share options have no voting or other shareholder rights. For the years ended December 31, 2016, 2017 and 2018, the Company paid no dividends on non-vested shares.
The Company expects that there will be no forfeitures of non-vested shares or options. The shares which are issued in accordance with the terms
of the Company’s equity incentive plans or awards remain restricted until they vest. For the years ended December 31, 2016, 2017 and 2018, the share based compensation cost was $4,166, $9,267 and $8,072, respectively, and is included under
“General and administrative expenses” in the consolidated statements of operations.
STAR BULK CARRIERS CORP.
Notes to Consolidated Financial Statements
December 31, 2018
(Expressed in thousands of U.S. dollars except for share and per share data unless otherwise stated)
12.
|
Equity Incentive Plans - (continued):
|
A summary of the status of the Company’s non-vested restricted shares as of December 31, 2016, 2017 and 2018, and the movement during these years,
is presented below:
|
|
Number of
shares
|
|
|
Weighted Average
Grant Date
Fair Value
|
|
Unvested as at January 1, 2016
|
|
|
135,230
|
|
|
$
|
17.75
|
|
Granted
|
|
|
1,035,000
|
|
|
|
4.15
|
|
Cancelled
|
|
|
(1,685
|
)
|
|
|
17.75
|
|
Vested
|
|
|
(783,545
|
)
|
|
|
6.14
|
|
Unvested as at December 31, 2016
|
|
|
385,000
|
|
|
$
|
4.82
|
|
|
|
|
|
|
|
|
|
|
Unvested as at January 1, 2017
|
|
|
385,000
|
|
|
$
|
4.82
|
|
Granted
|
|
|
944,000
|
|
|
|
9.59
|
|
Vested
|
|
|
(1,049,000
|
)
|
|
|
8.24
|
|
Unvested as at December 31, 2017
|
|
|
280,000
|
|
|
$
|
8.09
|
|
|
|
|
|
|
|
|
|
|
Unvested as at January 1, 2018
|
|
|
280,000
|
|
|
$
|
8.09
|
|
Granted
|
|
|
672,500
|
|
|
|
11.68
|
|
Vested
|
|
|
(809,500
|
)
|
|
|
10.29
|
|
Unvested as at December 31, 2018
|
|
|
143,000
|
|
|
$
|
12.49
|
|
A summary of the status of the Company’s non-vested share options as of each of the years ended December 31, 2016, 2017 and 2018 is presented
below. There has been no movement during each year:
Options
|
|
Number of
options
|
|
|
Weighted average
exercise price
|
|
|
Weighted Average
Grant Date Fair Value
|
|
Outstanding at beginning of period
|
|
|
104,250
|
|
|
$
|
27.5
|
|
|
$
|
7.0605
|
|
Granted
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
Vested
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
Outstanding at end of period
|
|
|
104,250
|
|
|
$
|
27.5
|
|
|
$
|
7.0605
|
|
The estimated compensation cost relating to non-vested share options and restricted share awards not yet recognized was $189 and $784,
respectively, as of December 31, 2018 and is expected to be recognized over the weighted average period of 1.28 years and 1.8 years, respectively. The total fair value of shares vested during the years ended December 31, 2016, 2017 and 2018 was
$3,580, $12,023 and $10,745 respectively.
13.
|
Earnings / (Loss) per share:
|
All common shares issued (including the restricted shares issued under the Company’s equity incentive plan) have equal rights to vote and
participate in dividends. The restricted shares issued under the Company’s equity incentive plans are subject to forfeiture provisions set forth in the applicable award agreement. The calculation of basic earnings per share does not consider
the non-vested shares as outstanding until the time-based vesting restriction has lapsed. For the purpose of calculating diluted earnings/ (loss) per share, the weighted average number of diluted shares outstanding includes the incremental
shares assumed issued, determined in accordance with the treasury stock method. For the years ended December 31, 2016 and 2017, during which the Company incurred losses, the effect of 385,000 and 280,000 non-vested shares, respectively, as well
as the effect of 104,250 non vested share options, would be anti-dilutive, and “Basic loss per share” equals “Diluted loss per share.” Diluted earnings per share for the year ended December 31, 2018 does not include the effect of 104,250
non-vested share options outstanding as of that date, as their effect was anti-dilutive.
STAR BULK CARRIERS CORP.
Notes to Consolidated Financial Statements
December 31, 2018
(Expressed in thousands of U.S. dollars except for share and per share data unless otherwise stated)
13.
|
Earnings / (Loss) per share
- (continued)
:
|
The Company calculates basic and diluted loss per share as follows:
|
|
2016
|
|
|
2017
|
|
|
2018
|
|
Income / (Loss) :
|
|
|
|
|
|
|
|
|
|
Net income / (loss)
|
|
$
|
(154,228
|
)
|
|
$
|
(9,771
|
)
|
|
$
|
58,397
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic earnings / (loss) per share:
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted average common shares outstanding, basic
|
|
|
47,574,454
|
|
|
|
63,034,394
|
|
|
|
77,061,227
|
|
Basic earnings / (loss) per share
|
|
$
|
(3.24
|
)
|
|
$
|
(0.16
|
)
|
|
$
|
0.76
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Effect of dilutive securities:
|
|
|
|
|
|
|
|
|
|
|
|
|
Dillutive effect of non vested shares
|
|
|
-
|
|
|
|
-
|
|
|
|
264,884
|
|
Weighted average common shares outstanding, diluted
|
|
|
47,574,454
|
|
|
|
63,034,394
|
|
|
|
77,326,111
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Diluted earnings / (loss) per share
|
|
$
|
(3.24
|
)
|
|
$
|
(0.16
|
)
|
|
$
|
0.76
|
|
STAR BULK CARRIERS CORP.
Notes to Consolidated Financial Statements
December 31, 2018
(Expressed in thousands of U.S. dollars except for share and per share data unless otherwise stated)
The amounts shown in the consolidated balance sheets are analyzed as follows:
|
|
2017
|
|
|
2018
|
|
Audit fees
|
|
$
|
243
|
|
|
$
|
295
|
|
Legal fees
|
|
|
59
|
|
|
|
34
|
|
Other professional fees
|
|
|
86
|
|
|
|
1,502
|
|
Vessel Operating and voyage expenses
|
|
|
5,608
|
|
|
|
6,514
|
|
Loan interest and financing fees
|
|
|
4,287
|
|
|
|
8,277
|
|
Income tax
|
|
|
238
|
|
|
|
232
|
|
Total Accrued Liabilities
|
|
$
|
10,521
|
|
|
$
|
16,854
|
|
The Company is in the business of international shipping and is not subject to a material amount of income taxes. The Company is subjected to
tonnage taxes in certain jurisdictions as described below and includes these taxes under “Vessel Operating Expenses” in the consolidated statements of operations.
The Company does receive dividends from its operating subsidiaries and these are not subject to withholding taxes nor are these dividends taxed at
the Company upon receipt. Thus, the Company does not record deferred tax liabilities for any unremitted earnings as there are no taxes associated with the remittances.
The Company is subjected to tax audits in the jurisdictions it operates in. There have been no adjustments assessed to the Company in the past
and the Company believes there are no uncertain tax positions to consider.
a)
|
Taxation on Marshall Islands Registered Companies and tonnage tax
|
Under the laws of the countries of the shipowning companies’ incorporation and/or vessels’ registration, the shipowning
companies are not subject to tax on international shipping income. However, they are subject to registration and tonnage taxes. In addition, each foreign flagged vessel managed in Greece by Greek or foreign ship management companies is subject
to Greek tonnage tax, under the laws of the Hellenic Republic. The technical managers of the Company’s vessels, which are established in Greece under Greek Law 89/67, are responsible for the filing and payment of the respective tonnage tax on
behalf the Company. Furthermore, under the New Tonnage Tax System (“TTS”) for Cypriot merchant shipping, qualifying ship managers who opted and are accepted to be taxed under the TTS are subject to an annual tax referred to as tonnage tax, which
is calculated on the basis of the net tonnage of the qualifying ships they manage. The technical managers of the Company’s vessels, which are established and operate in Cyprus, are responsible for the filing and payment of the respective tonnage
tax. These taxes for 2016, 2017 and 2018 were $2,438, $2,565 and $1,506 respectively, and have been included under “Vessel operating expenses” in the consolidated statements of operations.
b)
|
Taxation on US Source Income - Shipping Income
|
Under the United States Internal Revenue Code of 1986, as amended (the "Code"), the U.S. source gross transportation income of
a ship-owning or chartering corporation, such as the Company, is subject to a 4% U.S. federal income tax without allowance for deduction, unless that corporation qualifies for exemption from tax under Section 883 of the Code and the Treasury
Regulations promulgated thereunder. U.S. source gross transportation income consists of 50% of the gross shipping income that is attributable to transportation that begins or ends, but that does not both begin and end, in the United States.
STAR BULK CARRIERS CORP.
Notes to Consolidated Financial Statements
December 31, 2018
(Expressed in thousands of U.S. dollars except for share and per share data unless otherwise stated)
15.
|
Income taxes - (continued):
|
Under IRS regulations, a Company’s shares will be considered to be regularly traded on an established securities market if (i)
one or more classes of its shares representing 50% or more of its outstanding shares, by voting power of all classes of shares of the corporation entitled to vote and of the total value of the shares of the corporation, are listed on the market
and (ii) (A) such class of share is traded on the market, other than in minimal quantities, on at least 60 days during the taxable year or one sixth of the days in a short taxable year; and (B) the aggregate number of shares of such class of
share traded on such market during the taxable year must be at least 10% of the average number of shares of such class of share outstanding during such year or as appropriately adjusted in the case of a short taxable year. Notwithstanding the
foregoing, the treasury regulations provide, in pertinent part, that a class of the Company’s shares will not be considered to be “regularly traded” on an established securities market for any taxable year in which 50% or more of the vote and
value of the outstanding shares of such class are owned, actually or constructively under specified share attribution rules, on more than half the days during the taxable year by persons who each own 5% or more of the vote and value of such class
of the Company’s outstanding shares, (“5% Override Rule”).
For the taxable years 2016 and 2017 the Company believes that it was not exempt from U.S. federal income tax of 4% on U.S.
source shipping income, as it believes that it does not satisfy the Publicly Traded Test for these years because it is subject to the 5% Override Rule. As a result, tax charge of approximately $267 and $202 was recognized in the consolidated
statement of operations for the year ended December 31, 2016 and 2017, respectively, under “Income taxes”.
For the taxable year 2018 the Company believes that it was exempt from U.S. federal income tax of 4% on U.S. source shipping
income, as it believes that it satisfies the Publicly Traded Test for this year because it is not subject to the 5% Override Rule.
c)
|
Taxation on Maltese and Swiss Registered Companies
|
In addition to the tax consequences described above, the Company may be subject to tax in one or more other jurisdictions,
including Malta and Switzerland, where the Company conducts activities. The Company believes that its tax exposure for years ended December 31, 2016, 2017 and 2018 in Malta and Switzerland is immaterial.
16.
|
Commitments and Contingencies:
|
Various claims, suits, and complaints, including those involving government regulations and product liability, arise in the
ordinary course of the shipping business. In addition, losses may arise from disputes with charterers, agents, insurance and other claims with suppliers relating to the operations of the Company’s vessels. The Company’s vessels are covered for
pollution of $1 billion per vessel per incident, by the Protection and Indemnity (P&I) Association in which the Company’s vessels are entered. The Company’s vessels are subject to calls payable to their P&I Association and may be subject
to supplemental calls which are based on estimates of premium income and anticipated and paid claims. Such estimates are adjusted each year by the Board of Directors of the P&I Association until the closing of the relevant policy year, which
generally occurs within three years from the end of the policy year. Supplemental calls, if any, are expensed when they are announced and according to the period they relate to. The Company is not aware of any supplemental calls in respect of
any policy years other than those that have already been recorded in its consolidated financial statements.
STAR BULK CARRIERS CORP.
Notes to Consolidated Financial Statements
December 31, 2018
(Expressed in thousands of U.S. dollars except for share and per share data unless otherwise stated)
16.
|
Commitments and Contingencies - (continued):
|
a)
|
Legal proceedings - (continued)
|
|
(ii)
|
In March 2013, the Company commenced arbitration proceedings against Hanjin HHIC-Phil Inc., the shipyard that constructed the
Star Polaris
, relating to an engine failure the vessel experienced in Korea. This resulted in 142 off-hire days and the loss of $2,343 in revenues. The Company
pursued the compensation for the cost of the repairs and the loss of revenues and following the arbitration hearing in July 2015, the arbitral tribunal issued its partial final award (the “Award”), which found the yard liable for
certain aspects of the claim but did not quantify the Award. Following the dismissal of the loss of revenues claim before the High Court of the United Kingdom in the appeal proceedings, in 2018 a settlement agreement was entered into
between the Company, the yard and H&M insurers. The Company had no financial impact from the respective settlement agreement. .
|
Contingencies relating to Heron
Following the completion of the Merger, Oceanbulk Shipping became a wholly owned subsidiary of the Company. Oceanbulk
Shipping owned a convertible loan, which was convertible into 50% of Heron Ventures Ltd’s (“Heron”) equity. After the conversion of the loan, on November 5, 2014, Heron was a 50-50 joint venture between Oceanbulk Shipping and ABY Group Holding
Limited, and Oceanbulk Shipping shared joint control over Heron with ABY Group Holding Limited. Based on the applicable related agreements, neither party will entirely control Heron. In addition, any operational and other decisions with respect
to Heron will need to be jointly agreed between Oceanbulk Shipping and ABY Group Holding Limited. As of December 31, 2017, all vessels previously owned by Heron have been either sold or distributed to its equity holders. While Oceanbulk Shipping
and ABY Group Holding Limited intend that Heron eventually will be dissolved shortly after receiving permission from local authorities in Malta, until that occurs, contingencies to the Company may arise. However, the pre-transaction investors in
Heron effectively remain as ultimate beneficial owners of Heron, until Heron is dissolved on the basis that, according to the agreement governing the Merger, any cash received or paid by the Company from the final liquidation of Heron will be
settled accordingly by the pre-Merger investors in Oceanbulk (the “Oceanbulk Sellers”). The Company had no outstanding balance with the Oceanbulk Sellers as of December 31, 2016 and 2017, respectively. In July 2018, ABY Group Holding Limited
transferred to ABY Floriana Limited its interests to Heron.
STAR BULK CARRIERS CORP.
Notes to Consolidated Financial Statements
December 31, 2018
(Expressed in thousands of U.S. dollars except for share and per share data unless otherwise stated)
16.
|
Commitments and Contingencies - (continued):
|
The following table sets forth inflows and outflows, related to the Company’s charter party arrangements and other commitments,
as at December 31, 2018.
|
|
Twelve month periods ending December 31,
|
|
+ inflows/ - outflows
|
|
Total
|
|
|
2019
|
|
|
2020
|
|
|
2021
|
|
|
2022
|
|
|
2023
|
|
|
2024 and
thereafter
|
|
Future, minimum, non-cancellable charter revenue
(1)
|
|
$
|
72,588
|
|
|
$
|
66,581
|
|
|
$
|
6,007
|
|
|
$
|
-
|
|
|
$
|
-
|
|
|
$
|
-
|
|
|
$
|
-
|
|
Future, minimum, charter-in hire payments
(2)
|
|
|
(8,926
|
)
|
|
|
(8,926
|
)
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
Vessel upgrades
(3)
|
|
|
(140,974
|
)
|
|
|
(136,689
|
)
|
|
|
(4,285
|
)
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
Bareboat commitments charter hire
(4)
|
|
|
(142,771
|
)
|
|
|
(10,223
|
)
|
|
|
(12,083
|
)
|
|
|
(11,912
|
)
|
|
|
(11,742
|
)
|
|
|
(11,563
|
)
|
|
|
(85,248
|
)
|
Office rent
(5)
|
|
|
(1,647
|
)
|
|
|
(398
|
)
|
|
|
(323
|
)
|
|
|
(318
|
)
|
|
|
(290
|
)
|
|
|
(245
|
)
|
|
|
(73
|
)
|
Payments for E.R. Vessel acquisition
(6)
|
|
|
(27,653
|
)
|
|
|
(27,653
|
)
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
Total
|
|
$
|
(249,383
|
)
|
|
$
|
(117,308
|
)
|
|
$
|
(10,684
|
)
|
|
$
|
(12,230
|
)
|
|
$
|
(12,032
|
)
|
|
$
|
(11,808
|
)
|
|
$
|
(85,321
|
)
|
(1)
|
The amounts represent the minimum contractual charter revenues to be generated from the existing, as of December 31, 2018, non-cancellable time charter
agreements, until their expiration, net of address commission, assuming no off-hire days other than those related to scheduled interim and special surveys of the vessels.
|
(2)
|
The amounts represent the Company’s commitments under the existing, as of December 31, 2018, time charter-in arrangements for third party vessels.
|
(3)
|
The amounts represent the Company’s commitments for vessel upgrades that the Company entered into in 2018. For the respective payments, the Company has secured
total financing of $134,225, of which $92,400 was committed under loan and bareboat lease agreements signed as of December 31, 2018 (Note 5 and 8) and $41,825 was committed under loan and finance lease agreements signed subsequently
(Note 19).
|
(4)
|
The amounts represent the Company’s commitments under the bareboat lease arrangements representing the charter hire for the three vessels acquired as part of
the OCC Vessel Purchase Transaction discussed in Note 6 above, which, as of December 31, 2018, were under construction. The bareboat charter hire is comprised of fixed and variable portion, the variable portion is calculated based on
the 3-month LIBOR of 2.808% as of December 31, 2018.
|
(5)
|
The office rent includes an amount of 188,000 NOK (or approximately $22, using the exchange rate as of December 31, 2018, which was $0.1156 per NOK) up to the
twelve month period ended December 31, 2024, concerning a rental agreement with indefinite term.
|
(6)
|
The amounts represent the remaining payments to be made with respect to the two Step 1 Vessels
Star Marianne
and
Star Janni
that were delivered in January 2019 (Note 6). The Company has
financed the total acquisition cost of the vessels through the ABN $115,000 Facility (Note 8).
|
STAR BULK CARRIERS CORP.
Notes to Consolidated Financial Statements
December 31, 2018
(Expressed in thousands of U.S. dollars except for share and per share data unless otherwise stated)
17.
|
Voyage and Vessel operating expenses:
|
The amounts in the consolidated statements of operations are analyzed as follows:
|
|
2016
|
|
|
2017
|
|
|
2018
|
|
Voyage expenses
|
|
|
|
|
|
|
|
|
|
Port charges
|
|
$
|
30,229
|
|
|
$
|
21,060
|
|
|
$
|
37,215
|
|
Bunkers
|
|
|
28,121
|
|
|
|
34,997
|
|
|
|
72,287
|
|
Commissions – third parties
|
|
|
2,506
|
|
|
|
3,438
|
|
|
|
6,179
|
|
Commissions – related parties (Note 3)
|
|
|
3,300
|
|
|
|
3,300
|
|
|
|
3,400
|
|
Miscellaneous
|
|
|
1,665
|
|
|
|
1,887
|
|
|
|
2,515
|
|
Total voyage expenses
|
|
$
|
65,821
|
|
|
$
|
64,682
|
|
|
$
|
121,596
|
|
Vessel operating expenses
|
|
|
|
|
|
|
|
|
|
|
|
|
Crew wages and related costs
|
|
$
|
62,920
|
|
|
$
|
63,074
|
|
|
$
|
80,360
|
|
Insurances
|
|
|
6,124
|
|
|
|
6,314
|
|
|
|
7,544
|
|
Maintenance, repairs, spares and stores
|
|
|
17,194
|
|
|
|
18,589
|
|
|
|
26,368
|
|
Lubricants
|
|
|
6,372
|
|
|
|
7,016
|
|
|
|
8,494
|
|
Tonnage taxes
|
|
|
2,438
|
|
|
|
2,565
|
|
|
|
1,506
|
|
Pre-delivery and Pre-joining expenses
|
|
|
1,784
|
|
|
|
1,925
|
|
|
|
1,234
|
|
Miscellaneous
|
|
|
1,998
|
|
|
|
1,945
|
|
|
|
3,366
|
|
Total vessel operating expenses
|
|
$
|
98,830
|
|
|
$
|
101,428
|
|
|
$
|
128,872
|
|
18.
|
Fair Value Measurements and Hedging:
|
The guidance for fair value measurements applies to all assets and liabilities that are being measured and reported on a fair value basis. This
guidance enables the reader of the financial statements to assess the inputs used to develop those measurements by establishing a hierarchy for ranking the quality and reliability of the information used to determine fair values. The same
guidance requires that assets and liabilities carried at fair value should be classified and disclosed in one of the following three categories based on the inputs used to determine its fair value:
Level 1: Quoted market prices in active markets for identical assets or liabilities;
Level 2: Observable market based inputs or unobservable inputs that are corroborated by market data;
Level 3: Unobservable inputs that are not corroborated by market data.
In addition, ASC 815, “
Derivatives and Hedging
”
requires companies to recognize all derivative instruments as either assets or liabilities at fair value in the balance sheet.
Fair value on a recurring basis:
Interest rate swaps:
The Company enters into interest rate derivative contracts to manage interest costs and risk associated with changing interest rates with respect
to its variable interest loans and credit facilities.
STAR BULK CARRIERS CORP.
Notes to Consolidated Financial Statements
December 31, 2018
(Expressed in thousands of U.S. dollars except for share and per share data unless otherwise stated)
18.
|
Fair Value Measurements and Hedging - (continued):
|
Interest rate swaps:
Due to (i) changes in the timing of delivery of some of the Company’s newbuilding vessels and, by extension, the timing of some of the forecasted
transactions, (ii) changes in LIBOR curves, and (iii) the sale of some of the Company’s vessels in 2015 whose loans had been designated as hedged items, the Company determined that the “highly effective” criterion of the hedging effectiveness
test for the then existing swaps with Goldman Sachs & Co. LLC (the “Goldman Sachs Swaps”) was not satisfied for the quarter ended June 30, 2015. Consequently, the hedging relationship related to the Goldman Sachs Swaps no longer qualified
for cash flow hedge accounting, and as of April 1, 2015, the Company de-designated the cash flow hedge related to the Goldman Sachs Swaps. As a result, changes in the fair value of these swaps since the date of de-designation, April 1, 2015,
were reported in earnings under “Gain / (Loss) on derivative financial instruments, net.” The amount already reported up to March 31, 2015 in “Accumulated other comprehensive income / (loss)” with respect to the corresponding swaps is
reclassified to earnings when the hedged forecasted transaction impacts the Company’s earnings (i.e., when the hedged loan interest is incurred), except for amounts related to loans of sold or expected to be sold vessels which are being
reclassified to earnings when sale is probable, since the forecasted transaction attributable to these vessels is no longer expected to occur. The amount reclassified into earnings during the years ended December 31, 2016, 2017 and 2018 was
$570, $527 and $114 respectively.
All existing interest rates swaps as of December 31, 2017 matured during the year ended December 31, 2018 or were prepaid prior to their maturity
through the refinancing of the corresponding debt. Therefore, all amounts previously recognized in Other Comprehensive Income / (Loss), deriving from the effective portion of unrealized gains/losses from the designated cash flow hedges have been
reclassified into earnings.
Forward Freight Agreements and Bunker Swaps:
During the years ended December 31, 2016, 2017 and 2018, the Company entered into a certain number of FFAs on the Capesize, Panamax and Supramax
indices. The results of the Company’s FFAs during the years ended December 31, 2016, 2017 and 2018 and the valuation of the Company’s open position as at December 31, 2017 and 2018 are presented in the tables below.
During the years ended December 31, 2017 and 2018, the Company also entered into a certain number of bunker swaps. The results of the Company’s
bunker swaps and the valuation of the Company’s open position as at December 31, 2017 and 2018 are presented in the tables below.
The amount of Gain/ (Loss) on derivative financial instruments, forward freight agreements and bunker swaps recognized in the consolidated
statements of operations are analyzed as follows:
STAR BULK CARRIERS CORP.
Notes to Consolidated Financial Statements
December 31, 2018
(Expressed in thousands of U.S. dollars except for share and per share data unless otherwise stated)
18.
|
Fair Value Measurements and Hedging - (continued):
|
|
|
Year ended December 31,
|
|
|
|
2016
|
|
|
2017
|
|
|
2018
|
|
Consolidated Statement of Operations
|
|
|
|
|
|
|
|
|
|
Gain/(loss) on derivative financial instruments, net
|
|
|
|
|
|
|
|
|
|
Unrealized gain/(loss) from the Goldman Sachs Swaps after de-designation of accounting hedging
relationship (April 1, 2015)
|
|
$
|
2,974
|
|
|
$
|
2,802
|
|
|
$
|
140
|
|
Realized gain/(loss) from the Goldman Sachs Swaps after de-designation of accounting hedging
relationship (April 1, 2015)
|
|
|
(5,048
|
)
|
|
|
(2,556
|
)
|
|
|
(141
|
)
|
Write-off of unrealized losses related to forecasted transactions which are no longer considered
probable reclassified from other comprehensive income/(loss)
|
|
|
(42
|
)
|
|
|
-
|
|
|
|
708
|
|
Ineffective portion of cash flow hedges
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
Total Gain/(loss) on derivative financial instruments, net
|
|
$
|
(2,116
|
)
|
|
$
|
246
|
|
|
$
|
707
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest and finance costs
|
|
|
|
|
|
|
|
|
|
|
|
|
Reclassification adjustments of interest rate swap loss/(gain) transferred to Interest and finance costs
from Other comprehensive income/(loss) (Note 8)
|
|
|
(1,252
|
)
|
|
|
(852
|
)
|
|
|
3
|
|
Total Gain/(loss) recognized
|
|
$
|
(1,252
|
)
|
|
$
|
(852
|
)
|
|
$
|
3
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Gain/(loss) on forward freight agreements and bunker swaps
|
|
|
|
|
|
|
|
|
|
|
|
|
Realized gain/(loss) on forward freight agreements
|
|
|
370
|
|
|
|
(877
|
)
|
|
|
(599
|
)
|
Realized gain/(loss) on bunker swaps
|
|
|
-
|
|
|
|
-
|
|
|
|
1,491
|
|
Unrealized gain/(loss) on forward freight agreements
|
|
|
41
|
|
|
|
(24
|
)
|
|
|
520
|
|
Unrealized gain/(loss) on bunker swaps
|
|
|
-
|
|
|
|
60
|
|
|
|
(1,859
|
)
|
Total Gain/(loss) recognized
|
|
$
|
411
|
|
|
$
|
(841
|
)
|
|
$
|
(447
|
)
|
The following table summarizes the valuation of the Company’s financial instruments as of December 31, 2017 and 2018, based on Level 2 observable
inputs of the fair value hierarchy.
|
|
Significant Other Observable Inputs (Level 2)
|
|
|
|
December 31, 2017
|
|
|
December 31, 2018
|
|
|
|
(not designated as
cash flow hedges)
|
|
|
(designated as
cash flow hedges)
|
|
|
(not designated as
cash flow hedges)
|
|
|
(designated as
cash flow hedges)
|
|
ASSETS
|
|
|
|
|
|
|
|
|
|
|
|
|
Forward freight agreements - asset position
|
|
$
|
17
|
|
|
|
-
|
|
|
$
|
537
|
|
|
|
-
|
|
Bunker swaps - asset position
|
|
|
60
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
Interest rate swaps - asset position
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
Total
|
|
$
|
77
|
|
|
|
-
|
|
|
$
|
537
|
|
|
|
-
|
|
LIABILITIES
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Forward freight agreements - liability position
|
|
$
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
Bunker swaps - liability position
|
|
|
-
|
|
|
|
-
|
|
|
|
1,799
|
|
|
|
-
|
|
Interest rate swaps - liability position
|
|
|
609
|
|
|
|
16
|
|
|
|
-
|
|
|
|
-
|
|
Total
|
|
$
|
609
|
|
|
|
16
|
|
|
|
1,799
|
|
|
|
-
|
|
The carrying values of temporary cash investments, restricted cash, accounts receivable and accounts payable approximate their fair value due to
the short-term nature of these financial instruments. The fair value of long-term bank loans and bareboat leases (Level 2), bearing interest at variable interest rates, approximates their recorded values as of December 31, 2018, due to the
variable interest rate nature thereof.
STAR BULK CARRIERS CORP.
Notes to Consolidated Financial Statements
December 31, 2018
(Expressed in thousands of U.S. dollars except for share and per share data unless otherwise stated)
18.
|
Fair Value Measurements and Hedging - (continued):
|
The 2022 Notes have a fixed rate, and their estimated fair value as of December 31, 2017 and 2018, determined through Level 1 inputs of the fair
value hierarchy (quoted price on NASDAQ under the ticker symbol SBLKZ), was approximately $50,640 and $49,800, respectively.
Fair value hedge designation
In order to mitigate its exposure to the foreign currency risk arising from its commitment for vessel upgrades denominated in Euro discussed in
Note 16 c)3) above, in early April 2018 the Company converted some of its cash held in US dollars to Euro in an amount sufficient to cover 100% of its fixed orders for vessel upgrades and approximately 50% of its then optional orders for vessel
upgrades. During the fourth quarter of 2018 an additional amount of cash in USD was converted to Euro in order to cover the orders for vessel upgrades. The total amount of Euro converted was approximately €70.8 million, of which approximately
€20.5 million was related to the fixed orders at the time of designation. This amount is being held until the payments under the contracts for upgrades (or “unrecognized firm commitment”) are made. The Euro conversions corresponding to the fixed
orders at that time were designated, on April 3, 2018, as a fair value hedge with the portion of the unrecognized firm commitment corresponding to the fixed orders being the “hedged item” and the Euro deposits corresponding to the fixed orders
being the “Hedging Instrument”. Because the critical terms (currency, timing, and notional amounts) of the hedged item and the hedging instrument match in all material respects, the hedge is considered to highly offset changes in the fair value
of the unrecognized firm commitment attributable to changes in the USD/Euro exchange rates. The foreign exchange loss recognized from the re-measurement of the total Euro conversions discussed above during the year ended December 31, 2018 was
$3,159 and is included in “Interest and other income/(loss)” in the consolidated statement of operations. The cumulative amount of fair value hedging adjustment that is attributable to the aforementioned hedge during the year ended December 31,
2018 was $1,609 and is reflected within “Vessels and other fixed assets, net”, in the consolidated balance sheet, following the recognition of the corresponding firm commitment during the year. The corresponding gain of $1,609 recognized from
April 3, 2018 to December 31, 2018 is recorded within “Interest and other income/(loss)” in the consolidated statement of operations. The ineffective portion of the aforementioned hedge as of December 31, 2018 was $39 and is reflected within
“Interest and other income/(loss)” in the consolidated statement of operations. As of December 31, 2018, the entire amount of €20.5 million Euro conversions associated with this hedging relationship had been used.
Fair value on a nonrecurring basis
The Company reviewed, in 2016, 2017 and 2018 the recoverability of the carrying amount of its vessels. As further disclosed in Note 5, during 2016
the Company recognized an impairment loss of $18,537 related to the sale of two operating vessels and the termination of two newbuilding contracts during the year. The carrying value of the sold vessels was written down to their fair value as
determined by reference to their agreed sale prices (Level 2). In addition pursuant to the Company’s impairment analysis for its entire fleet, as at December 31, 2016, using the same framework that was used in the previous years, which is
described in Note 2(n), the Company recognized an additional impairment loss of $10,684. The carrying value of the respective vessels was written down to their fair value as determined by reference to the vessel valuations of independent
shipbrokers as of as of December 31, 2016 (Level 2).
STAR BULK CARRIERS CORP.
Notes to Consolidated Financial Statements
December 31, 2018
(Expressed in thousands of U.S. dollars except for share and per share data unless otherwise stated)
18.
|
Fair Value Measurements and Hedging - (continued):
|
The table following table summarizes the valuation of these assets measured at fair value on a non-recurring basis as of December 31, 2016:
Long-lived assets held and used
|
|
Quoted
Prices in
Active
Markets for
Identical
Assets
(Level 1)
|
|
|
Significant
Other
Observable
Inputs
(Level 2)
|
|
|
Significant
Unobservable
Inputs
(Level 3)
Impairment
loss
|
|
|
|
|
Vessels, net
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
TOTAL
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
The Company’s impairment analysis as of December 31, 2017, indicated that the carrying amount of the Company’s vessels, was recoverable, and
therefore, the Company concluded that no impairment charge, was necessary.
In addition, as further disclosed in Note 5, during 2018 the Company recognized an impairment loss of $17,784 related to the agreed and intended
sale of three operating vessels. The carrying value of the sold vessels was written down to the fair value as determined by reference to their agreed or negotiated sale prices (Level 2).
The table following table summarizes the valuation of these assets measured at fair value on a non-recurring basis as of December 31, 2018:
Long-lived assets held and used
|
|
Quoted
Prices in
Active
Markets for
Identical
Assets
(Level 1)
|
|
|
Significant
Other
Observable
Inputs
(Level 2)
|
|
|
Significant
Unobservable
Inputs
(Level 3)
Impairment
loss
|
|
|
|
|
Held for sale
|
|
$
|
-
|
|
|
$
|
5,949
|
|
|
$
|
-
|
|
|
$
|
1,606
|
|
Vessels, net
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
TOTAL
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
·
|
Pursuant to the E.R. Vessel Purchase Transaction as further discussed in Note 1, the Company took delivery of two of the three committed dry bulk vessels,
namely the 2010 built Capesize vessels
Star Marianne
and
Star Janni
on January 7, 2019 and January 14, 2019, respectively, in exchange for an aggregate of 999,336 of the Company’s common shares and $32.5 million cash. The cash portion of such acquisitions was
financed through proceeds from the third and the fourth tranche under the ABN $115,000 Facility (Note 8).
|
|
·
|
On January 28, 2019, the Company entered into a loan agreement with Skandinaviska Enskilda Banken AB (SEB), the “SEB Facility,” for the financing of an amount
up to $71.4 million. The facility is available in four tranches. The first two tranches of $32.8 million each were drawn on January 30, 2019 and used together with cash on hand to pay all the outstanding amounts under the lease
agreements of the
Star Laetitia
and the
Star
Sienna
, which are two of Augustea vessels (Note 5). The remaining two tranches of approximately $1,190 each, which will be used to finance the acquisition and installation of scrubber equipment for the respective vessels, are
expected to be drawn in 2019 and are repayable in 12 equal quarterly installments. The SEB Facility is secured by a first priority mortgage on the two vessels and will mature in January 2025.
|
STAR BULK CARRIERS CORP.
Notes to Consolidated Financial Statements
December 31, 2018
(Expressed in thousands of U.S. dollars except for share and per share data unless otherwise stated)
19.
|
Subsequent Events - (continued):
|
|
·
|
On January 31, 2019, the Company entered into a loan agreement with E. SUN Commercial Bank, Hong Kong branch, (the “E.SUN Facility”), for the financing of an
amount of up to $37.1 million to pay all outstanding amounts under the lease agreement of the
Star Ariadne
(Note 5). On March 1,
2019 the Company drew the amount of $37.1 million. The E.SUN Facility is secured by a first priority mortgage on the respective vessel and will mature in February 2024.
|
|
·
|
As part of the Company’s share repurchase program discussed in Note 9, subsequent to December 31, 2018 the Company acquired 195,605 of its common shares which
were canceled and removed from the Company’s share capital on February 28, 2019.
|
|
·
|
On January 7, 2019, the Company’s Board of Directors and Compensation Committee established an incentive program for key employees, pursuant to which an
aggregate of four million (4,000,000) restricted share units (each, a “RSU”) will be issued. Each RSU represents, upon vesting, a right for the relevant beneficiary to receive one (1) SBLK share. The RSUs are subject to the
satisfaction of certain performance conditions, which apply if the Company’s fleet performs better than relevant dry bulk charter rate indices as reported by the Baltic Exchange (the “Indices”) during 2020 and 2021. The RSUs start to
vest if the Company’s fleet performs better than the Indices by at least $120,000, and vest in increasing amounts if and to the extent the performance of the Company’s fleet exceeds the performance that would have been derived based
on the Indices by up to an aggregate of $300,000. The Company takes the view that the current likelihood of vesting of these RSUs does not meet a “more likely than not” standard under US GAAP, and as a result no charge will be
amortized through the Company’s statement of operations, until vesting becomes probable. Subject to the vesting conditions being met on April 30, 2021 and April 30, 2022 (each, a “Vesting Date”) two million RSUs will vest on each
Vesting Date, and the relevant SBLK shares will be issued and distributed to the relevant beneficiaries as per the allocation of the Board. Any non-vested RSUs at the applicable Vesting Date will be cancelled.
|
|
·
|
In February 2019, the Company entered into a committed term-sheet with ING Bank N.V., London Branch for the financing of an amount up to $52,800 (the “ING
$52,800 Facility”). The facility will be available in four tranches. The first two tranches of $17,400 and $32,600,respectively, will be used to refinance all outstanding amounts under the lease agreements of the
ABY Asia and
the
Star Magnanimus
(Note 5) and are expected to be drawn in late March 2019 with maturing date seven years later. The remaining two tranches
of $1,400 each, which will be used to finance the acquisition and installation of scrubber equipment for the respective vessels, are expected to be drawn in 2019 and will mature four years later. The ING $52,800 Facility will be
secured by a first priority mortgage on the two aforementioned vessels. The completion of the transaction is subject to the execution of customary definitive
documentation.
|
|
·
|
On February 28, 2019, the Company entered into a loan agreement with ABN AMRO Bank N.V. (the “Atradius Facility”) for the financing of an amount up to $36.6
million that will be used to finance the acquisition of scrubber equipment for 42 vessels. The respective financing is credit insured (85%) by Atradius Dutch State Business N.V. of the Netherlands (the “Atradius”). The amount is
expected to be drawn in 2019, and will be repayable in 10 consecutive half yearly installments of $3.6 million. The facility is secured by second mortgage on certain of the 42 vessels.
|