SBLK Star Bulk Carriers Corporation

SIGNATURE

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.

Dated: August 4, 2022

Exhibit 99.1

MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

The following is a discussion of the financial condition and results of operations of Star Bulk Carriers Corp. (“Star Bulk”) for the six-month periods ended June 30, 2021 and 2022. Unless otherwise specified herein, references to the “Company,” “we,” “us” or “our” shall include Star Bulk and its subsidiaries. You should read the following discussion and analysis together with the unaudited interim condensed consolidated financial statements and related notes included elsewhere herein. For additional information relating to our management’s discussion and analysis of financial conditions and results of operations, please see our Annual Report on Form 20-F for the year ended December 31, 2021, which was filed with the U.S. Securities and Exchange Commission (the “Commission”) on March 15, 2022  (the “2021 Annual Report”). Unless otherwise defined herein, capitalized words and expressions used herein shall have the same meanings ascribed to them in the 2021 Annual Report. This discussion includes forward-looking statements which, although based on assumptions that we consider reasonable, are subject to risks and uncertainties which could cause actual events or conditions to differ materially from those currently anticipated and expressed or implied by such forward-looking statements.

Overview

We are a global shipping company providing worldwide seaborne transportation solutions in the dry bulk sector. Our vessels transport major bulks, which include iron ore, coal and grain, and minor bulks which include bauxite, fertilizers and steel products. We were incorporated in the Marshall Islands on December 13, 2006 and, on December 3, 2007, we commenced operations when we took delivery of our first vessel. We maintain offices in Athens, New York, Limassol, Singapore and Germany. Our common shares trade on the Nasdaq Global Select Market under the symbol “SBLK.”

Our Fleet

As of August 3, 2022, our owned fleet consisted of 128 operating vessels with an aggregate carrying capacity of approximately 14.1 million dwt, consisting of Newcastlemax, Capesize, Post Panamax, Kamsarmax, Panamax, Ultramax and Supramax vessels. We believe the Company is the largest US-listed dry bulk operator in terms of number of vessels and deadweight tonnage.

The following tables present summary information relating to our fleet as of August 3, 2022:

Liquidity and Capital Resources

Our principal sources of funds have been cash flow from operations, equity offerings, borrowings under secured credit facilities, debt securities and bareboat lease financings and proceeds from vessel sales. Our principal uses of funds have been capital expenditures to establish and grow our fleet, maintain the quality of our dry bulk carriers, comply with international shipping standards, environmental laws and regulations, fund working capital requirements, make principal and interest payments on outstanding indebtedness and make dividend payments when approved by the Board of Directors.

Our short-term liquidity requirements include paying operating costs, funding working capital requirements and the short-term equity portion of the cost of vessel acquisitions and vessel upgrades, interest and principal payments on outstanding indebtedness and maintaining cash reserves to strengthen our position against adverse fluctuations in operating cash flows. Our primary source of short-term liquidity is cash generated from operating activities, available cash balances and portions of new debt and refinancings, as well as equity financings.

Our medium- and long-term liquidity requirements are funding the equity portion of any newbuilding vessel installments and secondhand vessel acquisitions, funding required payments under our vessel financing and other financing agreements and paying cash dividends when declared. Sources of funding for our medium- and long-term liquidity requirements include cash flows from operations, new debt and refinancings, or bareboat lease financings, sale and lease back arrangements, equity issuances and vessel sales. Please also refer to Note 14 to our unaudited interim condensed consolidated financial statements, included elsewhere herein, for developments that took place after June 30, 2022.

As of August 3, 2022, we had total cash of $474.2 million and $1,409.7 million of outstanding borrowings (including bareboat lease financing), after a) repaying in full the aggregate outstanding amount of $91.2 million under the i) lease agreements of each of the Delphin Vessels, ii) HSBC $80,000 Facility and iii) NTT $17,600 Facility and b) receiving in aggregate an amount of $90.3 million under the Citi $100,000 Facility and SEB $42,000 Facility, as further described in Note 14 to our unaudited interim condensed consolidated financial statements June 30, 2022, included herein. In addition, following a number of interest rates swaps that we have entered into, we have converted a total of $783.1 million of such debt from floating to an average fixed rate of 45 bps with average maturity of 1.7 years.

Our debt agreements contain financial covenants and undertakings requiring us to maintain various ratios. A summary of these terms is included in Note 7 of the Company’s consolidated financial statements for the year ended December 31, 2021, included in the 2021 Annual Report.

We believe that our current cash balance our operating cash flows to be generated over the short-term period and the resulting excess proceeds following the completion of the refinancings described in Note 14 to our unaudited interim condensed consolidated financial statements June 30, 2022, included elsewhere herein , will be sufficient to meet our liquidity needs for the foreseeable future (and at least through the end of the third quarter of 2023), including funding the operations of our fleet, capital expenditure requirements including commitments for the installation of ballast water treatment systems (“BWTS”)  and Energy Saving Devices (“ESD”) as further described in Note 11 to our unaudited interim condensed consolidated financial statements for the six month period ended June 30, 2022, included elsewhere herein and any other present financial requirements. In addition, under our two effective At-the-Market offering programs, which have an aggregate remaining capacity of $129.8 million, we may sell and issue shares. We may seek additional indebtedness to finance future vessel acquisitions in order to maintain our cash position or to refinance our existing debt on more favorable terms. Our practice has been to fund the cash portion of the acquisition of dry bulk carriers using a combination of funds from operations and bank debt or lease financing secured by mortgages or title of ownership on our dry bulk carriers held by the relevant lenders, respectively. We may also use the proceeds from potential equity or debt offerings to finance future vessel acquisitions. Our business is capital-intensive and its future success will depend on our ability to maintain a high-quality fleet through the acquisition of newer dry bulk carriers and the selective sale of older dry bulk carriers. These acquisitions will be principally subject to management’s expectation of future market conditions as well as our ability to acquire dry bulk carriers on favorable terms. However our ability to obtain bank or lease financing, to refinance our existing debt or to access the capital markets for offerings in the future, may be limited by our financial condition at the time of any such financing or offering, including the market value of our fleet, as well as by adverse market conditions resulting from, among other things, general economic conditions, weakness in the financial and equity markets and contingencies and uncertainties, all of which are beyond our control. Our liquidity is also impacted by our dividend policy, as discussed below  

The recent reopening of the global economy and consequent increased demand across all key dry bulk commodities following the 2019 Novel Coronavirus (“COVID-19”) pandemic has positively affected our revenues. On the other hand, as a result of COVID-19 restrictions imposed since 2020, additional crew expenses were incurred.

There continues to be a high level of uncertainty relating to how the pandemic will evolve, including as a result of new COVID-19 variants, the availability of vaccines and their global deployment, the development of effective treatments, the imposition of effective public safety and other protective measures and the public's and government's responses to such measures. An increase in the severity or duration or a resurgence of the COVID-19 pandemic could have a material adverse effect on our business, results of operations, cash flows, financial condition, the carrying value of our assets, the fair values of our vessels, and our ability to pay dividends.

In addition, the geopolitical situation in Eastern Europe intensified in late February 2022, with the commencement of Russia’s military action against Ukraine. Three of our vessels, the Star Pavlina, Star Helena and Star Laura had arrived in three different Ukrainian ports to load various grain cargos under charterers’ instructions, , well ahead of the commencement of the war activities, but at the time of the invasion, the loading operations were suspended by the port authorities. We had been intensively exploring options with the charterers to navigate the vessels safely out of the ports but unfortunately the ports were shut down and blockaded and safe passages were impossible. Since that time, all three vessels have been safely manned with Ukrainian crew. An estimate of any potential impact of the blockade cannot be made at this point of time. However, we do not expect such impact, if any, to be material, because in addition to standard industry vessel risk insurance, war risk insurance is in place for all three vessels and the applicable war risk insurers have confirmed that they hold the vessels covered at their current position in Ukraine, which includes Hull and Machinery and Increased Value insurance, Detention and Diversion Cover and War loss of Hire for 180 days. Furthermore, and to the extent that a court or tribunal has not declared the frustration of the charterparties for the above three vessels, as frustration is by operation of law, we believe that the vessels remain on hire and hire continues payable under the charterparty clauses. The situation continues to be closely monitored by management to ensure that the interests of all our stakeholders are safeguarded.

The vessel blockade may be impacted by diplomatic efforts to address the Russia-Ukraine conflict, including the recent multilateral agreement among Russia, Ukraine, Turkey and the United Nations to resume grain exports from the Black Sea regions.  The multilateral agreement is currently expected to result in an easing of the blockades on Black Sea ports in Ukraine and may result in the passage of one or more of the Star Pavlina, Star Helena and Star Laura out of the region in the near future.

Dividend Policy

In November 2019, our Board of Directors established a dividend policy, which was updated in May 2021, pursuant to which our Board of Directors intends to declare a dividend in each of February, May, August and November in an amount equal to (a) our Total Cash Balance minus (b) the product of (i) the Minimum Cash Balance per Vessel and (ii) the Number of Vessels.

“Total Cash Balance” means (a) the aggregate amount of cash on our balance sheet as of the last day of the quarter preceding the relevant dividend declaration date minus (b) any proceeds received by us, from vessel sales, or additional proceeds from vessel refinancing arrangements, or securities offerings in the last 12 months that have been earmarked for share repurchases, debt prepayment, vessel acquisitions and general corporate purposes.

“Minimum Cash Balance per Vessel” means $2.10 million for December 31, 2021 and thereafter.

“Number of Vessels” means the total number of vessels owned by us, or that are subject to sale and leaseback transactions and finance leases, as of the last day of the quarter preceding the relevant dividend declaration date.

As of June 30, 2022, we owned 128 vessels and our aggregate amount of cash on our balance sheet was $385.6 million.  Taking into account the Minimum Cash Balance per Vessel of $2.10 million and the refinancing arrangements in progress, on August 4, 2022, pursuant to our dividend policy, our Board of Directors declared a quarterly cash dividend of $1.65 per share, payable on or about September 8, 2022 to all shareholders of record as of August 25, 2022. The ex-dividend date is expected to be August 24, 2022.

Since Star Bulk is a holding company with no material assets other than the shares of its subsidiaries through which it conducts its operations, Star Bulk’s ability to pay dividends will depend on its subsidiaries distributing their earnings and cash flow to it. Any future dividends declared will be at the discretion and remain subject to approval of our Board of Directors each quarter after its review of our financial condition and other factors, including but not limited to our earnings, the prevailing charter market conditions, capital requirements, limitations under our debt agreements and applicable provisions of Marshall Islands law, which generally prohibits the payment of dividends other than from operating surplus or while a company is insolvent or would be rendered insolvent upon the payment of such dividend. Star Bulk’s dividend policy and declaration and payment of dividends may be changed at any time and are subject to legally available funds and our Board of Directors’ determination that each declaration and payment is at the time in the best interests of Star Bulk and its shareholders after its review of our financial performance.

There can be no assurance that our Board of Directors will declare or pay any dividend in the future.

Other Recent Developments

Please refer to Note 14 to our unaudited interim condensed consolidated financial statements, included elsewhere herein, for developments that took place after June 30, 2022.

Operating Results

Factors Affecting Our Results of Operations

We deploy our vessels on a mix of short to medium time charters or voyage charters, contracts of affreightment or in dry bulk carrier pools, according to our assessment of market conditions. We adjust the mix of these charters to take advantage of the relatively stable cash flow and high utilization rates associated with medium to long-term time charters, or to profit from attractive spot charter rates during periods of strong charter market conditions, or to maintain employment flexibility that the spot market offers during periods of weak charter market conditions. The following table reflects certain operating data of our fleet, including our ownership days and TCE rates, which we believe are important measures for analyzing trends in our results of operations, for the periods indicated:

The following table reflects the calculation of our TCE rates as discussed in footnote (7) above. The table presents reconciliation of TCE Revenues to voyage revenues as reflected in the unaudited interim condensed consolidated income statements.

Voyage Revenues

Voyage revenues are driven primarily by the number of vessels in our operating fleet, the duration of our charters, the number of charter-in days, the amount of daily charter hire or freight rates that our vessels earn under time and voyage charters, respectively, which, in turn, are affected by a number of factors, including our decisions relating to vessel acquisitions and disposals, the number of vessels chartered-in, the amount of time that we spend positioning our vessels, the amount of time that our vessels spend in dry dock undergoing repairs, maintenance and upgrade work, the age, condition and specifications of our vessels, levels of supply and demand in the seaborne transportation market.

Vessels operating on time charters for a certain period of time provide more predictable cash flows over that period of time, but can yield lower profit margins than vessels operating in the spot charter market during periods characterized by favorable market conditions. Vessels operating in the spot charter market generate revenues that are less predictable, but may enable us to capture increased profit margins during periods of improvements in charter rates, although we would be exposed to the risk of declining vessel rates, which may have a materially adverse impact on our financial performance. If we employ vessels on period time charters, future spot market rates may be higher or lower than the rates at which we have employed our vessels on period time charters.

Voyage Expenses

Voyage expenses may include port and canal charges, agency fees, fuel (bunker) expenses and brokerage commissions payable to related and third parties. Voyage expenses are incurred for our owned and chartered-in vessels during voyage charters or when the vessel is unemployed. Bunker expenses, port and canal charges primarily increase in periods during which vessels are employed on voyage charters because these expenses are paid by the owners. Our voyage expenses primarily consist of bunkers cost, port expenses and commissions paid in connection with the chartering of our vessels.

Charter-In Hire Expenses

Charter-in hire expenses represent hire expenses for chartering-in third and related party vessels, either under time charters or voyage charters.

Vessel Operating Expenses

Vessel operating expenses include crew wages and related costs, the cost of insurance and vessel registry, expenses relating to repairs and maintenance, the cost of spares and consumable stores, tonnage taxes, regulatory fees, vessel scrubbers and maintenance expenses of vessel scrubbers and BWTS, lubricants and other miscellaneous expenses. Other factors beyond our control, some of which may affect the shipping industry in general, including for instance, developments relating to market prices for crew wages, lubricants and insurance, may also cause these expenses to increase.

Dry Docking Expenses

Dry docking expenses relate to regularly scheduled intermediate survey or special survey dry docking necessary to preserve the quality of our vessels as well as to comply with international shipping standards and environmental laws and regulations. Dry docking expenses can vary according to the age of the vessel and its condition, the location where the dry docking takes place, shipyard availability and the number of days the vessel is under dry dock. We utilize the direct expense method, under which we expense all dry docking costs as incurred.

Depreciation

We depreciate our vessels on a straight-line basis over their estimated useful lives, which is determined to be 25 years from the date of their initial delivery from the shipyard. Depreciation is calculated based on a vessel’s cost less the estimated residual value.

General and Administrative Expenses

We incur general and administrative expenses, including our onshore personnel related expenses, directors’ and executives’ compensation, share based compensation, legal, consulting, audit and accounting expenses.

Management Fees

Management fees include fees paid to third parties as well as related parties providing certain procurement services to our fleet.

(Gain) / Loss on Forward Freight Agreements and Bunker Swaps, net

When deemed appropriate from a risk management perspective, we take positions in freight derivatives, including freight forward agreements (the “FFAs”) and freight options, with an objective to utilize those instruments as economic hedges to reduce the risk on specific vessels trading in the spot market and to take advantage of short term fluctuations in the market prices. Upon the settlement, if the contracted charter rate is less than the average of the rates, as reported by an identified index, for the specified route and time period, the seller of the FFA is required to pay the buyer the settlement sum. The settlement amount is 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. Conversely, if the contracted rate is greater than the settlement rate, the buyer is required to pay the seller the settlement sum. Our FFAs are settled on a daily basis mainly through reputable exchanges such as London Clearing House (LCH) or Singapore Exchange (SGX) so as to limit our exposure in over-the-counter transactions. Customary requirements for trading in FFAs include the maintenance of initial and variation margins based on expected volatility, open position and mark to market of the contracts. The fair value of the FFAs or freight options is treated as asset or liability until they are settled. Any such settlements by us or settlements to us under FFAs or freight options, if any, are recorded under (Gain)/Loss on forward freight agreements and bunker swaps, net.

Also, when deemed appropriate from a risk management perspective, we enter into bunker swap contracts to manage our exposure to fluctuations of bunker prices associated with the consumption of bunkers by our 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. Our bunker swaps are settled through reputable clearing houses. Bunker price differentials paid or received under the swap agreements are recognized under (Gain)/Loss on forward freight agreements and bunker swaps, net.

The fair value of freight derivatives and bunker swaps is determined through Level 1 inputs of the fair value hierarchy (quoted prices from the applicable exchanges such as the London Clearing House (LCH) or the Singapore Exchange (SGX)). Our FFAs and bunker swaps do not qualify for hedge accounting and therefore unrealized gains or losses are recognized under (Gain)/Loss on forward freight agreements and bunker swaps, net.

Interest and Finance Costs

We incur interest expense and financing costs in connection with our outstanding indebtedness under our existing loan facilities (including sale and leaseback financing transactions). We also incur financing costs in connection with establishing those facilities, which are presented as a direct deduction from the carrying amount of the relevant debt liability and amortize them to interest and financing costs over the term of the underlying obligation using the effective interest method.

Interest Income

We earn interest income on our cash deposits with our lenders and other financial institutions.

Gain / (Loss) on interest rate swaps, net

We enter into interest rate swap transactions to manage interest costs and risk associated with changing interest rates with respect to our variable interest loans and credit facilities. Interest rate swaps are recorded in the balance sheet as either assets or liabilities, measured at their fair value (Level 2), with changes in such fair value recognized in earnings under (gain)/loss on interest rate swaps, net, unless specific hedge accounting criteria are met. When interest rate swaps are designated and qualify as cash flow hedges, the effective portion of the unrealized gains/losses from those swaps is recorded in Other Comprehensive Income / (Loss) while any ineffective portion is recorded as Gain/(loss) on interest rate swaps, net.

Results of Operations

The six-month period ended June 30, 2022 compared to the six-month period ended June 30, 2021

Voyage revenues net of Voyage expenses: Voyage revenues for the six months ended June 30, 2022 increased to $778.2 million from $511.9 million in the corresponding period in 2021. Time charter equivalent revenues (“TCE Revenues”) (as defined above) were $642.4 million compared to $411.3 million for the corresponding period in 2021, which is indicative of improved market conditions prevailing during the six month period ended June 30, 2022 compared to the corresponding period in 2021 and the increase in the average number of vessels in our fleet to 128.0 vessels in the first six months of 2022 from 122.7 vessels. As a result, the TCE rate for the first six months of 2022 was $28,924 compared to $19,371 for the corresponding period in 2021. Please refer to the table above for the calculation of the TCE Revenues and TCE and their reconciliation with Voyage Revenues, which is the most directly comparable financial measure calculated and presented in accordance with U.S. GAAP.

Charter-in hire expenses: Charter-in hire expenses for the six months ended June 30, 2022 and 2021 were $13.0 million and $7.3 million, respectively. This increase is attributable to the increase in charter-in days to 506 in the first six months of 2022 from 327 in the corresponding period in 2021 as well as the increased charter-in rates prevailing during 2022.

Vessel operating expenses: For the six-months ended June 30, 2022 and 2021, vessel operating expenses were $115.8 million and $100.3 million, respectively, partially driven by the increase in the average number of vessels in our fleet. Vessel operating expenses for the first six months of 2022 included additional crew expenses related to the increased number and cost of crew changes performed during the period as a result of COVID-19 restrictions estimated to be $5.6 million. Vessel operating expenses for the first six months of 2021 included COVID-19 related expenses estimated to be $3.0 million and pre-delivery and pre-joining expenses of $2.3 million.  The overall increase was mainly driven by higher repair and maintenance costs due to the preventive maintenance program of our fleet during the applicable period, so as to ensure quality service to our clients and minimize off hire time.

Dry docking expenses: During the six month period ended June 30, 2022, we incurred $19.2 million dry docking expenses mainly attributable to thirteen of our vessels that completed their periodic dry docking surveys within such period as well as seven vessels whose periodic dry docking was in progress during that period. During the first six months of 2021, we incurred $18.9 million dry-docking expenses mainly attributable to nineteen of our vessels that completed their periodic dry docking surveys within such period as well as one vessel whose periodic dry docking was in progress during that period.

Depreciation: Depreciation expense increased to $77.5 million for the six month period ended June 30, 2022, compared to $74.3 million for the corresponding period in 2021. The increase was mainly driven by the increase in the average number of vessels in 2022 compared to 2021.

Management fees: Management fees remained almost unchanged for the six month period ended June 30, 2022 at $9.8 million compared to $9.6 million for the corresponding period of 2021 due to the fact that there was no significant change in the daily cost provided under management agreements in effect during the abovementioned periods.

General and administrative expenses: General and administrative expenses for the six month period ended June 30, 2022 were $25.9 million compared to $17.4 million in the corresponding period in 2021 primarily due to the increase in the stock based compensation expense to $11.5 million from $2.6 million.

(Gain)/Loss on forward freight agreements and bunker swaps, net: For the six month period ended June 30, 2022, we incurred a net loss on FFAs and bunker swaps of $3.9 million, consisting of an unrealized loss of $0.9 million and a realized loss of $3.0 million. For the six month period ended June 30, 2021, we incurred a net loss on FFAs and bunker swaps of $1.5 million, consisting primarily of an unrealized loss of $1.6 million.

Interest and finance costs net of interest and other income/(loss): Interest and finance costs net of interest and other income/(loss) for the first six month periods of 2022 and 2021 were $24.2 million and $27.8 million, respectively. This decrease is primarily attributable to the decline in the average interest rate on our outstanding indebtedness, mainly driven by the refinancing of certain of our debt agreements and the redemption of our outstanding 8.30% Senior Notes in July 2021, as well as the decrease in our weighted average outstanding debt balance during the corresponding periods.

Cash Flows

Net cash provided by operating activities for the first six months of 2022 and 2021 was $469.1 million and $219.7 million, respectively. This increase was primarily driven by the higher charter rates due to the improved market conditions that prevailed in the first six months of 2022 compared to the corresponding period in 2021 and the higher average number of vessels in 2022 compared to 2021 as described above, and the decrease in our interest payments due to refinancing of certain of our debt agreements as well as the decrease in our weighted average outstanding debt balance during the corresponding periods.

Net cash used in investing activities for the first six months of 2022 and 2021 was $45.9 million and $108.3 million, respectively. The decrease was primarily attributable to cash paid in 2021 in connection with the acquisition of vessels as opposed to no vessel acquisitions taking place in 2022, as well as to lower capital expenditures for vessel upgrades paid in 2022 compared to relevant payments in 2021.

Net cash used in financing activities for the first six months of 2022 was $546.1 million compared to net cash used in financing activities of $64.2 million in the first six months of 2021. This variation was primarily driven by the dividend payments of $375.3 million made in the first six months of 2022 compared to $30.7 million dividend payments made in corresponding period in 2021 and higher net debt repayments of $167.4 million in 2022 compared to $31.0 million in 2021.

Significant Accounting Policies and Critical Accounting Estimates

For a description of our critical accounting estimates and all of our significant accounting policies, see Note 2 to our audited financial statements and “Item 5 - Operating and Financial Review and Prospects,” included in our 2021 Annual Report. There have been no material changes from the “Critical Accounting Estimates” previously disclosed in our 2021 Annual Report.

 The accompanying notes are integral part of these unaudited interim condensed consolidated financial statements.

The accompanying notes are integral part of these unaudited interim condensed consolidated financial statements.

The accompanying notes are integral part of these unaudited interim condensed consolidated financial statements.

The accompanying notes are integral part of these unaudited interim condensed consolidated financial statements.

The accompanying notes are integral part of these unaudited interim condensed consolidated financial statements.

1.               Basis of Presentation and General Information:

Star Bulk Carriers Corp. (“Star Bulk”) is a global shipping company providing worldwide seaborne transportation solutions in the dry bulk sector. Star Bulk was incorporated in the Marshall Islands on December 13, 2006 and maintains offices in Athens, New York, Limassol, Singapore and Germany. Star Bulk’s common shares trade on the NASDAQ Global Select Market under the ticker symbol “SBLK”.

The unaudited interim condensed consolidated financial statements include the accounts of Star Bulk and its wholly owned subsidiaries (collectively, the “Company”) and have been prepared in accordance with accounting principles generally accepted in the United States of America (“U.S. GAAP”) and applicable rules and regulations of the U.S. Securities and Exchange Commission (the “SEC”) for interim financial information. Accordingly, they do not include all the information and notes required by U.S. GAAP for annual financial statements.

These unaudited interim condensed consolidated financial statements have been prepared on the same basis as the annual consolidated financial statements for the year ended December 31, 2021 and, in the opinion of management, reflect all normal recurring adjustments considered necessary for a fair presentation of the Company’s financial position, results of operations and cash flows for the periods presented. Operating results for the six-month period ended June 30, 2022 are not necessarily indicative of the results that might be expected for the fiscal year ending December 31, 2022.

The unaudited interim condensed consolidated financial statements presented in this report should be read in conjunction with the annual consolidated financial statements for the year ended December 31, 2021 included in the Company’s Annual Report on Form 20-F for the year ended December 31, 2021 (the “2021 Annual Report”). The balance sheet as of December 31, 2021 has been derived from the audited consolidated financial statements as of that date, but, pursuant to the requirements for interim financial information, does not include all of the information and footnotes required by U.S. GAAP for complete financial statements.

Unless otherwise defined herein, capitalized words and expressions used herein shall have the same meanings ascribed to them in the 2021 Annual Report.

The recent reopening of the global economy and consequent increased demand across all key dry bulk commodities following the COVID-19 pandemic has positively affected the Company’s revenues. On the other hand, as a result of COVID-19 restrictions imposed since 2020, additional crew expenses continue to be incurred.

There continues to be a high level of uncertainty relating to how the pandemic will evolve, including as a result of new COVID-19 variants, the availability of vaccines and their global deployment, the development of effective treatments, the imposition of effective public safety and other protective measures and the public's and government's responses to such measures. An increase in the severity or duration or a resurgence of the COVID-19 pandemic could have a material adverse effect on the Company’s future business, results of operations, cash flows, financial condition, the carrying value of the Company’s assets, the fair values of the Company’s vessels, and the Company’s ability to pay dividends.

1.       Basis of Presentation and General Information - continued:

In addition, the geopolitical situation in Eastern Europe intensified in late February 2022, with the commencement of Russia’s military action against Ukraine. Three of the Company’s vessels, the Star Pavlina, Star Helena and Star Laura, had arrived in three different Ukrainian ports to load various grain cargos under charterers’ instructions, well ahead of the commencement of the war activities, but at the time of the invasion, the loading operations were suspended by the port authorities. The Company had been intensively exploring options with the charterers to navigate the vessels safely out of the ports but unfortunately the ports were shut down and blockaded and safe passages were impossible. Since that time, all three vessels have been safely manned with Ukrainian crew. An estimate of any potential impact of the blockade cannot be made at this point of time. However, the Company does not expect such impact, if any, to be material, because in addition to standard industry vessel risk insurance, war risk insurance is in place for all three vessels and the applicable war risk insurers have confirmed that they hold the vessels covered at their current position in Ukraine, which includes Hull and Machinery and Increased Value insurance, Detention and Diversion Cover and War loss of Hire for 180 days. Furthermore, and to the extent that a court or tribunal has not declared the frustration of the charterparties for the above three vessels, as frustration is by operation of law, the Company believes that the vessels remain on hire and hire continues payable under the charterparty clauses. The situation continues to be closely monitored by management to ensure that the interests of all its stakeholders are safeguarded.

The vessel blockade may be impacted by diplomatic efforts to address the Russia-Ukraine conflict, including the recent multilateral agreement among Russia, Ukraine, Turkey and the United Nations to resume grain exports from the Black Sea regions.  The multilateral agreement is currently expected to result in an easing of the blockades on Black Sea ports in Ukraine and may result in the passage of one or more of the Star Pavlina, Star Helena and Star Laura out of the region in the near future.

As of June 30, 2022, the Company owned a modern fleet of 128 dry bulk vessels consisting of Newcastlemax, Capesize, Post Panamax, Kamsarmax, Panamax, Ultramax and Supramax vessels with a carrying capacity between 52,425 deadweight tonnage (“dwt”) and 209,529 dwt, a combined carrying capacity of 14.1 million dwt and an average age of 10.4 years.

2.               Significant accounting policies and recent accounting pronouncements:

Significant Accounting Policies and Recent Accounting Pronouncements 

A summary of the Company’s significant accounting policies and recent accounting pronouncements is included in Note 2 to the Company’s consolidated financial statements included in the 2021 Annual Report. There have been no changes to the Company’s significant accounting policies and recent accounting pronouncements in the six-month period ended June 30, 2022.

The time charter-in payments required to be made after June 30, 2022, for the outstanding operating lease liabilities of the time charter-in agreements with an initial term exceeding 12 months, recognized on the balance sheet, as described in Note 2x) A) to the Company’s consolidated financial statements included in the 2021 Annual Report, are as follows:

Significant Accounting Policies and Recent Accounting Pronouncements - Operating Lease, Time Charter - in Payments (Table)

The weighted average remaining lease term of these charter-in arrangements as of June 30, 2022 is 5.62 years.

The office rental payments required to be made after June 30, 2022, for the outstanding operating lease liabilities of the office rental arrangements, recognized on the balance sheet, as described in Note 2x) D) to the Company’s consolidated financial statements included in the 2021 Annual Report, are as follows:

The weighted average remaining lease term of these office rent arrangements as of June 30, 2022 is 1.62 years. Office rent expenses for the six-month periods ended June 30, 2021 and 2022 were $277 and $247, respectively.

3.               Transactions with Related Parties:

Details of the Company’s transactions with related parties did not change in the six-month period ended June 30, 2022 and are discussed in Note 3 of the Company’s consolidated financial statements for the year ended December 31, 2021, included in the 2021 Annual Report.

Transactions and balances with related parties are analyzed as follows:

Transactions with Related Parties - Balance Sheets (Table) 

4.               Inventories:

The amounts shown in the consolidated balance sheets are analyzed as follows:

Inventories (Table)

5.               Vessels and other fixed assets, net:

The amounts in the consolidated balance sheets are analyzed as follows:

Vessels and other fixed assets, net - Schedule of vessels and other fixed assets (Table)

As of June 30, 2022, 95 of the Company’s 128 vessels, having a net carrying value of $2,242,564, serve as collateral under certain of the Company’s loan facilities and were subject to first-priority mortgages (Note 7). Title of ownership is held by the relevant lenders for another 21 vessels with a carrying value of $504,892 to secure the relevant sale and lease back financing transactions (Note 6). In addition, certain of the Company’s vessels having a net carrying value of $463,452 are subject to second-priority mortgages and serve as collateral under certain of the Company’s loan facilities (Note 7).

There was no change to the Company’s operating fleet during the six-month period ended June 30, 2022, while during this period the Company continued the technical upgrades to its fleet, such as the installation of ballast water treatment systems (“BWTS”) and Energy Saving Devices (“ESD”).

6.               Lease financing:

Details of the Company’s lease financings are discussed in Note 6 of the Company’s consolidated financial statements for the year ended December 31, 2021, included in the 2021 Annual Report and are supplemented by the below new activities during the six-month period ended June 30, 2022.

On May 24, 2022, the Company repaid the outstanding amounts of $83,570 under the lease agreements of the Eneti Acquisition Vessels. The Company replenished the funds used in June for the prepayment of the outstanding lease amounts of the aforementioned vessels with the proceeds received under the amended and restated facility (the ING $310,600 Facility) with ING Bank N.V., London Branch (“ING”) (Note 7).

In addition in June 2022, the Company repaid the outstanding amounts of $69,899 under the lease agreements with CMBL for the vessels Laura, Idee Fixe, Roberta, Kaley, Diva, Star Sirius and Star Vega. The outstanding lease amount of the vessel Star Vega was also refinanced by the ING $310,600 Facility (Note 7) and the outstanding lease amounts of the remaining vessels, except for Diva, were refinanced from proceeds received under a new facility with Citibank, N.A., London Branch (“Citi”) (Note 14).

All of the Company’s lease financings bear interest at LIBOR plus a margin. The corresponding interest expense of the Company’s bareboat lease financing activities is included within “Interest and finance costs” in the unaudited interim condensed consolidated income statements (Note 7).

Some of the Company’s lease financings contain financial and other covenants similar to those included in its credit facilities, as described in Note 7 below and in Note 7 of the Company’s consolidated financial statements for the year ended December 31, 2021, included in the 2021 Annual Report, with which, as of June 30, 2022, the Company was in compliance (Note 7).

The principal payments required to be made after June 30, 2022, for the Company’s outstanding finance lease obligations recognized on the balance sheet, as of that date, after giving effect to the refinancing arrangements discussed in Note 14, to the extent applicable are as follows:

Lease financing - Capital lease obligations, Principal payments (Table) 

7.               Long-term bank loans:

Details of the Company’s credit facilities and debt securities are discussed in Note 7 of the Company’s consolidated financial statements for the year ended December 31, 2021, included in the 2021 Annual Report and supplemented by the below new activities during the six-month period ended June 30, 2022.

New Financing Activities

(i) ING $310,600 Facility:

On June 28, 2022, the Company entered into an amended and restated facility agreement with ING Bank N.V., London Branch (ING) the ING $310,600 Facility, in order to increase the financing by $100,000 and to include additional borrowers under the existing ING $210,600 Facility. The additional financing amount of $100,000 was available in nine tranches ranging from $9,895 to $12,368 and were drawn on June 30, 2022 in order to refinance the outstanding amounts under the lease agreements with CMBL of the Eneti Acquisition Vessels and the Star Vega (Note 6) and to refinance the outstanding loan amount of HSBC $80,000 Facility of the vessel Madredeus, as described below. Each tranche is repayable in 20 equal quarterly principal payments ranging from $261 to $412 plus a balloon payment ranging from $1,649 to $6,746 due five years after their drawdown. ING $310,600 Facility, is secured also by a first priority mortgage on the Eneti Acquisition Vessels, Star Vega and Madredeus.

In addition to the scheduled repayments during the six month period ended June 30, 2022, on March 24, 2022 and June 23, 2022 the Company prepaid an amount of $4,100 and $6,600, respectively, corresponding to the outstanding loan amount of the vessels Star Omicron and Madredeus under the HSBC $80,000 Facility. Furthermore, as further discussed in Note 7 of the Company’s consolidated financial statements for the year ended December 31, 2021, included in the 2021 Annual Report, the HSBC Working Capital Facility, which had been subject to annual renewals from the lender, was not renewed in February 2022.

The Company’s credit facilities contain financial covenants and undertakings, a summary of which is included in Note 7 of the Company’s consolidated financial statements for the year ended December 31, 2021, included in the 2021 Annual Report.

As of December 31, 2021 and June 30, 2022, the Company was required to maintain minimum liquidity, not legally restricted, of $64,000, which is included within “Cash and cash equivalents” in the consolidated balance sheets. In addition, as of December 31, 2021 and June 30, 2022, the Company was required to maintain a minimum liquidity, legally restricted, of $22,986 and $14,596, respectively, which is included within “Restricted cash, current and non-current” in the consolidated balance sheets. The decrease in restricted cash is attributable to the decrease in collateral required under certain of the Company’s financial instruments (Note 12).

7.       Long-term bank loans - continued:

As of June 30, 2022, the Company was in compliance with the applicable financial and other covenants contained in its debt agreements and lease financings described in Note 6.

The principal payments required to be made after June 30, 2022 for all of the then-outstanding bank debt, after giving effect to the refinancing arrangements discussed in Note 14, to the extent applicable are as follows:

All of the Company’s bank loans and applicable lease financings bear interest at LIBOR plus a margin, except for the DSF $55,000 Facility (Note 12). In addition, following a number of interest rate swaps that the Company entered during the last three years (Note 12), it has converted, as of June 30, 2022, a total of $796.1 million of its debt from floating to an average fixed rate of 45 bps. The weighted average interest rate (including the margin) related to the Company’s existing bank loans and lease financings for the six-month periods ended June 30, 2021 and 2022 was 3.06% and 2.82%, respectively.

The commitment fees incurred during the six-month periods ended June 30, 2021 and 2022 with regards to the Company’s unused amounts under its credit facilities were $3 and $700, respectively. There are no undrawn portions as of June 30, 2022.

The amounts of “Interest and finance costs” included in the unaudited interim condensed consolidated income statements are analyzed as follows:

Long-term bank loans - Interest and finance costs (Table)

During the six-month periods ended June 30, 2021 and 2022, the Company incurred finance expenses of $0 and $2,344, respectively and during the respective periods the Company wrote off an amount of $1,859 and $1,090, respectively of unamortized debt issuance costs. The above mentioned amounts were incurred in connection with the refinancing of certain credit facilities and lease financings as described in Note 7 (above) and in Note 6 and are included under “Gain/(Loss) on debt extinguishment, net” in the unaudited interim condensed consolidated statements of operations.

7.       Long-term bank loans - continued:

Also upon de-designation of an interest rate swap, an aggregate amount of $3,563 representing the cumulative gain on the hedging instrument on the de-designation date, previously recognized in equity was written-off, since the forecasted transactions associated with this hedge were no longer probable since the corresponding loan was fully repaid. The abovementioned amount was included under “Gain/(Loss) on debt extinguishment, net” in the unaudited interim condensed consolidated statements of operations.

8.               Preferred and Common Shares and Additional Paid-in Capital:

Details of the Company’s preferred shares and common shares are discussed in Note 8 of the Company’s consolidated financial statements for the year ended December 31, 2021, included in the 2021 Annual Report.

During the six months ended June 30, 2022, the Company issued and sold 654,690 common shares through the effective at-the-market offering programs for net proceeds of $19,792. In addition, 528,941 common shares were issued under the Company’s Equity Incentive Plans, as defined in Note 10 of the Company’s consolidated financial statements for the year ended December 31, 2021, included in the 2021 Annual Report and further discussed below in Note 10.

In addition, during the six months ended June 30, 2022, the Company repurchased 790,011 shares under the authorized share repurchase program (the “Share Repurchase Program”) in open market transactions at an average price of $25.37 per share, for an aggregate consideration of $20,044. The repurchased shares were cancelled and removed from the Company’s share capital. Commissions and share cancellation fees incurred amounted to $24.

Pursuant to its dividend policy during the six month period ended June 30, 2022, the Company declared and paid a cash dividend of $375,251 (or $2.00 per common share for the fourth quarter of 2021 and $1.65 per common share for the first quarter of 2022).

9.               Earnings per Share:

The computation of basic earnings per share is based on the weighted average number of common shares outstanding for the six-month periods ended June 30, 2021 and 2022. The calculation of basic earnings per share does not consider the non-vested shares as outstanding until the time-based vesting restriction has lapsed. Diluted earnings per share gives effect to stock awards, stock options and restricted stock units using the treasury stock method, unless the impact is anti-dilutive.

The Company calculates basic and diluted earnings per share as follows:

Earnings per Share - Earnings/ (Loss) per Share (Table) 

10.            Equity Incentive Plans:

Details of the Company’s equity incentive plans and share awards granted through December 31, 2021, are discussed in Note 10 of the Company’s consolidated financial statements for the year ended December 31, 2021, included in the 2021 Annual Report.

On April 11, 2022, the Company's Board of Directors adopted the 2022 Equity Incentive Plan (the “2022 Plan”) and reserved for issuance 810,000 common shares thereunder. On the same date, all of the 810,000 restricted common shares were granted to certain directors, officers and employees of which 528,745 restricted common shares vest in October 2022, 193,405 restricted common shares vest in April 2023 and the remaining 87,850 common shares vest in April 2025. The fair value of each share was $25.69, based on the closing price of the Company’s common shares on the grant date.

The stock based compensation cost for the six month period ended June 30, 2021 amounted to $2,571. The stock based compensation cost for the six month period ended June 30, 2022 amounted to $11,480. This amount includes $3,370 recognized in connection with the scrubber incentive award approved on June 7, 2021 (as further described in Note 10 of the Company’s consolidated financial statements for the year ended December 31, 2021, included in the 2021 Annual Report). The respective charge was calculated based on the Company’s estimate of the intrinsic value of the award basis June 30, 2022 VLSFO-HSFO spread and assuming 5% of scrubber savings to be awarded by the Board of Directors.

A summary of the status of the Company’s non-vested restricted shares as of June 30, 2022 and the movement during the six-month period ended June 30, 2022 is presented below.

Equity Incentive Plans - Summary of non-vested restricted share options (Table)

As of June 30, 2022, the estimated compensation cost relating to non-vested restricted share awards not yet recognized is $22,060 (including the scrubber incentive award) and is expected to be recognized over the weighted average period of 0.85 years. During the six month period ended June 30, 2022 the Company paid $2,467 for dividends to shareholders of non-vested shares.

11.            Commitments and Contingencies:

a)              Commitments:

The following tables set forth inflows and outflows related to the Company’s charter party arrangements and other commitments, as at June 30, 2022.

Charter party arrangements:

Commitments and Contingencies - Charter party agreements (Table) 

Other commitments: 

Commitments and Contingencies - Other commitments (Table)

b)              Legal proceedings

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 accrues for the cost of environmental liabilities when management becomes aware that a liability is probable and is able to reasonably estimate the probable exposure.  Currently, management is not aware of, and has not accrued for, any such claims or contingent liabilities requiring disclosure in the unaudited interim condensed consolidated financial statements.

12.            Fair value measurements and Hedging:

Interest rate swaps

The Company from time to time enters into interest rate derivative contracts to manage interest costs and risks associated with changing interest rates with respect to certain of its credit facilities. Details of the Company’s interest rate swaps are discussed in Note 17 of the Company’s consolidated financial statements for the year ended December 31, 2021, included in the 2021 Annual Report.

The Company’s interest rate swaps were designated and qualified as cash flow hedges. The effective portion of the unrealized gains/losses from those swaps is recorded in Other Comprehensive Income / (Loss). No portion of the cash flow hedges was ineffective during the six-month periods ended June 30, 2021 and 2022.

A gain of approximately $16,150 in connection with the interest rate swaps is expected to be reclassified into earnings during the following 12-month period when realized.

Freight Derivatives and Bunker Swaps

During the year ended December 31, 2021 and the six-month period ended June 30, 2022, the Company entered into a number of freight derivatives, including freight forward agreements (“FFAs”), freight options and bunker swaps, the results of which for the six-month periods ended June 30, 2021 and 2022 and the valuation of their open positions as at December 31, 2021 and June 30, 2022 are presented in the tables below.

The amounts of Gain / (Loss) on interest rate swaps, freight derivatives and bunker swaps recognized in the unaudited interim condensed consolidated income statements, are analyzed as follows:

Fair value measurements and Hedging - Derivative instruments effect on statement of operations (Table) 

12.       Fair value measurements and Hedging - continued:

The following table summarizes the valuation of the Company’s financial instruments as of December 31, 2021 and June 30, 2022. The fair value of freight derivatives and bunker swaps was determined through Level 1 inputs of the fair value hierarchy (quoted prices from the applicable exchanges such as London Clearing House (LCH) or Singapore Exchange (SGX)), while the fair value of the interest rate swaps was determined through Level 2 inputs of the fair value hierarchy (such as interest rate curves).

Fair Value Measurements and Hedging - Fair value on a recurring basis - Significant Other Observable Inputs (Table) 

Certain of the Company’s financial instruments discussed above require the Company to periodically post additional collateral depending on the level of any open position under such financial instruments, which as of December 31, 2021 and June 30, 2022 amounted to $10,128 and $990, respectively, and are included within “Restricted cash, current” in the consolidated balance sheets (Note 7).

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 financing under bareboat leases (Level 2), bearing interest at variable interest rates, approximates their recorded values as of June 30, 2022, due to the variable interest rate nature thereof. The fair value of the DSF $55,000 Facility (Note 7) as of June 30, 2022, measured through level 2 inputs (such as interest rate curves) is $46,324, which is $214 lower than the loan’s book value of $46,538. 

13.            Voyage revenues:

The following table shows the voyage revenues earned from time charters, voyage charters and pool agreements for the six-month periods ended June 30, 2021 and 2022, as presented in the consolidated income statements:

 Voyage revenues (Table)

As of June 30, 2022, trade accounts receivable, (excluding the provision for doubtful debt) increased by $11,668, and deferred revenue increased by $3,292 compared to December 31, 2021. These changes were mainly attributable to the timing of collections.

Further, as of June 30, 2022, deferred assets related to revenue contracts (included within “Other current assets” in the consolidated balance sheets) decreased by $2,083 compared to December 31, 2021, from $4,923 to $2,840. The outstanding balance is mainly affected by the timing of commencement of revenue recognition.

Under ASC 606, unearned voyage charter revenue represents the consideration received for undelivered performance obligations. The Company recorded $24,960 as unearned revenue related to voyages in progress as of December 31, 2021, which were recognized in earnings in the six month period ended June 30, 2022 as the performance obligations were satisfied in that period. In addition, the Company recorded $28,252 as unearned revenue related to voyages in progress as of June 30, 2022, which will be recognized in earnings as the performance obligations will be satisfied.

The adjustment to Company’s revenues from the vessels operating in the CCL Pool, deriving from the allocated pool result for those vessels as determined in accordance with the agreed-upon formula, for the six-month periods ended June 30, 2021 and 2022 was ($4,497) and $3,254, respectively, and is included within “Pool Revenues” in the table above, while the corresponding adjustment to Company’s revenues from the Short Pool for the six-month periods ended June 30, 2021 and 2022 was ($352) and $147 and is included within “Pool Revenues” in the table above. Pool Revenues also include other minor participation adjustments.

14.            Subsequent Events: 

Mercurial Virgo, Amami and Star Calypso 

Star Sirius, Laura, Idee Fixe, Kaley, Roberta, Star Apus, Star Cleo, Star Columba, Star Dorado, Star Hydrus, Star Pegasus and Star Pyxis