we have guaranteed $239.9 million of
indebtedness outstanding at Joint Venture entities. As of December 31, 2019, we had outstanding equity commitments of $54.6
million in the aggregate, consisting of payments (i) upon each vessels delivery from the shipyard in relation to the
five vessels under construction, payable until the vessels delivery, expected between the third quarter of 2020 and the
second quarter of 2021, while approximately $0.4 billion in total is financed through a financial institution, (ii) in
relation to the construction and installation of scrubbers in ten of our existing vessels, while an amount of $18.0 million
for five of them is financed and (iii) in relation to the balance amount payable for the acquisition cost of one secondhand
vessel.
As of February 25, 2020, we had three unencumbered vessels in the water. Under the Framework Deed there were three secondhand vessels acquired which are free of debt.
Our common stock dividend policy impacts our future liquidity needs. See Item 8. Financial InformationA. Consolidated Statements and Other Financial InformationDividend Policy. We paid our first cash dividend since becoming a public company in November 2010 on February 4, 2011 in an
amount of $0.25 per share of common stock. We have subsequently paid dividends to holders of our common stock of $0.25 per share on May 12, 2011 and August 9, 2011, $0.27 per share on November 7, 2011, February 8, 2012, May 9, 2012, August 7, 2012, November 6, 2012, February 13, 2013, May 8,
2013, August 7, 2013, November 6, 2013 and February 4, 2014, $0.28 per share on May 13, 2014, August 6, 2014, November 5, 2014 and February 4, 2015, $0.29 per share on May 6, 2015, August 5, 2015, November 4, 2015, February 4, 2016, May 4, 2016 and August 17, 2016 and $0.10 per share on
November 4, 2016, February 6, 2017, May 8, 2017, August 7, 2017, November 6, 2017, February 6, 2018, May 8, 2018, August 8, 2018, November 8, 2018, February 7, 2019, May 8, 2019, August 7, 2019, November 7, 2019 and February 5, 2020.
Our preferred stock dividend payment obligations also impact our future liquidity needs. See Item 8. Financial Information-A. Consolidated Statements and Other Financial Information-Preferred Stock Dividend Requirements. We paid dividends to holders of our Series B Preferred Stock of $0.3654
per share on October 15, 2013 and $0.476563 per share on January 15, 2014, April 15, 2014, July 15, 2014, October 15, 2014, January 15, 2015, April 15, 2015, July 15, 2015, October 15, 2015, January 15, 2016, April 15, 2016, July 15, 2016, October 17, 2016 January 17, 2017, April 17, 2017, July 17, 2017,
October 16, 2017, January 16, 2018, April 16, 2018, July 16, 2018, October 15, 2018, January 15, 2019, April 15, 2019, July 15, 2019, October 15, 2019 and January 15, 2020. We paid dividends to holders of our Series C Preferred Stock of $0.495833 per share on April 15, 2014 and $0.531250 per share on
July 15, 2014, October 15, 2014, January 15, 2015, April 15, 2015, July 15, 2015, October 15, 2015, January 15, 2016, April 15, 2016, July 15, 2016, October 17, 2016, January 17, 2017, April 17, 2017, July 17, 2017, October 16, 2017, January 16, 2018, April 16, 2018, July 16, 2018, October 15, 2018, January
15, 2019, April 15, 2019, July 15, 2019, October 15, 2019 and January 15, 2020. We paid dividends to holders of our Series D Preferred Stock of $0.376736 per share on July 15, 2015 and $0.546875 per share on October 15, 2015 and January 15, 2016, April 15, 2016, July 15, 2016, October 17, 2016,
January 17, 2017, April 17, 2017, July 17, 2017, October 16, 2017, January 16, 2018, April 16, 2018, July 16, 2018, October 15, 2018, January 15, 2019, April 15, 2019, July 15, 2019, October 15, 2019 and January 15, 2020. We paid dividends to holders of our Series E Preferred Stock of $0.462240 per share
on April 16, 2018 and $0.554688 per share on July 16, 2018, October 15, 2018, January 15, 2019, April 15, 2019, July 15, 2019, October 15, 2019 and January 15, 2020.
The dividends and distributions paid during the years ended December 31, 2015, 2016, 2017, 2018 and 2019 were funded in part by borrowings and in part by cash from operations. On a cumulative basis for the entire period, cash flow from operating activities exceeded the aggregate amount of
dividends and distributions.
On July 6, 2016, we implemented the Dividend Reinvestment Plan and registered 30 million shares for issuance under the Dividend Reinvestment Plan. The Dividend Reinvestment Plan offers holders of our common stock the opportunity to purchase additional shares by having their cash dividends
automatically reinvested in our common stock. Participation in the Dividend Reinvestment Plan is optional, and shareholders who decide not to participate in the Dividend Reinvestment Plan will continue to receive cash dividends, as declared and paid in the usual manner. On February 7,
77
2019, May 8, 2019, August 7, 2019, November 7, 2019 and February 5, 2020, we issued 961,656 shares, 775,947 shares, 798,908 shares, 650,540 shares and 649,928 shares, respectively, pursuant to the Dividend Reinvestment Plan. Members of the Konstantakopoulos family have reinvested a substantial part
of their cash dividends on each of the aforementioned dates.
Working Capital Position
We have historically financed our capital requirements with cash flow from operations, equity contributions from stockholders and long-term financing in the form of bank debt or sale and leaseback transactions. Our main uses of funds have been capital expenditures for the acquisition of new vessels,
for fleet renewal or expansion, expenditures incurred in connection with ensuring that our vessels comply with international and regulatory standards, repayments of bank loans and payments of dividends. We will require capital to fund ongoing operations, the construction of our new vessels, the
acquisition cost of any secondhand vessels we agree to acquire in the future and debt service. Working capital, which is current assets minus current liabilities, including the current portion of long-term debt, was negative $69.3 million at December 31, 2019 and negative $53.9 million at December 31, 2018.
We anticipate that internally generated cash flow will be sufficient to fund the operations of our fleet, including our working capital requirements. See Credit Facilities, Capital Leases and Other Financing Arrangements.
Cash Flows
Years ended December 31, 2017, 2018 and 2019
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|
|
|
|
|
|
Year ended December 31,
|
|
2017
|
|
2018
|
|
2019
|
|
|
(Expressed in millions of U.S. dollars)
|
Condensed cash flows
|
|
|
|
|
|
|
Net Cash Provided by Operating Activities
|
|
|
$
|
|
191.8
|
|
|
|
$
|
|
140.8
|
|
|
|
$
|
|
250.4
|
|
Net Cash Used in Investing Activities
|
|
|
|
(43.4
|
)
|
|
|
|
|
(112.6
|
)
|
|
|
|
|
(8.9
|
)
|
|
Net Cash Used in Financing Activities.
|
|
|
|
(140.0
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)
|
|
|
|
|
(80.5
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)
|
|
|
|
|
(212.2
|
)
|
|
Net Cash Provided by Operating Activities
Net cash flows provided by operating activities for the year ended December 31, 2019 increased by $109.6 million to $250.4 million, compared to $140.8 million for the year ended December 31, 2018. The increase is mainly attributable to the increased cash from operations of $109.1 million, the
favorable change in working capital position, excluding the current portion of long-term debt and the accrued charter revenue (representing the difference between cash received in that period and revenue recognized on a straight-line basis) of $20.4 million and the decreased special survey costs of $12.3
million during the year ended December 31, 2019 compared to the year ended December 31, 2018, partly off-set by increased payments for interest (including swap payments) during the year of $19.3 million.
Net cash flows provided by operating activities for the year ended December 31, 2018, decreased by $51.0 million to $140.8 million, from $191.8 million for the year ended December 31, 2017. The decrease is mainly attributable to the decreased cash from operations of $28.1 million, the increased
special survey costs of $13.1 million and the unfavorable change in working capital position, excluding the current portion of long-term debt and the accrued charter revenue (representing the difference between cash received in that period and revenue recognized on a straight-line basis) of $11.7 million
during the year ended December 31, 2018 compared to the year ended December 31, 2017; partly offset by decreased payments for interest (including swap net payments) during the year of $9.9 million.
78
Net Cash Used in Investing Activities
Net cash used in investing activities was $8.9 million in the year ended December 31, 2019, which mainly consisted of advance payments for upgrades for certain of our vessels, payments for the acquisition of three second hand vessels, advance payment for the acquisition of one vessel, which was
delivered in January 2020, dividend distribution we received from 11 entities jointly-owned with York pursuant to the Framework Deed and proceeds we received from the sale of five vessels.
Net cash used in investing activities was $112.6 million in the year ended December 31, 2018, which mainly consisted of net payments relating to the acquisition of six secondhand vessels and five vessels under construction, net payments for the acquisition of the 60% equity interest in five companies
previously jointly-owned with York pursuant to the Framework Deed, payments for capital injection into certain entities pursuant to the Framework Deed (net of dividend distributions we received) and proceeds we received from the sale of two vessels.
Net cash used in investing activities was $43.4 million in the year ended December 31, 2017, which consisted of payments for the acquisition of four secondhand vessels and payments for working capital injected into certain entities pursuant to the Framework Deed (net of dividend distributions we
received); partly offset by proceeds we received from the sale of four vessels.
Net Cash Used in Financing Activities
Net cash used in financing activities was $212.2 million in the year ended December 31, 2019, which mainly consisted of (a) $149.6 million of net payments relating to our debt financing agreements (including the prepayments following the sale of five container vessels during the year ended December
31, 2019), (b) $27.4 million we paid for dividends to holders of our common stock for the fourth quarter of 2018, the first quarter of 2019, the second quarter of 2019 and the third quarter of 2019 and (c) $3.8 million we paid for dividends to holders of our Series B Preferred Stock, $8.5 million we paid
for dividends to holders of our Series C Preferred Stock, $8.8 million we paid for dividends to holders of our Series D Preferred Stock and $10.2 million we paid for dividends to holders of our Series E Preferred Stock for the period from October 15, 2018 to January 14, 2019, January 15, 2019 to April
14, 2019, April 15, 2019 to July 14, 2019 and July 15, 2019 to October 14, 2019.
Net cash used in financing activities was $80.5 million in the year ended December 31, 2018, which mainly consisted of (a) $139.2 million net payments relating to our debt financing agreements, (b) $111.2 million net proceeds we received from our January 2018 public offering of 4.6 million shares of
our Series E Preferred Stock, net of underwriting discounts and expenses incurred in the offering, (c) $20.9 million we paid for dividends to holders of our common stock for the fourth quarter of 2017, the first quarter of 2018, the second quarter of 2018 and the third quarter of 2018 and (d) $3.8 million
we paid for dividends to holders of our Series B Preferred Stock, $8.5 million we paid for dividends to holders of our Series C Preferred Stock, $8.8 million we paid for dividends to holders of our Series D Preferred Stock, for the periods from October 15, 2017 to January 14, 2018, January 15, 2018 to
April 14, 2018, April 15, 2018 to July 14, 2018 and July 15, 2018 to October 14, 2018 and $7.2 million we paid for dividends to holders of our Series E Preferred Stock, for the period from January 30, 2018 to April 14, 2018, April 15, 2018 to July 14, 2018 and July 15, 2018 to October 14, 2018.
Net cash used in financing activities was $140.0 million in the year ended December 31, 2017, which mainly consisted of (a) $91.7 million we received from our follow-on offering in May 2017, net of underwriting discounts and expenses incurred in the offering, (b) $192.2 million net payments relating
to our debt financing agreements, (c) $16.5 million we paid for dividends to holders of our common stock for the fourth quarter of 2016, the first quarter, the second quarter and the third quarter of 2017 and (d) $3.8 million we paid for dividends to holders of our Series B Preferred Stock, $8.5 million we
paid for dividends to holders of our Series C Preferred Stock and $8.8 million we paid for dividends to holders of our Series D Preferred Stock, in each case for each of the periods from October 15, 2016 to January 14, 2017, January 15, 2017 to April 14, 2017, April 15, 2017 to July 14, 2017 and July 15,
2017 to October 14, 2017.
79
Credit Facilities, Capital Leases and Other Financing Arrangements
We operate in a capital-intensive industry, which requires significant amounts of investment, and we fund a portion of this investment through long-term debt, mainly from banks or other financial institutions. We have entered into a number of credit facilities, capital leases and other financing
arrangements in order to finance the acquisition of the vessels owned by our subsidiaries and for general corporate purposes. We act either as direct borrower or as guarantor and certain of our subsidiaries act respectively as guarantors or as borrowers. The obligations under our credit facilities, capital
leases and other financing arrangements are secured by, among other things, first priority mortgages over the vessels owned by the respective subsidiaries, charter assignments, first priority assignments of all insurances and earnings of the mortgaged vessels and guarantees by Costamare Inc or the
companies owning the financed vessels.
The following summarizes certain terms of our existing credit facilities, capital leases and other financing arrangements discussed below as at December 31, 2019:
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|
|
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Credit Facilities/Capital Leases
and Other Financing
Arrangements
|
|
Outstanding
Principal
Amount
|
|
Interest Rate(1)
|
|
Maturity
|
|
Repayment profile
|
|
|
(Expressed in thousands
of U.S. dollars)
|
|
|
|
|
|
|
Bank Debt
|
|
|
|
|
|
|
|
|
|
Alpha
|
|
|
|
22,000
|
|
|
LIBOR + Margin(2)
|
|
|
|
2020
|
|
|
Variable installments with
balloon
|
|
Bank of America Merrill Lynch
|
|
|
|
23,833
|
|
|
LIBOR + Margin(2)
|
|
|
|
2021
|
|
|
Straight-line amortization with
balloon
|
|
Credit Agricole
|
|
|
|
65,375
|
|
|
LIBOR + Margin(2)
|
|
|
|
2021
|
|
|
Variable installments with
balloon
|
|
Eurobank
|
|
|
|
18,080
|
|
|
LIBOR + Margin(2)
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|
|
|
2021
|
|
|
Variable installments with
balloon
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|
HSBC-Nerida
|
|
|
|
13,575
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|
|
LIBOR + Margin(2)
|
|
|
|
2022
|
|
|
Straight-line amortization with
balloon
|
|
Tatum et al.
|
|
|
|
44,000
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|
|
LIBOR + Margin(2)
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|
|
|
2025
|
|
|
Straight-line amortization with
balloon
|
|
Costamare Credit Facility
|
|
|
|
155,195
|
|
|
LIBOR + Margin(2)
|
|
|
|
2021
|
|
|
Variable amortization with
balloon
|
|
Verandi et al.
|
|
|
|
20,120
|
|
|
LIBOR + Margin(2)
|
|
|
|
2021
|
|
|
Straight-line amortization with
balloon
|
|
November 2018 Facility
|
|
|
|
36,385
|
|
|
LIBOR + Margin(2)
|
|
|
|
2023
|
|
|
Variable amortization with
balloon
|
|
Adele Shipping
|
|
|
|
66,500
|
|
|
LIBOR + Margin(2)
|
|
|
|
2026
|
|
|
Straight-line amortization with
balloon
|
|
Cadence et al
|
|
|
|
128,400
|
|
|
LIBOR + Margin(2)
|
|
|
|
2027
|
|
|
Straight-line amortization with
balloon
|
|
Quentin et al
|
|
|
|
91,239
|
|
|
LIBOR + Margin(2)
|
|
|
|
2025
|
|
|
Variable amortization with
balloon
|
|
Raymond et al
|
|
|
|
147,110
|
|
|
LIBOR + Margin(2)
|
|
|
|
2025
|
|
|
Straight-line amortization with
balloon
|
|
Capital Leases & Other Financing Arrangements
|
|
|
|
CCBFL Sale and Leaseback
|
|
|
|
102,120
|
(3)
|
|
|
LIBOR + Margin(2)
|
|
|
|
2023
|
(3)
|
|
|
Straight-line amortization with
balloon
|
|
BoComm Sale and Leaseback
|
|
|
|
36,477
|
|
|
Fixed Rate
|
|
|
|
2024
|
|
|
Bareboat structure-fixed daily
charter with balloon
|
|
Pre-Delivery Five Vessels Financing arrangement (Sale and Leaseback)
|
|
|
|
98,421
|
|
|
Fixed Rate
|
|
|
|
2030-2031
|
|
|
Bareboat structure-fixed daily
charter with balloon
|
|
Benedict et al Financing arrangements
|
|
|
|
495,929
|
|
|
Fixed Rate
|
|
|
|
2028
|
|
|
Variable amortization with
balloon
|
|
80
|
|
(1)
|
|
The interest rates of long-term bank debt at December 31, 2019 ranged from 3.75% to 5.53%, and the weighted average interest rate as at December 31, 2019 was 4.2%.
|
|
|
(2)
|
|
The interest rate margin of long-term bank debt at December 31, 2019 ranged from 1.85% to 3.60%, and the weighted average interest rate margin as at December 31, 2019 was 2.2%.
|
|
|
(3)
|
|
Additional information related to upsizing of the principal amount and tenor extension is cited below in the detailed description of the agreement.
|
Alpha Loan
On December 7, 2007, our subsidiaries, Montes Shipping Co. and Kelsen Shipping Co., as joint and several borrowers, entered into a ten-year, $150.0 million loan with Alpha Bank A.E., which we refer to in this section as the Alpha Loan. The lender assigned its obligations under the Alpha Loan
to Alpha Shipping Finance Limited in 2014. The loan is divided into two tranches: Tranche A in the amount of $75.0 million to Montes Shipping Co. and Tranche B in the amount of $75.0 million to Kelsen Shipping Co. The purpose of this facility was to finance part of the acquisition costs of two
vessels, the Maersk Kawasaki and the Kure.
The obligations under the Alpha Loan are guaranteed by Costamare Inc. and are secured by first priority mortgages over the vessels, the Maersk Kawasaki and the Kure, general assignments of earnings, insurances, requisition compensation and charter assignments.
As of December 31, 2019, there was $22.0 million outstanding under Tranche A and Tranche B in aggregate, of the Alpha Loan, and, as of the same date, there was no undrawn available credit. The outstanding loan amount is repayable in two semiannual installments until December 2020 of $5.0
million under both tranches and a balloon payment of $12.0 million payable together with the last installment.
BAML Loan
On May 6, 2016, our subsidiary, Uriza Shipping S.A., as borrower, entered into a five-year, $39.0 million loan with Bank of America Merrill Lynch, which we refer to in this section as the BAML Loan. The purpose of the proceeds raised under this facility was for general corporate purposes. On
September 21, 2016, we entered into a first supplemental agreement under which the bank agreed to the change of the flag of Navarino and the transfer of the technical management to Shanghai Costamare.
The obligations under the BAML Loan are guaranteed by Costamare Inc. and are secured by a first priority mortgage over the vessel Navarino, an account pledge, a general assignment of earnings, insurances, requisition compensation and charter rights.
As of December 31, 2019, there was $23.8 million outstanding under the BAML Loan, and, as of the same date, there was no undrawn available credit. The outstanding loan amount is repayable in six quarterly installments of $1.1 million and a balloon payment of $17.3 million payable together with
the last installment.
Credit Agricole Loan
On August 10, 2016, our subsidiaries, Christos Maritime Corp., Costis Maritime Corp. and Capetanissa Maritime Corp., as joint and several borrowers, entered into a five-year, $116.5 million loan with Credit Agricole Corporate and Investment Bank, which we refer to in this section as the Credit
Agricole Loan. The purpose of this facility was to re-finance in full the existing loans at the time.
The obligations under the Credit Agricole Loan are guaranteed by Costamare Inc. and are secured by first priority mortgages over the vessels, the York, the Sealand Washington and the Cosco Beijing, general assignments of earnings, insurances, requisition compensation and charter assignments.
As of December 31, 2019, there was $65.4 million outstanding under the Credit Agricole Loan, and, as of the same date, there was no undrawn available credit. The outstanding loan amount is
81
repayable in seven quarterly installments of $3.1 million and a balloon payment of $43.5 million payable together with the last installment.
Eurobank Loan
On December 22, 2016, our subsidiaries, Finch Shipping Co., Joyner Carriers S.A. and Rena Maritime Corporation, as borrowers, entered into a five-year, $32.0 million loan with Eurobank Ergasias S.A., which we refer to in this section as the Eurobank Loan. The purpose of this loan was to
refinance an existing loan with Rena Maritime Corporation as borrower and provide working capital to Finch Shipping Co., Joyner Carriers S.A.
The obligations under the Eurobank Loan are guaranteed by Costamare Inc. and are secured by a first priority mortgage over the vessels, Cosco Guangzhou and Messini, an account pledge, a general assignment of earnings, insurances, requisition compensation and charter rights. The obligations
under the Eurobank Loan were also secured by a first priority mortgage over the Neapolis, until the vessels disposal in January 2020.
As of December 31, 2019, there was $18.1 million outstanding under the Eurobank Loan, and, as of the same date, there was no undrawn available credit. Following the disposal of Neapolis we prepaid $1.4 million. Giving effect to this prepayment the outstanding facility amount of $16.7 million was
at the time repayable in eight quarterly installments of $0.7 million (with the first one payable in March 2020) and a balloon payment of $10.8 million payable together with the last installment.
HSBC Nerida Loan
On August 1, 2017, our subsidiary, Nerida Shipping Co., as borrower, entered into a five-year, $17.6 million loan with HSBC Bank, which we refer to in this section as the HSBC Nerida Loan. The purpose of this loan was to finance general corporate purposes relating to a vessel, the Maersk
Kowloon.
The obligations under the HSBC Nerida Loan are guaranteed by Costamare Inc. and are secured by a first priority mortgage over the vessel, Maersk Kowloon, an account pledge, a general assignment of earnings, insurances, requisition compensation and charter rights.
As of December 31, 2019, there was $13.6 million outstanding under the HSBC Nerida Loan, and, as of the same date, there was no undrawn available credit. The outstanding loan amount is repayable in 11 quarterly installments of $0.45 million and a balloon payment of $8.6 million payable
together with the last installment.
Tatum et al. Loan.
On July 17, 2018, our subsidiaries, Tatum Shipping Co. and Singleton Shipping Co., as joint borrowers, entered into a seven-year $48.0 million loan with a bank, which we refer to in this section as the Tatum et al. Loan. The purpose of this loan was to finance general corporate purposes related to
Megalopolis and Marathopolis. The loan was drawn in two equal tranches.
The obligations under the Tatum et al. Loan are guaranteed by Costamare Inc. and are secured by a first priority mortgage over the vessels, Marathopolis and Megalopolis, an account pledge, a general assignment of earnings, insurances, requisition compensation and charter rights.
As of December 31, 2019, there was $44.0 million outstanding under the Tatum et al. Loan, and, as of the same date, there was no undrawn available credit. The outstanding loan amount under both tranches is repayable in twenty-three quarterly installments of $0.8 million and a balloon payment of
$25.6 million payable together with the last installment.
Costamare Credit Facility
On March 7, 2018, Costamare Inc., as borrower, entered into a three-year, $233.0 million credit facility, which we refer to in this section as the Costamare Credit Facility. The purpose of the
82
Costamare Credit Facility was to refinance the existing indebtedness secured by 20 vessels at that time in two tranches (Tranche A in the amount of $180.0 million and Tranche B in the amount of $53.0 million) of the Repaid Costamare Facility.
The obligations under the Costamare Credit Facility are guaranteed by the owners of the mortgaged vessels. The mortgaged vessels as of December 31, 2019, were the Cosco Yantian, Cosco Ningbo, Cosco Hellas, Maersk Kolkata, Maersk Kingston, Maersk Kalamata, Maersk Kobe, Sealand Illinois,
Zim New York, Zim Shanghai, Singapore Express, Oakland Express, Halifax Express, Prosper, Zagora, Venetiko, Lakonia and Areopolis. Our obligations under this credit facility are secured by mortgages over the aforementioned 18 vessels owned by our subsidiaries, who are the guarantors, as well as
general assignments of earnings, insurances and requisition compensation, account pledges, charter assignments and a master agreement assignment.
As of December 31, 2019, there was $155.2 million outstanding under the Costamare Credit Facility, and, as of the same date, there was no undrawn available credit. The outstanding loan amount under both tranches is repayable in six quarterly installments of $11.9 million and a balloon payment of
$84.0 million payable together with the last installment.
Verandi et al. Loan
On October 26, 2018, our subsidiaries, Verandi Shipping Co. and Reddick Shipping Co., as joint borrowers, entered into a $25.0 million loan with a bank, which we refer to in this section as the Verandi et al. Loan. The purpose of this loan was to refinance part of the acquisition costs of the
Maersk Kleven and Maersk Kotka. The loan was drawn in two equal tranches.
The obligations under the Verandi et al. Loan are guaranteed by Costamare Inc. and are secured by a first priority mortgage over the vessels, Maersk Kleven and Maersk Kotka, an account pledge, a general assignment of earnings, insurances, requisition compensation and charter rights.
As of December 31, 2019, there was $20.1 million outstanding under the Verandi et al. Loan, and, as of the same date, there was no undrawn available credit. The outstanding loan amount under both tranches is repayable in six quarterly installments of $1.2 million and a balloon payment of $12.8
million payable together with the last installment.
November 2018 Facility
On November 27, 2018, Costamare Inc., as borrower, entered into a five-year $55.0 million credit facility comprised of a $28.0 million term loan facility (Tranche A) and a $27.0 million revolving credit facility (Tranche B) with a bank, which we refer to in this section as the November 2018 Loan
Facility.
We have used the November 2018 Facility to refinance in full the existing indebtedness of two loan facilities: (a) the Repaid UniCredit Facility, having a balance of $25.0 million at the time of refinancing and (b) the Repaid Orix Facility, having a balance of $19.4 million at the time of refinancing.
The obligations under the November 2018 Loan Facility were initially guaranteed by the owners of 9 mortgaged vessels. Following the sale of four vessels in 2019 and the prepayment of the required amounts under the terms of this facility, our obligations are secured by mortgages on the remaining
five vessels (Trader, Sealand Michigan Luebeck, MSC Methoni and Ulsan), account charges, charter assignments, a swap assignment and general assignments of earnings, insurances and requisition compensation.
As of December 31, 2019, there was $36.4 million outstanding under the November 2018 Loan Facility, and, as of the same date, there was $10.6 million undrawn available credit which can be utilized to finance the acquisition cost of new vessels to be mortgaged under this facility. The outstanding
loan amount under both tranches is repayable in four quarterly installments of $2.0 million, 12 quarterly installments of $1.0 million and a balloon payment of $16.4 million payable together with the last installment.
83
Adele Shipping Loan
On June 24, 2019, our subsidiary Adele Shipping Co., as borrower, entered into a seven-year $68.0 million credit facility with a bank, which we refer to in this section as the Adele Shipping Loan.
We have used the proceeds from Adele Shipping Loan to refinance the Repaid CLC Sale and Leaseback capital lease, for the part related to the MSC Azov and for general corporate purposes. At the time of the refinancing the outstanding amount related to the MSC Azov under the Repaid CLC
Sale and Leaseback capital lease amounted to $58.5 million.
The obligations under the Adele Shipping Facility are guaranteed by Costamare Inc. and are secured by a first priority mortgage over the MSC Azov, an account pledge, a general assignment of earnings, insurances, requisition compensation and charter rights.
As of December 31, 2019, there was $66.5 million outstanding under the Adele Shipping Facility, and, as of the same date, there was no undrawn available credit. The outstanding loan amount is repayable in 27 quarterly installments of $1.5 million and a balloon payment of $26.0 million payable
together with the last installment.
Cadence et al. Loan
On June 18, 2019, our subsidiaries Cadence Shipping Co. and Bastian Shipping Co., as joint and several borrowers, entered into an eight-year $136.0 million credit facility with a bank, which we refer to in this section as the Cadence et al. Loan. The loan was drawn in two equal tranches.
We have used the proceeds from the Cadence et al. Loan to refinance the Repaid CLC Sale and Leaseback capital lease, for the part related to the vessels MSC Amalfi and MSC Ajaccio and for general corporate purposes. At the time of the refinancing the outstanding amount related to the MSC
Amalfi and the MSC Ajaccio, under the Repaid CLC Sale and Leaseback capital lease amounted to $119.6 million.
The obligations under the Cadence et al. Loan are guaranteed by Costamare Inc. and are secured by first priority mortgages over the vessels, MSC Amalfi and MSC Ajaccio, account pledges, general assignment of earnings, insurances, requisition compensation and charter rights.
As of December 31, 2019, there was $128.4 million outstanding under the Cadence et al. Loan, and, as of the same date, there was no undrawn available credit. The outstanding loan amount under both tranches is repayable in 18 quarterly installments of $3.8 million, 12 quarterly installments of $2.6
million and a balloon payment of $28.8 million payable together with the last installment.
Quentin et al. Loan
On July 18, 2019, our subsidiaries Quentin Shipping Co. and Sander Shipping Co., as joint and several borrowers, entered into a six-year $94.0 million credit facility with a bank, which we refer to in this section as the Quentin et al. Loan. The loan was drawn in two equal tranches.
We have used the proceeds from the Quentin et al. Loan to refinance the DNB-Quentin et al Loan, for the part related to vessels Valor and Valiant. At the time of the refinancing the outstanding loan amounts related to Valor and Valiant under the DNB-Quentin et al. Loan amounted to $90.4
million.
The obligations under the Quentin et al. Loan are guaranteed by Costamare Inc. and are secured by first priority mortgages over the vessels, Valor and Valiant, account pledges, general assignment of earnings, insurances, requisition compensation and charter rights.
As of December 31, 2019, there was $91.2 million outstanding under the Quentin et al. Loan, and, as of the same date, there was no undrawn available credit. The outstanding loan amount under both tranches is repayable in three quarterly installments of $2.8 million, 20 quarterly installments of $2.0
million and a balloon payment of $42.7 million payable together with the last installment.
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Raymond et al. Loan
On June 28, 2019, Costamare Inc., as borrower, entered into a six-year $150.0 million credit facility with a bank, which we refer to in this section as the Raymond et al. Loan. The loan was drawn in three equal tranches.
We have used the proceeds from the Raymond et al. Loan to refinance (i) the DNB-Quentin et al. Loan, for the part related to vessel Vantage and (ii) the DNB-Raymond et al. Loan in full (vessels Value and Valence) and for general corporate purposes. At the time of the refinancing the outstanding
loan amounts related to vessels, Vantage, Value and Valence, under the aforementioned refinanced loans amounted to $137.1 million.
The obligations under the Raymond et al. Loan are guaranteed by Costamare Inc. and are secured by first priority mortgages over the vessels, Vantage, Value and Valence, account pledges, general assignment of earnings, insurances, requisition compensation and charter rights.
As of December 31, 2019, there was $147.1 million outstanding under the Raymond et al. Loan, and, as of the same date, there was no undrawn available credit. The outstanding loan amount under all three tranches is repayable in 23 quarterly installments of $2.9 million and a balloon payment of
$80.6 million payable together with the last installment.
CCBFL Sale and Leaseback
On June 29, 2016, our subsidiaries, Jodie Shipping Co. and Kayley Shipping Co., entered into bareboat charter agreements with CCBFL (collectively, the CCBFL Sale and Leaseback), whereby our subsidiaries agreed to bareboat charter in the vessels upon delivery for a period of seven years. Our
subsidiaries used the proceeds from the CCBFL Sale and Leaseback to refinance an existing facility and for general corporate purposes.
Under the terms of the CCBFL Sale and Leaseback, the MSC Athens and the MSC Athos containership vessels were sold for an amount of $76.0 and $75.8 million, respectively. Pursuant to the initial terms of the CCBFL Sale and Leaseback, Jodie Shipping Co. and Kayley Shipping Co. must each
pay a variable daily charter rate on a quarterly basis for seven years (based on a straight-line amortization schedule) along with a final balloon payment of $28.0 and $27.9 million, respectively. Furthermore and pursuant to the initial terms, upon expiration of the CCBFL Sale and Leaseback in 2023, the
vessels will be returned to the Company. On May 8, 2019, Jodie Shipping Co. and Kayley Shipping Co. signed a supplemental agreement, pursuant to which and upon the installation of scrubbers on board each of MSC Athens and MSC Athos within the first half of 2020, CCBFL will (i) advance an
additional amount of $6.0 million for each vessel, (ii) extend the maturity of the CCBFL Sale and Leaseback until 2026 and (iii) amend the amortization schedule so that the final balloon payment for each vessel shall be $15.0 million. As of February 25, 2020, scrubbers have not been yet installed on any
of the two vessels.
As of December 31, 2019, there was $102.1 million outstanding under the CCBFL Sale and Leaseback.
BoComm Sale and Leaseback
On June 19, 2017, our subsidiaries, Simone Shipping Co. and Plange Shipping Co., entered into bareboat charter agreements with BoComm (the BoComm Sale and Leaseback), whereby our subsidiaries agreed to bareboat charter in the vessels upon delivery for a period of seven and a half years.
Our subsidiaries used the proceeds from the BoComm Sale and Leaseback for general corporate purposes.
Under the terms of the BoComm Sale and Leaseback, both the Leonidio and the Kyparissia containership vessels were sold and Simone Shipping Co. and Plange Shipping Co. must each pay a fixed daily charter rate on a monthly basis for seven and a half years along with a final balloon payment of
$9.7 million, respectively. Upon expiration of the BoComm Sale and Leaseback in 2024, the vessels will be returned to the Company.
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As of December 31, 2019, there was $36.5 million outstanding under the BoComm Sale and Leaseback.
Pre-Delivery Five Vessels Financing arrangement (Sale and Leaseback)
On August 8, 2018, our subsidiaries, Barkley Shipping Co., Harden Shipping Co., Firmino Shipping Co., Longley Shipping Co. and Conley Shipping Co., entered into novation agreements with a financial institution, whereby they novated to the financial institution the shipbuilding contracts for the
construction of five ships and entered into bareboat charter agreements with the financial institution, which we refer to in this section as the Pre-Delivery Five Vessels Financing arrangement (Sale and Leaseback), whereby our subsidiaries agreed to bareboat charter the vessels, currently under
construction, upon delivery for a period of ten years. Our subsidiaries used the proceeds from the Pre-Delivery Five Vessels Financing arrangement (Sale and Leaseback) for the construction of five vessels.
Under the terms of the Pre-Delivery Five Vessels Financing arrangement (Sale and Leaseback), all five containership vessels currently under construction were sold and Barkley Shipping Co., Harden Shipping Co., Firmino Shipping Co., Longley Shipping Co. and Conley Shipping Co., must each pay a
fixed daily charter rate on a monthly basis for ten years along with a final balloon payment of $40.4 million. Upon expiration of the Pre-Delivery Five Vessels Financing arrangement (Sale and Leaseback) in 2030-2031, each of the vessels will be returned to the Company.
As of December 31, 2019, there was $98.4 million outstanding under the Pre-Delivery Five Vessels Financing arrangement (Sale and Leaseback). As of the same date an amount of approximately $0.3 billion was undrawn.
Benedict et al Financing arrangements
On November 12, 2018, Costamare Inc. became the sole shareholder of five vessel-owning companies: Benedict Maritime Co., Bertrand Maritime Co., Beardmore Maritime Co., Schofield Maritime Co. and Fairbank Maritime Co. and assumed the bareboat charter agreements that each of the five
vessel-owning companies had previously entered into with a financial institution, along with the obligation to pay part of the consideration under the provisions of the Share Purchase Agreement within the next 18 months from the date of the transaction (the Benedict et al Financing arrangements).
Under the bareboat charter agreements, each of the five vessel-owning companies had agreed to bareboat charter in their respective vessels (Triton, Titan, Talos, Taurus and Theseus) for a period of twelve years. At the same time we provided our corporate guarantee to the respective demise owner of
each vessel.
Under the terms of the Benedict et al Financing arrangements, our subsidiaries must each pay various installments from January 2020 to October 2028 until the expiry of each bareboat charter agreement in 2028. Each of our subsidiaries shall pay simultaneously with the last payment a final
installment of $32.0 million, at which time the vessels will be returned to the Company.
As of December 31, 2019, there was $496.0 million outstanding under the Benedict et al Financing arrangements.
Facilities Repaid in 2019
HSBC Mas Loan
On January 30, 2008, our subsidiary, Mas Shipping Co., as borrower, entered into a ten-year, $75.0 million loan with HSBC Bank, which we refer to in this section as the HSBC Mas Loan. The purpose of this loan was to finance part of the purchase price of a vessel, the Kokura (ex. Maersk
Kokura). On February 5, 2015, we entered into a side letter under which the lender accepted the replacement of the charterer of the Kokura. On September 1, 2016, we entered into a second supplemental agreement under which the bank agreed to the change of the flag of the Maersk Kokura and the
transfer of the technical management to V.Ships Greece.
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The interest rate under the HSBC Mas Loan was LIBOR plus an agreed margin. The repayment terms provide for Mas Shipping Co. to pay HSBC by 20 consecutive semi-annual installments, the first two (1-2) in the amount of $1.0 million, the following two (3-4) in the amount of $1.5 million, the following
two (5-6) each in the amount of $2.0 million, the following four (7-10) in the amount of $3.75 million, the following two (11-12) in the amount of $4.0 million, and the following eight (13-20) in the amount of $4.13 million, plus a balloon payment payable together with the twentieth installment in the amount of
$10.0 million. On August 1, 2017, we entered into a third supplemental agreement pursuant to which the Borrower agreed to provide the lender with additional security in the form of a second mortgage on one of our vessels and on August 3, 2017, we prepaid $1.0 million. On February 16, 2018, we entered
into a fourth supplemental agreement pursuant to which Mas Shipping repaid $1.0 million in February and the Lender agreed to extend the maturity of the loan until February 2019 payable in four equal quarterly installments of $1.0 million, plus a balloon payment payable together with the fourth installment
in the amount of $8.13 million.
The obligations under the HSBC Mas Loan were guaranteed by Costamare Inc. and secured by a first priority mortgage over the vessel, Kokura, a second priority mortgage over the vessel Maersk Kowloon, an account pledge, a general assignment of earnings, insurances, requisition compensation and
charter rights.
The HSBC Mas Loan was repaid on February 4, 2019.
Repaid CLC Sale and Leaseback
In January, March and April 2014, our subsidiaries, Adele Shipping Co., Bastian Shipping Co. and Cadence Shipping Co. entered into novation agreements with China Development Bank Financial Leasing Co., Ltd. (CLC), whereby they novated to CLC the shipbuilding contracts for the
construction of the MSC Azov, the MSC Ajaccio and the MSC Amalfi, respectively, and entered into bareboat charter agreements (collectively, the Repaid CLC Sale and Leaseback), whereby our subsidiaries agreed to bareboat charter in the vessels upon delivery for a period of 10 years. Our
subsidiaries used a portion of the proceeds from the Repaid CLC Sale and Leaseback to prepay the balance of the loan which had been used to finance the predelivery installments of the respective vessels.
Under the terms of the Repaid CLC Sale and Leaseback, the vessels were each sold for an amount of $85.6 million and our subsidiaries each paid a fixed daily charter rate on a quarterly basis for 10 years and a final installment of $25.7 million at which time the vessels were returned to the
Company.
The obligations under the Repaid CLC Sale and Leaseback were guaranteed by Costamare Inc. and were secured by charter assignments, account assignments and general assignments of earnings, insurances and requisition compensation.
The Repaid CLC Sale and Leaseback was repaid in the third quarter of 2019 from proceeds of the Adele Shipping Loan and the Cadence et al. Loan.
Repaid DnBQuentin et al. Loan
On August 16, 2011, our subsidiaries, Quentin Shipping Co., Undine Shipping Co., and Sander Shipping Co., as borrowers, entered into a seven-year loan for up to $229.2 million, with DnB Bank ASA, ING Bank, ABN Amro Bank and Bank of America N.A., which we refer to in this section as the
Repaid DnBQuentin et al. Loan. The purpose of this loan was to finance part of the acquisition and construction cost of the Valor, the Valiant and the Vantage, and the loan was divided into three tranches, one for each vessel. On July 3, 2013, we entered into the first supplemental agreement with the
lenders which amended the repayment schedule and added V.Ships Greece as an approved manager. On September 13, 2013, we entered into the second supplemental agreement with the lenders which further amended the repayment schedule (as reflected below).
The interest rate under the Repaid DnB - Quentin et al. loan was LIBOR plus an agreed margin. The loan provided that the borrowers repay the loan by 28 consecutive quarterly installments, the first 27 (1-27) in the amount of $1.3 million per tranche each, commencing at the
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time of delivery of each vessel, and a final installment in the amount of $1.3 million, together with a balloon payment of $40.7 million per tranche.
The obligations under the Repaid DnBQuentin et al. loan were guaranteed by Costamare Inc. and were secured by a first priority mortgage over the vessels, charter assignments, account assignments, master agreement assignment and general assignments of earnings, insurances and requisition
compensation.
The Repaid DNB-Quentin et al. Loan was repaid in the third quarter of 2019 from proceeds of the Quentin et al. Loan and the Raymond et al. Loan.
Repaid DnBRaymond et al. Loan
On October 12, 2011, our subsidiaries, Raymond Shipping Co. and Terance Shipping Co., as borrowers, entered into a seven-year loan for up to $152.8 million, with DnB Bank ASA, Mega International Commercial Bank Co., Ltd., Cathay United Bank, Chinatrust Commercial Bank, Hua Nan
Commercial Bank, Ltd. and Land Bank of Taiwan, which we refer to in this section as the Repaid DnBRaymond et al. Loan. The purpose of this loan was to finance part of the acquisition and construction cost of the Value and the Valence, and the facility is divided into two tranches, one for each
vessel.
The interest rate under the Repaid DnBRaymond et al. Loan was LIBOR plus an agreed margin. The loan provided that the borrowers repay the loan by 28 consecutive quarterly installments, the first 27 (1-27) in the amount of $1.4 million per tranche each, commencing at the time of delivery of the
vessels, and a final installment in the amount of $1.4 million, together with a balloon payment of $38.2 million per tranche.
The obligations under the Repaid DnBRaymond et al. Loan were guaranteed by Costamare Inc. and were secured by a first priority mortgage over the vessels, charter assignments, account assignments, master agreement assignment and general assignments of earnings, insurances and requisition
compensation.
The Repaid DNB-Raymond et al. Loan was repaid in the third quarter of 2019 from proceeds of the Raymond et al. Loan.
Guarantees of Framework Deed Entity Indebtedness
Costamare Inc. has agreed to guarantee 100% of the debt of Ainsley Maritime Co., Ambrose Maritime Co., Skerrett Maritime Co., Kemp Maritime Co. and Hyde Maritime Co., which were formed under the Framework Deed and own the vessels Cape Kortia, Cape Sounio, Cape Artemisio, Cape
Akritas and Cape Tainaro, respectively. As at December 31, 2019, Costamare Inc. has guaranteed $67.0 million of debt relating to Ainsley Maritime Co., $36.1 million of debt relating to Ambrose Maritime Co., $36.8 million of debt relating to Skerrett Maritime Co., $35.1 million of debt relating to Kemp
Maritime Co. and $65.0 million relating to Hyde Maritime Co. Furthermore, in January 2020 the debt relating to Ambrose Maritime Co. and Skerrett Maritime Co. has been refinanced and the new debt amounts for which Costamare Inc. offers its guarantee were $67.5 million and $65.0 million,
respectively, on the date of the drawdowns. Moreover, in February 2020 the debt relating to Kemp Maritime Co. has been refinanced and the new debt amount for which Costamare Inc. offers its guarantee was $65.0 million, on the date of the drawdown. As security for providing the guarantee, in the
event that Costamare Inc. is required to pay under any guarantee, Costamare Inc. is entitled to acquire all of the shares in the entities for whose benefit the guarantee has been issued that it does not already own for nominal consideration. Costamare Inc. owns 25% of the capital stock of Ainsley
Maritime Co., 25% of the capital stock of Ambrose Maritime Co., 49% of the capital stock of Skerrett Maritime Co., 49% of the capital stock of Kemp Maritime Co. and 49% of the capital stock of Hyde Maritime Co.
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Covenants and Events of Default
The credit facilities impose certain operating and financial restrictions on us. These restrictions in our existing credit facilities generally limit Costamare Inc. and our subsidiaries ability to, among other things:
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pay dividends if an event of default has occurred and is continuing or would occur as a result of the payment of such dividends;
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purchase or otherwise acquire for value any shares of the subsidiaries capital;
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make or repay loans or advances, other than repayment of the credit facilities;
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make investments in other persons;
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sell or transfer significant assets, including any vessel or vessels mortgaged under the credit facilities, to any person, including Costamare Inc. and our subsidiaries;
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create liens on assets; or
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allow the Konstantakopoulos familys direct or indirect holding in Costamare Inc. to fall below 40% of the total issued share capital.
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Our existing credit facilities also require Costamare Inc. and certain of our subsidiaries to maintain the aggregate of (a) the market value, primarily on an inclusive charter basis, of the mortgaged vessel or vessels and (b) the market value of any additional security provided to the lenders, above a
percentage ranging between 105% to 130% of the then outstanding amount of the credit facility and any related swap exposure.
The minimum value covenant must be determined at the expense of the borrower at any such time as the lenders may request.
Costamare Inc. is required to maintain compliance with the following financial covenants to maintain minimum liquidity, minimum market value adjusted net worth, interest coverage and leverage ratios, as defined.
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the ratio of our total liabilities (after deducting all cash and cash equivalents) to market value adjusted total assets (after deducting all cash and cash equivalents) may not exceed 0.75:1;
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the ratio of EBITDA over net interest expense must be equal to or higher than 2.5:1;
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the aggregate amount of all cash and cash equivalents may not be less than the greater of (i) $30 million or (ii) 3% of the total debt; provided, however, that under four of our credit facilities and capital leases, a minimum cash amount equal to 3% of the loan outstanding must be maintained in
accounts with or pledged in favour of the lender;
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the market value adjusted net worth must at all times exceed $500 million; and
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the ratio of net funded debt to market value adjusted total assets must be less than 80% on a charter inclusive valuation basis.
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Our credit facilities contain customary events of default, including nonpayment of principal or interest, breach of covenants or material inaccuracy of representations, default under other indebtedness in excess of a threshold and bankruptcy.
The Company is not in default under any of its credit facilities.
Quantitative and Qualitative Disclosures about Market Risk
Interest Rate Risk
The shipping industry is a capital intensive industry, requiring significant amounts of investment. Much of this investment is provided in the form of long-term debt. Our debt usually contains interest rates that fluctuate with the financial markets. Increasing interest rates could adversely impact future
earnings.
Our interest expense is affected by changes in the general level of interest rates, particularly LIBOR. As an indication of the extent of our sensitivity to interest rate changes, an increase of
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100 basis points would have decreased our net income and cash flows during the year ended December 31, 2019 by approximately $6.4 million based upon our debt level during 2019.
For more information on our interest rate risk see Item 11. Quantitative and Qualitative Disclosures About Market RiskA. Quantitative Information About Market RiskInterest Rate Risk.
Interest Rate Swaps
We have entered into interest rate swap agreements converting floating interest rate exposure into fixed interest rates in order to economically hedge our exposure to fluctuations in prevailing market interest rates. For more information on our interest rate swap agreements, refer to Notes 2, 18, 19
and 20 to our financial statements included at the end of this annual report.
Foreign Currency Exchange Risk
We generate all of our revenue in U.S. dollars, but a substantial portion of our vessel operating expenses, primarily crew wages, are in currencies other than U.S. dollars (mainly in Euro), and any gain or loss we incur as a result of the U.S. dollar fluctuating in value against those currencies is
included in vessel operating expenses. As of December 31, 2019, approximately 20% of our outstanding accounts payable were denominated in currencies other than the U.S. dollar (mainly in Euro). We hold cash and cash equivalents mainly in U.S. dollars.
As of December 31, 2019, the Company was engaged in three Euro/U.S. dollar contracts totaling $6.0 million at an average forward rate of Euro/U.S. dollar 1.1037, expiring in monthly intervals up to March 2020.
As of December 31, 2018, the Company was engaged in five Euro/U.S. dollar contracts totaling 10.0 million at an average forward rate of Euro/U.S. dollar 1.1514, expiring in monthly intervals up to May 2019.
As of December 31, 2017, the Company was engaged in 2 Euro/U.S. dollar contracts totaling $4.0 million at an average forward rate of Euro/U.S. dollar 1.1682, expiring in monthly intervals up to February 2018.
We recognize these financial instruments on our balance sheet at their fair value. These foreign currency forward contracts do not qualify as hedging instruments, and thus we recognize changes in their fair value in our earnings.
Capital Expenditures
As of December 31,
2019, we had outstanding equity commitments of $54.6 million in the aggregate, consisting of payments (i) upon each
vessels delivery from the shipyard in relation to the five vessels under construction, payable until the vessels
delivery, expected between the third quarter of 2020 and the second quarter of 2021, while approximately $0.4 billion in
total is financed through a financial institution, (ii) in relation to the construction and installation of scrubbers in ten
of our existing vessels, while an amount of $18.0 million for five of them is financed and (iii) in relation to the balance
amount payable for the acquisition cost of one secondhand vessel.
Critical Accounting Policies
The discussion and analysis of our financial condition and results of operations is based upon our consolidated financial statements, which have been prepared in accordance with U.S. GAAP. The preparation of those financial statements requires us to make estimates and judgments that affect the
reported amounts of assets and liabilities, revenues and expenses and related disclosure at the date of our financial statements. Actual results may differ from these estimates under different assumptions and conditions. Critical accounting policies are those that reflect significant judgments of uncertainties
and potentially result in materially different results under different assumptions and conditions. We describe below what we believe are our most critical accounting policies, because they generally involve a comparatively higher degree of judgment in their application. For a
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description of all our significant accounting policies, see Note 2 to our consolidated financial statements included elsewhere in this annual report.
Vessel Impairment
The Company reviews its vessels for impairment whenever events or changes in circumstances indicate that the carrying amount of a vessel might not be recoverable. The Company considers information, such as vessel sales and purchases, business plans and overall market conditions in order to
determine if an impairment might exist.
If the Company determines that an impairment indicator is present or if circumstances indicate that an impairment may exist, the Company then performs an analysis to determine whether an impairment loss should be recognized. The Company proceeds to Step 1 of the impairment analysis whereby
it computes estimates of the future undiscounted net operating cash flows for each vessel based on assumptions regarding time charter rates, vessels operating expenses, vessels capital expenditures, vessels residual value, fleet utilization and the estimated remaining useful life of each vessel. The future
undiscounted net operating cash flows are determined as the sum of (x) (i) the charter revenues from existing time charters for the fixed fleet days and (ii) an estimated daily time charter rate for the unfixed days (based on the most recent ten year historical average rates, after eliminating outliers, and
without adjustment for any growth rate) over the remaining estimated life of the vessel assuming fleet utilization of 99.5% (excluding the scheduled off-hire days for planned dry-dockings and special surveys which are determined separately ranging from 12 to 30 days depending on the size and age of each
vessel), less (y) (i) expected outflows for vessels operating expenses assuming an expected increase in expenses of 2.50%, based on managements estimates taking into consideration the Companys historical data, (ii) planned dry-docking and special survey expenditures and (iii) management fees
expenditures. Charter rates for container shipping vessels are cyclical and subject to significant volatility based on factors beyond our control. Therefore, we consider the most recent ten-year historical average, after eliminating outliers, to be a reasonable estimation of expected future charter rates over the
remaining useful life of our vessels. We define outliers as index values provided by an independent, third party maritime research services provider. Given the spread of rates between peaks and troughs over the decade, we believe the most recent ten-year historical average rates, after eliminating outliers,
provide a fair estimate in determining a rate for long-term forecasts. The salvage value used in the impairment test is estimated at $0.300 per light weight ton in accordance with the vessels depreciation policy. The assumptions used to develop estimates of future undiscounted net operating cash flows are
based on historical trends as well as future expectations. If those future undiscounted net operating cash flows are greater than a vessels carrying value, there are no impairment indications for such vessel. If those future undiscounted net operating cash flows are less than a vessels carrying value, the
Company proceeds to Step 2 of the impairment analysis for such vessel.
In Step 2 of the impairment analysis, the Company determines the fair value of the vessels that failed Step 1 of the impairment analysis, based on management estimates and assumptions, making use of available market data and taking into consideration third party valuations. Therefore, we have
categorized the fair value of the vessels as Level 2 in the fair value hierarchy. The difference between the carrying value of the vessels that failed Step 1 of the impairment analysis and their fair value as calculated in Step 2 of the impairment analysis is recognized in the Companys accounts as
impairment loss.
The economic and market conditions as at December 31, 2018 and 2019, including the significant disruptions in the global credit markets in the prior years, had broad effects on participants in a wide variety of industries. Time charter rates improved in the first half of 2018, but subsequently fell
towards the end of 2018 to approximately the same levels as in the beginning of the year. In 2019, time charter rates improved considerably, especially for vessels bigger than 6,000 TEU, approaching levels last achieved in 2011. A similar pattern occurred in the evolution of secondhand prices during 2019,
whereas prices for vessels larger than 6,000 TEU and younger than 10 years old increased in line with time charter rates. In 2019, demand for containerships increased
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only by 1.7%, while the supply of containerships exceeded demand by 2.3%, a condition which, all other things being equal, is an indicator of possible impairment.
The review of the carrying amounts in connection with the estimated recoverable amount of our vessels as of December 31, 2019 resulted in an impairment loss of $3.0 million in relation to two of our vessels. As of December 31, 2017 and 2018 our assessment concluded that $18.0 million and nil,
respectively, of impairment loss should be recorded.
As noted above, we determine projected cash flows for unfixed days using an estimated daily time charter rate based on the most recent 10 year historical average rates, after eliminating outliers. However, charter rates are subject to change based on a variety of factors that we cannot control and we
note that charter rates over the last few years have been, on average, below their historical 10 year average. If, as at December 31, 2018 and 2019, we were to utilize an estimated daily time charter equivalent for our vessels unfixed days based on the most recent five year, three year or one year
historical average rates without adjusting for inflation (or another growth assumption), the impact would be the following:
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December 31, 2018
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December 31, 2019
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No. of
Vessels (*)
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Amount
($ US Million) (**)
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No. of
Vessels (*)
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Amount
($ US Million) (**)
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5-year historical average rate.
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2
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$
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19.7
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2
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$
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16.3
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3-year historical average rate.
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6
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$
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66.6
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10
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$
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82.7
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1-year historical average rate.
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11
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$
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124.3
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8
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$
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59.1
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(*)
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Number of vessels the carrying value of which would not have been recovered.
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(**)
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Aggregate carrying value that would not have been recovered.
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In addition to the two step impairment analysis, the Company also conducts a separate internal analysis. This analysis uses a discounted cash flow model utilizing inputs and assumptions based on market observations as of December 31, 2019, and suggests that 27 of our 60 vessels in the water may
have current market values below their carrying values (32 of our 62 vessels in the water as at December 31, 2018). However, we believe that, with respect to these 27 vessels, we will recover their carrying values through the end of their useful lives, based on their undiscounted cash flows.
Although we believe that the assumptions used to evaluate potential impairment are reasonable and appropriate, such assumptions are highly subjective. There can be no assurance as to how long charter rates and vessel values will remain at their current low levels or whether they will improve by
any significant degree. Charter rates may remain at depressed levels for some time which could adversely affect our revenue, profitability and future assessments of vessel impairment.
While the Company intends to continue to hold and operate its vessels, the following table presents information with respect to the carrying amount of the Companys vessels and indicates whether their estimated market values based on our internal discounted cash flow analysis are below their
carrying values as of December 31, 2019 and 2018. In preparing the table below, the Company used third party valuations and the following methodology. For vessels with charters expiring before December 31, 2020 (i.e. within 12 months after the date of the annual financial statements for the year ended
December 31, 2019), the Company uses charter free third party valuations as at December 31, 2019. For all other vessels, the Company uses: (A) third party charter free valuations of each vessel at the earliest expiry date of the charter of each vessel (e.g., in determining the residual value of a 5-year old
vessel with a time charter having its earliest expiry date five years after the date of the annual financial statements, the third party valuation provides us with the charter free value of a 10-year old vessel with the same technical characteristics and specifications, which is representative of the residual value
of the vessel at the earliest expiry date of its respective time charter) discounted to December 31, 2019 plus (B) the discounted future cash flow from the charter of each vessel until the earliest expiry date of that charter.
The carrying value of each of the Companys vessels does not necessarily represent its fair value or the amount that could be obtained if the vessel were sold. The Companys estimates of fair values (under our internal analysis) assume that the vessels are all in good and seaworthy condition without
need for repair and, if inspected, would be certified as being in class without
92
recommendations of any kind. In addition, because vessel values are highly volatile, these estimates may not be indicative of either the current or future prices that the Company could achieve if it were to sell any of the vessels. The Company would not record impairment for any of the vessels for which
the estimated fair value is below its carrying value unless and until the Company either determines to sell the vessel for a loss or determines that the vessels carrying amount is not recoverable under Step 2 of the impairment analysis. For the vessels with estimated fair values lower than their carrying
values, we believe that such differences will be recoverable throughout the useful lives of such vessels.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Vessel
|
|
Capacity
(TEU)
|
|
Built
|
|
Acquisition Date
|
|
Carrying Value
December 31, 2018
($ US Million)(1)
|
|
Carrying Value
December 31, 2019
($ US Million)(1)
|
|
1
|
|
Triton
|
|
14,424
|
|
2016
|
|
November 2018
|
|
|
|
113.5
|
|
|
|
|
109.8
|
|
|
2
|
|
Titan
|
|
14,424
|
|
2016
|
|
November 2018
|
|
|
|
114.0
|
|
|
|
|
110.4
|
|
|
3
|
|
Talos
|
|
14,424
|
|
2016
|
|
November 2018
|
|
|
|
114.5
|
|
|
|
|
110.8
|
|
|
4
|
|
Taurus
|
|
14,424
|
|
2016
|
|
November 2018
|
|
|
|
114.3
|
|
|
|
|
110.7
|
|
|
5
|
|
Theseus
|
|
14,424
|
|
2016
|
|
November 2018
|
|
|
|
114.6
|
|
|
|
|
111.0
|
|
|
6
|
|
Cosco Hellas*,**
|
|
9,469
|
|
2006
|
|
July 2006
|
|
|
|
62.1
|
|
|
|
|
59.1
|
|
|
7
|
|
Cosco Guangzhou*,**
|
|
9,469
|
|
2006
|
|
February 2006
|
|
|
|
60.5
|
|
|
|
|
57.5
|
|
|
8
|
|
Cosco Beijing*,**
|
|
9,469
|
|
2006
|
|
June 2006
|
|
|
|
61.3
|
|
|
|
|
58.3
|
|
|
9
|
|
Cosco Yantian*,**
|
|
9,469
|
|
2006
|
|
April 2006
|
|
|
|
61.4
|
|
|
|
|
58.4
|
|
|
10
|
|
Cosco Ningbo*,**
|
|
9,469
|
|
2006
|
|
March 2006
|
|
|
|
60.9
|
|
|
|
|
57.9
|
|
|
11
|
|
MSC Azov
|
|
9,403
|
|
2014
|
|
January 2014
|
|
|
|
73.0
|
|
|
|
|
79.7
|
|
|
12
|
|
MSC Ajaccio
|
|
9,403
|
|
2014
|
|
March 2014
|
|
|
|
73.4
|
|
|
|
|
87.7
|
|
|
13
|
|
MSC Amalfi
|
|
9,403
|
|
2014
|
|
April 2014
|
|
|
|
73.7
|
|
|
|
|
80.7
|
|
|
14
|
|
MSC Athens
|
|
8,827
|
|
2013
|
|
March 2013
|
|
|
|
71.5
|
|
|
|
|
76.8
|
|
|
15
|
|
MSC Athos
|
|
8,827
|
|
2013
|
|
April 2013
|
|
|
|
70.7
|
|
|
|
|
76.1
|
|
|
16
|
|
Valor*
|
|
8,827
|
|
2013
|
|
June 2013
|
|
|
|
82.4
|
|
|
|
|
79.3
|
|
|
17
|
|
Value*
|
|
8,827
|
|
2013
|
|
June 2013
|
|
|
|
82.4
|
|
|
|
|
79.3
|
|
|
18
|
|
Valiant*
|
|
8,827
|
|
2013
|
|
August 2013
|
|
|
|
83.4
|
|
|
|
|
80.3
|
|
|
19
|
|
Valence
|
|
8,827
|
|
2013
|
|
September 2013
|
|
|
|
83.7
|
|
|
|
|
80.6
|
|
|
20
|
|
Vantage
|
|
8,827
|
|
2013
|
|
November 2013
|
|
|
|
83.7
|
|
|
|
|
80.6
|
|
|
21
|
|
Navarino*,**
|
|
8,531
|
|
2010
|
|
May 2010
|
|
|
|
90.6
|
|
|
|
|
86.7
|
|
|
22
|
|
Maersk Kleven
|
|
8,044
|
|
1996
|
|
September 2018
|
|
|
|
15.1
|
|
|
|
|
14.4
|
|
|
23
|
|
Maersk Kotka
|
|
8,044
|
|
1996
|
|
September 2018
|
|
|
|
14.8
|
|
|
|
|
14.1
|
|
|
24
|
|
Maersk Kowloon
|
|
7,471
|
|
2005
|
|
May 2017
|
|
|
|
14.4
|
|
|
|
|
13.9
|
|
|
25
|
|
Kure*,**
|
|
7,403
|
|
1996
|
|
December 2007
|
|
|
|
45.7
|
|
|
|
|
40.6
|
|
|
26
|
|
Kokura*,**
|
|
7,403
|
|
1997
|
|
February 2008
|
|
|
|
48.5
|
|
|
|
|
43.6
|
|
|
27
|
|
Maersk Kawasaki*,**
|
|
7,403
|
|
1997
|
|
December 2007
|
|
|
|
48.9
|
|
|
|
|
44.0
|
|
|
28
|
|
MSC Methoni*,**
|
|
6,724
|
|
2003
|
|
October 2011
|
|
|
|
45.3
|
|
|
|
|
42.4
|
|
|
29
|
|
Sealand Michigan*,**
|
|
6,648
|
|
2000
|
|
October 2000
|
|
|
|
28.8
|
|
|
|
|
26.9
|
|
|
30
|
|
Sealand Illinois*,**
|
|
6,648
|
|
2000
|
|
December 2000
|
|
|
|
28.9
|
|
|
|
|
27.0
|
|
|
31
|
|
York*,**
|
|
6,648
|
|
2000
|
|
May 2000
|
|
|
|
27.6
|
|
|
|
|
25.7
|
|
|
32
|
|
Sealand Washington*,**
|
|
6,648
|
|
2000
|
|
August 2000
|
|
|
|
28.2
|
|
|
|
|
26.4
|
|
|
33
|
|
Maersk Kobe*,**
|
|
6,648
|
|
2000
|
|
June 2000
|
|
|
|
27.8
|
|
|
|
|
26.0
|
|
|
34
|
|
Maersk Kalamata*,**
|
|
6,644
|
|
2003
|
|
June 2003
|
|
|
|
37.0
|
|
|
|
|
34.9
|
|
|
35
|
|
Maersk Kingston*,**
|
|
6,644
|
|
2003
|
|
April 2003
|
|
|
|
37.3
|
|
|
|
|
35.0
|
|
|
36
|
|
Maersk Kolkata*,**
|
|
6,644
|
|
2003
|
|
January 2003
|
|
|
|
36.4
|
|
|
|
|
34.2
|
|
|
37
|
|
Venetiko*,**
|
|
5,928
|
|
2003
|
|
January 2013
|
|
|
|
18.2
|
|
|
|
|
17.4
|
|
|
38
|
|
Zim Shanghai*,**
|
|
4,992
|
|
2002
|
|
October 2002
|
|
|
|
26.5
|
|
|
|
|
24.8
|
|
|
39
|
|
Zim New York*,**
|
|
4,992
|
|
2002
|
|
September 2002
|
|
|
|
26.3
|
|
|
|
|
24.7
|
|
|
40
|
|
Piraeus(2),(3),*
|
|
4,992
|
|
2004
|
|
May 2004
|
|
|
|
26.4
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
93
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Vessel
|
|
Capacity
(TEU)
|
|
Built
|
|
Acquisition Date
|
|
Carrying Value
December 31, 2018
($ US Million)(1)
|
|
Carrying Value
December 31, 2019
($ US Million)(1)
|
|
41
|
|
Leonidio
|
|
4,957
|
|
2014
|
|
May 2017
|
|
|
|
21.1
|
|
|
|
|
19.5
|
|
|
42
|
|
Kyparissia
|
|
4,957
|
|
2014
|
|
May 2017
|
|
|
|
21.1
|
|
|
|
|
19.5
|
|
|
43
|
|
Megalopolis
|
|
4,957
|
|
2013
|
|
July 2018
|
|
|
|
24.7
|
|
|
|
|
23.8
|
|
|
44
|
|
Marathopolis
|
|
4,957
|
|
2013
|
|
July 2018
|
|
|
|
24.8
|
|
|
|
|
23.9
|
|
|
45
|
|
Halifax Express*,**
|
|
4,890
|
|
2000
|
|
November 2000
|
|
|
|
23.2
|
|
|
|
|
21.5
|
|
|
46
|
|
Oakland Express*,**
|
|
4,890
|
|
2000
|
|
October 2000
|
|
|
|
22.9
|
|
|
|
|
21.2
|
|
|
47
|
|
Singapore Express*,**
|
|
4,890
|
|
2000
|
|
August 2000
|
|
|
|
22.5
|
|
|
|
|
20.9
|
|
|
48
|
|
Vulpecula
|
|
4,258
|
|
2010
|
|
December 2019
|
|
|
|
|
|
|
|
|
10.5
|
|
|
49
|
|
Volans
|
|
4,258
|
|
2010
|
|
December 2019
|
|
|
|
|
|
|
|
|
10.5
|
|
|
51
|
|
Vela
|
|
4,258
|
|
2009
|
|
December 2019
|
|
|
|
|
|
|
|
|
9.5
|
|
|
51
|
|
Ulsan*,**
|
|
4,132
|
|
2002
|
|
February 2012
|
|
|
|
22.3
|
|
|
|
|
20.9
|
|
|
52
|
|
Lakonia
|
|
2,586
|
|
2004
|
|
December 2014
|
|
|
|
7.6
|
|
|
|
|
7.9
|
|
|
53
|
|
Etoile
|
|
2,556
|
|
2005
|
|
November 2017
|
|
|
|
9.6
|
|
|
|
|
9.3
|
|
|
54
|
|
Areopolis
|
|
2,474
|
|
2000
|
|
May 2014
|
|
|
|
6.2
|
|
|
|
|
6.0
|
|
|
55
|
|
Messini*,**
|
|
2,458
|
|
1997
|
|
August 2012
|
|
|
|
5.8
|
|
|
|
|
5.5
|
|
|
56
|
|
Reunion (ex. MSC Reunion)(2)
|
|
2,024
|
|
1992
|
|
March 2011
|
|
|
|
3.6
|
|
|
|
|
|
|
|
57
|
|
Namibia II (ex. MSC Namibia II)(2)
|
|
2,023
|
|
1991
|
|
March 2011
|
|
|
|
3.6
|
|
|
|
|
|
|
|
58
|
|
Sierra II (ex. MSC Sierra II)(2)
|
|
2,023
|
|
1991
|
|
March 2011
|
|
|
|
3.6
|
|
|
|
|
|
|
|
59
|
|
MSC Pylos(2),(3)
|
|
2,020
|
|
1991
|
|
January 2011
|
|
|
|
|
|
|
|
|
|
|
|
60
|
|
Neapolis*,(4)
|
|
1,645
|
|
2000
|
|
April 2014
|
|
|
|
5.2
|
|
|
|
|
|
|
|
61
|
|
Prosper*,**
|
|
1,504
|
|
1996
|
|
March 2011
|
|
|
|
6.4
|
|
|
|
|
5.8
|
|
|
62
|
|
Michigan
|
|
1,300
|
|
2008
|
|
April 2018
|
|
|
|
9.1
|
|
|
|
|
7.2
|
|
|
63
|
|
Trader
|
|
1,300
|
|
2008
|
|
April 2018
|
|
|
|
9.1
|
|
|
|
|
7.2
|
|
|
64
|
|
Zagora(4)
|
|
1,162
|
|
1995
|
|
January 2011
|
|
|
|
2.6
|
|
|
|
|
|
|
|
65
|
|
Luebeck
|
|
1,078
|
|
2001
|
|
August 2012
|
|
|
|
4.3
|
|
|
|
|
4.1
|
|
|
|
|
|
|
|
|
|
|
TOTAL
|
|
|
|
2,587.0
|
|
|
|
|
2,502.4
|
|
|
|
|
(1)
|
|
For impairment test calculation, Carrying Value includes the unamortized balance of dry-docking cost as at December 31, 2018 and 2019.
|
|
|
(2)
|
|
Vessels sold during 2019.
|
|
|
(3)
|
|
As of December 31, 2018, the vessel was classified as held for sale.
|
|
|
(4)
|
|
As of December 31, 2019, the vessel was classified as held for sale.
|
|
|
*
|
|
Indicates container vessels which we believe, as of December 31, 2018, may have fair values below their carrying values. As of December 31, 2018, we believe that the aggregate carrying value of these 32 vessels was $437.0 million more than their market value.
|
|
|
**
|
|
Indicates container vessels which we believe, as of December 31, 2019, may have fair values below their carrying values. As of December 31, 2019, we believe that the aggregate carrying value of these 27 vessels was $399.9 million more than their market value.
|
Vessels are stated at cost, which consists of the contract price and any material expenses incurred upon acquisition (initial repairs, improvements and delivery expenses, interest and on-site supervision costs incurred during the construction periods). Subsequent expenditures for conversions and major
improvements are also capitalized when they appreciably extend the life, increase the earning capacity or improve the efficiency or safety of the vessels.
Vessel Lives and Depreciation
We depreciate our vessels based on a straight-line basis over the estimated economic lives assigned to each vessel, which is currently 30 years from the date of their initial delivery from the shipyard, which we believe is within industry standards and represents the most reasonable useful life for each
of our vessels. Depreciation is based on the cost of the vessel less its estimated residual value which is equal to the product of vessels lightweight tonnage and estimated scrap rate ($300
94
per lightweight ton). Secondhand vessels are depreciated from the date of their acquisition through their remaining estimated useful lives. A decrease in the residual value of the Companys vessels or a decrease in the estimated economic lives assigned to the Companys vessels due to unforeseen events
(such as an extended period of weak markets, the broad imposition of age restrictions by the Companys customers, new regulations, or other future events) which could result in a reduction of the estimated useful lives of any affected vessels may lead to higher depreciation charges and/or impairment
losses in future periods for the affected vessels. We examine the prospect and the timing of each vessel sale for demolition opportunistically and on a case by case basis. The decision to sell a specific vessel for demolition depends on the prospects of the vessel to secure employment, the estimated cost of
maintaining the vessel, the available financing and the price of scrap.
Voyage Revenue Recognition
Revenues are generated from time charters and are usually paid 15 days in advance. Time charters with the same charterer are accounted for as separate agreements according to the terms and conditions of each agreement. Time charter revenues over the term of the time charter are recorded as
service is provided, when they become fixed and determinable. Revenues from time charters providing for varying annual rates are accounted for as operating leases and thus recognized on a straight-line basis as the average revenue over the rental periods of such agreements, as service is performed. Some
of our time charters provide that the charter rate will be adjusted to a market rate for the final months of their respective terms. For purposes of determining the straight-line revenue amount, we exclude these periods and treat the charter as expiring at the end of the last fixed rate period. A voyage is
deemed to commence upon the completion of discharge of the vessels previous cargo and is deemed to end upon the completion of discharge of the current cargo, provided an agreed non-cancelable time charter between the Company and the charterer is in existence, the charter rate is fixed or
determinable and collectability is reasonably assured. Unearned revenue includes cash received prior to the balance sheet date for which all criteria to recognize as revenue have not been met, including any unearned revenue resulting from time charters providing for varying annual rates, which are
accounted for on a straight-line basis. Unearned revenue also includes the unamortized balance of the liability associated with the acquisition of secondhand vessels with time charters attached that were acquired at values below fair market value at the date the acquisition agreement is consummated.
Derivative Financial Instruments
We enter into interest rate swap contracts to manage our exposure to fluctuations of interest rate risks associated with specific borrowings. Interest rate differentials paid or received under these swap agreements are recognized as part of interest expense related to the hedged debt. All derivatives are
recognized in the consolidated financial statements at their fair value. On the inception date of the derivative contract, we designate the derivative as a hedge of a forecasted transaction or the variability of cash flow to be paid. Changes in the fair value of a derivative that is qualified, designated and
highly effective as a cash flow hedge are recorded in other comprehensive income until earnings are affected by the forecasted transaction or the variability of cash flow and are then reported in earnings. Changes in the fair value of undesignated derivative instruments and the ineffective portion of
designated derivative instruments are reported in earnings in the period in which those fair value changes have occurred. Realized gains or losses on early termination of the derivative instruments are also classified in earnings in the period of termination of the respective derivative instrument. We may
redesignate an undesignated hedge after its inception as a hedge but then will consider its non-zero value at redesignation in its assessment of effectiveness of the cash flow hedge.
We formally document all relationships between hedging instruments and hedged terms, as well as the risk-management objective and strategy for undertaking various hedge transactions. This process includes linking all derivatives that are designated as cash flow hedges to specific forecasted
transactions or variability of cash flow.
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We also formally assess, both at the hedges inception and on an ongoing basis, whether the derivatives that are used in hedging transactions are highly effective in offsetting changes in cash flow of hedged items. We consider a hedge to be highly effective if the change in fair value of the derivative
hedging instrument is within 80% to 125% of the opposite change in the fair value of the hedged item attributable to the hedged risk. When it is determined that a derivative is not highly effective as a hedge or that it has ceased to be a highly effective hedge, we discontinue hedge accounting
prospectively, in accordance with ASC 815 Derivatives and Hedging.
We also enter into forward exchange rate contracts to manage our exposure to currency exchange risk on certain foreign currency liabilities. We have not designated these forward exchange rate contracts for hedge accounting.
Recent Accounting Pronouncements
See Note 2 to our consolidated financial statements included elsewhere in this annual report.
C. Research and Development, Patents and Licenses, etc.
We incur from time to time expenditures relating to inspections for acquiring new vessels. Such expenditures are insignificant and are expensed as they are incurred.
D. Trend Information
In 2019, total seaborne container trade demand grew at around 1.7% as the synchronized global economic recovery started to lose momentum. During the year, the trade dispute between China and United States escalated, with both countries imposing tariffs in selective imported goods. As a result,
global trade lost momentum and business confidence and global capital expenditure declined.
Total containership supply grew at around 4% in 2019 as demolition activity fell over the year. However, the supply of large container vessels, with capacity of more than 12,000 TEU, continued to apply pressure throughout the industry. However, according to Clarkson Research 1.5% of total
containership supply was absorbed by scrubber retrofits. As a result, time charter rates and values on average maintained their 2018 levels, but with the bigger and younger vessels performing substantially better.
Demand for containership transportation services especially for larger vessels increased during the year as liner companies started to prepare for the introduction of the IMO regulations. Idle fleet represented 6.1% of the total fleet at the end of 2019. However, since the first quarter of 2019, idle fleet
includes vessels undergoing scrubber retrofit installations. For instance, out of the 1.4 million inactive TEU capacity, about 1 million TEU capacity is linked to vessels undergoing scrubber installations. With the exclusion of vessels linked to scrubber installations, idle fleet was 1.5%. As the majority of
scrubber retrofit installations are taking place on vessels larger than 6,000 TEU, these types of vessels benefited the most and earned higher charter rates. Containership ordering in 2019 decreased to 789,000 TEU. Total order book remained historically low at 11% of the total fleet at the end of 2019;
however, since 67% of the orderbook consisted of vessels larger than 12,000 TEU, if the improved containership demand is not sustainable there will be more negative pressure across the industry.
E. Off-Balance Sheet Arrangements
As of December 31, 2019, we did not have any off-balance sheet arrangements.
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F. Tabular Disclosure of Capital Obligations
Our contractual obligations as of December 31, 2019 were:
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Payments Due by Period(5)
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Total
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Less than
1 year
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1-3 years
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3-5 years
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More than
5 years
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(Expressed in thousands of U.S. dollars)
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Long-term debt obligations(1)
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$
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1,564,759
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$
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230,394
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$
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418,539
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$
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268,238
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$
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647,588
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Interest on long-term debt obligations(2)
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346,197
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66,065
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107,006
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80,067
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93,059
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Payments to our manager(3)
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307,699
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29,106
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57,677
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56,217
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164,699
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Other Obligations(4)
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54,566
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42,010
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12,556
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Total
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$
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2,273,221
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$
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367,575
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$
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595,778
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$
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404,522
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$
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905,346
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(1)
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Includes obligations under capital leases and other financing arrangements.
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(2)
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We expect to be obligated to make the interest payments set forth in the above table with respect to our long-term debt obligations, capital leases and other financing arrangements. The interest payments are based on annual assumed all-in rates calculated for the unhedged portion of our debt obligations based on the forward yield curve and on the average yearly debt
outstanding. With respect to interest payments under our lease obligations, these have been based on the repayment schedules agreed with the financing institution upon the commencement of the bareboat charters.
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(3)
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This amount assumes that we will cease paying our managers any fees in connection with the management of a vessel once the vessel exceeds 30 years of age, unless the vessel will exceed 30 years of age at the expiry of its current time charter, in which case we assume that we will pay the manager a fee for the management of that vessel until its charter expires.
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Payments to our managers include (a) a daily management fee of $956 per day per vessel, (b) total of 1.25% fee on charter revenues earned and (c) total fees of $2.5 million. Payments to our manager exclude the value of the shares of our common stock issued to the manager in exchange for its services. See Item 7. Major Shareholders and Related Party TransactionsB.
Related Party TransactionsManagement and Services Agreements. The above represent total fees paid to Costamare Shipping and Costamare Services.
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(4)
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This amount represents our share of the remaining equity commitments with regards to the five vessels under construction, equity payments in relation to the construction and installation of scrubbers in ten of our existing vessels and the remaining equity payment for one secondhand vessel that was delivered in January 2020.
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(5)
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These amounts exclude the following preferred stock dividend payment amounts (assuming that none of our preferred stock is redeemed in the next 5 years):
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Total
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Less than
1 year
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1-3 years
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3-5 years
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(Expressed in thousands of U.S. dollars)
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$156,344
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$
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31,269
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$
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62,538
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$
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62,538
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