Safe Bulkers announces profit, sale-leaseback, debt refinancing

SafeBulkers

Safe Bulkers announced its unaudited financial results for the three and six months period ended June 30, 2018.

Summary of Second Quarter 2018 Results

  • Net revenues for the second quarter of 2018 increased by 34% to $47.0 million from $35.0 million during the same period in 2017.
  • Net income for the second quarter of 2018 was $4.1 million as compared to a net loss of $1.6 million, during the same period in 2017. Adjusted net income1 for the second quarter of 2018 was $4.8 million as compared to adjusted net loss1 of $2.3 million, during the same period in 2017.
  • EBITDA2 for the second quarter of 2018 increased by 32% to $22.4 million as compared to $17.0 million during the same period in 2017. Adjusted EBITDA3 for the second quarter of 2018 increased by 43% to $23.1 million from $16.2 million during the same period in 2017.
  • Earnings per share4 and Adjusted earnings per share4 for the second quarter of 2018 were $0.01 and $0.02 respectively, calculated on a weighted average number of 101,549,872 shares, compared to a Loss per share4 of $0.07 and Adjusted loss per share4 of $0.07 during the same period in 2017, calculated on a weighted average number of 101,363,578 shares.

Summary of Six Months Ended June 30, 2018 Results

  • Net revenues for the six months of 2018 increased by 33% to $90.5 million from $68.3 million during the same period in 2017.
  • Net income for the six months of 2018 was $10.1 million as compared to a net loss of $4.9 million, during the same period in 2017. Adjusted net income1 for the six months of 2018 was $10.5 million as compared to adjusted net loss1 of $5.3 million, during the same period in 2017.
  • EBITDA2 for the six months of 2018 increased by 42% to $45.9 million as compared to $32.3 million during the same period in 2017. Adjusted EBITDA3 for the six months of 2018 increased by 45% to $46.3 million as compared to $31.9 million during the same period in 2017.
  • Earnings per share4 and Adjusted earnings per share4 for the six months of 2018 were $0.04 and $0.05, respectively, calculated on a weighted average number of 101,545,325 shares, as compared to Loss per share4 and Adjusted Loss per share4 of $0.13 and $0.14, respectively, during the same period in 2017, calculated on a weighted average number of 100,329,624 shares.

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1 Adjusted Net income/(loss) is a non-GAAP measure. Adjusted Net income/(loss) represents Net income/(loss) before loss on sale of assets, gain/(loss) on derivatives, early redelivery cost, other operating expense and gain/(loss) on foreign currency. See Table 1.

2 EBITDA is a non-GAAP measure and represents Net income/(loss) plus net interest expense, tax, depreciation and amortization. See Table 1.

3 Adjusted EBITDA is a non-GAAP measure and represents EBITDA before loss on sale of assets, gain/(loss) on derivatives, early redelivery cost, other operating expense and gain/(loss) on foreign currency. See Table 1.

4 Earnings/(loss) per share and Adjusted Earnings/(loss) per share represent Net Income/(loss) and Adjusted Net income/(loss) less preferred  dividend and preferred deemed dividend divided by the weighted average number of shares respectively. See Table 1.

Fleet and Employment Profile

In June 2018, the Company took delivery of the last contracted newbuild on our orderbook, the Pedhoulas Cedrus, (ex-Hull No. 1552), a 81,800 dwt Japanese built  Kamsarmax class vessel. Upon delivery from the shipyard the vessel commenced employment on a twelve month time charter contract at a gross daily charter rate of $15,500. In connection therewith, our ship owning subsidiary completed the previously announced issuance of $16.9 million of 2.95% cumulative redeemable perpetual preferred shares to an unaffiliated investor, to partially finance the acquisition of Pedhoulas Cedrus, which is presented as mezzanine equity.

As of July 20, 2018, our operational fleet comprised of 40 drybulk vessels, 11 of which eco-design, with an average age of 7.9 years and an aggregate carrying capacity of 3.6 million dwt. Our fleet consists of 14 Panamax class vessels, 10 Kamsarmax class vessels, 13 post- Panamax class vessels and 3 Capesize class vessels, all built from 2003 onwards.

Set out below is a table showing the Company’s vessels and their contracted employment as of July 20, 2018:

Vessel Name DWT Year Built Country of

construction

Gross Charter

Rate [USD/day]1

Charter Duration2
Panamax
Maria 76,000 2003 Japan 12,750 Jun 2018 – Aug 2018
Koulitsa 76,900 2003 Japan 13,250 Jun 2018 – Aug 2018
Paraskevi 74,300 2003 Japan 11,250 Jul 2018 – Aug 2018
Vassos 76,000 2004 Japan 13,500 Jul 2018 – Sept 2018
Katerina 76,000 2004 Japan 9,000 May 2018 – Apr 2019
Maritsa 76,000 2005 Japan 10,100 Sep 2017 – Dec 2018
Efrossini 75,000 2012 Japan 10,850 Jul 2018 – Sept 2018
Zoe 75,000 2013 Japan 8,200 Nov 2017 – Mar 2019
Kypros Land 77,100 2014 Japan 11,600 Jun 2018 – Aug 2018
Kypros Sea 77,100 2014 Japan 11,250

13,900

Jul 2017 – Aug 2018

Aug 2018 – Feb 2019

Kypros Bravery 78,000 2015 Japan 14,400 Apr 2018 – Sep 2018
Kypros Sky 77,100 2015 Japan 14,000 May 2018 – Oct 2018
Kypros Loyalty 78,000 2015 Japan 12,850 Jan 2018 – Mar 2019
Kypros Spirit 78,000 2016 Japan 14,000 Jun 2018 – Oct 2018
Kamsarmax
Pedhoulas Merchant 82,300 2006 Japan 14,500 Apr 2018 – Apr 2019
Pedhoulas Trader 82,300 2006 Japan 11,600 Sep 2017 – Oct 2018
Pedhoulas Leader 82,300 2007 Japan 11,600 Jul 2018 – Jul 2018
Pedhoulas Commander 83,700 2008 Japan 14,150 Jun 2018 – Jul 2019
Pedhoulas Builder 81,600 2012 China 9,900 Jun 2018 – Aug 2019
Pedhoulas Fighter 81,600 2012 China 13,000 Jul 2018 – Dec 2018
Pedhoulas Farmer 3 81,600 2012 China 12,600 Jan 2018 – Aug 2018
Pedhoulas Cherry 3, 5 82,000 2015 China 6,600 Apr 2017 – Oct 2018
Pedhoulas Rose 3 82,000 2017 China 10,000 Mar 2018 – May 2019
Pedhoulas Cedrus 81,800 2018 Japan 15,500 Jun 2018 – Jul 2019
Post-Panamax
Marina 87,000 2006 Japan 13,300 Jun 2018 – Jul 2018
Xenia 87,000 2006 Japan 12,500 Jun 2018 – Nov 2019
Sophia 87,000 2007 Japan 7,250 Apr 2016 – Nov 2018
Eleni 87,000 2008 Japan 12,750 Jul 2018 – Aug 2018
Martine 87,000 2009 Japan 12,800 Jul 2018 – Aug 2018
Andreas K 92,000 2009 South Korea 13,350 Jul 2018 – Aug 2018
Panayiota K 92,000 2010 South Korea 13,300 Jun 2018 – Aug 2018
Agios Spyridonas  92,000 2010 South Korea 13,500 Jul 2018 – Sept 2018
Venus Heritage 95,800 2010 Japan 13,200 Nov 2017 – Aug 2019
Venus History 95,800 2011 Japan 14,750 Jan 2018 – May 2019
Venus Horizon 95,800 2012 Japan 13,950 Jan 2018 – Feb 2019
Troodos Sun 85,000 2016 Japan 15,950 Mar 2018 – May 2019
Troodos Air 85,000 2016 Japan 12,500 May 2018 – Sep 2019
Capesize
Kanaris 178,100 2010 China 25,928 Sep 2011 – Jun 2031
Pelopidas 176,000 2011 China 38,000 Feb 2012 – Dec 2021
Lake Despina 181,400 2014 Japan   24,376 4 Jan 2014 – Jan 2024
Total dwt of existing fleet 3,595,600

  • Charter rate is the recognized gross daily charter rate. For charter parties with variable rates among periods or consecutive charter parties with the same charterer, the recognized gross daily charter rate represents the weighted average gross daily charter rate over the duration of the applicable charter period or series of charter periods, as applicable. In case a charter agreement provides for additional payments, namely ballast bonus to compensate for vessel repositioning, the gross daily charter rate presented has been adjusted to reflect estimated vessel repositioning expenses. In case of voyage charters the charter rate represents revenue recognized on a pro-rata basis over the duration of the voyage from load to discharge port less related voyage expenses.
  • The start date represents either the actual start date or, in the case of a contracted charter that had not commenced as of July 20, 2018, the scheduled start date.  The actual start date and redelivery date may differ from the referenced scheduled start and redelivery dates depending on the terms of the charter and market conditions and does not reflect the options to extend the period time charter.
  • Vessel sold and leased back on a net daily bareboat charter rate of $6,500 for a period of 10 years, with a purchase obligation at the end of the 10th year and purchase options in favor of the Company after the second year of the bareboat charter, at annual intervals and predetermined purchase prices.
  • A period time charter of ten years at a gross daily charter rate of $23,100 for the first two and a half years and of $24,810 for the remaining period. In January 2017, the period time charter was amended to reflect substitution of the initial charterer with its subsidiary guaranteed by the initial charterer and changes in payment terms; all other charter terms remained unchanged.  The charter agreement grants the charterer an option to purchase the vessel at any time beginning at the end of the seventh year of the charter, at a price of $39 million less a 1.00% commission, decreasing thereafter on a pro-rated basis by $1.5 million per year.  The Company holds a right of first refusal to buy back the vessel in the event that the charterer exercises its option to purchase the vessel and subsequently offers to sell such vessel to a third party. The charter agreement also grants the charterer the option to extend the period time charter for an additional twelve months at a time at a gross daily charter rate of $26,330, less 1.25% total commissions, which option may be exercised by the charterer a maximum of two times.
  • The Company has exercised the purchase option at a predetermined price for this vessel. The transaction is expected to consummate in August 2018.

The contracted employment of fleet ownership days as of July 20, 2018 was:

2018 (remaining) 65 %
2018 (full year) 84 %
2019 24 %
2020   8 %

Liquidity as of July 20, 2018

We had liquidity of $91.5 million consisting of $81.7 million in cash and bank time deposits, $9.8 million in restricted cash and the capacity to borrow against one unencumbered vessel.

Update on sale and leaseback transactions

In May 2018, we exercised the option under a sale and leaseback agreement to purchase one Kamsarmax class vessel at a predetermined price of $22.7 million. The transaction is scheduled to consummate in August 2018, and the Company is expected to finance the acquisition of the vessel through cash on hand.

The sale and leaseback transaction was accounted as a financing transaction and the sale proceeds from the sale and leaseback transaction were recorded as debt. Following the exercise of the purchase option, the outstanding debt obligation of this vessel, amounting to $22.3 million as of June 30, 2018, has been included in the current portion of the long term debt in our financial statements. The related deferred finance costs will be written off upon the consummation of the transaction.

This is the third purchase option the Company has exercised out of five sale and lease back arrangements previously entered into by the Company.

Refinancing of credit facilities as of July 20, 2018

The Company has agreed to amend an existing credit facility of $160.5 million expiring in 2022, secured by 11 vessels, with a new credit facility of $142.0 million secured by 10 vessels, extending the tenor by two years, pushing back part of the balloon payment to 2024, and reducing the principal installments for the next 4 years by $63.3 million.

The Company has agreed to refinance an existing credit facility of $28.0 million expiring in 2021, with a new credit facility of $26.0 million, extending the tenor by one year, pushing back the balloon payment to 2022, and reducing principal installments for the next 3 years by $3.2 million.

These amended facilities will contain lower margins and similar covenants compared to the existing facilities of the Company.

Dividend Policy

The Company has not declared a dividend on the Company’s common stock for the second quarter of 2018. The Company had 101,554,284 shares of common stock issued and outstanding as of July 20, 2018.

The Company declared in July 2018 a cash dividend of $0.50 per share on each of its 8.00% Series C Cumulative Redeemable Perpetual Preferred Shares (NYSE:SB.PR.C) and 8.00% Series D Cumulative Redeemable Perpetual Preferred Shares (NYSE:SB.PR.D) for the period from April 30, 2018 to July 29, 2018 payable on July 30, 2018 to the respective shareholders of record as of July 23, 2018.

The declaration and payment of dividends, if any, will always be subject to the discretion of the Board of Directors of the Company. The timing and amount of any dividends declared will depend on, among other things: (i) the Company’s earnings, financial condition and cash requirements and available sources of liquidity; (ii) decisions in relation to the Company’s growth and leverage strategies; (iii) provisions of Marshall Islands and Liberian law governing the payment of dividends; (iv) restrictive covenants in the Company’s existing and future debt instruments; and (v) global economic and financial conditions.

Management Commentary

Dr. Loukas Barmparis, President of the Company, said: ‘‘In the second quarter of 2018, our Time Charter Equivalent rate continued to increase as new charters have replaced older expiring charters at higher rates. We continued to focus on improving our capital structure and financing outflows by refinancing one Kamsarmax vessel under an existing sale and leaseback arrangement and by financing the delivery of our last outstanding newbuild with preferred equity of the ship owning subsidiary. We also agreed to refinance two loans with balloon payments until after 2021, extending our debt profile and increasing our financial flexibility.”

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