Safe Bulkers posts $24.5m net loss for the third quarter

safe bulkers

Safe Bulkers, an international provider of marine drybulk transportation services, announced today its unaudited financial results for the three and nine months period ended September 30, 2016.

Summary of Third Quarter 2016 Results

  • Net revenue for the third quarter of 2016 decreased by 19% to $27.1 million from $33.5 million during the same period in 2015.
  • Net loss for the third quarter of 2016 was $24.5 million as compared to $7.5 million, during the same period in 2015. Adjusted net loss1 for the third quarter of 2016 was $9.0 million as compared to $6.3 million, during the same period in 2015.
  • EBITDA2 for the third quarter of 2016 amounted to a loss of $6.2 million as compared to earnings of $9.0 million during the same period in 2015. Adjusted EBITDA3 for the third quarter of 2016 decreased by 10% to $9.3 million from $10.3 million during the same period in 2015.
  • Loss per share4 and adjusted loss per share4 for the third quarter of 2016 were $0.34 and $0.15 respectively, calculated on a weighted average number of 83,601,283 shares, as compared to a Loss per share of $0.13 and adjusted loss per share of $0.12 during the same period in 2015, calculated on a weighted average number of 83,480,875 shares.

Summary of Nine Months Ended September 30, 2016 Results

  • Net revenues for the nine months of 2016 decreased by 20% to $78.1 million from $97.4 million during the same period in 2015.
  • Net loss for the nine months of 2016 was $51.3 million as compared to $18.0 million, during the same period in 2015. Adjusted net loss1 for the nine months of 2016 was $32.0 million as compared to $14.7 million, during the same period in 2015.
  • EBITDA2 for the nine months of 2016 decreased by 91% to $2.5 million as compared to $26.6 million during the same period in 2015. Adjusted EBITDA3 for the nine months of 2016 decreased by 27% to $21.8 million as compared to $30.0 million during the same period in 2015.
  • Loss per share4 and adjusted loss per share4 for the nine months of 2016 were $0.74 and $0.51, respectively, calculated on a weighted average number of shares of 83,573,418, as compared to loss per share4 of $0.34 and adjusted loss per share4 of $0.30 during the same period in 2015, calculated on a weighted average number of shares of 83,471,336.

Fleet and Employment Profile

In July 2016, the Company took delivery of Kypros Spirit (ex-Hull No.828), a 78,000 dwt, Japanese eco-design newbuild Panamax class vessel. Upon her delivery, the vessel was employed in the spot charter market.

In July 2016, our subsidiary Kyotofriendo Two Shipping Corporation signed a novation agreement for newbuild Hull No. 1552, a 81,600 dwt, Japanese Kamsarmax class vessel, scheduled for delivery in 2018 and novated the newbuild to our subsidiary Pinewood Shipping Corporation (“Pinewood”). Pinewood has agreed to issue, upon delivery of the vessel, cumulative redeemable perpetual preferred shares to an unaffiliated investor (the “Investor”) to finance $16.9 million of the cost of such vessel. The preferred shares will pay a dividend of 2.95% p.a., will not entitle the Investor to any voting rights and may be redeemed at the option of Pinewood at any time or at the option of the Investor upon the third anniversary of the issuance date or at any time thereafter. Furthermore, the Investor will be entitled to nominate one director to the Issuer’s board that represents a minority of the Issuer’s board of directors.

In October 2016, our subsidiary Gloverseven Shipping Corporation signed a novation agreement for newbuild Hull No. S835, a 77,000 dwt, Japanese Panamax class vessel and our subsidiary Kyotofriendo One Shipping Corporation signed a memorandum of agreement for the sale upon delivery of newbuild Hull No. 1551, a 81,600 dwt, Japanese Kamsarmax class vessel, in each case, to entities owned by our Chief Executive Officer and Chairman of our Board of Directors, Polys Hajioannou. Each vessel is scheduled to be delivered in the first quarter of 2017. The two transactions were evaluated and approved in September 2016 by a Special Committee of the Company’s Board of Directors, wholly comprised of independent members of the Board and advised by independent counsel. This followed the Company’s decision to further reduce its capital commitments, which includes the novation or resale of newbuilds. The Special Committee obtained two appraisals from independent third party brokers for each newbuild vessel, and approved the terms of each transaction. The higher of the two appraisals obtained from the independent third party brokers was $21.5 million for Hull No. S835 and $24.5 million for Hull No. 1551; or $46.0 million in the aggregate. Our remaining capital expenditure requirements in respect of Hull No. S835 and Hull No. 1551 were $48.2 million in the aggregate. The difference of $2.2 million between the aggregate vessel valuations and the remaining aggregate capital expenditure requirements with respect to these newbuilds, as well as the commission of 1% of the contract price payable to the related party management company with respect to each of the newbuilds, have been waived in our favor. Hence an aggregate impairment loss of $17.2 million, representing installments already paid in respect of Hull No. S835 and Hull No. 1551 and capitalized costs, was recorded in the third quarter of 2016.

As of October 26, 2016, our operational fleet was comprised of 37 drybulk vessels with an average age of 6.50 years and an aggregate carrying capacity of 3,339,800 million dwt. The fleet consists of 14 Panamax class vessels, eight Kamsarmax class vessels, 12 post- Panamax class vessels and three Capesize class vessels, all built 2003 onwards.

As of October 26, 2016, we had contracted to acquire two additional drybulk newbuild vessels, both Kamsarmax class vessels, scheduled for delivery in 2017 and 2018, excluding Hull No. 1551 which has been contracted to be sold upon delivery. Upon delivery of all newbuilds and assuming we do not acquire any additional vessels or dispose of any of our vessels, our fleet will comprise of 39 vessels, 11 of which will be eco-design vessels, having an aggregate carrying capacity of 3.5 million dwt.

Set out below is a table showing the Company’s existing and newbuild vessels and their contracted employment as of October 26, 2016:

Vessel Name DWT Year Built1 Country of construction Charter Rate2 USD/day Charter Duration3
Panamax
Maria 76,000 2003 Japan 6,500 Aug 2016 – Jun 2017
Koulitsa 76,900 2003 Japan 5,825 Jun 2016 – Jan 2017
Paraskevi 74,300 2003 Japan 5,600 Aug 2016- Jan 2017
Vassos 76,000 2004 Japan
Katerina 76,000 2004 Japan BPI4 + 6% Apr 2015 – Apr 2017
Maritsa 76,000 2005 Japan 6,750 Jul 2016 – Mar 2017
Efrossini 75,000 2012 Japan 6,000 Oct 2016 – Oct 2016
Zoe 75,000 2013 Japan 6,200 Aug 2016 – Nov 2017
Kypros Land 77,100 2014 Japan 5,750 Mar 2016- Nov 2016
Kypros Sea 77,100 2014 Japan 7,850 Oct 2016 – Nov 2016
Kypros Bravery 78,000 2015 Japan 7,500 Sep 2016 – Jul 2017
Kypros Sky 77,100 2015 Japan 12,000 Oct2016 – Dec 2016
Kypros Loyalty 78,000 2015 Japan 6,250 Jun 2016 – Sep 2017
Kypros Spirit 78,000 2016 Japan 8,125 Sep 2016 – Nov 2016
Kamsarmax
Pedhoulas Merchant 82,300 2006 Japan 6,000 Jun 2016- Sep 2017
Pedhoulas Trader 82,300 2006 Japan 6,200 Jul 2016 – Sep 2017
Pedhoulas Leader 82,300 2007 Japan 6,250 Dec 2015- Jan 2017
Pedhoulas Commander 83,700 2008 Japan 6,250 Jan 2016 – Jan 2017
Pedhoulas Builder6 81,600 2012 China 9,150 Oct 2016 – Nov 2016
Pedhoulas Fighter6 81,600 2012 China 6,100 Feb 2016 – Jan 2017
Pedhoulas Farmer6 81,600 2012 China 6,200 Aug 2016 – Mar 2017
Pedhoulas Cherry6 82,000 2015 China 5,500
8,850
6,600
Feb 2016 – Dec 2016
Dec 2016-Feb 2017
Mar 2017 – May 2018
Post-Panamax
Marina 87,000 2006 Japan 6,200 Dec 2015 – Feb 2017
Xenia 87,000 2006 Japan 6,350 Jul 2016 – Feb 2017
Sophia 87,000 2007 Japan 7,250 Apr 2016 – Sep 2018
Eleni 87,000 2008 Japan 7,900 Oct 2016 – Nov 2016
Martine 87,000 2009 Japan BPI4 + 10% Apr 2015 – Mar 2017
Andreas K 92,000 2009 South Korea 5,650 Aug 2016 – Nov 2016
Panayiota K 92,000 2010 South Korea 8,750 Oct 2016 – Dec 2016
Venus Heritage 95,800 2010 Japan 10,200 Sep 2016 – Dec 2016
Venus History 95,800 2011 Japan 9,350 Oct 2016 – Nov 2016
Venus Horizon 95,800 2012 Japan 5,500 Jan 2016 – Apr 2017
Troodos Sun 85,000 2016 Japan 7,800 Aug 2016 – Oct 2016
Troodos Air 85,000 2016 Japan 8,050 Sep 2016 – Oct 2016
Capesize
Kanaris 178,100 2010 China 25,928 Sep 2011 – Sep 2031
Pelopidas 176,000 2011 China 38,000 Jan 2012 – Jan 2022
Lake Despina 181,400 2014 Japan 24,3765 Jan 2014 – Jan 2024
Total dwt of existing fleet 3,339,800
Hull Number DWT Expected delivery1 Country of construction Charter Rate2 USD/day Charter Duration3
Kamsarmax
Hull 1146 82,000 H1 2017 China
Hull 1552 81,600 H1 2018 Japan
Total dwt of orderbook 163,600

1) For existing vessels, the year represents the year built. For newbuilds, the dates shown reflect the expected delivery date.
2) 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.
3) The date listed represent either the actual start date or, in the case of a contracted charter that had not commenced as of October 26, 2016, the scheduled start date. The actual start date and redelivery date may differ from the scheduled start and redelivery dates depending on the terms of the charter and market conditions.
4) A period time charter at a gross daily charter rate linked to the Baltic Panamax Index (“BPI”) plus a premium.
5) 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. 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 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.
6) 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.

The contracted employment of fleet ownership days as of October 26, 2016 was:

2016 (remaining) 75%
2016 (full year) 93%
2017 28%
2018 10%

Capital expenditure requirements and liquidity
As of October 26, 2016, the remaining order book of the Company, excluding the Hull No. 1551 which has been contracted to be sold upon delivery in 2017, consists of two newbuild vessels, the Hull No. 1146 and the Hull No. 1552, which are scheduled to be delivered in 2017 and 2018 respectively.

Proceeds from the agreed sale of Hull No. 1551 fully cover the associated capital expenditure requirements for this vessel.

As of October 26, 2016, the aggregate remaining capital expenditure requirements amounted to $50.5 million, consisting of $28.1 million payable in 2017, and $22.4 million payable in 2018.

We have agreed $41.7 million of financing in total, in relation to $50.5 million of remaining capital expenditure requirements, consisting of an additional borrowing capacity of $24.8 million available under a sale and lease back financing agreement for Hull No. 1146 and of $16.9 million of preferred equity issuance in 2018 for Hull No. 1552 to an unaffiliated investor.

As of October 26, 2016, we had liquidity of $92.0 million consisting of $72.2 million in cash and bank time deposits, $19.8 million in restricted cash, in addition to $41.7 million of financing arrangements.

Dividend Policy

The Board of Directors of the Company has not declared a dividend for the third quarter of 2016. The Company has 83,611,628 shares of common stock issued and outstanding as of October 31, 2016.

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 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: “During the first nine months of 2016 in the worst part of the shipping cycle we maintained positive cash flows from operations covering our daily vessel operating expenses5 including dry docking cost and initial supplies expenses, daily general and administrative expenses5 and interest expense. We have worked over the past year to reduce debt maturities for the following years. We have also substantially reduced our capital expenditures by novating or reselling past relatively expensive new-build contracts. We have partially financed the purchase of the one new-build through the issuance of preferred stock and have arranged a sales and lease back financing for the other. These steps have strengthened the company’s liquidity position.”

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