Hanjin insolvency fuels Danaos’ Q4 2016 net loss

Prior to going bankrupt, Hanjin Shipping had chartered five, 3,400-TEU vessels and eight, 10,100-TEU vessels from Danaos.    Danaos recorded a $446.6 million net loss for the fourth quarter of 2016 as it felt the effects from Hanjin Shipping filing for bankruptcy during the third quarter of the year.
   In comparison, Danaos had a net income of $6.4 million for the fourth quarter of 2015.
   Operating revenues for the fourth quarter of 2016 totaled $112.1 million, tumbling 21.8 percent year-over-year.
   For the full year of 2016, Danaos recorded a net loss of $366.2 million compared to a net income of $117 million for 2015, while operating revenues fell 12.3 percent year-over-year to $498.3 million.
   The Athens, Greece-based containership owner and chartering company has a current fleet of 59 containerships aggregating 353,586 TEUs, including four vessels owned by the joint venture Gemini Shipholdings Corporation.
   Prior to filing bankruptcy, Hanjin chartered five, 3,400-TEU vessels and eight, 10,100-TEU vessels from Danaos.
   Danaos CEO Dr. John Coustas said Hanjin chartered the eight ships under long-term charter party agreements, representing about 20 percent of Danaos’ fixed contracted revenue. The agreements were terminated and each of the chartered ships were returned to Danaos.
   Coustas said Danaos re-chartered the five smaller ships on short term charters at market rates that reflect the prevailing weak chartering environment, and secured employment of up to 12 months starting from April 2017 for the three larger ships.
   Danaos said it stopped recognizing revenues from Hanjin starting July 1, 2016 onwards, and recognized a bad debt expense of $15.8 million relating to unpaid charter hire recorded as accounts receivable as of June 30, 2016 in its condensed consolidated statements of operations in the year ended Dec. 31, 2016.
   In addition, Danaos said it has an unsecured claim for unpaid charter hire, charges, expenses and a loss of profit against the now insolvent ocean carrier, totaling $597.9 million submitted to the Bankruptcy Court of Seoul.
   “As a result of the decrease in our operating income and charter attached values, primarily caused by the Hanjin bankruptcy, as of Dec. 31, 2016 we were in breach of certain financial covenants for which we have obtained waivers until April 1, 2017 and continue to engage in discussions with our lenders to address the matter,” Coustas said. “Because the waivers are for a period of less than 12 months after the balance sheet date, all of the debt has been classified as current on the Dec. 31, 2016 financial statements. Otherwise the company is currently in a position to fully service all of its operational and contractual financial obligations.”