Danaos profits slide on debt refinancing

The Athens-based containership lessor saw earnings fall 18.7 percent year-over-year in the first quarter despite rising revenues.    Danaos Corp. saw its net income slide 18.7 percent to just shy of $15 million in the first quarter of 2018, according to the company’s latest financial statements.
   The Athens-based containership owner and lessor posted earnings per share of $0.14 for the quarter compared with $0.17 per share in the same 2017 period despite operating revenues ticking up 1.6 percent to $111.9 million.
   Danaos attributed the decline in earnings primarily to professional fees of $9.6 million related to a debt refinancing program and a non-cash amortization charge of $3.4 million for fees related to the company’s 2011 comprehensive financing plan.
   Excluding those fees, the company’s adjusted net income stood at $27.9 million ($0.25 per share) in the first quarter, a year-over-year increase of 13.9 percent, thanks in large part to a $3.9 million decrease in total operating expenses and the abovementioned $1.8 million increase in revenues, factors that were offset in part by a $2.3 million increase in net finance expenses, Danaos said.
   “We are extremely pleased to have reached an agreement with certain of our lenders currently holding $2.2 billion of debt maturing on Dec. 31, 2018 that will significantly strengthen the company’s capital structure through a debt reduction of $551 million,” Danaos CEO John Coustas said of the first-quarter results, adding that the company expects to complete the refinancing process by July 31.
   “This comprehensive debt refinancing will also strengthen the company’s financial position through a resetting of financial and certain other covenants in credit facilities, a modification of interest rates and amortization profiles and an extension of existing debt maturities by approximately five years to Dec. 31, 2023,” he said. “In connection with these debt write-downs, we will issue just under 100 million shares of common stock to certain of our lenders.”
   Some of the debt currently being restructured stemmed directly from the 2016 bankruptcy of Hanjin Shipping, which at the time was the seventh largest ocean carrier worldwide and a charterer of several Danaos vessels. As a result of the insolvency, Hanjin was unable to pay Danaos, leaving the containership owner in breach of certain financial covenants.
   During the first quarter, Danaos owned an average of 55 containerships, the same as in first quarter 2017, with its fleet utilization climbing from 92.7 percent to 95.6 percent. And excluding off charter days of vessels previously chartered to Hanjin, the company’s fleet utilization stood at 98.1 percent for the quarter.
   “In the near term, we maintain high charter contract coverage of 90 percent for the next 12 months based on current operating revenues and 81 percent in terms of contracted operating days,” said Coustas. “The charter market has stabilized at current levels although trade tensions tend to make liner companies hesitant to commit for longer periods. The benefit, conversely, may be a reduction of speculative ordering or ordering by liner companies, a condition that would improve market conditions.”