EXHIBIT 99.1

DANAOS CORPORATION

OPERATING AND FINANCIAL REVIEW AND PROSPECTS

The following discussion and analysis should be read in conjunction with our interim condensed consolidated financial statements (unaudited) and the notes thereto included elsewhere in this report.

Results of Operations

The following discussion solely reflects results from continuing operations, unless otherwise noted. As described in Note 15, Discontinued Operations, in the notes to our condensed consolidated financial statements (unaudited) included in this report, the drybulk carriers that we owned and chartered to our customers (the “Drybulk Business”) are presented as discontinued operations.

Three months ended June 30, 2009 compared to three months ended June 30, 2008

During the three months ended June 30, 2009, we had an average of 40.1 containerships in our fleet. During the three months ended June 30, 2008, we had an average of 37.5 containerships in our fleet. We took delivery of one 4,253 TEU vessel, the Zim Luanda , on June 26, 2009.

Operating Revenue

Operating revenue increased 7.0%, or $5.2 million, to $79.1 million in the three months ended June 30, 2009, from $73.9 million in the three months ended June 30, 2008. The increase was primarily a result of the addition to our fleet of six 4,253 TEU containerships, the Zim Rio Grande , the Zim Sao Paolo , the Zim Kingston , the Zim Monaco , the Zim Dalian and the Zim Luanda on July 4, 2008, September 22, 2008, November 3, 2008, January 2, 2009, March 31, 2009 and June 26, 2009, respectively, which collectively contributed revenues of $10.4 million during the three months ended June 30, 2009. These revenues were offset in part by the sale of three 3,101 TEU containerships, the Maersk Constantia , the Asia Express and the Sederberg , on May 20, 2008, October 26, 2008 and December 10, 2008, respectively, that contributed revenues of $4.4 million for the three months ended June 30, 2008 compared to no revenues in the three months ended June 30, 2009.

We also had a further decrease in revenues of $0.8 million during the three months ended June 30, 2009 compared to the three months ended June 30, 2008, mainly attributable to the re-chartering of two of our vessels at reduced charter rates during the first half of 2009.

Voyage Expenses

Voyage expenses decreased 30.8% or $0.8 million, to $1.8 million in the three months ended June 30, 2009, from $2.6 million for the three months ended June 30, 2008. The decrease was mainly the result of bunker costs of $0.7 million, attributed to the repositioning of two of our vessels during the second quarter of 2008. Our vessels are not otherwise subject to fuel costs, which are paid by our charterers.

Vessel Operating Expenses

Vessel operating expenses increased 5.3%, or $1.2 million, to $23.8 million in the three months ended June 30, 2009, from $22.6 million in the three months ended June 30, 2008. The increase was due to the increase in the average number of vessels in our fleet during the three months ended June 30, 2009 compared to the three months ended June 30, 2008.

This overall increase was offset in part by the successful implementation of efficient management controls on our operating expenses, resulting in average daily operating cost per vessel of $6,533 in the three months ended June 30, 2009 compared to $6,699 in the three months ended June 30, 2008.

Amortization of Deferred Drydocking and Special Survey Costs

Amortization of deferred dry-docking and special survey costs increased 29.4%, or $0.5 million, to $2.2 million in the three months ended June 30, 2009, from $1.7 million in the three months ended June 30, 2008. The increase reflects higher drydocking costs incurred, which were subject to amortization during the three months ended June 30, 2009 compared to the three months ended June 30, 2008.

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Depreciation

Depreciation expense increased 20.2%, or $2.5 million, to $14.9 million in the three months ended June 30, 2009, from $12.4 million in the three months ended June 30, 2008. The increase in depreciation expense was due to the increased average number of vessels in our fleet during the three months ended June 30, 2009 compared to the three months ended June 30, 2008.

General and Administrative Expenses

General and administrative expenses increased 16.7%, or $0.5 million, to $3.5 million in the three months ended June 30, 2009, from $3.0 million in the three months ended June 30, 2008. The increase was mainly the result of increased fees of $0.4 million paid to our Manager in the second quarter of 2009 compared to the same period of 2008, due to the increase in the average number of our vessels in our fleet and an increase in the fees payable to our Manager as of January 1, 2009.

On February 12, 2009, the Company signed an addendum to the management contract amending the management fees, effective January 1, 2009, to a fee of $575 per day (from $500 per day), a fee of $290 per vessel per day (from $250 per vessel per day) for vessels on bareboat charter, a fee of $575 per vessel per day (from $500 per vessel per day) for vessels on time charter and a flat fee of $725,000 per newbuilding vessel (from $400,000 per newbuilding vessel) for the supervision of newbuilding contracts. All commissions to the Manager remained unchanged.

Interest Expense and Interest Income

Interest expense increased 44.6%, or $2.9 million, to $9.4 million in the three months ended June 30, 2009, from $6.5 million in the three months ended June 30, 2008. The change in interest expense was due to the increase in our average debt by $643.2 million, to $2,212.7 million in the quarter ended June 30, 2009, from $1,569.5 million in the three months ended June 30, 2008, as well as the increased margins over LIBOR on which our indebtedness is subject to, following our agreements with our lenders to waive certain covenant breaches as of December 31, 2008. The financing of our extensive newbuilding program resulted in interest capitalization, rather than such interest being recognized as an expense, of $9.4 million for the quarter ended June 30, 2009 compared to $7.8 million of capitalized interest for the three months ended June 30, 2008. The weighted average interest rate margin over LIBOR payable under our credit facilities has increased by approximately 1.1 percentage points per annum during the waiver periods, following our agreements with our lenders to waive certain covenant breaches as of December 31, 2008.

Interest income decreased by $0.2 million, to $0.7 million in the three months ended June 30, 2009, from $0.9 million in the three months ended June 30, 2008. The decrease in interest income is attributable to lower interest rates to which our cash balances were subject during the three months ended June 30, 2009 compared to the three months ended June 30, 2008, partially offset by higher average cash balances.

Other Income/(Expense), Net

Other income/(expenses), net, decreased by $0.8 million, to an expense of $0.6 million in the three months ended June 30, 2009, from a gain of $0.2 million in the three months ended June 30, 2008. The decrease in other income/(expenses), net, is mainly attributable to foreign currency revaluations of $1.4 million recorded during the three months ended June 30, 2009.

Other Finance Costs, Net

Other finance costs, net, remained stable at $0.9 million in the three months ended June 30, 2009 and 2008, respectively.

(Loss)/Gain on Fair value of Derivatives

(Loss)/gain on fair value of derivatives, decreased by $6.0 million, to an expense of $6.8 million in the three months ended June 30, 2009, from an expense of $0.8 million in the three months ended June 30, 2008. The decrease in (Loss)/gain on fair value of derivatives is mainly attributable to increased realized losses of $6.1 million in relation to our interest rate swaps in the three months ended June 30, 2009 compared to the three months ended June 30, 2008.

Six months ended June 30, 2009 compared to six months ended June 30, 2008

During the six months ended June 30, 2009, we had an average of 39.5 containerships in our fleet. During the six months ended June 30, 2008, we had an average of 36.9 containerships in our fleet. We took delivery of three 4,253 TEU containerships, the Zim Monaco , the Zim Dalian and the Zim Luanda on January 2, 2009, March 31, 2009 and June 26, 2009, respectively.

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Operating Revenue

Operating revenue increased 7.4%, or $10.6 million, to $154.4 million in the six months ended June 30, 2009, from $143.8 million in the six months ended June 30, 2008. The increase was primarily a result of the addition to our fleet of six 4,253 TEU containerships, the Zim Rio Grande , the Zim Sao Paolo , the Zim Kingston , the Zim Monaco , the Zim Dalian and the Zim Luanda on July 4, 2008, September 22, 2008, November 3, 2008, January 2, 2009, March 31, 2009 and June 26, 2009, respectively, which collectively contributed revenues of $18.6 million during the six months ended June 30, 2009. Moreover, three 2,200 TEU containerships, the Hyundai Progress , the Hyundai Highway and the Hyundai Bridge , which were added to our fleet on February 11, 2008, March 18, 2008 and March 20, 2008, respectively, contributed incremental revenues of $3.1 million during the six months ended June 30, 2009 compared to the six months ended June 30, 2008.

These revenues were offset in part by our sale of five vessels, one 5,506 TEU containership, the APL Belgium , on January 15, 2008 and four 3,101 TEU containerships, the Winterberg , the Maersk Constantia , the Asia Express and the Sederberg , on January 25, 2008, on May 20, 2008, on October 26, 2008 and December 10, 2008, respectively, which contributed revenues of $7.6 million during the six months ended June 30, 2008 compared to no revenues in the six months ended June 30, 2009, as well as reduced revenue amounting to $3.5 million attributable to revenue lost due to off-hire days and rechartering of two of our vessels at reduced charter rates.

Voyage Expenses

Voyage expenses decreased 7.1%, or $0.3 million, to $3.9 million in the six months ended June 30, 2009, from $4.2 million for the six months ended June 30, 2008. The decrease was mainly a result of bunker costs recorded in the six months ended June 30 2008, attributed to the repositioning of two of our vessels in the first half of 2008. Our vessels are not otherwise subject to fuel costs, which are paid by our charterers.

Vessel Operating Expenses

Vessel operating expenses increased 8.3%, or $3.5 million, to $45.9 million in the six months ended June 30, 2009, from $42.4 million in the six months ended June 30, 2008. The increase was due to the increase in the average number of our vessels in our fleet during the six months ended June 30, 2009 compared to the six months ended June 30, 2008.

This overall increase was offset in part by the successful implementation of efficient management controls on our operating expenses, resulting in an average daily operating cost per vessel of $6,412 in the six months ended June 30, 2009 compared to $6,504 in the six months ended June 30, 2008.

Amortization of Deferred Drydocking and Special Survey Costs

Amortization of deferred dry-docking and special survey costs increased 20.6%, or $0.7 million, to $4.1 million in the six months ended June 30, 2009, from $3.4 million in the six months ended June 30, 2008. The increase reflects higher drydocking costs incurred, which were subject to amortization during the six months ended June 30, 2009 as compared to the six months ended June 30, 2008.

Depreciation

Depreciation expense increased 20.7%, or $5.0 million, to $29.1 million in the six months ended June 30, 2009, from $24.1 million in the six months ended June 30, 2008. The increase in depreciation expense was due to the increased average number of vessels in our fleet during the six months ended June 30, 2009, compared to the six months ended June 30, 2008.

General and Administrative Expenses

General and administrative expenses increased 13.8%, or $0.8 million, to $6.6 million in the six months ended June 30, 2009, from $5.8 million in the six months ended June 30, 2008. The increase was mainly a result of increased fees paid to our Manager in the six months ended June 30, 2009 compared to the six months ended June 30, 2008 due to the increase in the average number of our vessels in our fleet and an increase in the rate of fees payable to our manager, as discussed above.

Interest Expense and Interest Income

Interest expense increased 19.7%, or $2.9 million, to $17.6 million in the six months ended June 30, 2009, from $14.7 million in the six months ended June 30, 2008. The change in interest expense was due to the increase in our average debt by $682.3 million, to $2,157.5 million in the six months ended June 30, 2009 from $1,475.2 million in the six months ended June 30, 2008, as well as the increased margins over LIBOR on which our indebtedness is subject to, following our agreements with

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our lenders to waive certain covenant breaches as of December 31, 2008. The financing of our extensive new-building program resulted in interest capitalization, rather than such interest being recognized as an expense, of $16.6 million for the six months ended June 30, 2009 compared to $18.1 million of capitalized interest for the six months ended June 30, 2008.

Interest income decreased by $0.2 million, to $1.7 million in the six months ended June 30, 2009, from $1.9 million in the six months ended June 30, 2008. The decrease in interest income is mainly attributed to lower interest rates on which our cash balances were subject to, partially offset by higher average bank deposits during the six months ended June 30, 2009 compared to the six months ended June 30, 2008. The weighted average interest rate margin over LIBOR payable under our credit facilities has increased by approximately 1.1 percentage points per annum during the waivers period, following our agreements with our lenders to waive certain covenant breaches as of December 31, 2008.

Other Income/(Expense), Net

Other income/(expenses), net, decreased by $1.0 million, to an expense of $1.1 million in the six months ended June 30, 2009, from an expense of $0.1 million in the six months ended June 30, 2008. The decrease in other income/(expenses), net, is mainly attributable to foreign currency revaluations of $1.4 million recorded during the six months ended June 30, 2009.

(Loss)/Gain on Fair value of Derivatives

(Loss)/gain on fair value of derivatives, decreased by $11.5 million, to an expense of $10.8 million in the six months ended June 30, 2009, from a gain of $0.7 million in the six months ended June 30, 2008. The decrease in (Loss)/gain on fair value of derivatives is attributable to increased realized losses of $11.5 million in relation to our interest rate swaps in the six months ended June 30, 2009 compared to the six months ended June 30, 2008.

Discontinued Operations

Although we did not conduct any discontinued operations during the six months ended June 30, 2009 and 2008, we recorded an expense of $1.6 million for the six months ended June 30, 2008, mainly attributed to an expense of $1.5 million recorded in the second quarter of 2008 following the adverse outcome of a lawsuit regarding the operation of one of our drybulk vessels sold in May 2007. As discussed in Note 15, Discontinued Operations, in our condensed consolidated financial statements for the six months ended June 30, 2009 included elsewhere in this report, we have determined that our Drybulk Business should be reflected as discontinued operations.

Liquidity and Capital Resources

Historically, our principal source of funds has been equity provided by our stockholders, operating cash flows, including from vessel sales, and long-term bank borrowings, as well as proceeds from our initial public offering in October 2006. Our principal uses of funds have been capital expenditures to establish, grow and maintain our fleet, comply with international shipping standards, environmental laws and regulations and to fund working capital requirements.

Our primary short-term liquidity needs are to fund our vessel operating expenses, loan amortization and interest payments. Our medium-term liquidity needs primarily relate to the purchase of the 28 additional containerships for which we have contracted and for which we had scheduled future payments through the scheduled delivery of the final contracted vessel during 2012 aggregating $2.0 billion as of August 31, 2009. Our long-term liquidity needs primarily relate to additional vessel acquisitions in the containership sector and debt repayment. We anticipate that our primary sources of funds will be cash from our existing credit facilities and additional credit facilities we will seek to arrange, cash from operations and, possibly, equity financings. We believe that currently contracted sources of funds will be sufficient to meet our liquidity needs through the first quarter of 2010, since such contracted revenue, absent any further disruptions therein, together with our committed credit facilities, will be sufficient to meet our currently projected liquidity needs for that period.   We are considering an underwritten public offering of our common stock, and have filed a Registration Statement on Form F-1 for our issuance and sale of common stock in connection therewith.  We would intend to use the net proceeds from any such offering to fund a portion of our newbuilding program and  for general corporate purposes.  Any such offering, including the number of shares of common stock to be sold, is subject to, among other things, market conditions and there is no assurance that such an offering will be completed.  In addition, we may pursue additional sales of equity and equity-linked securities, including to our directors, officers, existing stockholders or affiliates, as part of our efforts to enhance our liquidity position and fund our newbuilding program.

In the first half of 2009, we came to an agreement to delay the delivery dates of five 8,530 TEU containerships under construction by approximately two hundred days each on average, five 6,500 TEU, five 3,400 TEU containerships under construction by approximately one quarter each, five 12,600 TEU containerships under construction by approximately one year each and five 6,500 TEU containerships under construction for a period ranging from two to six months.  As of June 30, 2009,

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we expect to take delivery of four vessels during the remainder of 2009, eleven in 2010, eight in 2011 and five in 2012. As of June 30, 2009, the remaining capital expenditure installments for these vessels were approximately $323 million for the remainder of 2009, $889 million for 2010, $402 million for 2011 and $449 million for 2012.  In addition to our available borrowing capacity under committed credit facilities as of June 30, 2009, we would be required to procure significant additional financing of approximately $1.4 billion in order to fund these remaining installment payments, to the extent such installment payments are not funded with cash generated by our operations. Accordingly, as of June 30, 2009, we have no financing arranged for the acquisition of 12 of the newbuilding containerships expected to be delivered to us in 2010, 2011 and 2012. Our ability to obtain financing in the current economic environment, particularly for the acquisition of containerships, which are experiencing low charter rates and depressed vessel values, is limited.

Restricted cash decreased by $21.9 million, to $229.6 million as of June 30, 2009, from $251.5 million as of December 31, 2008. The decrease in restricted cash is attributed to cash borrowed under our revolving credit facilities designated to finance certain of our newbuildings and is utilized to fund progress payments of these newbuildings through their scheduled deliveries from December 2009 to the third quarter of 2011.

Under our existing multi-year charters as of June 30, 2009, we had contracted revenues of $166.5 million for the remainder of 2009, $402.9 million for 2010 and, thereafter, approximately $6.3 billion, of which amounts $16.4 million, $136.9 million and $5.1 billion, respectively, are associated with charters from our contracted newbuildings, some of which have not been financed.  Although these expected revenues are based on contracted charter rates, we are dependent on our charterers ability and willingness to meet their obligations under these charters.  For example, as part of an announced restructuring plan, Zim Israel Integrated Shipping Services, the charterer of six of our vessels, has stated that it is reducing, unilaterally, all of its long-term charter hire payments to ship-owners by 35% commencing September 1, 2009 and for an indicated period of three years, which reduction is not reflected in the above contracted revenue amount.  See “Recent Developments” and “Risk Factors.”

As of August 31, 2009, we had approximately $456 million undrawn under our credit facilities and $216 million of restricted cash designated for newbuilding progress payments, and cash and cash equivalents of $139.9 million. Our board of directors has determined to suspend the payment of further cash dividends as a result of market conditions in the international shipping industry and in particular the sharp decline in charter rates and vessel values in the containership sector.

In the first half and July of 2009, we obtained waivers from lenders, with which we had $1.8 billion of indebtedness, as of December 31, 2008, to cover breaches of our loan agreement covenants in relation to the collateral coverage ratios, corporate leverage ratios and the minimum net worth requirements, which we were not in compliance with as of December 31, 2008.  These waivers are effective from December 31, 2008 through January 31, 2010.  Furthermore, as of June 30, 2009, we were not in compliance with collateral coverage and corporate leverage ratio covenants, as applicable, contained in loan agreements governing $644.8 million of our outstanding indebtedness as of June 30, 2009, which were not breached and therefore not waived as of December 31, 2008. As a result, during the third quarter of 2009 we entered into agreements to extend waivers already obtained in relation to December 31, 2008 covenant breaches (except for the minimum book net worth covenant in two of our credit facilities, which was not breached as of June 30, 2009) and to waive additional breaches identified as of June 30, 2009. Our lenders agreed to waive, and not to exercise their right to demand repayment of any amounts due under the respective loan agreements as a result of, the December 31, 2008 and June 30, 2009 covenant breaches, and any future breaches of such covenants, through October 1, 2010.

If, however, the current low charter rates in the containership market and low vessels values continue or decrease further, or our charterers were to fail to meet their payment obligations, our ability to comply with these and other covenants in our loan agreements may be adversely affected and we may not be able to draw down the full amount of certain of our committed credit facilities, which contain restrictions on the amount of cash that can be advanced to us under our credit facilities based on the market value of the vessel or vessels in respect of which the advance is being made.

The following table summarizes the cash flows from our operations for each of the six months ended June 30, 2009 and 2008:

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Cash Flows

Net Cash Provided by Operating Activities

Net cash flows provided by operating activities decreased 16.5%, or $11.8 million, to $59.6 million in the six months ended June 30, 2009 compared to $71.4 million in the six months ended June 30, 2008. The decrease was primarily the result of increased interest cost of $24.4 million, which was partially offset by a favorable change in the working capital position and increased cash from operations of $12.1 million, as well as reduced payments for drydocking of $0.5 million in the six months ended June 30, 2009 compared to the same period in 2008.

Net Cash Used in Investing Activities

Net cash flows used in investing activities decreased by $46.2 million, to $207.0 million in the six months ended June 30, 2009 compared to $253.2 million in the six months ended June 30, 2008. The difference reflects the funds used to acquire secondhand vessels of $93.4 million in the six months ended June 30, 2008 compared to nil in the six months ended June 30, 2009, cash received of $16.9 million on March 7, 2008 in respect of the termination of certain lease arrangements that partially offset the cash used to acquire vessels, installment payments for newbuildings of $206.8 million in the six months ended June 30, 2009 compared to $245.9 million during the six months ended June 30, 2008 and proceeds from sale of vessels of $69.1 million in the six months ended June 30, 2008 compared to nil in the same period of 2009.

Net Cash Provided by Financing Activities

Net cash flows provided by financing activities decreased by $36.6 million, to $183.4 million in the six months ended June 30, 2009 compared to $220.0 million in the six months ended June 30, 2008. The decrease is primarily due to the proceeds from long-term debt of $181.2 million during the six months ended June 30, 2009 compared to $315.5 million in the six months ended June 30, 2008. In addition, repayment of indebtedness was $16.1 million in the six months ended June 30, 2009 compared to $43.8 million in the six months ended June 30, 2008, restricted cash decreased by $21.9 million in the six months ended June 30, 2009 compared to $0.7 million in the six months ended June 30, 2008 and no dividends were paid in the six months ended June 30, 2009 compared to $50.7 million in the six months ended June 30, 2008.

Credit Facilities

We, as guarantor, and certain of our subsidiaries, as borrowers, have entered into a number of credit facilities in connection with financing the acquisition of certain vessels in our fleet. We also have entered into guarantee facility agreements, with HSH Nordbank and The Royal Bank of Scotland, which are described in Note 12 to our unaudited condensed consolidated financial statements included in this report. The following summarizes certain terms of our credit facilities:

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(1)      As of June 30, 2009.

(2)      Our credit facility with RBS was, as of June 30, 2009, collateralized by mortgages for existing vessels and refund guarantees for newbuildings relating to the Hyundai Progress, the Hyundai Highway, the Hyundai Bridge , the Hyundai Federal (ex APL Confidence), the Zim Monaco, the HN N-219, the HN N-221, the HN N-222, the HN S-4005, the HN H1022A , the HN N-218 , the HN S-458 , the HN S-459 , the HN S-460 and the HN S-461.

(3)      Our credit facility with HSH Nordbank AG was, as of June 30, 2009, collateralized by mortgages and other security relating to the Maersk Deva (ex Vancouver Express) and the Bunga Raya Tiga (ex Maersk Derby) .

(4)      Our KEXIM credit facility was, as of June 30, 2009, collateralized by mortgages and other security relating to the CSCL Europe and the CSCL America (ex MSC Baltic).

(5)      Our KEXIM-FORTIS credit facility was, as of June 30, 2009, collateralized by mortgages and other security relating to the CSCL Pusan and the CSCL Le Havre .

(6)      Our credit facility with Aegean Baltic Bank S.A. and HSH Nordbank AG was, as of June 30, 2009, collateralized by mortgages and other security relating to the CMA CGM Elbe , the CMA CGM Kalamata , the CMA CGM Komodo , the CMA CGM Passiflore , the MOL Affinity (ex Hyundai Commodore) , the Hyundai Duke , the CMA CGM Vanille, the Maersk Marathon , the Maersk Messologi , the Maersk Mytilini , the YM Yantian , the Al Rayyan (ex Norasia Hamburg) , the YM Milano , the CMA CGM Lotus , the Hyundai Vladivostok , the Hyundai Advance , the Hyundai Stride, the Hyundai Future, the Hyundai Sprinter, the Hanjin Montreal and the MSC Eagle and assigned refund guarantees related to pre-delivery installments for the HN Z00001 , the HN Z00002 , the HN Z00003 and the HN Z00004 . As of July 10, 2009, we agreed to amend the facility by adding additional collateral as follows: (a) newbuilding vessel HN S-4004 to be provided as security under the facility, (b) second priority mortgages on the Maersk Deva (ex Vancouver Express ) and the Bunga Raya Tinga (ex Maersk Derby ) financed by HSH Nordbank AG and Dresdner Bank and (c) second priority mortgages on the CSCL Europe and the CSCL America (ex MSC Baltic ) financed by KEXIM credit facility and the CSCL Pusan (ex HN 1559 ) and the CSCL Le Havre (ex HN 1561 ) financed by our KEXIM-Fortis credit facility.

(7)      Our Emporiki Bank of Greece credit facility was, as of June 30, 2009, collateralized by refund guarantees relating to vessels the HN S4001 and the HN S4002 , which are currently under construction.

(8)      Our Deutsche Bank credit facility was, as of June 30, 2009, collateralized by mortgages and other security relating to the Zim Rio Grande, the Zim Sao Paolo and the Zim Kingston .

(9)      Our Credit Suisse credit facility was, as of June 30, 2009, collateralized by refund guarantees relating to vessels the Zim Luanda , the HN S4003 and the HN N-214.

(10)    Our Fortis Bank-Lloyds TSB-National Bank of Greece credit facility was, as of June 30, 2009, collateralized by mortgages and other security relating to the vessels the YM Colombo , the YM Seattle , the YM Vancouver and the YM Singapore.

(11)    Our Deutsche Schiffsbank-Credit Suisse-Emporiki Bank credit facility was, as of June 30, 2009, collateralized by mortgages and other security relating to the vessels the ZIM Dalian , the HN N-220 , the HN N-223 , the HN N-215 and the HN Z0001 .

The weighted average interest rate margin over LIBOR payable under our credit facilities has increased by approximately 1.4 percentage points per annum during the waiver period (from approximately 0.7 percentage points before the waiver period to approximately 2.1 percentage points during the waiver period), following our agreements with our lenders to waive certain covenant breaches as of December 31, 2008 and new breaches as of June 30, 2009, as well as extend the waiver period from January 31, 2010 to October 1, 2010.

As of June 30, 2009, we were in breach of (i) the collateral coverage ratio covenant contained in our credit facility with Credit Suisse which had an outstanding balance of $92.9 million as of June 30, 2009 (this covenant was not breached as of December 31, 2008 and therefore it was not covered by the waiver obtained in relation to the December 31, 2008 covenant breaches), (ii) the collateral coverage ratio covenant contained in our credit facility with Deutsche Bank which had an outstanding balance of $180.0 million as of June 30, 2009 (this covenant was not breached as of December 31, 2008 and therefore it was not covered by the waiver obtained in relation to the December 31, 2008 covenant breaches), (iii) the corporate leverage ratio and collateral coverage ratio covenants contained in our credit facility with Fortis Bank-Lloyds TSB-National

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Bank of Greece, which had an outstanding balance of $253.2 million as of June 30, 2009, and (iv) the corporate leverage ratio covenant under our KEXIM-Fortis credit facility which had an outstanding balance of $118.7 million as of June 30, 2009 (this covenant was not breached as of December 31, 2008 and therefore it was not covered by the waiver obtained in relation to December 31, 2008 covenant breaches).  During the third quarter of 2009, we entered into agreements to extend waivers already obtained in relation to the December 31, 2008 covenant breaches (except for the minimum book net worth covenant in two of our credit facilities, which was not breached as of June 30, 2009) and to waive additional breaches of certain covenants in our credit facilities identified as of June 30, 2009, which had not been breached and therefore were not waived as of December 31, 2008. Our lenders agreed to waive, and not to exercise their right to demand repayment of any amounts due under the respective loan agreements as a result of, the December 31, 2008 and June 30, 2009 covenant breaches, and any future breaches of such covenants, through October 1, 2010, as described in more detail below.

Our credit facilities, as modified by the waivers and amendments entered into in 2009, contain financial and security covenants requiring us to:

·       maintain a market value adjusted net worth of at least $400.0 million and stockholders’ equity of at least $250.0 million;

·       ensure that the aggregate market value of our vessels in our fleet exceeds 145.0% of our net consolidated debt at all times under our KEXIM-Fortis credit facility;

·       ensure that the ratio of the aggregate market value of the vessels in our fleet securing the applicable loan to our outstanding indebtedness under such loan at all times exceeds (i) 115% under our Emporiki Bank credit facility and (ii) a range from 120% to 125% under our other credit facilities (reduced to 100% under our RBS credit facility and our Credit Suisse credit facility during the applicable waiver period as described below);

·       maintain adjusted stockholders’ equity in excess of 30.0% of our total market value adjusted assets;

·       ensure that our total liabilities (after deducting cash and cash equivalents), will be no more than 70.0% (or 75% under one of our credit facilities) of our total market value adjusted assets;

·       maintain aggregate cash and cash equivalents of no less than the higher of (a) $30 million and (b) 3% of our total indebtedness until November 14, 2011 and 4% of our total indebtedness at all times thereafter; and

·       maintain a ratio of EBITDA to net interest expense of no less than 2.5 to 1.0.

Our credit facilities also contain other restrictions and customary events of default with respect to us and our applicable subsidiaries, such as a cross-default with respect to financial indebtedness or any adverse change in the financial position or prospects of the vessel-owning subsidiaries or the Company that creates a material risk to our ability to repay such indebtedness and, in some cases, certain changes in the charters for vessels mortgaged under the applicable credit facility. In addition, as described below, under the waiver agreements, our payment of any dividend is subject to the approval of certain of our lenders during periods covered by the waivers and is subject to restrictions on the amount of dividends that we may pay pursuant to terms of waivers from other lenders.

Set forth below are details of the respective waivers agreed with our lenders in respect of breaches of the loan covenants contained in certain of our credit facilities and our guarantee facility with HSH Nordbank.

The Royal Bank of Scotland Credit Facility . As of December 31, 2008, we were in breach of the collateral coverage ratio and corporate leverage ratio covenants contained in our $700.0 million senior revolving credit facility with The Royal Bank of Scotland. We entered into an agreement waiving the breach of the corporate leverage ratio covenant for the year ended December 31, 2008, as well as any subsequent breach of such covenant, up to January 31, 2010 and reducing the collateral coverage ratio to 100% from 125% (at which revised collateral coverage ratio we would have been in compliance as of December 31, 2008 and June 30, 2009) in respect of the year ended December 31, 2008 and up until January 31, 2010, with an increase in the interest rate margin by 1.5 percentage points per annum for the remaining period of the loan and a one-time fee of $100,000. In addition, during the period covered by the waiver we are not permitted to make dividend payments without the consent of our lender under this credit facility.   On July 17, 2009, we entered into an agreement with the lender under this credit facility to extend the waiver period through October 1, 2010, with above interest rate margin increases being applied to the revised waiver period.

HSH Nordbank Credit Facility (with Aegean Baltic Bank acting as agent) . As of December 31, 2008, we were in breach of the net worth covenant contained in our $60.0 million credit facility with HSH Nordbank, Dresdner Bank and Aegean Baltic Bank acting as agent. We entered into an agreement waiving the breach of such covenant for the year ended December 31, 2008, as well as any subsequent breach of such covenant, up to January 31, 2010. Such waiver has been provided by our lenders under this credit facility pursuant to the terms and conditions of a commitment letter we have entered into with such lenders pursuant to

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which we have agreed to amend the credit facility to increase the interest rate margin over LIBOR by 1.725 percentage points per annum (or, if lower, an increase in the interest rate margin of 1.225 percentage points and the replacement of LIBOR by the bank’s cost of funding) for the waiver period and increase the interest rate margin by 0.975 percentage points per annum for the remaining period of the loan as well as pay a one-time fee of 0.30 percentage points on the facility amount outstanding.  On July 21, 2009, we entered into an agreement with the lenders under this credit facility to extend the waiver period through October 1, 2010, with the above interest rate margin increases being applied to the revised waiver period.

Aegean Baltic Bank—HSH Nordbank—Piraeus Bank Credit Facility . As of December 31, 2008, we were in breach of the collateral coverage ratio, corporate leverage ratio and net worth covenants contained in our $700.0 million senior credit facility with Aegean Baltic Bank S.A., HSH Nordbank AG and Piraeus Bank. We entered into an agreement waiving breaches of such covenants for the year ended December 31, 2008, as well as any subsequent breach of such covenants, up to January 31, 2010. Such waiver has been provided by our lenders under this credit facility pursuant to the terms and conditions of a commitment letter we have entered into with such lenders pursuant to which we have agreed to amend the credit facility, including to add additional collateral and increase the interest rate margin by 1.8 percentage points per annum for the waiver period and increase the interest rate margin by 1.05 percentage points per annum for the remaining period of the loan, as well as pay a one-time fee of $2.1 million and make $5.0 million payments on July 31, 2009, October 31, 2009 and January 31, 2010, plus payment of any additional amounts from funds in the pledged account from income from the mortgaged vessels under this credit facility on January 31, 2010. We have also agreed to use our best efforts to raise additional equity capital, with the participation of our largest stockholder in any such transaction. In addition, during the period covered by the waiver we are not permitted to make dividend payments without the consent of our lenders under this credit facility. On July 21, 2009, we entered into an agreement with the lenders under this credit facility to extend the waiver period through October 1, 2010, with the above interest rate margin increases being applied to the revised waiver period, as well as to make additional $5.0 million payments on April 30, 2010 and July 31, 2010, plus payment of any additional amounts from funds in the pledged account from income from the mortgaged vessels under this credit facility on April 30, 2010, July 31, 2010 and September 30, 2010 as the lenders under this credit agreement may determine.

KEXIM—Fortis Credit Facility . As of December 31, 2008, we were in breach of the corporate leverage ratio and net worth covenants contained in our $144.0 million credit facility with the Export-Import Bank of Korea, or KEXIM, and Fortis Bank. We entered into an agreement waiving compliance with such covenants for the year ended December 31, 2008 and providing that compliance with such covenants in respect of the year ended December 31, 2009 will be tested within 180 days following that date. In return, we paid our lenders under this credit facility a one-time fee of $360,000 and the interest rate margin was increased by 0.5 percentage points for the waiver period. As of June 30, 2009, we were in breach of an additional corporate leverage ratio contained in this credit facility and on September 22, 2009, we entered into an agreement with the lenders under this credit facility to extend the waiver of the breach of the corporate leverage ratio and net worth covenants obtained for the year ended December 31, 2008, as well as any subsequent breaches of such covenant, through October 1, 2010 and waiving the breach of the additional corporate leverage ratio covenant identified as of June 30, 2009, and any subsequent breaches of such covenant, through October 1, 2010, with an increase in the interest rate margin by 1.0 percentage points per annum for the waiver period from June 30, 2009 to December 31, 2009 and by 0.5 percentage points per annum for the waiver period from January 1, 2010 to October 1, 2010, as well as a one-time fee of $360,000. We also agreed to use our best efforts to raise additional equity capital, and to use the net proceeds of any such equity capital issuance, as well as any debt raised, to fund a portion of our newbuilding program. Under the terms of the waiver, during the waiver period we are not permitted to pay dividends.

Emporiki Bank Credit Facility . As of December 31, 2008, we were in breach of the corporate leverage ratio and minimum net worth covenants contained in our $156.8 million credit facility with Emporiki Bank. We entered into an agreement waiving breaches of such covenants for the year ended December 31, 2008, as well as any subsequent breach of such covenants, up to January 31, 2010, with an increase in the interest rate margin by 1.65 percentage points per annum for the waiver period and 0.65 percentage points per annum for the period thereafter. On August 12, 2009, we entered into an agreement with the lender under this credit facility to extend the waiver period through October 1, 2010 (except for the minimum book net worth covenant, which was not breached as of June 30, 2009), with a one-time amendment fee of $0.2 million and the above interest rate margin increases being applied to the revised waiver period.

Deutsche Bank Credit Facility . As of December 31, 2008, we were in breach of the corporate leverage ratio covenant contained in our $180.0 million credit facility with Deutsche Bank. We entered into an agreement waiving the breach of such covenant for the year ended December 31, 2008, as well as any subsequent breach of such covenant, up to January 31, 2010. In return, we paid to the bank a one-time fee of 0.3% of the loan amount. As of June 30, 2009, we were in breach of the collateral coverage ratio covenant contained in our credit facility with Deutsche Bank, which was not covered by the waiver obtained in relation to the December 31, 2008 breach, which had an outstanding balance of $180.0 million as of June 30, 2009. On August 6, 2009, we entered into an agreement with Deutsche Bank to extend the waiver of the breach of the corporate leverage ratio covenant obtained for the year ended December 31, 2008, as well as any subsequent breaches of such covenant, through October 1, 2010 and waiving the breach of the collateral coverage ratio covenant identified as of June 30, 2009, and any subsequent

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breaches, through October 1, 2010, with an increase in the interest rate margin by 1.315 percentage points per annum for the waiver period and 0.815 percentage points per annum thereafter, as well as a one-time fee of $0.4 million. We also agreed to use our best efforts to raise additional equity capital. Under the terms of the waiver, during the waiver period we are not permitted to pay dividends without the consent of our lenders under this credit facility.

Credit Suisse Credit Facility . As of December 31, 2008, we were in breach of the corporate leverage ratio and net worth covenants contained in our credit facility with Credit Suisse. We entered into an agreement waiving breaches of such covenants for the year ended December 31, 2008, as well as any subsequent breach of such covenants, up to January 31, 2010. As of June 30, 2009, we were in breach of the collateral coverage ratio covenant, which was not covered by the waiver obtained in relation to the December 31, 2008 breaches, contained in our $221.1 million credit facility with Credit Suisse, which had an outstanding balance of $92.9 million as of June 30, 2009. On July 29, 2009, we entered into an agreement with Credit Suisse to extend the waiver of the breaches of the corporate leverage ratio and net worth covenants obtained for the year ended December 31, 2008, as well as any subsequent breach of such covenants, through October 1, 2010 (except for the minimum book net worth covenant, which was not breached as of June 30, 2009) and reducing the collateral coverage ratio to 100% from 125% (at which revised collateral coverage ratio we would have been in compliance as of June 30, 2009) in respect of the period ended June 30, 2009 and through October 1, 2010, with an increase in the interest rate margin by 1.225 percentage points per annum for the waiver period and a one-time fee of $50,000. Under the terms of the waiver, during the waiver period we are not permitted to pay dividends without the consent of our lenders under this credit facility.

Fortis Bank—Lloyds TSB—National Bank of Greece Credit Facility . As of December 31, 2008, we were in compliance with all covenants contained in our $253.2 million credit facility with Fortis Bank—Lloyds TSB—National Bank of Greece. As of June 30, 2009, we were in breach of the corporate leverage ratio and collateral coverage ratio covenants contained in this credit facility, which had an outstanding balance of $253.2 million as of June 30, 2009.  On August 14, 2009, we entered into an agreement, subject to receiving waivers through at least October 1, 2010 of all breaches under our other credit facilities, with the lenders under our Fortis Bank—Lloyds TSB—National Bank of Greece waiving the breach of the corporate leverage ratio and collateral coverage ratio covenant identified as of June 30, 2009, and any subsequent breaches, through October 1, 2010, with an increase in the interest rate margin by 1.25 percentage points per annum for the remaining period of the loan, as well as a one-time fee of $1.0 million. We also agreed to use our best efforts to raise additional equity capital, and to use the net proceeds of any such equity capital issuance to fund a portion of our newbuilding program. Under the terms of the waiver, during the waiver period we are not permitted to pay dividends.

Deutsche Schiffsbank—Credit Suisse—Emporiki Bank  Credit Facility . During the first quarter of 2009, we were in breach of the corporate leverage ratio and net worth covenants contained in our $298.5 million credit facility. On March 19, 2009, we entered into an agreement waiving breaches of such covenants, as well as any subsequent breach of such covenants, up to January 31, 2010. During the waiver period we are not permitted to pay dividends without the consent of our lenders under this credit facility. On August 17, 2009, we entered into an agreement with the lenders to extend the waiver period through October 1, 2010 (except for the minimum book net worth covenant, which was not breached as of June 30, 2009), with an increase in the interest rate margin by 0.8 percentage points per annum for the waiver period and a one-time waiver fee of 0.2 percentage points on the outstanding loan amount.

HSH Nordbank Guarantee Facility (with Aegean Baltic Bank acting as agent) . As of December 31, 2008, we were in breach of the corporate leverage ratio and net worth covenants contained in our $148.0 million guarantee facility with HSH Nordbank, with Aegean Baltic Bank acting as agent. We entered into an agreement, pursuant to the terms and conditions of a commitment letter, regarding the guarantee facility waiving breaches of such covenants for the year ended December 31, 2008, as well as any subsequent breach of such covenants, up to October 1, 2010. In addition, during the period covered by the waiver we are not permitted to make dividend payments without the consent of our lenders under this facility.

Qualitative and Quantitative Disclosures about Market Risk

Interest Rate Swaps

We have entered into interest rate swap agreements converting floating interest rate exposure into fixed interest rates in order to hedge our exposure to fluctuations in prevailing market interest rates, as well as interest rate swap agreements converting the fixed rate we pay in connection with certain of our credit facilities into floating interest rates in order to economically hedge the fair value of the fixed rate credit facilities against fluctuations in prevailing market interest rates. See Note 11, Financial Instruments, to our condensed consolidated financial statements (unaudited) included in this report. We do not use financial instruments for trading or other speculative purposes.

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Foreign Currency Exchange Risk

We have not entered into derivative instruments to hedge the foreign currency translation of assets or liabilities or foreign currency transactions during the six months ended June 30, 2009. Refer to Note 11(c), Financial Instruments — Foreign Currency Forward Contracts with respect to forward contracts expired and cash settled in April 2008. We do not use financial instruments for trading or other speculative purposes.

Off-Balance Sheet Arrangements

We do not have any transactions, obligations or relationships that could be considered material off-balance sheet arrangements.

Capitalization

The table below sets forth our consolidated capitalization as of June 30, 2009:

·          on an actual basis; and

·          on an as adjusted basis to reflect additional borrowings drawn of $26.5 million, as well as scheduled principal repayments of $9.2 million in the period from July 1, 2009 to September 18, 2009.

There have been no material changes to our capitalization as adjusted in the table below since June 30, 2009.  This table should be read in conjunction with our condensed consolidated financial statements (unaudited) and the notes thereto included in this report.

Recent Developments

We are considering an underwritten public offering of our common stock and, on August 6, 2009, filed a Registration Statement on Form F-1 in connection therewith.  We would intend to use the net proceeds from any such offering to fund a portion of our newbuilding program and for general corporate purposes.  Any such offering, including the number of shares of common stock to be sold, is subject to, among other things, market conditions and there is no assurance that such an offering will be completed.

The charterer of six of our containerships, Zim Integrated Shipping Services Ltd., has stated that it was reducing, unilaterally, all of its long-term charterhire payments to ship-owners by 35% commencing September 1, 2009 and for an indicated period of three years.  We are in discussions with Zim and are evaluating the situation. The vessels that we charter to Zim are currently operating under their 12-year time charter. Zim is not a charterer of any of our newbuilding containerships.

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On September 9, 2009, at our annual meeting of stockholders, each of Dr. Coustas and Messrs. Itkin and Mundell were re-elected as Class I directors for a three-year term expiring at the annual meeting of our stockholders in 2012 and our stockholders approved (i) an amendment to our Amended and Restated Articles of Incorporation to authorize additional shares of common stock and additional shares of preferred stock, (ii) an amendment to our Amended and Restated Articles of Incorporation to provide that the Board of Directors may amend, adopt and repeal the bylaws of the company with a vote of sixty-six and two-thirds percent of the members of the entire Board, (iii) an amendment and restatement of our Amended and Restated Bylaws to conform certain bylaws to reflect more customary provisions, and our stockholders also ratified the appointment of our independent auditors, each as described in our proxy statement set forth as Exhibit 99.1 to our report on Form 6-K furnished to the SEC on August 12, 2009.  The Articles of Amendment, providing for the amendments described above, to our Amended and Restated Articles of Incorporation are set forth as Exhibit 99.2 to this report and our Amended and Restated Bylaws, as amended and restated as described above, are set forth as Exhibit 99.3 to this report.

Risk Factors

In addition to the risk factors set forth in our annual report on Form 20-F for the year ended December 31, 2008, filed with the SEC on July 13, 2009, you should note the following updated risk factors.

Our business, and an investment in our securities, involves a high degree of risk, including risks relating to the downturn in the container shipping market, which continues to adversely affect the major liner companies which charter our vessels and to have an adverse effect on our earnings, affect our compliance with our loan covenants and could result in our having to restructure our obligations.

The abrupt and dramatic downturn in the containership market, from which we derive all of our revenues, has severely affected the container shipping industry, particularly the large liner companies to which we charter our vessels, and has adversely affected our business.  The average daily charter rate of a 4,400 TEU containership, which represents the approximate average TEU capacity of our vessels, decreased from $36,000 in May 2008 to $6,500 in July 2009. The decline in charter rates is due to various factors, including the reduced availability of trade financing for purchases of containerized cargo carried by sea, which has resulted in a significant decline in the volume of cargo shipments, and the level of global trade, including exports from China to Europe and the United States. The decline in the containership market has affected the major liner companies which charter our vessels, one of which, Zim Israel Integrated Shipping Services, recently stated that it is reducing, unilaterally, all of its long-term charterhire payments to ship-owners by 35% commencing September 1, 2009.  It also affects the value of our vessels, which follow the trends of freight rates and containership charter rates, and earnings on our charters, and similarly, affects our cash flows and  liquidity, as well as adversely affecting our ability to obtain the significant amount of additional financing needed to fund the remaining installments on our contracted newbuilding containerships.  We have had to obtain waivers from the lenders under all but one of our credit facilities because we have not been compliance with the covenants contained in our loan agreements.  The decline in the containership charter market has had and may continue to have additional adverse consequences for our industry including an absence of financing for vessel acquisitions and newbuildings, the absence of an active secondhand market for the sale of vessels, charterers not performing under existing time charters and widespread loan covenant defaults in the container shipping industry. As a result of this dramatic downturn in the container shipping industry, including any of these factors, it is possible that we could become unable to service our debt and other obligations and could have to restructure our obligations, either as part of a court supervised process or otherwise.

We have not been in compliance with financial covenants contained in certain of our credit facilities and the current low containership charter rates and containership vessel values and any future declines in these rates and values will affect our ability to comply with various covenants in our credit facilities.

Our credit facilities, which are secured by mortgages on our vessels, require us to maintain specified collateral coverage ratios and satisfy financial covenants, including requirements based on the market value of our containerships and our net worth.  The market value of containerships is sensitive to, among other things, changes in the charter markets with vessel values deteriorating in times when charter rates are falling and improving when charter rates are anticipated to rise.  The current low in charter rates in the containership market coupled with the prevailing difficulty in obtaining financing for vessel purchases have adversely affected containership values.  These conditions have led to a significant decline in the fair market values of our vessels and the extremely low prevailing interest rates have led to significant declines in the fair value of our interest rate swap

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agreements.  As a result, we were in breach of covenants contained in certain of our loan agreements as of December 31, 2008 and June 30, 2009, for each of which we have obtained waivers in 2009.

In 2009, we entered into waivers and amendments to certain of our credit facilities to waive the prior breaches, as of December 31, 2008 and new breaches as of June 30, 2009, resulting from the decrease in the market value of our vessels and the decline in the fair value of our interest rate swaps, of covenants to maintain minimum ratios of the fair market value of our vessels securing a particular credit facility to the aggregate outstanding indebtedness under such credit facility, a maximum ratio of total liabilities to market value adjusted total assets and minimum net worth, including on a market adjusted basis, requirements contained in our applicable credit facilities, as well any subsequent breaches of these covenants, through October 1, 2010, or in two instances reducing the collateral coverage ratio covenant requirement during such period. Such waivers and covenants do not, however, cover other covenants contained in our credit facilities. If the current low charter rates in the containership charter market and low vessel values continue, including continuing beyond the period covered by the waivers we obtained in 2009, we may not be in compliance with these covenants or other covenants not covered by waivers, and would have to seek additional waivers of compliance from our lenders and/or raise additional funds through asset sales, equity infusions or similar transactions. Our amended loan agreements contain additional restrictions, including the requirement that we obtain prior written consent of certain of our lenders before paying any dividends and caps on the per share and aggregate dividend that we may pay with respect to 2009 pursuant to the terms of our other credit facilities.

If we fail to obtain extensions of our existing waiver agreements when necessary or comply with our covenants and are not able to obtain covenant waivers or modifications with respect to such non-compliance, our lenders could require us to make prepayments or provide additional collateral sufficient to bring us into compliance with such collateral coverage covenants, and if we fail to do so or with respect to other covenants in any event, our lenders could accelerate our indebtedness and foreclose on the vessels in our fleet, which would impair our ability to continue to conduct our business. In addition, if we were unable to obtain waivers, we could be required to reclassify all of our affected indebtedness as current liabilities. Certain of these events, including under cross-default provisions, could in turn lead to additional defaults under our loan agreements, and the consequent acceleration of the indebtedness thereunder and the commencement of similar foreclosure proceedings by other lenders. If our indebtedness were accelerated in full or in part, it would be very difficult in the current financing environment for us to refinance our debt or obtain additional financing and we could lose our vessels if our lenders foreclose their liens, which would adversely affect our ability to continue our business. Any default by or the failure of our charterers to honor their obligations to us under our charter agreements would reduce the likelihood that our lenders would be willing to provide waivers or covenant modifications or other accommodations.

Moreover, in connection with any waivers and/or amendments to our loan agreements, our lenders may impose additional operating and financial restrictions on us and/or modify the terms of our existing loan agreements.  These restrictions may limit our ability to, among other things, pay dividends, make capital expenditures and/or incur additional indebtedness, including through the issuance of guarantees. In addition, our lenders may require the payment of additional fees, require prepayment of a portion of our indebtedness to them, accelerate the amortization schedule for our indebtedness and increase the interest rates they charge us on our outstanding indebtedness, all of which could adversely affect our profitability and cash flows.

We are dependent on the ability and willingness of our charterers to honor their commitments to us for all of our revenues and the failure of our charterers to meet their obligations under our time charter agreements could cause us to suffer losses or otherwise adversely affect our business.

We derive all of our revenues from the payment of charter hire by our charterers.  Our 41 containerships are currently employed under time charters with 10 customers, with 74% of our revenues in 2008 generated from four customers. We have also arranged long-term time charters for each of our 28 contracted newbuilding containerships.  We could lose a charterer or the benefits of a time charter if:

·       the charterer fails to make charter payments to us because of its financial inability, disagreements with us, defaults on a payment or otherwise;

·       the charterer exercises certain specific limited rights to terminate the charter;

·       we do not take delivery of a contracted newbuilding containership at the agreed time; or

·       the charterer terminates the charter because the ship fails to meet certain guaranteed speed and fuel consumption requirements and we are unable to rectify the situation or otherwise reach a mutually acceptable settlement.

If we lose a time charter, we may be unable to re-deploy the related vessel on terms as favorable to us.  We would not receive any revenues from such a vessel while it remained unchartered, but we may be required to pay expenses necessary to maintain the vessel in proper operating condition, insure it and service any indebtedness secured by such vessel.

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The time charters on which we deploy our containerships generally provide for charter rates that are significantly above current market rates.  The ability and willingness of each of our counterparties to perform its obligations under their time charters with us will depend on a number of factors that are beyond our control and may include, among other things, general economic conditions, the condition of the container shipping industry, which has experienced severe declines in the second half of 2008 and in 2009, and the overall financial condition of the counterparty.  Furthermore, the combination of a reduction in cash flow resulting from declines in world trade, a reduction in borrowing bases under credit facilities and the reduced availability of debt and equity financing may result in a significant reduction in the ability of our charterers to make charter payments to us.  For example, Senator Lines, the charterer of one of our vessels defaulted on its charter due to its insolvency in the first quarter of 2009 and the replacement charter we were able to arrange was at a reduced rate. In addition, the charterer of six of our containerships, Zim Israel Integrated Shipping Services, has stated that it is reducing, unilaterally, all of its long-term charterhire payments to ship-owners by 35% commencing September 1, 2009. The likelihood of a charterer seeking to renegotiate or defaulting on its charter with us may be heightened to the extent such customers are not able to utilize the vessels under charter from us, and instead leave such chartered vessels idle.  Should a charterer fail to honor its obligations under agreements with us, it may be difficult to secure substitute employment for such vessel, and any new charter arrangements we secure would be at lower rates given the currently depressed charter rates.  If one or more of our charterers fail to meet their obligations to us, we could sustain significant losses which would have a material adverse effect on our business, financial condition, results of operations and cash flows, as well as our ability to pay our debt service and otherwise comply with the covenants in our credit facilities.  In these circumstances, we might ourselves have to seek to restructure our obligations, either as part of a court supervised process or otherwise.

The charterer of six of our containerships has unilaterally reduced its charter payments under the charters for these vessels by 35%.

The charterer of six of our containerships, Zim Israel Integrated Shipping Services, recently stated that it is reducing, unilaterally, all of its long-term charterhire payments to ship-owners by 35% commencing September 1, 2009, and for an indicated period of three years, in connection with its announced restructuring efforts.  Furthermore, it is possible that, as part of a court-supervised restructuring, ZIM may seek to have this unilateral rate reduction, or an even larger rate reduction, approved as a condition to affirming these charters or seek to reject the charters.  These charters represent a significant amount of revenue and the principal source of funds for repayment of $346 million of our indebtedness which is secured by these vessels.  Although this was a unilateral action by ZIM, enforcing our rights to full payment under these charters is time consuming, uncertain and ultimately may be insufficient to compensate us or prove counterproductive.  If ZIM were to default on its obligations under these charters upon rejection of such charters in a court-supervised process or otherwise, we would likely have difficulty servicing our debt under such credit facilities and would likely need to seek an agreement from our lenders to modify our debt repayment obligations thereunder.  If we fail to comply with our obligations under these loan agreements, our lenders could accelerate our outstanding indebtedness thereunder and foreclose on the vessels securing such loans.  If charterers of our other vessels were to fail to meet their obligations under the charters for our vessels or seek to reduce their charter rates thereunder, as part of a court-led restructuring or otherwise, we could be unable to service our debt and other obligations and could ourselves have to restructure our obligations, either as part of a court supervised process or otherwise.

Although we have arranged charters for each of our 28 contracted newbuilding vessels, we are dependent on the ability and willingness of the charterers to honor their commitments under such charters as it would be difficult to redeploy such vessels at equivalent rates, or at all, if charter markets continue to experience weakness.

We are dependent on the ability and willingness of the charterers to honor their commitments under the  multi-year time charters we have arranged for each of our 28 contracted newbuilding vessels. The combination of a reduction of cash flow resulting from declines in world trade, a reduction in borrowing bases under credit facilities and the lack of availability of debt or equity financing may result in a significant reduction in the ability of our charterers to make charter payments to us. Furthermore, the surplus of containerships available at lower charter rates and lack of demand for our customers’ liner services could negatively affect our charterers’ willingness to perform their obligations under the time charters for our newbuildings, which provide for charter rates significantly above current market rates. In addition, if we fail to obtain financing for any of our newbuilding containerships or otherwise fail to timely deliver such containerships to their respective charterers, such charterers may cancel their charter contracts with, and, possibly assert claims against, us. The combination of the current surplus of containership capacity, and the expected significant increase in the size of the world containership fleet over the next few years, as the high volume of containerships currently being constructed are delivered, would make it difficult to secure substitute employment for any of our newbuilding containerships if our counterparties failed to perform their obligations under the currently arranged time charters, and any new charter arrangements we were able to secure would be at lower rates given currently depressed charter rates. As a result, we could sustain significant losses which would have a material adverse effect on our business, financial condition, results of operations and cash flows, as well as our ability to pay dividends, if any, in the future, and comply with the covenants in our credit facilities. If the charterers do not honor their commitments under these

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charters, we may have rights for certain claims, subject to the terms and conditions of each charter.  However, pursuing these claims may be time consuming, uncertain and ultimately insufficient to compensate us for any failure of the charterers to honor their commitments.

No financing has been arranged for the acquisition of 12 of our 28 newbuilding containerships under construction, which 12 containerships are expected to be delivered to us at various times in 2010, 2011 and 2012, and the current state of global financial markets and current economic conditions may adversely impact our ability to obtain financing on acceptable terms which may hinder or prevent us from fulfilling our obligations under our agreements to complete the construction of these newbuilding containerships, which could result in the loss of our deposit money and additional liability to shipyards and charterers.

We currently have contracts for the construction of 28 newbuilding containerships, with aggregate remaining installment payments of $2.1 billion as of June 30, 2009. Of these 28 newbuilding containerships, 4, 12, 7 and 5 vessels are expected to be delivered to us in the remainder of 2009, in 2010, 2011 and 2012, respectively.  We will need to procure significant additional financing in order to fund the remaining installment payments for these newbuildings and, currently, have no financing arranged for the acquisition of 12 of the newbuilding containerships expected to be delivered to us at various times in 2010, 2011 and 2012.  Our ability to obtain financing in the current economic environment, particularly for the acquisition of containerships, which are experiencing low charter rates and depressed vessel values, is limited and unless we are successful in obtaining debt financing, and our cash flow from operations remains stable or increases, we may not be able to complete these transactions.   Furthermore, the loss of an existing charter for any of these contracted newbuilding containerships, due to the insolvency of or default by a charterer or otherwise, would further exacerbate the difficulty in obtaining financing for such vessels, which have contracted construction prices well above the current charter-free market value of such vessels. In addition, the loss of an existing charter, or other failure to satisfy other conditions to our lenders’ financing commitments with respect to these vessels, could result in additional funding requirements which would be difficult for us to meet in the current container shipping and financing environment.  Prevailing conditions in the global financial markets may also preclude us from raising additional equity capital or issuing equity at prices which would not be dilutive to existing stockholders, or at all.  If we were not able to complete any of these transactions, we could lose our advances for vessels under construction, which amounted to $1.1 billion as of June 30, 2009, and incur additional liability to charterers and shipyards, which may pursue claims against us under our newbuilding construction contracts and retain and sell to third parties such newbuildings to the extent completed, and costs. Accordingly, it may be necessary for us, together with our charterers, to engage in negotiations, which could be difficult and prolonged, with the shipyards constructing our 28 newbuilding containerships for further delivery date extensions, beyond the modest extensions previously agreed in 2009, and substantially restructured payment schedules and terms, including possible price reductions, for such vessels, and there can be no assurance that we could reach satisfactory resolution of any such negotiations with the shipyards and our financing banks.  If we cannot arrange financing when these installment payments come due, we could exhaust our existing cash resources and available financing.

Our profitability and growth depend on the demand for containerships and the recent changes in general economic conditions, and the impact on consumer confidence and consumer spending, has resulted and may continue to result in a decrease in containerized shipping volume, driving charter rates to significantly lower levels than the historical highs of the past few years.  Charter hire rates for containerships may continue to experience volatility or settle at depressed levels, which would, in turn, adversely affect our profitability.

Demand for our vessels depends on demand for the shipment of cargoes in containers and, in turn, containerships.  The ocean-going container shipping industry is both cyclical and volatile in terms of charter hire rates and profitability.  In the second half of 2008 and the first half of 2009, the ocean-going container shipping industry has experienced severe declines, with charter rates at significantly lower levels than the historical highs of the past few years.  Variations in containership charter rates result from changes in the supply and demand for ship capacity and changes in the supply and demand for the major products transported by containerships.  The factors affecting the supply and demand for containerships and supply and demand for products shipped in containers are outside of our control, and the nature, timing and degree of changes in industry conditions are unpredictable.  The recent global economic slowdown and disruptions in the credit markets have significantly reduced demand for products shipped in containers and, in turn, containership capacity.

Factors that influence demand for containership capacity include:

·       supply and demand for products suitable for shipping in containers;

·       changes in global production of products transported by containerships;

·       the distance that container cargo products are to be moved by sea;

·       the globalization of manufacturing;

·       global and regional economic and political conditions;

·       developments in international trade;

·       changes in seaborne and other transportation patterns, including changes in the distances over which containerized

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cargoes are transported;

·       environmental and other regulatory developments; and

·       currency exchange rates.

Factors that influence the supply of containership capacity include:

·       the number of new building deliveries;

·       the scrapping rate of older containerships;

·       the price of steel and other raw materials;

·       changes in environmental and other regulations that may limit the useful life of containerships;

·       the number of containerships that are out of service; and

·       port congestion.

Consumer confidence and consumer spending have deteriorated significantly over the past year, and could remain depressed for an extended period.  Consumer purchases of discretionary items, many of which are transported by sea in containers, generally decline during periods where disposable income is adversely affected or there is economic uncertainty and, as a result, liner company customers may ship fewer containers or may ship containers only at reduced rates. This decrease in shipping volume could adversely impact our liner company customers and, in turn, demand for containerships.  As a result, charter rates and vessel values in the containership sector have decreased significantly and the counterparty risk associated with the charters for our vessels has increased.

Our ability to recharter our containerships upon the expiration or termination of their current charters and the charter rates payable under any renewal or replacement charters will depend upon, among other things, the prevailing state of the charter market for containerships.  If the charter market is depressed, as it has been in the latter half of 2008 and in 2009, when our vessels’ charters expire, with the next vessels up for rechartering being eight containerships in 2010, we may be forced to recharter the containerships, if we are able to recharter such vessels at all, at sharply reduced rates and even possibly at a rate whereby we incur a loss, which may reduce our earnings or make our earnings volatile.  The same issues will exist if we acquire additional containerships, if we are able to recharter such vessels at all, and attempt to obtain multi-year charter arrangements as part of an acquisition and financing plan.

Containership values have recently decreased significantly, and may remain at these depressed levels, or decrease further, and over time may fluctuate substantially. If these values are low at a time when we are attempting to dispose of a vessel, we could incur a loss.

Due to the sharp decline in world trade and containership charter rates, the market values of the containerships in our fleet are currently significantly lower than prior to the downturn in the second half of 2008. Containership values may remain at current low, or lower, levels for a prolonged period of time and can fluctuate substantially over time due to a number of different factors, including:

·       prevailing economic conditions in the markets in which containerships operate;

·       changes in and the level of world trade;

·       the supply of containership capacity;

·       prevailing charter rates; and

·       the cost of retrofitting or modifying existing ships, as a result of technological advances in vessel design or equipment, changes in applicable environmental or other regulations or standards, or otherwise.

In the future, if the market values of our vessels experience further deterioration or we lost the benefits of the existing charter arrangements for any of our vessels and could not replace such arrangements with charters at comparable rates, we may be required to record an impairment charge in our financial statements, which could adversely affect our results of operations. If a charter expires or is terminated, we may be unable to re-charter the vessel at an acceptable rate and, rather than continue to incur costs to maintain and finance the vessel, may seek to dispose of it. Our inability to dispose of the containership at a reasonable price could result in a loss on its sale and adversely affect our results of operations and financial condition.

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Our credit facilities impose operating and financial restrictions on us, and if we receive waivers and/or amendments to our loan agreements, our lenders may impose additional operating and financial restrictions on us and/or modify the terms of our existing loan agreements.

Our credit facilities and the covenant waiver agreements we obtained in 2009 impose, and our future financing arrangements, as well as any future waivers which may need to be obtained, may impose, operating and financial restrictions on us.  These restrictions may limit our ability to:

·       incur additional indebtedness;

·       create liens on our assets;

·       sell capital stock of our subsidiaries;

·       make investments;

·       engage in mergers or acquisitions;

·       pay dividends; or

·       make capital expenditures.

Certain of our credit facilities require us to maintain specified financial ratios and satisfy financial covenants. These financial ratios and covenants include requirements that we:

·       maintain a market value adjusted net worth of at least $400.0 million and stockholders’ equity of at least $250.0 million;

·       ensure that the aggregate market value of our vessels in our fleet exceeds 145.0% of our net consolidated debt at all times under our KEXIM-Fortis credit facility;

·       ensure that the ratio of the aggregate market value of the vessels in our fleet securing the applicable loan to our outstanding indebtedness under such loan at all times exceeds (i) 115% under our Emporiki Bank credit facility and (ii) a range from 120% to 125% under our other credit facilities (reduced to 100% under our RBS credit facility and our Credit Suisse credit facility during the applicable waiver period);

·       maintain adjusted stockholders’ equity in excess of 30.0% of our total market value adjusted assets;

·       ensure that our total liabilities (after deducting cash and cash equivalents), at all times, will be no more than 70.0% (or 75% under one of our credit facilities) of our total market value adjusted assets;

·       maintain aggregate cash and cash equivalents of no less than the higher of (a) $30 million and (b) 3% of our total indebtedness until November 14, 2011 and 4% of our total indebtedness at all times thereafter; and

·       maintain a ratio of EBITDA to net interest expense of no less than 2.5 to 1.0.

As a result of low containership charter rates and vessel values, as well as the reduced fair value of our interest rate swaps due to low prevailing interest rates, in 2009 we had to obtain waivers of covenant breaches under our credit facilities as of December 31, 2008 and new breaches as of June 30, 2009. If we fail to meet our payment or covenant compliance obligations under our secured credit facilities, either with respect to those covenants not covered by waivers or any covenants after their applicable waiver periods expire, our lenders could then accelerate our indebtedness and foreclose on the vessels in our fleet securing those credit facilities, which could result in cross-defaults under our other credit facilities, and the consequent acceleration of the indebtedness thereunder and the commencement of similar foreclosure proceedings by other lenders. The loss of these vessels would have a material adverse effect on our operating results and financial condition.

We may be unable to draw down the full amount of our credit facilities, and may have difficulty obtaining other financing, if the market values of our vessels further decline.

There are restrictions on the amount of cash that can be advanced to us under our credit facilities based on the market value of the vessel or vessels in respect of which the advance is being made.  If the market value of our fleet, which has experienced substantial recent declines, declines further, we may not be able to draw down the full amount of certain of our committed credit facilities, obtain other financing or incur debt on terms that are acceptable to us, or at all.  We may also not be able to refinance our debt or obtain additional financing, particularly for our newbuilding vessels which have purchase prices that are likely significantly in excess of their current charter-free market value.

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We cannot be assured that we will be able to raise financing sufficient to meet our future capital and operating needs and future issuances of equity or equity-linked securities may result in significant dilution and adversely affect the market price of our common stock.

We have filed a Registration Statement on Form F-1 for our issuance and sale of common stock in an underwritten public offering.  Such offering, including the number of shares of common stock to be sold, is subject to, among other things, market conditions. In addition, we may pursue additional sales of equity and equity-linked securities, including to our directors, officers, existing stockholders or affiliates, as part of our efforts to enhance our liquidity position and fund our newbuilding program.  Even if we successfully complete such offering, we cannot be assured that the proceeds will be sufficient to meet our capital and operating needs, particularly if the charter rates in the containership charter market remain low for a prolonged period of time.

We may have to attempt to sell additional shares in the future to satisfy our capital and operating needs.  Lenders may be unwilling to provide future financing or may provide future financing only at significantly increased rates.  If we sell shares in the future, the prices at which we sell these future shares will vary, and these variations may be significant.

Our existing stockholders will experience dilution, which could be significant, if we sell shares at prices below the price at which such previous stockholders invested. We cannot predict the effect that future sales of our common stock or other equity-related securities would have on the market price of our common stock.

Forward Looking Statements

Matters discussed in this report may constitute forward-looking statements within the meaning of the safeharbor provisions of Section 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934. Forward-looking statements reflect our current views with respect to future events and financial performance and may include statements concerning plans, objectives, goals, strategies, future events or performance, and underlying assumptions and other statements, which are other than statements of historical facts. The forward-looking statements in this report are based upon various assumptions, many of which are based, in turn, upon further assumptions, including management’s examination of historical operating trends, data contained in our records and other data available from third parties. Although we believe that these assumptions were reasonable when made, because these assumptions are inherently subject to significant uncertainties and contingencies which are difficult or impossible to predict and are beyond our control, we cannot assure you that it will achieve or accomplish these expectations, beliefs or projections. Important factors that, in our view, could cause actual results to differ materially from those discussed in the forward-looking statements include the strength of world economies and currencies, general market conditions, including changes in charterhire rates and vessel values, charter counterparty performance, ability to obtain financing and comply with covenants contained in our financing agreements, shipyard performance, changes in demand that may affect attitudes of time charterers to scheduled and unscheduled drydocking, changes in our operating expenses, including bunker prices, dry-docking and insurance costs, actions taken by regulatory authorities, potential liability from pending or future litigation, domestic and international political conditions, potential disruption of shipping routes due to accidents and political events or acts by terrorists.

Risks and uncertainties are further described in reports filed by us with the U.S. Securities and Exchange Commission.

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F-1

The accompanying notes are an integral part of these condensed consolidated financial statements.

F-3

The accompanying notes are an integral part of these condensed consolidated financial statements.

F-4

DANAOS CORPORATION

DANAOS CORPORATION

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)

1       Basis of Presentation and General Information (continued)

The Company also consolidates entities that are determined to be variable interest entities as defined in Financial Accounting Standards Board (“FASB”) Interpretation No. 46(R), Consolidation of Variable Interest Entities an Interpretation of ARB No. 51 (“FIN 46(R)” ). A variable interest entity is defined by FIN 46(R) as a legal entity where either (a) equity interest holders as a group lack the characteristics of a controlling financial interest, including decision making ability and an interest in the entity’s residual risks and rewards, or (b) the equity holders have not provided sufficient equity investment to permit the entity to finance its activities without additional subordinated financial support, or (c) the voting rights of some investors are not proportional to their obligations to absorb the expected losses of the entity, their rights to receive the expected residual returns of the entity, or both and substantially all of the entity’s activities either involve or are conducted on behalf of an investor that has disproportionately few voting rights.

The condensed consolidated financial statements (unaudited) have been prepared to reflect the consolidation of the companies listed below. The historical balance sheets and results of operations of the companies listed below have been reflected in the consolidated balance sheets and consolidated statements of income, cash flows and stockholders’ equity at and for each period since their respective incorporation dates.

The consolidated companies are referred to as “Danaos,” or “the Company.”

F-6

DANAOS CORPORATION

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)

1        Basis of Presentation and General Information (continued)

As of June 30, 2009, Danaos included the vessel owning (including vessels under contract and/or construction) companies (the “Danaos Subsidiaries”) listed below. All vessels are container vessels: