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

Three months ended March 31, 2010 compared to three months ended March 31, 2009

During the three months ended March 31, 2010, we had an average of 41.5 containerships in our fleet. During the three months ended March 31, 2009, we had an average of 39.0 containerships in our fleet. We took delivery of one 6,500 TEU vessel, the CMA CGM Musset , on March 12, 2010. As of January 22, 2010, we sold one 1,704 TEU vessel, the MSC Eagle , built in 1978. Our fleet utilization was 99.7% in the three months ended March 31, 2010 compared to 96.3% in the three months ended March 31, 2009.

Operating Revenue

Operating revenue increased 5.8%, or $4.4 million, to $79.7 million in the three months ended March 31, 2010, from $75.3 million in the three months ended March 31, 2009. The increase was primarily a result of the addition to our fleet of two 4,253 TEU containerships, the Zim Dalian and the Zim Luanda on March 31, 2009 and June 26, 2009, respectively, and two 6,500 TEU containerships, the CMA CGM Moliere and the CMA CGM Musset, on September 28, 2009 and March 12, 2010, respectively, which collectively contributed revenues of $7.8 million during the three months ended March 31, 2010. These revenues were offset in part by the sale of one 1,704 TEU containership, the MSC Eagle , on January 22, 2010, that contributed revenues of $0.9 million for the three months ended March 31, 2009 compared to $0.1 million for the three months ended March 31, 2010.

We also had a further decrease in revenues of $2.6 million during the three months ended March 31, 2010, mainly attributable to the re-chartering of the Hanjin Montreal on March 1, 2009 and the Bunga Raya Tiga on April 28, 2009 at reduced daily charter rates, as well as reduced charter hire in relation to vessels laid up by our charterers representing operating expenses credited to the charterers, since such expenses were not being incurred during the lay-up period. This was partially offset by reduced scheduled off-hire days in the three months ended March 31, 2010 compared to the respective period of 2009.

Voyage Expenses

Voyage expenses decreased 20.0%, or $0.4 million, to $1.6 million in the three months ended March 31, 2010, from $2.0 million in the three months ended March 31, 2009. During the first quarter of 2009, we had bunker costs of $0.4 million, attributable to five of our vessels for which drydocking was performed, which did not occur in the first quarter of 2010. Our vessels are not otherwise subject to fuel costs, which are paid by our charterers.

Vessel Operating Expenses

Vessel operating expenses decreased 20.8%, or $4.6 million, to $17.5 million in the three months ended March 31, 2010, from $22.1 million in the three months ended March 31, 2009. The reduction is mainly attributed to reduced costs of certain vessels which were on lay-up for 614 days in aggregate during the first quarter of 2010. Although the average number of vessels in our fleet increased during the three months ended March 31, 2010 compared to the same period of 2009, the average daily operating cost per vessel decreased to $4,701 for the three months ended March 31, 2010, from $6,286 for the three months ended March 31, 2009. Excluding those vessels on lay-up, the average daily operating cost per vessel in our fleet was $5,627 for the three months ended March 31, 2010.

Depreciation

Depreciation expense increased 13.4%, or $1.9 million, to $16.1 million in the three months ended March 31, 2010, from $14.2 million in the three months ended March 31, 2009. The increase in depreciation expense was due to the increased average number of vessels in our fleet during the three months ended March 31, 2010 compared to the same period of 2009.

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Impairment Loss

On March 31, 2010, we expected to enter into an agreement with Hanjin Heavy Industries & Construction Co. Ltd. to cancel three 6,500 TEU newbuilding containerships, the HN N-216 , the HN N-217 and the HN N-218 , initially expected to be delivered in the first half of 2012, and recorded impairment losses of $71.5 million consisting of cash advances of $64.35 million paid to the shipyard and $7.16 million of capitalized interest and other predelivery capital expenditures paid in relation to the construction of the respective newbuildings. On May 25, 2010, we signed the cancellation agreement. No impairment losses were recorded in 2009.

Amortization of Deferred Drydocking and Special Survey Costs

Amortization of deferred dry-docking and special survey costs decreased 10.5%, or $0.2 million, to $1.7 million in the three months ended March 31, 2010, from $1.9 million in the three months ended March 31, 2009.

General and Administrative Expenses

General and administrative expenses increased 74.2%, or $2.3 million, to $5.4 million in the three months ended March 31, 2010, from $3.1 million in the same period of 2009. The increase was mainly the result of legal and advisory fees of $1.8 million primarily related to our debt restructuring effort, and increased fees of $0.5 million to our Manager in the first quarter of 2010 compared to the same period of 2009 due to the increase in the average number of our vessels in our fleet and an increase in the per day fee payable to our Manager since January 1, 2010.

On February 8, 2010, the Company signed an addendum to the management contract adjusting the management fees, effective January 1, 2010, to a fee of $675 per day for commercial, chartering and administrative services, a fee of $340 per vessel per day for vessels on bareboat charter and $675 per vessel per day for vessels on time charter. The incremental amount of the management fees above the previous rate level is payable by the Company, as accrued until the date of payment, at any time before the end of 2010.

Gain on Sale of Vessels

On January 22, 2010, we sold the MSC Eagle , a containership built in 1978 with a capacity of 1,704 TEU. The sale consideration was $4.6 million. The Company realized a net gain on this sale of $1.9 million.

Interest Expense and Interest Income

Interest expense increased by 7.3%, or $0.6 million, to $8.8 million in the three months ended March 31, 2010, from $8.2 million in the three months ended March 31, 2009. The change in interest expense was due to the increase in our average debt by $240.6 million, to $2,342.3 million in the quarter ended March 31, 2010, from $2,101.7 million in the quarter ended March 31, 2009, which was partially offset by the decrease of LIBOR payable under our credit facilities in the three months ended March 31, 2010 compared to the three months ended March 31, 2009. The financing of our extensive newbuilding program resulted in interest capitalization, rather than such interest being recognized as an expense, of $7.2 million for the three months ended March 31, 2010 compared to $7.2 million of capitalized interest for the three months ended March 31, 2009.

Interest income decreased by $0.8 million, to $0.2 million in the three months ended March 31, 2010, from $1.0 million in the three months ended March 31, 2009. The decrease in interest income is attributable to lower average cash balances, as well as reduced interest rates to which our cash balances were subject during the three months ended March 31, 2010 compared to the three months ended March 31, 2009.

Other Finance Costs, Net

Other finance costs, net, increased by $0.2 million, to $0.5 million in the three months ended March 31, 2010, from $0.3 million in the three months ended March 31, 2009.

Other Income/(Expenses), Net

Other income/(expenses), net, was nil in the three months ended March 31, 2010 compared to an expense of $0.4 million in the three months ended March 31, 2009. The decreased expense is attributable to $0.4 million of deferred fees written-off during the three months ended March 31, 2009.

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Loss on Fair value of Derivatives

Loss on fair value of derivatives, increased by $34.6 million, to a loss of $38.5 million in the three months ended March 31, 2010, from a loss of $3.9 million in the same period of 2009. The increase is mainly attributable to non-cash changes in fair value of interest rate swaps losses of $18.3 million recorded in our condensed consolidated statement of income in the first quarter of 2010, due to hedge accounting ineffectiveness, compared to a gain of $0.6 million in the first quarter of 2009, as well as a loss of $4.2 million in relation to deferred realized losses of cash flow hedges for the HN N-216 , the HN N-217 and the HN N-218 following their cancellation reclassified from “Accumulated other comprehensive loss” in the condensed consolidated balance sheet to our condensed consolidated statement of income. Furthermore, realized losses on interest rate swap hedges of $16.0 million recorded in our condensed consolidated statement of income during the three months ended March 31, 2010, which is mainly attributable to reduced LIBOR payable on our credit facilities against LIBOR fixed through our interest rate swaps, compared to $4.5 million of such losses in the three months ended March 31, 2009. In addition, realized losses on cash flow hedges of $11.7 million and of $6.3 million in the three months ended March 31, 2010 and 2009, respectively, were deferred and recorded in “Accumulated Other Comprehensive Loss” on our balance sheet, rather than such realized losses being recognized as an expense, and will be reclassified into earnings over the depreciable life of these vessels under construction, which are financed by loans for which interest rates have been hedged by our interest rate swap contracts.

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 20 additional containerships for which we have contracted, as of June 30, 2010, and for which we had scheduled future payments through the scheduled delivery of the final contracted vessel during 2012 aggregating $1.4 billion as of June 30, 2010.  In July 2010, we have taken delivery of two additional containerships and paid aggregate newbuilding installments of $27.5 million, with cash on hand and $25.0 million of additional borrowings, in connection therewith.  Our long-term liquidity needs primarily relate to debt repayment. We anticipate that our primary sources of funds will be cash from our existing credit facilities and additional credit facilities and financing arrangements for which we have reached agreements in principle as described below, cash from operations and equity or equity-linked financings. Specifically, we have reached agreements in principle for an agreement (the “Bank Agreement”), but we have not yet obtained formal approvals from the credit committees of all the banks, in respect of our existing financing arrangements, other than our credit facilities with the Export Import Bank of Korea (“KEXIM”) and with KEXIM and Fortis Bank), and for new credit facilities (the “New Credit Facilities”) from certain of our current lenders aggregating approximately $426.0 million, including $25.0 million under a bridge facility which has already been advanced to us as of July 1, 2010 following the delivery of the CMA CGM Rabelais on July 2, 2010, and will be subsequently transferred to one of these new credit facilities.  In addition, we have reached an agreement in principle with Citibank and the Export Import Bank of China for a new $203.4 million credit facility (the “Citi-CEXIM Credit Facility”), in respect of which the China Export & Credit Insurance Corporation (or Sinosure) would cover certain risks, as well as guarantee our obligations in certain circumstances, and an agreement in principle with Hyundai Samho Shipyard (the “Hyundai Samho Vendor Financing”) to finance 15%, or $190.0 million, of the aggregate purchase price of eight of our newbuilding containerships. These agreements in principle, including the Bank Agreement, are subject to registration and execution by all parties of definitive agreements and the satisfaction of conditions thereto. Our receipt of net proceeds from equity issuances of $200 million, including an investment by our Chief Executive Officer, will be among the conditions to the Bank Agreement and new credit facilities. Any such equity offering is subject to, among other things, market conditions and there is no assurance that such an offering will be completed. We believe that, so long as we are able to enter into and comply with the terms of the definitive agreements for these arrangements, including raising the requisite net proceeds from equity issuances and the satisfaction of the other conditions thereto, we will be able to fund the remaining installment payments under our newbuilding contracts and satisfy our other liquidity needs.

As of May 25, 2010, we signed an agreement to cancel newbuilding contracts for three 6,500 TEU containerships which were scheduled to be delivered to us in 2012, in return for the shipyard retaining $64.35 million in previously paid deposits for such vessels and in connection with which we wrote-off capitalized interest and other predelivery capital expenditures of $7.16 million. We have also entered into agreements to cancel the charters for such vessels. As of June 30, 2010, after giving effect to these newbuilding cancellations, the remaining capital expenditure installments for our 20 newbuilding vessels were approximately $428.8 million for the remainder of 2010, $540.7 million for 2011 and $448.6 million for 2012. As of June 30, 2010, we expect to fund the remaining installment payments of approximately $1.4 billion with undrawn borrowing capacity under our existing credit facilities of $308.1 million, as well as restricted cash of $21.2 million designated for newbuilding progress payments, and with borrowings under the New Credit Facilities with certain of our existing lenders, under the Citi-CEXIM Credit Facility, under the Hyundai Samho Vendor Financing for which we have reached agreements in principle, as well

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as up to $200 million of net proceeds from equity issuances and cash generated from our operations.

Under our existing multi-year charters as of June 30, 2010, giving effect to the cancellation of the charters for the three newbuildings we agreed to cancel in the first half of 2010, we had contracted revenues of $196.2 million for the remainder of 2010, $437.9 million for 2011 and, thereafter, approximately $5.4 billion, of which amounts $24.8 million, $158.0 million and $3.5 billion, respectively, are associated with charters for our contracted newbuildings, some of which do not yet have committed financing arrangements in place. However, as described above, we have reached agreements in principle to partially finance such newbuildings, along with amounts we expect to fund with up to $200 million of net proceeds from planned equity issuances and with cash generated from our operations. These expected revenues are based on contracted charter rates and, therefore, we are dependent on our charterers’ ability and willingness to meet their obligations under these charters.

On April 14, 2010, we entered into a supplemental agreement with the Royal Bank of Scotland for the release of the balance of our restricted cash with the bank of $169.9 million and the immediate application of such amount as a prepayment of our $700.0 million senior revolving credit facility. The amount prepaid pursuant to this agreement is available for re-drawing as progress payments to shipyards for specific newbuildings. As of June 30, 2010, we had approximately $308.1 million undrawn under our credit facilities, $21.2 million of restricted deposits designated for newbuilding progress payments, as well as available cash and cash equivalents. 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 addition, during the period covered by the waiver agreements entered with our lenders in relation to certain covenant breaches, we are not permitted to make dividend payments without the consent of our lenders and under the terms of our Bank Agreement will generally not be permitted to pay dividends.

As of December 31, 2009 (and as further described in our 2009 annual financial statements contained in our Annual Report on Form 20-F for the year ended December 31, 2009 filed with the U.S. Securities and Exchange Commission (“SEC”) on June 18, 2010), we were in breach of various covenants in our credit facilities, for some of which we had obtained waivers and for others we had not. The waivers we have obtained are for a period through October 1, 2010. Furthermore, as of March 31, 2010, there are further breaches for which we have not obtained waivers. In addition, although we were in compliance with the covenants in our credit facility with KEXIM, and have obtained waivers of non-compliance with certain other covenants under other credit facilities as noted above, under the cross default provisions of our credit facilities the lenders could require immediate repayment of the related outstanding debt. Under the terms of the Bank Agreement for which we have reached an agreement in principle, the lenders under our existing credit facilities, other than under our KEXIM and our KEXIM-Fortis credit facilities, intend to waive any existing covenant breaches or defaults under our existing credit facilities, and agree to amend the covenants under the existing credit facilities in accordance with the terms of the Bank Agreement.

If we are not able to obtain waivers to these existing breaches, which due to the cross default provisions in our loan agreements result in breaches under our other credit facilities, by entering into definitive documentation for the Bank Agreement or otherwise and to reach separate agreements in respect of our KEXIM and KEXIM Fortis credit facilities, our lenders could accelerate our outstanding indebtedness and foreclose upon the vessels in our fleet, adversely affecting our ability to conduct our business. In addition, if the current low charter rates in the containership market and low vessel values continue or decrease further, or our charterers were to fail to meet their payment obligations, our ability to comply with the covenants in our loan agreements, including the modified covenants that would be applicable to our existing credit facilities under the terms of the Bank Agreement and the covenants in the other new financing arrangements for which we have reached agreements in principle, may be adversely affected and we may not be able to draw down the full amount of certain of our 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.

Due to the uncertainties relating to our ability to comply with the financial covenants in our existing credit facilities and procure additional bank, equity or other financing to repay outstanding indebtedness under such credit facilities should our lenders accelerate such indebtedness due to such covenant non-compliance, our independent registered public accounting firm issued its audit opinion with an explanatory paragraph in connection with our annual consolidated financial statements as of December 31, 2009, that expresses substantial doubt about our ability to continue as a going concern. Our condensed consolidated financial statements as of March 31, 2010 and our annual consolidated financial statements as of December 31, 2009, do not include any adjustments to reflect the possible future effects on the recoverability and classification of assets or the amounts and classification of liabilities that may result from the outcome of our inability to continue as a going concern. There is, however, a material uncertainty related to events or conditions which raise substantial doubt on our ability to continue as a going concern and, therefore, we may be unable to realize our assets and discharge our liabilities in the normal course of business. Our management has taken a number of steps to mitigate these concerns by seeking to conserve cash resources, reduce capital expenditure obligations and procure additional financing. Our management believes that such steps, which include seeking to restructure our existing debt, obtain additional bank financing, obtain vendor financing from shipyards, reduce our newbuilding capital expenditure obligations and raise equity capital as described above, will be sufficient to provide us with the

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ability to continue our operations, however, there can be no assurance that we will be able to negotiate and enter into definitive documentation for these arrangements for which we have reached agreements in principle or be able to satisfy the conditions thereto, including raising the requisite net proceeds from equity issuances.

Cash Flows

Working capital is equal to current assets minus current liabilities, including all of our outstanding debt which has been classified as current as of March 31, 2010 and December 31, 2009. Our working capital deficit was $2.3 billion as of March 31, 2010 compared to working capital deficit of $2.2 billion as of December 31, 2009. The deficit as of March 31, 2010 and December 31, 2009 is due to the reclassification of long-term debt to current liabilities due to breaches under our credit facilities.

We have reached agreements in principle on the Bank Agreement which will restructure our existing financing arrangements, other than our KEXIM and KEXIM Fortis credit facilities, and for new credit facilities and other financing arrangements. In addition, our receipt of net proceeds from equity issuances of $200 million, including an investment by our Chief Executive Officer, will be a condition to the Bank Agreement. Any such equity offering is subject to, among other things, prevailing market conditions and there is no assurance that such an offering will be completed. We believe that, so long as we are able to enter into and comply with the terms of the definitive agreements for these arrangements, including raising the requisite net proceeds from equity issuances, we will be able to fund the remaining installment payments under our newbuilding contracts and satisfy our other liquidity needs.

Net Cash Provided by Operating Activities

Net cash flows provided by operating activities decreased 46.3%, or $13.6 million, to $15.8 million in the three months ended March 31, 2010 compared to $29.4 million in the three months ended March 31, 2009. The decrease was primarily the result of increased interest cost of $17.6 million (including realized losses on the Company’s interest rate swaps), an unfavorable change in the working capital position and reduced cash from operations of $0.5 million, which was partially offset by reduced payments for drydocking of $4.5 million in the three months ended March 31, 2010 compared to the three months ended March 31, 2009.

Net Cash Used in Investing Activities

Net cash flows used in investing activities decreased by $59.1 million, to $73.9 million in the three months ended March 31, 2010 compared to $133.0 million in the three months ended March 31, 2009. The difference reflects installment payments for newbuildings, as well as interest capitalized and other related capital expenditures, of $75.6 million in the three months ended March 31, 2010 compared to $132.9 million during the three months ended March 31, 2009 and proceeds from sale of vessels of nil in the three months ended March 31, 2009 compared to $1.8 million in the three months ended March 31, 2010.

Net Cash Provided by Financing Activities

Net cash flows provided by financing activities decreased by $48.3 million, to $40.7 million in the three months ended March 31, 2010 compared to $89.0 million in the three months ended March 31, 2009. The decrease is primarily due to the proceeds from long-term debt of $57.9 million during the three months ended March 31, 2010 compared to $67.6 million in the three months ended March 31, 2009. In addition, repayment of indebtedness was $19.9 million in the three months ended March 31, 2010 compared to $9.2 million in the three months ended March 31, 2009 and restricted cash decreased by $2.8 million in the three months ended March 31, 2010 compared to a decrease of $32.0 million in the three months ended March 31, 2009.

Non-GAAP financial measures

We report our financial results in accordance with U.S. generally accepted accounting principles (GAAP). However, management believes that certain non-GAAP financial measures used in managing the business may provide users of this financial information additional meaningful comparisons between current results and results in prior operating periods. Management believes that these non-GAAP financial measures can provide additional meaningful reflection of underlying trends of the business because they provide a comparison of historical information that excludes certain items that impact the overall comparability. Management also uses these non-GAAP financial measures in making financial, operating and planning decisions and in evaluating the Company’s performance. See the tables below for supplemental financial data and corresponding reconciliations to GAAP financial measures for the three months ended March 31, 2010 and 2009. Non-GAAP financial measures should be viewed in addition to, and not as an alternative for, the Company’s reported results prepared in accordance with GAAP.

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EBITDA and Adjusted EBITDA

EBITDA represents net income before interest, taxes, depreciation and amortization. Adjusted EBITDA represents EBITDA, adjusted for non-cash changes in fair value of derivatives, non-cash impairment losses and gains/(losses) on sale of vessels. We believe that EBITDA and Adjusted EBITDA assist investors and analysts in comparing our performance across reporting periods on a consistent basis by excluding items that we do not believe are indicative of our core operating performance and because are used by certain investors to measure a company’s ability to service and/or incur indebtedness, pay capital expenditures and meet working capital requirements. EBITDA and Adjusted EBITDA are also used: (i) by prospective and current customers as well as potential lenders to evaluate potential transactions; and (ii) to evaluate and price potential acquisition candidates. Our EBITDA and Adjusted EBITDA may not be comparable to that reported by other companies due to differences in methods of calculation.

EBITDA and Adjusted EBITDA have limitations as analytical tools, and should not be considered in isolation or as a substitute for analysis of our results as reported under U.S. GAAP. Some of these limitations are: (i) EBITDA/Adjusted EBITDA does not reflect changes in, or cash requirements for, working capital needs; and (ii) although depreciation and amortization are non-cash charges, the assets being depreciated and amortized may have to be replaced in the future, and EBITDA/Adjusted EBITDA do not reflect any cash requirements for such capital expenditures. In evaluating Adjusted EBITDA, you should be aware that in the future we may incur expenses that are the same as or similar to some of the adjustments in this presentation.  Our presentation of Adjusted EBITDA should not be construed as an inference that our future results will be unaffected by unusual or non-recurring items. Because of these limitations, EBITDA/Adjusted EBITDA should not be considered as a principal indicator of our performance.

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EBITDA decreased by $96.8 million, to $(53.4) million in the three months ended March 31, 2010, from $43.4 million in the three months ended March 31, 2009. The decrease is mainly attributed to an impairment loss of $71.5 million recorded in the three months ended March 31, 2010, increased losses on fair value of derivatives of $34.5 million and increased net interest expense of $1.4 million in the three months ended March 31, 2010 compared to the three months ended March 31, 2009, which partially offset by a gain on sale of vessel of $1.9 million recorded in the three months ended March 31, 2010, increased operating revenues of $4.4 million in the three months ended March 31, 2010 compared to the three months ended March 31, 2009, as well as reduced operating expenses of $4.6 million in the three months ended March 31, 2010 compared to the three months ended March 31, 2009.

Adjusted EBITDA decreased by $4.2 million, to $38.6 million in the three months ended March 31, 2010, from $42.8 million in the three months ended March 31, 2009. The decrease is mainly attributed to increased realized losses on fair value of derivatives of $11.5 million and increased net interest expense of $1.4 million in the three months ended March 31, 2010 compared to the three months ended March 31, 2009, which partially offset by increased operating revenues of $4.4 million in the three months ended March 31, 2010 compared to the three months ended March 31, 2009, as well as reduced operating expenses of $4.6 million in the three months ended March 31, 2010 compared to the three months ended March 31, 2009.

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, which are described in Note 11 to our condensed consolidated financial statements. We also have entered into guarantee facility agreements, with HSH Nordbank and the Royal Bank of Scotland, which are described in Note 11 to our condensed consolidated financial statements.  Under the Bank Agreement for which we have reached an agreement in principle, these existing credit facilities would continue to be made available by the respective lenders but (other than with respect to our KEXIM and KEXIM-Fortis credit facilities which are not covered by the Bank Agreement) with revised amortization schedules, interest rates, financial covenants, events of default and other terms. In addition, while the vessels currently securing these credit facilities would continue to collateralize such facilities, we would provide additional collateral under certain of these credit facilities and provide first priority liens over certain currently unencumbered newbuildings and second or third priority liens over certain vessels currently securing existing facilities as collateral for our new credit facilities. The following summarizes certain terms of our existing credit facilities, as well as the new credit facilities for which we have reached agreements in principle:

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Outstanding indebtedness under our each of our existing credit facilities, other than our KEXIM and KEXIM-Fortis credit facilities, bears interest at a rate of LIBOR plus an applicable margin. The weighted average interest rate margin over LIBOR in respect of our existing credit facilities was 2.17% for the year ended December 31, 2009 and for the three months ended March 31, 2010. As described above, the interest rate, amortization profile and certain other terms of each of our existing credit facilities would be adjusted to provide for consistent terms under each facility pursuant to the terms of the Bank Agreement, other than with respect to our KEXIM and KEXIM-Fortis credit facilities which will not be covered by the Bank Agreement. Our KEXIM credit facility, under which outstanding indebtedness bears interest at a fixed rate of 5.0125%, and our KEXIM-Fortis credit facility, under which $98.5 million of the outstanding indebtedness, as of June 30, 2010, bears interest at a fixed rate of 5.02% and $9.0 million of the outstanding indebtedness, as of June 30, 2010, bears interest at a rate of LIBOR plus a margin, have maturity dates of November 2016 and October 2018 (in respect of the fixed rate tranche) and January 2019 (in respect of the floating rate tranche), respectively.

As of December 31, 2009 (and as further described in our 2009 annual financial statements contained in our Annual Report on Form 20-F for the year ended December 31, 2009 filed with the SEC on June 18, 2010), we were in breach of various covenants in our credit facilities, for some of which we had obtained waivers and for others we had not. The waivers we have obtained are for a period through October 1, 2010. Furthermore, as of March 31, 2010, there are further breaches for which we have not obtained waivers.  In addition, although we were in compliance with the covenants in our credit facility with KEXIM, and have obtained waivers of non-compliance with certain other covenants under other credit facilities as noted above, under the cross default provisions of our credit facilities the lenders could require immediate repayment of the related outstanding debt.  As described above, we have reached an agreement in principle for a Bank Agreement with the lenders under each of our existing credit facilities (other than our KEXIM and KEXIM-Fortis credit facilities), which contemplates that the lenders participating thereunder would continue to provide our existing credit facilities and would waive any existing covenant breaches or defaults under our existing credit facilities and agree to amend the covenants under our existing credit facilities in accordance with the terms of the Bank Agreement. Our existing 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.

For additional details regarding our agreements in principle for the Bank Agreement, the New Credit Facilities with existing lenders, Citi-CEXIM Credit Facility and Samho Hyundai Vendor Financing, please see “Item 5. Operating and Financial Review and Prospects” in our Annual Report on Form 20-F for the year ended December 31, 2009 filed with the Securities and Exchange Commission on June 18, 2010. As part of the Bank Agreement, we have agreed to issue to the lenders under our New Credit Facilities warrants to purchase an aggregate of 15 million shares of our common stock for an exercise price of $7.00 per share. The warrants would expire on December 31, 2018.

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. Due to the contemplated changes to the amortization profiles and interest rates under our existing credit facilities pursuant to the terms of the Bank Agreement, our interest rate swap agreements are expected to have a greater degree of ineffectiveness as hedging instruments with the result that changes in the fair value of such ineffective portion of such swap arrangements would be recognized in our statement of income. See Note 12, 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.

Foreign Currency Exchange Risk

We did not enter into derivative instruments to hedge the foreign currency translation of assets or liabilities or foreign currency transactions during the three months ended March 31, 2010.

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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 March 31, 2010:

·                            on an actual basis; and

·                            on an as adjusted basis to reflect scheduled principal repayments of $6.9 million under our existing credit facilities, principal prepayment of $169.9 million under our $700.0 million senior revolving credit facility with the Royal Bank of Scotland following a supplemental agreement signed to release the balance of our restricted cash with the bank and the immediate application of such amount to the outstanding balance of the credit facility, as well as debt drawdowns of $192.5 million in the period from March 31, 2010 to July 28, 2010 .

Other than these adjustments, there have been no material changes to our capitalization from debt or equity issuances, re-capitalizations or special dividends as adjusted in the table below between March 31, 2010 and July 28, 2010.  This table should be read in conjunction with our condensed consolidated financial statements (unaudited) and the notes thereto included in this report.

(1) All of our indebtedness is secured

Recent Developments

On July 2, 2010, we took delivery of the newbuilding 6,500 TEU vessel, the CMA CGM Rabelais . The vessel has been deployed on a 12-year time charter with one of the world’s major liner companies.

On July 6, 2010, we took delivery of the newbuilding 3,400 TEU vessel, the Hanjin Santos . The vessel has been deployed on a 10-year time charter with one of the world’s major liner companies.

Forward Looking Statements

Matters discussed in this report may constitute forward-looking statements within the meaning of the safe harbor 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

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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 enter into definitive documentation for the restructuring of certain of our existing credit facilities and new financing arrangements for which we have reached agreements in principle and satisfy the conditions thereto, 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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The accompanying notes are an integral part of these condensed consolidated financial statements.

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

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DANAOS CORPORATION

DANAOS CORPORATION

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)

1       Basis of Presentation and General Information (continuted)

As of December 31, 2009 (and as further described in the Company’s 2009 annual financial statements contained in its Annual Report on Form 20-F filed with the SEC on June 18, 2010), the Company was in breach of various covenants in its credit facilities, for some of which it had obtained waivers and for others it had not. The waivers the Company has obtained are for a period through October 1, 2010. Furthermore, as of March 31, 2010, there were further breaches for which the Company has not obtained waivers.  In addition, although the Company was in compliance with the covenants in its credit facility with KEXIM, and has obtained waivers of non-compliance with certain other covenants under other credit facilities as noted above, under the cross default provisions of its credit facilities the lenders could require immediate repayment of the related outstanding debt. Even though none of the lenders declared an event of default under the loan agreements, these breaches constituted defaults and potential events of default and, together with the cross default provisions in the various loan agreements, could result in the lenders requiring immediate repayment of all of the loans. During 2009, the Company’s lenders agreed to waive, and not to exercise their right to demand repayment of any amounts due under certain loan agreements as a result of, the December 31, 2008 and June 30, 2009 covenant breaches under certain of its loan agreements, and any future breaches of such covenants, through October 1, 2010. The current waiver agreements expire as of October 1, 2010, when the original covenants come back in force. The Company has deemed it is probable that it may not be able to comply with the original covenants at measurement dates that are within the next twelve months. In addition, the cross default provisions in the Company’s loan agreements and breaches existing under its credit facilities as of March 31, 2010 and December 31, 2009, as well as potential defaults and events of default under loan agreements with waivers expiring on October 1, 2010, could result in events of default under all of the Company’s affected debt and the acceleration of such debt by its lenders. In this respect, the Company classified its long-term debt of $2.3 billion as of March 31, 2010 and December 31, 2009 as current debt (for further details, refer to Note 11, Long-Term Debt). The Company continues to pay loan installments and accumulated or accrued interest as they fall due under the existing credit facilities.

While these condensed consolidated financial statements have been prepared using generally accepted accounting principles applicable to a going concern, which contemplate the realization of assets and liquidation of liabilities during the normal course of operations, the conditions and events described above raise substantial doubt about the Company’s ability to continue as a going concern. The financial statements do not include any adjustments to reflect the possible future effects on the recoverability and classification of assets or the amounts and classification of liabilities that may result from the outcome of the Company’s inability to continue as a going concern other than the reclassification of $2.3 billion as of March 31, 2010 and December 31, 2009, respectively, of its long-term debt as current.

The Company has reached an agreement in principle, but it has not obtained yet formal approvals from all of the credit committees of the respective banks, for an agreement (the “Bank Agreement”) that will supersede, amend and supplement the terms of each of its existing credit facilities (other than its credit facilities with KEXIM and KEXIM Fortis) and provide for, among other things, revised amortization schedules, interest rates, financial covenants, events of defaults, guarantee and security packages, as well as New Credit Facilities available for certain of its currently non-financed newbuildings. Subject to the terms of the Bank Agreement and under the New Credit Facilities of $426.0 million, the lenders will continue to provide the Company’s existing credit facilities, will waive covenant breaches or defaults under its existing credit facilities, as well as amend covenants under such existing credit facilities in accordance with the Bank Agreement. The Bank Agreement will be conditioned upon the Company’s entry into the Intercreditor Agreement, the Hyundai Samho Vendor Financing of $190.0 million and the newbuilding cancellation agreement in relation to three 6,500 TEU vessels, the HN N-216, the HN N-217 and the HN N-218 (refer to Note 19, Subsequent Events), as well as a commitment letter for the new Citi-CEXIM Credit Facility of $203.4 million and the receipt of $200 million in net proceeds from equity issuances, including an investment by the Company’s Chief Executive Officer. In addition, as of June 30, 2010, the Company had approximately $308.1 million undrawn funds under its credit facilities, $21.2 million of restricted deposits designated for newbuilding progress payments, as well as available cash and cash equivalents.

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DANAOS CORPORATION

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)

1       Basis of Presentation and General Information (continued)

As of March 31, 2010, Danaos included the vessel owning (including vessels under contract and/or construction) companies (the “Danaos Subsidiaries”) listed below. All vessels are container vessels:

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