EXHIBIT 99.1

DANAOS CORPORATION

OPERATING AND FINANCIAL REVIEW AND PROSPECTS

As described in detail below under “Liquidity and Capital Resources” and the notes to our condensed consolidated financial statements (unaudited) included elsewhere in this report, in the first quarter of 2011 we entered into a definitive agreement with our lenders, dated January 24, 2011 (the “Bank Agreement”) to restructure our existing indebtedness, as well as agreements for new financing arrangements. These agreements, among other things, provide for the funding of the remaining installment payments under our newbuilding contracts and amend our existing credit facilities.

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, 2011 compared to three months ended March 31, 2010

During the three months ended March 31, 2011, we had an average of 51.0 containerships in our fleet. During the three months ended March 31, 2010, we had an average of 41.5 containerships in our fleet.  Our fleet utilization was 96.7% in the three months ended March 31, 2011 compared to 99.7% in the three months ended March 31, 2010. We took delivery of one 3,400 TEU vessel, the Hanjin Algeciras , on January 26, 2011 and one 10,100 TEU vessel, the Hanjin Germany , on March 10, 2011.

Operating Revenue

Operating revenue increased 24.2%, or $19.3 million, to $99.0 million in the three months ended March 31, 2011, from $79.7 million in the three months ended March 31, 2010. The increase was primarily a result of the addition to our fleet of five 6,500 TEU containerships, the CMA CGM Nerval , the YM Mandate , the CMA CGM Rabelais , the CMA CGM Racine and the YM Maturity, on May 17, 2010, May 19, 2010, July 2, 2010, August 16, 2010 and August 18, 2010, respectively, four 3,400 TEU containerships, the Hanjin Buenos Aires , the Hanjin Santos , the Hanjin Versailles and the Hanjin Algeciras, on May 27, 2010, July 6, 2010, October 11, 2010 and January 26, 2011, respectively, as well as one 10,100 TEU containership, the Hanjin Germany , on March 10, 2011. These additions to our fleet contributed revenues of $23.2 million during the three months ended March 31, 2011. Moreover, a 6,500 TEU containership, the CMA CGM Musset , which was added to our fleet on March 12, 2010, contributed incremental revenues of $2.5 million during the three months ended March 31, 2011 compared to 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 $0.1 million for the three months ended March 31, 2010 compared to nil revenues in the three months ended March 31, 2011.

We also had a reduction in revenues of $6.3 million during the three months ended March 31, 2011, mainly attributable to re-chartering of vessels at reduced charter hire rates, as well as more revenues lost due to scheduled off-hire in the three months ended March 31, 2011 compared to 2010, which was partially offset by reduced charter hire in 2010, in relation to vessels laid up by our charterers (90 days and 614 days in the first quarter of 2011 and 2010, respectively), representing operating expenses not being incurred during the lay-up period.

Voyage Expenses

Voyage expenses increased 37.5%, or $0.6 million, to $2.2 million in the three months ended March 31, 2011, from $1.6 million in the three months ended March 31, 2010. The increase was the result of increases in various voyage expenses, such as port, commission and other expenses, due to the increased number of vessels in our fleet in the three months ended March 31, 2011 compared to the three months ended March 31, 2010.

Vessel Operating Expenses

Vessel operating expenses increased 52.0%, or $9.1 million, to $26.6 million in the three months ended March 31, 2011, from $17.5 million in the three months ended March 31, 2010. The increase is mainly attributable to the increased average number of vessels in our fleet during the three months ended March 31, 2011 compared to the three months ended March 31, 2010, as well as increased costs of certain vessels, which were on lay-up for 90 days in the aggregate during the three months

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ended March 31, 2011 compared to 614 days in the three months ended March 31, 2010. The average daily operating cost per vessel increased to $6,162 for the three months ended March 31, 2011, from $5,627 for the three months ended March 31, 2010 (excluding those vessels on lay-up).

Depreciation

Depreciation expense increased 39.1%, or $6.3 million, to $22.4 million in the three months ended March 31, 2011, from $16.1 million in the three months ended March 31, 2010. The increase in depreciation expense was due to the increased average number of vessels in our fleet during the three months ended March 31, 2011 compared to the three months ended March 31, 2010.

Impairment Loss

On March 31, 2010, we recorded an impairment loss 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 three 6,500 TEU newbuilding containerships, the HN N-216 , the HN N-217 and the HN N-218, following our agreement with Hanjin Heavy Industries & Construction Co. Ltd. to cancel the construction of the respective newbuildings.

No impairment loss was recorded in the three months ended March 31, 2011.

Amortization of Deferred Drydocking and Special Survey Costs

Amortization of deferred dry-docking and special survey costs decreased 11.8%, or $0.2 million, to $1.5 million in the three months ended March 31, 2011, from $1.7 million in the three months ended March 31, 2010.

General and Administrative Expenses

General and administrative expenses decreased 14.8%, or $0.8 million, to $4.6 million in the three months ended March 31, 2011, from $5.4 million in the same period of 2010. The decrease was mainly the result of legal and advisory fees of $1.4 million recorded in the three months ended March 31, 2010, which was partially offset by increased fees of $0.5 million to our Manager in the three months ended March 31, 2011 compared to the three months ended March 31, 2010, due to the increase in the average number of our vessels in our fleet.

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 gross sale consideration was $4.6 million. We realized a net gain on this sale of $1.9 million.

No vessels were sold in the three months ended March 31, 2011.

Interest Expense and Interest Income

Interest expense increased by 34.1%, or $3.0 million, to $11.8 million in the three months ended March 31, 2011, from $8.8 million in the three months ended March 31, 2010. The change in interest expense was due to the increase in our average debt by $257.0 million, to $2,599.3 million in the three months ended March 31, 2011, from $2,342.3 million in the three months ended March 31, 2010, which was partially offset by the decrease in the margin over LIBOR payable as interest under our credit facilities in the three months ended March 31, 2011 compared to the three months ended March 31, 2010, as contemplated by the Bank Agreement, which sets the margin at 1.85% (in relation to our credit facilities now governed by the Bank Agreement). Furthermore, the financing of our extensive newbuilding program resulted in interest capitalization, rather than such interest being recognized as an expense, of $5.9 million for the three months ended March 31, 2011 compared to $7.2 million of capitalized interest for the three months ended March 31, 2010.

Interest income increased by $0.1 million, to $0.3 million in the three months ended March 31, 2011, from $0.2 million in the three months ended March 31, 2010. The increase in interest income is attributable to increased interest rates to which our cash balances were subject during the three months ended March 31, 2011 compared to the three months ended March 31, 2010, which was partially offset by lower average cash balances in the three months ended March 31, 2011 compared to the 2010 period.

Other Finance Costs, Net

Other finance costs, net, increased by $3.9 million, to $4.4 million in the three months ended March 31, 2011, from $0.5

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million in the three months ended March 31, 2010. The increase is mainly attributable to amortization of finance fees of $1.3 million for the three months ended March 31, 2011 (which were deferred and will be amortized over the life of the respective credit facilities) and $0.3 million of finance fees accrued related to our comprehensive financing plan, as well as an expense of $2.3 million recorded in the three months ended March 31, 2011 due to non-cash changes in fair value of warrants (for the period up to March 29, 2011 when the exercise price of the warrants was increased to $7.00 per share from the initial exercise price of $6.00 per share, refer to Note 6, Deferred Charges, to our condensed consolidated financial statements included elsewhere in this report).

Other Income/(Expenses), Net

Other income/(expenses), net, was an expense of $1.9 million in the three months ended March 31, 2011, from nil in the three months ended March 31, 2010. The $1.9 million increase is mainly attributable to legal and advisory fees of $2.1 million directly related to our comprehensive financing plan contemplated by the Bank Agreement, which were recorded during the three months ended March 31, 2011.

Loss on Fair value of Derivatives

Loss on fair value of derivatives decreased by $20.2 million, to a loss of $18.3 million in the three months ended March 31, 2011, from a loss of $38.5 million in the same period of 2010. The decrease is mainly attributable to non-cash gain in fair value of interest rate swaps of $9.8 million recorded in the three months ended March 31, 2011, due to hedge accounting ineffectiveness, compared to a $22.5 million loss in the three months ended March 31, 2010, offset by a realized loss on interest rate swap hedges of $28.1 million recorded in the three months ended March 31, 2011, which is mainly attributable to a higher average notional amount of swaps and reduced LIBOR payable on our credit facilities (subject to variable interest rates) against the LIBOR fixed through such swaps, compared to $16.0 million loss in the three months ended March 31, 2010.

In addition, realized losses on cash flow hedges of $9.9 million and $11.7 million in the three months ended March 31, 2011 and 2010, respectively, were deferred in “Accumulated Other Comprehensive Loss”, rather than being recognized as expenses, and will be reclassified into earnings over the depreciable lives of the vessels under construction, which are financed by loans for which their interest rates have been hedged by our interest rate swap contracts. The table below provides an analysis of the items discussed above, and were recorded in the three months ended March 31, 2011 and 2010:

Liquidity and Capital Resources

Our principal source of funds has been equity provided by our stockholders, operating cash flows, vessel sales, and long-term bank borrowings, as well as proceeds from our common stock sale in August 2010. 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 and loan interest payments. Our medium-term liquidity needs primarily relate to the purchase of the 13 additional containerships for which we have contracted, as of March 31, 2011, and for which we had scheduled future payments through the scheduled delivery of the final contracted vessel during 2012 aggregating approximately $1.0 billion as of March 31, 2011. Our long-term liquidity needs primarily relate to debt repayment and capital expenditures related to any further growth of our fleet. We anticipate that our primary sources of funds will be cash from our credit facilities and financing arrangements, cash from operations and equity or debt raised in the capital markets.

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On January 24, 2011, we entered into a definitive agreement (the “Bank Agreement”), which became effective on March 4, 2011, in respect of our existing financing arrangements (other than our credit facilities with the Export Import Bank of Korea (“KEXIM”) and with KEXIM and ABN Amro), and for new credit facilities (the “New Credit Facilities”) from certain of our current lenders aggregating $424.75 million, including $23.75 million under a bridge facility, which had already been advanced to us following the delivery of the CMA CGM Rabelais on July 2, 2010, and has been transferred to one of these New Credit Facilities. Pursuant to the Bank Agreement, among other things, under our existing bank debt facilities: the amortization and maturities were rescheduled, the interest rate margin was reduced, and the financial covenants, events of default, and guarantee and security packages were revised. As of March 31, 2011, we were in compliance with the revised financial covenants under the Bank Agreement. Furthermore, on August 12, 2010, we entered into a supplemental agreement which set the financial covenants in our KEXIM-ABN Amro credit facility at the levels set forth in the Bank Agreement, and contemplated in the commitment letter therefore, effective from June 30, 2010 through June 30, 2012, and the interest rate margin was increased by 0.5 percentage points for the same period. Our KEXIM credit facility contains only a collateral coverage ratio covenant, with which we were in compliance as of March 31, 2011. In addition, on September 27, 2010, we entered into an agreement 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, and on February 21, 2011, we entered into a bank syndicate agreement, arranged by Citibank and led by the Export-Import Bank of China (“CEXIM”) for a new $203.4 million credit facility (the “Sinosure-CEXIM Credit Facility”), in respect of which the China Export & Credit Insurance Corporation (or Sinosure) will cover certain risks, as well as guarantee our obligations in certain circumstances. We believe that continued future compliance with the terms of these agreements will allow us to fund the remaining installment payments under our newbuilding contracts and satisfy our other liquidity needs. See Note 10, Long-term Debt, to our condensed consolidated financial statements included elsewhere herein for a more detailed description of the Bank Agreement and the Sinosure-CEXIM credit facility.

As of March 31, 2011, the remaining capital expenditure installments for our 13 newbuilding vessels were approximately $558.1 million for the remainder of 2011 and $450.8 million for 2012. As of March 31, 2011, we expect to fund the remaining installment payments of approximately $1.0 billion with undrawn borrowing capacity under our existing credit facilities of $93.1 million and with undrawn borrowing capacity under the New Credit Facilities with certain of our existing lenders of $354.5 million, under the Hyundai Samho Vendor Financing of $168.3 million and under the Sinosure-CEXIM credit facility of $203.4 million, as well as with the proceeds from the 2010 equity transaction remaining available under cash and cash equivalents.

Under our existing multi-year charters as of March 31, 2011, we have contracted revenues of $360.5 million for the remainder of 2011, $559.8 million for 2012 and, thereafter, approximately $4.9 billion, of which amounts $63.3 million, $205.0 million and $2.5 billion, respectively, are associated with charters for our contracted newbuildings. 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.

On March 2, 2011, we committed to issue 15,000,000 warrants to our lenders under the Bank Agreement and the New Credit Facilities to purchase, solely on a cashless exercise basis, shares of our common stock. On March 17, 2011, we issued 11,213,713 warrants at an initial exercise price of $6.00 per share, which exercise price was increased to $7.00 per share on March 29, 2011 upon the delivery of certain documents, as required by the Sinosure-CEXIM credit facility and related arrangement with Sinosure. On April 1, 2011, we issued an additional 3,711,417 warrants (part of the 15,000,000 warrants described above) with an exercise price of $7.00 per share, resulting in an aggregate of 14,925,130 warrants issued to our lenders. We will issue the remaining 74,870 warrants upon the request of the applicable lender. All warrants issued, or to be issued, will expire on January 31, 2019. We will not receive any cash upon exercise of the warrants as the warrants are only exercisable on a cashless basis. We have also agreed to register the warrants and underlying shares of common stock for resale under the Securities Act.

As of March 31, 2011, we had cash and cash equivalents of $131.9 million. As of March 31, 2011, we had approximately $819.3 million undrawn under our credit facilities. As of March 31, 2011, we had $2.6 billion of outstanding indebtedness, of which only $21.6 million was payable within the next twelve months. Under the Bank Agreement, no principal payments are scheduled to be due before March 31, 2013. After that time, however, we are required under the Bank Agreement to apply a substantial portion of our cash from operations to the repayment of principal under our financing arrangements, and limits our ability to incur additional indebtedness without our lenders’ consent. The Bank Agreement also contains requirements for the application of proceeds from any future vessel sales or financings, as well as other transactions. See “Item 5. Operating and Financial Review and Prospects” in our Annual Report on Form 20-F for the year ended December 31, 2010 filed with the Securities and Exchange Commission on April 8, 2011, as well as Note 10, Long-term Debt, to our condensed consolidated financial statements included elsewhere herein.

Our board of directors determined in 2009 to suspend the payment of further cash dividends as a result of market conditions in the international shipping industry and in order to conserve cash to be applied toward the financing of our extensive new building program. In addition, under the Bank Agreement and the Sinosure-CEXIM credit facility, we are not permitted to

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pay cash dividends or repurchase shares of our capital stock unless (i) our consolidated net leverage is below 6:1 for two consecutive quarters (four consecutive quarters under our Sinosure-CEXIM credit faciity) and (ii) the ratio of the aggregate market value of our vessels to our outstanding indebtedness exceeds 125% for four consecutive quarters and provided that an event of default has not occurred and we are not, and after giving effect to the payment of the dividend, in breach of any covenant.

Cash Flows

Net Cash (Used in)/Provided by Operating Activities

Net cash flows (used in)/provided by operating activities decreased by $31.3 million, to $15.5 million used in operating activities in the three months ended March 31, 2011 compared to $15.8 million provided by operating activities in the three months ended March 31, 2010. The decrease was primarily the result of increased interest cost of $13.3 million (including realized losses on our interest rate swaps), an unfavorable change in the working capital position and reduced cash from operations of $13.4 million, following the cash settlement of all legal, advisory, bank fees and retrospective waiver margin and fees in relation to our previously existing Aegean Baltic Bank-HSH Nordbank-Piraeus Bank facility agreement and our Bank Agreement (see Note 10, Long-term Debt to our condensed consolidated financial statements included elsewhere herein for a more detailed description of our Bank Agreement fees paid in the three months ended March 31, 2011), as well as increased payments for drydocking of $4.6 million in the three months ended March 31, 2011 compared to the three months ended March 31, 2010.

Net Cash Used in Investing Activities

Net cash flows used in investing activities increased by $47.4 million, to $121.3 million in the three months ended March 31, 2011 compared to $73.9 million in the three months ended March 31, 2010. The difference reflects installment payments for newbuildings, as well as interest capitalized and other related capital expenditures, of $121.3 million in the three months ended March 31, 2011 compared to $75.6 million during the three months ended March 31, 2010 and proceeds from sale of vessels of nil in the three months ended March 31, 2011 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 $1.8 million, to $38.9 million in the three months ended March 31, 2011 compared to $40.7 million in the three months ended March 31, 2010. The decrease is primarily due to the deferred fees paid to our lenders under the Bank Agreement of $30.2 million in the three months ended March 31, 2011 (refer to our condensed consolidated financial statements Note 10, Long-term Debt, included elsewhere in this report) compared to nil in the three months ended March 31, 2010, which was partially offset by increased net proceeds from long-term debt of $66.2 million during the three months ended March 31, 2011 compared to $38.0 million in the three months ended March 31, 2010.

Non-GAAP Financial Measures

We report our financial results in accordance with U.S. generally accepted accounting principles (GAAP). Management believes, however, 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 our performance. See the tables below for supplemental financial data and corresponding reconciliations to GAAP financial measures. Non-GAAP financial measures should be viewed in addition to, and not as an alternative for, our reported results prepared in accordance with GAAP.

EBITDA and Adjusted EBITDA

EBITDA represents net (loss)/income before interest income and expense, taxes, depreciation and amortization. Adjusted EBITDA represents net (loss)/income before interest income and expense, taxes, depreciation, amortization of deferred drydocking & special survey costs and deferred finance costs (and write-offs), impairment loss, gain/(loss) on sale of vessels, non-cash changes in fair value of derivatives, realized gain/(loss) on derivatives, gain on contract termination and other one-off items in relation to the Company’s Comprehensive Financing Plan. 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 they 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

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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 principal indicators of our performance.

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(1)                               Fees related to our Comprehensive Financing Plan, of which $2.1 million and $1.0 million for the three months ended March 31, 2011 and 2010, respectively, which were recorded in “Other income/(expense), net” and “General and administrative expenses”, respectively.

EBITDA increased by $95.6 million, to $42.5 million in the three months ended March 31, 2011, from $(53.1) million in the three months ended March 31, 2010. The increase is mainly attributable to increased operating revenues of $99.0 million in the three months ended March 31, 2011 compared to $79.7 million in the three months ended March 31, 2010, an impairment loss of $71.5 million recorded in the three months ended March 31, 2010, reduced losses on fair value of derivatives of $18.3 million in the three months ended March 31, 2011 compared to $38.5 million in the three months ended March 31, 2010, which were partially offset by increased operating expenses of $26.6 million in the three months ended March 31, 2011 compared to $17.5 million in the three months ended March 31, 2010, a gain on sale of vessel of $1.9 million recorded in the three months ended March 31, 2010, as well as increased other finance costs of $2.8 million (excluding amortization of deferred finance costs of $1.3 million and finance costs accrued of $0.3 million) in the three months ended March 31, 2011 compared to $0.5 million in the three months ended March 31, 2010 and other expenses of $1.9 million in the three months ended March 31, 2011 compared to nil in the three months ended March 31, 2010.

Adjusted EBITDA increased by $9.2 million, to $65.2 million in the three months ended March 31, 2011, from $56.0 million in the three months ended March 31, 2010. The increase is mainly attributed to increased operating revenues of $99.0 million in the three months ended March 31, 2011 compared to $79.7 million in the three months ended March 31, 2010, which was partially offset by increased operating expenses of $26.6 million in the three months ended March 31, 2011 compared to $17.5 million in the three months ended March 31, 2010 and increased voyage expenses of $2.2 million in the three months ended March 31, 2011 compared to $1.6 million in the three months ended March 31, 2010.

Credit Facilities

We, as borrower, and certain of our subsidiaries, as guarantors, 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 10 to our consolidated financial statements included in this report. Under the Bank Agreement our previously existing credit facilities continue to be made available by the respective lenders, in all cases as term loans, but (other than with respect to our KEXIM and KEXIM-ABN Amro credit facilities which are not covered by the Bank Agreement) with revised amortization schedules, interest rates, financial covenants, events of default and other terms and additional collateral under certain of these credit facilities and we obtained new credit facilities. The following summarizes certain terms of our previously existing credit facilities, as amended, as well as the new credit facilities we have entered into in the first quarter of 2011:

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(1)                                   As of March 31, 2011.

(2)                                  Pursuant to the Bank Agreement, this credit facility is also secured by a second priority lien on the Bunga Raya Tiga , the CSCL America (ex MSC Baltic ) and the CSCL Le Havre .

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(3)                                   As of July 10, 2009, we agreed to amend the facility by adding additional collateral as follows: (a) newbuilding vessel CMA CGM Rabelais to be provided as first priority security under the facility, (b) second priority mortgages on the Bunga Raya Tujuh (ex Maersk Deva ) and the Bunga Raya Tiga (ex Maersk Derby ) financed by Aegean Baltic-HSH Nordbank AG-Pireaus Bank 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-ABN Amro credit facility.

(4)                               Pursuant to the Bank Agreement, this credit facility is also secured by a second priority lien on the Bunga Raya Tujuh , the CSCL Europe and the CSCL Pusan.

(5)                                   As of January 24, 2011, we entered into a definitive agreement with the respective banks.

(6)                                   Includes principal amount of $23.75 million under the Aegean Baltic Bank—HSH Nordbank—Piraeus Bank credit facility as of December 31, 2010 (following a scheduled payment of $1.25 million as of December 31, 2010), which will be transferred to the new facility from a bridge financing facility and was drawn down ($25.0 million) on July 1, 2010 for the delivery of the vessel CMA CGM Rabelais on July 2, 2010.

(7)                                   As of February 21, 2011, we entered into a definitive agreement for this facility.

For additional details regarding the Bank Agreement, the New Credit Facilities with existing lenders, Sinosure-CEXIM Credit Facility and Hyundai Samho Vendor Financing, please refer to “Item 5. Operating and Financial Review and Prospects” in our Annual Report on Form 20-F for the year ended December 31, 2010 filed with the Securities and Exchange Commission on April 8, 2011, as well as Note 10, Long-term Debt, to our condensed consolidated financial statements (unaudited) included elsewhere herein.

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 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 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.

We are currently in an over-hedged position under our cash flow interest rate swaps, which is due to deferred progress payments to shipyards, cancellation of three newbuildings in 2010, replacements of variable interest rate debt with a fixed interest rate seller’s financing and equity proceeds from our private placement in 2010, all of which reduced initial forecasted variable interest rate debt and resulted in notional cash flow interest rate swaps being above our variable interest rate debt eligible for hedging. Realized losses attributable to the over-hedging position were $9.8 million in the three months ended March 31, 2011 compared to $4.0 million in the three months ended March 31, 2010.

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, 2011 and 2010.

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, 2011:

·           on an actual basis; and

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·           on an as adjusted basis to reflect in the period from March 31, 2011 to May 9, 2011 debt drawdowns of $172.9 million, of which $43.4 million relates to the Hyundai Samho Vendor financing and the issuance of 375,835 shares of common stock to the employees of our manager in respect of equity awards granted in 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, 2011 and May 9, 2011.  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

(2)           Does not include 15 million warrants to purchase shares of common stock, at an initial exercise price of $7.00 per share, which we have agreed to issue to lenders participating in our comprehensive financing plan, of which 14,925,130 warrants had been issued as of May 9, 2011.  The warrants, which will expire on January 31, 2019, are exercisable solely on a cashless exercise basis.

(3)           We have agreed to issue in 2011 an additional 22,015 shares of common stock to employees of our manager in respect of equity awards granted in 2010.

Recent Developments

On April 1, 2011, we issued 3,711,417 warrants (from the total 15,000,000 committed warrants), to one of our lenders under the Bank Agreement and the New Credit Facilities to purchase, solely on a cash-less exercise basis, shares of common stock, which warrants have an exercise price of $7.00 per share (subject to antidilutive adjustments). We will issue the remaining 74,870 warrants upon the request of the applicable lender. All warrants issued, or to be issued, will expire on January 31, 2019.

Between April 1, 2011 and May 5, 2011, we issued 375,835 new shares to the employees of the Manager (in respect of grants made in 2010) and we agreed to issue in 2011 an additional 22,015 new shares of common stock to employees of the Manager in respect of the same grants.

On April 6, 2011, the Company took delivery of the newbuilding 10,100 TEU vessel, the Hanjin Italy . The vessel has been deployed on a 12-year time charter with one of the world’s major liner companies.

On April 15, 2011, the Company took delivery of the newbuilding 3,400 TEU vessel, the Hanjin Constantza . The vessel has been deployed on a 10-year time charter with one of the world’s major liner companies.

On May 4, 2011, the Company took delivery of the newbuilding 10,100 TEU vessel, the Hanjin Greece . The vessel has been deployed on a 12-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

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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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INDEX TO FINANCIAL STATEMENTS

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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 (continued)

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.”

As of March 31, 2011, 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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