RISK
FACTORS
In
addition to the other information presented in this prospectus, the following
should be considered carefully in evaluating us and our business. This
prospectus contains forward-looking statements and information within the
meaning of U.S. securities laws that involve risks and uncertainties. Our actual
results may differ materially from the results discussed in the forward-looking
statements and information. Factors that may cause such a difference include
those discussed below and elsewhere in this prospectus.
Some
of the following risks relate principally to the industry in which we operate
and our business in general. Other risks relate principally to the securities
market and ownership of our common shares. The occurrence of any of the events
described in this section could significantly and negatively affect our
business, financial condition, operating results, ability pay dividends or the
trading price of our common shares.
Risks
relating to Our Industry
The
seaborne transportation industry is cyclical and volatile.
The
international seaborne transportation industry is both cyclical and volatile in
terms of charter rates, vessel values and profitability. Fluctuations in charter
rates result from changes in the supply and demand for vessel capacity and
changes in the supply and demand for energy resources, commodities,
semi-finished and finished consumer and industrial products internationally
carried at sea. For example, the degree of charter hire rate volatility among
different types of dry bulk vessels has varied widely. After reaching historical
highs in mid-2008, charter hire rates for Supramax and Panamax dry bulk vessels
reached near historically low levels at the end of 2008, and have since
recovered to some extent. Because from time to time we may charter some of our
vessels pursuant to short-term time charters or on the spot market, we may be
exposed to changes in spot market and short-term charter rates for dry bulk
vessels and such changes may affect our earnings and the value of our dry bulk
vessels at any given time. The supply of and demand for shipping capacity
strongly influences freight rates. The factors affecting the supply and demand
for vessels are outside of our control, and the nature, timing and degree of
changes in industry conditions are unpredictable.
Factors
that influence demand for vessel capacity include:
|
Ø
|
supply
and demand for energy resources, commodities, semi-finished and finished
consumer and industrial products;
|
|
Ø
|
changes
in the production of energy resources, commodities, semi-finished and
finished consumer and industrial
products;
|
|
Ø
|
the
location of regional and global production and manufacturing
facilities;
|
|
Ø
|
the
location of consuming regions for energy resources, commodities,
semi-finished and finished consumer and industrial
products;
|
|
Ø
|
the
globalization of production and
manufacturing;
|
|
Ø
|
global
and regional economic and political
conditions;
|
|
Ø
|
developments
in international trade;
|
|
Ø
|
changes
in seaborne and other transportation patterns, including the distance dry
bulk cargo is transported by sea;
|
|
Ø
|
environmental
and other regulatory
developments;
|
|
Ø
|
currency
exchange rates; and
|
Factors
that influence the supply of vessel capacity include:
|
Ø
|
the
number of newbuilding deliveries, which among other factors relates to the
ability of shipyards to deliver newbuildings by contracted delivery dates
and the ability of purchasers to finance such
newbuildings;
|
|
Ø
|
the
scrapping rate of older vessels;
|
|
Ø
|
changes
in environmental and other regulations that may limit the useful lives of
vessels;
|
|
Ø
|
the
number of vessels that are out of service;
and
|
|
Ø
|
port
or canal congestion.
|
We
anticipate that the future demand for our dry bulk vessels and charter rates
will be dependent upon continued economic growth in the world’s economies
including China and India, seasonal and regional changes in demand and changes
to the capacity of the global dry bulk vessel fleet and the sources and supply
of dry bulk cargo to be transported by sea. Adverse economic, political, social
or other developments could negatively impact charter rates and therefore have a
material adverse effect on our business, results of operations and ability to
pay dividends.
The
dry bulk vessel charter market remains significantly below its high in
2008.
The
revenues, earnings and profitability of companies in our industry are affected
by the charter rates that can be obtained in the market, which is volatile and
has experienced significant declines since its highs in the middle of 2008. For
example, the Baltic Dry Index, or BDI, declined from a high of 11,793 on May 20,
2008 to a low of 663 on December 5, 2008, which represents a decline of 94%
within a single calendar year. The BDI fell over 70% during October 2008 alone.
During 2009 and through the six-month period ended June 30, 2010, the BDI
remained volatile, reaching in 2009 a low of 772 on January 5, 2009 and a high
of 4,661 on November 19, 2009, and, in such six-month period ending June 30,
2010, reaching a high of 4,209 on May 26, 2010 and a low of 2,406 on June 30,
2010. We believe the decline and volatility in charter rates has been due to
various factors, including the lack of trade financing for purchases of
commodities carried by sea, which has resulted in declines in cargo shipments,
and the excess supply of iron ore in China, which has resulted in falling iron
ore prices and increased stockpiles in Chinese ports. The decline and volatility
in charter rates in the dry bulk market also affects the value of our dry bulk
vessels, which follows the trends of dry bulk charter rates, and earnings on our
charters, and similarly affects our cash flows, liquidity and compliance with
the covenants contained in our loan agreements.
There
remains considerable instability in the world economy.
We expect
that a significant number of the port calls we expect our vessels to make will
likely involve the loading or discharging of raw materials in ports in the Asia
Pacific region, particularly China. As a result, a negative change in economic
conditions in any Asia Pacific country, particularly China, Japan and, to some
extent, India, can have a material adverse effect on our business, financial
position and results of operations, as well as our future prospects, by reducing
demand and, as a result, charter rates and affecting our ability to charter our
vessels. In the recent past, China and India have had two of the world’s fastest
growing economies in terms of gross domestic product and have been the main
driving force behind increases in marine dry bulk trade and the demand for dry
bulk vessels. If economic growth declines in China, Japan, India and other
countries in the Asia Pacific region, we may face decreases in such dry bulk
trade and demand. Moreover, a slowdown in the United States and Japanese
economies or the economies of the European Union or certain Asian countries may
adversely affect economic growth in China, India and elsewhere. Such an economic
downturn in any of these countries could have a material adverse effect on our
business, financial condition, results of operations and ability to pay
dividends.
The
international shipping industry and dry bulk market are highly
competitive.
The
shipping industry and dry bulk market are capital intensive and highly
fragmented with many charterers, owners and operators of vessels and are
characterized by intense competition. Competition arises primarily from other
vessel owners, some of whom have substantially greater resources than we do.
Although we believe that no single competitor has a dominant position in the
markets in which we compete, the trend towards consolidation in the industry is
creating an increasing number of global enterprises capable of competing in
multiple markets, which may result in a greater competitive threat to us. Our
competitors may be better positioned to devote greater resources to the
development, promotion and employment of their businesses than we are.
Competition for the transportation of cargo by sea is intense and depends on
customer relationships, operating expertise, professional reputation, price,
location, size, age, condition and the acceptability of the vessel and its
operators to the charterers. Competition may increase in some or all of our
principal markets, including with the entry of new competitors, who may operate
larger fleets through consolidations or acquisitions and may be able to sustain
lower charter rates and offer higher quality vessels than we are able to offer.
We may not be able to continue to compete successfully or effectively with our
competitors and our competitive position may be eroded in the future, which
could have an adverse effect on our fleet utilization and, accordingly,
business, financial condition, results of operations and ability to pay
dividends.
There
may be changes in the economic and political environment in China and China may
adopt policies to regulate its economy.
The
Chinese economy differs from the economies of most countries belonging to the
Organization for Economic Cooperation and Development in respects such as
structure, government involvement, level of development, growth rate, capital
reinvestment, allocation of resources, rate of inflation and balance of payments
position. Prior to 1978, the Chinese economy was a planned economy. Since 1978,
increasing emphasis has been placed on the utilization of market forces in the
development of the Chinese economy. Annual and five year State Plans are adopted
by the Chinese government in connection with the development of the economy.
Although state-owned enterprises still account for a substantial portion of the
Chinese industrial output, in general, the Chinese government is reducing the
level of direct control that it exercises over the economy through State Plans
and other measures. There is an increasing level of freedom and autonomy in
areas such as allocation of resources, production, pricing and management and a
gradual shift in emphasis to a “market economy” and enterprise reform. Limited
price reforms were undertaken, with the result that prices for certain
commodities are principally determined by market forces. Many of the reforms are
unprecedented or experimental and may be subject to revision, change or
abolition based upon the outcome of such experiments. We cannot assure you that
the Chinese government will continue to pursue a policy of economic
reform.
The level
of imports to and exports from China could be adversely affected by changes to
these economic reforms by the Chinese government, as well as by changes in
political, economic and social conditions or other relevant policies of the
Chinese government, such as changes in laws, regulations or export and import
restrictions, all of which could, adversely affect our business, operating
results, financial condition and ability to pay dividends.
We
depend on spot charters in volatile shipping markets.
We
charter two of our five vessels on the spot charter market, and we may charter
other vessels on the spot market in the future. Although dependence on spot
charters is not unusual in the shipping industry, the spot charter market is
highly competitive and spot charter rates may fluctuate significantly based upon
available charters and the supply of and demand for seaborne shipping capacity.
While our focus on the spot market may enable us to benefit if industry
conditions strengthen, we must consistently procure spot charter business.
Conversely, such dependence makes us vulnerable to declining market rates for
spot charters and to the off-hire periods including ballast passages. Rates
within the spot charter market are subject to volatile fluctuations while
longer-term time charters provide income at pre-determined rates over more
extended periods of time. There can be no assurance that we will be successful
in keeping our vessels fully employed in these short-term markets or that future
spot rates will be sufficient to enable the vessels to be operated profitably. A
significant decrease in charter rates would affect value and adversely affect
our profitability, cash flows and ability to pay dividends. We cannot give
assurances that future available spot charters will enable us to operate our
vessels profitably.
The
dry bulk vessel capacity may be oversupplied.
The
market supply of dry bulk vessels has been increasing as a result of the
delivery of numerous newbuilding orders over the last few years. Newbuildings
were delivered in significant numbers starting at the beginning of 2006 and
continued to be delivered in significant numbers through 2007 and 2008.
Furthermore, the number of dry bulk vessels on order is near historic highs. As
of October 31, 2010, newbuilding orders had been placed for an aggregate of
approximately 55.1%
of the then-existing
global dry bulk fleet, according to Drewry Shipping Consultants Limited, which
we refer to as Drewry, with deliveries expected mainly during the succeeding 36
months. We have also seen fewer vessels being scrapped at levels observed during
the economic crisis. As a result, the dry bulk fleet remains an aged fleet that
has not decreased in number. An oversupply of dry bulk vessel capacity,
particularly during a period of economic recession, will likely result in a
reduction of charter hire rates. If we cannot enter into charters on acceptable
terms, we may have to secure charters on the spot market, where charter rates
are more volatile and revenues are, therefore, less predictable, or we may not
be able to charter our vessels at all. In addition, a material increase in the
net supply of dry bulk vessel capacity without corresponding growth in dry bulk
vessel demand could have a material adverse effect on our fleet utilization and
our charter rates generally, and could, accordingly, materially adversely affect
our business, financial condition, results of operations and ability to pay
dividends.
The
market values of our vessels may decrease.
The
market value of dry bulk vessels has generally experienced high volatility. The
market prices for secondhand and newbuilding dry bulk vessels in the recent past
have declined from historically high levels to low levels within a short period
of time. The market value of our vessels may increase and decrease depending on
a number of factors including:
|
Ø
|
prevailing
level of charter rates;
|
|
Ø
|
general
economic and market conditions affecting the shipping
industry;
|
|
Ø
|
competition
from other shipping companies;
|
|
Ø
|
configurations,
sizes and ages of vessels;
|
|
Ø
|
supply
and demand for vessels;
|
|
Ø
|
other
modes of transportation;
|
|
Ø
|
governmental
or other regulations; and
|
|
Ø
|
technological
advances.
|
If the
market value of our vessels declines, we may incur losses if we sell one or more
of our vessels, we may not be in compliance with certain provisions of our
credit facility and loan agreement and we may not be able to refinance our debt
or obtain additional financing, all of which would adversely affect our business
and financial condition. If we sell any vessel at a time when vessel prices have
fallen and before we have recorded an impairment adjustment to our financial
statements, the sale may be at less than the vessel’s depreciated book value in
our financial statements, resulting in a loss and a reduction in earnings. If
the market values of our vessels may decrease, we may breach covenants in our
credit facility and loan agreement, and such decrease and its effects could have
a material adverse effect on our business, financial condition, results of
operations and ability to pay dividends.
Our
revenues are subject to seasonal fluctuations.
Our fleet
consists of dry bulk vessels that operate in markets that have historically
exhibited seasonal variations in demand and, as a result, in charter rates. This
seasonality may result in quarter-to-quarter volatility in our operating
results, which could affect the amount of dividends, if any, that we pay to our
shareholders from quarter to quarter. The dry bulk sector is typically stronger
in the fall and winter months in anticipation of increased consumption of coal
and other raw materials in the northern hemisphere during the winter months. As
a result, revenues from our dry bulk vessels not otherwise fixed on long term
charters may be weaker during the quarters ended June 30 and September 30, and,
conversely, we expect our revenues from our dry bulk vessels may be stronger in
quarters ended December 31 and March 31. In addition, unpredictable weather
patterns in these months tend to disrupt vessel scheduling and supplies of
certain commodities. This seasonality could have a material adverse effect on
our business, financial condition, results of operations and ability to pay
dividends.
Our
industry is subject to complex laws and regulations, including environmental
regulations.
Our
operations are subject to numerous laws and regulations in the form of
international conventions and treaties, national, state and local laws and
national and international regulations in force in the jurisdictions in which
our vessels operate or are registered, which can significantly affect the
ownership and operation of our vessels. These requirements include but are not
limited to: International U.S. Oil Pollution Act 1990, as amended, which we
refer to as OPA; International Convention for the Safety of Life at Sea, 1974,
which we refer to as SOLAS; International Convention on Load Lines, 1966;
International Convention for the Prevention of Pollution from Ships, 1973,
Protocol 1978; International Convention on Civil Liability for Bunker Oil
Pollution Damage, 2001; International Convention on Liability and Compensation
for Damage in Connection with the Carriage of Hazardous and Noxious Substances
by Sea, 1996; International Convention on Civil Liability for Oil Pollution
Damage of 1969, as amended in 2000, which we refer to as the CLC; International
Convention on the Establishment of an International Fund for Compensation for
Oil Pollution Damage, 1971; and Marine Transportation Security Act of 2002,
which we refer to as the MTSA.
Government
regulation of vessels, particularly in the area of environmental requirements,
can be expected to become more stringent in the future and could require us to
incur significant capital expenditures on our vessels to keep them in
compliance, or even to scrap or sell certain vessels altogether. Compliance with
such laws, regulations and standards, where applicable, may require installation
of costly equipment or operational changes and may affect the resale value or
useful lives of our vessels. We may also incur additional costs in order to
comply with other existing and future regulatory obligations, including, but not
limited to, costs relating to air emissions, the management of ballast waters,
maintenance and inspection, elimination of tin-based paint, development and
implementation of emergency procedures and insurance coverage or other financial
assurance of our ability to address pollution incidents. These costs could have
a material adverse effect on our business, results of operations, cash flows and
financial condition and our ability to pay dividends.
Additional
conventions, laws and regulations may be adopted which could limit our ability
to do business or increase the cost of our doing business and which may
materially adversely affect our business, financial condition and results of
operations. Because such conventions, laws and regulations are often revised, or
the required additional measures for compliance are still under development, we
cannot predict the ultimate cost of complying with such conventions, laws and
regulations or the impact thereof on the resale prices or useful lives of our
vessels. We are also required by various governmental and quasi-governmental
agencies to obtain certain permits, licenses, certificates and financial
assurances with respect to our operations.
These
requirements can also affect the resale prices or useful lives of our vessels or
require reductions in capacity, vessel modifications or operational changes or
restrictions. Failure to comply with these requirements could lead to decreased
availability of or more costly insurance coverage for environmental matters or
result in the denial of access to certain jurisdictional waters or ports, or
detention in certain ports. Under local, national and foreign laws, as well as
international treaties and conventions, we could incur material liabilities,
including cleanup obligations and claims for natural resource, personal injury
and property damages in the event that there is a release of petroleum or other
hazardous materials from our vessels or otherwise in connection with our
operations. Violations of, or liabilities under, environmental regulations can
result in substantial penalties, fines and other sanctions, including, in
certain instances, seizure or detention of our vessels. Events of this nature
would have a material adverse effect on our business, financial condition and
results of operations.
The
operation of our vessels is affected by the requirements set forth in the ISM
Code. The ISM Code requires shipowners, ship managers and bareboat charterers to
develop and maintain an extensive “Safety Management System” that includes the
adoption of a safety and environmental protection policy setting forth
instructions and procedures for safe operation and describing procedures for
dealing with emergencies. The failure of a shipowner or bareboat charterer to
comply with the ISM Code may subject it to increased liability, may invalidate
existing insurance or decrease available insurance coverage for the affected
vessels and may result in a denial of access to, or detention in, certain ports.
As of the date of this document, each of our vessels is ISM
Code-certified.
Dividends paid by us may not
constitute qualified dividend income eligible for a preferential rate of United
States federal income taxation.
Unless
Congress passes a law to extend the 15% preferential rate of tax on qualified
dividend income, the rate of tax on qualified dividend income will increase
after December 31, 2010. There can be no assurance as to whether the
preferential rate of tax will be available generally if we pay a dividend before
December 31, 2010, and even if the preferential rate is extended whether it
would apply to dividends paid by a non-U.S. corporation such as the Company.
Legislation has been previously introduced in the U.S. Congress that would deny
the preferential rate of U.S. federal income tax currently imposed on qualified
dividend income in certain circumstances. Some of these proposals, if enacted,
may disqualify dividends from a non-U.S. corporation for the 15% preferential
rate of tax on qualified dividend income.
Capital
expenditures and other costs necessary to operate and maintain our vessels may
increase.
Changes
in safety or other equipment standards, as well as compliance with standards
imposed by maritime self-regulatory organizations and customer requirements or
competition, may require us to make additional expenditures. In order to satisfy
these requirements, we may, from time to time, be required to take our vessels
out of service for extended periods of time, with corresponding losses of
revenues. In the future, market conditions may not justify these expenditures or
enable us to operate some or all of our vessels profitably during the remainder
of their economic lives.
There
are inherent operational risks in the seaborne transportation industry and the
costs associated with these risks, such as drydocking for vessel repairs, may be
substantial.
The
operation of any vessel includes risks such as mechanical failure, collision,
fire, contact with floating objects, cargo or property loss or damage and
business interruption due to political circumstances in foreign countries,
piracy, terrorist attacks, armed hostilities and labor strikes. Such occurrences
could result in death or injury to persons, loss of property or environmental
damage, delays in the delivery of cargo, loss of revenues from or termination of
charter contracts, governmental fines, penalties or restrictions on conducting
business, higher insurance rates and damage to our reputation and customer
relationships generally. In the past, political conflicts have also resulted in
attacks on vessels, mining of waterways and other efforts to disrupt
international shipping, particularly in the Arabian Gulf region. In addition,
there is always the possibility of a marine disaster, including oil spills and
other environmental damage.
If our
vessels suffer damage, they may need to be repaired at a drydocking facility.
The costs of drydocking repairs are unpredictable and may be substantial. We may
have to pay drydocking costs that our insurance does not cover in full. The loss
of earnings while these vessels are being repaired and repositioned, as well as
the actual cost of these repairs, would decrease our earnings. In addition,
space at drydocking facilities is sometimes limited and not all drydocking
facilities are conveniently located. We may be unable to find space at a
suitable drydocking facility or our vessels may be forced to travel to a
drydocking facility that is not conveniently located to our vessels’ positions.
The loss of earnings while these vessels are forced to wait for space or to
steam to more distant drydocking facilities would decrease our
earnings.
Our
insurance may not be adequate to cover our losses that may result from our
operations due to the inherent operational risks of the seaborne transportation
industry.
We carry
insurance to protect us against most of the accident-related risks involved in
the conduct of our business, including marine hull and machinery insurance, war
risk insurance, protection and indemnity insurance, which includes pollution
risks, crew insurance and war risk insurance. However, we may not be adequately
insured to cover losses from our operational risks, which could have a material
adverse effect on us. Additionally, our insurers may refuse to pay particular
claims and our insurance may be voidable by the insurers if we take, or fail to
take, certain action, such as failing to maintain certification of our vessels
with applicable maritime regulatory organizations. Any significant uninsured or
underinsured loss or liability could have a material adverse effect on our
business, results of operations, cash flows and financial condition and our
ability to pay dividends. It may also result in protracted legal litigation. In
addition, we may not be able to obtain adequate insurance coverage at reasonable
rates in the future during adverse insurance market conditions. We maintain, for
each of our vessels, pollution liability coverage insurance for $1.0 billion per
event. If damages from a catastrophic spill exceed our insurance coverage, it
would have a materially adverse effect on our business, results of operations
and financial condition and our ability to pay dividends to our
shareholders.
As a
result of the September 11, 2001 terrorist attacks, the U.S. response to the
attacks and related concern regarding terrorism, insurers have increased
premiums and reduced or restricted coverage for losses caused by terrorist acts
generally. Accordingly, premiums payable for terrorist coverage have increased
substantially and the level of terrorist coverage has been significantly
reduced.
In
addition, we do not currently carry and may not carry loss-of-hire insurance,
which covers the loss of revenue during extended vessel offhire periods, such as
those that occur during an unscheduled drydocking due to damage to the vessel
from accidents. Accordingly, any loss of a vessel or extended vessel off-hire,
due to an accident or otherwise, could have a material adverse effect on our
business, results of operations, financial condition and our ability to pay
dividends.
We
may be subject to funding calls by our protection and indemnity clubs, and our
clubs may not have enough resources to cover claims made against
them.
We are
indemnified for legal liabilities incurred while operating our vessels through
membership of protection and indemnity, or P&I, associations, otherwise
known as P&I clubs. P&I clubs are mutual insurance clubs whose members
must contribute to cover losses sustained by other club members. The objective
of a P&I club is to provide mutual insurance based on the aggregate tonnage
of a member’s vessels entered into the club. Claims are paid through the
aggregate premiums of all members of the club, although members remain subject
to calls for additional funds if the aggregate premiums are insufficient to
cover claims submitted to the club. Claims submitted to the club may include
those incurred by members of the club, as well as claims submitted by other
P&I clubs with which our club has entered into interclub agreements. We
cannot assure you that the P&I club to which we belong will remain viable or
that we will not become subject to additional funding calls which could
adversely affect us.
There
are increased inspection procedures, tighter import and export controls and new
security regulations.
International
shipping is subject to various security and customs inspection and related
procedures in countries of origin and destination and trans-shipment points.
Inspection procedures can result in the seizure of the cargo and contents of our
vessels, delays in the loading, offloading or delivery and the levying of
customs duties, fines or other penalties against us.
It is
possible that changes to inspection procedures could impose additional financial
and legal obligations on us. Furthermore, changes to inspection procedures could
also impose additional costs and obligations on our customers and may, in
certain cases, render the shipment of certain types of cargo impractical. Any
such changes or developments may have a material adverse effect on our business,
financial condition, results of operations and our ability to pay
dividends.
Rising
fuel prices may adversely affect our profits.
While we
currently have no charters under which we are bearing the cost of fuel
(bunkers), fuel is a significant, if not the largest, expense if vessels are
under voyage charter. Moreover, the cost of fuel will affect the profit we can
earn on the spot market. Upon redelivery of vessels at the end of a time
charter, we may be obliged to repurchase the fuel on board at prevailing market
prices, which could be materially higher than fuel prices at the inception of
the time charter period. As a result, an increase in the price of fuel may
adversely affect our profitability. The price and supply of fuel is
unpredictable and fluctuates based on events outside our control, including
geopolitical events, supply and demand for oil and gas, actions by the
Organization of the Petroleum Exporting Countries and other oil and gas
producers, war and unrest in oil producing countries and regions, regional
production patterns and environmental concerns. Further, fuel may become much
more expensive in the future, which may reduce the profitability and
competitiveness of our business versus other forms of transportation, such as
truck or rail.
The
operation of dry bulk vessels has certain unique operational risks.
The
operation of certain vessel types, such as dry bulk vessels, has certain unique
risks. With a dry bulk vessel, the cargo itself and its interaction with the
vessel can be a risk factor. By their nature, dry bulk cargoes are often heavy,
dense, easily shifted, and react badly to water exposure. In addition, dry bulk
vessels are often subjected to battering during unloading operations with grabs,
jackhammers (to pry encrusted cargoes out of the hold), and small bulldozers.
This may cause damage to the vessel. Vessels damaged due to treatment during
unloading procedures may be more susceptible to breach while at sea. Hull
breaches in dry bulk vessels may lead to the flooding of the vessels holds. If a
dry bulk vessel suffers flooding in its forward holds, the bulk cargo may become
so dense and waterlogged that its pressure may buckle the vessels bulkheads
leading to the loss of a vessel. If we are unable to adequately maintain our
vessels we may be unable to prevent these events. Any of these circumstances or
events could negatively impact our business, financial condition, results of
operations and ability to pay dividends. In addition, the loss of any of our
vessels could harm our reputation as a safe and reliable vessel owner and
operator.
Maritime
claimants could arrest our vessels, which would interrupt our
business.
Crew
members, suppliers of goods and services to a vessel, shippers of cargo and
other parties may be entitled to a maritime lien against a vessel, or other
assets of the relevant vessel-owning company, for unsatisfied debts, claims or
damages. In many jurisdictions, a claimant may seek to obtain security for its
claim by arresting a vessel through foreclosure proceedings. The arrest or
attachment of one or more of our vessels, or other assets of the relevant
vessel-owning company or companies, could cause us to default on a charter,
breach covenants in our credit facility and loan agreement, interrupt our cash
flow and require us to pay large sums of money to have the arrest or attachment
lifted.
In
addition, in some jurisdictions, such as South Africa, under the “sister ship”
theory of liability, a claimant may arrest both the vessel which is subject to
the claimant’s maritime lien and any “associated” vessel, which is any vessel
owned or controlled by the same owner. Claimants could attempt to assert “sister
ship” liability against one vessel in our fleet for claims relating to another
of our vessels.
Governments
could requisition our vessels during a period of war or emergency.
A
government could requisition one or more of our vessels for title or for hire.
Requisition for title occurs when a government takes control of a vessel and
becomes the owner. Requisition for hire occurs when a government takes control
of a vessel and effectively becomes the charterer at dictated charter rates.
Generally, requisitions occur during a period of war or emergency, although
governments may elect to requisition vessels in other circumstances. Even if we
would be entitled to compensation in the event of a requisition of one or more
of our vessels, the amount and timing of payment would be uncertain. Government
requisition of one or more of our vessels may negatively impact our business,
financial condition, results of operations and ability to pay
dividends.
World events could affect our
results of operations and financial condition
.
Terrorist
attacks such as the attacks on the United States on September 11, 2001, in
London on July 7, 2005 and in Mumbai on November 26, 2008 and the continuing
response of the United States and others to these attacks, as well as the threat
of future terrorist attacks in the United States or elsewhere, continues to
cause uncertainty in the world’s financial markets and may affect our business,
operating results and financial condition. The continuing presence of United
States and other armed forces in Iraq and Afghanistan may lead to additional
acts of terrorism and armed conflict around the world, which may contribute to
further economic instability in the global financial markets. These
uncertainties could also adversely affect our ability to obtain additional
financing on terms acceptable to us or at all. In the past, political conflicts
have also resulted in attacks on vessels, mining of waterways and other efforts
to disrupt international shipping, particularly in the Arabian Gulf region. Acts
of terrorism have also affected vessels. Any of these occurrences could have a
material adverse impact on our operating results, revenues, costs and ability to
pay dividends.
Terrorist
attacks on vessels, such as the October 2002 attack on the
m.v. Limburg
and the July
2010 alleged Al-Qaeda attack on the
M. Star
, both very large
crude carriers not related to us, may in the future also negatively affect our
operations and financial condition and directly impact our vessels or our
customers. Future terrorist attacks could result in increased volatility and
turmoil of the financial markets in the United States and globally. Any of these
occurrences could have a material adverse impact on our operating results,
revenues, costs and ability to pay dividends.
Acts of piracy on ocean-going
vessels have recently increased in frequency
.
Acts of
piracy have historically affected ocean-going vessels trading in regions of the
world such as the South China Sea and in the Gulf of Aden off the coast of
Somalia. Throughout 2008 and 2009, the frequency of piracy incidents has
increased significantly, particularly in the Gulf of Aden off the coast of
Somalia. If these piracy attacks result in regions in which our vessels are
deployed being characterized by insurers as “war risk” zones, as the Gulf of
Aden temporarily was in May 2008, or Joint War Committee “war and strikes”
listed areas, premiums payable for such coverage could increase significantly
and such insurance coverage may be more difficult or impossible to obtain. One
of our vessels was previously the subject of an attempted piracy attack, but it
was able to evade such attack without damage to the vessel or its crew. In
addition, crew costs, including employing onboard security guards, could
increase in such circumstances. We may not be adequately insured to cover losses
from these incidents, which could have a material adverse effect on us. In
addition, detention hijacking as a result of an act of piracy against our
vessels, or an increase in cost, or unavailability of insurance for our vessels,
could have a material adverse impact on our business, financial condition,
results of operations and ability to pay dividends.
Disruptions in world financial
markets and the resulting governmental action in the United States and in other
parts of the world could affect us
.
The
United States and other parts of the world are exhibiting deteriorating economic
trends and have been in a recession. For example, the credit markets in the
United States have experienced significant contraction, deleveraging and reduced
liquidity, and the United States federal government and state governments have
implemented and are considering a broad variety of governmental action and/or
new regulation of the financial markets. Securities and futures markets and the
credit markets are subject to comprehensive statutes, regulations and other
requirements. The Securities and Exchange Commission, which we refer to as the
SEC, other regulators, self-regulatory organizations and exchanges are
authorized to take extraordinary actions in the event of market emergencies, and
may effect changes in law or interpretations of existing laws.
A number
of financial institutions have experienced serious financial difficulties and,
in some cases, have entered bankruptcy proceedings or are in regulatory
enforcement actions. The uncertainty surrounding the future of the credit
markets in the United States and the rest of the world has resulted in reduced
access to credit worldwide. As of June 30, 2010 and September 30, 2010, we have
total outstanding indebtedness of $102.2 million and $101.7 million,
respectively, (of principal balance) under our credit facility and loan
agreement.
We face
risks attendant to changes in economic environments, changes in interest rates
and instability in the banking and securities markets around the world, among
other factors. Major market disruptions and the current adverse changes in
market conditions and regulatory climate in the United States and worldwide may
adversely affect our business or impair our ability to borrow amounts under our
credit facility or any future financial arrangements. We cannot predict how long
the current market conditions will last. However, these recent and developing
economic and governmental factors, together with the concurrent decline in
charter rates and vessel values, may have a material adverse effect on our
results of operations, financial condition, cash flows and ability to pay
dividends.
Compliance
with safety and other vessel requirements imposed by classification societies
may be costly.
The hull
and machinery of every commercial vessel must be certified as safe and seaworthy
in accordance with applicable rules and regulations, and accordingly vessels
must undergo regular surveys. If any vessel does not maintain its class and/or
fails any annual survey, intermediate survey or special survey, the vessel will
be unable to trade between ports and will be unemployable and we would be in
violation of certain covenants in our credit facility and loan agreement. This
would also negatively impact our revenues. All of the vessels that we operate
are classed by the major classification societies, including Nippon Kaiji Kyokai
(Class NK), American Bureau of Shipping and Germanischer Lloyd.
Vessels
must undergo annual surveys, immediate surveys and special surveys. In lieu of a
special survey, a vessel’s machinery may be on a continuous survey cycle, under
which the machinery would be surveyed over a five-year period. Our vessels are
on special survey cycles for hull inspection and continuous survey cycles for
machinery inspection. Every vessel is also required to be drydocked every two to
three years for inspection of its underwater parts.
If any
vessel does not maintain its class and/or fails any annual, intermediate or
special survey, the vessel may be unable to trade between ports and may be
unemployable which could trigger the violation of certain covenants in our
credit facility and loan agreement. Such an occurrence could have a material
adverse impact on our business, financial condition, results of operations and
ability to pay dividends.
We
expect that a limited number of financial institutions will hold our cash
including financial institutions that may be located in
Greece.
We expect
that a limited number of financial institutions, including institutions that may
be located in Greece, will hold all of our cash. Our bank accounts are with
banks in Switzerland, Germany, Jersey and Greece. Of these financial
institutions located in Greece, some are subsidiaries of international banks and
others are Greek financial institutions. We do not expect that these balances
will be covered by insurance in the event of default by these financial
institutions. The occurrence of such a default could have a material adverse
effect on our business, financial condition, results of operations and cash
flows, and we may lose part or all of our cash that we deposit with such
banks.
The
smuggling of drugs or other contraband onto our vessels may lead to governmental
claims against us.
We expect
that our vessels will call at ports where smugglers may attempt to hide drugs
and other contraband on vessels, with or without the knowledge of crew members.
To the extent that our vessels are found with contraband, whether inside or
attached to the hull of our vessel, and whether with or without the knowledge of
any of our crew, we may face governmental or other regulatory claims that could
have an adverse effect on our business, results of operations, cash flows,
financial condition and ability to pay dividends.
Risks
relating to Globus
We
may be unable to attract and retain key management personnel and other employees
in the shipping industry.
Our
success depends to a significant extent upon the abilities and efforts of our
management team, and in particular on the experience, abilities, business
relationships and efforts of our chief executive officer and co-founder, George
Karageorgiou. Although we have entered into employment agreements in relation to
the services of Mr. Karageorgiou and our chief financial officer, Elias
Deftereos, and other members of our senior management, there is no guarantee
that such agreements will not be terminated or honored. Our success will depend
upon our ability to hire and retain key members of our management team and to
hire new members as may be necessary. The loss of any of these individuals, in
particular Mr. Karageorgiou, could adversely affect our business prospects and
financial condition. Difficulty in hiring and retaining replacement personnel
could have a similar effect. We do not intend to maintain “key man” life
insurance for any of our senior management.
Labor
interruptions could disrupt our business.
Our
vessels are manned by masters, officers and crews (totaling approximately 90 as
of September 30, 2010). Seafarers employed on the vessels in our fleet are
covered by industry-wide collective bargaining agreements that set basic
standards. Any labor interruptions or employment disagreements with our crew
members could disrupt our operations and could have a material adverse effect on
our business, results of operations, cash flows, financial condition and ability
to pay dividends. We cannot assure you that collective bargaining agreements
will prevent labor interruptions.
As
we expand our business, we may need to improve our operating and financial
systems and will need to recruit suitable employees and crew for our
vessels.
Our
current operating and financial systems may not be adequate as we implement our
plans to expand the size of our fleet, and our attempts to improve those systems
may be ineffective. In addition, as we seek to expand our internal technical
management capabilities and our fleet, we or our crewing agents may need to
recruit suitable additional seafarers and shore based administrative and
management personnel. We cannot guarantee that we or our crewing agents will be
able to hire suitable employees or a sufficient number of employees as we expand
our fleet. If we or our crewing agent encounter business or financial
difficulties, we may not be able to adequately staff our vessels. If we are
unable to develop and maintain effective financial and operating systems or to
recruit suitable employees as we expand our fleet, our financial performance may
be adversely affected and, among other things, the amount of cash available for
distribution as dividends to our shareholders may be reduced or
eliminated.
Recently,
the limited supply of and increased demand for well-qualified crew, due to the
increase in the size of the global shipping fleet, has created upward pressure
on crewing costs, which we generally bear under our time and spot charters.
Increases in crew costs may adversely affect our profitability.
We
may be unable to successfully employ our vessels on long-term time charters or
take advantage of favorable opportunities involving short-term or spot market
charter rates.
Our
strategy involves employing our vessels primarily on time charters generally
with durations of between three months and three years. As of September 30,
2010, three of our dry bulk vessels were employed on time and bareboat charters
with remaining terms of 25 months on average (based on earliest charter
expiration dates). Although time charters with durations of between one to three
years provide relatively steady streams of revenue, our vessels committed to
such charters may not be available for rechartering or for spot market voyages
when such employment would allow us to realize the benefits of comparably more
favorable charter rates. In addition, in the future, we may not be able to enter
into new time charters on favorable terms. The market is volatile, and in the
past charter rates have declined below operating costs of vessels. If we are
required to enter into a charter when charter rates are low, employ our vessels
on the spot market during periods when charter rates have fallen or we are
unable to take advantage of short-term opportunities on the spot or charter
market, our earnings and profitability could be adversely affected. We cannot
assure you that future charter rates will enable us to operate our vessels
profitably or to pay dividends, or both.
Our
charterers may renegotiate or default on their charters.
Our
charters provide the charterer the right to terminate the charter on the
occurrence of stated events or the existence of specified conditions. In
addition, the ability of each of our charterers to perform its obligations under
a charter will depend on a number of factors that are beyond our control. These
factors may include general economic conditions, the condition of the dry bulk
shipping industry and the overall financial condition of the counterparties. The
costs and delays associated with the default of a charterer of a vessel may be
considerable and may adversely affect our business, results of operations, cash
flows, financial condition and ability to pay dividends.
In the
recent depressed dry bulk market conditions, there have been numerous reports of
charterers renegotiating their charters or defaulting on their obligations
thereunder. If our current charterers or a future charterer defaults on a
charter, we will seek the remedies available to us, which may include
arbitration or litigation to enforce the contract, although such efforts may not
be successful. We cannot predict whether our charterers will, upon the
expiration of their charters, recharter our vessels on favorable terms or at
all. If our charterers decide not to recharter our vessels, we may not be able
to recharter them on terms similar to the terms of our current charters or at
all. In the future, we may also employ our dry bulk vessels on the spot charter
market, which is subject to greater rate fluctuation than the time charter
market. If we receive lower charter rates under replacement charters or are
unable to recharter all of our vessels, this may adversely affect our business,
results of operations, cash flows, financial condition and ability to pay
dividends.
The
aging of our fleet may result in increased operating costs in the
future.
In
general, the cost of maintaining a vessel in good operating condition increases
with the age of the vessel. As of September 30, 2010, the weighted average age
of the vessels in our current fleet was 3.7 years. As our fleet ages, we will
incur increased costs. Older vessels are typically less fuel efficient and more
costly to maintain than more recently constructed vessels due to improvements in
engine technology. Cargo insurance rates, paid by charterers, increase with the
age of a vessel, making older vessels less desirable to charterers. Governmental
regulations, safety or other equipment standards related to the age of vessels
may require expenditures for alterations, or the addition of new equipment, to
our vessels and may restrict the type of activities in which our vessels may
engage. We cannot assure you that, as our vessels age, further market conditions
will justify those expenditures or enable us to operate our vessels profitably
during the remainder of their useful lives.
We
may have difficulty managing our planned growth properly.
Any
future acquisitions of additional vessels will impose additional
responsibilities on our management and staff and may require us to increase the
number of our personnel. In the event of a future acquisition of additional
vessels, we will also have to increase our customer base to provide continued
employment for the new vessels.
We intend
to continue to grow our business through disciplined acquisitions of secondhand
vessels that meet our selection criteria and newly-built vessels if we can
negotiate attractive purchase prices. Our future growth will primarily depend
on:
|
Ø
|
locating
and acquiring suitable vessels;
|
|
Ø
|
identifying
and consummating acquisitions;
|
|
Ø
|
enhancing
our customer base;
|
|
Ø
|
managing
our expansion; and
|
|
Ø
|
obtaining
required financing on acceptable
terms.
|
A delay
in the delivery to us of any such vessel, or the failure of the shipyard to
deliver a vessel at all, could cause us to breach our obligations under a
related charter and could adversely affect our earnings. In addition, the
delivery of any of these vessels with substantial defects could have similar
consequences. A shipyard could fail to deliver a newbuilding on time or at all
because of:
|
Ø
|
work
stoppages or other hostilities or political or economic disturbances that
disrupt the operations of the
shipyard;
|
|
Ø
|
quality
or engineering problems;
|
|
Ø
|
bankruptcy
or other financial crisis of the
shipyard;
|
|
Ø
|
a
backlog of orders at the shipyard;
|
|
Ø
|
weather
interference or catastrophic events, such as major earthquakes or
fires;
|
|
Ø
|
our
requests for changes to the original vessel specifications or disputes
with the shipyard;
|
|
Ø
|
shortages of or delays in the
receipt of necessary construction materials, such as steel;
or
|
|
Ø
|
shortages of or delays in the
receipt of necessary equipment, such as main engines, electricity
generators and propellers.
|
In
addition, if we enter a newbuilding or secondhand contract in the future, we may
seek to terminate the contract due to market conditions, financing limitations
or other reasons. The outcome of contract termination negotiations may require
us to forego deposits on construction or purchase and pay additional
cancellation fees. In addition, where we have already arranged a future charter
with respect to the terminated newbuilding contract, we would need to provide an
acceptable substitute vessel to the charterer to avoid breaching our charter
agreement.
During
periods in which charter rates are high, vessel values generally are high as
well, and it may be difficult to consummate vessel acquisitions or enter into
newbuilding contracts at favorable prices. During periods when charter rates are
low, we may be unable to fund the acquisition of newbuildings, whether through
lending or cash on hand. For these reasons, we may be unable to execute our
growth plans or avoid significant expenses and losses in connection with our
future growth efforts.
Growing
any business by acquisition presents numerous risks, such as undisclosed
liabilities and obligations, the possibility that indemnification agreements
will be unenforceable or insufficient to cover potential losses and difficulties
associated with imposing common standards, controls, procedures and policies,
obtaining additional qualified personnel, managing relationships with customers
and integrating newly acquired assets and operations into existing
infrastructure. We cannot give any assurance that we will be successful in
executing our growth plans or that we will not incur significant expenses and
losses in connection with our future growth.
Possible
new legislative or regulatory changes in Greece may adversely affect our results
from operations.
Globus
Shipmanagement, our ship management subsidiary regulated under Greek Law 89/67,
conducts its operations and those on our behalf primarily in Greece. Greece has
been implementing new legislative measures to address its recent financial
difficulties, several of which as a response from oversight by the International
Monetary Fund and by European regulatory bodies such as the European Central
bank. Such legislative actions may impose new regulations on our operations in
Greece that will require us to incur new or additional compliance or other
administrative costs and may require that Globus Shipmanagement or we pay to the
Greek government new taxes or other fees. Any such taxes, fees or costs we incur
could be in amounts that are significantly greater than those in the past and
could adversely affect our results from operations.
Purchasing
and operating secondhand vessels may result in increased operating costs and
reduced fleet utilization.
While we
have the right to inspect previously owned vessels prior to our purchase of
them, such an inspection does not provide us with the same knowledge about their
condition that we would have if these vessels had been built for and operated
exclusively by us. A secondhand vessel may have conditions or defects that we
are not aware of when we buy the vessel and which may require us to incur costly
repairs to the vessel. These repairs may require us to put a vessel into
drydocking, which would reduce our fleet utilization. Furthermore, we usually do
not receive the benefit of warranties on secondhand vessels.
The
declaration and payment of dividends will depend on a number of factors and will
always be subject to the discretion of our board of directors.
There can
be no assurance that dividends will be paid in any anticipated amounts and
frequency at all. Our policy is to declare and pay a variable quarterly dividend
in excess of 50% of the net income of the previous quarter subject to any
reserves our board of directors may from time to time determine are required.
However, we may incur other expenses or liabilities that would reduce or
eliminate the cash available for distribution as dividends, including as a
result of the risks described in this section of the document. Our credit
facility and loan agreement also prohibit our declaration and payment of
dividends under some circumstances. Under each of our credit facility and loan
agreement we will be prohibited from paying dividends if an event of default has
occurred or any event has occurred or circumstance arisen which with the giving
of notice or the lapse of time or the satisfaction of any other condition would
constitute an event of default under our credit facility and loan agreement.
Please read “Loan Arrangements” for further details. We may also enter into new
financing or other agreements that will restrict our ability to pay
dividends.
In
addition, the declaration and payment of dividends will be subject at all times
to the discretion of our board of directors, and will be paid equally on a
per-share basis between our common shares and our Class B shares. We can provide
no assurance that dividends will be paid in the future.
There may
be a high degree of variability from period to period in the amount of cash, if
any, that is available for the payment of dividends based upon, among other
things:
|
Ø
|
the
rates we obtain from our charters as well as the rates obtained upon the
expiration of our existing
charters;
|
|
Ø
|
the
level of our operating costs;
|
|
Ø
|
the
number of unscheduled off-hire days and the timing of, and number of days
required for, scheduled drydocking of our
vessels;
|
|
Ø
|
vessel
acquisitions and related
financings;
|
|
Ø
|
restrictions
in our credit facility and loan agreement and in any future debt
arrangements;
|
|
Ø
|
our
ability to obtain debt and equity financing on acceptable terms as
contemplated by our growth
strategy;
|
|
Ø
|
prevailing
global and regional economic and political
conditions;
|
|
Ø
|
the
effect of governmental regulations and maritime self-regulatory
organization standards on the conduct of our
business;
|
|
Ø
|
our
overall financial condition;
|
|
Ø
|
our
cash requirements and availability;
|
|
Ø
|
the
amount of cash reserves established by our board of directors;
and
|
|
Ø
|
restrictions under Marshall
Islands law.
|
Marshall
Islands law generally prohibits the payment of dividends other than from surplus
or net profits, or while a company is insolvent or would be rendered insolvent
by the payment of such a dividend. We may not have sufficient funds, surplus or
net profits to make distributions available to us.
We may
incur expenses or liabilities or be subject to other circumstances in the future
that reduce or eliminate the amount of cash that we have available for
distribution as dividends, if any. Our growth strategy contemplates that we will
finance the acquisition of our newbuildings or selective acquisitions of vessels
through a combination of our operating cash flow and debt financing through our
subsidiaries or equity financing. If financing is not available to us on
acceptable terms, our board of directors may decide to finance or refinance
acquisitions with a greater percentage of cash from operations to the extent
available, which would reduce or even eliminate the amount of cash available for
the payment of dividends. We may also enter into other agreements that will
restrict our ability to pay dividends.
The
amount of cash we generate from our operations may differ materially from our
net income or loss for the period, which will be affected by non-cash items. We
may incur other expenses or liabilities that could reduce or eliminate the cash
available for distribution as dividends. As a result of these and the other
factors mentioned above, we may pay dividends during periods when we record
losses and may not pay dividends during periods when we record net income, if we
pay dividends at all.
We
are a holding company, and we will depend on the ability of our subsidiaries to
distribute funds to us in order to satisfy our financial obligations or to make
dividend payments.
We are a
holding company and our subsidiaries, which are all directly wholly owned by us,
will conduct all of our operations and own all of our operating assets. We have
no significant assets other than the equity interests in our wholly owned
subsidiaries. As a result, our ability to make dividend payments depends on our
subsidiaries and their ability to distribute funds to us. If we are unable to
obtain funds from our subsidiaries, our board of directors may exercise its
discretion not to declare or pay dividends. We and our subsidiaries will be
permitted to pay dividends under our credit facility and loan agreement only for
so long as no event of default has occurred and no event has occurred or
circumstance arisen which with the giving of notice or the lapse of time or the
satisfaction of any other condition would constitute an event of default under
the loan facility. In addition, our subsidiaries are subject to limitations on
the payment of dividends under Marshall Islands law.
Management
may be unable to provide reports as to the effectiveness of our internal control
over financial reporting or our independent registered public accounting firm
may be unable to provide us with unqualified attestation reports as to the
effectiveness of our internal control over financial reporting.
Under
Section 404 of the Sarbanes-Oxley Act of 2002, which we refer to as
Sarbanes-Oxley, after we file our annual report on Form 20-F for our next fiscal
year, we will be required to include in each of our subsequent future annual
reports on Form 20-F a report containing our management’s assessment of the
effectiveness of our internal control over financial reporting and a related
attestation of our independent registered public accounting firm. Our manager,
Globus Shipmanagement, will provide substantially all of our financial
reporting, and we will depend on the procedures it has in place. If, in such
future annual reports on Form 20-F, our management cannot provide a report as to
the effectiveness of our internal control over financial reporting or our
independent registered public accounting firm is unable to provide us with an
unqualified attestation report as to the effectiveness of our internal control
over financial reporting as required by Section 404, investors could lose
confidence in the reliability of our financial statements, which could result in
a decrease in the value of our common shares.
We
will incur increased costs as a result of being a public company in the United
States.
When we
become a public company in the United States, we anticipate that we will incur
costs associated with corporate governance requirements, including requirements
under Sarbanes-Oxley as well as new rules implemented by the SEC and the
Financial Industry Regulatory Authority, Inc., including, in particular, the
need to establish an enhanced system of internal controls over financial
reporting. These rules and regulations may increase our legal, accounting and
financial compliance costs and may make certain corporate activities more
time-consuming and costly above the costs and time spent while we were listed on
the AIM. We also expect these new rules and regulations may make it more
difficult and more expensive for us to obtain director and officer liability
insurance and we may be required to accept reduced policy limits and coverage or
incur substantially higher costs to obtain the same or similar coverage. As a
result, it may be more difficult for us to attract and retain qualified
individuals to serve on our board of directors or as executive officers. We
cannot predict or estimate the amount of additional costs we may incur or the
timing of such costs or the impact such costs may have on our results of
operations, profitability, cash flows and ability to pay dividends.
Unless
we set aside reserves or are able to borrow funds for vessel replacement, at the
end of a vessel’s useful life our revenues will decline.
As of
December 31, 2009 and September 30, 2010, the vessels in our current fleet had a
weighted average age of 10.5 and 3.7 years, respectively. Unless we maintain
reserves or are able to borrow or raise funds for vessel replacement, we will be
unable to replace the vessels in our fleet upon the expiration of their
remaining useful lives, which we expect to be 25 years from
the date of their
construction. Our cash flows and income are dependent on the revenues earned by
the chartering of our vessels to customers. If we are unable to replace the
vessels in our fleet upon the expiration of their useful lives, our business,
results of operations, financial condition and ability to pay dividends will be
materially adversely affected. Any reserves set aside for vessel replacement may
not be available for dividends.
Investments
in derivative instruments such as forward freight agreements could result in
losses.
From time
to time, we may take positions in derivative instruments including forward
freight agreements, or FFAs. FFAs and other derivative instruments may be used
to hedge a vessel owner’s exposure to the charter market by providing for the
sale of a contracted charter rate along a specified route and period of time.
Upon settlement, if the contracted charter rate is less than the average of the
rates, as reported by an identified index, for the specified route and time
period, the seller of the FFA is required to pay the buyer an amount equal to
the difference between the contracted rate and the settlement rate, multiplied
by the number of days in the specified period. Conversely, if the contracted
rate is greater than the settlement rate, the buyer is required to pay the
seller the settlement sum. If we take positions in FFAs or other derivative
instruments and do not correctly anticipate charter rate movements over the
specified route and time period, we could suffer losses in the settling or
termination of the FFA. This could adversely affect our results of operations,
cash flow and ability to pay dividends.
We
depend upon a few significant customers for a large part of our
revenues.
We derive
a significant part of our revenue from a small number of customers. During the
year ended December 31, 2009, we derived substantially all of our revenues from
approximately 25
customers and a majority
of our revenues from two customers, neither of which is currently a customer
that time charters or bareboat charters our vessels. If one or more of our
customers that contribute to a significant part of our revenues is unable to
perform under a charter with us and we are not able to find a replacement
charter, or if such a customer exercises certain rights to terminate the
charter, we could suffer a loss of revenues that could materially adversely
affect our business, financial condition, results of operations and cash
available for distribution as dividends to our shareholders.
We could
lose a customer or the benefits of a time charter if, among other
things:
|
Ø
|
the
customer fails to make charter payments because of its financial
inability, disagreements with us or
otherwise;
|
|
Ø
|
the
customer terminates the charter because of our non-performance, including
failure fail to deliver the vessel within a fixed period of time, the
vessel is lost or damaged beyond repair, serious deficiencies in the
vessel, prolonged periods of off-hire or our default under the charter;
or
|
|
Ø
|
the
customer terminates the charter because the vessel has been subject to
seizure for more than 30 days.
|
If we
lose a key customer, we may be unable to obtain charters on comparable terms
with charterers of comparable standing or we may have increased exposure to the
volatile spot market, which is highly competitive and subject to significant
price fluctuations. 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. The loss of any of our customers, time
charters or vessels or a decline in payments under our charters could have a
material adverse effect on our business, results of operations and financial
condition and our ability to pay dividends.
We
cannot assure you that we will be able to borrow amounts under our existing
credit facility or future debt arrangements and restrictive covenants in our
credit facility and loan agreement may impose financial and other restrictions
on us.
Our
credit facility and loan agreement impose operating and financial restrictions
on us. These restrictions may limit our ability to, among other
things:
|
Ø
|
create
or permit liens on our assets;
|
|
Ø
|
engage
in mergers or consolidations;
|
|
Ø
|
change
the flag or classification society of our
vessels;
|
|
Ø
|
change
the management of our vessels.
|
These
restrictions could limit our ability to finance our future operations or capital
needs, make acquisitions or pursue available business opportunities. In
addition, our credit facility and loan agreement will require us to maintain
specified financial ratios and satisfy financial covenants, some of which are
based upon the market value of our fleet. If the market value of our fleet
declines sharply, we may not be in compliance with certain provisions of our
credit facility and loan agreement and we may not be able to refinance our debt
or obtain additional financing. We expect that the market value of our fleet
will be above the minimum market values required by our credit facility and loan
agreement. However, should our time charter rate or vessel values materially
decline in the future due to any of the reasons discussed in the risk factors
set forth above or otherwise, we may be required to take action to reduce our
debt or to act in a manner contrary to our business objectives to meet these
ratios and satisfy these provisions.
Events
beyond our control, including changes in the economic and business conditions in
the shipping sectors in which we operate, may affect our ability to comply with
these covenants. We cannot assure you that we will satisfy this requirement or
that our lenders will waive any failure to do so.
A breach
of any of the covenants in, or our inability to maintain the required financial
ratios under, our credit facility would prevent us from borrowing additional
money under this facility and could result in a default under our credit
facility. If a default occurs under our credit facility or loan agreement, the
respective lender could elect to declare the outstanding debt, together with
accrued interest and other fees, to be immediately due and payable and proceed
against the collateral securing that debt, which could constitute all or
substantially all of our assets.
Therefore,
our discretion is limited because we may need to obtain consent from our lenders
in order to engage in certain corporate actions. Our lenders’ interests may be
different from ours, and we cannot guarantee that we will be able to obtain our
lenders’ consent when needed. This may limit our ability to pay dividends to our
shareholders, finance our future operations or pursue business
opportunities.
We
cannot assure you that we will be able to refinance any indebtedness incurred
under our credit facility and loan agreement or obtain additional debt
financing.
We may
finance future fleet expansion with additional secured indebtedness. While we
may refinance amounts drawn under our credit facility and loan agreement or
secure new debt facilities with the net proceeds of future debt and equity
offerings, we cannot assure you that we will be able to do so at an interest
rate or on terms that are acceptable to us or at all. Our ability to obtain bank
financing or to access the capital markets for future offerings may be limited
by our financial condition at the time of any such financing or offering,
including the actual or perceived credit quality of our charterers and the
market value of our fleet, as well as by adverse market conditions resulting
from, among other things, general economic conditions, weakness in the financial
markets and contingencies and uncertainties that are beyond our control.
Significant contraction, de-leveraging and reduced liquidity in credit markets
worldwide is reducing the availability and increasing the cost of
credit.
If we are
not able to refinance our current credit facility and loan agreement or obtain
new debt financing on terms acceptable to us, we will have to dedicate a portion
of our cash flow from operations to pay the principal and interest of this
indebtedness. If we are not able to satisfy these obligations, we may have to
undertake alternative financing plans. In addition, debt service payments under
our credit facility and loan agreement or alternative financing may limit funds
otherwise available for working capital, capital expenditures, the payment of
dividends and other purposes. Our inability to obtain additional or replacement
financing at anticipated costs or at all may materially affect our results of
operation, our ability to implement our business strategy and our payment of
dividends.
The
superior voting rights of our Class B shares, when issued, may limit our common
shareholders’ ability to influence corporate matters.
Under our
articles of incorporation following our redomiciliation into the Marshall
Islands, our Class B shares will have 20 votes per share, and our common shares
will have one vote per share. We currently have no Class B shares outstanding,
although we intend to issue in December 2010 or in 2011 a special stock dividend
of Class B shares to the holders of our common shares in a ratio of one Class B
share for every number of common shares owned that we will determine in the
future in connection with such dividend. We plan to issue this special stock
dividend to protect the voting power of the current shareholders against future
dilutions in the case of additional equity issuances.
Even
after we issue or otherwise sell additional common shares after we issue Class B
shares, holders of our Class B shares, depending on the number, may have
substantial control and influence over our management and affairs and over all
matters requiring shareholder approval, including the election of directors and
significant corporate transactions, such as a merger or other sale of our
company or its assets. It is possible that, because of this dual class stock
structure, holders of our Class B shares will be able to control all matters
submitted to our shareholders for approval even though they may own
significantly less than 50% of the aggregate number of outstanding shares of our
common shares and Class B shares. This potential concentrated control could
limit our common shareholders’ ability to influence corporate matters and, as a
result, we may take actions that our common shareholders do not view as
beneficial. As a result, the market price of our common shares could be
adversely affected.
Provisions
of our articles of incorporation and bylaws may have anti-takeover
effects.
Several
provisions of our articles of incorporation following our redomiciliation into
the Marshall Islands, which are summarized below, may have anti-takeover
effects. These provisions are intended to avoid costly takeover battles, lessen
our vulnerability to a hostile change of control and enhance the ability of our
board of directors to maximize shareholder value in connection with any
unsolicited offer to acquire our company. However, these anti-takeover
provisions could also discourage, delay or prevent the merger or acquisition of
our company by means of a tender offer, a proxy contest or otherwise that a
shareholder may consider in its best interest and the removal of incumbent
officers and directors.
Dual Class Stock
. Our dual
class stock structure, which consists of common shares and Class B shares, can
provide holders of our Class B shares a significant degree of control over all
matters requiring shareholder approval, including the election of directors and
significant corporate transactions, such as a merger or other sale of our
company or its assets.
Blank Check Preferred Shares
.
Under the terms of our articles of incorporation, our board of directors will
have authority, without any further vote or action by our shareholders, to issue
up to 100 million shares of “blank check” preferred shares. Our board could
authorize the issuance of preferred shares with voting or conversion rights that
could dilute the voting power or rights of the holders of common shares. The
issuance of preferred shares, while providing flexibility in connection with
possible acquisitions and other corporate purposes, could, among other things,
have the effect of delaying, deferring or preventing a change in control of us
or the removal of our management and may harm the market price of our common
shares. We intend to issue one preferred share to Mr. Feidakis or his affiliate
that will provide the holder with the ability to appoint any one person to be a
director, who may also be the chairman of our board of directors, for so long as
such holder and his or its affiliates also hold in the aggregate at least 30% of
the voting power of our shares. Such preferred share will have no voting or
dividend rights.
Classified Board of
Directors
. Our articles of incorporation provide for the division of our
board of directors into three classes of directors, with each class as nearly
equal in number as possible, serving staggered, three-year terms beginning upon
the expiration of the initial term for each class. Approximately one-third of
our board of directors is elected each year. This classified board provision
could discourage a third party from making a tender offer for our shares or
attempting to obtain control of us. It could also delay shareholders who do not
agree with the policies of our board of directors from removing a majority of
our board of directors for up to two years.
Election of Directors
. Our
articles of incorporation do not provide for cumulative voting in the election
of directors. Our bylaws require parties, other than the chairman of the board
of directors, board of directors and shareholders holding 30% or more of the
voting power of the aggregate number of our shares issued and outstanding and
entitled to vote, to provide advance written notice of nominations for the
election of directors. These provisions may discourage, delay or prevent the
removal of incumbent officers and directors.
Advance Notice Requirements for
Shareholder Proposals and Director Nominations
. Our bylaws provide that
shareholders, other than shareholders holding 30% or more of the voting power of
the aggregate number of our shares issued and outstanding and entitled to vote,
seeking to nominate candidates for election as directors or to bring business
before an annual meeting of shareholders must provide timely notice of their
proposal in writing to the corporate secretary. Generally, to be timely, a
shareholder’s notice must be received at our principal executive offices not
less than 150 days or more than 180 days prior to the first anniversary date of
the immediately preceding annual meeting of shareholders. Our bylaws also
specify requirements as to the form and content of a shareholder’s notice. These
provisions may impede a shareholder’s ability to bring matters before an annual
meeting of shareholders or make nominations for directors at an annual meeting
of shareholders.
We
may issue additional securities in the future.
The
market price of our common shares could decline due to sales of a large number
of our securities in the market, including sales of shares by our large
shareholders, or the perception that these sales could occur. These sales could
also make it more difficult or impossible for us to sell equity securities in
the future at a time and price that we deem appropriate to raise funds through
future offerings of shares.
We
are subject to risk relating to exchange rate fluctuations as we generate
revenues from the trading of our vessels in U.S. dollars but incur a portion of
our expenses in other currencies.
We
generate substantially all of our revenues from the trading of our vessels in
U.S. dollars, but in 2009 we incurred approximately 13% of our vessel operating
expenses, and certain administrative expenses, in currencies other than the U.S.
dollar. This difference could lead to fluctuations in net profit due to changes
in the value of the U.S. dollar relative to the other currencies. Expenses
incurred in foreign currencies against which the U.S. dollar falls in value can
increase, decreasing our revenues. We have not hedged our currency exposure,
and, as a result, our results of operations and financial condition, denominated
in U.S. dollars, and our ability to pay dividends could suffer.
Increases
in interest rates may cause the market price of our shares to
decline.
An
increase in interest rates may cause a corresponding decline in demand for
equity investments in general. Any such increase in interest rates or reduction
in demand for our shares resulting from other relatively more attractive
investment opportunities may cause the trading price of our shares to
decline.
There
is no guarantee that an active and liquid public market will be maintained or
develop for you to resell our common shares in the United States, or that our
common share price, once listed, will not decrease.
Prior
to this offering, our common shares traded on the AIM.
Our
common shares will be suspended from trading on the AIM from the date we
redomicile into the Marshall Islands and seek effectiveness of the registration
statement to which this prospectus relates, until our shares are delisted from
the AIM. We expect that our shares will be delisted from the AIM as soon as
practicable after the effective date of such registration statement.
Although our common shares have been approved for listing on the Nasdaq Global
Market, subject to effectiveness of the registration statement to which this
prospectus relates, a liquid trading market for our common shares may not
develop in the United States. If an active, liquid trading market does not
develop, you may have difficulty selling any of our common shares purchased by
you. Moreover, our selling shareholders may determine to sell their common
shares as soon as such common shares are listed on the Nasdaq Global Market
causing the market price of our common shares to decline.
We
or our vessel-owning subsidiaries may have to pay tax on United States source
shipping income.
Under the
United States Internal Revenue Code of 1986, as amended, or the Code, 50% of the
gross shipping income of a vessel-owning or chartering company that is
attributable to transportation that begins or ends, but that does not both begin
and end, in the United States is characterized as United States source shipping
income and such income is subject to a 4% United States federal income tax
without allowance for deductions, unless that corporation qualifies for
exemption from tax under section 883 of the Code and the United States Treasury
regulations promulgated thereunder, which we refer to as the Section 883
Exemption. For the taxable year that includes the date of this prospectus, we
expect that each of our vessel-owning subsidiaries should qualify for the
Section 883 Exemption based on the beneficial ownership of more than 50% of the
value of its shares by a qualifying shareholder, assuming that such shareholder
meets all of the substantiation and reporting requirements under Section 883 of
the Code and the United States Treasury regulations thereunder for such taxable
year. However, the eligibility of our vessel-owning subsidiaries to qualify for
the Section 883 Exemption is determined each taxable year and is dependent on
certain circumstances related to the ownership of our shares and on
interpretations of existing United States Treasury regulations, each of which
could change. We can therefore give no assurance that our vessel-owning
subsidiaries will in fact be eligible to qualify for the Section 883 Exemption
for all future taxable years. In addition, changes to the Code, the United
States Treasury regulations or the interpretation thereof by the United States
Internal Revenue Service, or IRS, or the courts could adversely affect the
ability of our subsidiaries to take advantage of the Section 883
Exemption.
If our
subsidiaries are not entitled to the Section 883 Exemption for any taxable year,
our subsidiaries would be subject to a 4% United States federal income tax on
any U.S.-source shipping income for the year (or an effective rate of 2% on
shipping income attributable to the transportation of freight to or from the
United States). The imposition of this taxation could have a negative effect on
our business and the business of our subsidiaries and would result in decreased
earnings available for distribution to our shareholders.
For a
more complete discussion, please read the section entitled “Taxation—United
States Tax Considerations—United States Federal Income Taxation of the
Company.”
United States tax authorities could
treat us as a “passive foreign investment company.”
A foreign
corporation will be treated as a “passive foreign investment company,” or PFIC,
for U.S. federal income tax purposes if either at least 75% of its gross income
for any taxable year consists of certain types of “passive income” or at least
50% of the average value of the corporation’s assets produce or are held for the
production of those types of “passive income.” For purposes of these tests,
“passive income” includes dividends, interest and gains from the sale or
exchange of investment property and rents and royalties other than rents and
royalties that are received from unrelated parties in connection with the active
conduct of a trade or business. For purposes of these tests, income derived from
the performance of services does not constitute “passive income.”
U.S.
shareholders of a PFIC are subject to a disadvantageous U.S. federal income tax
regime with respect to the income derived by the PFIC, the distributions they
receive from the PFIC, and the gain, if any, they derive from the sale or other
disposition of their shares in the PFIC, unless those shareholders make an
election available under the Code (which election could itself have adverse
consequences for such shareholders). In particular, U.S. holders who are
individuals would not be eligible for the 15% tax rate on qualified dividends
that is in effect through December 31, 2010 (and possibly thereafter if Congress
enacts legislation to extend the qualified dividend tax rate). Please read
“Taxation—United States Tax Considerations—United States Federal Income Taxation
of United States Holders” for a more comprehensive discussion of the U.S.
federal income tax consequences to U.S. shareholders if we are treated as a
PFIC.
Based on
our current operations and anticipated future operations, we believe that Globus
Maritime Limited will not be treated as a PFIC. In this regard, we intend to
treat gross income we derive or are deemed to derive from our time chartering
activities as services income, rather than rental income. Accordingly, we
believe that our income from our time chartering activities should not
constitute “passive income,” and that the assets we own and operate in
connection with the production of that income do not constitute passive
assets.
There are
legal uncertainties involved in this determination, because there is no direct
legal authority under the PFIC rules addressing our current and projected future
operations. Moreover, a recent case by the U.S. Court of Appeals for the Fifth
Circuit held that, contrary to the position of the IRS in that case, and for
purposes of a different set of rules under the Code, income received under a
time charter of vessels should be treated as rental income rather than services
income. If the reasoning of this case were extended to the PFIC context, the
gross income we derive or are deemed to derive from our time chartering
activities would be treated as rental income, and we would probably be a PFIC.
Although the IRS has recently announced that it will not follow the reasoning of
this case, and that it intends to treat the income from standard industry time
charter as services income, no assurance can be given that a United States court
will not follow the aforementioned case. Moreover, no assurance can be given
that we would not constitute a PFIC for any future taxable year if there were to
be changes in our assets, income or operations.
If the
IRS were to find that we are or have been a PFIC for any taxable year, our U.S.
shareholders will face adverse U.S. tax consequences and information reporting
obligations, as more fully described under “Taxation—United States Tax
Considerations—United States Federal Income Taxation of United States
Holders.”
Following our redomiciliation into
the Marshall Islands, we are subject to Marshall Islands corporation law, which
is not well-developed.
Following
our redomiciliation into the Marshall Islands, our corporate affairs are
governed by our articles of incorporation, our bylaws and by the Marshall
Islands Business Corporations Act, or the BCA. The provisions of the BCA
resemble provisions of the corporation laws of a number of states in the United
States. However, there have been few judicial cases in the Marshall Islands
interpreting the BCA. The rights and fiduciary responsibilities of directors
under the laws of the Marshall Islands are not as clearly established as the
rights and fiduciary responsibilities of directors under statutes or judicial
precedent in existence in certain United States jurisdictions. The rights of
shareholders of companies incorporated in or redomiciled into the Marshall
Islands may differ from the rights of shareholders of companies incorporated in
the United States. While the BCA provides that it is to be interpreted according
to the laws of the State of Delaware and other states with substantially similar
legislative provisions, there have been few, if any, court cases interpreting
the BCA in the Marshall Islands and we cannot predict whether Marshall Islands
courts would reach the same conclusions as United States courts. Thus, you may
have more difficulty in protecting your interests in the face of actions by our
management, directors or controlling shareholders than would shareholders of a
corporation incorporated in a United States jurisdiction that has developed a
more substantial body of case law in the corporate law area.
It may be difficult to serve us with
legal process or enforce judgments against us, our directors or our
management.
Our
business is operated primarily from our offices in Greece. In addition, a
majority of our directors and officers are or will be non-residents of the
United States, and all of our assets and a substantial portion of the assets of
these non-residents are located outside the United States. As a result, it may
be difficult or impossible for you to bring an action against us or against
these individuals in the United States if you believe that your rights have been
infringed under securities laws or otherwise. You may also have difficulty
enforcing, both within and outside of the United States, judgments you may
obtain in the United States courts against us or these persons in any action,
including actions based upon the civil liability provisions of United States
federal or state securities laws. There is also substantial doubt that the
courts of the Marshall Islands or Greece would enter judgments in original
actions brought in those courts predicated on United States federal or state
securities laws.
The nature of our operations may make
the outcome of any bankruptcy proceedings difficult to
predict.
We
redomiciled
into
the
Marshall
Islands on November 24, 2010,
and our
subsidiaries are incorporated under the laws of the Marshall Islands, and we
have
limited operations in the United States and maintain limited assets in the
United States
.
Consequently, in the event of any bankruptcy, insolvency, liquidation,
dissolution, reorganization or similar proceeding involving us or any of our
subsidiaries, bankruptcy laws other than those of the United States
could
apply
.
Marshall Islands does not have a bankruptcy statute or general statutory
mechanism for insolvency proceedings. If we become a debtor under
U.S. bankruptcy law, bankruptcy courts in the United States may seek to
assert jurisdiction over all of our assets, wherever located, including property
situated in other countries. There can be no assurance, however, that we would
become a debtor in the United States, or that a U.S. bankruptcy court would
be entitled to, or accept, jurisdiction over such a bankruptcy case, or that
courts in other countries that have jurisdiction over us and our operations
would recognize a U.S. bankruptcy court
’
s
jurisdiction if any other bankruptcy court would determine it had
jurisdiction.
These
fact
ors
may
delay or prevent us from entering bankruptcy in the United States and may affect
the ability of our shareholders to receive any recovery following our
bankruptcy.
USE
OF PROCEEDS
We will
not receive any proceeds from the sale of securities offered by the selling
shareholders.
OUR
DIVIDEND POLICY AND RESTRICTIONS ON DIVIDENDS
After our
common shares commence trading on Nasdaq, our dividend policy will be to pay a
variable quarterly dividend in excess of 50% of the net income of the previous
quarter subject to any reserves our board of directors may from time to time
determine are required. We believe this policy maintains an appropriate level of
dividend cover taking into account the likely effects of the shipping cycle and
the need to retain cash to reinvest in vessel acquisitions. We expect to pay our
first quarterly cash dividend in December 2010.
In
calculating our dividend, we exclude any gain on the sale of vessels and any
unrealized gains or losses on derivatives. Our board of directors, in its
discretion, can determine in the future whether any capital surpluses arising
from vessel sales are included in the calculation of a dividend. Dividends will
be paid in U.S. dollars equally on a per-share basis between our common shares
and our Class B shares, to the extent any are issued and
outstanding.
We are a
holding company, with no material assets other than the shares of our
subsidiaries. Therefore, our ability to pay dividends depends on the earnings
and cash flow of those subsidiaries and their ability to pay dividends to us.
Additionally, the declaration and payment of any dividend is subject at all
times to the discretion of our board of directors and will depend on, among
other things, our earnings, financial condition and anticipated cash
requirements and availability, additional acquisitions of vessels, restrictions
in our debt arrangements, the provisions of Marshall Islands law affecting the
payment of distributions to shareholders, required capital and drydocking
expenditures, reserves established by our board of directors, increased or
unanticipated expenses, a change in our dividend policy, additional borrowings
or future issuances of securities and other factors, many of which will be
beyond our control.
Marshall
Islands law
generally prohibits
the payment of dividends other than from surplus (retained earnings and the
excess of consideration received from the sale of shares above the par value of
the shares) or while a company is insolvent or would be rendered insolvent by
the payment of such dividend.
As a
company listed on the AIM, we historically paid dividends to our shareholders in
amounts ranging from $0.03 per share to $0.50 per share. We did not declare or
pay dividends in 2009. In September 2010, we declared and paid a cash dividend
of approximately US$0.11 (GB 7.3 pence) per outstanding common
share.
CAPITALIZATION
The following table sets forth our
capitalization
and indebtedness
as of
October 31
, 2010.
There has been no
material change in our capitalization between October 31, 2010 and the date of
this prospectus, as adjusted to reflect our redomiciliation into the Marshall
Islands. The following should be read in conjunction with the historical
financial statements and related notes thereto in this prospectus as well as
“Management’s Discussion and Analysis of Financial Condition and Results of
Operations.”
|
|
As of October 31, 2010
|
|
|
|
(In thousands of U.S. Dollars)
|
|
|
|
|
|
Long
term borrowings net of current portion
|
|
$
|
90,650
|
|
Long
term borrowings, current portion
|
|
|
11,000
|
|
Total
borrowings
|
|
|
101,650
|
|
|
|
|
|
|
Equity:
|
|
|
|
|
Issued
share capital
|
|
|
29
|
|
Share
premium
|
|
|
88,534
|
|
Retained
earnings
|
|
|
28,461
|
|
Total
Equity
|
|
|
117,024
|
|
Total
capitalization and indebtedness
|
|
$
|
218,674
|
|
DILUTION
Our net
tangible book value as of June 30, 2010 was $114,696 or $15.84 per common share
(as adjusted after the reverse split of our common shares). Net tangible book
value per share is determined by dividing our tangible book value (total
tangible assets less total liabilities) by the number of outstanding common
shares (as adjusted after the reverse split of our common shares) on June 30,
2010.
The
offering by our selling shareholders under this prospectus will not impact our
net tangible book value or our net tangible book value per share and thus there
is no dilution pursuant to this offering.
MARKET
FOR OUR COMMON SHARES
Our
common shares began trading in the United Kingdom on the London Stock Exchange
through the AIM on June 6, 2007. The current stock symbol on the AIM is “GLBS.”
Historical reports of transactions of our shares are available on the AIM
through the London Stock Exchange under the symbol “GLBS.”
Our
common shares will be suspended from trading on the AIM from the date we
redomicile into the Marshall Islands and seek effectiveness of the registration
statement to which this prospectus relates, until our shares are delisted from
the AIM. We expect that our shares will be delisted from the AIM as soon as
practicable after the effective date of such registration
statement.
The
following table lists the high and low sales prices and the average daily
trading volume on the AIM for our common shares for the last six months; the
last ten fiscal quarters; and the last three fiscal years (since we began
trading on the AIM). On July 29, 2010, we effected a four-for-one reverse split
of our common shares. Prices indicated below with respect to our common share
price include inter-dealer prices, without retail mark up, mark down or
commission and may not necessarily represent actual transactions. All prices are
quoted in U.K. pounds sterling.
Period Ended
|
|
High
|
|
|
Low
|
|
|
Average Daily
Trading
Volume
|
|
|
|
|
|
|
|
|
|
|
|
Monthly
|
|
|
|
|
|
|
|
|
|
October
31, 2010
|
|
|
6.35
|
|
|
|
6.27
|
|
|
|
556
|
|
September
30, 2010
|
|
|
6.45
|
|
|
|
5.55
|
|
|
|
3,502
|
|
August
31, 2010
|
|
|
5.70
|
|
|
|
5.55
|
|
|
|
3,508
|
|
July
31, 2010
|
|
|
6.14
|
|
|
|
5.40
|
|
|
|
3,023
|
|
June
30, 2010
|
|
|
5.60
|
|
|
|
5.46
|
|
|
|
18,932
|
|
May
31, 2010
|
|
|
5.60
|
|
|
|
5.46
|
|
|
|
41,971
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Quarterly
|
|
|
|
|
|
|
|
|
|
|
|
|
September
30, 2010
|
|
|
6.45
|
|
|
|
5.40
|
|
|
|
3,190
|
|
June
30, 2010
|
|
|
5.60
|
|
|
|
4.90
|
|
|
|
28,512
|
|
March
31, 2010
|
|
|
5.00
|
|
|
|
3.78
|
|
|
|
13,143
|
|
December
31, 2009
|
|
|
3.88
|
|
|
|
2.36
|
|
|
|
8,957
|
|
September
30, 2009
|
|
|
3.08
|
|
|
|
2.46
|
|
|
|
2,610
|
|
June
30, 2009
|
|
|
4.36
|
|
|
|
2.00
|
|
|
|
4,394
|
|
March
31, 2009
|
|
|
3.28
|
|
|
|
1.76
|
|
|
|
1,748
|
|
December
31, 2008
|
|
|
12.10
|
|
|
|
2.60
|
|
|
|
1,939
|
|
September
30, 2008
|
|
|
18.40
|
|
|
|
11.90
|
|
|
|
3,173
|
|
June
30, 2008
|
|
|
22.20
|
|
|
|
17.10
|
|
|
|
3,544
|
|
March
31, 2008
|
|
|
21.50
|
|
|
|
14.20
|
|
|
|
11,
367
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Yearly
|
|
|
|
|
|
|
|
|
|
|
|
|
December
31, 2009
|
|
|
4.36
|
|
|
|
1.76
|
|
|
|
4,431
|
|
December
31, 2008
|
|
|
22.20
|
|
|
|
2.60
|
|
|
|
4,954
|
|
December
31, 2007
|
|
|
25.00
|
|
|
|
12.00
|
|
|
|
14,391
|
|
SELECTED
CONSOLIDATED FINANCIAL & OPERATING DATA
The
following tables set forth our selected consolidated financial and operating
data. The selected consolidated financial data as of and for the years ended
December 31, 2009, 2008 and 2007 are derived from our audited consolidated
financial statements, included elsewhere in this prospectus, which have been
prepared in accordance with IFRS as issued by the IASB. The selected
consolidated financial data as of June 30, 2010 and for the six months ended
June 30, 2009 and 2010 are derived from our unaudited consolidated interim
financial statements. The data set forth below should be read in conjunction
with the “Management’s Discussion and Analysis of Financial Condition and
Results of Operations” and our audited consolidated financial statements,
related notes and other financial information included elsewhere in this
prospectus. Results of operations in any period are not necessarily indicative
of results in any future period.
|
|
Six Months Ended June 30,
(unaudited)
|
|
|
Year Ended December 31,
|
|
|
|
(Expressed
in Thousands of U.S. Dollars, except per share data)
|
|
|
|
2010
|
|
|
2009
|
|
|
2009
|
|
|
2008
|
|
2007
|
|
Statements
of comprehensive income data
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Time
charter revenue
|
|
|
11,618
|
|
|
|
26,540
|
|
|
|
52,812
|
|
|
|
98,597
|
|
|
|
40,960
|
|
Voyage
expenses
|
|
|
(845
|
)
|
|
|
(2,070
|
)
|
|
|
(3,742
|
)
|
|
|
(6,674
|
)
|
|
|
(2,245
|
)
|
Vessel
operating expenses
|
|
|
(2,638
|
)
|
|
|
(5,678
|
)
|
|
|
(10,137
|
)
|
|
|
(12,537
|
)
|
|
|
(7,639
|
)
|
Depreciation
|
|
|
(2,816
|
)
|
|
|
(6,989
|
)
|
|
|
(11,204
|
)
|
|
|
(17,407
|
)
|
|
|
(10,212
|
)
|
Depreciation
of drydocking costs
|
|
|
(260
|
)
|
|
|
(836
|
)
|
|
|
(1,512
|
)
|
|
|
(1,572
|
)
|
|
|
(1,033
|
)
|
Administrative
expenses
|
|
|
(1,005
|
)
|
|
|
(907
|
)
|
|
|
(2,004
|
)
|
|
|
(2,122
|
)
|
|
|
(1,292
|
)
|
Administrative
expenses payable to related parties
|
|
|
(518
|
)
|
|
|
(541
|
)
|
|
|
(1,272
|
)
|
|
|
(1,216
|
)
|
|
|
(1,377
|
)
|
Share-based
payments
|
|
|
(148
|
)
|
|
|
(1,542
|
)
|
|
|
(1,754
|
)
|
|
|
(770
|
)
|
|
|
(380
|
)
|
Impairment
loss
|
|
|
-
|
|
|
|
(18,826
|
)
|
|
|
(28,429
|
)
|
|
|
(20,224
|
)
|
|
|
-
|
|
Gain/(loss)
on sale of vessel
|
|
|
7
|
|
|
|
-
|
|
|
|
(802
|
)
|
|
|
15,095
|
|
|
|
-
|
|
Other
(expenses)/income, net
|
|
|
(31
|
)
|
|
|
(20
|
)
|
|
|
(106
|
)
|
|
|
408
|
|
|
|
(36
|
)
|
Operating
profit/(loss) before financial activities
|
|
|
3,364
|
|
|
|
(10,869
|
)
|
|
|
(8,150
|
)
|
|
|
51,578
|
|
|
|
16,746
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest
income from bank balances & deposits
|
|
|
223
|
|
|
|
488
|
|
|
|
1,032
|
|
|
|
946
|
|
|
|
577
|
|
Interest
expense and finance costs
|
|
|
(977
|
)
|
|
|
(1,591
|
)
|
|
|
(2,926
|
)
|
|
|
(7,707
|
)
|
|
|
(5,596
|
)
|
(Loss)
/gain on derivative financial instruments
|
|
|
(564
|
)
|
|
|
309
|
|
|
|
143
|
|
|
|
(1,373
|
)
|
|
|
-
|
|
Foreign
exchange (losses)/gains, net
|
|
|
(956
|
)
|
|
|
34
|
|
|
|
(178
|
)
|
|
|
(626
|
)
|
|
|
298
|
|
Total
loss from financial activities
|
|
|
(2,274
|
)
|
|
|
(760
|
)
|
|
|
(1,929
|
)
|
|
|
(8,760
|
)
|
|
|
(4,721
|
)
|
Total
comprehensive income/(loss) for the period/year
|
|
|
1,090
|
|
|
|
(11,629
|
)
|
|
|
(10,079
|
)
|
|
|
42,818
|
|
|
|
12,025
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Attributable
to:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Shareholders
of Globus Maritime Limited
|
|
|
1,090
|
|
|
|
(11,629
|
)
|
|
|
(10,079
|
)
|
|
|
42,818
|
|
|
|
11,210
|
|
Non-controlling
interest
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
815
|
|
|
|
|
1,090
|
|
|
|
(11,629
|
)
|
|
|
(10,079
|
)
|
|
|
42,818
|
|
|
|
12,025
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic
earnings/(loss) per share for the period/year
|
|
|
0.151
|
|
|
|
(1.619
|
)
|
|
|
(1.401
|
)
|
|
|
5.978
|
|
|
|
1.885
|
|
Diluted
earnings/(loss) per share for the period/year
|
|
|
0.151
|
|
|
|
(1.619
|
)
|
|
|
(1.401
|
)
|
|
|
5.771
|
|
|
|
1.885
|
|
Adjusted
EBITDA(1) (unaudited)
|
|
|
6,433
|
|
|
|
15,782
|
|
|
|
33,797
|
|
|
|
75,686
|
|
|
|
27,991
|
|
(1)
Adjusted EBITDA represents net earnings before interest and finance costs net,
gains or losses from the change in fair value of derivative financial
instruments, foreign exchange gains or losses, income taxes, depreciation,
depreciation of drydocking costs, impairment and gains or losses from sale of
vessels. Adjusted EBITDA does not represent and should not be considered as an
alternative to total comprehensive income/(loss) or cash generated from
operations, as determined by IFRS, and our calculation of Adjusted EBITDA may
not be comparable to that reported by other companies. Adjusted EBITDA is not a
recognized measurement under IFRS.
Adjusted
EBITDA is included herein because it is a basis upon which we assess our
financial performance and because we believe that it presents useful information
to investors regarding a company’s ability to service and/or incur indebtedness
and it is frequently used by securities analysts, investors and other interested
parties in the evaluation of companies in our industry.
Adjusted
EBITDA has limitations as an analytical tool, and you should not consider it in
isolation, or as a substitute for analysis of our results as reported under
IFRS. Some of these limitations are:
|
Ø
|
Adjusted EBITDA does not
reflect our cash expenditures or future requirements for capital
expenditures or contractual
commitments;
|
|
Ø
|
Adjusted EBITDA does not
reflect the interest expense or the cash requirements necessary to service
interest or principal payments on our
debt;
|
|
Ø
|
Adjusted EBITDA does not
reflect changes in or cash requirements for our working capital needs;
and
|
|
Ø
|
other companies in our
industry may calculate Adjusted EBITDA differently than we do, limiting
its usefulness as a comparative
measure.
|
Because
of these limitations, Adjusted EBITDA should not be considered a measure of
discretionary cash available to us to invest in the growth of our
business.
The
following table sets forth a reconciliation of total comprehensive income/
(loss) to Adjusted EBITDA (unaudited) for the periods
presented:
|
|
Six Months Ended June 30, (unaudited)
|
|
|
Year Ended December 31,
|
|
|
|
(Expressed
in Thousands of U.S. Dollars, except per share data)
|
|
|
|
2010
|
|
|
2009
|
|
|
2009
|
|
|
2008
|
|
|
2007
|
|
Total
comprehensive income/(loss) for the period/year
|
|
|
1,090
|
|
|
|
(11,629
|
)
|
|
|
(10,079
|
)
|
|
|
42,818
|
|
|
|
12,025
|
|
Interest
and finance costs, net
|
|
|
754
|
|
|
|
1,103
|
|
|
|
1,894
|
|
|
|
6,761
|
|
|
|
5,019
|
|
Loss/(gain)
on derivative financial instruments
|
|
|
564
|
|
|
|
(309
|
)
|
|
|
(143
|
)
|
|
|
1,373
|
|
|
|
-
|
|
Foreign
exchange losses/(gains)
|
|
|
956
|
|
|
|
(34
|
)
|
|
|
178
|
|
|
|
626
|
|
|
|
(298
|
)
|
Depreciation
|
|
|
2,816
|
|
|
|
6,989
|
|
|
|
11,204
|
|
|
|
17,407
|
|
|
|
10,212
|
|
Depreciation
of drydocking costs
|
|
|
260
|
|
|
|
836
|
|
|
|
1,512
|
|
|
|
1,572
|
|
|
|
1,033
|
|
Loss/(gain)
on sale of vessel
|
|
|
(7
|
)
|
|
|
-
|
|
|
|
802
|
|
|
|
(15,095
|
)
|
|
|
-
|
|
Impairment
loss
|
|
|
-
|
|
|
|
18,826
|
|
|
|
28,429
|
|
|
|
20,224
|
|
|
|
-
|
|
Adjusted
EBITDA (unaudited)
|
|
|
6,433
|
|
|
|
15,782
|
|
|
|
33,797
|
|
|
|
75,686
|
|
|
|
27,991
|
|
|
|
Six Months Ended
June 30, (unaudited)
|
|
|
Year Ended December 31,
|
|
|
|
(Expressed
in Thousands of U.S. Dollars)
|
|
|
|
2010
|
|
|
2009
|
|
|
2008
|
|
|
2007
|
|
Statements
of financial position data
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
non-current assets
|
|
|
196,216
|
|
|
|
93,204
|
|
|
|
216,075
|
|
|
|
273,781
|
|
Total
current assets (including “Non-current assets classified as held for
sale”)
|
|
|
24,372
|
|
|
|
94,366
|
|
|
|
68,371
|
|
|
|
11,719
|
|
Total
assets
|
|
|
220,588
|
|
|
|
187,570
|
|
|
|
284,446
|
|
|
|
285,500
|
|
Total
equity
|
|
|
114,696
|
|
|
|
113,458
|
|
|
|
121,783
|
|
|
|
96,677
|
|
Total
non-current liabilities
|
|
|
90,828
|
|
|
|
36,218
|
|
|
|
79,735
|
|
|
|
157,069
|
|
Total
current liabilities
|
|
|
15,064
|
|
|
|
37,894
|
|
|
|
82,928
|
|
|
|
31,754
|
|
Total
equity and liabilities
|
|
|
220,588
|
|
|
|
187,570
|
|
|
|
284,446
|
|
|
|
285,500
|
|
|
|
Six Months Ended June 30,
(unaudited)
|
|
|
Year Ended December 31,
|
|
|
|
(Expressed
in Thousands of U.S. Dollars)
|
|
|
|
2010
|
|
|
2009
|
|
|
2009
|
|
|
2008
|
|
|
2007
|
|
Statements
of cash flows data
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net
cash generated from operating activities
|
|
|
5,870
|
|
|
|
16,926
|
|
|
|
33,566
|
|
|
|
70,383
|
|
|
|
30,248
|
|
Net
cash (used in)/generated from investing activities
|
|
|
(72,723
|
)
|
|
|
10,769
|
|
|
|
60,253
|
|
|
|
27,077
|
|
|
|
(183,044
|
)
|
Net
cash generated from/(used in) financing activities
|
|
|
35,531
|
|
|
|
(26,693
|
)
|
|
|
(74,496
|
)
|
|
|
(72,857
|
)
|
|
|
159,770
|
|
|
|
Six Months Ended June 30,
|
|
|
Year Ended December 31,
|
|
|
|
2010
|
|
|
2009
|
|
|
2009
|
|
|
2008
|
|
|
2007
|
|
Ownership
days(1)
|
|
|
538
|
|
|
|
1,267
|
|
|
|
2,314
|
|
|
|
2,878
|
|
|
|
2,017
|
|
Available
days(2)
|
|
|
538
|
|
|
|
1,256
|
|
|
|
2,277
|
|
|
|
2,808
|
|
|
|
1,965
|
|
Operating
days(3)
|
|
|
529
|
|
|
|
1,239
|
|
|
|
2,246
|
|
|
|
2,781
|
|
|
|
1,837
|
|
Fleet
utilization(4)
|
|
|
98.3
|
%
|
|
|
98.7
|
%
|
|
|
98.6
|
%
|
|
|
99.0
|
%
|
|
|
93.5
|
%
|
Average
number of vessels(5)
|
|
|
3.0
|
|
|
|
7.0
|
|
|
|
6.3
|
|
|
|
7.9
|
|
|
|
5.5
|
|
Daily
time charter equivalent (TCE) rate(6)
|
|
$
|
20,060
|
|
|
$
|
19,482
|
|
|
$
|
21,550
|
|
|
$
|
32,736
|
|
|
$
|
19,702
|
|
(1)
Ownership days are the aggregate number of days in a period during which each
vessel in our fleet has been owned by us.
(2)
Available days are the number of our ownership days less the aggregate number of
days that our vessels are off-hire due to scheduled repairs or repairs under
guarantee, vessel upgrades or special surveys and the aggregate amount of time
that we spend positioning our vessels for employment.
(3)
Operating days are the number of available days in a period less the aggregate
number of days that the vessels are off-hire due to any reason, including
unforeseen circumstances.
(4)
We calculate fleet utilization by dividing the number of our operating days
during a period by the number of our available days during the
period.
(5)
Average number of vessels is measured by the sum of the number of days each
vessel was part of our fleet during a relevant period divided by the number of
calendar days in such period.
(6)
TCE rates are our voyage and time charter revenues less voyage expenses during a
period divided by the number of our available days during the period excluding
bareboat charter days and net revenue, which is consistent with industry
standards. TCE is a non-GAAP measure. Please read “Management’s Discussion and
Analysis of Financial Condition and Results of Operations.”
The
following table reflects the calculation of our daily TCE rates for the years
ended December 31, 2009, 2008 and 2007 and the six months ended June 30, 2010
and 2009.
|
|
Six Months Ended June 30,
(unaudited)
|
|
|
Year Ended December 31,
|
|
|
|
(Expressed
in Thousands of U.S. Dollars, except number of days and daily TCE
rates)
|
|
|
|
2010
|
|
|
2009
|
|
|
2009
|
|
|
2008
|
|
|
2007
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Time
charter revenue
|
|
$
|
11,618
|
|
|
$
|
26,540
|
|
|
$
|
52,812
|
|
|
$
|
98,597
|
|
|
$
|
40,960
|
|
Less:
Voyage expenses
|
|
$
|
845
|
|
|
$
|
2,070
|
|
|
$
|
3,742
|
|
|
$
|
6,674
|
|
|
$
|
2,245
|
|
Less:
bareboat charter net revenue
|
|
$
|
21
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
Net
revenue
|
|
$
|
10,752
|
|
|
$
|
24,470
|
|
|
$
|
49,070
|
|
|
$
|
91,923
|
|
|
$
|
38,715
|
|
Available
days net of bareboat charter days
|
|
|
536
|
|
|
|
1,256
|
|
|
|
2,277
|
|
|
|
2,808
|
|
|
|
1,965
|
|
Daily
TCE rate
|
|
$
|
20,060
|
|
|
$
|
19,482
|
|
|
$
|
21,550
|
|
|
$
|
32,736
|
|
|
$
|
19,702
|
|
MANAGEMENT’S
DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS
OF OPERATIONS
The
following discussion should be read in conjunction with our consolidated
financial statements and the accompanying notes thereto included elsewhere in
this prospectus. We believe that the following discussion contains
forward-looking statements that involve risks and uncertainties. Actual results
or plan of operations could differ materially from those anticipated by
forward-looking information due to factors discussed under “Risk Factors” and
elsewhere in this prospectus.
OVERVIEW
We are
an integrated dry bulk shipping company, which began operations in September
2006, providing marine transportation services on a worldwide basis. We own,
operate and manage a fleet of dry bulk vessels that transport iron ore, coal,
grain, steel products, cement, alumina and other dry bulk cargoes
internationally. Following the conclusion of our initial public offering on June
1, 2007, our common shares were listed on the AIM under the ticker “GLBS.”
Our
common shares will be suspended from trading on the AIM from the date we
redomicile into the Marshall Islands and seek effectiveness of the registration
statement to which this prospectus relates, until our shares are delisted from
the AIM. We expect that our shares will be delisted from the AIM as soon as
practicable after the effective date of such registration statement.
As
of November 19, 2010, our issued and outstanding capital stock consisted of
7,241,865 common shares. Our fleet consists of three Supramax vessels, one
Panamax vessel and one Kamsarmax vessel.
We intend
to grow our fleet through timely and selective acquisitions of modern vessels in
a manner that we believe will provide an attractive return on equity and will be
accretive to our earnings and cash flow based on anticipated market rates at the
time of purchase. There is no guarantee however, that we will be able to find
suitable vessels to purchase or that such vessels will provide an attractive
return on equity or be accretive to our earnings and cash flow.
Our
policy is to charter our vessels on charters generally with durations of up to
three years, while also engaging vessels on the spot market. We may, from time
to time, enter into charters with longer durations depending on our assessment
of market conditions.
The
composition of our fleet has changed significantly since December 2009. As of
December 31, 2009, our fleet consisted of four dry bulk vessels (two Handymaxes,
one Supramax and one Panamax) with an aggregate carrying capacity of 212,915
dwt. As of March 31, 2010 our fleet consisted of two dry bulk vessels (one
Supramax and one Panamax) with an aggregate carrying capacity of 126,555 dwt. As
of June 30, 2010 and September 30, 2010, our fleet consisted of five dry bulk
vessels (three Supramaxes, one Panamax and one Kamsarmax) with an aggregate
carrying capacity of 319,913 dwt.
We seek
to manage our fleet in a manner that allows us to maintain profitability across
the shipping cycle and thus maximize returns for our shareholders. To accomplish
this objective we have deployed our vessels primarily on a mix of time charters
(with terms of between six months and two years) and spot charters. According to
our assessment of market conditions, we have adjusted the mix of these charters
to take advantage of the relatively stable cash flow and high utilization rates
associated with time charters or to profit from attractive spot charter rates
during periods of strong charter market conditions. As of June 30, 2010, our
fleet was comprised of three vessels employed on a time charter, one vessel
employed on a spot charter, and one vessel employed on a bareboat charter. The
time charter on one such vessel in our fleet has since expired and the vessel
operates on the spot market.
The
average number of vessels in our fleet for the years ended December 31,
2007, 2008, and 2009 was 5.5, 7.9 and 6.3 respectively. The average number of
vessels in our fleet for the six months ended June 30, 2010 and for the nine
months ended September 30, 2010 was 3.0 and 3.7
vessels,
respectively.
Our
operations are managed by our Athens, Greece-based wholly owned subsidiary,
Globus Shipmanagement Corp., which provides in-house commercial and technical
management exclusively for our vessels. Globus Shipmanagement enters into a ship
management agreement with each of our wholly owned vessel-owning subsidiaries to
provide such services.
FACTORS
AFFECTING OUR RESULTS OF OPERATIONS
We
believe that the important measures for analyzing trends in our results of
operations consist of the following:
|
Ø
|
Ownership days
. We
define ownership days as the aggregate number of days in a period during
which each vessel in our fleet has been owned by us. Ownership days are an
indicator of the size of our fleet over a period and affect both the
amount of revenues and the amount of expenses that we record during a
period.
|
|
Ø
|
Available days
. We
define available days as the number of our ownership days less the
aggregate number of days that our vessels are off-hire due to scheduled
repairs or repairs under guarantee, vessel upgrades or special surveys and
the aggregate amount of time that we spend positioning our vessels for
employment. The shipping industry uses available days to measure the
number of days in a period during which vessels should be capable of
generating revenues.
|
|
Ø
|
Operating days
.
Operating days are the number of available days in a period less the
aggregate number of days that the vessels are off-hire due to any reason,
including unforeseen circumstances. The shipping industry uses operating
days to measure the aggregate number of days in a period during which
vessels generate revenues.
|
|
Ø
|
Fleet utilization
. We
calculate fleet utilization by dividing the number of our operating days
during a period by the number of our available days during the period. The
shipping industry uses fleet utilization to measure a company’s efficiency
in finding suitable employment for its vessels and minimizing the amount
of days that its vessels are off-hire for reasons other than scheduled
repairs or repairs under guarantee, vessel upgrades, special surveys or
vessel positioning.
|
|
Ø
|
Average number of
vessels
. We measure average number of vessels by the sum of the
number of days each vessel was part of our fleet during a relevant period
divided by the number of calendar days in such
period.
|
|
Ø
|
TCE rates
. We define
TCE rates as our voyage and time charter revenues less voyage expenses
during a period divided by the number of our available days during the
period
excluding bareboat
charter days and net revenues, which is consistent with industry
standards. TCE is a non-GAAP measure. TCE rate is a standard shipping
industry performance measure used primarily to compare daily earnings
generated by vessels on time charters with daily earnings generated by
vessels on voyage charters, because charter hire rates for vessels on
voyage charters are generally not expressed in per day amounts while
charter hire rates for vessels on time charters generally are expressed in
such amounts.
|
The
following table reflects our ownership days, available days, operating days,
average number of vessels and fleet utilization for the periods
indicated.
|
|
Six Months Ended June 30,
|
|
|
Year Ended December 31,
|
|
|
|
2010
|
|
|
2009
|
|
|
2009
|
|
|
2008
|
|
|
2007
|
|
Ownership
days
|
|
|
538
|
|
|
|
1,267
|
|
|
|
2,314
|
|
|
|
2,878
|
|
|
|
2,017
|
|
Available
days
|
|
|
538
|
|
|
|
1,256
|
|
|
|
2,277
|
|
|
|
2,808
|
|
|
|
1,965
|
|
Operating
days
|
|
|
529
|
|
|
|
1,239
|
|
|
|
2,246
|
|
|
|
2,781
|
|
|
|
1,837
|
|
Fleet
utilization
|
|
|
98.3
|
%
|
|
|
98.7
|
%
|
|
|
98.6
|
%
|
|
|
99.0
|
%
|
|
|
93.5
|
%
|
Average
number of vessels
|
|
|
3.0
|
|
|
|
7
.0
|
|
|
|
6.3
|
|
|
|
7.9
|
|
|
|
5.5
|
|
Daily
time charter equivalent (TCE) rate
|
|
$
|
20,060
|
|
|
$
|
19,482
|
|
|
$
|
21,550
|
|
|
$
|
32,736
|
|
|
$
|
19,702
|
|
We
utilize TCE because we believe it is a meaningful measure to compare
period-to-period changes in our performance despite changes in the mix of
charter types (i.e., spot charters, time charters and bareboat charters) under
which our vessels may be employed between the periods. Our management also
utilizes TCE to assist them in making decisions regarding employment of our
vessels. We believe that our method of calculating TCE is consistent with
industry standards and is determined by dividing net revenues after deducting
voyage expenses, including commissions, by available days for the relevant
period
excluding
bareboat charter days and net revenues. Voyage expenses primarily consist of
brokerage commissions, port, canal and fuel costs that are unique to a
particular voyage, which would otherwise be paid by the charter under a time
charter contract.
The
following table reflects the calculation of our daily TCE rates for the periods
indicated.
|
|
Six Months Ended June 30,
(unaudited)
|
|
|
Year Ended December 31,
|
|
|
|
(Expressed
in Thousands of U.S. Dollars, except number of days and daily TCE
rates)
|
|
|
|
2010
|
|
|
2009
|
|
|
2009
|
|
|
2008
|
|
|
2007
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Time
charter revenue
|
|
$
|
11,618
|
|
|
$
|
26,540
|
|
|
$
|
52,812
|
|
|
$
|
98,597
|
|
|
$
|
40,960
|
|
Less:
Voyage expenses
|
|
$
|
845
|
|
|
$
|
2,070
|
|
|
$
|
3,742
|
|
|
$
|
6,674
|
|
|
$
|
2,245
|
|
Less:
bareboat charter net revenue
|
|
$
|
21
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
Net
revenue
|
|
$
|
10,752
|
|
|
$
|
24,470
|
|
|
$
|
49,070
|
|
|
$
|
91,923
|
|
|
$
|
38,715
|
|
Available
days net of bareboat charter days
|
|
|
536
|
|
|
|
1,256
|
|
|
|
2,277
|
|
|
|
2,808
|
|
|
|
1,965
|
|
Daily
TCE rate
|
|
$
|
20,060
|
|
|
$
|
19,482
|
|
|
$
|
21,550
|
|
|
$
|
32,736
|
|
|
$
|
19,702
|
|
LACK
OF HISTORICAL OPERATING DATA FOR VESSELS BEFORE THEIR ACQUISITION
Consistent
with shipping industry practice, we were not and have not been able obtain the
historical operating data for the secondhand vessels we purchase, in part
because that information is not material to our decision to acquire such
vessels, nor do we believe such information would be helpful to potential
investors in our common shares in assessing our business or profitability. We
purchased our vessels under a standardized agreement commonly used in shipping
practice, which, among other things, provides us with the right to inspect the
vessel and the vessel’s classification society records. The standard agreement
does not provide us the right to inspect, or receive copies of, the historical
operating data of the vessel. Accordingly, such information was not available to
us. Prior to the delivery of a purchased vessel, the seller typically removes
from the vessel all records, including past financial records and accounts
related to the vessel. Typically, the technical management agreement between a
seller’s technical manager and the seller is automatically terminated and the
vessel’s trading certificates are revoked by its flag state following a change
in ownership.
In
addition, and consistent with shipping industry practice, we treat the
acquisition of vessels from unaffiliated third parties as the acquisition of an
asset rather than a business. We believe that, under the applicable provisions
of Rule 11-01(d) of Regulation S-X under the Securities Act, the acquisition of
our vessels does not constitute the acquisition of a “business” for which
historical or pro forma financial information would be provided pursuant to
Rules 3-05 and 11-01 of Regulation S-X.
Although
vessels are generally acquired free of charter, we may in the future acquire
some vessels with time charters. Where a vessel has been under a voyage charter,
the vessel is usually delivered to the buyer free of charter. It is rare in the
shipping industry for the last charterer of the vessel in the hands of the
seller to continue as the first charterer of the vessel in the hands of the
buyer. In most cases, when a vessel is under time charter and the buyer wishes
to assume that charter, the vessel cannot be acquired without the charterer’s
consent and the buyer entering into a separate direct agreement, called a
novation agreement, with the charterer to assume the charter. The purchase of a
vessel itself does not transfer the charter because it is a separate service
agreement between the vessel owner and the charterer.
Where we
identify any intangible assets or liabilities associated with the acquisition of
a vessel, we record all identified assets or liabilities at fair value. Fair
value is determined by reference to market data. We value any asset or liability
arising from the market value of the time charters assumed when a vessel is
acquired. The amount to be recorded as an asset or liability at the date of
vessel delivery is based on the difference between the current fair market value
of the charter and the net present value of future contractual cash flows. When
the present value of the time charter assumed is greater than the current fair
market value of such charter, the difference is recorded as prepaid charter
revenue. When the opposite situation occurs, any difference, capped to the
vessel’s fair value on a charter free basis, is recorded as deferred revenue.
Such assets and liabilities, respectively, are amortized as a reduction of, or
an increase in, revenue over the period of the time charter
assumed.
If we
purchase a vessel and assume or renegotiate a related time charter, we must take
the following steps before the vessel will be ready to commence
operations:
|
Ø
|
obtain
the charterer’s consent to us as the new
owner;
|
|
Ø
|
obtain
the charterer’s consent to a new technical
manager;
|
|
Ø
|
in
some cases, obtain the charterer’s consent to a new flag for the
vessel;
|
|
Ø
|
arrange
for a new crew for the vessel, and where the vessel is on charter, in some
cases, the crew must be approved by the
charterer;
|
|
Ø
|
replace
all hired equipment on board, such as gas cylinders and communication
equipment;
|
|
Ø
|
negotiate
and enter into new insurance contracts for the vessel through our own
insurance brokers;
|
|
Ø
|
register
the vessel under a flag state and perform the related inspections in order
to obtain new trading certificates from the flag
state;
|
|
Ø
|
implement
a new planned maintenance program for the vessel;
and
|
|
Ø
|
ensure
that the new technical manager obtains new certificates for compliance
with the safety and vessel security regulations of the flag
state.
|
The
following discussion is intended to help you understand how acquisitions of
vessels affect our business and results of operations.
Our
business is comprised of the following main elements:
|
Ø
|
employment
and operation of our dry bulk vessels;
and
|
|
Ø
|
management
of the financial, general and administrative elements involved in the
conduct of our business and ownership of our dry bulk
vessels.
|
The
employment and operation of our vessels require the following main
components:
|
Ø
|
vessel
maintenance and repair;
|
|
Ø
|
crew
selection and training;
|
|
Ø
|
vessel
spares and stores supply;
|
|
Ø
|
contingency
response planning;
|
|
Ø
|
onboard
safety procedures auditing;
|
|
Ø
|
vessel
insurance arrangement;
|
|
Ø
|
vessel
security training and security response plans
(ISPS);
|
|
Ø
|
obtain
ISM certification and audit for each vessel within the six months of
taking over a vessel;
|
|
Ø
|
vessel
hire management;
|
|
Ø
|
vessel
performance monitoring.
|
The
management of financial, general and administrative elements involved in the
conduct of our business and ownership of our vessels requires the following main
components:
|
Ø
|
management
of our financial resources, including banking relationships, i.e.,
administration of bank loans and bank
accounts;
|
|
Ø
|
management
of our accounting system and records and financial
reporting;
|
|
Ø
|
administration
of the legal and regulatory requirements affecting our business and
assets; and
|
|
Ø
|
management
of the relationships with our service providers and
customers.
|
The
principal factors that affect our profitability, cash flows and shareholders’
return on investment include:
|
Ø
|
rates
and periods of hire;
|
|
Ø
|
levels
of vessel operating expenses, including repairs and
drydocking;
|
|
Ø
|
purchase
and sale of vessels;
|
|
Ø
|
fluctuations
in foreign exchange rates.
|
CHARTER
& SPOT MARKET REVENUE
Overview
We generate revenues by charging our
customers for the use of our vessels to transport their dry bulk
commodities.
Under a time charter, the charterer pays us a fixed daily
charter hire rate and bears all voyage expenses, including the cost of bunkers
(fuel oil) and port and canal charges. We remain responsible for paying the
chartered vessel’s operating expenses, including the cost of crewing, insuring,
repairing and maintaining the vessel, the costs of spares and consumable stores,
tonnage taxes and other miscellaneous expenses. Under a bareboat charter, the
charterer pays us a fixed daily charter hire rate and bears all voyage expenses,
as well as the vessel’s operating expenses.
Spot
charters can be spot voyage charters or spot time charters. Spot voyage charters
involve the carriage of a specific amount and type of cargo on a load-port to
discharge-port basis, subject to various cargo handling terms, and the vessel
owner is paid on a per-ton basis. Under a spot voyage charter, the vessel owner
is responsible for the payment of all expenses including capital costs, voyage
and expenses, such as port, canal and bunker costs. A spot time charter is a
contract to charter a vessel for an agreed period of time at a set daily rate.
Under spot time charters, the charterer pays the voyage
expenses.
Revenues
Our
revenues are driven primarily by the number of vessels in our fleet, the number
of days during which our vessels operate and the amount of daily hire rates that
our vessels earn under charters or on the spot market, which, in turn, are
affected by a number of factors, including:
|
Ø
|
the
duration of our charters;
|
|
Ø
|
the
number of days our vessels are hired to operate on the spot
market;
|
|
Ø
|
our
decisions relating to vessel acquisitions and
disposals;
|
|
Ø
|
the
amount of time that we spend positioning our vessels for
employment;
|
|
Ø
|
the
amount of time that our vessels spend in drydocking undergoing
repairs;
|
|
Ø
|
maintenance
and upgrade work;
|
|
Ø
|
the
age, condition and specifications of our
vessels;
|
|
Ø
|
levels
of supply and demand in the dry bulk shipping industry;
and
|
|
Ø
|
other
factors affecting spot market charter rates for dry bulk
vessels.
|
Our
revenues grew significantly in 2008 as a result of the enlargement of our fleet,
which increased our ownership, available and operating days. Revenues also
increased in 2008 due to high time charter rates negotiated on vessels before
the drastic decline in the dry bulk market during the latter five months of
2008, although not all of our vessels were employed through time
charters.
Our
revenues in 2009 declined as we were exposed to the lower charter rates on the
spot market and consequently a number of vessels were fixed to new employments
at daily time charter rates considerably lower than their previous employments,
in addition to the lower spot charter rates we earned. We also disposed of
vessels in 2009, which led to decreased ownership, available and operating
days.
Our
revenues declined during the six months ended June 30, 2010 as a result of the
decrease in the number of vessels in our fleet.
Employment of our Vessels
As of
June 30, 2010, we employed our vessels as follows:
|
Ø
|
m/v Tiara Globe
– on a
time charter with Transgrain Shipping that began in February 2010 and is
scheduled to expire in a minimum of 24 months (maximum of 26 months) from
such date, at the gross rate of $20,000 per
day.
|
|
Ø
|
m/v Star Globe
– on a
time charter with Transgrain Shipping that began in May 2010 and is
scheduled to expire in a minimum of 11 months (maximum of 13 months) from
such date, at the gross rate of $22,000 per
day.
|
|
Ø
|
m/v River Globe
– on a
time charter with Eastern Bulk Carriers A/S at the gross rate of $25,000
per day, which has since been redelivered to us. We currently employ such
vessel on the spot market while we contemplate employing this vessel on a
new time charter.
|
|
Ø
|
m/v Jin Star
– on a
bareboat charter with Eastern Media International Corporation and Far
Eastern Silo & Shipping (Panama) S.A. for a period of five years
(which can be extended for one year at the charterer’s option, and
thereafter extended one additional year at our option), at the gross rate
of $14,250 per day.
|
|
Ø
|
m/v Sky Globe
– on the
spot market.
|
Our
charter agreements subject us to counterparty risk. In depressed market
conditions, charterers may seek to renegotiate the terms of their existing
charter parties or avoid their obligations under those contracts. Should
counterparties to one or more of our charters fail to honor their obligations
under their agreements with us, we could sustain significant losses which could
have a material adverse effect on our business, financial condition, results of
operations, cash flows and ability to pay dividends.
VOYAGE
EXPENSES
We
charter our vessels primarily through time charters under which the charterer is
responsible for most voyage expenses, such as the cost of bunkers (fuel oil),
port expenses, agents’ fees, canal dues, extra war risks insurance and any other
expenses related to the cargo.
Whenever
we employ our vessels on a voyage basis (such as trips for the purpose of
geographically repositioning a vessel or trip(s) after the end of one time
charter and up to the beginning of the next time charter), we incur voyage
expenses that include port expenses and canal charges and bunker (fuel oil)
expenses.
If we
charter our vessels on bareboat charters, the charterer will pay all voyage
expenses.
As is
common in the shipping industry, we have historically paid commissions ranging
from 3.75% to 6.25% of the total daily charter hire rate of each charter to
unaffiliated ship brokers and in-house brokers associated with the charterers,
depending on the number of brokers involved with arranging the
charter.
For 2009,
2008 and 2007, commissions amounted to $2.7 million, $4.8 million and $1.9
million, respectively. During the six-month period ended June 30, 2010,
commissions amounted to $0.6 million.
We
believe that the amounts and the structures of our commissions are consistent
with industry practices.
These
commissions are directly related to our revenues. We therefore expect that the
amount of total commissions will increase as the size of our fleet grows as a
result of additional vessel acquisitions and employment of those
vessels.
VESSEL
OPERATING EXPENSES
Vessel
operating expenses include costs for crewing, insurance, repairs and
maintenance, lubricants, spare parts and consumable stores, statutory and
classification tonnage taxes and other miscellaneous expenses. We calculate
daily vessel operating expenses by dividing vessel operating expenses by
ownership days for the relevant time period
excluding bareboat charter
days.
Our
vessel operating expenses have historically fluctuated as a result of changes in
the size of our fleet. In addition, a portion of our vessel operating expenses
is in currencies other than the U.S. dollar, such as costs related to repairs,
spare parts and consumables. These expenses may increase or decrease as a result
of fluctuation of the U.S. dollar against these currencies.
We expect
that crewing costs will increase in the future due to the shortage in the supply
of qualified sea-going personnel. In addition, we expect that drydocking and
maintenance costs will increase as our vessels age. Other factors that may
affect the shipping industry in general, such as the cost of insurance, may also
cause our expenses to increase. To the extent that we purchase additional
vessels, we expect our vessel operating expenses to increase
accordingly.
DEPRECIATION
The cost
of our vessels is depreciated on a straight-line basis over the expected useful
life of each vessel. Depreciation is based on the cost of the vessel less its
estimated residual value. We estimate the useful life of our vessels to be 25
years from the date of delivery from the shipyard. Furthermore, we estimate the
residual values of our vessels to be $200 per light-weight ton. We do not expect
these assumptions to change in the near future. Our depreciation charges have
decreased in recent periods due to the reduction of the size our fleet which has
also led to a decrease of ownership days. We expect that these charges will
increase if we acquire additional vessels.
DEPRECIATION
OF DRYDOCKING COSTS
Vessels
are required to be drydocked for major repairs and maintenance that cannot be
performed while the vessels are operating. Drydockings occur approximately every
2.5 years. The costs associated with the drydockings are capitalized and
depreciated on a straight-line basis over the period between drydockings, to a
maximum of 2.5 years. At the date of acquisition of a secondhand vessel, we
estimate the component of the cost that corresponds to the economic benefit to
be derived until the first scheduled drydocking of the vessel under our
ownership and this component is depreciated on a straight-line basis over the
remaining period through the estimated drydocking date.
ADMINISTRATIVE
EXPENSES
Our
administrative expenses include payroll expenses, traveling, promotional and
other expenses associated with us being a public company, which include the
preparation of disclosure documents, legal and accounting costs, director and
officer liability insurance costs and costs related to compliance. We expect
that our administrative expenses will increase as we enlarge our
fleet.
ADMINISTRATIVE
EXPENSES PAYABLE TO RELATED PARTIES
Our
administrative expenses payable to related parties include cash remuneration of
our executive officers and directors and rental of our office
space.
SHARE-BASED
PAYMENTS
We
operate an equity-settled, share-based compensation plan. The value of the
service received in exchange of the grant of shares is recognized as an expense.
The total amount to be expensed over the vesting period is determined by
reference to the fair value of the share awards at the grant date. The relevant
expense is recognized in the income statement component of the consolidated
statement of comprehensive income, with a corresponding impact in
equity.
IMPAIRMENT
LOSS
We assess
at each reporting date whether there is an indication that a vessel may be
impaired. The vessel’s recoverable amount is estimated when events or changes in
circumstances indicate the carrying value may not be recoverable. If such
indication exists and where the carrying value exceeds the estimated recoverable
amounts, the vessel is written down to its recoverable amount. The recoverable
amount is the greater of fair value less costs to sell and value-in-use. In
assessing value-in-use, the estimated future cash flows are discounted to their
present value using a discount rate that reflects current market assessments of
the time value of money and the risks specific to the vessel. Impairment losses
are recognized in the consolidated statement of comprehensive income. A
previously recognized impairment loss is reversed only if there has been a
change in the estimates used to determine the asset’s recoverable amount since
the last impairment loss was recognized. If that is the case, the carrying
amount of the asset is increased to its recoverable amount. That increased
amount cannot exceed the carrying amount that would have been determined, net of
depreciation, had no impairment loss been recognized for the asset in prior
years. Such reversal is recognized in the consolidated statement of
comprehensive income. After such a reversal, the depreciation charge is adjusted
in future periods to allocate the asset’s revised carrying amount, less any
residual value, on a systematic basis over its remaining useful
life.
GAIN/(LOSS)
ON SALE OF VESSEL
Gain or
loss on the sale of a vessel is the residual value remaining after deducting
from the vessel’s sale proceeds, the carrying value of the vessel at the date of
delivery to its new owners and the total expenses associated with the
sale.
OTHER
(EXPENSES)/INCOME, NET
We
include other operating expenses or income that is not classified otherwise. It
mainly consists of provisions for insurance claims deductibles and refunds from
insurance claims.
INTEREST
INCOME FROM BANK BALANCES & DEPOSITS
We earn
interest on the funds we have deposited with banks as well as from short-term
certificates of deposit.
INTEREST
EXPENSE AND FINANCE COSTS
We incur
interest expense and financing costs in connection with the indebtedness under
our credit facility and loan agreement. We also incurred financing costs in
connection with establishing those arrangements, which is included in our
finance costs and amortization and write-off of deferred finance charges. As of
December 31, 2009, 2008 and 2007, we had $70.6 million, $157.6 million and
$183.2 million of indebtedness outstanding under our then existing credit
facilities, respectively. As of June 30, 2010, outstanding bank debt is $102.2
million. We incur interest expense and financing costs relating to our
outstanding debt as well as our available but undrawn credit facility. We will
incur additional interest expense in the future on our outstanding borrowings
and under future borrowings to finance future acquisitions.
(LOSS)/GAIN
ON DERIVATIVE FINANCIAL INSTRUMENTS
We may
enter into derivative instruments, which mainly consist of interest rate SWAP
agreements. Derivative financial instruments are initially recognized at fair
value on the date a derivative contract is entered into and are subsequently
remeasured at fair value. Changes in the fair value of these derivative
instruments are recognized immediately in the income statement component of the
consolidated statement of comprehensive income.
FOREIGN
EXCHANGE (LOSSES)/GAINS, NET
We
generate substantially all of our
revenues from the trading
of our vessels in U.S. dollars but incur a portion of our expenses in currencies
other than the U.S. dollar. While we were incorporated in Jersey, the majority
of our general and administrative expenses as well as the dividends paid to
shareholders were in U.K. pounds sterling. Following our redomiciliation into
the Marshall Islands and the listing of our common shares on the Nasdaq Global
Market, we do not anticipate having any material expenses in U.K. pounds
sterling, and going forward our dividends will be declared and paid in U.S.
dollars.
For cash
management, or treasury, purposes, we convert U.S. dollars into foreign
currencies to pay for our non-U.S. dollar expenses, which we then hold on
deposit until the date of each transaction. Fluctuations in foreign exchange
rates create foreign exchange gains or losses when we mark-to-market these
non-U.S. dollar deposits.
For
accounting purposes, expenses incurred in all foreign currencies are converted
into U.S. dollars at the exchange rate prevailing on the date of each
transaction.
Because a
portion of our expenses is payable in currencies other than the U.S. dollar, our
expenses may from time to time increase relative to our revenues as a result of
fluctuations in exchange rates, which could affect the amount of net income that
we report in future periods.
RESULTS
OF OPERATIONS
The
following is a discussion of our operating results for the six-month period
ended June 30, 2010 compared to the six-month period ended June 30, 2009, for
the year ended December 31, 2009 compared to the year ended December 31, 2008
and for the year ended December 31, 2008 compared to the year ended December 31,
2007.
Six-month
period ended June 30, 2010 compared to the six-month period ended June 30,
2009
During
the six-month period ended June 30, 2010, we had an average of 3.0 dry bulk
vessels in our fleet. During the six-month period ended June 30, 2009, we had an
average of 7.0 dry bulk vessels in our fleet. The
m/v Sea Globe
and
m/v Coral Globe
were sold in
February 2010, the
m/v Sky
Globe
and
m/v Star
Globe
were delivered to us in May 2010 and the
m/v Jin Star
was delivered to
us in June 2010.
Time charter revenue
. Time
charter revenue decreased by $14.9 million, or 56%, to $11.6 million during the
six-month period ended June 30, 2010, compared to $26.5 million during the
six-month period ended June 30, 2009. Net revenues decreased by $13.7 million,
or 56%, to $10.8 million during the six-month period ended June 30, 2010,
compared to $24.5 million during the six-month period ended June 30, 2009. The
decrease is partly attributable to a decrease in the size of the fleet, which
resulted in a 57% decrease in operating days and effectively reduced our net
revenues by approximately $14 million, assuming all other variables were held
constant. The decrease is also partly attributable to continued volatility of
market conditions. During the six-month period ended June 30, 2010, we had total
operating days of 529 and fleet utilization of 98.3%, compared to 1,239 total
operating days and a fleet utilization of 98.7% during the six-month period
ended June 30, 2009.
Voyage expenses
. Voyage
expenses decreased by $1.3 million, or 62%, to $0.8 million during the six-month
period ended June 30, 2010, compared to $2.1 million during the six-month period
ended June 30, 2009. This decrease is attributable to the decrease in our
revenues and the reduction in the size of our fleet.
Vessel operating expenses
.
Vessel operating expenses decreased by $3.1 million, or 54%, to $2.6 million
during the six-month period ended June 30, 2010, compared to $5.7 million during
the six-month period ended June 30, 2009. This decrease is attributable to the
reduction in the size of our fleet.
Average
daily operating expenses were $4,922 during the six-month period ended June 30,
2010, compared to $4,481 during the six-month period ended June 30, 2009,
representing an increase of 10%. This increase is mostly due to the initial
supplies for the
m/v Sky
Globe
and
m/v Star
Globe
, which were delivered to us in May 2010.
Depreciation
. Depreciation
decreased by $4.2 million, or 60%, to $2.8 million during the six-month period
ended June 30, 2010, compared to $7.0 million during the six-month period ended
June 30, 2009. This decrease is a direct result of the decrease in the number of
vessels in our fleet.
Depreciation of drydocking
costs
. Depreciation of drydocking costs decreased by $0.5 million, or
63%, to $0.3 million during the six-month period ended June 30, 2010, compared
to $0.8 million during the six-month period ended June 30, 2009. This decrease
is directly the result of the decrease in the number of vessels in our
fleet.
Share-based payments
.
Share-based payments decreased by $1.4 million to $0.1 million during the
six-month period ended June 30, 2010, compared to $1.5 million during the
six-month period ended June 30, 2009. The decrease is due to a decrease in the
number of shares we paid to our executives during the six-month period ended
June 30, 2010. In April 2009, our board of directors, in agreement with our
chief executive officer, decided to release the unvested 171,052 common shares
awarded in March 2008 to our chief executive officer under our long term
incentive plan, which we refer to as our incentive plan. We accounted for the
cancellation of this award as an acceleration of vesting and as such, we
immediately recognized the amount that otherwise would have been recognized over
the remainder of the vesting period to March 2011. The amount recognized was
$1.4 million.
Impairment loss
. During the
six-month period ended June 30, 2009, we entered into two memoranda of agreement
for the sale of the
m/v Island
Globe
and
m/v Gulf
Globe
. From the date each memorandum of agreement was executed up until
the delivery of each vessel to its respective new owner, the vessels were
classified as held for sale and were measured at the lower of their carrying
amount and fair value less cost to sale. As a result, we recognized an
impairment loss of approximately $18.8 million for the six-month period ended
June 30, 2009. We did not recognize any impairment charge during the six-month
period ended June 30, 2010.
Interest income from bank balances
& deposits
. Interest income decreased by $0.3 million, or 60%, to
$0.2 million during the six-month period ended June 30, 2010, compared to $0.5
million during the six-month period ended June 30, 2009. The decrease is
attributable to the decrease in the average cash and cash balances and bank
deposits during the six-month period ended June 30, 2010.
Interest expense and finance
costs
. Interest expense decreased by $0.6 million, or 38%, to $1.0
million during the six-month period ended June 30, 2010, compared to $1.6
million during the six-month period ended June 30, 2009.
The decrease is attributable to
a
de
crease in our
average loan balances
, all of which were denominated in U.S.
dollars
.
Loss/(gain) on derivative financial
instruments
. At June 30, 2010, the two interest rate SWAP agreements (for
$25 million in total, or 24% of our then-existing total debt outstanding of
$102.2 million) were recorded at fair value, which resulted in a $0.6 million
non-cash unrealized loss compared to the valuation of the SWAP agreements for
the six-month period ended June 30, 2009. The valuation of our interest rate
swaps at the end of each six-month period is affected by the prevailing interest
rates at the time.
Foreign exchange (losses)/gains,
net
. Foreign currency losses were $1.0 million during the six-month
period ended June 30, 2010, compared to a gain of $0.03 million during the
six-month period ended June 30, 2009. Foreign currency exchange losses resulted
primarily from the change in fair value of cash deposits in Euro, as well as
currency exchanges to pay for vessel operating expenses and general and
administrative expenses, a material portion of which were in currencies other
than the U.S. dollar.
Year
ended December 31, 2009 compared to the year ended December 31,
2008
During
the year ended December 31, 2009, we agreed to sell to unaffiliated third
parties five vessels, each of which was built in the mid-1990s. Three of these
vessels (the
m/v Island
Globe
,
m/v Gulf
Globe
and
m/v Lake
Globe
) were delivered to their new owners during 2009, and two vessels
(the
m/v Sea Globe
and
m/v Coral Globe
) were
delivered to their new owners in February 2010. At the time in 2009 when both
parties executed each of the five memoranda of agreement to sell these vessels,
the book value (or carrying amount) of each of such vessels was higher than the
agreed sale price. The mandatory adjustment of the book values (or carrying
amount) of these five vessels resulted in a $28.4 million impairment charge for
the year ended December 31, 2009 and we had an operating loss of $8.2 million,
whereas during the year ended December 31, 2008, we had an operating profit of
$51.6 million.
During
the year ended December 31, 2008, we sold to an unaffiliated third party the
m/v Ocean Globe
, built
in the mid-1990s, for a sale price that exceeded the book value (or carrying
amount) of the vessel, which resulted in a $15.1 million profit on the
sale.
During
the year ended December 31, 2009, we had an average of 6.3 dry bulk vessels in
our fleet. During the year ended December 31, 2008, we had an average of 7.9 dry
bulk vessels in our fleet.
Time charter revenue
. Time
charter revenue decreased by $45.8 million, or 46%, to $52.8 million for 2009,
compared to $98.6 million for 2008. Net revenues decreased by $42.8 million, or
47%, to $49.1 million for 2009, from $91.9 million for 2008. The decrease is
partly attributable to a decrease in the size of the fleet, which resulted in a
19% decrease in operating days and effectively reduced our time charter revenue
by approximately $17.4 million, assuming all other variables were held constant.
In addition, the decrease is partly attributable to a 34% decrease in average
TCE rates due to the unfavorable shipping rates in 2009 compared to 2008, which
effectively reduced our net revenues by approximately $25.4 million, assuming
all other variables were held constant. In 2009, we had total operating days of
2,246 and fleet utilization of 98.6%, compared to 2,781 total operating days and
a fleet utilization of 99.0% in 2008.
Voyage expenses
. Voyage
expenses decreased by $3.0 million, or 45%, to $3.7 million in 2009, compared to
$6.7 million in 2008. This decrease is attributable to the decrease in our
revenues and the reduction of the size of our fleet.
Vessel operating expenses
.
Vessel operating expenses decreased by $2.4 million, or 19%, to $10.1 million in
2009, compared to $12.5 million in 2008. The decrease in operating expenses is
attributable to the 20% decrease in ownership days resulting from the sale of
vessels in our fleet. The breakdown of our operating expenses for the year 2009
was as follows:
Crew
expenses
|
52%
|
Repairs
and spares
|
17%
|
Insurance
|
11%
|
Stores
|
9%
|
Lubricants
|
9%
|
Other
|
2%
|
Daily
operating expenses were $4,381 in 2009 compared to $4,356 in 2008, representing
an increase of under 1%. This increase is a result of a combination of lower
insurance costs due to the lower values of our vessels
,
higher crewing cost
attributable to increased salaries paid to our crews and higher cost for
lubricants due to increased lubricants prices.
Depreciation
. Depreciation
decreased by $6.2 million, or 36%, to $11.2 million for 2009, compared to $17.4
million for 2008. This decrease is directly the result of the decrease in the
number of vessels in our fleet.
Depreciation of drydocking
costs
. Depreciation of drydocking costs decreased by $0.1 million, or 5%,
to $1.5 million for 2009, compared to $1.6 million for 2008.
Administrative expenses
.
Administrative expenses for 2009 decreased by $0.1 million or 5% to $2.0
million, compared to $2.1 million in 2008. The decrease in administration
expenses is due to our improved cost efficiency.
Share-based payments
.
Share-based payments for 2009 increased by $1 million or 125% to $1.8 million,
compared to $0.8 million in 2008. On April 21, 2009, our board of directors in
agreement with our chief executive officer, decided to release the unvested
171,052 common shares awarded on March 4, 2008 to our chief executive officer
under our incentive plan. We accounted for the cancellation of the award as an
acceleration of vesting and therefore recognized immediately the amount that
otherwise would have been recognized over the remaining of the vesting period to
March 4, 2011. The amount recognized was $1.4 million.
Impairment loss
.
In 2009, we entered
into five memoranda of agreement for the sale of the
m/v Sea Globe
,
m/v Coral Globe
,
m/v Island Globe
,
m/v Gulf Globe
and
m/v Lake Globe
. From the date
each memorandum of agreement was executed until the delivery of each vessel to
its respective new owner, the vessels were classified as held for sale and were
measured at the lower of their carrying amount and fair value less cost to sale.
As a result, we recognized an impairment loss of approximately $28.4
million
for the year
ended December 31, 2009. As of December 31, 2008, we assessed whether any of our
vessels may have been impaired. We concluded that the recoverable amount for the
m/v Tiara Globe
and
m/v River Globe
was
lower than their carrying values. Subsequently, we recognized an impairment loss
of approximately $20.2 million
for the year ended
December 31, 2008.
(Loss)/gain on sale of
vessel
. In 2009, we had a loss on sale of vessel of $0.8 million,
compared to a gain on sale of vessel of $15.1 million in 2008. The loss is
mainly attributable to a discount on the sale proceeds received due to late
delivery of
m/v Island
Globe
to its new owners.
Interest income from bank balances
& deposits
. Interest income increased by $0.1 million, or 11%, to
$1.0 million in 2009, compared to $0.9 million in 2008. The increase is
attributable to the increased cash balances on average in our
accounts.
Interest expense and finance
costs
. Interest expense decreased by $4.8 million, or 62%, to $2.9
million in 2009, compared to $7.7 million in 2008. The decrease is attributable
to the lower prevailing LIBOR rates. The total outstanding bank loans as of
December 31, 2009 amounted to $70.6 million compared to $157.6 million as of
December 31, 2008. All of our bank loans are denominated in U.S.
dollars.
Gain/(loss) on derivative financial
instruments
. At December 31, 2009, the two interest rate SWAP agreements
(for $25.0 million in total or 35% of our then-existing total debt outstanding
of $70.6 million) were recorded at fair value, which resulted in a $0.1 million
non-cash unrealized gain in favor of us as compared to the valuation of the SWAP
agreements as of December 31, 2008.
Foreign exchange (losses)/gains,
net
. Foreign exchange losses were $0.2 million for 2009, compared to
losses of $0.6 million in 2008. Foreign currency exchange losses resulted
primarily from currency exchanges to pay for operating expenses of our
fleet
and general and
administrative expenses, a material portion of which were in currencies other
than the U.S. dollar.
Year
ended December 31, 2008 compared to the year ended December 31,
2007
During
the year ended December 31, 2008, we had an average of 7.9 dry bulk vessels in
our fleet. During the year ended December 31, 2007, we had an average of 5.5 dry
bulk vessels in our fleet.
During
the year ended December 31, 2008, we sold the
m/v Ocean Globe
to an
unaffiliated third party.
During
the year ended December 31, 2007, we acquired the
m/v Gulf Globe
in January,
the
m/v Island Globe
in
July and the
m/v River
Globe
and the
m/v Tiara
Globe
in December.
Time charter revenue
. Time
charter revenue increased by $57.6 million, or 140%, to $98.6 million for 2008,
compared to $41.0 million for 2007. Net revenues increased by $53.2 million, or
137%, to $91.9 million for 2008, from $38.7 million for 2007. The increase is
partly attributable to an increase in the size of our fleet resulting in a 51%
increase in operating days, which effectively increased our time charter revenue
by approximately $16.6 million, assuming all other variables were held constant.
The increase in revenues is also partly attributable to a 66% increase in TCE
rates as a result of the favorable shipping rates in 2008 compared to the same
period of 2007, which effectively increased our net revenues by approximately
$36.6 million, assuming all other variables were held constant. The net increase
in operating days during 2008 resulted from the enlargement of our fleet
following our acquisition of the
m/v Tiara Globe
and the
m/v River Globe
, both in late
December 2007, and was offset with days lost due to the sale of the
m/v Ocean Globe
in November
2008. In 2008, we had total operating days of 2,781 and fleet utilization of
99.0%, compared to 1,837 total operating days and a fleet utilization of 93.5%
in 2007.
Voyage expenses
. Voyage
expenses increased by $4.5 million, or 205%, to $6.7 million in 2008, compared
to $2.2 million in 2007. This increase is attributable to our increased revenues
and the increase in the number of days some vessels in our fleet operated on the
spot market as compared to 2007 when all our vessels operated under time
charters.
Vessel operating expenses
.
Vessel operating expenses increased by $4.9 million, or 64%, to $12.5 million in
2008, compared to $7.6 million in 2007. This increase is attributable to the 43%
increase in ownership days resulting from the acquisition of the
m/v Tiara Globe
and the
m/v River Globe
, both in late
December 2007 as well as higher crew costs, higher insurance premiums, higher
prices for lubricants and other expenses. The breakdown of our operating
expenses for the year 2008 was as follows:
Crew
expenses
|
47%
|
Repairs
and spares
|
17%
|
Stores
|
13%
|
Insurance
|
12%
|
Lubricants
|
9%
|
Other
|
2%
|
Daily
operating expenses were $4,356 in 2008 compared to $3,787 in 2007, representing
an increase of 15%.
Depreciation
. Depreciation
increased by $7.2 million, or 71%, to $17.4 million for 2008, from $10.2 million
for 2007. This increase is the result of the net increase in the number of
vessels in our fleet.
Depreciation of drydocking
costs
. Depreciation of drydocking costs increased by $0.6 million, or
60%, to $1.6 million for 2008, from $1.0 million for 2007. This increase is the
result of the net increase in the number of vessels in our fleet.
Administrative expenses
.
Administrative expenses increased by $0.8 million, or 62%, to $2.1 million for
2008, compared to $1.3 million in 2007. The increase is due mainly to higher
employee related expenses and higher general administration costs associated
with the compliance requirements of an AIM listed company.
Administrative expenses payable to
related parties
. Administrative expenses payable to related parties
decreased by $0.2 million, or 14%, to $1.2 million in 2008, compared to $1.4
million in 2007. The difference is attributable to a cash bonus paid to our
executive directors in 2007.
Share-based payments
.
Share-based payments increased by $0.4 million, or 100%, to $0.8 million for
2008, compared to $0.4 million for 2007. The increase is due to the shares we
paid to our executives in 2008, in compliance with our incentive plan, after our
total shareholder return in 2007, which was calculated based on changes in share
price and dividends paid over a calendar year, was higher relative to a peer
group of publicly listed dry bulk shipping companies.
Impairment loss
. As of
December 31, 2008, due to the general decrease in vessel values worldwide, we
assessed whether a vessel may be impaired, in compliance with our policy to
assess at each reporting date whether there is an indication that our vessels
may be impaired. We concluded that the recoverable amount for the
m/v Tiara Globe
and
m/v River Globe
was lower
than their carrying values. Subsequently, we recognized an impairment loss of
$20.2 million. We did not recognize any impairment in 2007.
(Loss)/gain on sale of
vessel
. In 2008, we gained $15.1 million on the sale of the
m/v Ocean Globe
, which
selling price was higher than the carrying amount. We did not sell any vessels
in 2007.
Interest income from bank balances
& deposits
. Interest income increased by $0.3 million, or 50%, to
$0.9 million in 2008, compared to $0.6 million in 2007. The increase is
attributable to increased cash generated by the operations of our growing fleet
activities.
Interest expense and finance
costs
. Interest expense increased by $2.1 million, or 38%, to $7.7
million in 2008, compared to $5.6 million in 2007. The increase is attributable
to the drawing of new debt in December 2007 to finance the acquisition of the
m/v Tiara Globe
and the
m/v River
Globe
.
(Gain)/loss on derivative financial
instruments
. In November 2008, we entered into two interest rate SWAP
agreements for $25.0 million in total, or 16% of our then-existing total debt
outstanding of $157.6 million. As LIBOR interest rates fell, as of December 31,
2008 the two SWAP agreements had a total value of $1.4 million in favor of the
SWAP counterparties, resulting in a non-cash mark-to-market valuation
loss.
Foreign exchange (losses)/gains,
net
. Foreign currency losses were $0.6 million for 2008, compared to
gains of $0.3 million in 2007. Foreign currency exchange gains and losses
resulted primarily from currency exchanges to pay for the operating expenses of
our fleet
and general
and administrative expenses, a material portion of which were in currencies
other than the U.S. dollar. All of our bank loans are denominated in U.S.
dollars.
INFLATION
Inflation
has only a moderate effect on our expenses given current economic conditions. In
the event that significant global inflationary pressures appear, these pressures
would increase our operating, voyage, administrative and financing
costs.
LIQUIDITY
AND CAPITAL RESOURCES
As of
December 31, 2009, we had $59.2 million in “cash and bank balances and bank
deposits” that consisted of cash short-term bank deposits with original
maturities shorter than three months.
As of
December 31, 2009, we had an aggregate bank debt outstanding of $70.6 million of
which $34.2 million was payable within the next 12 months, including the entire
outstanding balance of $27.0 million for the loan secured by the
m/v Sea Globe
and the
m/v Coral Globe
, which were
shown on our Statement of Financial Position as “held for sale” under memoranda
of agreement signed in November 2009. We fully repaid this loan
to Deutsche Schiffsbank in
February 2010 upon the delivery of these two vessels to their new unaffiliated
third party owners. In addition, at December 31, 2009, we had committed undrawn
funds up to $36.4 million under the facility with Credit Suisse. As of June 30,
2010, we had an aggregate bank debt outstanding of $102.2 million, which
includes $35.5 million drawn from Credit Suisse to finance the purchase of the
m/v Sky Globe
and
m/v Star Globe
and $26.7
million borrowed by Kelty Marine Ltd., a subsidiary that owns the
m/v Jin Star
, to finance the
purchase of such vessel, and which has since paid a quarterly installment of
$0.5 million and reduced the outstanding balance to $26.2 million.
Our
primary uses of funds have been capital expenditures for the acquisition of
vessels, vessel operating expenses, general and administrative expenses,
expenditures incurred in connection with ensuring that our vessels comply with
international and regulatory standards, financing expenses and repayments of
bank loans and payments of dividends to our shareholders. We do not have any
commitments for newbuilding contracts.
Since our
operations began in 2006, we have financed our capital requirements with equity
contributions from shareholders, long-term bank debt and cash from operations,
including cash from sales of vessels. To finance further vessel acquisitions of
either new or secondhand vessels, we anticipate that our primary sources of
funds will be our current cash, cash from continuing operations, additional
indebtedness to be raised and, possibly, future equity financings.
Working
capital, which is current assets, including non-current assets held for sale
minus current liabilities, including the current portion of long-term debt,
amounted to $56.5 million as of December 31, 2009.
As of
June 30, 2010, we had $102.2 million outstanding debt and cash (including bank
balances and bank deposits that consisted of short-term bank deposits with
original maturities shorter than three months) of $22.7 million. Our working
capital amounted to $9.3 million as of June 30, 2010. As of September 30, 2010,
our cash and bank balances and bank deposits exceeded $26.7 million and our
outstanding debt was $101.7 million.
Because
of the global economic downturn that has affected the international dry bulk
industry we may not be able to obtain financing either from our credit facility
or the equity markets. Based on our planned expenditures and assuming no
unanticipated expenses, we believe that our cash reserves and expected cash from
operations will be sufficient to meet our anticipated cash needs for working
capital and capital expenditures for the next twelve months.
Cash
Flows
Cash and
bank balances and bank deposits decreased to $59.2 million as of December 31,
2009, compared to $65.3 million as of December 31, 2008. While $21.4 million, or
33%, was pledged as collateral at the end of 2008, only $6 million, or 10%, was
pledged as collateral at the end of 2009. Cash and bank balances and bank
deposits decreased to $22.7 million as of June 30, 2010, compared to $59.2
million as of December 31, 2009. We consider highly liquid investments such as
bank time deposits with an original maturity of three months or less to be cash
equivalents.
Net
Cash Generated From Operating Activities
Net cash
generated from operating activities decreased by $36.8 million, or 52%, to $33.6
million in 2009, compared to $70.4 million in 2008. The decrease was primarily
attributable to the decrease in the number of operating days that we achieved
during the year due to the operation of a smaller fleet and the decrease in time
charter equivalent rate, which resulted in decreased revenues. Net cash provided
by operating activities increased by $40.2 million, or 133%, to $70.4 million in
2008, compared to $30.2 million in 2007. This increase was primarily
attributable to an increase in the charter equivalent rate, the increase of the
average number of vessels in our fleet and the improved fleet
utilization.
Net cash
generated from operating activities decreased by $11.0 million to $5.9 million
during the six-month period ended June 30, 2010, compared to $16.9 million
during the six-month period ended June 30, 2009. The decrease was primarily
attributable to the decrease in the number of operating days during the
six-month period ended June 30, 2010 due to the operation of a smaller
fleet.
Net
Cash Generated From (Used In) Investing Activities
Net cash
generated from investing activities was $60.3 million for 2009, which consisted
mainly of the $49.0 million received from the sale of three vessels during 2009,
plus $10.0 million which was reclassified upon the maturity of a time deposit
with original maturity of four months, as compared to net cash from investing
activities in 2008 of $27.1 million that related mostly to $36.8 million
proceeds from the sale of the
m/v Ocean Globe
reduced by
$10.0 million which was invested on a time deposit with maturity of four
months.
Net cash
generated from investing activities was $27.1 million for 2008, related mostly
to the proceeds from the sale of the
m/v Ocean Globe
as compared
to net cash used in investing activities of $183.0 million for 2007, mainly
consisting of the acquisition of the
m/v Gulf Globe
,
m/v Island Globe
,
m/v Tiara Globe
and
m/v River Globe
for $22.3
million, $38.0 million, $66.9 million and $57.6 million,
respectively.
Net cash
used in investing activities was $72.7 million during the six-month period ended
June 30, 2010, compared to net cash generated from investing activities of $10.8
million during the six-month period ended June 30, 2009. This was attributable
to net cash of $106.1 million used for the acquisition of the
m/v Star Globe
,
m/v Sky Globe
and
m/v Jin Star
and $33.0
million generated from the sale of the
m/v Sea Globe
and
m/v Coral Globe
during the
six-month period ended June 30, 2010, compared to $10.0 million that was
reclassified upon the maturity of a time deposit with original maturity of four
months during the six-month period ended June 30, 2009.
Net
Cash Generated From (Used In) Financing Activities
Net cash
used in financing activities in 2009 amounted to $74.5 million and consisted of
$87.0 million of indebtedness that we repaid under our then-existing credit and
loan facilities, plus $2.9 million of interest paid on our loans, reduced by
$15.4 million of pledged cash, which was released by the bank.
Net cash
used in financing activities in 2008 amounted to $72.9 million and consisted of
$120.6 million of indebtedness that we repaid under our then-existing credit and
loan facilities, $21.4 million which was pledged in favor of the bank, $18.5
million of dividends paid to shareholders and $7.8 million of interest paid on
our loans. Net cash generated by financing activities in 2008 consisted of $95.0
million of proceeds drawn under our then-existing credit and loan
facilities.
Net cash
generated from financing activities in 2007 was $159.8 million, mainly
consisting of $5.6 million equity financing prior to our IPO, $46.6 million
equity financing upon the conclusion of our IPO on June 1, 2007 and $147.0
million of proceeds drawn under our then-existing credit and loan facilities for
the acquisition of the
m/v
Island Globe
,
m/v Gulf
Globe
,
m/v Tiara
Globe
and
m/v River
Globe.
Net cash used in financing activities in 2007 includes an amount
of $5.5 million of interest paid on our loans, $30 million indebtedness that we
repaid under our then-existing credit and loan facilities and $2.9 million which
was paid as dividends to shareholders in 2007.
Net cash
generated from financing activities during the six-month period ended June 30,
2010 amounted to $35.5 million and consisted of $62.2 million of proceeds drawn
for the acquisition of the
m/v
Star Globe
,
m/v Sky
Globe
and
m/v Jin
Star
, $30.6 million of indebtedness that we repaid under our
then-existing credit and loan facilities, plus $0.9 million of interest paid on
our loans, reduced by $5.0 million of pledged cash, which was released by the
bank.
Indebtedness
As of
December 31, 2009 and 2008, we and our vessel-owning subsidiaries had
outstanding borrowings under our credit facility from Credit Suisse and a loan
from Deutsche Schiffsbank of an aggregate of $70.6 million and $157.6 million,
respectively. We repaid such Deutsche Schiffsbank loan in full in February
2010.
As of
June 30, 2010, our loan arrangements consisted of the following:
|
Ø
|
our
reducing revolving credit facility with Credit Suisse, which we entered
into in November 2007. Interest on outstanding balances are payable at
0.95% per annum over LIBOR, except when the aggregate security value of
the mortgaged vessels is more than 200% of the outstanding balances, in
which case the interest is 0.75% per annum over LIBOR. As of December 31,
2009, the reduced facility limit of our credit facility with Credit Suisse
stood at $80 million, approximately $43.6 million of which was outstanding
while approximately $36.5 million was undrawn and available. The credit
facility limit reduces in 11 semi-annual reduction dates after May 2010,
and $30.5 million is due on the final reduction date in November 2015. As
of June 30, 2010, the outstanding balance of our credit facility with
Credit Suisse was $75.5 million, which was equal to the reduced facility
limit. We therefore cannot draw down any additional funds thereunder
unless and until we repay a portion of the debt. The facility limit will
be further reduced by $4.5 million in November 2010, on the Reduction
Date, when we repay such amount to Credit Suisse;
and
|
|
Ø
|
a
loan agreement with Deutsche Schiffsbank, which our vessel-owning
subsidiary, Kelty Marine, entered into in June 2010. Interest on
outstanding balances under our loan agreement is payable at LIBOR plus a
variable margin. The margin will depend on the “loan to value ratio,”
which is a fraction where the numerator is the principal amount
outstanding under our loan agreement and the denominator is the charter
free market value of the vessel securing our loan agreement and any amount
of free liquidity maintained with Deutsche Schiffsbank. As of June 30,
2010, $26.7 million remained outstanding, which is payable in 28 equal
quarterly installments of $500,000, as well as a balloon payment of $12.65
million due together with the final installment in June 2017. As of
September 30, 2010, $26.2 million remained
outstanding.
|
Our loan
arrangements generally contain, in addition to provisions relating to events of
default, covenants requiring us, among other things, to ensure
that:
|
Ø
|
we
or Kelty Marine must maintain a minimum liquidity;
and
|
|
Ø
|
the
fair market value of the mortgaged vessel(s) must be no less than a
certain percentage (which is greater than 100%) of outstanding borrowings
under the respective loan
arrangement.
|
As of
December 31, 2008, we were in breach of the loan to value ratio covenant in our
credit facility, for which we obtained a waiver from the bank that was valid
until January 31, 2010. As of December 31, 2009 and June 30, 2010, we were not
in breach of any provisions of our credit facility.
As of
December 31, 2008, we had breached a loan to value ratio covenant on a loan that
has since been repaid. In order to rectify such breach, we had pledged an amount
of $21.4 million in favor of the lending bank.
Financial
Instruments
The major
trading currency of our business is the U.S. dollar. Movements in the U.S.
dollar relative to other currencies can potentially impact our operating and
administrative expenses and therefore our operating results.
In
November 2008, in an effort to mitigate the exposure to interest rate movements,
we entered into two interest rate swap agreements for a notional amount of $25
million in total, which remain in place on the date of this
prospectus.
We
believe that we have a low risk approach to treasury management. Cash balances
are invested in term deposit accounts, with their maturity dates projected to
coincide with our liquidity requirements. Credit risk is diluted by placing cash
on deposit with a variety of institutions in Europe, including a small number of
banks in Greece, which are selected based on their credit ratings. We have
policies to limit the amount of credit exposure to any particular financial
institution.
As of
December 31, 2009, 2008 and 2007 and as of the date of this prospectus, we did
not use and have not used any financial instruments designated in our financial
statements as those with hedging purposes.
Capital
Expenditures
We make
capital expenditures from time to time in connection with our vessel
acquisitions. We have no agreements to purchase any additional vessels, but may
do so in the future. We expect that any purchases of vessels will be paid for
with cash from operations, with funds from new credit facilities from banks with
whom we currently transact business, with loans from banks with whom we do not
have a banking relationship but will provide us funds at terms acceptable to us,
with funds from equity issuances or any combination thereof.
We incur
additional capital expenditures when our vessels undergo surveys. This process
of recertification may require us to reposition these vessels from a discharge
port to shipyard facilities, which will reduce our operating days during the
period. The loss of earnings associated with the decrease in operating days,
together with the capital needs for repairs and upgrades, is expected to result
in increased cash flow needs. We expect to fund these expenditures with cash on
hand.
Research
and Development, Patents and Licenses, etc.
We incur,
from time to time, expenditures relating to inspections for acquiring new
vessels that meet our standards. Such expenditures are insignificant and they
are expensed as they incur.
Trend
Information
Our
results of operations depend primarily on the charter hire and spot market rates
that we are able to realize. Charter hire and spot market rates paid for dry
bulk vessels are primarily a function of the underlying balance between vessel
supply and demand. To the extent that either supply or demand is significantly
affected, we believe this would cause rates to fluctuate.
RECENT
DEVELOPMENTS
On
November 12, 2010, we issued a press release that contained certain of our
unaudited financial and operating information for the nine months ended
September 30, 2010 and for the third quarter in 2010. We disclosed in the press
release that on September 30, 2010, our cash and bank balances and bank deposits
exceeded $26.7 million while the total outstanding debt under our credit
facility and loan agreement was $101.7 million (consisting of $75.5 million owed
to Credit Suisse and $26.2 million owed to Deutsche Schiffsbank).
The following tables set forth certain
selected consolidated financial and operating data for the three-month and
nine-month periods ended September 30, 2010 and 2009
that we included in the press
release
.
|
|
Three
Months
Ended
September 30, (unaudited)
|
|
|
Nine
Months
Ended
September 30, (unaudited)
|
|
|
|
(Expressed
in
Thousands
of
U.S.
Dollars
)
|
|
|
|
2010
|
|
|
2009
|
|
|
2010
|
|
|
2009
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Time charter
revenue
|
|
|
8,828
|
|
|
|
14,958
|
|
|
|
20,446
|
|
|
|
41,498
|
|
Vessel operating
expenses
|
|
|
1,486
|
|
|
|
2,530
|
|
|
|
4,124
|
|
|
|
8,208
|
|
Total
comprehensive i
ncome/(loss) for the
period
|
|
|
2,289
|
|
|
|
2,730
|
|
|
|
3,379
|
|
|
|
(8,899
|
)
|
Cash generated from
operations
|
|
|
5,818
|
|
|
|
9,536
|
|
|
|
11,688
|
|
|
|
26,462
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Adjusted EBITDA reconciliation
with Total comprehensive income/(loss) for the
period
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
comprehensive
income/(loss) for the
period
|
|
|
2,289
|
|
|
|
2,730
|
|
|
|
3,379
|
|
|
|
(8,899
|
)
|
Interest expense and finance
costs, net
|
|
|
583
|
|
|
|
490
|
|
|
|
1,337
|
|
|
|
1,593
|
|
(
Gain
)
/loss on derivative financial
instruments
|
|
|
395
|
|
|
|
261
|
|
|
|
959
|
|
|
|
(48
|
)
|
Foreign exchange
losses/
(
gains
)
, net
|
|
|
(96
|
)
|
|
|
204
|
|
|
|
860
|
|
|
|
170
|
|
Depreciation
|
|
|
2,263
|
|
|
|
2,550
|
|
|
|
5,079
|
|
|
|
9,539
|
|
Depreciation of dry
docking
costs
|
|
|
132
|
|
|
|
505
|
|
|
|
392
|
|
|
|
1,341
|
|
Loss/(gain) on sale of
vessel
|
|
|
-
|
|
|
|
896
|
|
|
|
(7
|
)
|
|
|
896
|
|
Impairment
loss
|
|
|
-
|
|
|
|
3,499
|
|
|
|
-
|
|
|
|
22,325
|
|
Adjusted EBITDA(
1
)
|
|
|
5,566
|
|
|
|
11,135
|
|
|
|
11,999
|
|
|
|
26,917
|
|
(1)
Adjusted EBITDA represents net earnings before interest and finance costs net,
gains or losses from the change in fair value of derivative financial
instruments, foreign exchange gains or losses, income taxes, depreciation,
depreciation of drydocking costs, impairment and gains or losses from sale of
vessels. Adjusted EBITDA does not represent and should not be considered as an
alternative to total comprehensive income/(loss) or cash generated from
operations, as determined by IFRS, and our calculation of Adjusted EBITDA may
not be comparable to that reported by other companies. Adjusted EBITDA is not a
recognized measurement under IFRS.
Adjusted
EBITDA is included herein because it is a basis upon which we assess our
financial performance and because we believe that it presents useful information
to investors regarding a company’s ability to service and/or incur indebtedness
and it is frequently used by securities analysts, investors and other interested
parties in the evaluation of companies in our industry.
Adjusted
EBITDA has limitations as an analytical tool, and you should not consider it in
isolation, or as a substitute for analysis of our results as reported under
IFRS. Some of these limitations are:
|
Ø
|
Adjusted EBITDA does not
reflect our cash expenditures or future requirements for capital
expenditures or contractual
commitments;
|
|
Ø
|
Adjusted EBITDA does not
reflect the interest expense or the cash requirements necessary to service
interest or principal payments on our
debt;
|
|
Ø
|
Adjusted EBITDA does not
reflect changes in or cash requirements for our working capital needs;
and
|
|
Ø
|
other companies in our
industry may calculate Adjusted EBITDA differently than we do, limiting
its usefulness as a comparative
measure.
|
Because
of these limitations, Adjusted EBITDA should not be considered a measure of
discretionary cash available to us to invest in the growth of our
business.
|
|
Three
Months
Ended
September
30,
(unaudited)
|
|
|
Nine
Months
Ended
September
30,
(unaudited)
|
|
|
|
2010
|
|
|
2009
|
|
|
2010
|
|
|
2009
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Ownership
days
|
|
|
460
|
|
|
|
615
|
|
|
|
998
|
|
|
|
1,882
|
|
Available
days
|
|
|
460
|
|
|
|
589
|
|
|
|
998
|
|
|
|
1,845
|
|
Operating
days
|
|
|
460
|
|
|
|
579
|
|
|
|
989
|
|
|
|
1,818
|
|
Fleet
utilization
|
|
|
100
|
%
|
|
|
98.3
|
%
|
|
|
99.1
|
%
|
|
|
98.5
|
%
|
Average number of
vessels
|
|
|
5
|
|
|
|
6.68
|
|
|
|
3.66
|
|
|
|
6.89
|
|
Time c
harter equivalent (TCE)
rate
|
|
$
|
18,234
|
|
|
$
|
24,496
|
|
|
$
|
19,316
|
|
|
$
|
21,083
|
|
The
following table reflects the calculation of our daily TCE rates for the periods
indicated.
|
|
Three
Months
Ended
September 30, (unaudited)
|
|
|
Nine
Months
Ended
September
30, (unaudited)
|
|
|
|
(Expressed
in
Thousands
of
U.S.
Dollars,
except
daily
TCE
rate
)
|
|
|
|
2010
|
|
|
200
9
|
|
|
2010
|
|
|
2
009
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Time charter
revenue
|
|
|
8,828
|
|
|
|
14,958
|
|
|
|
20,446
|
|
|
|
41,498
|
|
Less: Voyage
expenses
|
|
|
856
|
|
|
|
530
|
|
|
|
1,701
|
|
|
|
2,600
|
|
Less: Bareboat charter net
revenue
|
|
|
1,262
|
|
|
|
-
|
|
|
|
1,283
|
|
|
|
-
|
|
Net Revenue
|
|
|
6,710
|
|
|
|
14,428
|
|
|
|
17,462
|
|
|
|
38,898
|
|
Available days net of bareboat
charter days
|
|
|
368
|
|
|
|
589
|
|
|
|
904
|
|
|
|
1,845
|
|
Daily TCE
rate
|
|
|
18,234
|
|
|
|
24,496
|
|
|
|
19,316
|
|
|
|
21,083
|
|
Our
performance during the third quarter of 2010 as compared to the third quarter of
2009 and during the nine month period ending September 30, 2010 as compared to
the nine month period ending September 30, 2009 mainly reflect the results from
changes to the size of our fleet and that the
m/v Tiara Globe
was chartered
in 2009 for a greater amount than such vessel was able to obtain in 2010 and
that voyage expenses were greater in 2010 than in 2009.
QUANTITATIVE
AND QUALITATIVE DISCLOSURE ABOUT MARKET RISK
Interest Rates
We are
exposed to market risks associated with changes in interest rates relating to
our loan arrangements with Credit Suisse and Deutsche Schiffsbank. As of June
30, 2010, we had a $75.5 million outstanding balance under our credit facility
with Credit Suisse. As of June 30, 2010, Kelty Marine has a $26.7 million
principal balance outstanding under its loan agreement with Deutsche
Schiffsbank. Interest costs incurred under our loan arrangements are included in
our statement of income.
In 2009,
the weighted average interest rate for our then-outstanding facilities was 1.91%
and the respective interest rates ranged from 1.16 % to 3.04%, including
margins. An average increase of 1% in the interest rates of 2009 would have
resulted in interest costs of $3.7 million instead of $
2.7 million, an increase
of 37%.
In 2009,
the weighted average interest rate relating to our credit facility with Credit
Suisse was 1.97% and the respective interest rates ranged from 1.19% to 2.27%,
including margins. An average increase of 1% in the interest rates of 2009
would have resulted in interest expenses of $2.1 million, instead of $1.7
million, an increase of 24%.
In 2009,
the weighted average interest rate relating to our credit facility with Deutsche
Schiffsbank (which has since been repaid in full) was 1.84% and the respective
interest rates ranged from 1.16% to 3.04%, including margins. An average
increase of 1% in the interest rates of 2009 would have resulted in interest
expenses of $1.6 million, instead of $1.0 million, an increase of
60%.
We will
continue to have debt outstanding, which could impact our results of operations
and financial condition. Although we may in the future prefer to generate funds
through equity offerings on terms acceptable to us rather than through the use
of debt arrangements, we may not be able to do so. We expect to manage any
exposure in interest rates through our regular operating and financing
activities and, when deemed appropriate, through the use of derivative financial
instruments.
Currency and Exchange
Rates
We
generate revenues from the trading of our vessels in U.S. dollars but
historically incur certain amounts of our operating expenses in currencies other
than the U.S. dollar. While we were incorporated in Jersey, the majority of our
general and administrative expenses (including stock exchange fees and advisor
fees) were payable in U.K. pounds sterling. For cash management, or treasury,
purposes, we convert U.S. dollars into foreign currencies which we then hold on
deposit until the date of each transaction. Fluctuations in foreign exchange
rates create foreign exchange gains or losses when we mark-to-market these
non-U.S. dollar deposits.
For
accounting purposes, expenses incurred in Euro and other foreign currencies are
converted into U.S. dollars at the exchange rate prevailing on the date of each
transaction. Because a portion of our expenses are incurred in currencies other
than the U.S. Dollar, our expenses may from time to time increase relative to
our revenues as a result of fluctuations in exchange rates, which could affect
the amount of net income that we report in future periods. While we historically
have not mitigated the risk associated with exchange rate fluctuations through
the use of financial derivatives, we may determine to employ such instruments
from time to time in the future in order to minimize this risk. Our use of
financial derivatives would involve certain risks, including the risk that
losses on a hedged position could exceed the nominal amount invested in the
instrument and the risk that the counterparty to the derivative transaction may
be unable or unwilling to satisfy its contractual obligations, which could have
an adverse effect on our results.
Commodity Risk Exposure
The price
and supply of fuel is unpredictable and fluctuates as a result of events outside
our control, including geo-political developments, supply and demand for oil and
gas, actions by members of the Organization of Petroleum Exporting Countries,
and other oil and gas producers, war and unrest in oil producing countries and
regions, regional production patterns and environmental concerns and
regulations. Because we do not intend to hedge our fuel costs, an increase in
the price of fuel beyond our expectations may adversely affect our
profitability, cash flows and ability to pay dividends.
Inflation
We do not
expect inflation to be a significant risk to us in the current and foreseeable
economic environment. In the event that inflation becomes a significant factor
in the global economy, inflationary pressures would result in increased
operating, voyage and finance costs.
OFF-BALANCE
SHEET ARRANGEMENTS
We have
no off-balance sheet arrangements in place at this time.
TABULAR
DISCLOSURE OF CONTRACTUAL OBLIGATIONS
The
following table sets forth our contractual obligations and their maturity dates
as of December 31, 2009, as adjusted to reflect an additional draw down of $35.5
million from our credit facility, and Kelty Marine’s entry into the loan
agreement with Deutsche Schiffsbank
for $26.7 million. The
table does not include any amounts payable under our ship management agreements,
as those amounts are eliminated upon consolidation of our
accounts.
|
|
Within
One Year
|
|
|
One to
Three
Years
|
|
|
Three to
Five
Years
|
|
|
More
than
Five
years
|
|
|
Total
|
|
|
|
(in
thousands of U.S. Dollars)
|
|
Long
term debt(1)
|
|
$
|
36,082
|
(3)
|
|
|
22,000
|
|
|
|
22,000
|
|
|
|
52,650
|
|
|
$
|
132,732
|
|
Operating
lease obligations(2)
|
|
|
247
|
|
|
|
513
|
|
|
|
538
|
|
|
|
185
|
|
|
|
1,483
|
|
(1)
Our long term debt includes both our credit facility with Credit Suisse and
Kelty Marine’s loan agreement with Deutsche Schiffsbank, each of which is
described in “Management’s Discussion and Analysis of Financial Condition and
Results of Operations—Liquidity and Capital
Resources—Indebtedness.”
(2)
We rent our office space from Cyberonica S.A. for an amount of €14,577 per
month, which we expect will increase at a rate of 2.5% per year. We expect that
the Euro:U.S. dollar exchange rate is 1.0:1.4.
(3)
As of September 30, 2010, we had paid $31.1 million out of the $36.1 million
scheduled to be paid within the year ending December 31, 2010.
CRITICAL
ACCOUNTING POLICIES
The
discussion and analysis of our financial condition and results of operations are
based upon our consolidated financial statements, which have been prepared in
accordance with IFRS as issued by the IASB. The preparation of those financial
statements requires us to make estimates and judgments that affect the reported
amounts of assets and liabilities, revenues and expenses and related disclosure
of contingent assets and liabilities at the date of our financial statements.
Actual results may differ from these estimates under different assumptions and
conditions.
Critical
accounting policies are those that reflect significant judgments of
uncertainties and potentially result in material different results under
different assumptions and conditions. We have described below what we believe
are our most critical accounting policies, because they generally involve a
comparatively higher degree of judgment in their application. For a description
of all our significant accounting policies, see Note 2 to our consolidated
financial statements included in this prospectus.
Impairment of Long-Lived
Assets.
We
assess at each reporting date whether there is an indication that a vessel may
be impaired. The vessel’s recoverable amount is estimated when events or changes
in circumstances indicate the carrying value may not be
recoverable.
If such
indication exists and where the carrying value exceeds the estimated recoverable
amounts, the vessel is written down to its recoverable amount. The recoverable
amount is the greater of fair value less costs to sell and value-in-use. In
assessing value-in-use, the estimated future cash flows are discounted to their
present value using a discount rate that reflects current market assessments of
the time value of money and the risks specific to the vessel. This assessment is
made at the individual vessel level as separately identifiable cash flow
information for each vessel is available. We determine the fair value of our
assets based on management estimates and assumptions and by making use of
available market data and taking into consideration third party
valuations.
The
estimated future cash flows are determined by considering the charter revenues
from existing time charters for the fixed fleet days and an estimated daily time
charter equivalent for the unfixed days, based on the most recent 10 year
historical average of the six-month, one-year and three-year time charter rates
over the remaining estimated life of each vessel assuming an annual growth rate
as published by the International Monetary Fund, or IMF, net of brokerage
commissions. Expected outflows for scheduled vessels’ maintenance and vessel
operating expenses are based on historical rates, and adjusted annually assuming
an average annual inflation rate as published by the IMF. Effective fleet
utilization is assumed to be 92%, taking into account the period(s) each vessel
is expected to undergo drydocking and estimated off-hire days during the year.
We have assumed no change in the remaining estimated useful lives of the current
fleet, and scrap values based on $200 per lightweight ton at
disposal.
Although
we believe that the assumptions used to evaluate potential impairment are
reasonable and appropriate, these assumptions are highly subjective and we are
not able to estimate the variability between the assumptions used and actual
results that is reasonably likely to result in the future.
Impairment
losses are recognized in the consolidated statement of comprehensive income. A
previously recognized impairment loss is reversed only if there has been a
change in the estimates used to determine the asset’s recoverable amount since
the last impairment loss was recognized. If that is the case, the carrying
amount of the asset is increased to its recoverable amount. That increased
amount cannot exceed the carrying amount that would have been determined, net of
depreciation, had no impairment loss been recognized for the asset in prior
years. Such reversal is recognized in the consolidated statement of
comprehensive income. After such a reversal, the depreciation charge is adjusted
in future periods to allocate the asset’s revised carrying amount, less any
residual value, on a systematic basis over its remaining useful
life.
Vessels, net.
Vessels are stated at
cost, less accumulated depreciation and accumulated impairment losses. Vessel
cost consists of the contract price for the vessel and any material expenses
incurred upon acquisition (initial repairs, improvements and delivery expenses,
interest and on-site supervision costs incurred during the construction
periods). Any seller’s credit, i.e., amounts received from the seller of the
vessels until date of delivery, is deducted from the cost of the vessel.
Subsequent expenditures for conversions and major improvements are also
capitalized when the recognition criteria are met. Otherwise, these amounts are
charged to expenses as incurred. When we acquire a vessel with a time charter
agreement assumed, the cost of acquisition is allocated between the individual
assets and/or liabilities assumed based on their relative fair values at the
time of acquisition. The time charter agreement assumed can be assigned a
positive value (asset) or a negative value (deferred revenue) or zero
value.
Depreciation.
We depreciate
our vessels based on a straight line basis over the expected useful life of each
vessel, which is 25 years from the date of their initial delivery from the
shipyard, which we believe is within industry standards and represents the most
reasonable useful life for each of our vessels. Depreciation is based on the
cost of the vessel less its estimated residual value at the date of the vessel’s
acquisition, which is estimated at $200 per lightweight ton, which we believe is
common in the shipping industry. Secondhand vessels are depreciated from the
date of their acquisition through their remaining estimated useful lives. A
decrease in the useful life of a vessel or in its residual value would have the
effect of increasing the annual depreciation charge. When regulations place
limitations over the ability of a vessel to trade on a worldwide basis, its
useful life is adjusted to end at the date such regulations become
effective.
Deferred drydocking
costs.
Vessels are required to
be drydocked for major repairs and maintenance that cannot be performed while
the vessels are operating. Drydockings occur approximately every 2.5 years. The
costs associated with the drydockings are capitalized and depreciated on a
straight-line basis over the period between drydockings, to a maximum of 2.5
years.
At the date
of acquisition of a secondhand vessel, management estimates the component of the
cost that corresponds to the economic benefit to be derived until the first
scheduled drydocking of the vessel under our ownership and this component is
depreciated on a straight-line basis over the remaining period through the
estimated drydocking date.
Costs
capitalized are limited to actual costs incurred, such as shipyard rent, paints
and related works and surveyor fees in relation to obtaining the class
certification. If a drydocking is performed prior to the scheduled date, the
remaining unamortized balances of previous drydockings are immediately written
off. Unamortized balances of vessels that are sold are written off and included
in the calculation of the resulting gain or loss in the period of the vessel’s
sale.
Non-current assets held for
sale.
Non-current assets and
disposal groups classified as held for sale are measured at the lower of
carrying amount and fair value less costs to sell. We determine the fair value
of our assets based on management estimates and assumptions and by making use of
available market data and taking into consideration third party valuations. If
the carrying amount exceeds fair value less costs to sell, we recognize a loss
under impairment loss in the income statement component of the consolidated
statement of comprehensive income. Non-current assets and disposal groups are
classified as held for sale if their carrying amounts will be recovered through
a sale transaction rather than through continuing use. This condition is
regarded as met only when the sale is highly probable and the asset or disposal
group is available for immediate sale in its present condition. Management must
be committed to the sale, which should be expected to qualify for recognition as
a complete sale within one year from the date of classification. Property, plant
and equipment and intangible assets once classified as held for sale are not
depreciated or amortized.
Revenue.
We generate our revenues
from charterers for the charter hire of our vessels. Vessels are chartered using
time charters, where a contract is entered into for the use of a vessel for a
specific period of time and a specified daily charter hire rate. If a time
charter agreement exists and collection of the related revenue is reasonably
assured, revenue is recognized on a straight line basis over the period of the
time charter. Such revenues are treated in accordance with IAS 17 as lease
income. Associated voyage expenses, which primarily consist of commissions, are
recognized on a pro-rata basis over the duration of the period of the time
charter. Deferred revenue relates to cash received prior to the financial
position date and is related to revenue earned after such date. Deferred revenue
also includes the value ascribed to time charter agreements assumed upon the
purchase of a vessel, if any. This ascribed amount is amortized over the
remaining term of the time charter and the amortized portion for the period is
included in revenue for the period.
Voyage expenses.
Primarily
consisting of port expenses and owner’s expenses paid by the charterer, canal
and bunker expenses that are unique to a particular charter under time charter
arrangements or by us under voyage charter arrangements. Furthermore, voyage
expenses include commission on income paid by us. We defer bunker expenses under
voyage charter agreements and amortize them over the related
voyage.
Trade receivables, net.
The
amount shown as trade receivables at each financial position date includes
estimated recoveries from charterers for hire, freight and demurrage billings,
net of an allowance for doubtful accounts. Trade receivables are measured at
amortized cost less impairment losses, which are recognized in the consolidated
statement of comprehensive income. At each financial position date, all
potentially uncollectible accounts are assessed individually for the purpose of
determining the appropriate allowance for doubtful accounts. Although we may
believe that our provisions are based on fair judgment at the time of their
creation, it is possible that an amount under dispute will not be recovered and
the estimated provision of doubtful accounts would be inadequate. If any of our
revenues become uncollectible, these amounts would be written-off at that
time.
Derivative financial
instruments.
Derivative financial instruments are initially recognized at
fair value on the date a derivative contract is entered into and are
subsequently remeasured at fair value. The fair value of these instruments at
each reporting date is derived principally from or corroborated by observable
market data. Inputs include quoted prices for similar assets, liabilities (risk
adjusted) and market-corroborated inputs, such as market comparables, interest
rates, yield curves and other items that allow value to be determined. Changes
in the fair value of these derivative instruments are recognized immediately in
the income statement component of the consolidated statement of comprehensive
income.
THE
DRY BULK INDUSTRY
All
the information and data presented in this section, including the analysis of
the various sectors of the dry bulk shipping industry, has been provided by
Drewry Shipping Consultants Ltd, or Drewry. Drewry has advised that the
statistical and graphical information contained herein is drawn from its
database and other sources. In connection therewith, Drewry has advised
that:
|
Ø
|
certain information in
Drewry’s database is derived from estimates or subjective
judgments;
|
|
Ø
|
the information in the
databases of other maritime data collection agencies may differ from the
information in Drewry’s database;
and
|
|
Ø
|
while Drewry has taken
reasonable care in the compilation of the statistical and graphical
information and believes it to be accurate and correct, data compilation
is subject to limited audit and validation
procedures.
|
Drewry’s
methodologies for collection information and data, and therefore the information
discussed in this section, may differ from those of other sources, and do not
reflect all or even necessarily a comprehensive set of the actual transactions
occurring in the dry bulk industry.
INDUSTRY
OVERVIEW
The
seaborne transportation industry is a vital link in international trade, with
ocean going vessels representing the most efficient, and often the only, method
of transporting large volumes of basic commodities and finished products. In
2009, approximately 4.8 billion tons of dry cargo was transported by sea, which
represents approximately 60% of total global seaborne trade. Dry bulk cargo is
cargo that is shipped in large quantities and can be easily stowed in a single
hold with little risk of cargo damage. The following table presents the
breakdown of global seaborne trade by type of cargo in 2000 and
2009.
World
Seaborne Trade: 2000 & 2009
|
|
Trade -
Million Tons
|
|
|
CAGR(1)
2000-09
|
|
|
% Total Trade
|
|
|
|
2000
|
|
|
2009
|
|
|
%
|
|
|
2000
|
|
|
2009
|
|
Dry
Cargo
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Major
Bulks
|
|
|
1,249
|
|
|
|
1,952
|
|
|
|
5.1
|
|
|
|
21.2
|
|
|
|
23.4
|
|
Coal
|
|
|
539
|
|
|
|
784
|
|
|
|
4.3
|
|
|
|
9.1
|
|
|
|
9.4
|
|
Iron
Ore
|
|
|
489
|
|
|
|
959
|
|
|
|
7.8
|
|
|
|
8.3
|
|
|
|
11.5
|
|
Grain
|
|
|
221
|
|
|
|
209
|
|
|
|
-0.6
|
|
|
|
3.7
|
|
|
|
2.5
|
|
Minor
Bulks
|
|
|
901
|
|
|
|
1,080
|
|
|
|
2.0
|
|
|
|
15.3
|
|
|
|
12.9
|
|
Total
Dry Bulk
|
|
|
2,150
|
|
|
|
3,032
|
|
|
|
3.9
|
|
|
|
36.5
|
|
|
|
36.3
|
|
Container
Cargo
|
|
|
620
|
|
|
|
1,205
|
|
|
|
7.7
|
|
|
|
10.5
|
|
|
|
14.4
|
|
Non
Container/General Cargo
|
|
|
720
|
|
|
|
590
|
|
|
|
-2.2
|
|
|
|
12.2
|
|
|
|
7.1
|
|
Total
Dry Cargo
|
|
|
3,490
|
|
|
|
4,827
|
|
|
|
3.7
|
|
|
|
59.2
|
|
|
|
57.8
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Liquid
Cargo
|
|
|
2977
|
|
|
|
3,526
|
|
|
|
1.9
|
|
|
|
40.8
|
|
|
|
42.2
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
Seaborne Trade
|
|
|
6,467
|
|
|
|
8,353
|
|
|
|
2.9
|
|
|
|
100.0
|
|
|
|
100.0
|
|
(1)
Compound annual growth rate
Source:
Drewry
Dry bulk
cargo is generally categorized as either major dry bulk or minor dry bulk. Major
dry bulk cargo constitutes the vast majority of dry bulk cargo by weight, and
includes, among other things, iron ore, coal and grain. Minor dry bulk cargo
includes products such as agricultural products (other than grain), mineral
cargoes, cement, forest products and steel products and represents the balance
of the dry bulk industry. Other dry bulk cargo is categorized as container
cargo, which is shipped in 20- or 40- foot containers and includes a wide
variety of either finished products, or non-container cargo, which includes
other dry bulk cargoes that cannot be shipped in a container due to size, weight
or handling requirements, such as large manufacturing equipment or large
industrial vehicles. The balance of seaborne trade involves the transport of
liquids or gases in tanker vessels and includes products such as oil, refined
oil products and chemicals.
In 2009,
in line with the downturn in the world economy, the volume of seaborne trade in
some of the major commodity groups has declined from the levels achieved in
2008.
DRY
BULK TRADE
Dry bulk
trade is influenced by the underlying demand for the dry bulk commodities which,
in turn, is influenced by the level of worldwide economic activity. Generally,
growth in gross domestic product, or GDP, and industrial production correlate
with peaks in demand for marine dry bulk transportation services. The following
chart demonstrates the change in world dry bulk trade between 2000 and
2009.
Dry
Bulk Trade Development: 2000 to 2009
(Million
Tons)
Source:
Drewry
Historically,
certain economies have acted as the primary drivers of dry bulk trade. In the
1990s, Japan was the driving force of increases in ton-miles, when buoyant
Japanese industrial production stimulated demand for imported dry bulk
commodities. More recently, China and, to a lesser extent, India have been the
main drivers behind the recent increase in seaborne dry bulk trade, as high
levels of economic growth have generated increased demand for imported raw
materials. The downturn in economic activity in 2009 has obviously had a
negative impact on world trade; however, the economic stimulus packages
announced by several countries have had a positive effect on economic
development. The following table illustrates China’s and India’s gross domestic
product growth rates compared to those of the United States, Europe, Japan and
the world during the periods indicated.
Real
GDP Growth: 2000 to 2010
(%
change previous period)
GDP
|
|
2000
|
|
|
2001
|
|
|
2002
|
|
|
2003
|
|
|
2004
|
|
|
2005
|
|
|
2006
|
|
|
2007
|
|
|
2008
|
|
|
2009
|
|
|
|
2010
|
*
|
Global
Economy
|
|
|
4.8
|
|
|
|
2.4
|
|
|
|
3.0
|
|
|
|
4.1
|
|
|
|
5.3
|
|
|
|
4.4
|
|
|
|
4.9
|
|
|
|
5.0
|
|
|
|
2.8
|
|
|
|
-0.8
|
|
|
|
4.7
|
|
USA
|
|
|
3.8
|
|
|
|
0.3
|
|
|
|
1.6
|
|
|
|
2.7
|
|
|
|
3.9
|
|
|
|
3.1
|
|
|
|
2.7
|
|
|
|
2.1
|
|
|
|
0.4
|
|
|
|
-2.6
|
|
|
|
2.7
|
|
Europe
|
|
|
3.4
|
|
|
|
1.7
|
|
|
|
1.1
|
|
|
|
1.1
|
|
|
|
2.1
|
|
|
|
1.8
|
|
|
|
3.1
|
|
|
|
2.7
|
|
|
|
0.5
|
|
|
|
-4.1
|
|
|
|
1.7
|
|
Japan
|
|
|
2.8
|
|
|
|
0.4
|
|
|
|
-0.3
|
|
|
|
1.8
|
|
|
|
2.7
|
|
|
|
1.9
|
|
|
|
2.0
|
|
|
|
2.4
|
|
|
|
-1.2
|
|
|
|
-5.2
|
|
|
|
3.0
|
|
China
|
|
|
8.0
|
|
|
|
7.5
|
|
|
|
8.3
|
|
|
|
10.0
|
|
|
|
10.1
|
|
|
|
10.4
|
|
|
|
11.6
|
|
|
|
13.0
|
|
|
|
9.6
|
|
|
|
9.1
|
|
|
|
10.0
|
|
India
|
|
|
5.1
|
|
|
|
4.4
|
|
|
|
4.7
|
|
|
|
7.4
|
|
|
|
7.0
|
|
|
|
9.1
|
|
|
|
9.9
|
|
|
|
9.3
|
|
|
|
7.5
|
|
|
|
6.7
|
|
|
|
8.5
|
|
*
Provisional
Source:
Drewry
The
impact of the rapid expansion of Asian economies on dry bulk trade growth can be
seen below. In the 1990s, the average CAGR in seaborne trade was 2.4%, but in
the period 2000-2009, the average annual rate increased to 3.9%.
Dry
Bulk Trade*—Growth Rates by Period
(CAGR—Percent)
*
Based on tons
Source:
Drewry
The
following is an overview of changes in seaborne trade in major and minor bulk
cargoes in the period 2000 to 2009.
Dry
Bulk Seaborne Trade: 2000 to 2009
(Million
Tons)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
CAGR%
|
|
|
|
2000
|
|
|
2001
|
|
|
2002
|
|
|
2003
|
|
|
2004
|
|
|
2005
|
|
|
2006
|
|
|
2007
|
|
|
2008
|
|
|
2009
|
|
|
2000/2009
|
|
Coal
|
|
|
539
|
|
|
|
587
|
|
|
|
590
|
|
|
|
619
|
|
|
|
650
|
|
|
|
675
|
|
|
|
769
|
|
|
|
833
|
|
|
|
830
|
|
|
|
784
|
|
|
|
4.3
|
|
Iron
Ore
|
|
|
489
|
|
|
|
503
|
|
|
|
544
|
|
|
|
580
|
|
|
|
644
|
|
|
|
715
|
|
|
|
759
|
|
|
|
823
|
|
|
|
886
|
|
|
|
959
|
|
|
|
7.8
|
|
Grain
|
|
|
221
|
|
|
|
213
|
|
|
|
210
|
|
|
|
211
|
|
|
|
208
|
|
|
|
212
|
|
|
|
221
|
|
|
|
228
|
|
|
|
235
|
|
|
|
209
|
|
|
|
-0.6
|
|
Minor
Bulks
|
|
|
901
|
|
|
|
890
|
|
|
|
900
|
|
|
|
957
|
|
|
|
1,025
|
|
|
|
1,000
|
|
|
|
1,035
|
|
|
|
1,075
|
|
|
|
1,087
|
|
|
|
1,080
|
|
|
|
2.1
|
|
Total
|
|
|
2,150
|
|
|
|
2,193
|
|
|
|
2,244
|
|
|
|
2,367
|
|
|
|
2,526
|
|
|
|
2,602
|
|
|
|
2,783
|
|
|
|
2,958
|
|
|
|
3,037
|
|
|
|
3,032
|
|
|
|
3.9
|
|
Source:
Drewry
Coal
Asia’s
rapid industrial development has contributed to strong demand for coal, which
accounted for roughly one third of the total growth of seaborne dry bulk trade
between 2000 and 2009. Coal is divided into two main categories: thermal (or
steam) and coking (or metallurgical). Thermal coal is used mainly for power
generation, whereas coking coal is used to produce coke to feed blast furnaces
in the production of steel. Chinese and Indian electricity consumption has grown
at a rapid pace. China is the second largest consumer of electricity in the
world, even though generally highly populated developing economies have low per
capita electricity consumption.
Expansion
in air conditioned office and factory space, along with industrial use, has
increased demand for electricity, of which nearly half is generated from
coal-fired plants, thus increasing demand for thermal coal. In addition, Japan’s
domestic nuclear power generating industry has suffered from safety problems in
recent years, leading to increased demand for oil, gas and coal-fired power
generation. Furthermore, the high cost of oil and gas has led to increasing
development of coal-fired electricity plants around the world, especially in
Asia. Future prospects are heavily tied to the steel industry. Coking coal is of
a higher quality than thermal coal (i.e., more carbon and fewer impurities) and
its price is both higher and more volatile.
The
following chart illustrates trends in the Chinese coal trade in recent years.
From January to December 2009, China’s coal imports exceeded 126.6 million tons,
a year-on-year increase of approximately 310%.
Chinese
Coal Trade: 2007 to 2010
(Thousand
Tons)
Source:
Drewry
Increases
in steam coal demand have been significant, as both developed and developing
nations require increasing amounts of electric power. The main exporters of coal
are Australia, South Africa, Russia, Indonesia, United States, Colombia and
Canada. The main importers of coal are Europe, Japan, South Korea, Taiwan, India
and China, as illustrated in the first chart below. China has recently become a
net importer of coal, and Indian imports have doubled in less than five years.
Coal is transported primarily by Capesize, Panamax and Supramax
vessels.
Coal
Imports: 2002 to 2010
(Thousand
Tons)
Source:
Drewry
Iron
Ore
Iron ore
is used as a raw material for the production of steel, along with limestone and
coking (or metallurgical) coal. Steel is the most important construction and
engineering material in the world. In 2009, approximately 928 million tons of
iron ore were exported worldwide, with the main importers being China, the
European Union, Japan and South Korea. The main producers and exporters of iron
ore are Australia and Brazil.
Chinese
imports of iron ore have grown significantly due to increased steel production
in the last few years and have been a major driving force in the dry bulk
sector. In 2008, Chinese iron ore imports increased by approximately 15.7% to
444.1 million tons and despite the downturn in the world economy and global
trade they continued to grow in 2009. In 2009, total Chinese imports of iron ore
amounted to 628.2 million tons.
Iron
Ore Imports: 2000 to 2010
(Thousand
Tons)
Source:
Drewry
Chinese
Iron Ore Imports and Steel Production: 2000 to 2010
(Thousand
Tons)
Source:
Drewry
Chinese
imports of iron ore have traditionally come primarily from Australia, Brazil and
India. The shares of Indian and Brazilian imports into China have increased
since 2000. Australia and Brazil together account for approximately two-thirds
of global iron ore exports. Although both countries have seen strong demand from
China, Australia continues to benefit the most from China’s increased demand for
iron ore. India is also becoming a major exporter of iron ore. Unlike Australia
and Brazil, which tend to export primarily in the larger Capesize vessels, much
of India’s exports are shipped in smaller Panamax, Supramax and Handymax
vessels.
The
following chart shows how Chinese market share of world iron ore seaborne trade
developed between 2000 and 2009.
World
Seaborne Iron Ore Trades and Chinese Market Share
Source:
Drewry
The
growth in iron ore trades is closely linked to trends in global steel
production. World steel production rose steadily between 2000 and 2009, as did
Chinese market share, as indicated by the following chart.
World
Steel Production and Chinese Market Share
Source:
Drewry
Globally,
Chinese steel production and consumption was the principal driver of the dry
bulk shipping boom supported by the iron ore trades. From about 127.2 million
tons of crude steel output in 2000, Chinese production increased to
approximately 498 million tons in 2008 and 566 million tons in
2009.
Industrialization
of emerging economies, primarily China and India, will continue to drive an
increasing demand for steel commodities. On a per capita basis, emerging
economies are consuming less steel than developed countries and thus have a
great potential for growth in consumption. As a country builds infrastructure,
steel consumption increases on a per capita basis. This is illustrated by
Chinese construction sector demand, which accounts for close to 50% of the
country’s total steel consumption.
Grains
Grains
include wheat, coarse grains (corn, barley, oats, rye and sorghum) and oil seeds
extracted from different crops such as soybeans and cotton seeds. In general,
wheat is used for human consumption, while coarse grains are used as feed for
livestock. Oil seeds are used to manufacture vegetable oil for human consumption
or for industrial use, while their protein-rich residue is used as food for
livestock.
Global
grain production is dominated by the United States. Argentina is the second
largest producer, followed by Canada and Australia. International trade in
grains is dominated by four key exporting regions: North America, South America,
Oceania and Europe (including the former Soviet Union). These regions
collectively account for over 90% of global exports. In terms of imports, the
Asia/Pacific region (excluding Japan) ranks first, followed by Latin America,
Africa and the Middle East.
Historically,
international grain trade volumes have fluctuated considerably as a result of
regional weather conditions and the long history of grain price volatility and
government interventionism. However, demand for wheat and coarse grains are
fundamentally linked in the long-term to population growth and rising per capita
income.
Minor
Dry Bulks
The
balance of dry bulk trade, minor dry bulks, can be subdivided into two types of
cargo. The first type includes secondary dry bulks or free-flowing cargo, such
as agricultural cargoes, bauxite and alumina, fertilizers and cement. The second
type is neo-bulks, which include non-free flowing or part manufactured cargo
that is principally forest products and steel products, including
scrap.
Major
Dry Bulk Vessel Routes
Dry bulk
vessels are one of the most versatile elements of the global shipping fleet in
terms of employment alternatives. They seldom operate on round trip voyages with
high ballasting times. Rather, the norm is often triangular or multi-leg
voyages. Hence, trade distances assume greater importance in the demand
equation, and increases in long-haul shipments will have greater impact on
overall vessel demand. The following map represents the major global dry bulk
trade routes:
Major
Dry Bulk Seaborne Trades
Source:
Drewry
DEMAND
FOR DRY BULK VESSELS
Globally,
total seaborne trade in all dry bulk commodities increased from 2.15 billion
tons in 2000 to 2.97 billion tons in 2009, representing a CAGR of 3.7%. Another
industry measure of vessel demand is ton-miles, which is calculated by
multiplying the volume of cargo moved on each route by the distance of such
voyage. Between 2000 and 2009, ton-mile demand in the dry bulk sector increased
by 37% to 15.3 billion ton-miles, equivalent to a CAGR of 3.6%. The following
table illustrates this measure.
Dry
Bulk Vessel Demand: 2000 to 2009*
(
Billion
Ton-Miles)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
CAGR
|
|
|
|
2000
|
|
|
2001
|
|
|
2002
|
|
|
2003
|
|
|
2004
|
|
|
2005
|
|
|
2006
|
|
|
2007
|
|
|
2008
|
|
|
2009
|
|
|
2000/2009%
|
|
Coal
|
|
|
2,831
|
|
|
|
3,082
|
|
|
|
3,115
|
|
|
|
3,250
|
|
|
|
3,412
|
|
|
|
3,544
|
|
|
|
3,842
|
|
|
|
4,166
|
|
|
|
4,151
|
|
|
|
3,830
|
|
|
|
3.4
|
|
Iron
Ore
|
|
|
2,690
|
|
|
|
2,766
|
|
|
|
2,990
|
|
|
|
3,193
|
|
|
|
3,525
|
|
|
|
3,899
|
|
|
|
4,098
|
|
|
|
4,443
|
|
|
|
4,782
|
|
|
|
5,011
|
|
|
|
7.2
|
|
Grain
|
|
|
1,161
|
|
|
|
1,118
|
|
|
|
1,103
|
|
|
|
1,108
|
|
|
|
1,089
|
|
|
|
1,113
|
|
|
|
1,161
|
|
|
|
1,196
|
|
|
|
1,231
|
|
|
|
1,128
|
|
|
|
-0.3
|
|
Minor
Bulks
|
|
|
4,457
|
|
|
|
4,404
|
|
|
|
4,452
|
|
|
|
4,724
|
|
|
|
5,059
|
|
|
|
4,927
|
|
|
|
5,096
|
|
|
|
5,289
|
|
|
|
5,354
|
|
|
|
5,296
|
|
|
|
1.9
|
|
Total
|
|
|
11,138
|
|
|
|
11,371
|
|
|
|
11,641
|
|
|
|
12,274
|
|
|
|
13,086
|
|
|
|
13,728
|
|
|
|
14,197
|
|
|
|
15,094
|
|
|
|
15,518
|
|
|
|
15,265
|
|
|
|
3.6
|
|
*
includes ton-mile demand for vessels less than 10,000 dwt.
Source:
Drewry
Seasonality
Two of
the three largest commodity drivers of the dry bulk industry, coal and grains,
are affected by seasonal demand fluctuations. Thermal coal is linked to the
energy markets and in general encounters upswings towards the end of the year in
anticipation of the forthcoming winter period as power supply companies try to
increase their stocks, or during hot summer periods when increased electricity
demand is required for air conditioning and refrigeration purposes. Grain
production is also seasonal and is driven by the harvest cycle of the northern
and southern hemispheres. However, with four nations and the European Union
representing the largest grain producers (the United States, Canada and the
European Union in the northern hemisphere and Argentina and Australia in the
southern hemisphere), harvests and crops reach seaborne markets throughout the
year. In 2009, seasonal trading patterns were also disrupted due to Chinese iron
ore price negotiations. Taken as a whole, seasonal factors mean that the market
for dry bulk vessels is often stronger during the winter
months.
Supply
of Dry Bulk Vessels
The world
dry bulk fleet is generally divided into six major categories, based on a
vessel’s cargo carrying capacity. These categories consist of: Handysize,
Handymax/Supramax, Panamax, Post Panamax, Capesize and Very Large Ore
Carrier.
Category
|
|
Size
Range - Dwt
|
Handysize
|
|
10-39,999
|
Handymax/Supramax
|
|
40-59,999
|
Panamax
|
|
60-79,999
|
Post
Panamax
|
|
80-109,999
|
Capesize
|
|
110-199,999
|
VLOC
|
|
200,000
+
|
Ø
Handysize.
Handysize vessels have a carrying capacity of up to 39,999 dwt. These vessels
are primarily involved in carrying minor bulk cargoes. Increasingly, vessels of
this type operate on regional trading routes, and may serve as trans-shipment
feeders for larger vessels. Handysize vessels are well suited for small ports
with length and draft restrictions. Their cargo gear enables them to service
ports lacking the infrastructure for cargo loading and unloading.
Ø
Handymax/Supramax.
Handymax vessels have a carrying capacity of between 40,000 and 59,999 dwt.
These vessels operate on a large number of geographically dispersed global trade
routes, carrying primarily iron ore, coal, grains and minor bulks. Within the
Handymax category there is also a sub-sector known as
Supramax
.
Supramax bulk vessels are vessels between 50,000 to 59,999 dwt, normally
offering cargo loading and unloading flexibility with on-board cranes, while at
the same time possessing the cargo carrying capability approaching conventional
Panamax bulk vessels. Hence, the earnings potential of a Supramax dry bulk
vessel, when compared to a conventional Handymax vessel of 45,000 dwt, is
greater.
Ø
Panamax.
Panamax vessels have a carrying capacity of between 60,000 and 79,999 dwt. These
vessels carry coal, grains, and, to a lesser extent, minor bulks, including
steel products, forest products and fertilizers. Panamax vessels are able to
pass through the Panama Canal, making them more versatile than larger
vessels.
Ø
Post
Panamax.
(sometimes known as Kamsarmax). Post Panamax vessels typically
have a carrying capacity of between 80,000 and 109,999 dwt. These vessels tend
to be shallower and have a larger beam than a standard Panamax vessel with a
higher cubic capacity. They have been designed specifically for loading high
cubic cargoes from draught restricted ports. This type of vessel cannot transit
the Panama Canal. The term Kamsarmax stems from Port Kamsar in Guinea, where
large quantities of bauxite are exported from a port with only 13.5 meter
draught and a 229 meter length overall restriction, but no beam
restriction.
Ø
Capesize.
Capesize vessels have carrying capacities of between 110,000 and 199,999 dwt.
Only the largest ports around the world possess the infrastructure to
accommodate vessels of this size. Capesize vessels are mainly used to transport
iron ore or coal and, to a lesser extent, grains, primarily on long-haul
routes.
Ø
VLOC.
Very large ore carriers are in excess of 200,000 dwt and are a comparatively new
sector of the dry bulk vessel fleet. VLOCs are built to exploit economies of
scale on long-haul iron ore routes.
Dry
Bulk Vessels: Indicative Deployment by Size Category
Cargo Type
|
|
Handysize
|
|
Handymax
|
|
Supramax
|
|
Panamax
|
|
Post Panamax/
Kamsarmax
|
|
Capesize
|
|
VLOC
|
Iron Ore
|
|
|
|
|
|
|
|
|
|
|
|
X
|
|
X
|
Coal
|
|
|
|
|
|
X
|
|
X
|
|
X
|
|
X
|
|
X
|
Grains
|
|
|
|
|
|
X
|
|
X
|
|
X
|
|
|
|
|
Alumina,
Bauxite
|
|
|
|
|
|
X
|
|
X
|
|
X
|
|
|
|
|
Steel
Products
|
|
|
|
X
|
|
X
|
|
X
|
|
X
|
|
|
|
|
Forest
Products
|
|
|
|
X
|
|
X
|
|
|
|
|
|
|
|
|
Fertilizers
|
|
|
|
X
|
|
X
|
|
X
|
|
|
|
|
|
|
Minerals
|
|
|
|
X
|
|
X
|
|
X
|
|
|
|
|
|
|
Minor
Bulks-Other
|
|
X
|
|
X
|
|
X
|
|
X
|
|
|
|
|
|
|
Source:
Drewry
The
supply of dry bulk shipping capacity, measured by the amount of suitable vessel
tonnage available to carry cargo, is determined by the size of the existing
worldwide dry bulk fleet, the number of new vessels on order, the scrapping of
older vessels and the number of vessels out of active service (i.e., laid up or
otherwise not available for hire). In addition to prevailing and anticipated
freight rates, factors that affect the rate of newbuilding, scrapping and
laying-up include newbuilding prices, secondhand vessel values in relation to
scrap prices, costs of bunkers and other voyage expenses, costs associated with
classification society surveys, normal maintenance and insurance coverage, the
efficiency and age profile of the existing fleets in the market and government
and industry regulation of marine transportation practices.
The
supply of dry bulk vessels is not only a result of the number of vessels in
service, but also the operating efficiency of the fleet. For example, during
times of very heavy commodity demand, bottlenecks develop in the form of port
congestion, which absorbs fleet capacity through delays in loading and
discharging of cargo.
As of
October 31, 2010, the world fleet of dry bulk vessels consisted of 7,858
vessels, totaling 518 million dwt in capacity. These figures are, however, based
on pure dry bulk vessels and exclude a small number of combination
vessels.
The
following table presents the world dry bulk vessel fleet by size as of October
31, 2010.
Dry
Bulk Fleet: October 31, 2010
Size Category
|
|
Deadweight
Tons
|
|
|
Number of
Vessels
|
|
|
% of Total
Fleet
|
|
|
Total
Capacity
|
|
|
% of Total
Fleet
|
|
|
|
|
|
|
|
|
|
(number)
|
|
|
(million dwt)
|
|
|
(dwt)
|
|
Handysize
|
|
|
10-39,999
|
|
|
|
2,878
|
|
|
|
36.6
|
|
|
|
79.2
|
|
|
|
15.3
|
|
Handymax
|
|
|
40-59,999
|
|
|
|
2,070
|
|
|
|
26.3
|
|
|
|
103.8
|
|
|
|
20.0
|
|
Panamax
|
|
|
60-79,999
|
|
|
|
1,420
|
|
|
|
18.1
|
|
|
|
102.0
|
|
|
|
19.7
|
|
Post
Panamax
|
|
|
80-109,999
|
|
|
|
376
|
|
|
|
4.8
|
|
|
|
33.0
|
|
|
|
6.4
|
|
Capesize
|
|
|
110-199,999
|
|
|
|
923
|
|
|
|
11.8
|
|
|
|
154.2
|
|
|
|
29.7
|
|
VLOC
|
|
|
200,000
|
+
|
|
|
191
|
|
|
|
2.4
|
|
|
|
45.9
|
|
|
|
8.9
|
|
Total
|
|
|
|
|
|
|
7,858
|
|
|
|
100.0
|
|
|
|
518.0
|
|
|
|
100.0
|
|
Source:
Drewry
As the
table below illustrates, ownership of the world dry bulk fleet remains
fragmented with no single owner accounting for more than 6% of any one
sector.
The
average age of dry bulk vessels in service as of October 31, 2010 was
approximately 14.0 years, and 22% of the fleet is more than 20 years old. The
following chart illustrates the age profile of the global dry bulk vessel fleet
as of October 31, 2010.
Dry
Bulk Vessel Fleet Age Profile: October 31, 2010
(Millions
of Dwt & No. of Vessels)
Source:
Drewry
The
supply of dry bulk vessels depends on the delivery of new vessels and the
removal of vessels from the global fleet, either through scrapping or
loss.
As of
October 31, 2010, the global dry bulk orderbook (excluding options) amounted to
285.4 million dwt, or 55.1% of the then-existing dry bulk fleet. The size of
orderbook built up rapidly in the period 2006 to 2008, when strong freight
encouraged high levels of new ordering. Although there was decreased new
ordering in the dry sector in 2009, new ordering
levels increased during the first six months of 2010.
Dry
Bulk Vessel Orderbook: October 31, 2010
Size
|
|
2010
|
|
|
2011
|
|
|
2012
|
|
|
2013
|
|
|
2014
|
|
|
2015+
|
|
|
Total
|
|
|
No.
|
|
|
Dwt
|
|
|
No.
|
|
|
Dwt
|
|
|
No.
|
|
|
Dwt
|
|
|
No.
|
|
|
Dwt
|
|
|
No.
|
|
|
Dwt
|
|
|
No.
|
|
|
Dwt
|
|
|
No.
|
|
|
Dwt
|
|
|
%
of fleet
|
10-40,000
|
|
350
|
|
|
10,949
|
|
|
287
|
|
|
9,436
|
|
|
135
|
|
|
4,581
|
|
|
17
|
|
|
572
|
|
|
0
|
|
|
0
|
|
|
0
|
|
|
0
|
|
|
789
|
|
|
25,538
|
|
|
32.3%
|
40-60,000
|
|
409
|
|
|
22,864
|
|
|
338
|
|
|
19,135
|
|
|
119
|
|
|
6,695
|
|
|
17
|
|
|
931
|
|
|
0
|
|
|
0
|
|
|
0
|
|
|
0
|
|
|
883
|
|
|
49,624
|
|
|
47.8%
|
60-80,000
|
|
78
|
|
|
5,817
|
|
|
77
|
|
|
5,477
|
|
|
55
|
|
|
3,594
|
|
|
16
|
|
|
1,006
|
|
|
2
|
|
|
121
|
|
|
0
|
|
|
0
|
|
|
228
|
|
|
16,015
|
|
|
15.7%
|
80-110,000
|
|
208
|
|
|
18,156
|
|
|
243
|
|
|
21,029
|
|
|
89
|
|
|
7,592
|
|
|
19
|
|
|
1,646
|
|
|
4
|
|
|
330
|
|
|
0
|
|
|
0
|
|
|
563
|
|
|
48,753
|
|
|
148.0%
|
110-200,000
|
|
303
|
|
|
51,722
|
|
|
210
|
|
|
35,001
|
|
|
72
|
|
|
11,724
|
|
|
18
|
|
|
2,875
|
|
|
1
|
|
|
180
|
|
|
0
|
|
|
0
|
|
|
604
|
|
|
101,502
|
|
|
65.8%
|
200,000+
|
|
19
|
|
|
5,415
|
|
|
61
|
|
|
17,975
|
|
|
56
|
|
|
16,285
|
|
|
14
|
|
|
3,726
|
|
|
2
|
|
|
545
|
|
|
0
|
|
|
0
|
|
|
152
|
|
|
43,946
|
|
|
95.7%
|
Total
|
|
1,367
|
|
|
114,923
|
|
|
1,216
|
|
|
108,053
|
|
|
526
|
|
|
50,472
|
|
|
101
|
|
|
10,755
|
|
|
9
|
|
|
1,176
|
|
|
0
|
|
|
0
|
|
|
3,219
|
|
|
285,379
|
|
|
55.1%
|
Dry
Bulk Vessel Orderbook (‘000 Dwt) by Delivery Date: as of October 31,
2010
(By
Scheduled Year of Delivery)
Source:
Drewry
Deliveries
& Slippage
If all
the vessels currently on order are delivered on time and to schedule, there
would be a large influx of newbuildings in 2010 and 2011 in the dry bulk sector.
However, it is clear that not all vessels currently on order will be delivered
on time for a number of reasons, including the following:
|
Ø
|
In
the most recent new ordering spree, which peaked in early 2008, shipowners
were quoted unrealistic delivery times by some of the less experienced and
new emerging shipyards.
|
|
Ø
|
The
current economic and financial crisis and the steep depression in shipping
markets generally may lead to further orderbook cancellations. A
significant number of dry bulk vessel orders have been cancelled since the
crisis began in the second half of
2008.
|
|
Ø
|
Financing
is not in place for all of the vessels on order and in the current climate
some owners will find it difficult to secure adequate
funding.
|
|
Ø
|
Orders
have been placed at “greenfield” shipyards, some of which are also finding
it difficult to secure funding for yard
development.
|
|
Ø
|
Even
before the crisis, the less experienced shipyards were experiencing delays
in deliveries.
|
Delays in
deliveries are often referred to as slippage. Historically, slippage rates have
tended to be less than 10%, which means that 10% of the vessels due to be
delivered in any year are in fact delivered in subsequent years. However, in
2007 and 2008 slippage rates rose, as the high level of new ordering that
occurred across all market sectors since 2004 led to the commercial vessel
orderbook reaching its highest point in history. This placed pressure on
shipbuilding capacity, which in turn has forced shipowners to place orders for
new vessels in countries or shipyards which have little or no experience in
building vessels for international customers. Indeed, in some cases the orders
have been placed with new shipyards which have yet to construct the actual
shipbuilding facilities—the so called “greenfield” shipyards.
In the
dry bulk sector, the evidence suggests that the slippage rate was slightly less
than 20% in 2008 and that it increased further in 2009. At the start of 2009,
approximately 70 million dwt was scheduled for delivery in the year, but by the
year end only 43 million dwt had been completed. Although late reports may
inflate the 43 million dwt, it seems that slippage rates have increased in the
dry bulk sector. As previously explained, one reason for the delay in deliveries
is the inexperience of some of the shipyards constructing dry bulk vessels.
Indeed, almost 50% of the current dry bulk vessel orderbook is with Chinese
shipyards.
Dry
Bulk Vessel Orderbook—By Place of Build: October 31, 2010
Source:
Drewry
Taken as
whole, slippage is a manifestation of the combined effects of (1) shipyards
initially quoting unrealistic delivery times, (2) inexperience among new
shipbuilders, and (3) financing problems associated with both shipowners
securing finance and new shipyards obtaining development capital.
The
outcome is that the delivery of new vessels to the marketplace has been at a
slower pace than the headline newbuilding orderbook delivery schedule would
suggest. If this situation persists, the increases in dry bulk vessel supply
will be spread out over a longer period of time.
Vessel
Scrapping
The level
of scrapping activity is generally a function of the age profile of the fleet,
as all vessels have finite lives, together with charter market conditions, and
operating, repair and survey costs. While strong freight markets persisted,
there was minimal scrapping activity, but as freight markets weakened, scrapping
activity has increased. The following chart illustrates the scrapping rates of
dry bulk vessels for the periods indicated. It can be seen there was a marked
increase in scrapping activity in 2008, 2009 and the first eight months of
2010.
Dry
Bulk Vessel Scrapping: 2000 to October 2010
(‘000
Dwt)
*
January to October 2010
Source:
Drewry
CHARTER
MARKET
Dry bulk
vessels are employed in the market through a number of different chartering
options. The general terms typically found in these types of contracts are
described below.
Ø
Time
Charter.
A charter under which the vessel owner is paid charterhire on a
per-day basis for a specified period of time. Typically, the shipowner receives
semi-monthly charterhire payments on a U.S. dollar-per-day basis and is
responsible for providing the crew and paying vessel operating expenses while
the charterer is responsible for paying the voyage expenses and additional
voyage insurance. Under time charters, including trip time charters, the
charterer pays voyage expenses such as port, canal and fuel costs and
bunkers.
Ø
Trip
Charter.
A time charter for a trip to carry a specific cargo from a load
port to a discharge port at a set daily rate.
Ø
Voyage
Charter.
A voyage charter involves the carriage of a specific amount and
type of cargo on a load port-to-discharge port basis, subject to various cargo
handling terms. Most of these charters are of a single voyage nature, as trading
patterns do not encourage round voyage trading. The owner of the vessel receives
one payment derived by multiplying the tonnage of cargo loaded on board by the
agreed upon freight rate expressed on a U.S. dollar-per-ton basis. The owner is
responsible for the payment of all voyage and operating expenses, as well as the
capital costs of the vessel.
Ø
Spot
Charter.
A spot charter generally refers to a voyage charter or a trip
charter, which generally last from 10 days to three months. Under both types of
spot charters, the shipowner would pay for vessel operating expenses, which
include crew costs, provisions, deck and engine stores, lubricating oil,
insurance, maintenance and repairs and for commissions on gross revenues. The
shipowner would also be responsible for each vessel’s intermediate and special
survey costs.
Ø
Contract of
Affreightment.
A contract of affreightment, or CoA, relates to the
carriage of multiple cargoes over the same route and enables the CoA holder to
nominate different vessels to perform the individual voyages. Essentially, it
constitutes a series of voyage charters to carry a specified amount of cargo
during the term of the CoA, which usually spans a number of years. The entire
vessel’s operating expenses, voyage expenses and capital costs are borne by the
shipowner. Freight normally is agreed on a U.S. dollar-per-ton
basis.
Ø
Bareboat
Charter.
A bareboat charter involves the use of a vessel usually over
longer periods of time ranging over several years. In this case, all voyage
related costs, mainly vessel fuel and port dues, as well as all vessel operating
expenses, such as day-to-day operations, maintenance, crewing and insurance, are
for the charterer’s account. The owner of the vessel receives monthly charter
hire payments on a U.S. dollar per day basis and is responsible only for the
payment of capital costs related to the vessel. A bareboat charter is also known
as a “demise charter” or a “time charter by demise.”
Charter
Rates
In the
time charter market, rates vary depending on the length of the charter period
and vessel specific factors such as age, speed, size and fuel consumption. In
the voyage charter market, rates are influenced by cargo size, commodity, port
dues and canal transit fees, as well as delivery and redelivery regions. In
general, a larger cargo size is quoted at a lower rate per ton than a smaller
cargo size. Routes with costly ports or canals generally command higher rates.
Voyages loading from a port where vessels usually discharge cargo, or
discharging from a port where vessels usually load cargo, are generally quoted
at lower rates. This is because such voyages generally increase vessel
efficiency by reducing the unloaded portion (or ballast leg) that is included in
the calculation of the return charter to a loading area.
Within
the dry bulk shipping industry, the freight rate indices issued by the Baltic
Exchange in London are the references most likely to be monitored. These
references are based on actual charter hire rates under charters entered into by
market participants as well as daily assessments provided to the Baltic Exchange
by a panel of major shipbrokers. The Baltic Exchange, an independent
organization comprised of shipbrokers, shipping companies and other shipping
players, provides daily independent shipping market information and has created
freight rate indices reflecting the average freight rates (that incorporate
actual business concluded as well as daily assessments provided to the exchange
by a panel of independent shipbrokers) for the major bulk vessel trading routes.
These indices include the Baltic Panamax Index, or BPI, the index with the
longest history and, more recently, the Baltic Capesize Index, or BCI. The
following chart details the movement of the BPI, BCI and Baltic Supramax
Index.
Baltic
Exchange Freight Indices: 2000 to 2010
(Index
Points)
*
The Baltic Supramax Index (BSI) is
included from January 7, 2005, the date of its initial
calculation.
Source:
Baltic Exchange
Charter
(or hire) rates paid for dry bulk vessels are generally a function of the
underlying balance between vessel supply and demand. Over the past 25 years, dry
bulk cargo charter rates have passed through cyclical phases and changes in
vessel supply and demand have created a pattern of rate “peaks” and “troughs,”
which can been from the chart above. Generally, spot/voyage charter rates will
be more volatile than time charter rates, as they reflect short term movements
in demand and market sentiment. The BDI declined from a high of 11,793 on May
20, 2008 to a low of 663 on December 5, 2008, which represents a decline of 94%
within a single calendar year. The BDI fell over 70% during October 2008 alone.
During 2009 and through the six-month period ended June 30, 2010, the BDI
remained volatile, reaching in 2009 a low of 772 on January 5, 2009 and a high
of 4,661 on November 19, 2009, and, in such six-month period ending June 30,
2010, reaching a high of 4,209 on May 26, 2010 and a low of 2,406 on June 30,
2010.
The trend
in voyage rates expressed in terms of a time charter equivalent is shown in the
following chart for representative dry bulk vessels.
Dry
Bulk Vessels TCE Rates: 2002 to 2010
(U.S.
Dollars per Day)
Source:
Drewry
In the
time charter market, rates vary depending on the length of the charter period as
well as vessel specific factors, such as age, speed and fuel consumption.
Generally, short-term time charter rates are higher than long-term charter
rates. The market benchmark tends to be a 12-month time charter rate, based on a
modern vessel.
From
early 2006 until the middle of 2008, rates for all sizes of dry bulk vessels
increased significantly and in most cases reached record levels. However, the
severe downturn in the global economy in the second half of 2008 and the
collapse in demand for dry bulk vessels led rates to plummet to record lows.
Since the early part of 2009 rates have been volatile, but they have gradually
recovered from the market lows, with further improvements taking place in the
first half of 2010, before leveling out in the period July to October
2010.
The
following charts show one year time charter rates for Capesize, Panamax,
Supramax and Handysize class vessels between 2000 and October
2010.
One
Year Time Charter Rates: 2000 to October 2010
(U.S.
Dollars per Day)
Source:
Drewry
The
following table illustrates a comparison of average one year time charter rates
for Handysize, Supramax, Panamax, Capesize and VLOC dry bulk vessels between
2000 and October 2010.
Dry
Bulk Vessels—One Year Time Charter Rates (Period Averages)
(U.S.
Dollars per Day)
|
|
Handysize
|
|
|
Supramax
|
|
|
Panamax
|
|
|
Capesize
|
|
|
VLOC
|
|
|
|
28,000 dwt
|
|
|
55,000 dwt
|
|
|
75,000 dwt
|
|
|
170,000 dwt
|
|
|
200,000 dwt+
|
|
|
|
10-15 years old
|
|
|
1-5 years old
|
|
|
1-5 years old
|
|
|
1-5 years old
|
|
|
1-5 years old
|
|
2000
|
|
|
7,371
|
|
|
|
9,433
|
|
|
|
11,063
|
|
|
|
18,021
|
|
|
|
n/a
|
|
2001
|
|
|
5,629
|
|
|
|
8,472
|
|
|
|
9,543
|
|
|
|
14,431
|
|
|
|
n/a
|
|
2002
|
|
|
4,829
|
|
|
|
7,442
|
|
|
|
9,102
|
|
|
|
13,608
|
|
|
|
n/a
|
|
2003
|
|
|
8,289
|
|
|
|
13,736
|
|
|
|
17,781
|
|
|
|
30,021
|
|
|
|
n/a
|
|
2004
|
|
|
14,413
|
|
|
|
31,313
|
|
|
|
36,708
|
|
|
|
55,917
|
|
|
|
n/a
|
|
2005
|
|
|
12,021
|
|
|
|
23,038
|
|
|
|
27,854
|
|
|
|
49,333
|
|
|
|
54,330
|
|
2006
|
|
|
12,558
|
|
|
|
21,800
|
|
|
|
22,475
|
|
|
|
45,646
|
|
|
|
50,650
|
|
2007
|
|
|
23,021
|
|
|
|
43,946
|
|
|
|
52,229
|
|
|
|
102,875
|
|
|
|
107,920
|
|
2008
|
|
|
24,110
|
|
|
|
48,310
|
|
|
|
56,480
|
|
|
|
116,180
|
|
|
|
119,240
|
|
2009
|
|
|
9,425
|
|
|
|
15,179
|
|
|
|
19,650
|
|
|
|
35,285
|
|
|
|
30,950
|
|
October
2010(1)
|
|
|
13,000
|
|
|
|
19,700
|
|
|
|
23,000
|
|
|
|
43,000
|
|
|
|
44,000
|
|
(1)
Average rate for October 2010
Newbuilding
Prices
Newbuilding
prices are determined by a number of factors, including the underlying balance
between shipyard output and newbuilding demand, raw material costs, freight
markets and exchange rates. From 2003 to 2007, high levels of new ordering were
recorded across all sectors of shipping, and as a result, newbuilding prices
increased significantly, as can be seen in the chart below. However, as freight
markets declined in the second half of 2008, new vessel ordering came to an
almost complete stop, which made the assessment of newbuilding prices very
difficult. Nevertheless, based on the few contracts which have been reported, it
is evident that prices for new vessels also weakened in line with the general
downturn in the market, but have shown some signs of
stabilizing in 2010.
The
following chart depicts changes in newbuilding contract prices for dry bulk
vessels on a monthly basis since 2000 to October 2010.
Dry
Bulk Vessel Newbuilding Prices: 2000 to October 2010
(Million
U.S. Dollars)
Source:
Drewry
Secondhand
Prices
The
dramatic increase in newbuilding prices and the strength of the charter market
have also affected values in the secondhand market, to the extent that prices
for dry bulk vessels rose sharply from 2004 reaching a peak in mid 2008. With
vessel earnings running at relatively high levels and a limited availability of
newbuilding berths, the ability to deliver a vessel early has resulted in
increases in secondhand prices, especially for modern tonnage. Consequently,
secondhand prices of modern dry bulk vessels in 2008 reached higher levels than
those of comparably sized newbuildings.
However,
this situation changed quickly when the freight market fell and values for all
types of bulk vessels declined steeply in the second half of 2008. There were
very few recorded sales in the second half of 2008 after the market collapsed
and the trend in prices during this period can only be taken as an assessment.
In 2009, there were more reported sales and the details of these sales seem to
suggest that after reaching a low in the early part of 2009, prices for modern
secondhand dry bulk vessels have since staged a modest recovery that has
continued in the first ten months of 2010.
Dry
Bulk Vessel Secondhand Prices: 2000 to October 2010
5
Year Old Vessels*
(Million U.S.
Dollars
)
*
Handysize vessel is 10 years old
Source:
Drewry
Port
Congestion
Supply of
dry bulk vessel capacity is also affected by the operating efficiency of the
global fleet. In recent years, the growth in trade has led to port congestion,
with vessels at times being forced to wait outside port to either load or
discharge due to limited supply of berths at major ports. At major Australian
coal and iron ports in 2009/ 2010, delays were several days for most vessels,
and there have also been delays in unloading at Chinese dry bulk terminals. In
effect, port delays absorb shipping capacity, and the potential impact of this
type of delay on capacity is illustrated in the chart below.
Port
Delays—Impact on Shipping Capacity
Indicates
reduction in shipping capacity of a 170,000 dwt Capesize bulk
vessel
trading
iron ore on round voyages
Source:
Drewry
Based on
a Capesize bulk vessel trading iron ore on a round voyage pattern from Australia
to China, a 10-day delay for loading on each voyage would reduce the overall
transportation capacity of the vessel by 30%. Hence, delays at major bulk vessel
loading ports have reduced the amount of available shipping capacity in the
sector, and in doing so have led to a much tighter balance between overall
supply and demand.
OUR
COMPANY
We are an
integrated dry bulk shipping company, which began operations in September 2006,
providing marine transportation services on a worldwide basis. We own, operate
and manage a fleet of dry bulk vessels that transport iron ore, coal, grain,
steel products, cement, alumina and other dry bulk cargoes internationally.
Following the conclusion of our IPO on June 1, 2007, our common shares were
listed on the AIM under the ticker “GLBS.” As of November 19, 2010, our issued
and outstanding capital stock consisted of 7,241,865 common shares.
We intend
to grow our fleet through timely and selective acquisitions of modern vessels in
a manner that we believe will provide an attractive return on equity and will be
accretive to our earnings and cash flow based on anticipated market rates at the
time of purchase. There is no guarantee however, that we will be able to find
suitable vessels to purchase or that such vessels will provide an attractive
return on equity or be accretive to our earnings and cash flow.
Our
policy is to charter our vessels on charters generally with durations of up to
three years, while also engaging vessels on the spot market. We may, from time
to time, enter into charters with longer durations depending on our assessment
of market conditions.
Our
operations are managed by our Athens, Greece-based wholly owned subsidiary,
Globus Shipmanagement, which provides in-house commercial and technical
management exclusively for our vessels. Globus Shipmanagement enters into a ship
management agreement with each of our wholly owned vessel-owning subsidiaries to
provide services that include managing day-to-day vessel operations, such as
supervising the crewing, supplying, maintaining of vessels and other
services.
OUR
FLEET
As of
December 31, 2009, our fleet comprised a total of four dry bulk vessels,
consisting of two Handymaxes, one Supramax and one Panamax, with a weighted
average age of approximately 10.5 years and a total carrying capacity of 212,915
dwt.
In
February 2010, we sold both Handymax vessels, the
m/v Sea Globe
and the
m/v Coral Globe
, for an
aggregate total selling price of $34.0 million. In May 2010, we purchased two
sister ships, the
m/v Sky
Globe
and
m/v Star
Globe
, for a total purchase price of approximately $65.7 million. In June
2010, we purchased one Kamsarmax vessel, the
m/v Jin Star
, for $41.1
million.
The
weighted average age of the vessels in our fleet as of September 30, 2010 was
3.7 years. The following table presents information concerning our
vessels.
Vessel
|
|
Year
Built
|
|
Flag
|
|
Direct
Owner
|
|
Shipyard
|
|
Vessel
Type
|
|
Delivery
Date
|
|
Carrying
Capacity
(dwt)
|
|
Charter
Type
|
|
Rate
(per
day)(1)
|
|
|
Earliest
Anticipated
Redelivery
Date
|
|
m/v
Tiara Globe
|
|
1998
|
|
Marshall
Islands
|
|
Elysium
Maritime
Limited
|
|
Hudong
Zhonghua
|
|
Panamax
|
|
December
2007
|
|
|
72,928
|
|
Time
|
|
$
|
20,000
|
|
|
January
2012
|
(2)
|
m/v
River Globe
|
|
2007
|
|
Marshall
Islands
|
|
Devocean
Maritime Ltd.
|
|
Yangzhou
Dayang
|
|
Supramax
|
|
December
2007
|
|
|
53,627
|
|
Spot
|
|
|
n/a
|
|
|
|
n/a
|
|
m/v
Sky Globe
|
|
2009
|
|
Marshall
Islands
|
|
Domina
Maritime Ltd.
|
|
Taizhou
Kouan
|
|
Supramax
|
|
May
2010
|
|
|
56,785
|
|
Spot
|
|
|
n/a
|
|
|
|
n/a
|
|
m/v
Star Globe
|
|
2010
|
|
Marshall
Islands
|
|
Dulac
Maritime S.A.
|
|
Taizhou
Kouan
|
|
Supramax
|
|
May
2010
|
|
|
56,785
|
|
Time
|
|
$
|
22,000
|
|
|
April
2011
|
|
m/v
Jin Star
|
|
2010
|
|
Panama
|
|
Kelty
Marine Ltd.
|
|
Jiangsu
Eastern
|
|
Kamsarmax
|
|
June
2010
|
|
|
79,788
|
|
Bareboat
|
|
$
|
14,250
|
|
|
January
2015
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total:
|
|
|
319,913
|
|
|
|
|
|
|
|
|
|
|
(1)
This table shows gross rates and does not reflect any commissions
payable.
(2)
The time charter contains a provision that allows for redelivery plus or minus
15 days.
We own
each of our vessels through separate, wholly owned subsidiaries, all
incorporated in the Marshall Islands. The Panamax vessel and all of our Supramax
vessels are geared. Geared vessels can operate in ports with minimal shore-side
infrastructure. Due to the ability to switch between various dry bulk cargo
types and to service a wider variety of ports, the day rates for geared vessels
tend to have a premium.
We budget
20 days per drydocking per vessel. Actual length will vary based on the
condition of each vessel, shipyard schedules and other factors.
The
following table provides information about vessels we previously owned since we
began our operations and subsequently sold:
Vessel
|
Type
|
Year Built
|
Month-Year of
Delivery
|
Month-Year Sold
|
m/v
Ocean Globe
|
Handymax
|
1995
|
September
2006
|
November
2008
|
m/v
Island Globe
|
Panamax
|
1995
|
July
2007
|
September
2009
|
m/v
Gulf Globe
|
Handymax
|
1994
|
January
2007
|
October
2009
|
m/v
Lake Globe
|
Handymax
|
1994
|
December
2006
|
November
2009
|
m/v
Coral Globe
|
Handymax
|
1994
|
November
2006
|
February
2010
|
m/v
Sea Globe
|
Handymax
|
1995
|
September
2006
|
February
2010
|
All the
vessels that we purchased and sold since we began our operations were purchased
from and sold to unaffiliated third parties.
Our
capital expenditures, which principally consist of purchasing, operating and
maintaining dry bulk vessels,
for the previous three
fiscal years consisted of deferred drydocking costs. We paid deferred drydocking
costs of $1.1 million in 2009, of $2.8 million in 2008 and of $1.7 million in
2007. During the six-month period ended June 30, 2009, we paid deferred
drydocking costs of $0.3 million. We did not incur any deferred drydocking costs
during the six-month period ended June 30, 2010.
VESSEL
EMPLOYMENT
Our
policy is to charter the majority of our vessels with durations of up to three
years, while also employing a small number of our vessels on the spot market. We
believe our chartering strategy provides cash flow stability and high
utilization rates, while reducing our potential exposure to a market downturn,
and at the same time exposing us to the potential revenues that can be generated
on the spot market. We may, however, seek to employ a greater portion of our
fleet on the spot market or on time charters with longer durations, should we
believe it to be in our best interests. We continually monitor developments in
the dry bulk shipping industry and, subject to market demand, will adjust the
number of vessels on charters and the charter periods for our vessels according
to market conditions.
We and
Globus Shipmanagement have developed relationships with a number of
international charterers, vessel brokers, financial institutions, insurers and
shipbuilders. We have also developed a network of relationships with vessel
brokers who help facilitate vessel charters and acquisitions.
Employment of our Vessels
The
m/v Tiara Globe
is employed
on a time charter with Transgrain Shipping
that began in February
2010,
at the gross
rate of $20,000 per day, for a minimum of 24 months (maximum of 26 months) from
such date.
The
m/v Star Globe
is employed on
a time charter with Transgrain Shipping that began in May 2010, at the gross
rate of $22,000 per day, and is scheduled to expire in 11 months (maximum 13
months) from such date.
The
m/v River Globe
was
employed on a time
charter with Eastern Bulk Carriers A/S at the gross rate of $25,000 per day,
which has since been redelivered to us. We currently employ such vessel on the
spot market while we contemplate employing this vessel on a new time
charter.
The
m/v Jin Star
is employed on a
bareboat charter with Eastern Media International Corporation and Far Eastern
Silo & Shipping (Panama) S.A., at the gross rate of $14,250 per day, for a
period of five years (which can be extended for one year at the charterer’s
option, and thereafter extended one additional year at our option).
The
m/v Sky Globe
is employed on
the spot market.
Each of
our vessels travels across the world and not on any particular route. The
charterers of our vessels, whether time, bareboat or on the spot market, select
the locations to which our vessels travel.
TIME
CHARTER
A time
charter is a contract for the use of a vessel for a fixed period of time at a
specified daily rate. Under a time charter, the vessel owner provides crewing,
insuring, repairing and maintenance and other services related to the vessel’s
operation, the cost of which is included in the daily rate, and the customer is
responsible for substantially all of the vessel voyage costs, including the cost
of bunkers (fuel oil) and canal and port charges. The owner also pays
commissions typically ranging from 0% to 6.25% of the total daily charter hire
rate of each charter to unaffiliated ship brokers and to in-house brokers
associated with the charterer, depending on the number of brokers involved with
arranging the charter. Two of the vessels in our fleet are hired out under time
charters, and we intend to continue to hire out our vessels under time charters
in the future.
Basic
Hire Rate and Term
“Basic
hire rate” refers to the basic payment from the customer for the use of the
vessel. The hire rate is generally payable semi-monthly or 15 days, in advance,
in U.S. dollars as specified in the charter. The following chart discloses when
such vessels are contracted to be redelivered to us at the end of the charter
period.
Vessel
Name
|
Earliest
Anticipated Redelivery Date
|
m/v
Tiara Globe
|
January
2012(1)
|
m/v
Star Globe
|
April
2011
|
(1)
The time charter contains a provision that allows for redelivery plus or minus
15 days.
Off-hire
When the
vessel is “off-hire,” the charterer generally is not required to pay the basic
hire rate, and we are responsible for all costs. Prolonged off-hire may lead to
vessel substitution or termination of the time charter. A vessel generally will
be deemed off-hire if there is a loss of time due to, among other things,
operational deficiencies; drydocking for examination or painting the bottom;
equipment breakdowns; damages to the hull; or similar problems. The charterers
for the
m/v Tiara Globe
and the
m/v Star Globe
have the option to extend the charter for the number of days that the
vessel was off-hire.
Ship
Management and Maintenance
We are
responsible for the technical management of the vessel and for maintaining the
vessel, periodic drydocking, cleaning and painting and performing work required
by regulations. Globus Shipmanagement provides the technical, commercial and
day-to-day operational management of our vessels. Technical management includes
crewing, maintenance, repair and drydockings. We pay Globus Shipmanagement $700
per vessel per day. All fees payable to Globus Shipmanagement are eliminated
upon consolidation of our accounts.
Termination
We are
generally entitled to suspend performance under the time charter if the customer
defaults in its payment obligations. Either party may terminate the charter in
the event of war in specified countries.
Commissions
During
2009, we paid commissions ranging from 3.75% to 6.25% relevant to each time
charter agreement. During the first six months of 2010, we paid commissions
ranging from 5% to 6.25%.
BAREBOAT
CHARTER
A
bareboat charter is a contract pursuant to which the vessel owner provides the
vessel to the charterer for a fixed period of time at a specified daily rate,
and the charterer provides for all of the vessel’s operating expenses including
crewing, repairs, maintenance, insurance, stores, lube oils and communication
expenses in addition to the voyage costs, and generally assumes all risk of
operation. The charterer undertakes to maintain the vessel in a good state of
repair and efficient operating condition and drydock the vessel during this
period as per the classification society requirements. We have bareboat
chartered the
m/v Jin
Star
to Eastern Media International Corporation and Far Eastern Silo
& Shipping (Panama) S.A.
Basic
Hire Rate and Term
Our
bareboat charter commenced upon the vessel’s delivery for a five year term at a
rate of $14,250 per day. Our bareboat charter includes an option to extend the
charter’s term for one additional year at the charterer’s option. After such one
year extension, we can extend the charter for one additional year.
Redelivery
Upon the
expiration of the bareboat charter, the charterer is required to redeliver the
vessel in as good structure, state, condition and class as that in which the
vessel was delivered, fair wear and tear not affecting class
excepted.
Ship Management and
Maintenance
Under the
bareboat charter, the charterer is responsible for crewing, insuring,
maintaining and repairing the vessel including any drydocking as well as for all
other operating costs with respect to the vessel. The charterer will cover the
costs associated with the vessel’s special surveys and related drydocking
falling within the charter period.
Termination
We have
the right to terminate the charter if the charterer fails (following a short
grace period in which the charterer may have an opportunity to cure) to make
punctual hire payments, to insure the vessel or to maintain and/or repair the
vessel as agreed.
Either
party may terminate the charter in the event of war. The charterer may also
terminate the charter if the charterer is deprived of ownership of the vessel
for 14 days. In addition, the bareboat charter terminates automatically upon a
total or constructive loss of the vessel.
Commissions
We pay a
3.75% commission on our bareboat charter.
INDEBTEDNESS
We have
one credit facility and one loan agreement outstanding. Please read
“Management’s Discussion and Analysis of Financial Condition and Results of
Operations—Liquidity and Capital Resources—Indebtedness” and “Loan
Arrangements.”
OUR
CUSTOMERS
We seek
to charter our vessels to customers who we perceive as creditworthy thereby
minimizing the risk of default by our charterers. We also try to select
charterers depending on the type of product they want to carry and the
geographical areas in which they tend to trade.
Our
assessment of a charterer’s financial condition and reliability is an important
factor in negotiating employment for our vessels. We generally charter our
vessels to operators, trading houses (including commodities traders), shipping
companies and producers and government-owned entities and generally avoid
chartering our vessels to speculative or undercapitalized entities. Since our
operations began in September 2006, our customers have included COSCO Bulk
Carrier Co., Ltd, Dampskibsselskabet NORDEN A/S, ED & F Man Shipping
Limited, STX Pan Ocean Co., Ltd, Transgrain, and Korea Line Corporation. In
addition, during the periods when some of our vessels were trading on the spot
market, they have been chartered to charterers such as Cargill International SA,
Oldendorff Carriers GmbH & Co. KG, Western Bulk Carriers KS and others, thus
expanding our customer base.
COMPETITION
Our
business fluctuates in line with the main patterns of trade of the major dry
bulk cargoes and varies according to changes in the supply and demand for these
items. We operate in markets that are highly competitive and based primarily on
supply and demand. We compete for charters on the basis of price, vessel
location, size, age and condition of the vessel, as well as on our reputation as
an owner and operator. We compete with other owners of dry bulk vessels in the
Panamax, Supramax and Kamsarmax dry bulk vessels, but we also compete with
owners for the purchase and sale of vessels of all sizes.
According
to Drewry, ownership of dry bulk vessels is highly fragmented. It is likely that
we will face substantial competition for long-term charter business from a
number of experienced companies. Many of these competitors will have larger dry
bulk vessel fleets and greater financial resources than us, which may make them
more competitive. It is also likely that we will face increased numbers of
competitors entering into our transportation sectors, including in the dry bulk
sector. Many of these competitors have strong reputations and extensive
resources and experience. Increased competition may cause greater price
competition, especially for long-term charters. We believe that no single
competitor has a dominant position in the markets in which we compete. For a
more detailed description of our competitive environment, please read “The Dry
Bulk Industry.”
The
process for obtaining longer term time charters generally involves a lengthy and
intensive screening and vetting process and the submission of competitive bids.
In addition to the quality and suitability of the vessel, longer term shipping
contracts may be awarded based upon a variety of other factors relating to the
vessel operator, including:
|
Ø
|
environmental,
health and safety record;
|
|
Ø
|
compliance
with regulatory industry standards;
|
|
Ø
|
reputation
for customer service, technical and operating
expertise;
|
|
Ø
|
shipping
experience and quality of vessel operations, including
cost-effectiveness;
|
|
Ø
|
quality,
experience and technical capability of
crews;
|
|
Ø
|
the
ability to finance vessels at competitive rates and overall financial
stability;
|
|
Ø
|
relationships
with shipyards and the ability to obtain suitable
berths;
|
|
Ø
|
construction
management experience, including the ability to procure on-time delivery
of new vessels according to customer
specifications;
|
|
Ø
|
willingness
to accept operational risks pursuant to the charter, such as allowing
termination of the charter for force majeure events;
and
|
|
Ø
|
competitiveness
of the bid in terms of overall
price.
|
As a
result of these factors, we may be unable to expand our relationships with
existing customers or obtain new customers for long-term time charters on a
profitable basis, if at all. However, even if we are successful in employing our
vessels under longer term charters, our vessels will not be available for
trading on the spot market during an upturn in the market cycle, when spot
trading may be more profitable. If we cannot successfully employ our vessels in
profitable charters, our results of operations and operating cash flow could be
materially adversely affected.
SEASONALITY
Our fleet
consists of dry bulk vessels that operate in markets that have historically
exhibited seasonal variations in demand and, as a result, in charter rates. The
dry bulk sector is typically stronger in the fall and winter months in
anticipation of increased consumption of coal and other raw materials in the
northern hemisphere during the winter months. Such seasonality will affect the
rates we obtain on the vessels in our fleet that operate on the spot
market.
PERMITS
AND AUTHORIZATIONS
We are
required by various governmental and quasi-governmental agencies to obtain
certain permits, licenses and certificates with respect to our vessels. The
kinds of permits, licenses and certificates required depend upon several
factors, including the commodity transported, the waters in which the vessel
operates, the nationality of the vessel’s crew and the age of a vessel. We have
been able to obtain all permits, licenses and certificates currently required to
permit our vessels to operate. Additional laws and regulations, environmental or
otherwise, may be adopted which could limit our ability to do business or
increase the cost of us doing business.
INSPECTION
BY CLASSIFICATION SOCIETIES
Every
oceangoing vessel must be “classed” by a classification society. The
classification society certifies that the vessel is “in class,” signifying that
the vessel has been built and maintained in accordance with the rules of the
classification society and complies with applicable rules and regulations of the
vessel’s country of registry and the international conventions of which that
country is a member. In addition, where surveys are required by international
conventions and corresponding laws and ordinances of a flag state, the
classification society will undertake them on application or by official order,
acting on behalf of the authorities concerned.
The
classification society also undertakes on request other surveys and checks that
are required by regulations and requirements of the flag state. These surveys
are subject to agreements made in each individual case and/or to the regulations
of the country concerned. For maintenance of the class certification, regular
and extraordinary surveys of hull, machinery, including the electrical plant,
and any special equipment classed are required to be performed as
follows:
|
Ø
|
Annual Surveys
. For
seagoing vessels, annual surveys are conducted for the hull and the
machinery, including the electrical plant and where applicable for special
equipment classed, at intervals of 12 months from the date of commencement
of the class period indicated in the
certificate.
|
|
Ø
|
Intermediate Surveys
.
Extended annual surveys are referred to as intermediate surveys and
typically are conducted two and one-half years after commissioning and
each class renewal. Intermediate surveys may be carried out on the
occasion of the second or third annual
survey.
|
|
Ø
|
Class Renewal Surveys
.
Class renewal surveys, also known as special surveys, are carried out for
the vessel’s hull, machinery, including the electrical plant, and for any
special equipment classed, at the intervals indicated by the character of
classification for the hull. At the special survey the vessel is
thoroughly examined, including audio-gauging to determine the thickness of
the steel structures. Should the thickness be found to be less than class
requirements, the classification society would prescribe steel renewals.
The classification society may grant a one-year grace period for
completion of the special survey. Substantial amounts of money may have to
be spent for steel renewals to pass a special survey if the vessel
experiences excessive wear and tear. In lieu of the special survey every
four or five years, depending on whether a grace period was granted, a
shipowner has the option of arranging with the classification society for
the vessel’s hull or machinery to be on a continuous survey cycle, in
which every part of the vessel would be surveyed within a five-year cycle.
At an owner’s application, the surveys required for class renewal may be
split according to an agreed schedule to extend over the entire period of
class. This process is referred to as continuous class
renewal.
|
All areas
subject to survey as defined by the classification society are required to be
surveyed at least once per class period, unless shorter intervals between
surveys are prescribed elsewhere. The period between two subsequent surveys of
each area must not exceed five years.
Most
vessels are also drydocked every 30 to 36 months for inspection of the
underwater parts and for repairs related to inspections. If any defects are
found, the classification surveyor will issue a “recommendation” which must be
rectified by the shipowner within prescribed time limits.
Most
insurance underwriters make it a condition for insurance coverage that a vessel
be certified as “in class” by a classification society that is a member of the
International Association of Classification Societies. All our vessels that we
operate are certified as being “in class” by Nippon Kaiji Kyokai (Class NK),
American Bureau of Shipping and Germanischer Lloyd. Typically, all new and
secondhand vessels that we purchase must be certified prior to their delivery
under our standard purchase contracts and memorandum of agreement. Under our
standard purchase contracts, unless negotiated otherwise, if the vessel is not
certified on the date of closing, we would have no obligation to take delivery
of the vessel. Although we may not have an obligation to accept any vessel that
is not certified on the date of closing, we may determine nonetheless to
purchase the vessel, should we determine it to be in our best interests. If we
do so, we may be unable to charter such vessel after we purchase it until it
obtains such certification, which could increase our costs and affect the
earnings we anticipate from the employment of the vessel.
RISK
MANAGEMENT AND INSURANCE
General
The
operation of any cargo vessel embraces a wide variety of risks, including the
following:
|
Ø
|
mechanical
failure or damage, for example by reason of the seizure of a main engine
crankshaft;
|
|
Ø
|
cargo
loss, for example arising from hull
damage;
|
|
Ø
|
personal
injury, for example arising from collision or
piracy;
|
|
Ø
|
losses
due to piracy, terrorist or war-like action between
countries;
|
|
Ø
|
environmental
damage, for example arising from marine disasters such as oil spills and
other environmental mishaps;
|
|
Ø
|
physical
damage to the vessel, for example by reason of
collision;
|
|
Ø
|
damage
to other property, for example by reason of cargo damage or oil pollution;
and
|
|
Ø
|
business
interruption, for example arising from strikes and political or regulatory
change.
|
The value
of such losses or damages may vary from modest sums, for example for a small
cargo shortage damage claim, to catastrophic liabilities, for example arising
out of a marine disaster, such as a serious oil or chemical spill, which may be
virtually unlimited. While we maintain the traditional range of marine and
liability insurance coverage for our fleet (hull and machinery insurance, war
risks insurance and protection and indemnity coverage) in amounts and to extents
that we believe are prudent to cover normal risks in our operations, we cannot
insure against all risks, and we cannot be assured that all covered risks are
adequately insured against. Furthermore, there can be no guarantee that any
specific claim will be paid by the insurer or that it will always be possible to
obtain insurance coverage at reasonable rates. Any uninsured or under-insured
loss could harm our business and financial condition.
Hull and Machinery and War
Risks
The
principal coverages for marine risks (covering loss or damage to the vessels,
rather than liabilities to third parties) are hull and machinery insurance and
war risk insurance. These address the risks of the actual (or constructive)
total loss of a vessel and accidental damage to a vessel’s hull and machinery,
for example from running aground or colliding with another ship. These
insurances provide coverage which is limited to an agreed “insured value” which,
as a matter of policy, is never less than the particular vessel’s fair market
value. Reimbursement of loss under such coverage is subject to policy
deductibles which vary according to the vessel and the nature of the coverage.
Hull and machinery deductibles may, for example, be between $75,000 and $150,000
per incident whereas the war risks insurance has a more modest incident
deductible of, for example, $30,000.
Protection
and Indemnity Insurance
We are a
member of a P&I association, or P&I club, which covers our third party
liabilities in connection with our shipping activities. This includes
third-party liability and other expenses and claims in connection with injury or
death of crew, passengers and other third parties, loss or damage to cargo,
damage to other third-party property, pollution arising from oil or other
substances, wreck removal and related costs. Subject to the “capping” discussed
below, our coverage, except for pollution, is unlimited. Our current protection
and indemnity insurance coverage for oil pollution is $1 billion per vessel per
incident. The Company’s P&I policies are subject to deductibles per each
accident or occurrence.
The
P&I club of which we are a member is one of the P&I clubs that compose
the International Group of P&I clubs, which insure more than 90% of the
world’s commercial tonnage and have entered into a pooling agreement to reinsure
each association’s liabilities. Each P&I club has capped its exposure to
this pooling agreement at $4.25 billion. A member of a P&I club that is a
member of the International Group is typically subject to possible supplemental
amounts or calls, payable to its P&I club based on its claim records as well
as the claim records of all other members of the individual associations, and
members of the International Group. To the extent the Company experiences
supplemental calls, its policy is to expense such amounts.
Uninsured
Risks
Not all
risks are insured and not all risks are insurable. The principal insurable risks
which nevertheless remain uninsured across our fleet are “loss of hire” and
“strikes.” We will not insure these risks because the costs are regarded as
disproportionate. These insurances provide, subject to a deductible, a limited
indemnity for hire that is not receivable by the shipowner for reasons set forth
in the policy. For example, loss of hire risk may be covered on a 14/90/90
basis, with a 14 days deductible, 90 days cover per incident and a 90-day
overall limit per vessel per year. Should a vessel on time charter, where the
vessel is paid a fixed hire day by day, suffer a serious mechanical breakdown,
the daily hire will no longer be payable by the charterer. The purpose of the
loss of hire insurance is to secure the loss of hire during such
periods.
ENVIRONMENTAL
REGULATION
Sources
of Applicable Rules and Standards
Shipping
is one of the world’s most heavily regulated industries, and it is subject to
many industry standards. Government regulation significantly affects the
ownership and operation of vessels. These regulations consist mainly of rules
and standards established by international conventions, but they also include
national, state and local laws and regulations in force in jurisdictions where
vessels may operate or are registered, and which may be more stringent than
international rules and standards. This is the case particularly in the United
States and, increasingly, in Europe.
A variety
of governmental and private entities subject vessels to both scheduled and
unscheduled inspections. These entities include local port authorities (the U.S.
Coast Guard, harbor masters or equivalent entities), classification societies,
flag state administration (country vessel of registry), and charterers,
particularly terminal operators. Certain of these entities require vessel owners
to obtain permits, licenses and certificates for the operation of their vessels.
Failure to maintain necessary permits or approvals could require a vessel owner
to incur substantial costs or temporarily suspend operation of one or more of
its vessels.
Heightened
levels of environmental and quality concerns among insurance underwriters,
regulators and charterers continue to lead to greater inspection and safety
requirements on all vessels and may accelerate the scrapping of older vessels
throughout the industry. Increasing environmental concerns have created a demand
for vessels that conform to stricter environmental standards. Vessel owners are
required to maintain operating standards for all vessels that will emphasize
operational safety, quality maintenance, continuous training of officers and
crews and compliance with U.S. and international regulations. Because laws and
regulations are frequently changed and may impose increasingly stricter
requirements, we cannot predict the ultimate cost of complying with these
requirements, or the impact of these requirements on the resale value or useful
lives of our vessels. In addition, a future serious marine incident that causes
significant adverse environmental impact could result in additional legislation
or regulation that could negatively affect our profitability.
The
International Maritime Organization, or IMO, has negotiated a number of
international conventions concerned with preventing, reducing or controlling
pollution from vessels. These fall into two main categories, consisting firstly
of those concerned generally with vessel safety standards, and secondly of those
specifically concerned with measures to prevent pollution.
Ship
Safety Regulation
In the
former category the primary international instrument is the Safety of Life at
Sea Convention of 1974, as amended, or SOLAS, together with the regulations and
codes of practice that form part of its regime. Much of SOLAS is not directly
concerned with preventing pollution, but some of its safety provisions are
intended to prevent pollution as well as promote safety of life and preservation
of property. These regulations have been and continue to be regularly amended as
new and higher safety standards are introduced with which we are required to
comply.
An
amendment of SOLAS introduced the International Safety Management, or ISM, Code,
which has been effective since July 1998. Under the ISM Code, the party with
operational control of a vessel is required to develop an extensive safety
management system that includes, among other things, the adoption of a safety
and environmental protection policy setting forth instructions and procedures
for operating its vessels safely and describing procedures for responding to
emergencies. The ISM Code requires that vessel operators obtain a safety
management certificate for each vessel they operate. This certificate evidences
compliance by a vessel’s management with code requirements for a safety
management system. No vessel can obtain a certificate unless its manager has
been awarded a document of compliance, issued by the respective flag state for
the vessel, under the ISM Code.
Another
amendment of SOLAS, made after the terrorist attacks in the United States on
September 11, 2001, introduced special measures to enhance maritime security,
including the International Ship and Port Facilities Security Code, or ISPS
Code.
The
vessels that we operate maintain ISM and ISPS certifications for safety and
security of operations.
Regulations
to Prevent Pollution from Ships
In the
secondary main category of international regulation, the primary instrument is
the International Convention for the Prevention of Pollution from Ships, or
MARPOL, which imposes environmental standards on the shipping industry set out
in Annexes I-VI of MARPOL. These contain regulations for the prevention of
pollution by oil (Annex I), by noxious liquid substances in bulk (Annex II), by
harmful substances in packaged forms within the scope of the International
Maritime Dangerous Goods Code (Annex III), by sewage (Annex IV), by garbage
(Annex V) and by air emissions (Annex VI).
These
regulations have been and continue to be regularly amended as new and higher
standards of pollution prevention are introduced with which we are required to
comply.
For
example, MARPOL Annex VI sets limits on Sulphur Oxides (SOx) and Nitrogen Oxides
(NOx) emissions from vessel exhausts, prohibits deliberate emissions of ozone
depleting substances and limits the emission of volotile organic compound (VOC).
Limiting worldwide SOx emissions will mean a cap on the content of sulphur in
fuel oil and such cap will be reduced from the current 4.5% to 3.5% on or after
January 2012. For special areas (SECAS) the cap is lower at currently at 1.0%
and will reduce to 0.1% after January 1, 2015. In addition, within the EU Member
States the current cap is now at 0.1%. Limiting NOx emissions is set on a three
tier reduction, the final one of which comes into force on January 1, 2016. We
anticipate incurring costs at each stage of implementation on all these areas.
Currently we are compliant in all our vessels.
Greenhouse
Gas Emissions
In
February 2005, the Kyoto Protocol to the United Nations Framework Convention on
Climate Change entered into force. Pursuant to the Kyoto Protocol, adopting
countries are required to implement national programs to reduce emissions of
certain gases, generally referred to as greenhouse gases, which are suspected of
contributing to global warming. Currently, the greenhouse gas emissions from
international shipping do not come under the Kyoto Protocol. The European Union
confirmed in April 2007 that it plans to expand the European Union emissions
trading scheme by adding vessels. In the United States, the California Attorney
General and a coalition of environmental groups petitioned the U.S.
Environmental Protection Agency, or EPA, in October 2007 to regulate greenhouse
gas emissions from ocean-going vessels under the Clean Air Act. Any passage of
climate control legislation or other regulatory initiatives by the IMO, European
Union or individual countries where we operate that restrict emissions of
greenhouse gases from vessels could require us to make significant financial
expenditures, which we cannot predict with certainty at this
time.
Anti-Fouling
Requirements
In 2001,
the IMO adopted the International Convention on the Control of Harmful
Anti-fouling Systems on Ships, or the Anti-fouling Convention. The Anti-fouling
Convention prohibits the use of organotin compound coatings to prevent the
attachment of mollusks and other sea life to the hulls of vessels after
September 1, 2003. The exteriors of vessels constructed prior to January 1, 2003
that have not been in drydock must, as of September 17, 2008, either not contain
the prohibited compounds or have coatings applied to the vessel exterior that
act as a barrier to the leaching of the prohibited compounds. Vessels of over
400 gross tons engaged in international voyages must obtain an International
Anti-Fouling System Certificate and undergo a survey before the vessel is put
into service or when the anti-fouling systems are altered or
replaced.
Other
International Regulations to Prevent Pollution
In
addition to MARPOL, other more specialized international instruments have been
adopted to prevent different types of pollution or environmental harm from
vessel. In February 2004, the IMO adopted an International Convention for the
Control and Management of Ships’ Ballast Water and Sediments, or the BWM
Convention. The BWM Convention’s implementing regulations call for a phased
introduction of mandatory ballast water exchange requirements, beginning in
2009, to be replaced in time with mandatory concentration limits. The BWM
Convention will not enter into force until 12 months after it has been adopted
by 30 states, the combined merchant fleets of which represent not less than
35.0% of the gross tonnage of the world’s merchant shipping. To date, there has
not been sufficient adoption of this standard by governments that are members of
the convention for it to take force. Moreover, the IMO has supported deferring
the requirements of this convention that would first come into effect until
December 31, 2011, even if it were to be adopted earlier.
Although
the United States is not a party to these conventions, many countries have
ratified and follow the liability plan adopted by the IMO and set out in the CLC
and its Protocols. Under this convention and depending on whether the country in
which the damage results is a party to the 1992 Protocol to the CLC, a vessel’s
registered owner is strictly liable for pollution damage caused in the
territorial waters of a contracting state by discharge of persistent oil,
subject to certain defenses. The limits on liability outlined in the 1992
Protocol use the International Monetary Fund currency unit of Special Drawing
Rights, or SDR. Under an amendment to the 1992 Protocol that became effective on
November 1, 2003, for vessels between 5,000 and 140,000 gross tons (a unit of
measurement for the total enclosed spaces within a vessel), liability is limited
to approximately 4.51 million SDR plus 631 SDR for each additional gross ton
over 5,000. For vessels of over 140,000 gross tons, liability is limited to
89.77 million SDR. The exchange rate between SDRs and U.S. dollars was 0.63364
SDR per U.S. dollar on November 9, 2010. The right to limit liability is
forfeited under the CLC where the spill is caused by the shipowner’s actual
fault and under the 1992 Protocol where the spill is caused by the shipowner’s
intentional or reckless conduct. Vessels trading with states that are parties to
these conventions must provide evidence of insurance covering the liability of
the owner. In jurisdictions where the CLC has not been adopted, various
legislative schemes or common law govern, and liability is imposed either on the
basis of fault or in a manner similar to that of the convention. We believe that
our protection and indemnity insurance will cover the liability under the plan
adopted by the IMO.
IMO
regulations also require owners and operators of vessels to adopt Ship Oil
Pollution Emergency Plans. Periodic training and drills for response personnel
and for vessels and their crews are required.
European
Regulations
European
regulations in the maritime sector are in general based on international
law
most of which
were promulgated by the IMO and then adopted by the Member States. However,
since the
Erika
incident in 1999, when the
Erika
broke in two off the
coast of France while carrying heavy fuel oil, the European Community has become
increasingly active in the field of regulation of maritime safety and protection
of the environment. It has been the driving force behind a number of amendments
of MARPOL (including, for example, changes to accelerate the timetable for the
phase-out of single hull tankers, and prohibiting the carriage in such tankers
of heavy grades of oil), and if dissatisfied either with the extent of such
amendments or with the timetable for their introduction it has been prepared to
legislate on a unilateral basis. In some instances where it has done so,
international regulations have subsequently been amended to the same level of
stringency as that introduced in Europe, but the risk is well established that
EU regulations (and other jurisdictions) may from time to time impose burdens
and costs on shipowners and operators which are additional to those involved in
complying with international rules and standards.
In some
areas of regulation the EU has introduced new laws without attempting to procure
a corresponding amendment of international law. Notably, it adopted in 2005 a
directive on ship-source pollution, imposing criminal sanctions for pollution
not only where this is caused by intent or recklessness (which would be an
offense under MARPOL), but also where it is caused by “serious negligence.” The
directive could therefore result in criminal liability being incurred in
circumstances where it would not be incurred under international law. Experience
has shown that in the emotive atmosphere often associated with pollution
incidents, retributive attitudes towards vessel interests have found expression
in negligence being alleged by prosecutors and found by courts on grounds which
the international maritime community has found hard to understand. Moreover,
there is skepticism that the notion of “serious negligence” is likely to prove
any narrower in practice than ordinary negligence. Criminal liability for a
pollution incident could not only result in us incurring substantial penalties
or fines but may also, in some jurisdictions, facilitate civil liability claims
for greater compensation than would otherwise have been payable.
Compliance
Enforcement
The flag
state, as defined by the United Nations Convention on Law of the Sea, has
overall responsibility for the implementation and enforcement of international
maritime regulations for all vessels granted the right to fly its flag. The
“Shipping Industry Guidelines on Flag State Performance” evaluates flag states
based on factors such as sufficiency of infrastructure, ratification of
international maritime treaties, implementation and enforcement of international
maritime regulations, supervision of surveys, casualty investigations and
participation at IMO meetings. The vessels that we operate are flagged in the
Marshall Islands. Marshall Islands-flagged vessels have historically received a
good assessment in the shipping industry.
Noncompliance
with the ISM Code or other IMO regulations may subject the shipowner or bareboat
charterer to increased liability, may lead to decreases in available insurance
coverage for affected vessels and may result in the denial of access to, or
detention in, some ports. The U.S. Coast Guard and European Union authorities
have, for example, indicated that vessels not in compliance with the ISM Code
will be prohibited from trading in U.S. and European Union ports, respectively.
As of the date of this prospectus, each of our vessels is ISM Code certified.
However, there can be no assurance that such certificate will be
maintained.
The IMO
continues to review and introduce new regulations. It is impossible to predict
what additional regulations, if any, may be passed by the IMO and what effect,
if any, such regulations may have on our operations.
United
States Environmental Regulations and Laws Governing Civil Liability for
Pollution
Environmental
legislation in the United States merits particular mention as it is in many
respects more onerous than international laws, representing a high-water mark of
regulation with which shipowners and operators must comply, and of liability
likely to be incurred in the event of non-compliance or an incident causing
pollution.
U.S.
federal legislation, including notably the OPA, establishes an extensive
regulatory and liability regime for the protection and cleanup of the
environment from oil spills, including bunker oil spills from dry bulk vessels
as well as cargo or bunker oil spills from tankers. The OPA affects all owners
and operators whose vessels trade in the United States, its territories and
possessions or whose vessels operate in United States waters, which includes the
United States’ territorial sea and its 200 nautical mile exclusive economic
zone. Under the OPA, vessel owners, operators and bareboat charterers are
“responsible parties” and are jointly, severally and strictly liable (unless the
spill results solely from the act or omission of a third party, an act of God or
an act of war) for all containment and clean-up costs and other damages arising
from discharges or substantial threats of discharges of oil from their vessels.
In addition to potential liability under the OPA as the relevant federal
legislation, vessel owners may in some instances incur liability on an even more
stringent basis under state law in the particular state where the spillage
occurred.
Title VII
of the U.S. Coast Guard and Maritime Transportation Act of 2004 amended the OPA
to require the owner or operator of any non-tank vessel of 400 gross tons or
more that carries oil of any kind as a fuel for main propulsion, including
bunkers, to prepare and submit a response plan for each vessel on or before
August 8, 2005. Prior to this amendment, these provisions of the OPA applied
only to vessels that carried oil in bulk as cargo. The vessel response plans
must include detailed information on actions to be taken by vessel personnel to
prevent or mitigate any discharge or substantial threat of such a discharge of
oil from the vessel due to operational activities or casualties. The OPA limits
the liability of responsible parties to the greater of $1,000 per gross ton or
approximately $855,000 per containership that is over 300 gross tons (subject to
possible adjustment for inflation).
These
limits of liability do not apply if an incident was proximately caused by
violation of applicable United States federal safety, construction or operating
regulations or by a responsible party’s gross negligence or willful misconduct,
or if the responsible party fails or refuses to report the incident or to
cooperate and assist in connection with oil removal activities.
In
addition, the Comprehensive Environmental Response, Compensation, and Liability
Act, or CERCLA, which applies to the discharge of hazardous substances (other
than oil) whether on land or at sea, contains a similar liability regime and
provides for cleanup, removal and natural resource damages. Liability under
CERCLA is limited to the greater of $300 per gross ton or $0.5 million for
vessels not carrying hazardous substances as cargo or residue, unless the
incident is caused by gross negligence, willful misconduct or a violation of
certain regulations, in which case liability is unlimited.
We
maintain, for each of our owned vessels, insurance coverage against pollution
liability risks in the amount of $1.0 billion per event. The insured risks
include penalties and fines as well as civil liabilities and expenses resulting
from accidental pollution. However, this insurance coverage is subject to
exclusions, deductibles and other terms and conditions. If any liabilities or
expenses fall within an exclusion from coverage, or if damages from a
catastrophic incident exceed the $1.0 billion limitation of coverage per event,
our cash flow, profitability and financial position could be adversely
impacted.
The OPA
requires owners and operators of all vessels over 300 gross tons, even those
that do not carry petroleum or hazardous substances as cargo, to establish and
maintain with the U.S. Coast Guard evidence of financial responsibility
sufficient to meet their potential liabilities under the OPA. The U.S. Coast
Guard has implemented regulations requiring evidence of financial responsibility
for containerships in the amount of $1,300 per gross ton, which includes the OPA
limitation on liability of $1,000 per gross ton and the CERCLA liability limit
of $300 per gross ton for vessels not carrying hazardous substances as cargo or
residue. Under the regulations, vessel owners and operators may evidence their
financial responsibility by showing proof of insurance, surety bond,
self-insurance or guaranty. We believe our insurance coverage as described above
meets the requirements of the OPA.
Under the
OPA, an owner or operator of a fleet of vessels is required only to demonstrate
evidence of financial responsibility in an amount sufficient to cover the vessel
in the fleet having the greatest maximum liability under the OPA. Under the
self-insurance provisions, the shipowner or operator must have a net worth and
working capital, measured in assets located in the United States against
liabilities located anywhere in the world, that exceeds the applicable amount of
financial responsibility.
The U.S.
Coast Guard’s regulations concerning certificates of financial responsibility
provide, in accordance with the OPA, that claimants may bring suit directly
against an insurer or guarantor that furnishes certificates of financial
responsibility. In the event that such insurer or guarantor is sued directly, it
is prohibited from asserting any contractual defense that it may have had
against the responsible party and is limited to asserting those defenses
available to the responsible party and the defense that the incident was caused
by the willful misconduct of the responsible party.
The OPA
specifically permits individual states to impose their own liability regimes
with regard to oil pollution incidents occurring within their boundaries, and
some states have enacted legislation providing for unlimited liability for oil
spills. In some cases, states that have enacted such legislation have not yet
issued implementing regulations defining vessels owners’ responsibilities under
these laws. We intend to comply with all applicable state regulations in the
ports where our vessels call.
The
United States Clean Water Act, or CWA, prohibits the discharge of oil or
hazardous substances in U.S. navigable waters and imposes strict liability in
the form of penalties for unauthorized discharges. The CWA also imposes
substantial liability for the costs of removal, remediation and damages and
complements the remedies available under CERCLA. Pursuant to regulations
promulgated by the EPA in the early 1970s, the discharge of sewage and effluent
from properly functioning marine engines was exempted from the permit
requirements of the National Pollution Discharge Elimination System. This
exemption allowed vessels in U.S. ports to discharge certain substances,
including ballast water, without obtaining a permit to do so. However, on March
30, 2005, a U.S. District Court for the Northern District of California granted
summary judgment to certain environmental groups and U.S. states that had
challenged the EPA regulations, arguing that the EPA exceeded its authority in
promulgating them. On September 18, 2006, the U.S. District Court issued an
order invalidating the exemption in EPA’s regulations for all discharges
incidental to the normal operation of a vessel as of September 30, 2008, and
directing the EPA to develop a system for regulating all discharges from vessels
by that date.
The EPA
enacted rules governing the regulation of ballast water discharges and other
discharges incidental to the normal operation of vessels within U.S. waters.
Under the rules, commercial vessels 79 feet in length or longer (other than
commercial fishing vessels), or Regulated Vessels, are required to obtain a CWA
permit regulating and authorizing such normal discharges. This permit, which the
EPA has designated as the Vessel General Permit for Discharges Incidental to the
Normal Operation of Vessels, or VGP, incorporates the current U.S. Coast Guard
requirements for ballast water management as well as supplemental ballast water
requirements, and includes limits applicable to specific discharge streams, such
as deck runoff, bilge water and gray water.
For each
discharge type, among other things, the VGP establishes effluent limits
pertaining to the constituents found in the effluent, including best management
practices, or BMPs, designed to decrease the amount of constituents entering the
waste stream. Unlike land-based discharges, which are deemed acceptable by
meeting certain EPA-imposed numerical effluent limits, each of the VGP discharge
limits is deemed to be met when a Regulated Vessel carries out the BMPs
pertinent to that specific discharge stream. The VGP imposes additional
requirements on certain Regulated Vessel types that emit discharges unique to
those vessels. Administrative provisions, such as inspection, monitoring,
recordkeeping and reporting requirements are also included for all Regulated
Vessels.
The VGP
application procedure, known as the Notice of Intent, or NOI, may be
accomplished through the “eNOI” electronic filing interface, which became
operational in June 2009. Owners and operators of Regulated Vessels must have
filed their NOIs prior to September 19, 2009, or the Deadline. Any Regulated
Vessel that did not file an NOI by the Deadline will, as of that date, no longer
be covered by the VGP and will not be allowed to discharge into U.S. navigable
waters until it has obtained a VGP. Any Regulated Vessel that was delivered on
or before the Deadline will receive final VGP permit coverage on the date that
the EPA receives such Regulated Vessel’s complete NOI. Regulated Vessels
delivered after the Deadline will not receive VGP permit coverage until 30 days
after their NOI submission. We submitted NOIs for all our vessels to which the
CWA applies.
In
addition, pursuant to section 401 of the CWA, which requires each state to
certify federal discharge permits such as the VGP, certain states have enacted
additional discharge standards as conditions to their certification of the VGP.
These local standards bring the VGP into compliance with more stringent state
requirements, such as those further restricting ballast water discharges and
preventing the introduction of non-indigenous species considered to be invasive.
The VGP and related state-specific regulations and any similar restrictions
enacted in the future will increase the costs of operating in the relevant
waters.
The U.S.
National Invasive Species Act, or NISA, was enacted in 1996 in response to
growing reports of harmful organisms being released into U.S. ports through
ballast water taken on by vessels in foreign ports. NISA established a ballast
water management program for vessels entering U.S. waters. Under NISA, mid-ocean
ballast water exchange is voluntary, except for vessels heading to the Great
Lakes or Hudson Bay, or vessels engaged in the foreign export of Alaskan North
Slope crude oil. However, NISA’s reporting and record keeping requirements are
mandatory for vessels bound for any port in the United States. Although ballast
water exchange is the primary means of compliance with NISA’s guidelines,
compliance can also be achieved through the retention of ballast water on board
the ship, or the use of environmentally sound alternative ballast water
management methods approved by the U.S. Coast Guard. If the mid-ocean ballast
exchange is made mandatory throughout the United States, or if water treatment
requirements or options are instituted, the cost of compliance could increase
for ocean carriers. Although we do not believe that the costs of compliance with
a mandatory mid-ocean ballast exchange would be material, it is difficult to
predict the overall impact of such a requirement on the dry bulk shipping
industry. In April 2008, the U.S. House of Representatives passed a bill that
amends NISA by prohibiting the discharge of ballast water unless it has been
treated with specified methods or acceptable alternatives. Similar bills have
been introduced in the U.S. Senate, but we cannot predict which bill, if any,
will be enacted into law. In the absence of federal standards, states have
enacted legislation or regulations to address invasive species through ballast
water and hull cleaning management and permitting requirements. For instance, in
2007 the state of California enacted legislation extending its ballast water
management program to regulate the management of “hull fouling” organisms
attached to vessels and adopted regulations limiting the number of organisms in
ballast water discharges. In addition, in November 2008, the Sixth Circuit
affirmed a District Court’s dismissal of challenges to the state of Michigan’s
ballast water management legislation mandating the use of various techniques for
ballast water treatment. Other states may proceed with the enactment of similar
requirements that could increase the costs of operating in state
waters.
Security
Regulations
Since the
terrorist attacks of September 11, 2001, there have been a variety of
initiatives intended to enhance vessel security. On November 25, 2002, the MTSA
came into effect. To implement certain portions of the MTSA, in July 2003, the
U.S. Coast Guard issued regulations requiring the implementation of certain
security requirements aboard vessels operating in waters subject to the
jurisdiction of the United States. Similarly, in December 2002, amendments to
SOLAS created a new chapter of the convention dealing specifically with maritime
security. The new chapter went into effect on July 1, 2004, and imposes various
detailed security obligations on vessels and port authorities, most of which are
contained in the newly created ISPS Code. Among the various requirements
are:
|
Ø
|
on-board
installation of automatic information systems to enhance vessel-to-vessel
and vessel-to-shore communications;
|
|
Ø
|
on-board
installation of ship security alert
systems;
|
|
Ø
|
the
development of vessel security plans;
and
|
|
Ø
|
compliance
with flag state security certification
requirements.
|
The U.S.
Coast Guard regulations, intended to be aligned with international maritime
security standards, exempt non-U.S. vessels from MTSA vessel security measures,
provided such vessels have on board, by July 1, 2004, a valid International Ship
Security Certificate that attests to the vessel’s compliance with SOLAS security
requirements and the ISPS Code. The vessels in our fleet that we operate have on
board valid International Ship Security Certificates and, therefore, will comply
with the requirements of the MTSA.
International
Laws Governing Civil Liability to Pay Compensation or Damages
In 2001,
the IMO adopted the International Convention on Civil Liability for Bunker Oil
Pollution Damage, or the Bunker Convention, which imposes strict liability on
shipowners for pollution damage in jurisdictional waters of ratifying states
caused by discharges of “bunker oil.” The Bunker Convention defines “bunker oil”
as “any hydrocarbon mineral oil, including lubricating oil, used or intended to
be used for the operation or propulsion of the ship, and any residues of such
oil.” The Bunker Convention also requires registered owners of vessels over a
certain size to maintain insurance for pollution damage in an amount equal to
the limits of liability under the applicable national or international
limitation regime (but not exceeding the amount calculated in accordance with
the Convention on Limitation of Liability for Maritime Claims of 1976, as
amended, or the 1976 Convention). The Bunker Convention entered into force on
November 21, 2008, and in early 2009 it was in effect in 22 states. In other
jurisdictions, liability for spills or releases of oil from vessels’ bunkers
continues to be determined by the national or other domestic laws in the
jurisdiction where the events or damages occur.
Outside
the United States, national laws generally provide for the owner to bear strict
liability for pollution, subject to a right to limit liability under applicable
national or international regimes for limitation of liability. The most widely
applicable international regime limiting maritime pollution liability is the
1976 Convention. Rights to limit liability under the 1976 Convention are
forfeited where a spill is caused by a shipowners’ intentional or reckless
conduct. Some states have ratified the 1996 LLMC Protocol to the 1976
Convention, which provides for liability limits substantially higher than those
set forth in the 1976 Convention to apply in such states. Finally, some
jurisdictions are not a party to either the 1976 Convention or the 1996 LLMC
Protocol, and, therefore, shipowners’ rights to limit liability for maritime
pollution in such jurisdictions may be uncertain.
ORGANIZATIONAL
STRUCTURE
We own
six operational subsidiaries, all of which are Marshall Islands corporations.
Five of our operational subsidiaries each own one vessel and our sixth
operational subsidiary, Globus Shipmanagement, provides the technical and
day-to-day commercial management of our fleet. Globus Shipmanagement maintains
ship management agreements with each of our vessel-owning
subsidiaries.
PROPERTY
In August
2006, Globus Shipmanagement entered into a rental agreement for 350 square
meters of office space for our operations within a building owned by Cyberonica
S.A., a company related to us through common control. Rental expense is
currently €14,577 per month. The rental agreement provides for an annual
increase in rent of 2% above the rate of inflation as set by the Bank of Greece.
The contract runs for nine years and can be terminated by us with six months
notice. We do not presently own any real estate.
We have
no manufacturing capacity, nor do we produce any products.
We
believe that our existing facilities are adequate to meet our needs for the
foreseeable future.
EXCHANGE
CONTROLS
Under
Marshall Islands law, there are currently no restrictions on the export or
import of capital, including foreign exchange controls or restrictions that
affect the remittance of dividends, interest or other payments to non-resident
holders of our common shares.
CORPORATE
INFORMATION
Globus
Maritime Limited is a holding company originally incorporated on July 26, 2006
pursuant to the Companies (Jersey) Law 1991 (as amended), and redomiciled into
the Marshall Islands on November 24, 2010 pursuant to the BCA. Because of
the number of U.S. publicly traded shipping companies that are incorporated,
formed or redomiciled in the Marshall Islands, we believe that a redomiciliation
into the Marshall Islands would facilitate investors’ understanding of our
company and corporate governance. Our executive office is located at the office
of Globus Shipmanagement Corp., 128 Vouliagmenis Avenue, 3rd Floor, 166 74
Glyfada, Athens, Greece. Our telephone number is +30 210 960 8300. Our
registered agent in the Marshall Islands is The Trust Company of the Marshall
Islands, Inc. and our registered address in the Marshall Islands is Trust
Company Complex, Ajeltake Road, Ajeltake Island, Majuro, Marshall Islands
MH96960. We maintain our website at www.globusmaritime.gr. Information that will
be available on or accessed through our website does not constitute part of, and
is not incorporated by reference into, this prospectus.
LEGAL
PROCEEDINGS
We have
not been involved in any legal proceedings which may have, or have had, a
significant effect on our business, financial position, results of operations or
liquidity, nor are we aware of any proceedings that are pending or threatened
which may have a significant effect on our business, financial position, results
of operations or liquidity. From time to time, we may be subject to legal
proceedings and claims in the ordinary course of business, principally personal
injury and property casualty claims. We expect that these claims would be
covered by insurance, subject to customary deductibles. Those claims, even if
lacking merit, could result in the expenditure of significant financial and
managerial resources.
LOAN
ARRANGEMENTS
The
following summary of the material terms of our credit facility and loan
agreement does not purport to be complete and is subject to, and qualified in
its entirety by reference to, all the provisions of the credit facility and loan
agreement. Because the following is only a summary, it does not contain all
information that you may find useful. For more complete information, you should
read each of the credit facility and loan agreement filed as an exhibit to the
registration statement of which this prospectus forms a part.
CREDIT
SUISSE CREDIT FACILITY
General
In
November 2007, we entered into a $120.0 million secured reducing revolving
credit facility with Credit Suisse, which we have supplemented from time to
time. Our credit facility is available to us in connection with vessel
acquisitions by our vessel-owning subsidiaries as well as for working capital
purposes. Our credit facility had an original term of eight years and has a
remaining term of approximately five years.
Our
credit facility permits us to borrow funds up to the reducing facility limit
which began at $120.0 million and which is reduced on “Reduction Dates” every
six months (in May and November) according to the following agreed schedule: (1)
by $10.0 million on each of the first to fourth Reduction Dates, inclusive, (2)
by $4.5 million on each of the fifth to fifteenth Reduction Dates, inclusive,
and (3) $30.5 million on the sixteenth and final Reduction Date, which is
November 2015. Consequently, on every Reduction Date that the outstanding
balance exceeds the applicable reduced facility limit, we must pay a principal
installment to the bank to ensure that the outstanding balance remains at or
below the applicable facility limit. As of June 30, 2010, we had a $75.5 million
outstanding balance under the credit facility, which was equal to the reduced
facility limit. We therefore could not draw down any additional funds
thereunder. The facility limit will be further reduced by $4.5 million in
November 2010, on the Reduction Date, when we repay such amount to Credit
Suisse.
We can
voluntarily prepay principal installments to the bank without penalty at any
time between Reduction Dates. Such voluntarily prepaid principal amounts become
undrawn amounts under the credit facility and we can re-borrow such amounts, or
parts thereof, subject to the reducing facility limit. Our credit facility has
commitment fees of 0.25% per annum on any undrawn amounts under the facility,
other than undrawn amounts currently relating to approximately $15.5 million, in
which the commitment fee is 0.5%. Interest on outstanding balances is payable at
0.95% per annum over LIBOR, except when the aggregate security value of the
mortgaged vessels is more than 200% of the outstanding balances, in which case
the interest is 0.75% per annum over LIBOR.
Our
ability to borrow amounts under our credit facility is subject to satisfaction
of certain customary conditions precedent and compliance with terms and
conditions included in our credit facility documentation. To the extent that the
vessels in our fleet that secure our obligations under our credit facility are
insufficient to satisfy minimum security requirements, we will be required to
grant additional security or obtain a waiver or consent from the
lender.
Security
Our
obligations under our credit facility are secured by a first preferred mortgage
on one or more vessels in our fleet, currently on four vessels (the
m/v Tiara Globe
,
m/v River Globe
,
m/v Sky Globe
and
m/v Star Globe
), and such
other vessels that we may from time to time include with the approval of our
lender, and a first priority assignment of any time charter or other contract of
employment of any vessel that acts as security, a first priority account pledge
over the operating account of the vessel-owning company and an assignment of the
vessel’s insurances and earnings. We may grant additional security from time to
time in the future. Each of the vessel-owning subsidiaries that owns a vessel
pledged as security under our credit facility has guaranteed our obligations
under the facility.
Covenants
Our
credit facility contains financial and other covenants requiring us, among other
things, to ensure that:
|
Ø
|
the
aggregate market value of the four vessels in our fleet financed by our
credit facility at all times is or exceeds 133% of the outstanding balance
under our credit facility plus the notional or actual cost of terminating
any relating hedging arrangements minus the aggregate amount, if any,
standing to the credit of our operating accounts or any bank accounts
opened with Credit Suisse, which are subject to an encumbrance in favor of
Credit Suisse and designated as a “security account” by Credit Suisse for
purposes of the credit facility;
|
|
Ø
|
the
ratio of our consolidated market adjusted net worth to our total assets
will not be less than 0.35:1.0;
|
|
Ø
|
Mr.
Feidakis maintains at least 35% of our total issued voting share capital;
and
|
|
Ø
|
we
maintain an aggregate of $10.0 million of consolidated cash and cash
equivalents.
|
Our
credit facility also contains general covenants that require us to comply with
the ISPS Code, carry all required licenses and provide financial statements to
the bank. In addition, our credit facility includes customary events of default,
including those relating to a failure to pay principal or interest, a breach of
covenant, representation and warranty, a cross-default to other indebtedness and
non-compliance with security documents. We are permitted to pay dividends so
long as we are not in default of our credit facility at the time of the
declaration or payment of the dividends and the dividends do not exceed 75% of
our net profit for such period.
We
believe we are not in default of our covenants relating to our credit
facility.
DEUTSCHE
SCHIFFSBANK LOAN AGREEMENT
In June
2010, Kelty Marine Ltd., our subsidiary that owns the
m/v Jin Star
, entered into a
$26.7 million loan agreement with Deutsche Schiffsbank and used the funds to pay
part of the purchase price for the vessel. We act as guarantor for this
loan.
The loan
agreement has a term of seven years and is payable in 28 equal quarterly
installments of $500,000 starting three months after the draw down of the funds,
as well as a balloon payment of $12.65 million due together with the 28
th
and
final installment due in June 2017. Interest on outstanding balances under our
loan agreement is payable at LIBOR plus a variable margin. The margin depends on
the “loan to value ratio,” which is a fraction where the numerator is the
principal amount outstanding under our loan agreement and the denominator is the
charter free market value of the
m/v Jin Star
and any amount
of free liquidity maintained with Deutsche Schiffsbank. Set forth below is the
margin that will apply to the loan, depending on the applicable loan to value
ratio in any given application period:
Loan to Value Ratio
|
|
Margin
|
|
|
|
Less
than 45%
|
|
|
2.25%
|
|
|
|
|
45%
or greater and less than or equal to 60%
|
|
|
2.40%
|
|
|
|
|
Greater
than 60% and less than or equal to 70%
|
|
|
2.50%
|
|
|
|
|
Greater
than 70%
|
|
|
2.75%
|
Kelty
Marine can prepay up to $2 million per year in minimum prepayment amounts of $1
million without any penalty. Our loan agreement has a commitment fee of 0.5% per
annum on the amount of the undrawn balance of the agreement through September
30, 2010, and had a 0.75% flat management fee on the loan amount. As of June 30,
2010, the loan was fully drawn and the outstanding balance was $26.7 million. We
paid a quarterly installment of $0.5 million in September 2010 and reduced the
outstanding balance to $26.2 million. The next quarterly installment is due in
December 2010.
Security
The loan
is secured by a first preferred mortgage on the
m/v Jin Star
, assignment of
insurances, earnings and requisition compensation on the vessel and assignment
of the bareboat charter.
Covenants
The loan
agreement with Deutsche Schiffsbank contains financial and other covenants
requiring Kelty Marine to, among other things, ensure that:
|
Ø
|
Kelty
Marine does not undergo a change of
control;
|
|
Ø
|
Kelty
Marine maintain at least $1 million in minimum
liquidity;
|
|
Ø
|
the
ratio of our shareholders’ equity to total assets is not less than
25%;
|
|
Ø
|
we
must have a minimum equity of $50
million;
|
|
Ø
|
the
market value of the
m/v
Jin Star
is or exceeds 130% of the aggregate principal amount of
debt outstanding under our loan agreement;
and
|
|
Ø
|
Mr.
Feidakis and Mr. Karageorgiou, our founders, maintain at least 37% of the
shareholding in us.
|
Our loan
agreement permits us to declare and pay dividends without prior written
permission of the lender so long as there is no event of default under the loan
agreement.
As of the
date of this prospectus, we have a $75.5 million balance outstanding under our
credit facility with Credit Suisse and $26.2 million outstanding under the loan
agreement with Deutsche Schiffsbank.
MANAGEMENT
The
following table sets forth information regarding our executive officers and our
directors. Our articles of incorporation following our redomiciliation provide
for a board of directors serving staggered, three-year terms, other than any
members of our board of directors that may serve at the option of the holders of
preferred shares, if any. The term of our Class I directors expires at our
annual general meeting of shareholders in 2011, the term of our Class II
directors expires at our annual general meeting of shareholders in 2012 and the
term of our Class III directors expires at our annual general meeting of
shareholders in 2013. The business address of each of the directors and officers
is c/o Globus Shipmanagement Corp., 128 Vouliagmenis Avenue, 3rd Floor, 166 74
Glyfada, Athens, Greece.
Name
|
Position
|
Age
|
Georgios
Feidakis
|
Chairman
of the Board of Directors
|
60
|
Georgios
Karageorgiou
|
Director
and Chief Executive Officer
|
45
|
Elias
S. Deftereos
|
Director
and Chief Financial Officer
|
50
|
Amir
Eilon
|
Director
|
62
|
Jeffrey
O. Parry
|
Director
|
51
|
Georgios (“George”) Feidakis
,
a Class III director, is our founder and principal shareholder and has served as
chairman of the board of directors since inception. Mr. Feidakis is also the
major shareholder and Chairman of FG Europe, a company Mr. Feidakis has been
involved with since 1994 and that has been listed on the Athens Stock Exchange
since 1968, and acts as a director and executive for several of its
subsidiaries. FG Europe is active in four lines of business and distributes well
known brands in Greece, the Balkans, Turkey and Italy. FG Europe is in the
air-conditioning and white/brown electric goods market in Greece and is active
in power generation and mobile telephony. Mr. Feidakis is also the director and
chief executive officer of R.F. Energy S.A., a company that plans, develops and
controls the operation of energy projects, and acts as a director and executive
for several of its subsidiaries.
Georgios (“George”)
Karageorgiou
, a Class I director, has served as our chief executive
officer since our inception. From 1992 to March 2004, Mr. Karageorgiou worked as
a director and corporate secretary for Stelmar Shipping Limited, a shipping
company listed on the New York Stock Exchange between 2001 and 2004. Mr.
Karageorgiou worked as a projects engineer for Kassos Maritime Enterprises from
1990 to 1992. Mr. Karageorgiou was also a director of easyGroup Ltd, easyJet
Holdings Ltd, easyInternetCafe Ltd, easyCruise Ltd, Stelinvest Corp. and a
number of other easyGroup subsidiaries from 1995 through March 2005. Mr.
Karageorgiou holds a B.E. in Mechanical Engineering and an M.E. in Ocean
Engineering from Stevens Institute of Technology and an M.Sc. in Shipping Trade
and Finance from City University Business School.
Elias S. Deftereos
, a Class II
director, has served as our chief financial officer and a member of our board of
directors since April 2007. Mr. Deftereos previously worked as a finance
director at Astron Maritime from March 2005 to July 2006 and as the finance
director of Konkar Shipping Agencies S.A. from January 2004 to February 2005,
each of which company managed fleets of dry bulk vessels. Mr. Deftereos worked
as the group treasurer of Mytilineos Holdings from 1999 to 2001, a company
listed on the Athens Stock Exchange, and as an investment manager for Lehman
Brothers from 1997 to 1998. Mr. Deftereos worked as an account officer for ship
financing for ABN AMRO Bank from 1994 to 1996, and an analyst for Olympic
Maritime of the Onassis Group from 1988 to 1991. Mr. Deftereos holds a B.A. in
Economics from the State University of New York at Buffalo and an MBA in Finance
from the University of Chicago.
Amir Eilon
, a Class III
director, has served as our director since June 2007. Mr. Eilon has been a
director of Eilon & Associates Limited since February 1999, which provides
general corporate advice. Mr. Eilon was previously a non-executive chairman of
Spring plc, listed on the London Stock Exchange, from mid-2004 to August 2009
and a director of Flamingo Holdings, a venture capital backed private company,
from March 2007 to April 2009. Mr. Eilon was the managing director of Credit
Suisse First Boston Private Equity from 1998 to 1999, the managing director of
BZW from 1990 to 1998, where he was head of global capital markets, and the
managing director of Morgan Stanley, London from 1985 to 1990, where he was
responsible for international equity capital markets.
Jeffrey O. Parry
, a Class II
director,
has
served as our director since July 2010. Mr. Parry is currently the president of
Mystic Marine Advisors LLC, a Connecticut-based advisory firm specializing in
turnaround and emerging shipping companies, and has been affiliated with such
company since August 1998. From July 2008 to October 2009, he was president and
chief executive officer of Nasdaq-listed Aries Maritime Transport Limited (now
named NewLead Holdings Ltd.). Mr. Parry has also served as the managing director
of A.G. Pappadakis & Co. Ltd, an Athens-based shipowner from March 2007 to
July 2008, and managing director of Poten Capital Services LLC, a U.S.
broker/dealer firm specializing in shipping from February 2003 to March 2007.
Mr. Parry holds a B.A. from Brown University and an MBA from Columbia
University. Mr. Parry started his career as a stevedore on the New York
waterfront.
There are
no family relationships between any of our directors or senior management. There
are no arrangements or understandings with major shareholders, customers,
suppliers or others, pursuant to which any person referred to above was selected
as a director or member of senior management.
BOARD
& COMMITTEE PRACTICES
Our board
of directors and executive officers will oversee and supervise our
operations.
Mr. Parry
has a letter of appointment, which contains a provision that the director may be
terminated by us upon three months’ notice. Each director holds office until his
successor is elected or appointed, unless his office is earlier vacated in
accordance with the articles of incorporation or with the provisions of the BCA.
In addition to cash compensation as described below under
“Compensation—Non-Executive Directors’ Fees,” we intend to pay to Mr. Eilon, and
the letter of appointment with Mr. Parry provides that we will pay to Mr. Parry,
£12,000 in our shares annually. If Mr. Parry ceases to be a director as a result
of a change of control in us, then he will immediately receive the number of
shares that he would have otherwise received had his appointment been for two
years. The members of our senior management are appointed to serve at the
discretion of our board of directors. Our board of directors and committees of
our board of directors schedule regular meetings over the course of the year.
Under the Nasdaq rules, we believe that Mr. Eilon and Mr. Parry are
independent.
While a
number of the Nasdaq’s corporate governance standards do not apply to us as a
foreign private issuer, we intend to comply with a number of those rules. The
practices that we will follow in lieu of Nasdaq’s corporate governance rules are
as follows:
|
Ø
|
in
lieu of a nomination committee and remuneration committee comprised
entirely of independent directors, our nomination and remuneration
committees will be comprised of a majority of independent directors. Each
of these committees will be comprised of a minimum of two individuals.
There is nothing to prohibit shareholders identifying and recommending
potential candidates to become board
members;
|
|
Ø
|
in
lieu of holding regularly scheduled meetings of the board of directors at
which only independent directors are present, we will not be holding such
regularly scheduled meetings;
|
|
Ø
|
in
lieu of a board of directors that is comprised by a majority of
independent directors, our board of directors is not comprised of a
majority of independent directors;
and
|
|
Ø
|
in
lieu of an audit committee comprised of three independent directors, our
audit committee has two members.
|
We have
an Audit Committee, a Remuneration Committee and a Nomination
Committee.
The Audit
Committee is comprised of Amir Eilon and Jeffrey Parry. It is responsible for
ensuring that our financial performance is properly reported on and monitored,
for reviewing internal control systems and the auditors’ reports relating to our
accounts and for reviewing and approving all related party transactions. Our
board of directors has determined that Amir Eilon is our audit committee
financial expert. Each Audit Committee member has experience in reading and
understanding financial statements, including statements of financial position,
statements of comprehensive income and statements of cash
flows.
The
Remuneration Committee is comprised of George Feidakis, Amir Eilon and Jeffrey
Parry. It is responsible for determining, subject to approval from our board of
directors, the remuneration guidelines to apply to our executive officers,
secretary and other members of the executive management as our board of
directors designates the Remuneration Committee to consider. It is also
responsible for determining the total individual remuneration packages of each
director including, where appropriate, bonuses, incentive payments and share
options. The Remuneration Committee will also liaise with the Nomination
Committee to ensure that the remuneration of newly appointed executives falls
within our overall remuneration policies.
The
Nomination Committee is comprised of George Feidakis, Amir Eilon and Jeffrey
Parry. It is responsible for reviewing the structure, size and composition of
our board of directors and identifying and nominating candidates to fill board
of directors’ positions as and when they arise.
CODE
OF ETHICS
We have
adopted a code of ethics that applies to our directors, officers and
employees.
Our code
of ethics is posted on our website and is available upon written request by our
shareholders at no cost.
EMPLOYEES
As of
December 31, 2009, we had approximately 13
full-time employees and
five consultants, including the senior management, all of whom were hired
through Globus Shipmanagement. All of these employees are located in Greece and
are engaged in the service and management of our fleet. None of our employees
are covered by collective bargaining agreements, although certain crew members
are parties to collective bargaining agreements. We do not employ a significant
number of temporary employees.
COMPENSATION
Non-Executive
Directors’ Fees
We intend
to pay to Mr. Eilon, and the letter of appointment with Mr. Parry provides that
we will pay Mr. Parry, £25,000 in cash annually, and we intend to pay the
chairman of our board of directors £40,000 in cash annually. Our three
non-executive directors were remunerated in 2009 by quarterly cash payments as
well as by quarterly issuances of shares, as follows:
Name
|
|
Date
|
|
Cash (GBP)
|
|
|
Share Issuances
(1)
|
|
|
|
|
|
|
|
|
|
|
Mr.
George Feidakis
|
|
March
12, 2009
|
|
|
10,000
|
|
|
|
-
|
|
|
|
June
16, 2009
|
|
|
10,000
|
|
|
|
-
|
|
|
|
September
15, 2009
|
|
|
10,000
|
|
|
|
-
|
|
|
|
December
9, 2009
|
|
|
10,000
|
|
|
|
-
|
|
|
|
|
|
|
|
|
|
|
|
|
Mr.
Amir Eilon
|
|
April
9, 2009
|
|
|
6,250
|
|
|
|
4,225
|
|
|
|
June
16, 2009
|
|
|
6,250
|
|
|
|
4,000
|
|
|
|
September
15, 2009
|
|
|
6,250
|
|
|
|
4,444
|
|
|
|
December
9, 2009
|
|
|
6,250
|
|
|
|
4,286
|
|
|
|
|
|
|
|
|
|
|
|
|
Mr.
Arjun Batra
(2)
|
|
April
9, 2009
|
|
|
6,250
|
|
|
|
4,225
|
|
|
|
June
16, 2009
|
|
|
6,250
|
|
|
|
4,000
|
|
|
|
September
15, 2009
|
|
|
6,250
|
|
|
|
4,444
|
|
|
|
December
9, 2009
|
|
|
6,250
|
|
|
|
4,286
|
|
|
|
|
|
|
|
|
|
|
|
|
TOTAL
|
|
|
|
£
|
90,000
|
|
|
|
33,910
|
|
(1)
Does not take into account the 4:1 reverse split of shares that took place on
July 29, 2010.
(2)
Mr. Batra resigned as a director in 2010.
Executives
of Globus
Globus
Shipmanagement has entered into employment agreements with each of Mr.
Karageorgiou and Mr. Deftereos for work performed in Greece and we have entered
into separate consulting agreements with companies wholly owned by each of them
for them to assist and advise the chief executive officer and chief financial
officer, respectively, in respect of his duties performed outside of
Greece.
Compensation
Philosophy and Objectives
We
believe that our executive compensation program should reward executives for
enhancing our long-term performance while delivering favorable annual operating
results. The Remuneration Committee evaluates both performance and compensation
so that we may attract and retain superior executives and maintain compensation
competitive to that of our peer companies for similarly situated executives. The
principal components of compensation for our executives currently are salary,
annual cash bonuses and equity awards in the form of common shares issued
pursuant to our incentive plan.
Annual
Salary and Bonus
The
salaries of our executive officers are reviewed on an annual basis. Adjustments
in salary are based on the evaluation of individual performance, our overall
performance during a given financial year and the individual’s contribution to
our overall performance. With respect to determining bonuses, the Remuneration
Committee considers the following factors:
|
Ø
|
average
operating expenses per vessel per
day;
|
|
Ø
|
overall
fleet utilization;
|
|
Ø
|
average
overhead burden per vessel per day (excluding corporate-related
expenses);
|
|
Ø
|
drydocking
budget performance; and
|
|
Ø
|
growth
in earnings before interest, taxes, depreciation and amortization
(EBITDA).
|
An
individual may not be granted a bonus in excess of 100% of his annual base
salary in any fiscal year.
In 2009,
our chief executive officer and our chief financial officer received the
following aggregate amounts shown in Euro, net of contributions and
taxes:
Salary and Fees (Euro)
|
|
Benefits (Euro)
|
|
|
Cash Bonus (Euro)
|
|
|
Share Issuances
|
|
€480,000
|
|
€
|
6,000
|
|
|
€
|
78,448
|
|
|
|
256,812
|
*
|
*
This number of shares does not
take into account the 4:1 reverse split.
We expect
that the aggregate compensation that we will pay members of our senior
management will be approximately $800,000 in 2010, using a Euro:U.S. dollar
exchange rate of 1.0:1.4.
THE
INCENTIVE PLAN
We
allocate a portion of annual compensation to awards of our common shares, or
awards, under our incentive plan, because we believe that equity awards are
important to align our employees’ interests with those of our shareholders. Our
incentive plan is administered by our Remuneration Committee.
Our board
of directors believes that these awards will keep our employees focused on our
growth, as well as dividend growth and its impact on our share price, over an
extended time period. In addition, our board of directors believes the gradual
vesting schedule of these awards will help us retain both our executive officers
and key employees. The amount of awards we grant to any person under our
incentive plan is subject to the performance condition as set out
below.
Grant
of Awards
Awards
will be granted on an annual basis. Awards may generally only be granted in the
period of four weeks commencing on the day following any amendment to our
incentive plan taking effect; or an announcement by us of our results for any
period, or the issue by us of a prospectus or similar document. The grant of any
awards under our incentive plan will be subject to performance
conditions.
Performance
Condition
The
Remuneration Committee generally compares our performance in terms of total
shareholder return, which is calculated based on changes in share price and
dividends paid over a calendar year, and which we refer to as TSR, relative to a
peer group of publicly listed dry bulk shipping companies. The current peer
group that we use is comprised of the following companies, which is subject to
change at the discretion of our Remuneration Committee:
|
Ø
|
United
Kingdom: Hellenic Carriers Ltd. and Goldenport Holdings Inc.;
and
|
|
Ø
|
United
States: Diana Shipping Inc., Excel Maritime Carriers Ltd., Paragon
Shipping Inc., DryShips Inc., Eagle Bulk Shipping Inc., Euroseas Ltd.,
FreeSeas Inc., Genco Shipping & Trading Limited, OceanFreight Inc. and
Seanergy Maritime Holdings Corp.
|
We
believe that TSR, measured relative to the performance of comparable companies,
is the best way of evaluating our performance and measuring value creation for
shareholders.
If, on
the purported date of grant, we rank below the twentieth percentile within the
peer group, then no awards may be granted. If we achieve or exceed the twentieth
percentile, the number of common shares which may be made subject to an award to
a particular individual on the date of grant shall be restricted to a percentage
of the “individual limit” referred to below. This percentage shall be calculated
on a straight-line basis from 17.5% of the individual limit (if we achieve the
twentieth percentile) to the maximum value we are permitted to grant under our
incentive plan (if we achieve the hundredth percentile and therefore rank first
compared to our then existing peer group). These targets will be reviewed
annually.
Individual
Limit
In any
fiscal year, no participant may be granted awards over common shares with a
market value (on the relevant date(s) of grant) in excess of 200% of the
aggregate of the participant’s annual salary and bonus.
Vesting
of Awards
Subject
to what is set out below, awards vest proportionally over a three-year period
from their date of grant and vested common shares subject to awards will be
delivered to participants within the 30 days that follow the first, second and
third anniversaries of the date of grant of the relevant award. If the
participant is summarily dismissed from his employment, his award in respect of
vested and unvested common shares will lapse in its entirety. In all other
circumstances of cessation of employment (unless the Remuneration Committee
acting in its absolute discretion otherwise determines), the participant shall
retain his vested award but any unvested award shall lapse. Vested common shares
subject to awards in such circumstances will be delivered to participants within
the 30 days that follow cessation of employment.
Lock
In
After
shares are issued under our incentive plan, they are subject to a one-year
“lock-in” period pursuant to the terms of our incentive plan.
Overall
Limit
Not more
than 10% of our issued share capital (including shares held in treasury) may be
made subject to awards or options granted under our incentive plan or any other
share-based employee incentive plan established by us in any ten-year
period.
2009
Grants
On
December 10, 2009, we granted to our two executive officers and a number of
managers and staff of our wholly owned subsidiary Globus Shipmanagement a
conditional award of 575,199 shares, which following our four-for-one reverse
split of our common shares, became an effective award of 143,799, with a
conditional right for the shares to be allotted and delivered to them in the
future at no cost. If a cash dividend is paid during the vesting period,
additional shares will be granted and calculated in accordance with the terms of
our incentive plan. Due to the cash dividend declared and paid during September
2010, an additional 1,631 common shares of the Company were added to the
initially granted shares. The outstanding award adjusted for the effects of the
dividend paid, award forfeitures and reverse split became as
follows:
|
Ø
|
255,536
ordinary shares were granted to George Karageorgiou, our chief executive
officer, which following our four-for-one reverse split of our common
shares and dividend paid, became an effective award of
64,618;
|
|
Ø
|
94,679
ordinary shares were granted to Elias Deftereos, our chief financial
officer, which following our four-for-one reverse split of our common
shares and dividend paid, became an effective award of 23,942;
and
|
|
Ø
|
224,984
ordinary shares were granted to fourteen managers and staff of Globus
Shipmanagement, which following our four-for-one reverse split of our
common shares, dividend paid and award forfeitures, became an effective
award of 54,910, making the total effective award 143,470
shares.
|
The
shares above will only be issued if, prior to December 31, 2010, our shares are
listed on Nasdaq or we have raised more than $30 million from third parties. Our
incentive plan provides that these shares will vest on a daily basis over the
next three years, and one-third of these shares will be allotted and delivered
to them at no cost on each of the first, second and third anniversaries subject
to their continuing employment.
There are
no other outstanding awards.
RELATED
PARTY TRANSACTIONS
Globus
Maritime Limited or Globus Shipmanagement has entered into various agreements
that will effect our business. These agreements are not the result of third
party negotiations as they were negotiated with related parties. According to
its charter, our Audit Committee will review and approve all related party
transactions.
CONSULTING
AGREEMENTS
We have
entered into separate consulting agreements with companies wholly owned by each
of our executive officers for them to assist and advise the chief executive
officer and chief financial officer, respectively, in respect of his duties
performed outside of Greece.
LEASE
During
the 2009, 2008 and 2007 fiscal years, we paid $239,000 $242,000 and $214,000
respectively, to Cyberonica S.A., a company owned by Mr. Feidakis, for the
rental of 350 square meters of office space for our operations. During the
six-month period ended June 30, 2010, we paid $118,000 to Cyberonica S.A for the
rental of the office space.
BROKERAGE
SERVICES
In
November 2009, we entered into memoranda of agreement for the sale of
m/v Sea Globe
and
m/v Coral Globe
for an
aggregate price of $34 million, for which North South Maritime Ltd provided
brokerage services. The managing director of North South Maritime Ltd, Arjun
Batra, was a member of our board of directors who resigned in 2010 as a result
of his family’s relocation from the United Kingdom to Singapore. North South
Maritime Ltd received brokerage commission fees of 2.5% on the total sale price
of the vessels, which amounted to $850,000.
SHIP
MANAGEMENT
In
September 2006, Globus Shipmanagement entered into an agreement with Eolos
Shipmanagement S.A., a company related through common control. The agreement
provided for a fee of $100,000 per month for services rendered in connection
with the management of dry bulk vessels. The amount of the service fee was
unaffected by the number of vessels and timing of delivery or sale of any such
vessels. During the year ended December 31, 2007, an amount of $204,000 was
included in the consolidated statement of comprehensive income for the fee
payable to Eolos Shipmanagement. The agreement was terminated on March 31, 2007
and there was no balance outstanding as of that date.
BUSINESS
OPPORTUNITIES AGREEMENT
In
November 2010, Mr. Feidakis entered into a business opportunities arrangement
with us. Under this agreement, Mr. Feidakis is required to disclose to us any
business opportunities relating to dry bulk shipping that may arise during his
service to us as a member of our board of directors that could reasonably be
expected to be a business opportunity that we may pursue. Mr. Feidakis agreed to
disclose all such opportunities, and the material facts attendant thereto, to
our board of directors for our consideration and if our board of directors fails
to adopt a resolution regarding an opportunity within seven business days of
disclosure, we will be deemed to have declined to pursue the opportunity, in
which event Mr. Feidakis will be free to pursue it. Mr. Feidakis is also
prohibited for six months after the termination of the agreement to solicit any
of our or our subsidiaries’ senior employees or officers. Mr. Feidakis’s
obligations under the business opportunities agreement will also terminate when
he no longer beneficially owns our shares representing at least 30% of the
combined voting power of all our outstanding shares or any other equity, or no
longer serves as our director. Mr. Feidakis remains free to conduct his other
businesses that are not related to dry bulk shipping.
REGISTRATION
RIGHTS AGREEMENT
In
November 2010, we entered into a registration rights agreement with Firment
Trading Limited and Kim Holdings S.A., pursuant to which we granted to them
and their affiliates (including Mr. George Feidakis and Mr. George Karageorgiou)
and certain of their transferees, the right, under certain circumstances and
subject to certain restrictions to require us to register under the
Securities Act our common shares held by them. Under the registration rights
agreement, these persons have the right to request us to register the sale of
shares held by them on their behalf and may require us to make available shelf
registration statements permitting sales of shares into the market from time to
time over an extended period. In addition, these persons have the ability to
exercise certain piggyback registration rights in connection with registered
offerings requested by shareholders or initiated by us.
RELATIONSHIP
AGREEMENT
In May
2007, we, Firment Trading Limited and Mr. George Feidakis entered into a
relationship agreement, which provided that Firment Trading is entitled to
appoint the chairman of our board of directors for so long as Firment Trading
and Mr. Feidakis held directly or indirectly at least 30% of our outstanding
shares. The agreement also provided, among other things, that Firment Trading
and Mr. Feidakis would not compete with us, and contained provisions relating to
related party transactions. We intend to terminate this agreement shortly after
our common shares are delisted from the AIM. In connection with such
termination, we intend to issue one preferred share to Mr. Feidakis or his
affiliate that will provide the holder with the ability to appoint any one
person to be a director, who may also be the chairman of our board of directors,
for so long as such holder and his or its affiliates also hold in the aggregate
at least 30% of the voting power of our shares. Such preferred share will have
no voting or dividend rights.
ACQUISITION
OF NON-CONTROLLING INTERESTS
In March
2007, prior to the consummation of our IPO, we acquired from related parties all
outstanding non-controlling interests in two subsidiaries, over which we had
already exercised full operational control. We issued common shares as
consideration for such acquisition.
SHARES
ELIGIBLE FOR FUTURE SALE
We cannot
predict what effect, if any, market sales of our common shares in the United
States or the availability of our common shares for sale in the United States
will have on the market price of our common shares. Nevertheless, sales of
substantial amounts of our common shares in the public market, or the perception
that such sales may occur, could materially and adversely affect the market
price of our common shares and could impair our ability to raise capital through
the sale of our equity or equity-related securities at a time and price that we
deem appropriate.
7,241,865
of our common shares are outstanding, and no Class B shares are outstanding,
although we intend to issue in December 2010 or in 2011 a special stock dividend
of Class B shares to the holders of our common shares in a ratio of one Class B
share for every number of common shares owned that we will determine in the
future in connection with such dividend. The common shares registered in our
registration statement to which this prospectus relates will be freely
transferable in the United States without restriction under the Securities Act.
The remaining outstanding common shares, if any, may be sold in the public
market only if registered under the Securities Act or if they qualify for an
exemption from registration under Rule 144 under the Securities Act, which is
summarized below, or another SEC rule.
Under
Rule 144, a person who is not one of our affiliates at any time during the
three months preceding a sale, and who has beneficially owned our common shares
to be sold for at least six months, would be entitled to sell an unlimited
number of our common shares, provided current public information about us is
available. In addition, under Rule 144, a person who is not one of our
affiliates at any time during the three months preceding a sale, and who has
beneficially owned our common shares to be sold for at least one year, would be
entitled to sell an unlimited number of shares.
In
general, under Rule 144 as currently in effect, our affiliates who have
beneficially owned our common shares for at least one year are entitled to sell
within any three month period a number of shares that does not exceed the
greater of:
|
Ø
|
1.0%
of our then-outstanding common shares;
and
|
|
Ø
|
the
average weekly trading volume during the four calendar weeks preceding the
date on which notice of the sale is filed with the
SEC.
|
Sales of
restricted shares under Rule 144 by our affiliates are also subject to
requirements regarding the manner of sale, notice and the availability of
current public information about us. Rule 144 also provides that affiliates
relying on Rule 144 to sell our common shares that are not restricted shares
must nonetheless comply with the same restrictions applicable to restricted
shares, other than the holding period requirement.
Shares
sold outside the United States pursuant to Regulation S would not be subject to
these restrictions.
We
entered into a registration rights agreement in November 2010 with Firment
Trading Limited and Kim Holdings S.A. pursuant to which we granted to them and
their affiliates and certain of their transferees, the right, under certain
circumstances and subject to certain restrictions to require us to register
under the Securities Act our common shares held by them. When registered under
any registration statement, our common shares held by them will be available for
sale in the open market unless restrictions apply. Please see “Related Party
Transactions—Registration Rights Agreement.” In addition, these common shares
would be available for sale into the public market after one year pursuant to
Rule 144, Regulation S and other exemptions under the Securities Act, subject to
the limitations contained therein, as described above.
SELLING
SHAREHOLDERS
The
following table identifies the selling shareholders, and the number and
percentage of common shares beneficially owned by the selling shareholders as of
November 19, 2010, the number of common shares that the selling shareholders may
offer or sell, the number and percentage of common shares beneficially owned by
the selling shareholders assuming they sell all of the shares that may be sold
by them and their relationship with us over the past three years, if any. We
have prepared this table solely based upon information furnished to us by or on
behalf of the selling shareholders. The selling shareholders may have sold,
transferred or otherwise disposed of, or may sell, transfer or otherwise dispose
of, at any time and from time to time, the common shares after the date on which
each selling shareholder provided the information set forth in the table below.
As used in this prospectus, “selling shareholders” includes pledgees, assignees,
successors-in-interest, donees, transferees or others who may later hold the
selling shareholders’ common shares. Unless otherwise provided, the address of
each of the selling shareholders is c/o Globus Shipmanagement Corp., 128
Vouliagmenis Avenue, 3rd Floor, 166 74 Glyfada, Athens, Greece. We have assumed
for purposes of the following table that all of the securities covered by this
prospectus held by such selling shareholders are sold. Unless otherwise noted,
none of the following selling shareholders have, or have had in the past three
years, a material relationship with us.
Name and Address of Selling Shareholder
|
|
Beneficial
Ownership
of Common
Shares as of
November
19, 2010
|
|
|
Percentage
of
Common
Shares
Owned as
of
November
19, 2010
|
|
|
Number of
Common
Shares
Offered for
Sale
|
|
|
Beneficial
Ownership of
Common Shares
After Giving
Effect to
Proposed Sale
|
|
|
Percentage
to be
Owned
After
Offering
|
|
Firment
Trading Limited (1)(2)
|
|
|
4,474,475
|
|
|
|
61.8
|
%
|
|
|
4,474,475
|
|
|
|
-
|
|
|
*
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Lipati
Shipping Company Limited (1)(3)
56
Pindou Street, Chalandri
152
33, Athens, Greece
|
|
|
428,928
|
|
|
|
5.9
|
%
|
|
|
428,928
|
|
|
|
-
|
|
|
*
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Alpine
Navigation Co. (4)
Ajeltake
Road, Ajeltake Island
Majuro,
Marshall Islands, MH 96960
|
|
|
328,075
|
|
|
|
4.5
|
%
|
|
|
328,075
|
|
|
|
-
|
|
|
*
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Muse
Trading Co. (5)
Ajeltake
Road, Ajeltake Island
Majuro,
Marshall Islands, MH 96960
|
|
|
326,577
|
|
|
|
4.5
|
%
|
|
|
326,577
|
|
|
|
-
|
|
|
*
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Kim
Holdings S.A. (1)
|
|
|
250,157
|
|
|
|
3.5
|
%
|
|
|
250,157
|
|
|
|
-
|
|
|
*
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Jupiter
Dividend & Growth Trust plc (6)
1
Grosvenor Place
London,
SW1X 7JJ, U.K.
|
|
|
178,833
|
|
|
|
2.5
|
%
|
|
|
178,833
|
|
|
|
-
|
|
|
*
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Unis
Investments Ltd. (7)
Trust
Company Complex
Ajeltake
Road, Ajeltake Island
Majuro,
Marshall Islands, MH 96960
|
|
|
25,000
|
|
|
|
*
|
|
|
|
25,000
|
|
|
|
-
|
|
|
*
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Elias
S. Deftereos (1)
|
|
|
15,000
|
|
|
|
*
|
|
|
|
15,000
|
|
|
|
-
|
|
|
*
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Amir
Eilon (1)
|
|
|
10,401
|
|
|
|
*
|
|
|
|
10,401
|
|
|
|
-
|
|
|
*
|
|
Avery
Holding Corp. (8)
Trust
Company Complex
Ajeltake
Road, Ajeltake Island
Majuro,
Marshall Islands, MH 96960
|
|
|
7,500
|
|
|
|
*
|
|
|
|
7,500
|
|
|
|
-
|
|
|
*
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Arjun
Batra (9)
#06-04
Astrid Meadows
46B
Coronation Road West
Singapore
269262
|
|
|
6,250
|
|
|
|
*
|
|
|
|
6,250
|
|
|
|
-
|
|
|
*
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Sherman
Revocable Trust (10)
5840
East Joshua Tree
Paradise
Valley, Arizona 85253, U.S.A.
|
|
|
5,250
|
|
|
|
*
|
|
|
|
5,250
|
|
|
|
-
|
|
|
*
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
John
Archibald Burdon-Cooper
Cret
William, Crieff
Perthshire,
PH7 4JY, Scotland
|
|
|
5,000
|
|
|
|
*
|
|
|
|
5,000
|
|
|
|
-
|
|
|
*
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Malcolm
John Morrisby
331
Chartridge Lane
Chesham,
Bucks HP5 2SQ, U.K.
|
|
|
5,000
|
|
|
|
*
|
|
|
|
5,000
|
|
|
|
-
|
|
|
*
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
George
Nikas
25
Columbus Circle
New
York, New York 10019
|
|
|
4,975
|
|
|
|
*
|
|
|
|
4,975
|
|
|
|
-
|
|
|
*
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Patricia
Mary Morrisby
331
Chartridge Lane
Chesham,
Bucks HP5 2SQ, U.K.
|
|
|
4,000
|
|
|
|
*
|
|
|
|
4,000
|
|
|
|
-
|
|
|
*
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Richard
A. Hurowitz, Sasha C. Hurowitz M/NY/UTMA (11)
985
Fifth Avenue, Apt. 2B
New
York, New York 10075-0142
|
|
|
3,250
|
|
|
|
*
|
|
|
|
3,250
|
|
|
|
-
|
|
|
*
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Richard
A. Hurowitz, Asher C. Hurowitz
M/NY/UTMA
(11)
985
Fifth Avenue, Apt. 2B
New
York, New York 10075-0142
|
|
|
3,250
|
|
|
|
*
|
|
|
|
3,250
|
|
|
|
-
|
|
|
*
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Bettina
von Meyenburg
Seestrasse
1
8704
Herrliberg, Switzerland
|
|
|
3,000
|
|
|
|
*
|
|
|
|
3,000
|
|
|
|
-
|
|
|
*
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Claudia
von Meyenburg
Seestrasse
1
8704
Herrliberg, Switzerland
|
|
|
3,000
|
|
|
|
*
|
|
|
|
3,000
|
|
|
|
-
|
|
|
*
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Olav
zu Ermgassen
3
Cranmore Avenue, Osterley
Isleworth,
TW7 4QW, U.K.
|
|
|
2,556
|
|
|
|
*
|
|
|
|
2,556
|
|
|
|
-
|
|
|
*
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
George
Charalambous
29
Dimitriou Biskini Str.
157
71, Athens, Greece
|
|
|
2,500
|
|
|
|
*
|
|
|
|
2,500
|
|
|
|
-
|
|
|
*
|
|
Jason
Richard Higgins
3,
The Granary Buildings, Millow
Biggleswade,
Bedfordshire SG18 8RH, U.K.
|
|
|
2,035
|
|
|
|
*
|
|
|
|
2,035
|
|
|
|
-
|
|
|
*
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Winterflood
Securities Ltd. (12)
The
Atrium Building, Cannon Bridge House
25
Dowgate Hill
London,
EC4R 2GA, U.K.
|
|
|
1,525
|
|
|
|
*
|
|
|
|
1,525
|
|
|
|
-
|
|
|
*
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Christopher
John Baker
7
Avenue Road, Dorridge
Solihull,
B93 8LD, U.K.
|
|
|
1,455
|
|
|
|
*
|
|
|
|
1,455
|
|
|
|
-
|
|
|
*
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Raymond
Edward Oakley
The
Old School House, Westbury
Brackley,
Northamptonshire, NN13 5JR, U.K.
|
|
|
1,250
|
|
|
|
*
|
|
|
|
1,250
|
|
|
|
-
|
|
|
*
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Christopher
William Owens
24,
Pembridge Mews
London,
W11 3EQ, U.K.
|
|
|
1,250
|
|
|
|
*
|
|
|
|
1,250
|
|
|
|
-
|
|
|
*
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Alastair
Dickson
16 Charlotte Square
Edinburgh, EH2 4DF, U.K.
|
|
|
1,150
|
|
|
|
*
|
|
|
|
1,150
|
|
|
|
-
|
|
|
*
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
IPM
Sipp Administration Limited (13)
Cintel
House, Watton Road, Ware
Hertfordshire,
SG12 0AD, U.K.
|
|
|
1,091
|
|
|
|
*
|
|
|
|
1,091
|
|
|
|
-
|
|
|
*
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Ioannis
Papaioannou
27
Proteos Street
145
64, Kifisia, Greece
|
|
|
1,000
|
|
|
|
*
|
|
|
|
1,000
|
|
|
|
-
|
|
|
*
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Graham
Stewart Brandon Street
Impstone
House, Pamber Road, Silchester
Reading,
Berkshire RG7 2NU, U.K.
|
|
|
1,000
|
|
|
|
*
|
|
|
|
1,000
|
|
|
|
-
|
|
|
*
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Ioannis
Triarchos
3
Rue Adrien Lachenal
Geneva
1207, Switzerland
|
|
|
1,000
|
|
|
|
*
|
|
|
|
1,000
|
|
|
|
-
|
|
|
*
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Alastair
Marshall
Flat
28, Churchfield Mansions
321-345
New King’s Road
Parsons
Green, London SW6 4RA, U.K.
|
|
|
758
|
|
|
|
*
|
|
|
|
758
|
|
|
|
-
|
|
|
*
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Brian
Gregory Burroughs
6
Queen Mary Road
Chesterfield,
S40 3LB, U.K.
|
|
|
750
|
|
|
|
*
|
|
|
|
750
|
|
|
|
-
|
|
|
*
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Charles
Albert Vanbergen
24
Castle Court, Hadlow Road
Tonbridge,
Kent TN9 1QU, U.K.
|
|
|
750
|
|
|
|
*
|
|
|
|
750
|
|
|
|
-
|
|
|
*
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Lazaridis
Vassilis
24
B Kifissias Ave.
151
25, Marousi, Greece
|
|
|
750
|
|
|
|
*
|
|
|
|
750
|
|
|
|
-
|
|
|
*
|
|
Michael
Emanuel
Flat
7, 260 Elgin Avenue
London,
W9 1JD, U.K.
|
|
|
670
|
|
|
|
*
|
|
|
|
670
|
|
|
|
-
|
|
|
*
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Jillian
Sandra Kay Hellen
7
Owen Drive, Failand,
Bristol,
BS8 3UE, U.K.
|
|
|
597
|
|
|
|
*
|
|
|
|
597
|
|
|
|
-
|
|
|
*
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Kishor
Pindoria
66
Chapman Crescent, Harrow
Middlesex,
HA3 0TE U.K.
|
|
|
550
|
|
|
|
*
|
|
|
|
550
|
|
|
|
-
|
|
|
*
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Kouniniotis
Anoliki
8 D
Tripia Street
151
21, Pefki, Greece
|
|
|
500
|
|
|
|
*
|
|
|
|
500
|
|
|
|
-
|
|
|
*
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Kathleen
Rowe
Heigh
Head, Mewith, Bentham
Lancaster,
LA2 7AV, U.K.
|
|
|
500
|
|
|
|
*
|
|
|
|
500
|
|
|
|
-
|
|
|
*
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Jeffrey
O. Parry (1)
|
|
|
472
|
|
|
|
*
|
|
|
|
472
|
|
|
|
-
|
|
|
*
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Paul
Lyon
7
Lime Road, Southville
Bristol,
BS3 ILS, U.K.
|
|
|
452
|
|
|
|
*
|
|
|
|
452
|
|
|
|
-
|
|
|
*
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Robert
David Cole
Pastures
Farm, Farm town, Coleorton
Leicestershire,
LE67 BFH, U.K.
|
|
|
379
|
|
|
|
*
|
|
|
|
379
|
|
|
|
-
|
|
|
*
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Michael
Francis and Margaret Woodhouse
45
St. Peter’s Road
West
Mersea, Essex C05 8LL, U.K.
|
|
|
330
|
|
|
|
*
|
|
|
|
330
|
|
|
|
-
|
|
|
*
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Stephen
Sharrock
58
Milnthorpe Road, Kendal
Cumbria,
LA9 5ND, U.K.
|
|
|
325
|
|
|
|
*
|
|
|
|
325
|
|
|
|
-
|
|
|
*
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Peter
Berchtold
5
Whitethorn Close
Marple,
Stockport SK6 6XP, U.K.
|
|
|
323
|
|
|
|
*
|
|
|
|
323
|
|
|
|
-
|
|
|
*
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Andrew
Timothy Harwood
Green
Farm House, Green Lane
Hucclecote,
Gloucester, U.K.
|
|
|
260
|
|
|
|
*
|
|
|
|
260
|
|
|
|
-
|
|
|
*
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Christina
Costaridi Crosby
51
Holland Park
London,
W11 3RS, U.K.
|
|
|
250
|
|
|
|
*
|
|
|
|
250
|
|
|
|
-
|
|
|
*
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
David
Paul Fletcher
4
Waveney Hill, Oulton Broad
Suffolk,
NR32 3PR, U.K.
|
|
|
250
|
|
|
|
*
|
|
|
|
250
|
|
|
|
-
|
|
|
*
|
|
Christos
Karaindros
24
B Kifissias Ave.
151
25, Marousi, Greece
|
|
|
250
|
|
|
|
*
|
|
|
|
250
|
|
|
|
-
|
|
|
*
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Robert
Woodland-Ferrari
Eyot
Lodge, Walton Lane
Weybridge,
Surrey, KT13 8LU
|
|
|
250
|
|
|
|
*
|
|
|
|
250
|
|
|
|
-
|
|
|
*
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Carl
Pollard
47
Avenue Clamart, Scunthorpe
North
Lincolnshire, DN15 8EQ, U.K.
|
|
|
216
|
|
|
|
*
|
|
|
|
216
|
|
|
|
-
|
|
|
*
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Grahame
Booth
64
Prince Charles Road
Worksop,
Nottinghamshire S81 7ER, U.K.
|
|
|
175
|
|
|
|
*
|
|
|
|
175
|
|
|
|
-
|
|
|
*
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Robert
Oliver Drummond
Pine
Ridge, Common Road, Ightham
Sevenoaks,
Kent TN15 9AY, U.K.
|
|
|
164
|
|
|
|
*
|
|
|
|
164
|
|
|
|
-
|
|
|
*
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Andrew
James Leese
The
School House, Fimber, Driffield
East
Yorkshire, YO25 9LY, U.K.
|
|
|
140
|
|
|
|
*
|
|
|
|
140
|
|
|
|
-
|
|
|
*
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Lady
DM White Aim
c/o
Kirkland House, Bruce Street
Whithorn,
Newton Stewart, Wigtownshire DG8 8PY, U.K.
|
|
|
135
|
|
|
|
*
|
|
|
|
135
|
|
|
|
-
|
|
|
*
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Anthony
King
1
Dean Road, Colebrode
Plymouth,
Devon, U.K.
|
|
|
121
|
|
|
|
*
|
|
|
|
121
|
|
|
|
-
|
|
|
*
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Robert
Neil Essex
22
Woodstock Road
Bristol,
BS6 7EJ, U.K.
|
|
|
111
|
|
|
|
*
|
|
|
|
111
|
|
|
|
-
|
|
|
*
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Nikolaos
Economides
6
Fokilidou Str
106
73 , Athens, Greece
|
|
|
100
|
|
|
|
*
|
|
|
|
100
|
|
|
|
-
|
|
|
*
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Vosinaki
Eleftheria
54
Papanastasiou
154
52, Athens, Greece
|
|
|
100
|
|
|
|
*
|
|
|
|
100
|
|
|
|
-
|
|
|
*
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Sofia
Gavriilidou
3
Psatha
152
37, Athens, Greece
|
|
|
100
|
|
|
|
*
|
|
|
|
100
|
|
|
|
-
|
|
|
*
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Elias
Konstantinidis
54
Papanastasiou
154
52, Athens, Greece
|
|
|
100
|
|
|
|
*
|
|
|
|
100
|
|
|
|
-
|
|
|
*
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Vasilios
Konstantinidis
30
Vas. Pavlou St
154
52, Athens, Greece
|
|
|
100
|
|
|
|
*
|
|
|
|
100
|
|
|
|
-
|
|
|
*
|
|
Giourgas
Marinos
3
Psatha
152
37, Athens, Greece
|
|
|
100
|
|
|
|
*
|
|
|
|
100
|
|
|
|
-
|
|
|
*
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Julia
Naiboropenko
Pontou
26
Athens
14572 Greece
|
|
|
100
|
|
|
|
*
|
|
|
|
100
|
|
|
|
-
|
|
|
*
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Maria
Platanopoulou
Pontou
26
145
72, Athens, Greece
|
|
|
100
|
|
|
|
*
|
|
|
|
100
|
|
|
|
-
|
|
|
*
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Stefanos
Platanopoulos
Pontou
26
145
72, Athens, Greece
|
|
|
100
|
|
|
|
*
|
|
|
|
100
|
|
|
|
-
|
|
|
*
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Brian
Sampson
114
Pinehurst Road
Swindon,
England, U.K.
|
|
|
100
|
|
|
|
*
|
|
|
|
100
|
|
|
|
-
|
|
|
*
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Paul
Charles Philip Bernardes
18
Carnarvon Grove
Carlton,
Nottingham, NG4 IRN, U.K.
|
|
|
72
|
|
|
|
*
|
|
|
|
72
|
|
|
|
-
|
|
|
*
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Sandeep
Modi
1F1,
13 Wardlaw Place
Edinburgh,
EH11 IUD, U.K.
|
|
|
50
|
|
|
|
*
|
|
|
|
50
|
|
|
|
-
|
|
|
*
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
James
Barry Fox
40
Drumlee Road, Dungannon
County
Tyrone, Northern Ireland, BT71 7QD
|
|
|
44
|
|
|
|
*
|
|
|
|
44
|
|
|
|
-
|
|
|
*
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Jennifer
Mary Jackson
183
Pompallier Estate Drive, Maunu
Whangarei,
New Zealand, 0110
|
|
|
33
|
|
|
|
*
|
|
|
|
33
|
|
|
|
-
|
|
|
*
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Sippdeal
Trustees Limited (14)
Trafford
House, Chester Road
Manchester,
M32 0RS, U.K.
|
|
|
29
|
|
|
|
*
|
|
|
|
29
|
|
|
|
-
|
|
|
*
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
TOTAL
|
|
|
6,117,389
|
|
|
|
|
|
|
|
6,117,389
|
|
|
|
-
|
|
|
|
|
* Less
than one percent.
(1)
Individual or entity listed is one of our officers, directors or 5%
shareholders, or owned by one of our officers or directors.
(2)
Firment Trading Limited is beneficially owned by George Feidakis, the chairman
of our board of directors, and owns more than 50% of our outstanding common
shares.
(3)
Ioannis Panayiotopoulos exercises
dispositive and voting authority over the common shares owned by this
entity.
(4)
Poulengeris Sotiris exercises dispositive and voting authority over the common
shares owned by this entity.
(5)
Kazantzidis Ioannis exercises dispositive and voting authority over the common
shares owned by this entity.
(6)
Anthony Nutt, fund manager for Jupiter Asset Management Ltd, exercises
dispositive and voting authority over the common shares held by Jupiter Dividend
& Growth Trust plc.
(7)
Georgios Melisanidis exercises dispositive and voting authority over the common
shares owned by this entity.
(8)
Mileua Maria Pappa exercises dispositive and voting authority over the common
shares owned by this entity.
(9)
Arjun Batra previously served as one of our non-executive
directors.
(10)
Aaron and Paula G. Sherman share beneficial ownership of the trust and both
exercise dispositive and voting authority over the common shares owned by the
trust.
(11)
Richard A. Horowitz,is the indirect beneficial owner of, and, in his capacity as
trustee, exercises dispositive and voting authority over, the common shares
owned by the trust.
(12)
Winterflood Securities Ltd is beneficially owned by Close Brothers Group plc, a
publicly traded company listed on the London Stock Exchange.
(13)
Maurice Daley exercises dispositive and voting authority over the common shares
owned by this entity.
(14)
Philip Sloan, in his capacity as trustee, exercises dispositive and voting
authority over the common shares owned by the trust.
PRINCIPAL
SHAREHOLDERS
The
following table sets forth information concerning ownership of our common shares
as of November 9, 2010 by persons who beneficially own more than 5.0% of our
outstanding common shares, each person who is a director of our company, each
executive officer named in this Prospectus and all directors and executive
officers as a group.
Beneficial
ownership of shares is determined under rules of the SEC and generally includes
any shares over which a person exercises sole or shared voting or investment
power. Except as indicated in the footnotes to this table and subject to
community property laws where applicable, the persons named in the table have
sole voting and investment power with respect to all shares shown as
beneficially owned by them.
The
numbers of shares and percentages of beneficial ownership are based on
approximately 7,241,865 common shares outstanding. All common shares owned by
the shareholders listed in the table below have the same voting rights as other
of our outstanding common shares.
The
address for those individuals for which an address is not otherwise indicated
is: c/o Globus Shipmanagement Corp., 128 Vouliagmenis Avenue, 3rd Floor, 166 74
Glyfada, Athens, Greece.
Name and address of beneficial owner
|
|
Number of common shares
beneficially owned as of
November 19, 2010
|
|
|
Percentage of common shares
beneficially owned as of
November 19, 2010
|
|
George
Feidakis
(1)
|
|
|
4,474,475
|
|
|
|
61.8
|
%
|
George
Karageorgiou
(2)
|
|
|
250,157
|
|
|
|
3.5
|
%
|
Ioannis
Panayiotopoulos
(3)
|
|
|
428,928
|
|
|
|
5.9
|
%
|
Commerzbank
AG
(4)
|
|
|
480,250
|
|
|
|
6.6
|
%
|
Elias
S. Deftereos
|
|
|
15,000
|
|
|
|
*
|
|
Amir
Eilon
|
|
|
10,401
|
|
|
|
*
|
|
Jeffrey
O. Parry
|
|
|
472
|
|
|
|
*
|
|
|
|
|
|
|
|
|
|
|
All
executive officers and directors as a group (five persons)
|
|
|
4,750,505
|
|
|
|
65.6
|
%
|
*Less
than 1.0% of the outstanding shares.
(1)
Mr. George Feidakis beneficially owns his common shares through Firment Trading
Limited, a Cypriot company, for which he exercises sole voting and investment
power through two companies that hold Firment Trading’s shares in trust for Mr.
Feidakis.
(2) Mr. George Karageorgiou
beneficially owns his common shares through Kim Holdings S.A., a Marshall
Islands company, for which we believe he exercises
sole voting and investment
power.
(3) Mr. Ioannis Panayiotopoulos
beneficially owns his common shares through Lipati Shipping Company Limited, a
Cypriot company, for which we believe he exercises
sole voting and investment power.
Its address is 56 Pindou Street, Halandri, 152 33 Athens,
Greece.
(4)
To our knowledge, Commerzbank AG, a publicly traded company in Germany,
purchased and holds the common shares for use in “contract for difference”
transactions in order to hedge the trades of its own clients. Its address is
P.O. Box 52715, 30 Gresham Street, London EC2P 2XY.
To the
best of our knowledge, except as disclosed in the table above, we are not owned
or controlled, directly or indirectly, by another corporation or by any foreign
government. To the best of our knowledge, there are no agreements in place that
could result in a change of control of us.
In the
normal course of business, there have been institutional investors that buy and
sell our shares. It is possible that significant changes in the percentage
ownership of these investors will occur. Kairos Fund Limited, a company
unrelated to us other than by its ownership of our shares, held more than five
percent of our shares in 2009 and no longer holds any of our
shares.
PLAN
OF DISTRIBUTION
The
selling shareholders of our common shares and any of their pledgees, assignees
and successors-in-interest may, from time to time, sell any or all of their
common shares on any stock exchange, market or trading facility on which the
shares are traded or in private transactions. The offering price of our common
shares by the selling shareholders using this prospectus to sell such shares
will be $11.60 per common share, based on the closing price of our common shares
on November 23, 2010, the day prior to such effective date, and an exchange rate
of U.K. pounds sterling:U.S. dollar of 1.0:1.6, until our shares are listed on
the Nasdaq Global Market. Thereafter, the offering price of our common shares
may be at prevailing market prices or at fixed or negotiated prices. The selling
shareholders may use any one or more of the following methods when selling
shares:
|
Ø
|
ordinary
brokerage transactions and transactions in which the broker-dealer
solicits purchasers;
|
|
Ø
|
block
trades in which the broker-dealer will attempt to sell the shares as agent
but may position and resell a portion of the block as principal to
facilitate the transaction;
|
|
Ø
|
purchases
by a broker-dealer as principal and resale by the broker-dealer for its
account;
|
|
Ø
|
an
exchange distribution in accordance with the rules of the applicable
exchange;
|
|
Ø
|
privately
negotiated transactions;
|
|
Ø
|
settlement
of short sales entered into after the date of this
prospectus;
|
|
Ø
|
broker-dealers
may agree with the selling shareholders to sell a specified number of such
shares at a stipulated price per
share;
|
|
Ø
|
through
the writing or settlement of options or other hedging transactions,
whether through an options exchange or otherwise entered into after the
date of this prospectus; or
|
|
Ø
|
any
other method of sale permitted pursuant to applicable law;
and
|
|
Ø
|
a
combination of any such methods of
sale.
|
The
selling shareholders may also transfer the securities by gift or sell the common
shares in accordance with Rule 144 under the Securities Act. Please read “Shares
Eligible for Future Sale.”
Agents or
broker-dealers engaged by the selling shareholders may arrange for other
broker-dealers to participate in sales. Broker-dealers may receive commissions
or discounts from the selling shareholders (or, if any broker-dealer acts as
agent for the purchaser of shares, from the purchaser) in amounts to be
negotiated. The selling shareholders do not expect these commissions and
discounts to exceed what is customary in the types of transactions involved,
however compensation to a particular broker-dealer may be in excess of customary
commissions. If the broker-dealer is unable to sell securities acting as agent
for a selling shareholder, it may purchase as principal any unsold securities at
the stipulated price. Broker-dealers who acquire securities as principals may
thereafter resell the securities from time to time in transactions on any stock
exchange on which the securities are then listed, at prices and on terms then
prevailing at the time of sale, at prices related to the then-current market
price or in negotiated transactions. Broker-dealers may use block transactions
and sales to and through broker-dealers, including transactions of the nature
described above.
The
selling shareholders and any broker-dealers or agents that participate in the
distribution of the securities may be deemed to be “underwriters” within the
meaning of the Securities Act, and any discounts, concessions, commissions or
fees received by them and any profit on the resale of the securities sold by
them may be deemed to be underwriting discounts and commissions.
In
connection with the sale of our common shares or interests therein, the selling
shareholders after the date the registration statement in which this prospectus
forms a part is declared effective by the SEC may enter into hedging
transactions with broker-dealers or other financial institutions, which may in
turn engage in short sales of the common shares in the course of hedging the
positions they assume.
The
selling shareholders after the date the registration statement in which this
prospectus forms a part is declared effective by the SEC may also sell our
common shares short and deliver these securities to close out their short
positions, or loan or pledge the common shares to broker-dealers that in turn
may sell these securities. The selling shareholders may also enter into option
or other transactions with broker-dealers or other financial institutions or the
creation of one or more derivative securities which require the delivery to such
broker-dealer or other financial institution of shares offered by this
prospectus, which shares such broker-dealer or other financial institution may
resell pursuant to this prospectus.
Each
selling shareholder has informed us that it is not a broker-dealer registered
pursuant to Section 15(b) of the Securities Exchange Act of 1934, as amended,
which we refer to as the Exchange Act, or an affiliate of a broker-dealer
registered under the Exchange Act, and does not have any agreement or
understanding, directly or indirectly, with any person to distribute these
securities.
Any
person participating in the distribution of common shares covered by this
prospectus will be subject to applicable provisions of the Exchange Act and the
applicable SEC rules and regulations, including, among others, Regulation M,
which may limit the timing of purchases and sales of our common shares by that
person.
We may
suspend offers and sales of the common shares pursuant to the registration
statement to which this prospectus relates in certain
circumstances.
The
offering by our selling shareholders pursuant to the registration statement to
which this prospectus relates will continue until the earlier of one year
following the date our registration statement to which this prospectus relates
is declared effective, and such time as all securities covered by such
registration statement have been sold or may be sold without volume restrictions
pursuant to Rule 144(e) under the Securities Act.
We cannot
assure you that the selling shareholders will sell all or any portion of the
shares offered by this prospectus. In addition, we cannot assure you that a
selling shareholder will not transfer shares by other means not described in
this prospectus.
DESCRIPTION
OF CAPITAL STOCK
The
following is a description of the material terms of our articles of
incorporation and bylaws that we adopted in connection with our redomiciliation
into the Marshall Islands. The description does not purport to be complete and
is subject to, and qualified in its entirety by reference to, all the provisions
of the articles of incorporation and bylaws. Because the following is only a
summary, it does not contain all information that you may find
important.
AUTHORIZED
CAPITAL
As of
November 24, 2010, the authorized number of shares of us consisted of (1)
500,000,000 shares of common stock, par value $0.004 per share, (2) 100,000,000
shares of Class B common stock, par value $0.001 per share, which we refer to as
the Class B shares, and (3) 100,000,000 preferred shares, par value $0.001 per
share, which we refer to as the preferred shares. As of November 19, 2010,
7,241,865 of our common
shares are outstanding. No Class B shares or preferred shares have been issued,
nor has any series of preferred shares been designated. We intend to issue in
December 2010 or in 2011 a special stock dividend of Class B shares to the
holders of our common shares in a ratio of one Class B share for every number of
common shares owned that we will determine in the future in connection with such
dividend
.
We plan to
issue this special stock dividend to protect the voting power of the current
shareholders against future dilutions in the case of additional equity
issuances. We also intend to issue one preferred share to Mr. Feidakis or his
affiliate that will provide the holder with the ability to appoint any one
person to be a director, who may also be the chairman of our board of directors,
for so long as such holder and his or its affiliates also hold in the aggregate
at least 30% of the voting power of our shares. Such preferred share will have
no voting or dividend rights. There is no limitation on the right to own
securities or the rights of non-resident shareholders to hold or exercise voting
rights on our securities under Marshall Islands law or our articles of
incorporation or bylaws.
We have
financed our operations through funds raised in public and private placements of
common shares. We also issued shares to our officers and employees as part of
our incentive plan.
The
following table shows our history of share capital for the last three years.
None of the share numbers below prior to August 2010 reflect the 4:1 reverse
split of our shares:
Effective Date of
Issuance
|
|
Number of
ordinary
shares Issued
|
|
|
Price per
share
|
|
|
Gross Proceeds or
Fair Value of
Share Transaction
|
|
Process/ Consideration
|
October
8, 2010
|
|
|
472
|
|
|
|
-
|
|
|
|
n/a
|
|
Payment
for acting as board member
|
September
13, 2010
|
|
|
541
|
|
|
|
-
|
|
|
|
n/a
|
|
Payment
for acting as board member
|
June
29, 2010
|
|
|
2,256
|
|
|
|
-
|
|
|
|
n/a
|
|
Payment
for acting as board member
|
March
16, 2010
|
|
|
4,980
|
|
|
|
-
|
|
|
|
n/a
|
|
Payment
for acting as board member
|
December
9, 2009
|
|
|
8,572
|
|
|
|
-
|
|
|
|
n/a
|
|
Payment
for acting as board member
|
November
19,2009
|
|
|
171,052
|
|
|
|
-
|
|
|
|
n/a
|
|
Bonus
payment for services rendered
|
September
15, 2009
|
|
|
8,888
|
|
|
|
-
|
|
|
|
n/a
|
|
Payment
for acting as board member
|
June
16, 2009
|
|
|
8,000
|
|
|
|
-
|
|
|
|
n/a
|
|
Payment
for acting as board member
|
April
9, 2009
|
|
|
8,450
|
|
|
|
-
|
|
|
|
n/a
|
|
Payment
for acting as board member
|
March
5, 2009
|
|
|
85,760
|
|
|
|
-
|
|
|
|
n/a
|
|
Part
of the annual compensation award
|
December
9, 2008
|
|
|
8,282
|
|
|
|
-
|
|
|
|
n/a
|
|
Payment
for acting as board member
|
September
3, 2008
|
|
|
1,412
|
|
|
|
-
|
|
|
|
n/a
|
|
Payment
for acting as board member
|
June
2, 2008
|
|
|
1,206
|
|
|
|
-
|
|
|
|
n/a
|
|
Payment
for acting as board member
|
May
1, 2008
|
|
|
16,897
|
|
|
|
-
|
|
|
|
n/a
|
|
Bonus
payment for services rendered
|
March
12, 2008
|
|
|
1,500
|
|
|
|
-
|
|
|
|
n/a
|
|
Payment
for acting as board member
|
December
31, 2007
|
|
|
35,586
|
|
|
|
-
|
|
|
|
n/a
|
|
Bonus
payment for services rendered
|
December
4, 2007
|
|
|
1,240
|
|
|
|
-
|
|
|
|
n/a
|
|
Payment
for acting as board member
|
October
3, 2007
|
|
|
920
|
|
|
|
-
|
|
|
|
n/a
|
|
Payment
for acting as board member
|
September
26, 2007
|
|
|
920
|
|
|
|
-
|
|
|
|
n/a
|
|
Payment
for acting as board member
|
May
31, 2007
|
|
|
8,423,333
|
|
|
$
|
5.9391
|
|
|
$
|
50,027,000
|
|
Initial
public offering on the
AIM
|
Please
read “Management—Board & Committee Practices” and
“Management—The
Incentive Plan—2009 Grants” and for a discussion of shares that may be awarded
in the near future.
PURPOSE
Our
objects and purposes, as provided in Section 1.3 of our articles of
incorporation, are to engage in any lawful act or activity for which
corporations may now or hereafter be organized under the BCA.
COMMON
SHARES AND CLASS B SHARES
Generally,
Marshall Islands law provides that the holders of a class of stock of a Marshall
Islands corporation are entitled to a separate class vote on any proposed
amendment to the relevant articles of incorporation that would change the
aggregate number of authorized shares or the par value of that class of shares
or alter or change the powers, preferences or special rights of that class so as
to affect it adversely. Except as described below, holders of our common shares
and Class B shares will have equivalent economic rights, but holders of our
common shares will be entitled to one vote per share and holders of our Class B
shares will be entitled to 20 votes per share. Each holder of Class B shares
(not including the Company and the Company’s subsidiaries) may convert, at its
option, any or all of the Class B shares held by such holder into an equal
number of common shares.
Except as
otherwise provided by the BCA, holders of our common shares and Class B shares
will vote together as a single class on all matters submitted to a vote of
shareholders, including the election of directors.
The
rights, preferences and privileges of holders of our shares are subject to the
rights of the holders of any preferred shares which we may issue in the
future.
Holders
of our common shares do not have conversion, redemption or pre-emptive rights to
subscribe to any of our securities.
PREFERRED
SHARES
Our
articles of incorporation authorize our board of directors to establish and
issue up to 100 million preferred shares and to determine, with respect to any
series of preferred shares, the rights and preferences of that series,
including:
|
Ø
|
the
designation of the series;
|
|
Ø
|
the
number of preferred shares in the
series;
|
|
Ø
|
the
preferences and relative participating option or other special rights, if
any, and any qualifications, limitations or restrictions of such series;
and
|
|
Ø
|
the
voting rights, if any, of the holders of the series (subject to terms set
forth below with regard to the policy of our board of directors regarding
preferred shares).
|
Our board
of directors may issues preferred shares on terms calculated to discourage,
delay or prevent a change of control of us or the removal of management. We
intend to issue one preferred share to Mr. Feidakis or his affiliate that will
provide the holder with the ability to appoint any one person to be a director,
who may also be the chairman of our board of directors, for so long as such
holder and his or its affiliates also hold in the aggregate at least 30% of the
voting power of our shares. Such preferred share will have no voting or dividend
rights.
LIQUIDATION
In the
event of our dissolution, liquidation or winding up, whether voluntary or
involuntary, after payment in full of the amounts, if any, required to be paid
to our creditors and the holders of preferred shares, our remaining assets and
funds shall be distributed pro rata to the holders of our common shares and
Class B shares, and the holders of common shares and the holders of Class B
shares shall be entitled to receive the same amount per share in respect
thereof.
DIVIDENDS
Declaration
and payment of any dividend is subject to the discretion of our board of
directors. The timing and amount of dividend payments will depend on a series of
factors and risks described under “Risk Factors,” and includes risks relating to
earnings, financial condition, cash requirements and availability, restrictions
in our current and future loan arrangements, the provisions of the Marshall
Islands law affecting the payment of dividends and other factors. The BCA
generally prohibits the payment of dividends other than from paid-in capital in
excess of par value and our earnings or while we are insolvent or if we would be
rendered insolvent upon paying the dividend.
Subject
to preferences that may apply to any shares of preferred stock outstanding at
the time, the holders of our common shares and Class B shares will be entitled
to share equally in any dividends that our board of directors may declare from
time to time out of funds legally available for dividends.
CONVERSION
Our
common shares will not be convertible into any other shares of our capital
stock. Each of our Class B shares will be convertible at any time at the
election of the holder thereof into one of our common shares. All conversions
will be effected on a one-for-one basis. We will not reissue or resell any Class
B shares that shall have been converted into common shares.
DIRECTORS
Our
directors will be elected by the vote of the plurality of the votes cast by
holders with voting power of our voting shares. Our articles of incorporation
provide that our board of directors must consist of at least three members.
Shareholders may change the number of directors only by the affirmative vote of
holders of a majority of the total voting power of our outstanding capital stock
(subject to the rights of any holders of preferred shares). The board of
directors may change the number of directors only by a majority vote of the
entire board of directors. We intend to issue one preferred share to Mr.
Feidakis or his affiliate that will provide the holder with the ability to
appoint any one person to be a director, who may also be the chairman of our
board of directors, for so long as such holder and his or its affiliates also
hold in the aggregate at least 30% of the voting power of our shares. Such
preferred share will have no voting or dividend rights.
No
contract or transaction between us and one or more of our directors or officers
will be void or voidable solely for this reason, or solely because the director
or officer is present at or participates in the meeting of our board of
directors or committee thereof which authorizes the contract or transaction, or
solely because his or her or their votes are counted for such purpose, if (1)
the material facts as to his or her or their relationship or interest and as to
the contract or transaction are disclosed or are known to our board of directors
or the committee and the board of directors or committee in good faith
authorizes the contract or transaction by the affirmative votes of a majority of
the disinterested directors, or, if the votes of the disinterested directors are
insufficient to constitute an act of the board of directors, by unanimous vote
of the disinterested directors; or (2) the material facts as to his or her or
their relationship or interest and as to the shareholders entitled to vote
thereon, and the contract or transaction is specifically approved in good faith
by vote of the shareholders.
CLASSIFIED
BOARD OF DIRECTORS
Our
articles of incorporation provide for a board of directors serving staggered,
three-year terms. Approximately one-third of our board of directors will be
elected each year.
REMOVAL
OF DIRECTORS; VACANCIES
Our
articles of incorporation provides that directors may be removed with or without
cause upon the affirmative vote of holders of 66-2/3% of the total voting power
of our outstanding capital stock. Our bylaws require parties to provide advance
written notice of nominations for the election of directors other than the board
of directors and shareholders holding 30% or more of the voting power of the
aggregate number of our shares issued and outstanding and entitled to
vote.
NO
CUMULATIVE VOTING
The BCA
provides that shareholders are not entitled to the right to cumulate votes in
the election of directors unless our articles of incorporation provide
otherwise. Our articles of incorporation prohibit cumulative
voting.
SHAREHOLDER
MEETINGS
Under our
bylaws, annual shareholder meetings will be held at a time and place selected by
our board of directors. The meetings may be held in or outside of the Marshall
Islands. Special meetings may be called by the chairman of our board of
directors, by resolution of our board of directors or by holders of 30% or more
of the voting power of the aggregate number of our shares issued and outstanding
and entitled to vote at such meeting. Our board of directors may set a record
date between 15 and 60 days before the date of any meeting to determine the
shareholders that will be eligible to receive notice and vote at the
meeting.
DISSENTERS’
RIGHTS OF APPRAISAL AND PAYMENT
Under the
BCA, our shareholders have the right to dissent from various corporate actions,
including any merger or consolidation or sale of all or substantially all of our
assets not made in the usual course of our business, and receive payment of the
fair value of their shares. In the event of any amendment of our articles of
incorporation, a shareholder also has the right to dissent and receive payment
for his or her shares if the amendment alters certain rights in respect of those
shares. The dissenting shareholder must follow the procedures set forth in the
BCA to receive payment. In the event that we and any dissenting shareholder fail
to agree on a price for the shares, the BCA procedures involve, among other
things, the institution of proceedings in the high court of the Republic of the
Marshall Islands or in any appropriate court in any jurisdiction in which our
shares are primarily traded on a local or national securities exchange to fix
the value of the shares.
SHAREHOLDERS’
DERIVATIVE ACTIONS
Under the
BCA, any of our shareholders may bring an action in our name to procure a
judgment in our favor, also known as a derivative action, provided that the
shareholder bringing the action is a holder of common shares both at the time
the derivative action is commenced and at the time of the transaction to which
the action relates.
AMENDMENT
OF OUR ARTICLES OF INCORPORATION
Except as
otherwise provided by law, any provision in our articles of incorporation
requiring a vote of shareholders may only be amended by such a vote. Further,
certain sections may only be amended by affirmative vote of the holders of at
least a majority of the voting power of the voting shares.
ANTI-TAKEOVER
EFFECTS OF CERTAIN PROVISIONS OF OUR ARTICLES OF INCORPORATION AND
BYLAWS
Certain
provisions of our articles of incorporation and bylaws, which are summarized in
the following paragraphs, may have an anti-takeover effect and may delay, defer
or prevent a takeover attempt or hostile change of control that a shareholder
may consider in its best interest, including those attempts that may result in a
premium over the market price for our common shares held by
shareholders.
Two
Classes of Shares
As
discussed above, our Class B shares will have 20 votes per share, while our
common shares, which is the only class of shares that is currently outstanding
and will be the only class of shares to be listed on an established U.S.
securities exchange, will have one vote per share. Because of this share
structure, any issuance of Class B shares may cause such holders to be able to
significantly influence matters submitted to our shareholders for approval even
if such holders and its affiliates come to own significantly less than 50% of
the aggregate number of outstanding common shares and Class B shares. This
control over shareholder voting could discourage others from initiating any
potential merger, takeover or other change of control transaction that other
shareholders may view as beneficial and which would require shareholder
approval.
Blank
Check Preferred Shares
Under the
terms of our articles of incorporation, our board of directors has authority,
without any further vote or action by our shareholders, to issue up to 100
million shares of blank check preferred shares.
Classified
Board of Directors
Our
articles of incorporation provide for a board of directors serving staggered,
three-year terms. Approximately one-third of our board of directors will be
elected each year. This classified board of directors provision could discourage
a third party from making a tender offer for our shares or attempting to obtain
control of us. It could also delay shareholders who do not agree with the
policies of the board of directors from removing a majority of the board of
directors for two years.
No
Cumulative Voting
The BCA
provides that shareholders are not entitled to the right to cumulate votes in
the election of directors unless our articles of incorporation provide
otherwise. Our articles of incorporation prohibit cumulative
voting.
Calling
of Special Meetings of Shareholders
Our
bylaws provide that special meetings of our shareholders may be called only by
the chairman of our board of directors, by resolution of our board of directors
or by holders of 30% or more of the voting power of the aggregate number of our
shares issued and outstanding and entitled to vote at such meeting.
Advance
Notice Requirements for Shareholder Proposals and Director
Nominations
Our
bylaws provide that, with a few exceptions, shareholders seeking to nominate
candidates for election as directors or to bring business before an annual
meeting of shareholders must provide timely notice of their proposal in writing
to the corporate secretary.
Generally,
to be timely, a shareholder’s notice must be received at our principal executive
offices not less than 150 days nor more than 180 days prior to the first
anniversary date of the immediately preceding annual meeting of shareholders.
Our bylaws also specify requirements as to the form and content of a
shareholder’s notice. These provisions may impede shareholders’ ability to bring
matters before an annual meeting of shareholders or make nominations for
directors at an annual meeting of shareholders.
BUSINESS
COMBINATIONS
Although
the BCA does not contain specific provisions regarding “business combinations”
between companies organized under or redomiciled pursuant to the laws of the
Marshall Islands and “interested shareholders,” these provisions are contained
in our articles of incorporation. Specifically, our articles of incorporation
contain provisions that prohibit us from engaging in a business combination with
an interested shareholder for a period of three years following the date of the
transaction in which the person became an interested shareholder, unless, in
addition to any other approval that may be required by applicable
law:
|
Ø
|
prior
to the date of the transaction that resulted in the shareholder becoming
an interested shareholder, our board of directors approved either the
business combination or the transaction that resulted in the shareholder
becoming an interested
shareholder;
|
|
Ø
|
upon
consummation of the transaction that resulted in the shareholder becoming
an interested shareholder, the interested shareholder owned at least 85.0%
of our voting shares outstanding at the time the transaction commenced,
excluding for purposes of determining the number of shares outstanding
those shares owned by (1) persons who are directors and officers and (2)
employee stock plans in which employee participants do not have the right
to determine confidentially whether shares held subject to the plan will
be tendered in a tender or exchange offer;
or
|
|
Ø
|
at
or after the date of the transaction that resulted in the shareholder
becoming an interested shareholder, the business combination is approved
by our board of directors and authorized at an annual or special meeting
of shareholders, and not by written consent, by the affirmative vote of at
least 66-2/3% of the voting power of the voting shares that are not owned
by the interested shareholder.
|
Among
other transactions, a “business combination” includes any merger or
consolidation of us or any directly or indirectly majority-owned subsidiary of
ours with (1) the interested shareholder or any of its affiliates or (2) with
any corporation, partnership, unincorporated association or other entity if the
merger or consolidation is caused by the interested shareholder. Generally, an
“interested shareholder” is any person or entity (other than us and any direct
or indirect majority-owned subsidiary of ours) that:
|
Ø
|
owns
15.0% or more of our outstanding voting
shares;
|
|
Ø
|
is
an affiliate or associate of ours and was the owner of 15.0% or more of
our outstanding voting shares at any time within the three-year period
immediately prior to the date on which it is sought to be determined
whether such person is an interested shareholder;
or
|
|
Ø
|
is
an affiliate or associate of any person listed in the first two bullets,
except that any person who owns 15.0% or more of our outstanding voting
shares, as a result of action taken solely by us will not be an interested
shareholder unless such person acquires additional voting shares, except
as a result of further action by us and not caused, directly or
indirectly, by such person.
|
Additionally,
the restrictions regarding business combinations do not apply to persons that
became interested shareholders prior to the effectiveness of our articles of
incorporation.
LIMITATIONS
ON LIABILITY AND INDEMNIFICATION OF DIRECTORS AND OFFICERS
The BCA
authorizes corporations to limit or eliminate the personal liability of
directors and officers to corporations and their shareholders for monetary
damages for breaches of directors’ fiduciary duties. Our articles of
incorporation include a provision that eliminates the personal liability of
directors for monetary damages for breach of fiduciary duty as a director to the
fullest extent permitted by law and provides that we must indemnify our
directors and officers to the fullest extent authorized by law. We are also
expressly authorized to advance certain expenses to our directors and officers
and expect to carry directors’ and officers’ insurance providing indemnification
for our directors and officers for some liabilities. We believe that these
indemnification provisions and the directors’ and officers’ insurance are useful
to attract and retain qualified directors and executive officers.
The
limitation of liability and indemnification provisions in our articles of
incorporation may discourage shareholders from bringing a lawsuit against our
directors for breach of their fiduciary duty. These provisions may also have the
effect of reducing the likelihood of derivative litigation against directors and
officers, even though such an action, if successful, may otherwise benefit us
and our shareholders. In addition, an investor in our common shares may be
adversely affected to the extent we pay the costs of settlement and damage
awards against directors and officers pursuant to these indemnification
provisions.
There is
no pending material litigation or proceeding involving any of our directors,
officers or employees for which indemnification is sought.
TRANSFER
AGENT AND REGISTRAR
The
registrar and transfer agent for our common shares is Computershare Trust
Company, N.A. Its principal business address is 250 Royall Street, Canton,
Massachusetts 02021.
LISTING
Our
common shares have been approved for listing on the Nasdaq Global Market under
the symbol “GLBS,” subject to the effectiveness of the registration statement to
which this prospectus relates.
REPUBLIC
OF THE MARSHALL ISLANDS COMPANY CONSIDERATIONS
Upon
our redomiciliation on November 24, 2010, our corporate affairs are
governed by our articles of incorporation and bylaws and the BCA. The provisions
of the BCA resemble provisions of the corporation laws of a number of states in
the United States. While the BCA specifically incorporates the non-statutory
law, or judicial case law, of the State of Delaware and other states with
substantially similar legislative provisions, the rights and fiduciary
responsibilities of directors under Marshall Islands law are not as clearly
established as the rights and fiduciary responsibilities of directors under
statutes or judicial precedent in existence in certain U.S. jurisdictions and
there have been few judicial cases in the Marshall Islands interpreting the BCA.
Shareholder rights may differ as well. We cannot predict whether the Marshall
Islands courts would reach the same conclusions as United States courts. Thus,
you may have more uncertainty and difficulty in protecting your interests in the
face of actions by the management, directors or controlling shareholders than
would shareholders of a corporation incorporated in a United States jurisdiction
that has developed a substantial body of case law. The following table provides
a comparison between the statutory provisions of the BCA and the Delaware
General Corporation Law, or DGCL, relating to shareholders’
rights.
BCA
|
|
DGCL
|
Shareholder
Meetings
|
Ø
Held at a time
and place as designated in the bylaws
|
|
Ø
May be held at
such time or place as designated in the certificate of incorporation or
the bylaws, or if not so designated, as determined by the board of
directors
|
Ø
May be held
within or outside the Marshall Islands
|
|
Ø
May be held
within or outside Delaware
|
Ø
Notice:
o
Whenever shareholders are required to take action at a meeting,
written notice shall state the place, date and hour of the meeting and
indicate that it is being issued by or at the direction of the person
calling the meeting
o
A copy of the notice of any meeting shall be given personally or
sent by mail not less than 15 nor more than 60 days before the
meeting
|
|
Ø
Notice:
o
Whenever shareholders are required or permitted to take any action
at a meeting, a written notice of the meeting shall be given that shall
state the place, if any, date and hour of the meeting, and the means of
remote communication, if any
o
Written notice shall be given not less than 10 nor more than 60
days before the meeting
|
|
Shareholder’s
Voting Rights
|
Ø
Any action
required to be taken by meeting of shareholders may be taken without
meeting if consent is in writing and is signed by all the shareholders
entitled to vote
|
|
Ø
Shareholders may
act by written consent signed by the holders of outstanding shares having
the number of votes necessary to take action at a
meeting
|
Ø
Any person
authorized to vote may authorize another person to act for him by
proxy
|
|
Ø
Any person
authorized to vote may authorize another person or persons to act for him
by proxy
|
Ø
Unless otherwise
provided in the articles of incorporation, a majority of shares entitled
to vote constitutes a quorum. In no event shall a quorum consist of fewer
than one-third of the shares entitled to vote at a meeting
|
|
Ø
For stock
corporations, the certificate of incorporation or bylaws may specify the
number to constitute a quorum but in no event shall a quorum consist of
less than one-third of shares entitled to vote at a meeting. In the
absence of such specifications, a majority of shares entitled to vote
shall constitute a
quorum
|
BCA
|
|
DGCL
|
Ø
The articles of
incorporation may provide for cumulative voting
|
|
Ø
The certificate
of incorporation may provide for cumulative voting
|
|
|
|
Ø
Any two or more
domestic corporations may merge into a single corporation if approved by
the board and if authorized by a majority vote of the holders of
outstanding shares at a shareholder meeting
|
|
Ø
Any two or more
corporations existing under the laws of the state may merge into a single
corporation pursuant to a board resolution and upon the majority vote by
stockholders of each constituent corporation at an annual or special
meeting
|
Ø
Any sale, lease,
exchange or other disposition of all or substantially all the assets of a
corporation, if not made in the corporation’s usual or regular course of
business, once approved by the board, shall be authorized by the
affirmative vote of two-thirds of the shares of those entitled to vote at
a shareholder meeting
|
|
Ø
Every corporation
may at any meeting of the board sell, lease or exchange all or
substantially all of its property and assets as its board deems expedient
and for the best interests of the corporation when and as so authorized by
a resolution adopted by the holders of a majority of the outstanding stock
of a corporation entitled to vote
|
Ø
Any domestic
corporation owning at least 90.0% of the outstanding shares of each class
of another domestic corporation may merge such other corporation into
itself without the authorization of the shareholders of any
corporation
|
|
Ø
Any corporation
owning at least 90.0% of the outstanding shares of each class of another
corporation may merge the other corporation into itself and assume all of
its obligations without the vote or consent of stockholders; however, in
case the parent corporation is not the surviving corporation, the proposed
merger shall be approved by a majority of the outstanding stock of the
parent corporation entitled to vote at a duly called stockholder
meeting
|
Ø
Any mortgage,
pledge of or creation of a security interest in all or any part of the
corporate property may be authorized without the vote or consent of the
shareholders, unless otherwise provided for in the articles of
incorporation
|
|
Ø
Any mortgage or
pledge of a corporation’s property and assets may be authorized without
the vote or consent of stockholders, except to the extent that the
certificate of incorporation otherwise provides
|
|
Directors
|
Ø
Board must
consist of at least one member
|
|
Ø
Board must
consist of at least one member
|
Ø
Number of members
can be changed by an amendment to the bylaws, by the shareholders or by
action of the board
|
|
Ø
Number of members
shall be fixed by the bylaws, unless the certificate of incorporation
fixes the number of directors, in which case a change in the number shall
be made only by amendment of the certificate of
incorporation
|
Ø
If the board is
authorized to change the number of directors, it can only do so by an
absolute majority (majority of the entire board)
|
|
|
BCA
|
|
DGCL
|
Ø
Removal:
|
|
Ø
Removal:
|
o
Any or all of the directors may be removed for cause by vote of the
shareholders
o
If the articles of incorporation or the bylaws so provide, any or
all of the directors may be removed without cause by vote of the
shareholders
|
|
o
Any or all of the directors may be removed, with or without cause,
by the holders of a majority of the shares entitled to vote except: (1)
unless the certificate of incorporation otherwise provides, in the case of
a corporation whose board is classified, stockholders may effect such
removal only for cause, or (2) if the corporation has cumulative voting,
if less than the entire board is to be removed, no director may be removed
without cause if the votes cast against such director’s removal would be
sufficient to elect such director if then cumulatively voted at an
election of the entire board of directors, or, if there be classes of
directors, at an election of the class of directors of which such director
is a part
|
|
Dissenter’s
Rights of Appraisal
|
Ø
Shareholders have
a right to dissent from a merger or sale of all or substantially all
assets not made in the usual course of business, and receive payment of
the fair value of their shares
|
|
Ø
Appraisal rights
shall be available for the shares of any class or series of stock of a
corporation in a merger or consolidation, subject to
exceptions
|
Ø
A holder of any
adversely affected shares who does not vote on or consent in writing to an
amendment to the articles of incorporation has the right to dissent and to
receive payment for such shares if the amendment:
o
Alters or abolishes any preferential right of any outstanding
shares having preference;
o
Creates, alters or abolishes any provision or right in respect to
the redemption of any outstanding shares;
o
Alters or abolishes any preemptive right of such holder to acquire
shares or other securities; or
o
Excludes or limits the right of such holder to vote on any matter,
except as such right may be limited by the voting rights given to new
shares then being authorized of any existing or new class
|
|
Ø
The certificate
of incorporation may provide that appraisal rights are available for
shares as a result of an amendment to the certificate of incorporation,
any merger or consolidation or the sale of all or substantially all of the
assets
|
BCA
|
|
DGCL
|
Shareholder’s
Derivative Actions
|
Ø
An action may be
brought in the right of a corporation to procure a judgment in its favor,
by a holder of shares or of voting trust certificates or of a beneficial
interest in such shares or certificates. It shall be made to appear that
the plaintiff is such a holder at the time of bringing the action and that
he was such a holder at the time of the transaction of which he complains,
or that his shares or his interest therein devolved upon him by operation
of law
|
|
Ø
In any derivative
suit instituted by a shareholder or a corporation, it shall be averred in
the complaint that the plaintiff was a shareholder of the corporation at
the time of the transaction of which he complains or that such
shareholder’s stock thereafter devolved upon such shareholder by operation
of law
|
Ø
Complaint shall
set forth with particularity the efforts of the plaintiff to secure the
initiation of such action by the board or the reasons for not making such
effort
|
|
|
Ø
Such action shall
not be discontinued, compromised or settled, without the approval of the
High Court of the Republic of the Marshall Islands
|
|
|
Ø
Attorney’s fees
may be awarded if the action is successful
|
|
|
Ø
Corporation may
require a plaintiff bringing a derivative suit to give security for
reasonable expenses if the plaintiff owns less than 5.0% of any class of
stock and the shares have a value of less than $50,000
|
|
|
TAXATION
MARSHALL
ISLANDS TAX CONSIDERATIONS
The
following discussion is the opinion of Watson, Farley & Williams (New York)
LLP, our counsel as to matters of the laws of the Republic of the Marshall
Islands, and the current laws of the Republic of the Marshall Islands and is
applicable only to persons who do not reside in, maintain offices in or engage
in business in the Marshall Islands.
Because
we do not, and we do not expect that we or any of our future subsidiaries will,
conduct business or operations in the Marshall Islands, and because we
anticipate that all documentation related to any offerings of our securities
will be executed outside of the Marshall Islands, under current Marshall Islands
law our shareholders will not be subject to Marshall Islands taxation or
withholding tax on our distributions. In addition, our shareholders will not be
subject to Marshall Islands stamp, capital gains or other taxes on the purchase,
ownership or disposition of our common shares, and our shareholders will not be
required by the Marshall Islands to file a tax return related to our common
shares.
Each
shareholder is encouraged to consult its own tax counsel or other advisor with
regard to the legal and tax consequences under the laws of all pertinent
jurisdictions, including the Marshall Islands, of its investment in
us.
UNITED
STATES TAX CONSIDERATIONS
This
section is a discussion of the material United States federal income tax
considerations that may be relevant to holders of our common shares who are
individual citizens or residents of the United States and is the opinion of
Watson, Farley & Williams (New York) LLP, counsel to the Company, insofar as
it relates to matters of United States federal income tax law and legal
conclusions with respect to those matters. This discussion is based upon
provisions of the Code, existing final, temporary and proposed regulations
thereunder and current administrative rulings and court decisions, all as in
effect on the effective date of the registration statement to which this
prospectus relates and all of which are subject to change, possibly with
retroactive effect. Changes in these authorities may cause the tax consequences
to vary substantially from the consequences described below. No rulings have
been or are expected to be sought from the Internal Revenue Service, or IRS,
with respect to any of the United States federal income tax consequences
discussed below, and no assurance can be given that the IRS will not take
contrary positions.
Further,
the following summary does not deal with all United States federal income tax
consequences applicable to any given holder of our common shares, nor does it
address the United States federal income tax considerations applicable to
categories of investors subject to special taxing rules, such as expatriates,
banks, real estate investment trusts, regulated investment companies, insurance
companies, tax-exempt organizations, dealers or traders in securities or
currencies, partnerships, S corporations, estates and trusts, investors that
hold their common shares as part of a hedge, straddle or an integrated or
conversion transaction, investors whose “functional currency” is not the United
States dollar or investors that own, directly or indirectly 10% or more of our
stock by vote or value. Furthermore, the discussion does not address alternative
minimum tax consequences or estate or gift tax consequences, or any state tax
consequences, and is generally limited to people that will hold their common
shares as “capital assets” within the meaning of Section 1221 of the Code. Each
prospective shareholder is encouraged to consult, and discuss with his or her
own tax advisor the United States federal, state, local and non-United States
tax consequences particular to him or her of the acquisition, ownership or
disposition of common shares. Further, it is the responsibility of each
shareholder to file all state, local and non-U.S., as well as U.S. federal, tax
returns that may be required of it.
Pursuant
to U.S. Department of the Treasury regulations, the Company and its tax advisors
hereby inform you that: (1) any tax advice contained in the registration
statement to which this prospectus relates is not intended and was not written
to be used, and cannot be used by any taxpayer, for the purposes of avoiding
penalties that may be imposed on the taxpayer; and (2) each taxpayer should seek
advice based on the taxpayer’s particular circumstances from an independent tax
advisor.
United
States Federal Income Taxation of the Company
Taxation
of Operating Income
Unless
exempt from United States federal income taxation under the rules described
below in “—The Section 883 Exemption,” a foreign corporation that earns only
transportation income is generally subject to United States federal income
taxation under one of two alternative tax regimes: (1) the 4% gross basis tax or
(2) the net basis tax and branch profits tax. Because the Company following its
redomiciliation and its subsidiaries are incorporated in the Marshall Islands
and there is no comprehensive income tax treaty between the Marshall Islands and
the United States, the Company and such subsidiaries cannot claim an exemption
from this tax under a treaty.
The
4% Gross Basis Tax
The
United States imposes a 4% United States federal income tax (without allowance
of any deductions) on a foreign corporation’s United States source gross
transportation income to the extent such income is not treated as effectively
connected with the conduct of a United States trade or business. For this
purpose, transportation income includes income from the use, hiring or leasing
of a vessel, or the performance of services directly related to the use of a
vessel (and thus includes time charter, spot charter and bareboat charter
income). The United States source portion of transportation income is 50% of the
income attributable to voyages that begin or end, but not both begin and end, in
the United States. As a result of this sourcing rule the effective tax rate is
2% of the gross income attributable to U.S. voyages. Generally, no amount of the
income from voyages that begin and end outside the United States is treated as
United States source, and consequently none of the transportation income
attributable to such voyages is subject to this 4% tax. Although the entire
amount of transportation income from voyages that begin and end in the United
States would be United States source, neither the Company nor any of its
subsidiaries expects to
have any transportation income from voyages that begin and end in the United
States.
The
Net Basis Tax and Branch Profits Tax
The
Company and each of its subsidiaries do not expect to engage in any activities
in the United States (other than port calls of its vessels) or otherwise have a
fixed place of business in the United States. Nonetheless, if this situation
were to change or if the Company
or a subsidiary of the
Company were to be treated as engaged in a United States trade or business, all
or a portion of the Company’s or such subsidiary’s taxable income, including
gain from the sale of vessels, could be treated as effectively connected with
the conduct of this United States trade or business, or effectively connected
income. Any effectively connected income, net of allowable deductions, would be
subject to United States federal corporate income tax (with the highest
statutory rate currently being 35%). In addition, an additional 30% branch
profits tax would be imposed on the Company or such subsidiary at such time as
the Company’s or such subsidiary’s after-tax effectively connected income is
deemed to have been repatriated to the Company’s or subsidiary’s offshore
office. The 4% gross basis tax described above is inapplicable to income that is
treated as effectively connected income. A non-United States corporation’s
United States source transportation income would be considered to be effectively
connected income only if the non-United States corporation has or is treated as
having a fixed place of business in the United States involved in the earning of
the transportation income and substantially all of its United States source
transportation income is attributable to regularly scheduled transportation
(such as a published schedule with repeated sailings at regular intervals
between the same points for voyages that begin or end in the United States). The
Company and its vessel-owning subsidiaries believe that their vessels will not
operate to and from the United States on a regularly scheduled basis. Based on
the intended mode of shipping operations and other activities, the Company and
its vessel-owning subsidiaries do not expect to have any effectively connected
income.
The
Section 883 Exemption
Both the
4% gross basis tax and the net basis and branch profits taxes described above
are inapplicable to transportation income that qualifies for the Section 883
Exemption. To qualify for the Section 883 Exemption a foreign corporation must,
among other things:
|
Ø
|
be
organized in a jurisdiction outside the United States that grants an
equivalent exemption from tax to corporations organized in the United
States (an “Equivalent Exemption”);
|
|
Ø
|
satisfy
one of the following three ownership tests (discussed in more detail
below): (1) the more than 50% ownership test, or 50% Ownership Test, (2)
the controlled foreign corporation test, or CFC Test or (3) the “Publicly
Traded Test”; and
|
|
Ø
|
meet
certain substantiation, reporting and other requirements (which include
the filing of United States income tax
returns).
|
Following
the Company’s redomiciliation into the Marshall Islands, it will be a Marshall
Islands corporation, and each of the vessels in its fleet is owned by a separate
wholly owned subsidiary organized in the Marshall Islands. The U.S. Department
of the Treasury recognizes the Marshall Islands as a jurisdiction that grants an
Equivalent Exemption; therefore, the Company
and each of its
vessel-owning subsidiaries meets the first requirement for the Section 883
Exemption.
The 50
%
Ownership Test
In order
to satisfy the 50% Ownership Test, a non-United States corporation must be able
to substantiate that more than 50% of the value of its shares is owned, directly
or indirectly, by “qualified shareholders.” For this purpose, qualified
shareholders are: (1) individuals who are residents (as defined in the Treasury
regulations promulgated under Section 883 of the Code, or Section 883
Regulations) of countries, other than the United States, that grant an
Equivalent Exemption, (2) non-United States corporations that meet the Publicly
Traded Test of the Section 883 Regulations and are organized in countries that
grant an Equivalent Exemption, or (3) certain foreign governments, non-profit
organizations, and certain beneficiaries of foreign pension funds. In order for
a shareholder to be a qualified shareholder, there generally cannot be any
bearer shares in the chain of ownership between the shareholder and the taxpayer
claiming the exemption (unless such bearer shares are maintained in a
dematerialized or immobilized book-entry system as permitted under the Section
883 Regulations). A corporation claiming the Section 883 exemption based on the
50% Ownership Test must obtain all the facts necessary to satisfy the IRS that
the 50% Ownership Test has been satisfied (as detailed in the Section 883
Regulations). For the taxable year that includes the effective date of the
registration statement to which this prospectus relates, the Company believes
that each of its vessel-owning subsidiaries should satisfy the 50% Ownership
Test based on the beneficial ownership of more than 50% of the value of its
shares by a qualifying shareholder, assuming that such shareholder meets all of
the substantiation and reporting requirements under Section 883 of the Code and
the Section 883 Regulations for such taxable year, and that each such subsidiary
should therefore qualify for the Section 883 Exemption for such taxable
year.
The
CFC Test
The CFC
Test requires that a non-United States corporation be treated as a controlled
foreign corporation, or a CFC, for United States federal income tax purposes for
more than half of the days in the taxable year. A CFC is a foreign corporation,
more than 50% of the vote or value of which is owned by significant U.S.
shareholders (meaning U.S. persons who own at least 10% of the voting power of
the foreign corporation). In addition, more than 50% of the value of the shares
of the CFC must be owned by qualifying U.S. persons for more than half of the
days during the taxable year concurrent with the period of time that the company
qualifies as a CFC. For this purpose, a qualifying U.S. person is defined as a
U.S. citizen or resident alien, a domestic corporation or domestic trust, in
each case, if such U.S. person provides the company claiming the exemption with
an ownership statement. Please read “—United States Federal Income Taxation of
the Company—The Publicly Traded Test.” Each of the Company and its subsidiaries
will not be a CFC on the effective date of the registration statement to which
this prospectus relates and, hence, the Company does not believe that the
requirements of the CFC Test will be met in the near future
with respect to the
Company or any of its subsidiaries.
The
Publicly Traded Test
The
Publicly Traded Test requires that one or more classes of equity representing
more than 50% of the voting power and value in a non-United States corporation
be “primarily and regularly traded” on an established securities market either
in the United States or in a foreign country that grants an Equivalent
Exemption. The Section 883 Regulations provide, in relevant part, that the
shares of a non-United States corporation will be considered to be “primarily
traded” on an established securities market in a country if the number of shares
of each class of shares that are traded during any taxable year on all
established securities markets in that country exceeds the number of shares in
each such class that are traded during that year on established securities
markets in any other single country. The Section 883 Regulations also generally
provide that shares will be considered to be “regularly traded” on an
established securities market if one or more classes of shares in the
corporation representing in the aggregate more than 50% of the total combined
voting power and value of all classes of shares of the corporation are listed on
an established securities market. Also, with respect to each class relied upon
to meet this requirement (1) such class of shares must be traded on the market,
other than in minimal quantities, on at least 60 days during the taxable year or
one-sixth of the days in a short taxable year, and (2) the aggregate number of
shares of such class of shares traded on such market during the taxable year is
at least 10% of the average number of shares of such class of shares outstanding
during such year or as adjusted for a short taxable year. These two tests are
deemed to be satisfied if such class of shares is traded on an established
market in the United States and such shares are regularly quoted by dealers
making a market in such shares.
Notwithstanding
the foregoing, the Section 883 Regulations provide, in relevant part, that a
class of shares will not be considered to be “regularly traded” on an
established securities market for any taxable year in which 50% or more of the
vote and value of the outstanding shares of such class are owned, actually or
constructively under specified share attribution rules, on more than half the
days during the taxable year by persons who each own 5% or more of the vote and
value of such class of outstanding shares, to which we refer as the 5 Percent
Override Rule.
For
purposes of being able to determine the person who actually or constructively
own 5% or more of the vote and value of the Company’s common shares, or 5%
Shareholders, the Section 883 Regulations permit the Company to rely on those
persons that are identified on Schedule 13G and Schedule 13D filings with the
SEC, as owning 5% or more of the Company’s common shares.
In the
event the 5 Percent Override Rule is triggered, the Section 883 Regulations
provide that such rule will not apply if the Company can establish that within
the group of 5% Shareholders, there are sufficient qualified shareholders within
the meaning of Section 883 and the Section 883 Regulations to preclude
non-qualified shareholders in such group from owning 50% or more of the total
value of the Company’s common shares for more than half the number of days
during the taxable year.
The
Company and its vessel-owning subsidiaries do not expect to rely on the Publicly
Traded Test immediately after the registration statement to which this
prospectus relates is declared effective because they expect to satisfy the 50%
Ownership Test. The stock in the Company’s vessel-owning subsidiaries is not
publicly traded, but if the Company meets the Publicly Traded Test described
above, the Company may be a qualifying shareholder for purposes of applying the
50% Ownership Test as to any subsidiary claiming the Section 883 Exemption.
However, if for any period after the Company issues the Class B shares, the
common shares represent less than 50% of the voting power of the Company, the
Company would not be able to satisfy the Publicly Traded Test for such period
because less than 50% of the stock of the Company, measured by voting power,
would be listed on an established securities market.
A foreign
corporation can only claim the Section 883 Exemption if it receives the
ownership statements required under the Section 883 Regulations certifying as to
the matters required to satisfy the relevant ownership test, each an ownership
statement. Each of our vessel-owning subsidiaries has received, or expects to
receive, ownership statements, relating to the current taxable year, certifying
the qualifying shareholder status of a shareholder beneficially owning more than
50% of the value of each such subsidiary’s stock and the status of
intermediaries as required to support a claim by each vessel-owning subsidiary
of the Section 883 Exemption.
Each of
the Company’s vessel-owning subsidiaries has claimed the Section 883 Exemption
on the basis that it satisfies the 50% Ownership Test and the Company intends to
continue to comply with the substantiation, reporting and other requirements
that are applicable under Section 883 of the Code to enable such subsidiaries to
claim the exemption on this basis.
In the
future, if the shareholders or the relative ownership in the Company changes, if
the Company believes that it (or its subsidiaries) can qualify for the Section
883 Exemption, each shareholder who is or may be a qualifying person will be
asked to provide to the Company an ownership statement for purposes of
substantiating the relevant company’s entitlement for the exemption. An
ownership statement is required to be signed by the shareholder under penalties
of perjury and contains information regarding the residence of the shareholder
and its ownership in the company claiming the Section 883 Exemption. If the
Company or a subsidiary needs to obtain additional ownership statements in order
to establish a Section 883 Exemption, there is no guarantee that shareholders
representing a sufficient ownership interest in the Company or any of its
subsidiaries will provide ownership statements to the relevant company so that
it will satisfy any of the Section 883 ownership tests and the Section 883
Exemption would not apply to the Company. If in future years the shareholders
fail to update or correct such statements, the Company and its subsidiaries may
not continue to qualify for the Section 883 Exemption.
A
corporation’s qualification for the Section 883 Exemption is determined for each
taxable year. If the Company and/or its subsidiaries were not to qualify for the
Section 883 Exemption in any year, the United States income taxes that become
payable would have a negative effect on the business of the Company and its
subsidiaries, and would result in decreased earnings available for distribution
to the Company’s shareholders.
United
States Taxation of Gain on Sale of Vessels
If the
Company’s subsidiaries qualify for the Section 883 Exemption, then gain from the
sale of any vessel would be exempt from tax under Section 883. If, however, the
gain is not exempt from tax under Section 883, the Company will not be subject
to United States federal income taxation with respect to such gain provided that
the income from the vessel has never constituted effectively connected income
and that the sale is considered to occur outside of the United States under
United States federal income tax principles. In general, a sale of a vessel will
be considered to occur outside of the United States for this purpose if title to
the vessel, and risk of loss with respect to the vessel, pass to the buyer
outside of the United States. To the extent possible, the Company will attempt
to structure any sale of a vessel so that it is considered to occur outside of
the United States.
United
States Federal Income Taxation of United States Holders
As used
herein, “United States Holder” means a beneficial owner of the Company’s common
shares that is an individual citizen or resident of the United States for United
States federal income tax purposes, a corporation or other entity taxable as a
corporation created or organized in or under the laws of the United States or
any state thereof (including the District of Columbia), an estate the income of
which is subject to United States federal income taxation regardless of its
source or a trust where a court within the United States is able to exercise
primary supervision over the administration of the trust and one or more United
States persons (as defined in the Code) have the authority to control all
substantial decisions of the trust (or a trust that has made a valid election
under U.S. Department of the Treasury regulations to be treated as a domestic
trust). A “Non-United States Holder” generally means any owner (or beneficial
owner) of common shares that is not a United States Holder, other than a
partnership. If a partnership holds common shares, the tax treatment of a
partner will generally depend upon the status of the partner and upon the
activities of the partnership. Partners of partnerships holding common shares
should consult their own tax advisors regarding the tax consequences of an
investment in the common shares (including their status as United States Holders
or Non-United States Holders).
Distributions
Subject
to the discussion of PFICs below, any distributions made by the Company with
respect to the common shares to a United States Holder will generally constitute
dividends, which may be taxable as ordinary income or qualified dividend income
as described in more detail below, to the extent of the Company’s current or
accumulated earnings and profits as determined under United States federal
income tax principles. Distributions in excess of the Company’s earnings and
profits will be treated as a nontaxable return of capital to the extent of the
United States Holder’s tax basis in its common shares and, thereafter, as
capital gain. United States Holders that are corporations generally will not be
entitled to claim a dividends received deduction with respect to any
distributions they receive from us.
Dividends
paid on the shares of a non-U.S. corporation to an individual generally will not
be treated as qualified dividend income that is taxable at a maximum tax rate of
15% through 2010. The preferential rate of federal tax on qualified dividends
will expire unless Congress enacts legislation to extend it beyond December 31,
2010. However, under the law in effect through December 31, 2010, dividends paid
in respect of the Company’s common shares may qualify as qualified dividend
income if: (1) the common shares are readily tradable on an established
securities market in the United States; (2) the Company is not a PFIC for the
taxable year during which the dividend is paid or in the immediately preceding
taxable year; (3) the United States Holder has owned the common shares for more
than 60 days in the 121-day period beginning 60 days before the date on which
the common shares become ex-dividend and (4) the United States Holder is not
under an obligation to make related payments with respect to positions in
substantially similar or related property. The first requirement is expected to
be met shortly after the registration statement to which this prospectus relates
is declared effective after our common shares are listed on the Nasdaq Global
Market. The second requirement is expected to be met as more fully described
below under “—Consequences of Possible PFIC Classification.” Satisfaction of the
final two requirements will depend on the particular circumstances of each
United States Holder. Consequently, if any of these requirements are not met,
the dividends paid to individual United States Holders in respect of the
Company’s common shares would not to be treated as qualified dividend income and
would be taxed as ordinary income at ordinary rates.
After
December 31, 2010, dividend income will be taxed at ordinary interest rates and,
therefore, the rate on such dividend income will increase, unless Congress
enacts legislation to extend the preferential rates.
However,
legislation has been proposed in the past and may again be proposed in the
future that would have the effect of classifying dividends paid by the Company
as other than qualified dividends, with the result that no United States Holder
would be eligible for the preferential tax rates applicable to qualified
dividend income even if the preferential rate is extended.
Amounts
taxable as dividends generally will be treated as income from sources outside
the United States and will, depending on your circumstances, be “passive” or
“general” income which, in either case, is treated separately from other types
of income for purposes of computing the foreign tax credit allowable to you.
However, if (1) the Company is 50% or more owned, by vote or value, by United
States persons and (2) at least 10% of the Company’s earnings and profits are
attributable to sources within the United States, then for foreign tax credit
purposes, a portion of our dividends would be treated as derived from sources
within the United States. Under such circumstances, with respect to any dividend
paid for any taxable year, the United States source ratio of the Company’s
dividends for foreign tax credit purposes would be equal to the portion of the
Company’s earnings and profits from sources within the United States for such
taxable year, divided by the total amount of the Company’s earnings and profits
for such taxable year.
Consequences
of Possible PFIC Classification
A
non-United States entity treated as a corporation for United States federal
income tax purposes will be a PFIC in any taxable year in which, after taking
into account the income and assets of the corporation and certain subsidiaries
pursuant to a “look through” rule, either: (1) 75% or more of its gross income
is “passive” income or (2) 50% or more of the average value of its assets is
attributable to assets that produce passive income or are held for the
production of passive income. If a corporation is a PFIC in any taxable year
that a person holds shares in the corporation (and was not a qualified electing
fund with respect to such year, as discussed below), the shares held by such
person will be treated as shares in a PFIC for all future years (absent an
election which, if made, may require the electing person to pay taxes in the
year of the election). A United States Holder of shares in a PFIC would be
required to file an annual information return on IRS Form 8621 containing
information regarding the PFIC as required by U.S. Department of the Treasury
regulations.
While
there are legal uncertainties involved in this determination, including as a
result of adverse recent case law described herein, based upon the Company’s and
its subsidiaries’ expected operations as described herein and based upon the
current and expected future activities and operations of the Company and its
subsidiaries, the income of the Company and such subsidiaries from time charters
should not constitute “passive income” for purposes of applying the PFIC rules,
and the assets that the Company owns for the production of this time charter
income should not constitute passive assets for purposes of applying the PFIC
rules.
Although
there is no legal authority directly on point, this view is based principally on
the position that the gross income that the Company and its subsidiaries derive
from time charters constitutes services income rather than passive rental
income. Recently, the Fifth Circuit Court of Appeals decided in
Tidewater Inc. v. United
States
, 565 F.3d 299 (5th Cir., April 13, 2009), that a typical time
charter is a lease, and not a contract for the provision of transportation
services. In that case, the court was considering a tax issue that turned on
whether the taxpayer was a lessor where a vessel was under a time charter, and
the court did not address the definition of passive income or the PFIC rules;
however, the reasoning of the case could have implications as to how the income
from a time charter would be classified under such rules. If the reasoning of
the
Tidewater
case is
applied to the Company’s situation and the Company’s or its subsidiaries’ time
charters are treated as leases, the Company’s or its subsidiaries’ time charter
income could be classified as rental income and the Company would be a PFIC
unless more than 25% of the income of the Company (taking into account the
subsidiary look through rule) is from spot charters plus other active income or
an active leasing exception applies. The IRS has announced that it will not
follow the reasoning of the Tidewater case and would have treated the income
from the time charters at issue in that case as services income, including for
other purposes of the Code. The Company intends to take the position that all of
its time, voyage and spot chartering activities will generate active services
income and not passive leasing income, but in the absence of direct legal
authority specifically relating to the Code provisions governing PFICs, the IRS
or a court could disagree with this position. Although the matter is not free
from doubt as described herein, based on the current operations and activities
of the Company and its subsidiaries and on the relative values of the vessels in
the Company’s fleet and the charter income in respect of the vessels, Globus
Maritime Limited should not be treated as a PFIC during the taxable year in
which the registration statement to which this prospectus relates is declared
effective.
Based on
the Company’s intention and expectation that the Company’s subsidiaries’ income
from spot, time and voyage chartering activities plus other active operating
income will be greater than 25% of the Company’s total gross income at all
relevant times and that the gross value of the vessels subject to such time,
voyage or spot charters will exceed the gross value of all other assets the
Company owns at all relevant times, Globus Maritime Limited does not expect that
it will constitute a PFIC with respect to a taxable year in the near
future.
The
Company will try to manage its vessels and its business so as to avoid being
classified as a PFIC for a future taxable year; however there can be no
assurance that the nature of the Company’s assets, income and operations will
remain the same in the future (notwithstanding the Company’s current
expectations). Additionally, no assurance can be given that the IRS or a court
of law will accept the Company’s position that the time charters that the
Company’s subsidiaries have entered into or any other time charter that the
Company or a subsidiary may enter into will give rise to active income rather
than passive income for purposes of the PFIC rules, or that future changes of
law will not adversely affect this position. The Company has not obtained a
ruling from the IRS on its time charters or its PFIC status and does not intend
to seek one. Any contest with the IRS may materially and adversely impact the
market for the common shares and the prices at which they trade. In addition,
the costs of any contest on the issue with the IRS will result in a reduction in
cash available for distribution and thus will be borne indirectly by the
Company’s shareholders.
If Globus
Maritime Limited were to be classified as a PFIC in any year, each United States
Holder of the Company’s shares will be subject (in that year and all subsequent
years) to special rules with respect to: (1) any “excess distribution”
(generally defined as any distribution received by a shareholder in a taxable
year that is greater than 125% of the average annual distributions received by
the shareholder in the three preceding taxable years or, if shorter, the
shareholder’s holding period for the shares), and (2) any gain realized upon the
sale or other disposition of the common shares. Under these rules:
|
Ø
|
the
excess distribution or gain will be allocated ratably over the United
States Holder’s holding period;
|
|
Ø
|
the
amount allocated to the current taxable year and any year prior to the
first year in which the Company was a PFIC will be taxed as ordinary
income in the current year; and
|
|
Ø
|
the
amount allocated to each of the other taxable years in the United States
Holder’s holding period will be subject to United States federal income
tax at the highest rate in effect for the applicable class of taxpayer for
that year, and an interest charge will be added as though the amount of
the taxes computed with respect to these other taxable years were
overdue.
|
In order
to avoid the application of the PFIC rules, United States Holders may make a
qualified electing fund, or a QEF, election provided in Section 1295 of the Code
in respect of their common shares. Even if a United States Holder makes a QEF
election for a taxable year of the Company, if the Company was a PFIC for a
prior taxable year during which such holder held the common shares and for which
such holder did not make a timely QEF election, the United States Holder would
also be subject to the more adverse rules described above. Additionally, to the
extent any of the Company’s subsidiaries is a PFIC, an election by a United
States Holder to treat Globus Maritime Limited as a “Qualifying Electing Fund”
would not be effective with respect to such holder’s deemed ownership of the
stock of such subsidiary and a separate QEF election with respect to such
subsidiary is required. In lieu of the PFIC rules discussed above, a United
States Holder that makes a timely, valid QEF election will, in very general
terms, be required to include its pro rata share of the Company’s ordinary
income and net capital gains, unreduced by any prior year losses, in income for
each taxable year (as ordinary income and long-term capital gain, respectively)
and to pay tax thereon, even if no actual distributions are received for that
year in respect of the common shares and even if the amount of that income is
not the same as the amount of actual distributions paid on the common shares
during the year. If the Company later distributes the income or gain on which
the United States Holder has already paid taxes under the QEF rules, the amounts
so distributed will not again be subject to tax in the hands of the United
States Holder. A United States Holder’s tax basis in any common shares as to
which a QEF election has been validly made will be increased by the amount
included in such United States Holder’s income as a result of the QEF election
and decreased by the amount of nontaxable distributions received by the United
States Holder. On the disposition of a common share, a United States Holder
making the QEF election generally will recognize capital gain or loss equal to
the difference, if any, between the amount realized upon such disposition and
its adjusted tax basis in the common share. In general, a QEF election should be
made by filing a Form 8621 with the United States Holder’s federal income tax
return on or before the due date for filing such Holder’s federal income tax
return for the first taxable year for which the Company is a PFIC or, if later,
the first taxable year for which the United States Holder held common shares. In
this regard, a QEF election is effective only if certain required information is
made available by the PFIC. Subsequent to the date that the Company first
determines that it is a PFIC, the Company will use commercially reasonable
efforts to provide any United States Holder of common shares, upon request, with
the information necessary for such United States Holder to make the QEF
election.
In
addition to the QEF election, Section 1296 of the Code permits United States
Holders to make a “mark-to-market” election with respect to marketable shares in
a PFIC, generally meaning shares regularly traded on a qualified exchange or
market and certain other shares considered marketable under U.S. Department of
the Treasury regulations. As the Company’s common shares are expected to be
listed on an established securities market
after the registration
statement to which this prospectus relates is declared effective, such common
shares may be marketable for purposes of this election. If a United States
Holder makes a mark-to-market election in respect of its common shares, such
United States Holder generally would, in each taxable year: (1) include as
ordinary income the excess, if any, of the fair market value of the common
shares at the end of the taxable year over such United States Holder’s adjusted
tax basis in the common shares, and (2) be permitted an ordinary loss in respect
of the excess, if any, of such United States Holder’s adjusted tax basis in the
common shares over their fair market value at the end of the taxable year, but
only to the extent of the net amount previously included in income as a result
of the mark-to-market election (with the United States Holder’s basis in the
common shares being increased and decreased, respectively, by the amount of such
ordinary income or ordinary loss). The consequences of this election are
generally less favorable than those of a QEF election for United States Holders
that are sensitive to the distinction between ordinary income and capital gain,
although this is not necessarily the case.
United
States Holders are urged to consult their tax advisors as to the consequences of
making a mark-to-market or QEF election, as well as other United States federal
income tax consequences of holding shares in a PFIC.
As
previously indicated, if the Company were to be classified as a PFIC for a
taxable year in which the Company pays a dividend or the immediately preceding
taxable year, dividends paid by the Company would not constitute “qualified
dividend income” and, hence, would not be eligible for the reduced rate of
United States federal income tax that is available through 2010.
Consequences
of Controlled Foreign Corporation Classification of the Company
If more
than 50% of either the total combined voting power of the shares of the Company
entitled to vote or the total value of all of the Company’s outstanding shares
were owned, directly, indirectly or constructively by (i) citizens or residents
of the United States, (ii) U.S. partnerships or corporations, or U.S. estates or
trusts (as defined for U.S. federal income tax purposes), each of which owned,
directly, indirectly or constructively 10% or more of the total combined voting
power of the Company shares entitled to vote (each a “U.S. Shareholder”), the
Company and its wholly owned subsidiaries generally would be treated as CFCs.
U.S. Shareholders of a CFC are treated as receiving current distributions of
their shares of Subpart F Income of the CFC even if they do not receive actual
distributions. The Company or its subsidiaries may have income that would be
treated as Subpart F Income, such as interest income, services income of Globus
Shipmanagement or passive leasing income in respect of vessel charters. (Please
read “—United States Federal Income Taxation of United States
Holders—Consequences of Possible PFIC Classification”). Consequently, any United
States Holders who are also U.S. Shareholders may be required to include in
their U.S. federal taxable income their pro rata share of the Subpart F income
of the Company and its subsidiaries, regardless of the amount of cash
distributions received. The Company believes that its time charter income will
not be treated as passive rental income, but there can be no assurance that the
IRS will accept this position. Please read “—United States Federal Income
Taxation of United States Holders—Consequences of Possible PFIC
Classification.”
In the
case where the Company and its subsidiaries are CFCs, to the extent that the
Company’s distributions to a United States Holder who is also a U.S. Shareholder
are attributable to prior inclusions of Subpart F income of such United States
Holder, such distributions are not required to be reported as additional income
of such United States Holder.
Whether
or not the Company or a subsidiary will be a CFC will depend on the identity of
the shareholders of the Company during each taxable year of the Company. As of
the date of this prospectus, the Company should not be a CFC based on the
current shareholders in the Company.
If the
Company or one of its subsidiaries is a CFC, certain burdensome U.S. federal
income tax and administrative requirements would apply to United States Holders
that are U.S. Shareholders, but such United States Holders generally would not
also be subject to all of the requirements generally applicable to owners of a
PFIC. For example, a United States Holder that is a U.S. Shareholder will be
required to annually file IRS Form 5471 to report certain aspects of its
indirect ownership of a CFC. United States Holders should consult with their own
tax advisors as to the consequences to them of being a U.S. Shareholder in a
CFC.
Sale,
Exchange or Other Disposition of Common Shares
A United
States Holder generally will recognize taxable gain or loss upon a sale,
exchange or other disposition of common shares in an amount equal to the
difference between the amount realized by the United States Holder from such
sale, exchange or other disposition and the United States Holder’s tax basis in
such common shares. Assuming the Company does not constitute a PFIC for any
taxable year, this gain or loss will generally be treated as long-term capital
gain or loss if the United States Holder’s holding period is greater than one
year at the time of the sale, exchange or other disposition. A United States
Holder’s ability to deduct capital losses is subject to severe
limitations.
A United
States Holder generally will recognize taxable gain or loss upon a sale,
exchange or other disposition of common shares in an amount equal to the
difference between the amount realized by the United States Holder from such
sale, exchange or other disposition and the United States Holder’s tax basis in
such shares.
If a
United States Holder’s holding period for the common shares is more than one
year, the gain or loss will be long-term capital gain or loss assuming that the
Company does not constitute a PFIC for any taxable year.
United
States Federal Income Taxation of Non-United States Holders
A
Non-United States Holder will generally not be subject to United States federal
income tax on dividends paid in respect of the common shares or on gains
recognized in connection with the sale or other disposition of the common shares
provided that the Non-United States Holder makes certain tax representations
regarding the identity of the beneficial owner of the common shares, that such
dividends or gains are not effectively connected with the Non-United States
Holder’s conduct of a United States trade or business and that, with respect to
gain recognized in connection with the sale or other disposition of the common
shares by a non-resident alien individual, such individual is not present in the
United States for 183 days or more in the taxable year of the sale or other
disposition and other conditions are met. If the Non-United States Holder is
engaged in a United States trade or business for United States federal income
tax purposes, the income from the common shares, including dividends and gain
from the sale, exchange or other disposition of the common stock, that is
effectively connected with the conduct of that trade or business will generally
be subject to regular United States federal income tax in the same manner as
discussed above relating to the taxation of United States Holders.
Backup
Withholding and Information Reporting
Information
reporting to the IRS may be required with respect to payments on the common
shares and with respect to proceeds from the sale of the common shares. With
respect to Non-United States Holders, copies of such information returns may be
made available to the tax authorities in the country in which the Non-United
States Holder resides under the provisions of any applicable income tax treaty
or exchange of information agreement. A “backup” withholding tax may also apply
to those payments if:
|
Ø
|
a
holder of the common shares fails to provide certain identifying
information (such as the holder’s taxpayer identification number or an
attestation to the status of the holder as a Non-United States
Holder);
|
|
Ø
|
such
holder is notified by the IRS that he or she has failed to report all
interest or dividends required to be shown on his or her federal income
tax returns; or
|
|
Ø
|
in
certain circumstances, such holder has failed to comply with applicable
certification requirements.
|
Backup
withholding is not an additional tax and may be refunded (or credited against
the holder’s United States federal income tax liability, if any), provided that
certain required information is furnished to the IRS in a timely
manner.
United
States Holders of common shares may be required to file forms with the IRS under
the applicable reporting provisions of the Code. For example, such United States
Holders may be required, under Sections 6038, 6038B and/or 6046 of the Code, to
supply the IRS with certain information regarding the United States Holder,
other United States Holders and the Company if (1) such person owns at least 10%
of the total value or 10% of the total combined voting power of all classes of
shares entitled to vote or (2) the acquisition, when aggregated with certain
other acquisitions that may be treated as related under applicable regulations,
exceeds $100,000. In the event a United States Holder fails to file a form when
required to do so, the United States Holder could be subject to substantial tax
penalties.
Non-United
States Holders may be required to establish their exemption from information
reporting and backup withholding by certifying their status on IRS Form W-8BEN,
W-8ECI or W-8IMY, as applicable.
We
encourage each United States Holder and Non-United States Holder to consult with
his, her or its own tax advisor as to the particular tax consequences to him,
her or it of holding and disposing of the Company’s common shares, including the
applicability of any federal, state, local or foreign tax laws and any proposed
changes in applicable law.
EXPENSES
OF ISSUANCE AND DISTRIBUTION
We
estimate our expenses in connection with the distribution by our selling
shareholders of our common shares in this offering, other than the underwriting
discounts and commissions, which, if any, will be paid by our selling
shareholders, will be as follows:
SEC
Registration Fee
|
|
$
|
4,065
|
|
Printing
and Engraving Expenses
|
|
|
6,000
|
|
Legal
Fees and Expenses
|
|
|
150,000
|
|
Accountants’
Fees and Expenses
|
|
|
170,000
|
|
Nasdaq
Listing Fee
|
|
|
125,000
|
|
Transfer
Agent’s Fees and Expenses
|
|
|
6,000
|
|
Miscellaneous
Costs
|
|
|
50,000
|
|
Total
|
|
$
|
511,065
|
|
LEGAL
MATTERS
The
validity of our common shares and certain other legal matters with respect to
the laws of the Marshall Islands and other legal matters relating to United
States law will be passed upon for us by Watson, Farley & Williams (New
York) LLP, New York, New York.
EXPERTS
The
consolidated financial statements of Globus Maritime Limited as of December 31,
2009 and 2008 and for each of the three years in the period ended December 31,
2009, appearing in this prospectus and registration statement have been audited
by Ernst & Young (Hellas) Certified Auditors Accountants S.A., independent
registered public accounting firm, as set forth in their report thereon
appearing elsewhere herein, and are included in reliance upon such report given
on the authority of such firm as experts in accounting and
auditing.
The
sections in this prospectus entitled “Risk Factors,” “The Dry Bulk Industry,”
and the statistical and graphical information contained therein, and “Business,”
and in any other
instance where Drewry has been identified as the source of information included
in this prospectus,
have been reviewed by Drewry, which has confirmed to
us that it accurately describes the dry bulk shipping market
industry.
WHERE
YOU CAN FIND ADDITIONAL INFORMATION
We have
filed with the SEC a registration statement on Form F-1 under the Securities Act
with respect to our common shares offered by this prospectus. This prospectus is
a part of that registration statement. For the purposes of this section, the
term registration statement means the original registration statement and any
and all amendments including the schedules and exhibits to the original
registration statement or any amendment. This prospectus does not contain all of
the information set forth in the registration statement we filed. Each statement
made in this prospectus concerning a document filed as an exhibit to the
registration statement is qualified by reference to that exhibit for a complete
statement of its provisions. The registration statement, including its exhibits
and schedules, may be inspected and copied at the public reference facilities
maintained by the SEC at 100 F Street, N.E., Washington, D.C. 20549. You may
obtain information on the operation of the public reference room by calling 1
(800) SEC-0330, and you may obtain copies at prescribed rates from the Public
Reference Section of the SEC at its principal office in Washington, D.C. 20549.
The SEC maintains a website (http://www.sec.gov) that contains reports, proxy
and information statements and other information regarding registrants that file
electronically with the SEC.
As a
“foreign private issuer,” we will be exempt from the rules under the Exchange
Act prescribing the furnishing and content of proxy statements to shareholders.
In addition, as a “foreign private issuer,” our officers, directors and
principal shareholders will be exempt from the rules under the Exchange Act
relating to short swing profit reporting and liability.
ENFORCEABILITY
OF CIVIL LIABILITIES
As of
November 24, 2010, we are a Marshall Islands corporation and our executive
offices are located outside of the United States. Certain of our directors,
executive officers and some of the experts named in this prospectus reside
outside the United States. In addition, a substantial portion of our assets and
the assets of our directors, executive officers and experts are located outside
of the United States. As a result, you may have difficulty serving legal process
within the United States upon us or any of these persons. You may also have
difficulty enforcing, both in and outside the United States, judgments you may
obtain in U.S. courts against us or these persons in any action, including
actions based upon the civil liability provisions of U.S. federal or state
securities laws.
Furthermore,
there is substantial doubt that the courts of the Marshall Islands would enter
judgments in original actions brought in those courts predicated on U.S. federal
or state securities laws.
GLOSSARY
The
following are definitions of certain terms that are commonly used in the
shipping industry and in this prospectus:
Annual survey
. The inspection
of a vessel pursuant to international conventions, by a classification society
surveyor, on behalf of the flag state, that takes place every year.
Ballast
. A voyage during
which the vessel is not laden with cargo.
Bareboat charter
. A charter
of a vessel under which the shipowner is usually paid a fixed daily or monthly
rate for a certain period of time during which the charterer is responsible for
the vessel operating expenses and voyage expenses of the vessel and for the
management of the vessel. In this case, all voyage related costs, including
vessel fuel, or bunker, and port dues as well as all vessel operating expenses,
such as day-to-day operations, maintenance, crewing and insurance are paid by
the charterer. A bareboat charter is also known as a “demise charter” or a “time
charter by demise” and involves the use of a vessel usually over longer periods
of time ranging over several years. The owner of the vessel receives monthly
charter hire payments on a per day basis and is responsible only for the payment
of capital costs related to the vessel.
Bunkers
. Fuel oil used to
operate a vessel’s engines, generators and boilers.
Capesize
. A dry bulk vessel
with a cargo-carrying of approximately 110,000 to 199,999 dwt. These vessels
generally operate along long haul iron ore and coal trade routes. Only the
largest ports around the world possess the infrastructure to accommodate vessels
of this size.
Charter
. The hire of a vessel
for a specified period of time or to carry a cargo for a fixed fee from a
loading port to a discharging port. The contract for a charter is called a
charterparty.
Charterer
. The company that
hires a vessel pursuant to a charter.
Charter hire
. Money paid to
the shipowner by a charterer for the use of a vessel under a time charter or
bareboat charter. Such payments are usually made during the course of the
charter every 15 or 30 days in advance or in arrears by multiplying the daily
charter rate times the number of days and, under a time charter only,
subtracting any time the vessel was deemed to be off-hire. Under a bareboat
charter such payments are usually made monthly and are calculated on a 360 or
365 day calendar year basis.
Charter rate
. The amount of
money agreed between the charterer and the shipowner accrued on a daily or
monthly basis that is used to calculate the vessel’s charter hire.
Classification society
. An
independent society that certifies that a vessel has been built and maintained
according to the society’s rules for that type of vessel and complies with the
applicable rules and regulations of the country in which the vessel is
registered, as well as the international conventions which that country has
ratified. A vessel that receives its certification is referred to as being “in
class” as of the date of issuance.
Deadweight ton or “dwt”
. A
unit of a vessel’s capacity for cargo, fuel oil, stores and crew, measured in
metric tons. A vessel’s dwt or total deadweight is the total weight the vessel
can carry when loaded to a particular load line.
Draft
. Vertical distance
between the waterline and the bottom of the vessel’s keel.
Dry bulk
. Non-liquid cargoes
of commodities shipped in an unpackaged state.
Dry bulk vessels
. Vessels
which are specially designed and built to carry large volumes of dry
bulk.
Drydocking
. The removal of a
vessel from the water for inspection and/or repair of those parts of a vessel
which are below the water line. During drydockings, which are required to be
carried out periodically, certain mandatory classification society inspections
are carried out and relevant certifications issued. Drydockings are generally
required once every 30 to 60 months.
Freight
. Money paid to the
shipowner by a charterer for the use of a vessel under a voyage charter. Such
payment is usually made on a lump-sum basis upon loading or discharging the
cargo and is derived by multiplying the tons of cargo loaded on board by the
cost per cargo ton, as agreed to transport that cargo between the specific
ports.
Gross ton
. A unit of
measurement for the total enclosed space within a vessel equal to 100 cubic feet
or 2.831 cubic meters used in arriving at the calculation of gross
tonnage.
Handymax
. Handymax vessels
have a cargo carrying capacity of approximately 40,000 to 59,999 dwt. These
vessels operate on a large number of geographically dispersed global trade
routes, carrying primarily grains and minor bulks. Vessels that are less than
60,000 dwt are sometimes built with on-board cranes enabling them to load and
discharge cargo in countries and ports with limited infrastructure. These
vessels are generally called “geared” vessels.
Handysize
. Handysize vessels
have a cargo carrying capacity of approximately 10,000 to 39,999 dwt. These
vessels carry exclusively minor bulk cargo. Increasingly, these vessels are
operating on regional trading routes. Handysize vessels are well suited for
small ports with length and draft restrictions that may lack the infrastructure
for cargo loading and unloading.
Hull
. Shell or body of a
vessel.
IMO
. International Maritime
Organization, a United Nations agency that issues international regulations and
standards for seaborne transportation.
Intermediate survey
. The
inspection of a vessel by a classification society surveyor which takes place
between two and three years before and after each special survey for such vessel
pursuant to the rules of international conventions and classification
societies.
Kamsarmax
. Kamsarmax vessels
(sometimes known as Post Panamax) have a cargo carrying capacity of
approximately 80,000 to 109,999 dwt. These vessels tend to be shallower and have
a larger beam than a standard Panamax vessel with a higher cubic capacity. These
vessels have been designed specifically for loading high cubic cargoes from
draught restricted ports, and cannot transit the Panama Canal.
Metric ton
. A unit of weight
equal to 1,000 kilograms.
Newbuilding
. A new vessel
under construction or just completed.
Off-hire
. The period a vessel
is unable to perform the services for which it is required under a time charter.
Off-hire periods typically include days spent undergoing repairs and drydocking,
whether or not scheduled.
OPA
. Oil Pollution Act of
1990 of the United States, as amended.
Orderbook
. The orderbook
refers to the total number of currently placed orders for the construction of
vessels or a specific type of vessel worldwide.
Panamax
. Panamax vessels have
a cargo carrying capacity of approximately 60,000 to 79,999 dwt of maximum
length, depth and draft capable of passing fully loaded through the Panama
Canal. The ability of Panamax vessels to pass through the Panama Canal makes
them more versatile than larger vessels. Panamax dry bulk vessels carry coal,
grains, and, to a lesser extent, minor bulks, including steel products, forest
products and fertilizers.
Protection and indemnity (or
P&I) insurance
. Insurance obtained through mutual associations
(called “P&I clubs”) formed by vessel-owners to provide liability insurance
protection against a large financial loss by one member by contribution towards
that loss by all members. To a great extent, the risks are
reinsured.
Scrapping
. The disposal of
old or damaged vessel tonnage by way of sale as scrap metal.
Sister ships
. Vessels of the
same type and specification which were built by the same shipyard.
SOLAS
. The International
Convention for the Safety of Life at Sea 1974, as amended, adopted under the
auspices of the IMO.
Special survey
. An extensive
inspection of a vessel by classification society surveyors that must be
completed within five years. Special surveys require a vessel to be
drydocked.
Spot charter
. A spot charter
is an industry term referring to both voyage and trip time charters. These
charters are referred to as spot charters or spot market charters due to their
short term duration, consisting mostly of a single voyage between one load port
and one discharge port.
Strict liability
. Liability
that is imposed without regard to fault.
Supramax
. Supramax vessels
have a cargo carrying capacity of approximately 50,000 to 59,999 dwt. These
vessels normally offer cargo loading and unloading flexibility with on-board
cranes, while at the same time possess the cargo carrying capability approaching
conventional Panamax bulk vessels.
Tanker
. Vessel designed for
the carriage of liquid cargoes in bulk with cargo space consisting of many
tanks. Tankers carry a variety of products including crude oil, refined
petroleum products and liquid chemicals. The vessel may have equipment designed
for the loading and unloading of cargoes with a high viscosity.
TCE
. Time charter equivalent,
a standard industry measure of the average daily revenue performance of a
vessel. The TCE rate achieved on a given voyage is expressed in U.S. dollars/day
and is generally calculated by subtracting voyage expenses, including bunkers
and port charges, from voyage revenue and dividing the net amount (time charter
equivalent revenues) by the round-trip voyage duration. TCE is a standard
seaborne transportation industry performance measure used primarily to compare
period-to-period changes in a seaborne transportation company’s performance
despite changes in the mix of charter types (i.e., spot charters, time charters
and bareboat charters) under which the vessels may be employed during specific
periods.
Time charter
. A time charter
is a contract under which a charterer pays a fixed daily hire rate on a
semi-monthly or monthly basis for a fixed period of time for use of the vessel.
Subject to any restrictions in the charter, the charterer decides the type and
quantity of cargo to be carried and the ports of loading and unloading. The
charterer pays the voyage related expenses such as fuel, canal tolls, and port
charges. The shipowner pays all vessel operating expenses such as the management
expenses and crew costs as well as for the capital costs of the vessel. Any
delays at port or during the voyages are the responsibility of the charterer,
save for certain specific exceptions such as loss of time arising from vessel
breakdown and routine maintenance.
Vessel operating expenses
.
The costs of operating a vessel that is incurred during a charter, primarily
consisting of crew wages and associated costs, insurance premiums, lubricants
and spare parts, and repair and maintenance costs. Vessel operating expenses
exclude fuel and port charges, which are known as
“voyage
expenses.” For a time charter, the vessel-owner pays vessel operating expenses.
For a bareboat charter, the charterer pays vessel operating
expenses.
Voyage charter
. A voyage
charter involves the carriage of a specific amount and type of cargo from
specific load port(s) to specific discharge port(s), subject to various cargo
handling terms. Most of these charters are of a single voyage nature between two
specific ports, as trading patterns do not encourage round voyage trading. The
owner of the vessel receives one payment derived by multiplying the tons of
cargo loaded on board by the cost per cargo ton, as agreed to transport that
cargo between the specific ports. The owner is responsible for the payment of
all expenses including voyage, operating and capital costs of the vessel. The
charterer is typically responsible for any delay at the loading or discharging
ports.
Voyage expenses
. Expenses
incurred due to a vessel’s traveling from a loading port to a discharging port,
such as fuel (bunker) cost, port expenses, agent’s fees, canal dues and extra
war risk insurance, as well as commissions.
INDEX
TO CONSOLIDATED FINANCIAL STATEMENTS
|
|
Page
|
|
|
|
Report
of Independent Registered Public Accounting Firm
|
|
F-2
|
|
|
|
Consolidated
Statement of Financial Position as of December 31, 2008 and
2009
|
|
F-3
|
|
|
|
Consolidated
Statement of Comprehensive Income for the years ended December 31, 2007,
2008 and 2009
|
|
F-4
|
|
|
|
Consolidated
Statement of Changes in Equity for the years ended December 31, 2007, 2008
and 2009
|
|
F-5
|
|
|
|
Consolidated
Statement of Cash Flows for the years ended December 31, 2007, 2008 and
2009
|
|
F-6
|
|
|
|
Notes
to the Consolidated Financial Statements
|
|
F-7
|
|
|
|
Interim
Condensed Consolidated Unaudited Statement of Financial Position as of
June 30, 2010
|
|
F-41
|
|
|
|
Interim
Condensed Consolidated Unaudited Statement of Comprehensive Income for the
six months ended June 30, 2009 and 2010
|
|
F-42
|
|
|
|
Interim
Condensed Consolidated Unaudited Statement of Changes in Equity for the
six months ended June 30, 2009 and 2010
|
|
F-43
|
|
|
|
Interim
Condensed Consolidated Unaudited Statement of Cash Flows for the six
months ended June 30, 2009 and 2010
|
|
F-44
|
|
|
|
Notes
to the Interim Condensed Consolidated Unaudited Financial
Statements
|
|
F-45
|
REPORT OF
INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
The Board
of Directors and Stockholders of Globus Maritime Limited
We have
audited the accompanying consolidated statements of financial position of Globus
Maritime Limited (“the Company”) as of December 31, 2009 and 2008, and the
related consolidated statements of comprehensive income, changes in equity and
cash flows for each of the three years in the period ended December 31, 2009.
These financial statements are the responsibility of the Company’s management.
Our responsibility is to express an opinion on these financial statements based
on our audits.
We
conducted our audits in accordance with the standards of the Public Company
Accounting Oversight Board (United States). Those standards require that we plan
and perform the audit to obtain reasonable assurance about whether the financial
statements are free of material misstatement. We were not engaged to perform an
audit of the Company’s internal control over financial reporting. Our audits
included consideration of internal control over financial reporting as a basis
for designing audit procedures that are appropriate in the circumstances, but
not for the purpose of expressing an opinion on the effectiveness of the
Company’s internal control over financial reporting. Accordingly, we express no
such opinion. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements, assessing the
accounting principles used and significant estimates made by management, as well
as evaluating the overall financial statement presentation. We believe that our
audits provide a reasonable basis for our opinion.
In our
opinion, the financial statements referred to above present fairly, in all
material respects, the consolidated financial position of Globus Maritime
Limited at December 31, 2009 and 2008, and the consolidated results of its
operations and its cash flows for each of the three years in the period ended
December 31, 2009, in conformity with International Financial Reporting
Standards as issued by the International Accounting Standards Board
(IASB).
/s/ Ernst & Young (Hellas)
Certified Auditors Accountants S.A.
Athens,
Greece
November 24,
2010
GLOBUS
MARITIME LIMITED
CONSOLIDATED
STATEMENT OF FINANCIAL POSITION
(Expressed
in thousands of U.S. Dollars)
|
|
|
|
|
December 31
,
|
|
|
|
Notes
|
|
|
2009
|
|
|
2008
|
|
ASSETS
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
NON-CURRENT
ASSETS
|
|
|
|
|
|
|
|
|
|
Vessels,
net
|
|
5
|
|
|
|
93,166
|
|
|
|
216,007
|
|
Office
furniture and equipment
|
|
|
|
|
|
28
|
|
|
|
58
|
|
Other
non-current assets
|
|
|
|
|
|
10
|
|
|
|
10
|
|
Total
non-current assets
|
|
|
|
|
|
93,204
|
|
|
|
216,075
|
|
CURRENT
ASSETS
|
|
|
|
|
|
|
|
|
|
|
|
Cash
and bank balances and bank deposits
|
|
3
|
|
|
|
59,157
|
|
|
|
65,342
|
|
Trade
accounts receivable, net
|
|
|
|
|
|
336
|
|
|
|
830
|
|
Inventories
|
|
6
|
|
|
|
355
|
|
|
|
565
|
|
Prepayments
and other assets
|
|
7
|
|
|
|
1,488
|
|
|
|
1,634
|
|
Total
current assets
|
|
|
|
|
|
61,336
|
|
|
|
68,371
|
|
Non-current
assets classified as held for sale
|
|
2.29,
5
|
|
|
|
33,030
|
|
|
|
-
|
|
|
|
|
|
|
|
94,366
|
|
|
|
68,371
|
|
TOTAL
ASSETS
|
|
|
|
|
|
187,570
|
|
|
|
284,446
|
|
|
|
|
|
|
|
|
|
|
|
|
|
EQUITY AND LIABILITIES
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
EQUITY
ATTRIBUTABLE TO SHAREHOLDERS OF GLOBUS MARITIME LIMITED
|
|
|
|
|
|
|
|
|
|
|
|
Share
capital
|
|
10
|
|
|
|
29
|
|
|
|
29
|
|
Share
premium
|
|
10
|
|
|
|
88,516
|
|
|
|
87,600
|
|
Retained
earnings
|
|
|
|
|
|
24,913
|
|
|
|
34,154
|
|
Total
equity
|
|
|
|
|
|
113,458
|
|
|
|
121,783
|
|
NON-CURRENT
LIABILITIES
|
|
|
|
|
|
|
|
|
|
|
|
Long-term
borrowings, net of current portion
|
|
12
|
|
|
|
36,175
|
|
|
|
79,705
|
|
Provision
for staff retirement indemnities
|
|
|
|
|
|
43
|
|
|
|
30
|
|
Total
non-current liabilities
|
|
|
|
|
|
36,218
|
|
|
|
79,735
|
|
CURRENT
LIABILITIES
|
|
|
|
|
|
|
|
|
|
|
|
Current
portion of long-term borrowings
|
|
12
|
|
|
|
33,900
|
|
|
|
77,278
|
|
Trade
accounts payable
|
|
8
|
|
|
|
1,158
|
|
|
|
2,212
|
|
Accrued
liabilities and other payables
|
|
9
|
|
|
|
1,095
|
|
|
|
707
|
|
Derivative
financial instruments
|
|
19
|
|
|
|
1,230
|
|
|
|
1,373
|
|
Deferred
revenue
|
|
|
|
|
|
511
|
|
|
|
1,358
|
|
Total
current liabilities
|
|
|
|
|
|
37,894
|
|
|
|
82,928
|
|
TOTAL
LIABILITIES
|
|
|
|
|
|
74,112
|
|
|
|
162,663
|
|
TOTAL
EQUITY AND LIABILITIES
|
|
|
|
|
|
187,570
|
|
|
|
284,446
|
|
The
accompanying notes form an integral part of these financial
statements.
GLOBUS
MARITIME LIMITED
CONSOLIDATED
STATEMENT OF COMPREHENSIVE INCOME
(Expressed
in thousands of U.S. Dollars, except per share data)
|
|
|
|
Year ended December 31
|
|
|
|
Notes
|
|
2009
|
|
|
2008
|
|
|
2007
|
|
REVENUE:
|
|
|
|
|
|
|
|
|
|
|
|
Time
charter revenue
|
|
|
|
|
52,812
|
|
|
|
98,597
|
|
|
|
40,960
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
EXPENSES
& OTHER OPERATING INCOME:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Voyage
expenses
|
|
15
|
|
|
(3,742
|
)
|
|
|
(6,674
|
)
|
|
|
(2,245
|
)
|
Vessel
operating expenses
|
|
15
|
|
|
(10,137
|
)
|
|
|
(12,537
|
)
|
|
|
(7,639
|
)
|
Depreciation
|
|
5
|
|
|
(11,204
|
)
|
|
|
(17,407
|
)
|
|
|
(10,212
|
)
|
Depreciation
of drydocking costs
|
|
5
|
|
|
(1,512
|
)
|
|
|
(1,572
|
)
|
|
|
(1,033
|
)
|
Administrative
expenses
|
|
16
|
|
|
(2,004
|
)
|
|
|
(2,122
|
)
|
|
|
(1,292
|
)
|
Administrative
expenses payable to related parties
|
|
4
|
|
|
(1,272
|
)
|
|
|
(1,216
|
)
|
|
|
(1,377
|
)
|
Share-based
payments
|
|
13
|
|
|
(1,754
|
)
|
|
|
(770
|
)
|
|
|
(380
|
)
|
Impairment
loss
|
|
5
|
|
|
(28,429
|
)
|
|
|
(20,224
|
)
|
|
|
-
|
|
(Loss)/gain
on sale of vessel
|
|
20
|
|
|
(802
|
)
|
|
|
15,095
|
|
|
|
-
|
|
Other
(expenses)/income, net
|
|
|
|
|
(106
|
)
|
|
|
408
|
|
|
|
(36
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating
(loss)/profit before financial activities
|
|
|
|
|
(8,150
|
)
|
|
|
51,578
|
|
|
|
16,746
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest
income from bank balances & deposits
|
|
|
|
|
1,032
|
|
|
|
946
|
|
|
|
577
|
|
Interest
expense and finance costs
|
|
17
|
|
|
(2,926
|
)
|
|
|
(7,707
|
)
|
|
|
(5,596
|
)
|
Gain/(loss)
on derivative financial instruments
|
|
19
|
|
|
143
|
|
|
|
(1,373
|
)
|
|
|
-
|
|
Foreign
exchange (losses)/gain, net
|
|
|
|
|
(178
|
)
|
|
|
(626
|
)
|
|
|
298
|
|
Total
loss from financial activities
|
|
|
|
|
(1,929
|
)
|
|
|
(8,760
|
)
|
|
|
(4,721
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
TOTAL
(LOSS)/PROFIT FOR THE YEAR
|
|
|
|
|
(10,079
|
)
|
|
|
42,818
|
|
|
|
12,025
|
|
Other
comprehensive income
|
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
TOTAL
COMPREHENSIVE (LOSS)/INCOME FOR THE YEAR
|
|
|
|
|
(10,079
|
)
|
|
|
42,818
|
|
|
|
12,025
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Attributable
to:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Shareholders
of Globus Maritime Limited
|
|
|
|
|
(10,079
|
)
|
|
|
42,818
|
|
|
|
11,210
|
|
Non-controlling
interests
|
|
|
|
|
-
|
|
|
|
-
|
|
|
|
815
|
|
|
|
|
|
|
(10,079
|
)
|
|
|
42,818
|
|
|
|
12,025
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(Loss)/earnings
per share (U.S.$):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
-
Basic (loss)/earnings per share for the year
|
|
11
|
|
|
(1.401
|
)
|
|
|
5.978
|
|
|
|
1.885
|
|
-
Diluted (loss)/earnings per share for the year
|
|
11
|
|
|
(1.401
|
)
|
|
|
5.771
|
|
|
|
1.885
|
|
The
accompanying notes form an integral part of these financial
statements.
GLOBUS
MARITIME LIMITED
CONSOLIDATED
STATEMENT OF CHANGES IN EQUITY
(Expressed
in thousands of U.S. Dollars, except share and per share data)
|
|
Common
Stock
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Post
reverse split
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
equivalent
(note 26)
|
|
|
Issued
|
|
|
|
|
|
|
|
|
Non-
|
|
|
|
|
|
|
Number
of
Shares
|
|
|
Par
Value
|
|
|
Number
of
Shares
|
|
|
Par
Value
|
|
|
Share
Capital
|
|
|
Share
Premium
|
|
|
Retained
Earnings
|
|
|
Controlling
Interests
|
|
|
Total
Equity
|
|
|
|
(note
10)
|
|
|
|
|
|
(note
14)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance
at January 1, 2007
|
|
|
7,333
|
|
|
|
2
|
|
|
|
-
|
|
|
|
-
|
|
|
|
14
|
|
|
|
28,783
|
|
|
|
940
|
|
|
|
5,298
|
|
|
|
35,035
|
|
Profit
for the year
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
11,210
|
|
|
|
815
|
|
|
|
12,025
|
|
Other
comprehensive income
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
Total
comprehensive income for the year
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
11,210
|
|
|
|
815
|
|
|
|
12,025
|
|
Issuance
of share capital
|
|
|
402
|
|
|
|
2
|
|
|
|
-
|
|
|
|
-
|
|
|
|
1
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
1
|
|
Capital
contributions
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
1,575
|
|
|
|
-
|
|
|
|
4,000
|
|
|
|
5,575
|
|
Acquisition
of non-controlling interests (note 14)
|
|
|
2,342
|
|
|
|
2
|
|
|
|
-
|
|
|
|
-
|
|
|
|
4
|
|
|
|
10,109
|
|
|
|
-
|
|
|
|
(10,113
|
)
|
|
|
-
|
|
Conversion
of share capital
|
|
|
20,174,154
|
|
|
|
0.001
|
|
|
|
5,043,539
|
|
|
|
0.004
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
Proceeds
from initial public offering
|
|
|
8,423,333
|
|
|
|
0.001
|
|
|
|
2,105,833
|
|
|
|
0.004
|
|
|
|
10
|
|
|
|
50,017
|
|
|
|
-
|
|
|
|
-
|
|
|
|
50,027
|
|
Transaction
costs
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
(3,449
|
)
|
|
|
-
|
|
|
|
-
|
|
|
|
(3,449
|
)
|
Share-based
payment (note 13)
|
|
|
38,666
|
|
|
|
0.001
|
|
|
|
9,667
|
|
|
|
0.004
|
|
|
|
-
|
|
|
|
376
|
|
|
|
4
|
|
|
|
-
|
|
|
|
380
|
|
Dividends
(note 18)
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
(2,917
|
)
|
|
|
-
|
|
|
|
(2,917
|
)
|
Balance
as of December 31, 2007
|
|
|
28,636,153
|
|
|
|
0.001
|
|
|
|
7,159,039
|
|
|
|
0.004
|
|
|
|
29
|
|
|
|
87,411
|
|
|
|
9,237
|
|
|
|
-
|
|
|
|
96,677
|
|
Profit
for the year
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
42,818
|
|
|
|
-
|
|
|
|
42,818
|
|
Other
comprehensive income
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
Total
comprehensive income for the year
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
42,818
|
|
|
|
-
|
|
|
|
42,818
|
|
Share-based
payment (note 13)
|
|
|
29,297
|
|
|
|
0.001
|
|
|
|
7,324
|
|
|
|
0.004
|
|
|
|
-
|
|
|
|
189
|
|
|
|
581
|
|
|
|
-
|
|
|
|
770
|
|
Dividends
(note 18)
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
(18,482
|
)
|
|
|
-
|
|
|
|
(18,482
|
)
|
Balance
as of December 31, 2008
|
|
|
28,665,450
|
|
|
|
0.001
|
|
|
|
7,166,363
|
|
|
|
0.004
|
|
|
|
29
|
|
|
|
87,600
|
|
|
|
34,154
|
|
|
|
-
|
|
|
|
121,783
|
|
Loss
for the year
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
(10,079
|
)
|
|
|
-
|
|
|
|
(10,079
|
)
|
Other
comprehensive income
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
Total
comprehensive loss for the year
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
(10,079
|
)
|
|
|
-
|
|
|
|
(10,079
|
)
|
Share-based
payment (note 13)
|
|
|
290,722
|
|
|
|
0.001
|
|
|
|
72,680
|
|
|
|
0.004
|
|
|
|
-
|
|
|
|
916
|
|
|
|
838
|
|
|
|
-
|
|
|
|
1,754
|
|
Balance
as of December 31, 2009
|
|
|
28,956,172
|
|
|
|
0.001
|
|
|
|
7,239,043
|
|
|
|
0.004
|
|
|
|
29
|
|
|
|
88,516
|
|
|
|
24,913
|
|
|
|
-
|
|
|
|
113,458
|
|
The
accompanying notes form an integral part of these financial
statements.
GLOBUS
MARITIME LIMITED
CONSOLIDATED
STATEMENT OF CASH FLOWS
(Expressed
in thousands of U.S. Dollars)
|
|
|
|
Year ended December 31,
|
|
|
|
Notes
|
|
2009
|
|
|
2008
|
|
|
2007
|
|
Cash
flows from operating activities:
|
|
|
|
|
|
|
|
|
|
|
|
(Loss)/profit
for the year
|
|
|
|
|
(10,079
|
)
|
|
|
42,818
|
|
|
|
12,025
|
|
Adjustments
for:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Depreciation
|
|
5
|
|
|
11,204
|
|
|
|
17,407
|
|
|
|
10,212
|
|
Depreciation
of deferred drydocking costs
|
|
5
|
|
|
1,512
|
|
|
|
1,572
|
|
|
|
1,033
|
|
Payment
of deferred drydocking costs
|
|
|
|
|
(1,135
|
)
|
|
|
(2,823
|
)
|
|
|
(1,688
|
)
|
Loss/(gain)
on sale of vessel
|
|
20
|
|
|
802
|
|
|
|
(15,095
|
)
|
|
|
-
|
|
Impairment
loss
|
|
5
|
|
|
28,429
|
|
|
|
20,224
|
|
|
|
-
|
|
Provision
for staff retirement indemnities
|
|
|
|
|
13
|
|
|
|
-
|
|
|
|
30
|
|
(Gain)/loss
on derivative financial instruments
|
|
19
|
|
|
(143
|
)
|
|
|
1,373
|
|
|
|
-
|
|
Interest
expense and finance costs
|
|
|
|
|
2,926
|
|
|
|
7,707
|
|
|
|
5,596
|
|
Interest
income
|
|
|
|
|
(1,032
|
)
|
|
|
(946
|
)
|
|
|
(577
|
)
|
Foreign
exchange losses/(gains), net
|
|
|
|
|
178
|
|
|
|
626
|
|
|
|
(298
|
)
|
Share-based
payment
|
|
13
|
|
|
1,754
|
|
|
|
770
|
|
|
|
380
|
|
(Increase)/decrease
in:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Due
from related parties
|
|
|
|
|
-
|
|
|
|
-
|
|
|
|
489
|
|
Trade
accounts receivables, net
|
|
|
|
|
494
|
|
|
|
(795
|
)
|
|
|
(16
|
)
|
Inventories
|
|
|
|
|
210
|
|
|
|
(12
|
)
|
|
|
(171
|
)
|
Prepayments
and other assets
|
|
|
|
|
(46
|
)
|
|
|
(591
|
)
|
|
|
(1,020
|
)
|
Increase/(decrease)
in:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Due
to related parties
|
|
|
|
|
-
|
|
|
|
-
|
|
|
|
(77
|
)
|
Trade
accounts payable
|
|
|
|
|
(1,054
|
)
|
|
|
(881
|
)
|
|
|
2,480
|
|
Accrued
liabilities and other payables
|
|
|
|
|
380
|
|
|
|
110
|
|
|
|
234
|
|
Deferred
revenue
|
|
|
|
|
(847
|
)
|
|
|
(1,081
|
)
|
|
|
1,616
|
|
Net
cash generated from operating activities
|
|
|
|
|
33,566
|
|
|
|
70,383
|
|
|
|
30,248
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash
flows from investing activities:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Vessel
acquisitions
|
|
|
|
|
-
|
|
|
|
-
|
|
|
|
(184,841
|
)
|
Sellers
credit
|
|
|
|
|
-
|
|
|
|
-
|
|
|
|
1,294
|
|
Vessel
improvements
|
|
|
|
|
-
|
|
|
|
(307
|
)
|
|
|
-
|
|
Time
deposits with maturity of three months or more
|
|
|
|
|
10,000
|
|
|
|
(10,000
|
)
|
|
|
-
|
|
Net
proceeds from sale of vessels
|
|
|
|
|
49,031
|
|
|
|
36,752
|
|
|
|
-
|
|
Purchases
of office furniture and equipment
|
|
|
|
|
(2
|
)
|
|
|
(24
|
)
|
|
|
(80
|
)
|
Interest
received
|
|
|
|
|
1,224
|
|
|
|
656
|
|
|
|
583
|
|
Net
cash generated from/(used in) investing activities
|
|
|
|
|
60,253
|
|
|
|
27,077
|
|
|
|
(183,044
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash
flows from financing activities:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Proceeds
from issuance of long-term debt
|
|
12
|
|
|
-
|
|
|
|
95,000
|
|
|
|
147,000
|
|
Repayment
of long-term debt
|
|
12
|
|
|
(87,038
|
)
|
|
|
(120,635
|
)
|
|
|
(30,115
|
)
|
Capital
contributions
|
|
|
|
|
-
|
|
|
|
-
|
|
|
|
5,575
|
|
Proceeds
from issuance of share capital, net of costs
|
|
|
|
|
-
|
|
|
|
-
|
|
|
|
46,593
|
|
Pledged
bank deposits
|
|
12
|
|
|
15,400
|
|
|
|
(21,400
|
)
|
|
|
-
|
|
Restricted
cash
|
|
2.7
|
|
|
-
|
|
|
|
732
|
|
|
|
(364
|
)
|
Payment
of financing costs
|
|
|
|
|
-
|
|
|
|
(284
|
)
|
|
|
(549
|
)
|
Dividends
paid
|
|
18
|
|
|
-
|
|
|
|
(18,482
|
)
|
|
|
(2,917
|
)
|
Interest
paid
|
|
|
|
|
(2,858
|
)
|
|
|
(7,788
|
)
|
|
|
(5,453
|
)
|
Net
cash (used in)/generated from financing activities
|
|
|
|
|
(74,496
|
)
|
|
|
(72,857
|
)
|
|
|
159,770
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net
increase in cash and cash equivalents
|
|
|
|
|
19,323
|
|
|
|
24,603
|
|
|
|
6,974
|
|
Foreign
exchange (losses)/gains on cash and cash equivalents
|
|
|
|
|
(108
|
)
|
|
|
(2
|
)
|
|
|
298
|
|
Cash
and cash equivalents at the beginning of the year
|
|
3
|
|
|
33,942
|
|
|
|
9,341
|
|
|
|
2,069
|
|
Cash
and cash equivalents at the end of the year
|
|
3
|
|
|
53,157
|
|
|
|
33,942
|
|
|
|
9,341
|
|
The
accompanying notes form an integral part of these financial
statements.
GLOBUS
MARITIME LIMITED
NOTES
TO THE CONSOLIDATED FINANCIAL STATEMENTS
(Amounts
presented in thousands of U.S. Dollars - except for share and per share data,
unless otherwise stated)
The
consolidated financial statements of Globus Maritime Limited (the “Company”) and
its subsidiaries (the “Group”) include the financial statements of the following
companies:
Company
|
|
Country
of
Incorporation
|
|
Date
of
Incorporation
|
|
Activity
|
|
|
|
|
|
|
|
Globus
Maritime Limited
|
|
Jersey
|
|
July
26, 2006
|
|
Holding
Company
|
Globus
Shipmanagement Corp.
|
|
Marshall
Islands
|
|
July
26, 2006
|
|
Management
Company
|
Globus
Shipmanagement Corp. (the “Manager”) is a wholly owned subsidiary of the
Company. The consolidated financial statements also include the financial
statements of the following vessel-owning subsidiaries, all of which are wholly
owned as of December 31, 2009, 2008 and 2007:
Company
|
|
Country
of
Incorporation
|
|
Vessel
Delivery Date
|
|
Vessel
Owned
|
|
|
|
|
|
|
|
Chantal
Maritime Co.
|
|
Marshall
Islands
|
|
September
15, 2006
|
|
m/v Ocean Globe
(sold
in November 2008)
|
Sibelle
Marine Inc.
|
|
Marshall
Islands
|
|
September
26, 2006
|
|
m/v Sea Globe
(Delivered to its new owners in February 2010, see note
25)
|
Supreme
Navigation Co.
|
|
Marshall
Islands
|
|
November
14, 2006
|
|
m/v Coral Globe
(Delivered to its new owners in February 2010, see note
25)
|
Adagio
Marine S.A.
|
|
Marshall
Islands
|
|
December
6, 2006
|
|
m/v Lake Globe
(sold in
November 2009)
|
Abrosa
Shipping Inc.
|
|
Marshall
Islands
|
|
January
11, 2007
|
|
m/v Gulf Globe
(sold in
October 2009)
|
Eleanor
Maritime Limited
|
|
Marshall
Islands
|
|
July
9, 2007
|
|
m/v Island Globe
(sold
in September 2009)
|
Devocean
Maritime Ltd.
|
|
Marshall
Islands
|
|
December
18, 2007
|
|
m/v
River Globe
|
Elysium
Maritime Limited
|
|
Marshall
Islands
|
|
December
18, 2007
|
|
m/v
Tiara
Globe
|
The
principal business of the Group is the ownership and operation of a fleet of dry
bulk motor vessels (“m/v”), providing maritime services for the transportation
of dry cargo products on a worldwide basis. The Group conducts its operations
through its vessel-owning companies.
On June
1, 2007, the Company consummated its initial public offering in the United
Kingdom and its shares were admitted for trading on the Alternative Investment
Market of the London Stock Exchange (“AIM”).
The
address of the registered office of the Company is Walker House, P.O. Box 498,
28-34 Hill Street, St Helier, Jersey, JE4 5TF, Channel Islands. On
November 24, 2010, the Company redomiciled from Jersey into the Marshall
Islands. Upon redomiciliation, the existence of the Company shall be deemed to
have commenced on the date the Company commenced its existence in Jersey (note
26).
The
operations of the vessels are managed by the Manager, a wholly owned Marshall
Islands corporation. The Manager has an office in Greece, located at 128
Vouliagmenis Avenue, 166 74 Glyfada, Greece and provides the commercial,
technical, cash management and accounting services necessary for the operation
of the fleet in exchange for a management fee. The management fee is eliminated
on consolidation.
GLOBUS
MARITIME LIMITED
NOTES
TO THE CONSOLIDATED FINANCIAL STATEMENTS
(Amounts
presented in thousands of U.S. Dollars - except for share and per share data,
unless otherwise stated)
1.
|
General
Information (continued)
|
The
consolidated financial statements as of December 31, 2009 and 2008 and for the
three years ended December 31, 2009, were approved for issuance by the board of
directors on November 24, 2010.
2.
|
Basis
of Preparation and Significant Accounting
Policies
|
2.1
|
Basis of Preparation:
The consolidated financial statements have been prepared on a
historical cost basis, except for derivative financial instruments that
have been measured at fair value. The consolidated financial statements
are presented in U.S. dollars and all values are rounded to the nearest
thousand, except when otherwise
indicated.
|
Statement of Compliance:
These
consolidated financial statements of the Group have been prepared in accordance
with International Financial Reporting Standards (“IFRS”) as issued by the
International Accounting Standards Board (“IASB”), for the first time. The
Company also previously prepared consolidated financial statements as of
December 31, 2009 and 2008 and for the three years ended December 31, 2009, in
accordance with IFRS as endorsed by the European Union (“EU”). There are no
significant differences between the Company’s consolidated financial statements
prepared in accordance with IFRS as issued by the IASB and the Company’s
consolidated financial statements prepared in accordance with IFRS as endorsed
by the EU.
Basis of Consolidation:
The
consolidated financial statements comprise the financial statements of the
Company and its subsidiaries listed in note 1. The financial statements of the
subsidiaries are prepared for the same reporting period as the Company, using
consistent accounting policies. All intra-group balances and transactions have
been eliminated upon consolidation. Subsidiaries are fully consolidated from the
date on which control is transferred to the Group and cease to be consolidated
from the date on which control is transferred out of the
Group.
2.2
|
Standards,
Amendments and Interpretations:
|
IFRS
and IFRIC Interpretations that became effective in the year ended December 31,
2009:
The
following Standards and Interpretations became effective within the year ended
December 31, 2009. None of the Standards and Interpretations had an impact on
the consolidated financial statements of the Group.
|
·
|
IFRS
8, “Operating Segments”. This standard requires disclosure of information
about the Group’s operating segments and replaces the requirement to
determine primary and secondary reporting segments of the Group. The Group
has previously determined that it operates under one reportable segment
and, accordingly, this standard had no impact on its consolidated
financial statements.
|
|
·
|
IAS
1, “Presentation of Financial Statements” (Revised). The main requirements
are: that the statement of changes in equity includes only transactions
with shareholders; the introduction of a new statement of comprehensive
income that combines all items of income and expense recognized in profit
or loss together with “other comprehensive income” either in one single
statement or in two linked statements. The Group has elected to present
one statement.
|
|
·
|
IAS
23, “Borrowing Costs” (Revised).
|
|
·
|
IFRIC
13, “Customer Loyalty Programs”.
|
|
·
|
IFRIC
15, “Agreements for the Construction of Real
Estate”.
|
|
·
|
IFRIC
16, “Hedges of a net investment in a foreign
operation”.
|
|
·
|
IFRIC
9, “Remeasurement of Embedded Derivatives” (Amended) and IAS 39 “Financial
Instruments: Recognition and Measurement”
(Amended).
|
|
·
|
IFRS
2, “Share-based Payments” vesting conditions and cancellations
(Amended).
|
|
·
|
IAS
32, “Financial instruments: Presentation” (Amended) and IAS 1, “Puttable
Financial Instruments and obligations arising on liquidation”
(Amended).
|
|
·
|
IFRS
7, “Financial Instruments: Disclosures”
(Amended).
|
GLOBUS
MARITIME LIMITED
NOTES
TO THE CONSOLIDATED FINANCIAL STATEMENTS
(Amounts
presented in thousands of U.S. Dollars - except for share and per share data,
unless otherwise stated)
2.
|
Basis
of Preparation and Significant Accounting Policies
(continued)
|
2.2
|
Standards,
Amendments and Interpretations
(continued):
|
|
·
|
IFRS
1, “First time adoption of International Financial Reporting Standards”
(Amended) and IAS 27, “Consolidated and Separate Financial Statements”
(Amended).
|
|
·
|
IFRIC
18 “Transfers of Assets from
Customers”.
|
Improvements
to IFRS: In May 2008 the IASB issued its first omnibus of amendments to its
standards, primarily with a view to remove inconsistencies and providing
clarification. The standards affected were as follows:
|
·
|
IFRS
5 Non-current Assets Held for Sale and Discontinued
Operations
|
|
·
|
IFRS
7 Financial Instruments:
Disclosures
|
|
·
|
IAS
1 Presentation of Financial
Statements
|
|
·
|
IAS
8 Accounting Policies, Changes in Accounting Estimates and
Errors
|
|
·
|
IAS
10 Events after the Reporting
Period
|
|
·
|
IAS
16 Property, Plant and Equipment
|
|
·
|
IAS
19 Employee Benefits
|
|
·
|
IAS
20 Accounting for Government Grants and Disclosure of Government
Assistance
|
|
·
|
IAS
27 Consolidated and Separate Financial
Statements
|
|
·
|
IAS
28 Investment in Associates
|
|
·
|
IAS
29 Financial Reporting in Hyperinflationary
Economies
|
|
·
|
IAS
31 Interest in Joint ventures
|
|
·
|
IAS
34 Interim Financial Reporting
|
|
·
|
IAS
36 Impairment of assets
|
|
·
|
IAS
38 Intangible Assets
|
|
·
|
IAS
39 Financial instruments recognition and
measurement
|
|
·
|
IAS
40 Investment property
|
IFRS and IFRIC Interpretations not
yet effective:
The Group has not applied the following IFRS and
International Financial Reporting Interpretations Committee (“IFRIC”)
Interpretations that have been issued but are not yet effective:
|
·
|
IFRIC
17, “Distributions of Non-cash Assets to Owners”. This interpretation is
effective for annual periods beginning on or after July 1, 2009 with early
application permitted. The interpretation provides guidance on how to
account for non-cash distributions to owners. The interpretation clarifies
when to recognize a liability, how to measure it and the associated assets
and when to derecognize the asset and liability. The Group does not expect
IFRIC 17 to have an impact on its consolidated financial statements as it
has not made any non-cash distributions to shareholders in the
past.
|
GLOBUS
MARITIME LIMITED
NOTES
TO THE CONSOLIDATED FINANCIAL STATEMENTS
(Amounts
presented in thousands of U.S. Dollars - except for share and per share data,
unless otherwise stated)
2.
|
Basis
of Preparation and Significant Accounting Policies
(continued)
|
2.2
|
Standards,
Amendments and Interpretations
(continued):
|
|
·
|
IFRIC
19, “Extinguishing Financial Liabilities with Equity Instruments”. The
interpretation is effective for annual periods beginning on or after July
1, 2010. This interpretation addresses the accounting treatment when there
is a renegotiation between the entity and the creditor regarding the terms
of a financial liability and the creditor agrees to accept the entity’s
equity instruments to settle the financial liability fully or partially.
IFRIC 19 clarifies such equity instruments are “consideration paid” in
accordance with paragraph 41 of IAS 39. As a result, the financial
liability is derecognized and the equity instruments issued are treated as
consideration paid to extinguish that financial liability. The Group does
not expect that the amendment will have impact on its financial position
or performance.
|
|
·
|
IFRIC
14, “Prepayments of a Minimum Funding Requirement” (Amended). The
amendment is effective for annual periods beginning on or after January 1,
2011. The purpose of this amendment is to permit entities to recognize as
an asset some voluntary prepayments for minimum funding contributions.
Earlier application is permitted and must be applied retrospectively. The
Group does not expect that the amendment will have impact on its financial
position or performance.
|
|
·
|
IFRS
3, “Business Combinations” (Revised) and IAS 27, “Consolidated and
Separate Financial Statements” (Amended). The revision and amendment is
effective for annual periods beginning on or after July 1, 2009. The
revised IFRS 3 introduces a number of changes in the accounting for
business combinations which will impact the amount of goodwill recognized,
the reported results in the period that an acquisition occurs and future
reported results. Such changes include the expensing of
acquisition-related costs and recognizing subsequent changes in fair value
of contingent consideration in the income statement, rather than by
adjusting goodwill. The amended IAS 27 requires that a change in ownership
interest of a subsidiary is accounted for as an equity transaction.
Therefore, such a change will have no impact on goodwill, nor will it give
rise to a gain or loss. Furthermore, the amended standard changes the
accounting for losses incurred by the subsidiary as well as the loss of
control of a subsidiary. The changes introduced by IFRS 3 (Revised) and
IAS 27 (Amendment) must be applied prospectively and will affect future
acquisitions and transactions with non-controlling
interests.
|
|
·
|
IAS
39, “Financial Instruments: Recognition and Measurement” (Amended) –
eligible hedged items. The amendment is effective for annual periods
beginning on or after July 1, 2009. The amendment clarifies that an entity
is permitted to designate a portion of the fair value changes or cash flow
variability of a financial instrument as hedged item. This also covers the
designation of inflation as a hedged risk or portion in particular
situations. The Group does not expect that the amendment will have any
impact on its financial position or
performance.
|
|
·
|
IFRS
9, “Financial Instruments” – Phase 1 financial assets, classification and
measurement. The new standard is effective for annual periods beginning on
or after January 1, 2013. Phase 1 of this new IFRS introduces new
requirements for classifying and measuring financial assets. Early
adoption is permitted. The Group is in the process of assessing the impact
of the new standard on its financial position or
performance.
|
|
·
|
IFRS
2, “Group Cash-settled Share-based Payment Transactions” (Amended). The
amendment is effective for annual periods beginning on or after January 1,
2010. This amendment clarifies the accounting for group cash-settled
share-based payment transactions and how such transactions should be
arranged in the individual financial statements of the subsidiary. The
Group does not expect that the amendment will have any impact on its
financial position or performance.
|
GLOBUS
MARITIME LIMITED
NOTES
TO THE CONSOLIDATED FINANCIAL STATEMENTS
(Amounts
presented in thousands of U.S. Dollars - except for share and per share data,
unless otherwise stated)
2.
|
Basis
of Preparation and Significant Accounting Policies
(continued)
|
2.2
|
Standards,
Amendments and Interpretations
(continued):
|
|
·
|
IAS
32, “Classification on Rights Issues” (Amended). The amendment is
effective for annual periods beginning on or after February 1, 2010. This
amendment relates to the rights issues offered for a fixed amount of
foreign currency which were treated as derivative liabilities by the
existing standard. The amendment states that if certain criteria are met,
these should be classified as equity regardless of the currency in which
the exercise price is denominated. The amendment applies retrospectively.
The Group does not expect that this amendment will have an impact on its
financial position or performance.
|
|
·
|
IAS
24, “Related Party Disclosures” (Revised). The revision is effective for
annual periods beginning on or after January 1, 2011. This revision
relates to the judgment which is required to assess whether a government
and entities known to the reporting entity to be under the control of that
government are considered a single customer. The reporting entity, in its
assessment, shall consider the extent of economic integration between
those entities. Early application is permitted and adoption is applied
retrospectively. The Group does not expect that this amendment will have
an impact on its financial position or
performance.
|
|
·
|
IFRS
1, “Additional Exemptions for First-time Adopters (Amended)”. The
amendment is effective for annual periods beginning on or after January 1,
2010. The Group does not expect that this amendment will have an impact on
its financial position or
performance.
|
|
·
|
IFRS
1, “Limited Exemption from Comparative”, IFRS 7, “Disclosures for first
time adopters” (Amended). The amendment is effective for annual periods
beginning on or after July 1, 2010.
|
|
·
|
In
April 2009, the IASB issued its second omnibus of amendments to its
standards, primarily with a view to removing inconsistencies and
clarifying wording. The effective dates of the improvements vary, and the
earliest is for the financial year beginning July 1, 2009. These
amendments are as follows:
|
|
o
|
IFRS 2 Share-based
Payment,
is effective for annual periods beginning on or after
July 1, 2009. This amendment clarifies that the contribution of a
business on formation of a joint venture and combinations under common
control are not within the scope of IFRS 2 even though they are out of
scope of IFRS 3 (revised). If an entity applies IFRS 3 (revised) for an
earlier period, the amendment shall also be applied for that earlier
period.
|
|
o
|
IFRS 5 Non-current Assets Held
for Sale and Discontinued Operations,
is effective for annual
periods beginning on or after January 1, 2010. This amendment clarifies
that the disclosures required in respect of non-current assets and
disposal groups classified as held for sale or discontinued operations are
only those set out in IFRS 5. The disclosure requirements of other IFRS
apply only if specifically required for such non-current assets or
discontinued operations.
|
|
o
|
IFRS 8 Operating Segment
Information,
is effective for annual periods beginning on or
after January 1, 2010. This amendment clarifies that segment assets and
liabilities need only be reported when those assets and liabilities are
included in measures that are used by the chief operating decision
maker.
|
|
o
|
IAS 1 Presentation of Financial
Statements,
is
effective for annual periods beginning on or after January 1, 2010.
The terms of a liability that could result, at any time, in its settlement
by the issuance of equity instruments at the option of the counterparty do
not affect its classification.
|
|
o
|
IAS 7 Statement of Cash Flows,
is
effective for annual periods beginning on or after January 1, 2010.
This amendment states that only expenditure that results in recognizing an
asset can be classified as a cash flow from investing
activities.
|
GLOBUS
MARITIME LIMITED
NOTES
TO THE CONSOLIDATED FINANCIAL STATEMENTS
(Amounts
presented in thousands of U.S. Dollars - except for share and per share data,
unless otherwise stated)
2.
|
Basis
of Preparation and Significant Accounting Policies
(continued)
|
2.2
|
Standards,
Amendments and Interpretations
(continued):
|
|
·
|
IAS 17 Leases
,
is
effective for
annual periods beginning on or after January 1, 2010. The amendment
removes the specific guidance on classifying land as a lease so that only
the general guidance remains.
|
|
·
|
IAS 18 Revenue,
has
added guidance (which accompanies the standard) to determine whether an
entity is acting as a principal or as an agent. The features to consider
are whether the entity:
|
|
o
|
has
primary responsibility for providing the goods or
service;
|
|
o
|
has
discretion in establishing prices;
and
|
|
·
|
IAS 36 Impairment of Assets,
is effective for annual periods beginning on or after January 1,
2010. The amendment clarifies that the largest unit permitted for
allocating goodwill acquired in a business combination is the operating
segment as defined in IFRS 8 before aggregation for reporting
purposes.
|
|
·
|
IAS 38 Intangible Assets,
is
effective for
annual periods beginning on or after July 1, 2009. This amendment
clarifies that if an intangible asset acquired in a business combination
is identifiable only with another intangible asset, the acquirer may
recognize the group of intangible assets as a single asset, provided the
individual assets have similar useful lives. It also clarifies that the
valuation techniques presented for determining the fair value of
intangible assets acquired in a business combination that are not
traded in active markets are only examples and are not restrictive on the
methods that can be used. If an entity applies IFRS 3 (revised) for an
earlier period, the amendment shall also be applied for that earlier
period.
|
|
·
|
IAS 39 Financial Instruments:
Recognition and Measurement,
is
effective for
annual periods beginning on or after January 1, 2010. The amendment
clarifies that:
|
|
o
|
A
prepayment option is considered closely related to the host contract when
the exercise price of a prepayment option reimburses the lender up to the
approximate present value of lost interest for the remaining term of the
host contract.
|
|
o
|
The
scope exemption for contracts between an acquirer and a vendor in a
business combination to buy or sell a target at a future date applies only
to binding forward contracts and not derivative contracts where further
actions by either party are still to be taken. (Applicable to all
unexpired contracts for annual periods beginning on or after January
1, 2010.)
|
|
o
|
Gains
and losses on cash flow hedges of a forecast transaction that subsequently
results in the recognition of a financial instrument or on cash flow
hedges of recognized financial instruments should be reclassified in the
period that the hedged forecast cash flows affect profit or loss.
(Applicable to all unexpired contracts for annual periods beginning on or
after January 1, 2010.)
|
GLOBUS
MARITIME LIMITED
NOTES
TO THE CONSOLIDATED FINANCIAL STATEMENTS
(Amounts
presented in thousands of U.S. Dollars - except for share and per share data,
unless otherwise stated)
2.
|
Basis
of Preparation and Significant Accounting Policies
(continued)
|
2.2
|
Standards,
Amendments and Interpretations
(continued):
|
|
·
|
IFRIC 9 Reassessment of
Embedded Derivatives,
is effective for annual periods beginning on
or after July 1, 2009. The scope paragraph of IFRIC 9 was amended to
clarify that it does not apply to possible reassessment, at the date of
acquisition, to embedded derivatives in contracts acquired in a
combination between entities or business under common control or the
formation of a joint venture. If an entity applies IFRS 3 (revised) for an
earlier period, the amendment shall also be applied for that earlier
period.
|
|
·
|
IFRIC 16 Hedges of a Net
Investment in a Foreign Operation,
is effective for annual periods
beginning on or after July 1, 2009. The amendment states that, in a hedge
of a net investment in a foreign operation, qualifying hedging instruments
may be held by any entity or entities within the group, including the
foreign operation itself, as long as the designation, documentation and
effectiveness requirements of IAS 39 that relate to a net investment hedge
are satisfied.
|
|
-
|
In
May 2010, the IASB issued its third omnibus of amendments to its
standards, primarily with a view to removing inconsistencies and providing
clarification. The effective dates of the improvements vary and the
earliest is for the financial year beginning on or after July 1, 2010. The
amendments relate to:
|
|
·
|
IFRS
1 First-time Adoption of International Financial Reporting
Standards
|
|
·
|
IFRS
3 Business Combinations
|
|
·
|
IFRS
7 Financial Instruments:
Disclosures
|
|
·
|
IAS
1 Presentation of Financial
Statements
|
|
·
|
IAS
27 Consolidated and Separate Financial
Statements
|
|
·
|
IAS
34 Interim Financial Reporting
|
|
·
|
IFRC
13 Customer Loyalty Programmes
|
None of
the above amendments have any impact on the accounting policies, financial
position or performance of the Group.
2.3
|
Significant Accounting
Judgments, Estimates and Assumptions:
The preparation
of consolidated financial statements in conformity with IFRS requires
management to make judgments, estimates and assumptions that affect the
reported amounts of assets and liabilities and disclosure of contingent
assets and liabilities at the date of the financial statements and the
amounts of revenues and expenses recognized during the reporting period.
However, uncertainty about these assumptions and estimates could result in
outcomes that could require a material adjustment to the carrying amount
of the asset or liability affected in the
future.
|
Judgments:
In the process of
applying the Group’s accounting policies, management has made the following
judgments that had a significant effect on the amounts recognized in the
financial statements.
|
·
|
Non-current assets held for
sale
:
On November 11,
2009, the Group entered into memoranda of agreement for the sale of two
vessels, the
m/v Sea
Globe
and
m/v
Coral Globe
. The Group determined the vessels met the criteria to
be classified as held for sale at that date for the following
reasons:
|
|
o
|
The
sale was considered highly probable and the vessels were available for
immediate sale in their present
condition.
|
|
o
|
The
delivery was expected to take place during February 2010. The actual
delivery of the vessels took place on February 17, 2010 (see note
26).
|
GLOBUS
MARITIME LIMITED
NOTES
TO THE CONSOLIDATED FINANCIAL STATEMENTS
(Amounts
presented in thousands of U.S. Dollars - except for share and per share data,
unless otherwise stated)
2.
|
Basis
of Preparation and Significant Accounting Policies
(continued)
|
2.3
|
Significant
Accounting Judgments, Estimates and Assumptions
(continued):
|
For more
details on non-current assets held for sale refer to note 5.
Estimates and Assumptions:
The
key assumptions concerning the future, and other key sources of estimation
uncertainty at the financial position date, which have a significant risk of
causing a significant adjustment to the carrying amount of assets and
liabilities within the next financial year are discussed below.
|
·
|
Carrying amount of Vessels,
net
: Vessels are stated at cost, less accumulated depreciation and
accumulated impairment losses. The estimates and assumptions that have the
most significant effect on the vessels carrying amount are estimations in
relation to useful lives of vessels, their salvage value and estimated
drydocking dates. The key assumptions used are further explained in notes
2.10 to 2.12.
|
|
·
|
Impairment of Non-Financial
Assets
: The Group’s impairment test for non-financial assets is
based on the assets’ recoverable amount, where the recoverable amount is
the greater of fair value, less costs to sell and value in use. The Group
engaged independent valuation specialists to determine the fair value of
non-financial assets as of December 31, 2009. The value in use calculation
is based on a discounted cash flow model. The value in use calculation is
most sensitive to the discount rate used for the discounted cash flow
model as well as the expected net cash flows and the growth rate used for
extrapolation (refer to note 5).
|
2.4
|
Accounting for Revenue and
Related Expenses:
The
Group generates its revenues from charterers for the charter hire of its
vessels. Through December 31, 2009, vessels were chartered using time
charters, where a contract is entered into for the use of a vessel for a
specific period of time and a specified daily charter hire rate. If a time
charter agreement exists and collection of the related revenue is
reasonably assured, revenue is recognized on a straight line basis over
the period of the time charter. Such revenues are treated in accordance
with IAS 17 as lease income as explained in note 2.23 below. Associated
voyage expenses, which primarily consist of commissions, are recognized on
a pro-rata basis over the duration of the period of the time
charter.
|
Deferred
revenue relates to cash received prior to the financial position date and is
related to revenue earned after such date. Deferred revenue also includes the
value ascribed to time charter agreements assumed upon the purchase of a vessel,
if any. This ascribed amount is amortized over the remaining term of the time
charter and the amortized portion for the period is included in revenue for the
period. During the years ended December 31, 2009, 2008 and 2007, no vessels were
purchased with a time charter agreement attached.
Interest Income:
Revenue is
recognized as interest accrues (using the effective interest
method).
Voyage Expenses:
Voyage
expenses primarily consist of port expenses and owners’ expenses paid by the
charterer, canal and bunker expenses that are unique to a particular charter
under time charter arrangements or by the Group under voyage charter
arrangements. Furthermore, voyage expenses include commission on income paid by
the Group. The Group defers bunker expenses under voyage charter agreements and
amortizes them over the related voyage.
Vessel Operating Expenses:
Vessel operating expenses
are accounted for on an
accruals basis.
GLOBUS
MARITIME LIMITED
NOTES
TO THE CONSOLIDATED FINANCIAL STATEMENTS
(Amounts
presented in thousands of U.S. Dollars - except for share and per share data,
unless otherwise stated)
2
|
Basis
of Preparation and Significant Accounting Policies
(continued)
|
2.5
|
Foreign Currency
Translation:
The
functional currency of the Company and its subsidiaries is the U.S.
dollar, which is also the presentation currency of the Group, because the
Group’s vessels operate in international shipping markets, where the U.S.
dollar is the currency used for transactions. Transactions involving other
currencies during the period are converted into U.S. dollars using the
exchange rates in effect at the time of the transactions. At the financial
position dates, monetary assets and liabilities, which are denominated in
currencies other than the U.S. dollar, are translated into the functional
currency using the period-end exchange rate. Gains or losses resulting
from foreign currency transactions are included in foreign currency gain
or loss in the consolidated statement of comprehensive
income.
|
2.6
|
Cash and Cash
Equivalents:
The
Group considers highly liquid investments such as time deposits and
certificates of deposit with original maturity of three months or less to
be cash and cash equivalents.
|
2.7
|
Restricted Cash:
Restricted cash refers to retention accounts that can only be used
to fund the loan installments coming
due.
|
Under a
loan facility, the Company was required to hold bank deposits, which were used
to fund the loan installments coming due. These funds could only be used for the
purpose of loan repayments and are shown as “Restricted cash” under current
assets that as of December 31, 2009, December 31, 2008 and December 31, 2007
amounted to nil, nil and $732, respectively, in the accompanying consolidated
statement of financial position. The relevant loan facility was fully repaid
during March 2008.
2.8
|
Trade Accounts Receivable,
net:
The
amount shown as trade accounts receivable at each financial position date
includes estimated recoveries from charterers for hire and freight and
demurrage billings, net of an allowance for doubtful accounts. Trade
accounts receivable are measured at amortized cost less impairment losses,
which are recognized in the consolidated statement of comprehensive
income. At each financial position date, all potentially uncollectible
accounts are assessed individually for the purpose of determining the
appropriate allowance for doubtful accounts. There is no provision for
doubtful accounts as of December 31, 2009 and
2008.
|
2.9
|
Inventories:
Inventories
consist of lubricants and gas cylinders and are stated at the lower of
cost or net realizable value. The cost is determined by the first-in,
first-out method.
|
2.10
|
Vessels, net:
Vessels
are stated at cost, less accumulated depreciation and accumulated
impairment losses. Vessel cost consists of the contract price for the
vessel and any material expenses incurred upon acquisition (initial
repairs, improvements and delivery expenses, interest and on-site
supervision costs incurred during the construction periods).
Any seller’s
credit, i.e., amounts received from the seller of the vessels until date
of delivery, is deducted from the cost of the vessel. Subsequent
expenditures for conversions and major improvements are also capitalized
when the recognition criteria are met. Otherwise these amounts are charged
to expenses as incurred. When the Group acquires a vessel with a time
charter agreement assumed, the cost of acquisition is allocated between
the individual assets and/or liabilities assumed based on their relative
fair values at the time of acquisition. The time charter agreement assumed
can be assigned a positive value (asset) or a negative value (deferred
revenue) or zero value. During the years ended December 31, 2009 and 2008,
no vessels were purchased with a time charter agreement
attached.
|
GLOBUS
MARITIME LIMITED
NOTES
TO THE CONSOLIDATED FINANCIAL STATEMENTS
(Amounts
presented in thousands of U.S. Dollars - except for share and per share data,
unless otherwise stated)
2
|
Basis
of Preparation and Significant Accounting Policies
(continued)
|
2.11
|
Deferred Drydocking Costs:
Vessels are required to be drydocked for major repairs and
maintenance that cannot be performed while the vessels are operating.
Drydockings occur approximately every 2.5 years. The costs associated with
the drydockings are capitalized and depreciated on a straight-line basis
over the period between drydockings, to a maximum of 2.5 years.
At the date of
acquisition of a secondhand vessel, management estimates the component of
the cost that corresponds to the economic benefit to be derived until the
first scheduled drydocking of the vessel under the ownership of the Group,
and this component is depreciated on a straight-line basis over the
remaining period through the estimated drydocking
date.
|
2.12
|
Depreciation:
The
cost of each of the Group’s vessels is depreciated on a straight-line
basis over each vessel’s remaining useful economic life, after considering
the estimated salvage value of each vessel, beginning when the vessel is
ready for its intended use. Management estimates that the useful life of
new vessels is 25 years, which is consistent with industry practice. The
salvage value of a vessel is the product of its lightweight tonnage and
estimated scrap value per lightweight
ton.
|
2.13
|
Impairment of Long-Lived
Assets:
The Group assesses at each reporting date whether there is
an indication that a vessel may be impaired. The vessel’s recoverable
amount is estimated when events or changes in circumstances indicate the
carrying value may not be recoverable. If such indication exists and where
the carrying value exceeds the estimated recoverable amounts, the vessel
is written down to its recoverable amount. The recoverable amount is the
greater of fair value less costs to sell and value-in-use. In assessing
value-in-use, the estimated future cash flows are discounted to their
present value using a discount rate that reflects current market
assessments of the time value of money and the risks specific to the
vessel. Impairment losses are recognized in the consolidated statement of
comprehensive income. A previously recognized impairment loss is reversed
only if there has been a change in the estimates used to determine the
asset’s recoverable amount since the last impairment loss was recognized.
In that case, the carrying amount of the asset is increased to its
recoverable amount. That increased amount cannot exceed the carrying
amount that would have been determined, net of depreciation, had no
impairment loss been recognized for the asset in prior years. Such
reversal is recognized in the consolidated statement of comprehensive
income. After such a reversal, the depreciation charge is adjusted in
future periods to allocate the asset’s revised carrying amount, less any
residual value, on a systematic basis over its remaining useful
life.
|
2.14
|
Long-Term Debt:
Long-term debt is initially recognized at the fair value of the
consideration received net of financing costs directly attributable to the
borrowing. After initial recognition, long-term debt is subsequently
measured at amortized cost using the effective interest rate method.
Amortized cost is calculated by taking into account any financing costs
and any discount or premium on settlement. Gains and losses are recognized
in net profit or loss when the liabilities are derecognized or impaired,
as well as through the amortization
process.
|
2.15
|
Financing Costs:
Fees
incurred for obtaining new loans or refinancing existing loans are
deferred and amortized over the life of the related debt, using the
effective interest rate method. Any unamortized balance of costs relating
to loans repaid or refinanced is expensed in the period the repayment or
refinancing is made.
|
2.16
|
Borrowing Costs:
Borrowing costs are expensed to the income statement component of
the consolidated statement of comprehensive income as incurred except
borrowing costs that relate to a qualifying asset. A qualifying asset is
an asset that necessarily takes a substantial period of time to get ready
for its intended use. Borrowing costs that relate to qualifying assets are
capitalized. For the years ended December 31, 2009 and 2008, the Group had
no qualifying assets.
|
GLOBUS
MARITIME LIMITED
NOTES
TO THE CONSOLIDATED FINANCIAL STATEMENTS
(Amounts
presented in thousands of U.S. Dollars - except for share and per share data,
unless otherwise stated)
2
|
Basis
of Preparation and Significant Accounting Policies
(continued)
|
2.17
|
Operating Segment:
The
Group reports financial information and evaluates its operations by
charter revenues and not by length of ship employment for its customers,
i.e., spot or time charters. The Group does not use discrete financial
information to evaluate the operating results for each such type of
charter. Although revenue can be identified for these types of charters,
management cannot and does not identify expenses, profitability or other
financial information for these
charters.
|
As a
result, management, including the chief operating decision maker, reviews
operating results solely by revenue per day and operating results of the fleet
and thus the Group has determined that it operates under one operating segment.
Furthermore, when the Group charters a vessel to a charterer, the charterer is
free to trade the vessel worldwide and, as a result, the disclosure of
geographical information is impracticable.
2.18
|
Provisions and Contingencies:
Provisions are recognized when (i) the Group has a present legal or
constructive obligation as a result of past events, (2) it is probable
that an outflow of resources embodying economic benefits will be required
to settle the obligation, and (3) a reliable estimate of the amount of the
obligation can be made. Provisions are reviewed at each financial position
date and adjusted to reflect the present value of the expenditure expected
to be required to settle the obligation. Contingent liabilities are not
recognized in the financial statements but are disclosed unless the
possibility of an outflow of resources embodying economic benefits is
remote, in which case there is no disclosure. Contingent assets are not
recognized in the financial statements but are disclosed when an inflow of
economic benefits is probable.
|
2.19
|
Pension and Retirement Benefit
Obligations:
The crew on board the Group’s vessels is under
short-term contracts (usually up to nine months) and, accordingly, no one
is liable for any pension or post retirement benefits payable to the
crew.
|
Provision for Employees’ Severance
Compensation:
The Greek employees of the Group are bound by the Greek
Labour law. Accordingly, compensation is payable to such employees upon
dismissal or retirement. The amount of compensation is based on the number of
years of service and the amount of remuneration at the date of dismissal or
retirement. If the employees remain in the employment of the Group until normal
retirement age, they are entitled to retirement compensation which is equal to
40% of the compensation amount that would be payable if they were dismissed at
that time. The number of employees that will remain with the Group until
retirement age is not known.
The Group
has provided for the employees’ retirement compensation liability, amounting to
$43 as of December 31, 2009 (2008: $30), calculated by using the Projected Unit
Credit Method and disclosed under non-current liabilities in the consolidated
statement of financial position.
2.20
|
Offsetting of Financial Assets
and Liabilities:
Financial assets and liabilities are offset and
the net amount is presented in the consolidated financial position only
when the Group has a legally enforceable right to set off the recognized
amounts and intend either to settle such asset and liability on a net
basis or to realize the asset and settle the liability
simultaneously.
|
2.21
|
Derecognition
of Financial Assets and
Liabilities:
|
(i)
|
Financial
assets: A financial asset, or where applicable a part of a financial asset
or part of a group of similar financial assets, is derecognized
where:
|
|
·
|
the
rights to receive cash flows from the asset have
expired;
|
|
·
|
the
Group retains the right to receive cash flows from the asset, but has
assumed an obligation to pay them in full without material delay to a
third party under a “pass-through” arrangement;
or
|
GLOBUS
MARITIME LIMITED
NOTES
TO THE CONSOLIDATED FINANCIAL STATEMENTS
(Amounts
presented in thousands of U.S. Dollars - except for share and per share data,
unless otherwise stated)
2
|
Basis
of Preparation and Significant Accounting Policies
(continued)
|
2.21
|
Derecognition
of Financial Assets and Liabilities
(continued):
|
|
·
|
the
Group has transferred its rights to receive cash flows from the asset and
either (a) has transferred substantially all the risks and rewards of the
assets, or (b) has neither transferred nor retained substantially all the
risks and rewards of the asset, but has transferred control of the
asset.
|
Where the
Group has transferred its rights to receive cash flows from an asset and has
neither transferred nor retained substantially all the risks and rewards of the
asset nor transferred control of the asset, the asset is recognized to the
extent of the Group continuing involvement in the asset. Continuing involvement
that takes the form of a guarantee over the transferred asset is measured at the
lower of the original carrying amount of the asset and the maximum amount of
consideration that the Group could be required to repay.
(ii)
|
Financial
liabilities: A financial liability is derecognized when the obligation
under the liability is discharged, is cancelled or expires. Where an
existing financial liability is replaced by another from the same lender
on substantially different terms, or the terms of an existing liability
are substantially modified, such an exchange or modification is treated as
a derecognition of the original liability and the recognition of a new
liability, and the difference in the respective carrying amounts is
recognized in profit or loss.
|
2.22
|
Leases – where the Group is the
lessee:
Leases where a significant portion of the risks and rewards
of ownership are retained by the lessor are classified as operating
leases. Payments made under operating leases are charged to the income
statement component of the consolidated statement of comprehensive income
on a straight-line basis over the period of the
lease.
|
2.23
|
Leases – where a Group entity
is the lessor:
Leases of vessels where the Group does not transfer
substantially all the risks and benefits of ownership of the vessel are
classified as operating leases. Lease income on operating leases is
recognized on a straight-line basis over the lease term. Contingent rents
are recognized as revenue in the period in which they are
earned.
|
2.24
|
Insurance:
The Group
recognizes insurance claim recoveries for insured losses incurred on
damage to vessels. Insurance claim recoveries are recorded, net of any
deductible amounts, at the time the Group’s vessels suffer insured
damages. They include the recoveries from the insurance companies for the
claims, provided there is evidence the amounts are virtually certain to be
received.
|
2.25
|
Share Based Compensation:
The Group operates an equity-settled, share-based compensation
plan. The value of the service received in exchange of the grant of shares
is recognized as an expense. The total amount to be expensed over the
vesting period is determined by reference to the fair value of the share
awards at the grant date. The relevant expense is recognized in the income
statement component of the consolidated statement of comprehensive income,
with a corresponding impact in
equity.
|
2.26
|
Share Capital
:
Ordinary shares are
classified as equity. Incremental costs directly attributable to the issue
of new shares are recognized in equity as a deduction from the
proceeds.
|
2.27
|
Dividends
:
Dividends to
shareholders are recognized in the period in which the dividends are
declared and appropriately authorized and are accounted for as dividends
payable until paid.
|
2.28
|
Derivative Financial
Instruments at Fair Value through profit and loss:
Derivative
financial instruments are initially recognized at fair value on the date a
derivative contract is entered into and are subsequently remeasured at
fair value. Changes in the fair value of these derivative instruments are
recognized immediately in the income statement component of the
consolidated statement of comprehensive
income.
|
GLOBUS
MARITIME LIMITED
NOTES
TO THE CONSOLIDATED FINANCIAL STATEMENTS
(Amounts
presented in thousands of U.S. Dollars - except for share and per share data,
unless otherwise stated)
2
|
Basis
of Preparation and Significant Accounting Policies
(continued)
|
2.29
|
Non-current assets held for
sale:
Non-current assets and disposal groups classified as held for
sale are measured at the lower of carrying amount and fair value less
costs to sell. If the carrying amount exceeds fair value less costs to
sell, the Group recognizes a loss under impairment loss in the income
statement component of the consolidated statement of comprehensive income.
Non-current assets and disposal groups are classified as held for sale if
their carrying amounts will be recovered through a sale transaction rather
than through continuing use. This condition is regarded as met only when
the sale is highly probable and the asset or disposal group is available
for immediate sale in its present condition. Management must be committed
to the sale, which should be expected to qualify for recognition as a
complete sale within one year from the date of classification. Property,
plant and equipment and intangible assets once classified as held for sale
are not depreciated or amortized.
|
3.
|
Cash
and Bank Balances and Bank Deposits
|
For the
purpose of the consolidated statement of financial position, cash and bank
balances and bank deposits were comprised of the following:
|
|
December 31,
|
|
|
|
2009
|
|
|
2008
|
|
Cash
on hand
|
|
$
|
8
|
|
|
$
|
9
|
|
Bank
balances
|
|
|
1,315
|
|
|
|
939
|
|
Bank
deposits
|
|
|
57,834
|
|
|
|
64,394
|
|
Total
|
|
$
|
59,157
|
|
|
$
|
65,342
|
|
Cash held
in banks earns interest at floating rates based on daily bank deposit rates.
Bank deposits are made for varying periods of between one day and three months,
depending on the immediate cash requirements of the Group, and earn interest at
the respective bank deposit rates. The fair value of cash and bank balances and
bank deposits as of December 31, 2009 and 2008 were $59,157 and $65,342
respectively.
On
December 31, 2009 and 2008, the Group had available $36,445 and nil (note 12),
respectively, of undrawn committed borrowing facilities in respect of which all
conditions precedent had been met.
As of
December 31, 2009 and 2008, the Group had pledged a part of its bank deposits in
order to fulfill collateral requirements. Refer to note 12 for further
details.
For the
purpose of the consolidated statement of cash flow, the following reconciliation
with cash and cash equivalents as of December 31 is provided:
|
|
December 31,
|
|
|
|
2009
|
|
|
2008
|
|
Cash
and bank balances and bank deposits
|
|
$
|
59,157
|
|
|
$
|
65,342
|
|
Less:
Restricted cash
|
|
|
-
|
|
|
|
-
|
|
Less:
bank deposits with maturity of three months or more
|
|
|
-
|
|
|
|
(10,000
|
)
|
Less:
pledged bank deposits (note 12)
|
|
|
(6,000
|
)
|
|
|
(21,400
|
)
|
Cash
and cash equivalents
|
|
$
|
53,157
|
|
|
$
|
33,942
|
|
GLOBUS
MARITIME LIMITED
NOTES
TO THE CONSOLIDATED FINANCIAL STATEMENTS
(Amounts
presented in thousands of U.S. Dollars - except for share and per share data,
unless otherwise stated)
4.
|
Transactions
with Related Parties
|
The Group
is controlled by Firment Trading Limited (incorporated in Cyprus) which, as of
December 31, 2009, 2008 and 2007, owned 61.8%, 62.3% and 62%, respectively, of
the Company’s shares. The remaining percentage of the shares is widely held. The
ultimate controlling party of the Group is Mr. George Feidakis. The following
are the major transactions, which have been entered into with related parties
during the years ended December 31, 2009, 2008 and 2007:
On August
20, 2006, the Manager entered into a rental agreement for 350 square meters of
office space for its operations within a building owned by Cyberonica S.A. (a
company related through common control). Rental expense is Euro 14 ($20) per
month up to August 20, 2009. The rental agreement provides for an annual
increase in rent of 2% above the rate of inflation as set by the Bank of Greece.
The duration of the rental agreement is for 9 years and can be terminated by the
Group with 6 months notice. During the years ended December 31, 2009, 2008 and
2007, rent expense was $239, $242 and $214, respectively.
On
September 1, 2006, the Manager entered into an agreement with Eolos
Shipmanagement S.A. (“Eolos”) a company related through common control. The
agreement provided for a fee of $100 per month for services rendered in
connection with the management of dry bulk vessels. The amount of the service
fee was unaffected by the number of vessels and timing of delivery or sale of
any such vessels. During the year ended December 31, 2007, an amount of $204 was
included in the consolidated statement of comprehensive income for the fee
payable to Eolos. The agreement was terminated on March 31, 2007 and there was
no balance outstanding as of that date.
In
November 2009, the Group entered into memoranda of agreement for the sale of
m/v Sea Globe
and
m/v Coral Globe
for an
aggregate price of $34,000. North South Maritime Ltd offered brokerage services
on the aforementioned agreements. The Managing director of North South Maritime
Ltd was a non-executive director of the Company’s board of directors as of
December 31, 2009.
Upon completion of the
sale that took place in February 2010 (note 26), the related party company
received brokerage commission fees of 2.5% on the total sale price, which was
$850.
Compensation
of Key Management Personnel of the Group:
In May
2007, the Company agreed to pay its three non-executive directors a total of
Pound Sterling (“GBP”) 90 ($143) cash in total. The Company also agreed to issue
an aggregate amount of GBP24 (US$38) quarterly to two of the non-executive
directors in ordinary shares of the Company per annum, less any tax and/or
National Insurance contributions payable, from the date the Company was admitted
to the AIM in arrears. The relevant number of shares is calculated based on the
Company’s share price published in the Financial Times on the date of issue.
During the years ended December 31, 2009, 2008 and 2007, total compensation to
the Company’s non-executive directors amounted to $181, $202 and $133,
respectively.
Compensation
to the Company’s executive directors is analyzed as follows:
|
|
For the year ended December
31,
|
|
|
|
2009
|
|
|
2008
|
|
|
2007
|
|
Executive
directors’ remuneration
|
|
$
|
849
|
|
|
$
|
752
|
|
|
$
|
792
|
|
Executive
directors employer’s contributions
|
|
|
33
|
|
|
|
30
|
|
|
|
43
|
|
Share-based
payments (note 13)
|
|
|
307
|
|
|
|
726
|
|
|
|
273
|
|
Other
benefits
|
|
|
8
|
|
|
|
34
|
|
|
|
19
|
|
Total
|
|
$
|
1,197
|
|
|
$
|
1,542
|
|
|
$
|
1,127
|
|
GLOBUS
MARITIME LIMITED
NOTES
TO THE CONSOLIDATED FINANCIAL STATEMENTS
(Amounts
presented in thousands of U.S. Dollars - except for share and per share data,
unless otherwise stated)
The
amounts in the consolidated statement of financial position are analyzed as
follows:
Vessels Cost
|
|
Cost
|
|
|
Accumulated
Depreciation
|
|
|
Net Book Value
|
|
Balance
as of December 31, 2007
|
|
$
|
283,455
|
|
|
$
|
(11,449
|
)
|
|
$
|
272,006
|
|
Vessel
improvements
|
|
|
307
|
|
|
|
-
|
|
|
|
307
|
|
Vessel
disposals (note 20)
|
|
|
(24,817
|
)
|
|
|
3,319
|
|
|
|
(21,498
|
)
|
Impairment
loss
|
|
|
-
|
|
|
|
(20,224
|
)
|
|
|
(20,224
|
)
|
Depreciation
for the year
|
|
|
-
|
|
|
|
(17,390
|
)
|
|
|
(17,390
|
)
|
Balance
as of December 31, 2008
|
|
|
258,945
|
|
|
|
(45,744
|
)
|
|
|
213,201
|
|
Vessel
disposals (note 20)
|
|
|
(63,032
|
)
|
|
|
14,545
|
|
|
|
(48,487
|
)
|
Impairment
loss
|
|
|
-
|
|
|
|
(28,429
|
)
|
|
|
(28,429
|
)
|
Depreciation
for the year
|
|
|
-
|
|
|
|
(11,172
|
)
|
|
|
(11,172
|
)
|
Vessels
held for sale
|
|
|
(42,761
|
)
|
|
|
10,404
|
|
|
|
(32,357
|
)
|
Balance
as of December 31, 2009
|
|
$
|
153,152
|
|
|
$
|
(60,396
|
)
|
|
$
|
92,756
|
|
Drydocking Cost
|
|
Cost
|
|
|
Accumulated
Depreciation
|
|
|
Net Book
Value
|
|
Balance
as of December 31, 2007
|
|
$
|
2,880
|
|
|
$
|
(1,166
|
)
|
|
$
|
1,714
|
|
Drydocking
additions
|
|
|
2,823
|
|
|
|
-
|
|
|
|
2,823
|
|
Disposals
(note 20)
|
|
|
(406
|
)
|
|
|
247
|
|
|
|
(159
|
)
|
Depreciation
for the year
|
|
|
-
|
|
|
|
(1,572
|
)
|
|
|
(1,572
|
)
|
Balance
as of December 31, 2008
|
|
|
5,297
|
|
|
|
(2,491
|
)
|
|
|
2,806
|
|
Drydocking
additions
|
|
|
1,135
|
|
|
|
-
|
|
|
|
1,135
|
|
Disposals
(note 20)
|
|
|
(3,104
|
)
|
|
|
1,758
|
|
|
|
(1,346
|
)
|
Depreciation
for the year
|
|
|
-
|
|
|
|
(1,512
|
)
|
|
|
(1,512
|
)
|
Drydocking
costs on vessels held for sale
|
|
|
(1,947
|
)
|
|
|
1,274
|
|
|
|
(673
|
)
|
Balance
as of December 31, 2009
|
|
|
1,381
|
|
|
|
(971
|
)
|
|
|
410
|
|
Vessels
net book value as of December 31, 2008
|
|
|
264,242
|
|
|
|
(48,235
|
)
|
|
|
216,007
|
|
Vessels
net book value as of December 31, 2009
|
|
$
|
154,533
|
|
|
$
|
(61,367
|
)
|
|
$
|
93,166
|
|
For the
purpose of the consolidated statement of comprehensive income, depreciation
comprises the following:
|
|
For the year ended December
31,
|
|
|
|
2009
|
|
|
2008
|
|
|
2007
|
|
Depreciation
on vessels cost
|
|
$
|
11,172
|
|
|
$
|
17,390
|
|
|
$
|
10,180
|
|
Depreciation
on office furniture and equipment
|
|
|
32
|
|
|
|
17
|
|
|
|
32
|
|
Total
|
|
$
|
11,204
|
|
|
$
|
17,407
|
|
|
$
|
10,212
|
|
GLOBUS
MARITIME LIMITED
NOTES
TO THE CONSOLIDATED FINANCIAL STATEMENTS
(Amounts
presented in thousands of U.S. Dollars - except for share and per share data,
unless otherwise stated)
5.
|
Vessels,
net (continued)
|
During
the year ended December 31, 2007, the Group took delivery of four vessels, the
m/v Gulf Globe
, for a
purchase price of $24.8 million; the
m/v Island Globe
, for a
purchase price of $37.9 million; the
m/v Tiara Globe
for a
purchase price of $66.8 million; and the
m/v River Globe
, a
newbuilding, for a purchase price of $57 million. The vessels were delivered
charter free. The Group estimated, as of the date of acquisition of the three
secondhand vessels, the
m/v
Gulf Globe
,
m/v Island
Globe
and
m/v
Tiara Globe
, an
aggregate amount of $64, $190 and $65, respectively, representing the component
of the cost of the purchase price of the vessels that related to the economic
benefits derived from the vessel’s previous drydocking. These amounts were
included in drydocking cost. Upon entering into the purchase agreements for
m/v
Gulf Globe
and
m/v
Island Globe
, the Company
agreed with the sellers that, from a pre-agreed date, a seller’s credit would
accrue daily until the date of delivery of the vessel. This credit was in
proportion to the hire earned by the vessel up to the date of delivery and was
received shortly after delivery. The seller’s credit has been accounted for as a
reduction of the vessels cost.
During
the year ended December 31, 2008, the Group sold the
m/v Ocean Globe
for a selling
price of $37,000 (note 20). The vessel was delivered on November 12,
2008.
During
the year ended December 31, 2009, the Group sold and delivered to their new
owners the
m/v Island
Globe
,
m/v Gulf
Globe
and
m/v Lake
Globe
for a selling price of $19,100, $15,500 and $16,500, respectively.
These vessels were measured at the lower of carrying amount and fair value less
costs to sell, once the conditions described in note 2.29 were satisfied. In
this respect, the Group recognized an impairment loss of $22,325.
During
November 2009, the Group entered into memoranda of agreement for the sale of the
m/v Sea Globe
and
m/v Coral Globe
for a selling
price of $17,500 and $16,500, respectively. The conditions described in Note
2.29 were satisfied and the vessels were classified as held for sale and
measured at the lower of their carrying amount and fair value less cost to sale.
The Group recognized an impairment loss of $6,104. Both vessels were delivered
to their new owners in February 2010 (note 26).
The Group
assesses at each reporting date whether there is an indication that its vessels
may be impaired. The vessels’ recoverable amount is estimated when events or
changes in circumstances indicate the carrying value may not be recoverable. If
such indication exists and where the carrying value exceeds the estimated
recoverable amounts, the vessel is written down to its recoverable amount. The
recoverable amount is the greater of fair value less costs to sell and
value-in-use. In assessing value-in-use, the estimated future cash flows are
discounted to their present value using a discount rate that reflects current
market assessments of the time value of money and the risks specific to the
vessel. Impairment losses are recognized in the consolidated statement of
comprehensive income. Since mid-August 2008, the charter rates in the dry bulk
charter market have declined significantly and dry bulk vessel values have also
declined both as a result of a slowdown in the availability of global credit and
the significant deterioration in charter rates, which are conditions that the
Group considered indicators of impairment as of December 31, 2008.
Discounted
future cash flows for each vessel were determined and compared to the vessel’s
carrying value. The projected net discounted future cash flows were determined
by considering an estimate daily time charter equivalent (based on the most
recent blended (for modern and older vessels) average historical one-year time
charter rates available for each type of vessel) over the remaining estimated
life of each vessel, net of brokerage commissions, expected outflows for
scheduled vessels maintenance and vessel operating expenses assuming an average
annual inflation rate of 4%. Historical ten-year blended average one-year time
charter rates used in the impairment test exercise were in line with the overall
chartering strategy, especially in periods/years of depressed charter rates,
reflecting the full operating history of vessels of the same type and
particulars with the Group’s operating fleet (Handymax and Panamax vessels with
deadweight (“dwt”) over 40,000 and 70,000, respectively) and they covered at
least a full business cycle. The average annual inflation rate applied on
vessels’ maintenance and operating costs approximated current projections for
global inflation rate for the remaining useful life of the Group’s vessels.
Effective fleet utilization was assumed at 90%, taking into account the
period(s) each vessel is expected to undergo scheduled maintenance (drydocking
and special surveys), as well as an estimate of the period(s) needed for finding
suitable employment and off-hire for reasons other than scheduled maintenance,
which are assumptions in line with the Group’s expectations for future fleet
utilization under the current fleet deployment strategy. The Company concluded
that the recoverable amount for two of the vessels namely, the
m/v
Tiara Globe
and
m/v
River Globe
, was lower than
their carrying values. Subsequently, the Group recognized an impairment loss of
$20,224 in 2008. As of December 31, 2009, none of the aforementioned assumptions
have changed significantly and no indication for impairment
existed.
GLOBUS
MARITIME LIMITED
NOTES
TO THE CONSOLIDATED FINANCIAL STATEMENTS
(Amounts
presented in thousands of U.S. Dollars - except for share and per share data,
unless otherwise stated)
Inventories
in the consolidated statement of financial position are analyzed as
follows:
|
|
December
31,
|
|
|
|
2009
|
|
|
2008
|
|
Lubricants
|
|
$
|
314
|
|
|
$
|
502
|
|
Gas
cylinders
|
|
|
41
|
|
|
|
63
|
|
Total
|
|
$
|
355
|
|
|
$
|
565
|
|
7.
|
Prepayments
and Other Assets
|
Prepayments
and other assets in the consolidated statement of financial position are
analyzed as follows:
|
|
December
31,
|
|
|
|
2009
|
|
|
2008
|
|
Insurance
claims
|
|
$
|
26
|
|
|
$
|
-
|
|
Interest
receivable
|
|
|
106
|
|
|
|
298
|
|
Bunkers
prepaid
|
|
|
1,155
|
|
|
|
988
|
|
Other
prepayments
|
|
|
201
|
|
|
|
348
|
|
Total
|
|
$
|
1,488
|
|
|
$
|
1,634
|
|
8.
|
Trade
Accounts Payable
|
Trade
accounts payable in the consolidated statement of financial position as of
December 31, 2009 and 2008, amounted to $1,158 and $2,212, respectively. Trade
accounts payable are non-interest bearing and are normally settled on 60-day
terms.
9.
|
Accrued
Liabilities and Other Payables
|
Accrued
liabilities and other payables in the consolidated statement of financial
position are analyzed as follows:
|
|
December
31,
|
|
|
|
2009
|
|
|
2008
|
|
Accrued
interest
|
|
$
|
161
|
|
|
$
|
153
|
|
Accrued
audit fees
|
|
|
80
|
|
|
|
52
|
|
Other
accruals
|
|
|
739
|
|
|
|
334
|
|
Other
payables
|
|
|
115
|
|
|
|
168
|
|
Total
|
|
$
|
1,095
|
|
|
$
|
707
|
|
|
Ø
|
Interest
is normally settled quarterly throughout the
year.
|
|
Ø
|
Other
payables are non-interest bearing and are normally settled on monthly
terms.
|
GLOBUS
MARITIME LIMITED
NOTES
TO THE CONSOLIDATED FINANCIAL STATEMENTS
(Amounts
presented in thousands of U.S. Dollars - except for share and per share data,
unless otherwise stated)
10.
|
Share
Capital and Share Premium
|
The share
capital of the Company consisted of the following:
|
|
December 31,
|
|
|
|
2009
|
|
|
2008
|
|
|
|
USD
|
|
|
USD
|
|
Authorized
|
|
|
|
|
|
|
100,000,000
Ordinary Shares of $0.001 each
|
|
|
100,000
|
|
|
|
100,000
|
|
25,000,000
Ordinary Shares of $0.004 each post-reverse split (note
26)
|
|
|
100,000
|
|
|
|
100,000
|
|
Ordinary
shares issued and fully paid
|
|
Number of
shares
|
|
|
Number of
shares post
reverse
split (note
26)
|
|
|
GBP
|
|
|
USD
|
|
At
January 1, 2007
|
|
|
7,333
|
|
|
|
|
|
|
7,333
|
|
|
|
-
|
|
Issued
on March 23, 2007 and on May 7, 2007 for cash
|
|
|
402
|
|
|
|
|
|
|
402
|
|
|
|
-
|
|
Issued
on March 21, 2007 in exchange of non-controlling interests
(note14)
|
|
|
2,342
|
|
|
|
|
|
|
2,342
|
|
|
|
-
|
|
Total
share capital at May 14, 2007
|
|
|
10,077
|
|
|
|
|
|
|
10,077
|
|
|
|
-
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Conversion
and subdivision of share capital on May 14, 2007
|
|
|
20,174,154
|
|
|
|
5,043,539
|
|
|
|
-
|
|
|
|
20,174
|
|
Issued
on June 1, 2007 for cash on its initial public offering
|
|
|
8,423,333
|
|
|
|
2,105,833
|
|
|
|
-
|
|
|
|
8,423
|
|
Issued
during the year as part of share based compensation (note
13)
|
|
|
38,666
|
|
|
|
9,667
|
|
|
|
-
|
|
|
|
39
|
|
As
of December 31, 2007
|
|
|
28,636,153
|
|
|
|
7,159,039
|
|
|
|
-
|
|
|
|
28,636
|
|
Issued
during the year as part of share based compensation (note
13)
|
|
|
29,297
|
|
|
|
7,324
|
|
|
|
-
|
|
|
|
29
|
|
As
of December 31, 2008
|
|
|
28,665,450
|
|
|
|
7,166,363
|
|
|
|
-
|
|
|
|
28,665
|
|
Issued
during the year as part of share based compensation (note
13)
|
|
|
290,722
|
|
|
|
72,680
|
|
|
|
-
|
|
|
|
291
|
|
As
of December 31, 2009
|
|
|
28,956,172
|
|
|
|
7,239,043
|
|
|
|
-
|
|
|
|
28,956
|
|
The
Company was incorporated with an authorized share capital of GBP10,000 divided
into 10,000 ordinary shares of GBP1 each.
As of
December 31, 2006, the Company had issued 7,333 ordinary shares.
On March
23, 2007, the Company issued 2,342 ordinary shares that were exchanged for the
non-controlling interest shares in Adagio Marine S.A. and Abrosa Shipping Inc.,
as described in note 14 below. In addition, the Company issued another 325
ordinary shares at par value to Firment Trading Limited.
By a
shareholders’ resolution dated May 7, 2007, the Company increased its authorized
share capital to GBP10,077 by the creation of an additional 77 ordinary shares
of GBP1 each. Following this increase, the Company’s authorized and issued share
capital was GBP10,077 divided into 10,077 ordinary shares of GBP1
each.
By a
shareholders’ resolution dated May 14, 2007, the Company converted its
authorized and issued share capital from Pounds Sterling to U.S. dollars at an
exchange rate of GBP1=US$2.002 and divided the authorized share capital into
ordinary shares of $0.001 each. Following this conversion and sub-division, the
Company’s authorized share capital was $20,174.15 divided into 20,174,154
ordinary shares of $0.001 each (equivalent to 5,043,539 ordinary shares of
$0.004 each post 2010 reverse split).
GLOBUS
MARITIME LIMITED
NOTES
TO THE CONSOLIDATED FINANCIAL STATEMENTS
(Amounts
presented in thousands of U.S. Dollars - except for share and per share data,
unless otherwise stated)
10.
|
Share
Capital and Share Premium
(continued)
|
By a
shareholders’ resolution also dated May 14, 2007, the Company increased its
authorized share capital to 100,000 by the creation of an additional 79,825,846
ordinary shares of $0.001 each (equivalent to 19,956,461 ordinary shares of
$0.004 each post 2010 reverse split). Following this conversion and
sub-division, the Company’s authorized share capital was $100,000 divided into
100,000,000 ordinary shares of $0.001 each (equivalent to 25,000,000 ordinary
shares of $0.004 each post 2010 reverse split).
On June
1, 2007, the Company consummated its initial public offering in the United
Kingdom of 8,423,333 (equivalent to 2,105,833 post 2010 reverse split) ordinary
shares at an offering price of $5.9391 per share (GBP3). The net proceeds of the
offering after expenses were $46,578.
During
the years ended December 31, 2009, 2008 and 2007, the Company issued 290,722,
29,297 and 38,666, respectively (equivalent to 72,680, 7,324 and 9,667,
respectively, post 2010 reverse split), ordinary shares as share-based payments
(note 13).
Share
premium includes the contribution by the Group’s shareholders to the acquisition
of the Group’s vessels. Firment Trading Limited contributed $1,275 in connection
with the purchase of the
m/v
Gulf Globe
and $300 in connection with the advance payment for the
purchase of the
m/v Island
Globe
. Another party, related through common control, contributed $4,000
to the purchase price of the
m/v Gulf Globe
. Additionally,
share premium includes the effects of the acquisition of non-controlling
interests, the effects of the Company’s initial public offering and the effects
of the share-based payments described in note 13. Accordingly, as of December
31, 2009, 2008 and 2007, the Company’s share premium amounted to $88,516,
$87,600 and $87,411, respectively.
11.
|
(Loss)/
Earnings per Share
|
Basic
(loss)/ earnings per share are calculated by dividing the (loss)/ profit for the
year attributable to the Company’s shareholders by the weighted average number
of shares issued, paid and outstanding.
Diluted
earnings per share amounts are calculated by dividing the net (loss)/ profit
attributable to ordinary equityholders of the parent by the weighted average
shares outstanding during the year plus the weighted average number of ordinary
shares that would be issued on the conversion of all the dilutive potential
ordinary shares into ordinary shares.
The
following reflects the (loss)/ profit and share data used in the basic and
diluted earnings per share computations:
|
|
Year
ended December 31,
|
|
|
|
2009
|
|
|
2008
|
|
|
2007
|
|
Net
(loss)/profit attributable to ordinary equityholders
|
|
$
|
(10,079
|
)
|
|
$
|
42,818
|
|
|
$
|
11,210
|
|
Weighted
average number of shares prior to the share reverse split (note
26)
|
|
|
28,769,477
|
|
|
|
28,650,255
|
|
|
|
23,785,402
|
|
Weighted
average number of shares after the share reverse split (note
26)
|
|
|
7,192,369
|
|
|
|
7,162,564
|
|
|
|
5,946,350
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Effect
of dilution:
|
|
|
|
|
|
|
|
|
|
|
|
|
Effect
of shares awarded treated as options (note 13)
|
|
|
-
|
|
|
|
256,812
|
|
|
|
-
|
|
Weighted
average number of shares adjusted for the effect of
dilution
|
|
|
7,192,369
|
|
|
|
7,419,375
|
|
|
|
5,946,350
|
|
GLOBUS
MARITIME LIMITED
NOTES
TO THE CONSOLIDATED FINANCIAL STATEMENTS
(Amounts
presented in thousands of U.S. Dollars - except for share and per share data,
unless otherwise stated)
Long-term debt in the consolidated
statement of financial position is analyzed as follows:
|
Borrower
|
|
Loan Balance
|
|
|
Unamortized Debt
Discount
|
|
|
Total
Borrowings
|
|
(a)
|
Globus
Maritime Limited
|
|
$
|
43,555
|
|
|
$
|
(295
|
)
|
|
$
|
43,260
|
|
(b)
|
Globus
Maritime Limited
|
|
|
27,007
|
|
|
|
(192
|
)
|
|
|
26,815
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
as of December 31, 2009
|
|
|
70,562
|
|
|
|
(487
|
)
|
|
|
70,075
|
|
|
Less:
Current Portion
|
|
|
34,157
|
|
|
|
(257
|
)
|
|
|
33,900
|
|
|
Long-Term
Portion
|
|
|
36,405
|
|
|
|
(230
|
)
|
|
|
36,175
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
as of December 31, 2008
|
|
|
157,600
|
|
|
|
(617
|
)
|
|
|
156,983
|
|
|
Less:
Current Portion
|
|
|
77,600
|
|
|
|
(322
|
)
|
|
|
77,278
|
|
|
Long-Term
Portion
|
|
$
|
80,000
|
|
|
$
|
(295
|
)
|
|
$
|
79,705
|
|
(a)
|
In
November 2007, the Company entered into a secured reducing revolving
credit facility for $120,000 with a bank in order to: (i) refinance the
existing indebtedness on the
m/v Island Globe
, (ii)
finance part of the purchase price of the
m/v Tiara Globe
and the
m/v River Globe
,
and (iii) provide general working capital to the
Group.
|
The
$120,000 facility is in the name of the Company as borrower and, at the time of
execution, was guaranteed by the vessel-owning subsidiaries of the
m/v Island Globe
,
m/v Tiara Globe
and
m/v River Globe
collateralized by first preferred mortgages over their vessels.
This
reducing revolving credit facility bears interest at LIBOR plus a margin of
0.95% per annum if the aggregate market value of the mortgaged vessels is less
than 200% of the outstanding balance of the credit facility, and 0.75% per annum
if their market value exceeds 200% of the outstanding balance.
On
September 2, 2009, following the sale of the
m/v Island Globe
, the Company
repaid $18,500. The outstanding balance as of December 31, 2009, was $43,555
(2008: $95,000).
Following
the sale of the
m/v Island
Globe
in September 2009, the facility was secured as
follows:
|
Ø
|
First
preferred mortgage over the
m/v Tiara Globe
and
m/v River
Globe
.
|
|
Ø
|
Guarantees
from the owning companies of these
vessels.
|
|
Ø
|
First
preferred assignment of all insurances and earnings of the mortgaged
vessels.
|
|
Ø
|
General
pledge of earnings account or any other accounts to be held with the
lender.
|
Committed undrawn amounts under this
credit facility
As of
December 31, 2009, under this credit facility, the Group had available a total
of $36,445 (2008: nil) of committed undrawn amounts, in two tranches, for
financing further vessel acquisitions.
Tranche
1, in the amount of $20,000, had a commitment fee of 0.25% per annum while
undrawn. This tranche was available to be drawn in one or multiple drawings,
until the maturity of the credit facility in November 28, 2015, in order to
finance one or more vessel acquisitions under the following conditions: (i) the
vessel(s) to be acquired must not be smaller than Handysize type (10,000 –
39,999 dwt) dry bulk vessels and must not be older than 10 years at the time of
the time of the granting of each security, and the bank would be granted
security over the vessel(s) in its favor (including a mortgage over the
vessel(s), guarantees from the owning company(ies) and assignment(s) of
insurances and earnings) and (ii) the market value(s) of the vessel(s) acquired
would be no less than 125% of the amount(s) drawn.
GLOBUS
MARITIME LIMITED
NOTES
TO THE CONSOLIDATED FINANCIAL STATEMENTS
(Amounts
presented in thousands of U.S. Dollars - except for share and per share data,
unless otherwise stated)
12.
|
Long-Term
Debt, net (continued)
|
Tranche 2
in the amount of $16,445 had a commitment fee of 0.50% per annum while undrawn.
This tranche was available to be drawn in one or multiple drawings, but the
maximum amount that could be drawn would be reduced every six months (in May and
November) by twelve equal reductions of $925 each followed by a balloon
reduction of $5,345 in November 2015, being the final maturity of the credit
facility. Funds were to be used in order to finance one or more vessel
acquisitions under the following conditions: (i) the vessel(s) to be acquired
must not be smaller than Handymax type (40,000 – 59,999 dwt) dry bulk vessel and
must not be older than 10 years at the time of the granting of each security,
and the bank would be granted security over the vessel(s) in its favor
(including a mortgage over the vessel(s), guarantees from the owning
company(ies) and assignment(s) of insurances and earnings) and (ii) the market
value(s) of the vessel(s) acquired would be no less than 166.67% of the
amount(s) drawn. During May 2010, tranche 2 was reduced to $15,520. The Company
drew the total amount available under both tranches, $35,520, and used the
proceeds to finance the acquisitions of the
m/v Sky Globe
and
m/v Star Globe
(note 26). The
credit facility is fully drawn and no amounts are available for further
drawing.
The
credit facility contains various covenants, including, among others,
restrictions (a) that prohibit changes in management and ownership of the
mortgaged vessel without prior written consent of the lender, (b) that prohibit
the incurrence of additional indebtedness other than in the normal course of
business without the prior written consent of the lender, (c) relating to
mortgaging the vessel, (d) that prohibit payment of dividends in excess of 75%
of the net income of the preceding financial year without the bank’s prior
consent, (e) that set forth minimum requirements for the vessels’ market value
and insured value in relation to the outstanding balance, and (f) that set forth
the requirement to maintain at the end of each accounting period and all other
times during the security period, consolidated cash and bank balances and bank
deposits of at least $10,000. The global economic conditions during the fourth
quarter of the fiscal year 2008, including the significant disruptions in global
trade and the slowdown in the availability of credit, had broad effects on the
industry. Since mid-August 2008, the spot and time charter rates in the dry bulk
market fell significantly and as a result the market values of dry bulk vessels
also declined. This correction of vessel values caused a breach of the relevant
covenants as of December 31, 2008, for which the Company obtained a waiver from
the bank through January 31, 2010. As of December 31, 2009, all breaches of
covenants have been remediated.
(b)
|
In
March 2008, the Company entered into a credit facility of up to $85,000
with a bank in order to: (i) refinance the existing indebtedness on the
m/v Coral Globe
,
m/v
Gulf Globe
,
m/v
Lake Globe
,
m/v
Ocean Globe
, and
m/v
Sea Globe
and (ii)
provide general working capital to the Group. The Company was the borrower
in the $85,000 loan and the subsidiaries owning the vessels
m/v Coral Globe
,
m/v
Gulf Globe
,
m/v
Lake Globe
,
m/v
Ocean Globe
, and
m/v
Sea Globe
were
guarantors. The loan was secured by first preferred mortgages over such
vessels. The
m/v Ocean
Globe
was sold in November 2008. The loan bore interest at LIBOR
plus a margin of 0.80% per annum if the ratio of the outstanding loan less
cash deposits to the market value of the mortgaged vessels was less than
30% and 0.85% over LIBOR per annum at all other times. Following the sale
of the
m/v Gulf
Globe
in October 22, 2009 and of the
m/v Lake Globe
in
November 12, 2009, an amount of $15,301 and $14,014 was repaid,
respectively. The balance outstanding as of December 31, 2009, was $27,007
(2008: $62,600).
|
Following
the sale of the
m/v Gulf
Globe
and
m/v Lake
Globe
, the loan was secured as follows:
|
Ø
|
First
preferred mortgage over the
m/v Coral Globe
and
m/v
Sea Globe
(the
m/v Ocean Globe
was
sold during November 2008).
|
|
Ø
|
Guarantees
from the owning companies of the
vessels.
|
GLOBUS
MARITIME LIMITED
NOTES
TO THE CONSOLIDATED FINANCIAL STATEMENTS
(Amounts
presented in thousands of U.S. Dollars - except for share and per share data,
unless otherwise stated)
12.
|
Long-Term Debt, net
(continued)
|
|
Ø
|
First
specific assignment of time charters in excess of 12
months.
|
|
Ø
|
First
preferred assignment of all insurances and earnings of the mortgaged
vessels.
|
The loan
agreement contains various covenants, including, among others, restrictions (a)
that prohibit changes in management and ownership of the mortgaged vessel
without prior written consent of the lender, (b) that prohibit the incurrence of
additional indebtedness other than in the normal course of business without the
prior written consent of the lender, (c) relating to mortgaging the vessel, (d)
that prohibit payment of dividends that exceed 75% of the net income recorded
for the preceding financial year without the bank’s prior consent, (e) that set
forth minimum requirements for the vessel’s market value and insured value in
relation to the loan’s outstanding balance, and (f) that set forth the
requirement to maintain freely available cash deposits of an amount in aggregate
not less than $1,000 in respect of each vessel mortgaged to this
bank.
The
global economic conditions during the fourth quarter of the fiscal year 2008,
including the significant disruptions in global trade and the slowdown in the
availability of credit, had broad effects on the industry. Since mid-August
2008, the spot and time charter rates in the dry bulk market fell significantly
and as a result the market values of dry bulk vessels also declined. This
correction of vessel values caused a breach of the relevant covenant as of
December 31, 2008 and, as agreed with the bank, the Company pledged an amount of
$21,400 in favor of the bank and included total amount outstanding as of
December 31, 2008 of $62,600 in the current portion of long term borrowings. As
of December 31, 2009, and following the sale of the
m/v Gulf Globe
,
and
m/v Lake Globe
the bank
agreed to release $15,400 and retained the amount of $6,000 as a pledge (note
3). Following the sale of the
m/v Sea Globe
and
m/v Coral Globe
in February
2010, the outstanding debt of $27,007 as of December 31, 2009 was fully repaid
(note 26).
The
contractual annual loan principal payments per bank loan anticipated to be made
subsequent to December 31, 2009, were as follows:
|
|
Bank Loan
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2010
|
|
$
|
7,150
|
|
|
$
|
3,510
|
|
|
$
|
10,660
|
|
2011
|
|
|
7,150
|
|
|
|
3,510
|
|
|
|
10,660
|
|
2012
|
|
|
7,150
|
|
|
|
3,510
|
|
|
|
10,660
|
|
2013
|
|
|
7,150
|
|
|
|
3,510
|
|
|
|
10,660
|
|
2014
|
|
|
7,150
|
|
|
|
3,510
|
|
|
|
10,660
|
|
2015
and thereafter
|
|
|
7,805
|
|
|
|
9,457
|
|
|
|
17,262
|
|
Total
|
|
$
|
43,555
|
|
|
$
|
27,007
|
|
|
$
|
70,562
|
|
During
November 2009, the Group entered into memoranda of agreement for the sale of the
m/v Sea Globe
and
m/v Coral Globe
, which were
delivered to their new owners in February 2010. The balance outstanding as of
December 31, 2009, for loan (b) therefore, is classified under current portion
of long-term borrowings in the consolidated statement of financial position. The
outstanding amount of $27,007 was fully repaid in February 2010 (note
26).
The
contractual annual loan principal payments to be made subsequently to December
31, 2008, were as follows:
GLOBUS
MARITIME LIMITED
NOTES
TO THE CONSOLIDATED FINANCIAL STATEMENTS
(Amounts
presented in thousands of U.S. Dollars - except for share and per share data,
unless otherwise stated)
12.
|
Long-Term
Debt, net (continued)
|
|
|
Bank Loan
|
|
|
|
|
December 31,
|
|
(a)
|
|
|
(b)
|
|
|
Total
|
|
2009
|
|
$
|
15,000
|
|
|
$
|
7,200
|
|
|
$
|
22,200
|
|
2010
|
|
|
9,000
|
|
|
|
7,200
|
|
|
|
16,200
|
|
2011
|
|
|
9,000
|
|
|
|
7,200
|
|
|
|
16,200
|
|
2012
|
|
|
9,000
|
|
|
|
7,200
|
|
|
|
16,200
|
|
2013
|
|
|
9,000
|
|
|
|
7,200
|
|
|
|
16,200
|
|
2014
and thereafter
|
|
|
44,000
|
|
|
|
26,600
|
|
|
|
70,600
|
|
Total
|
|
$
|
95,000
|
|
|
$
|
62,600
|
|
|
$
|
157,600
|
|
Share-based
payment comprise the following:
|
|
Year ended December 31, 2007
|
|
|
|
Ordinary
Shares
|
|
|
Ordinary Shares
post reverse split
(note 26)
|
|
|
Share
Premium
|
|
|
Retained
earnings
|
|
Non
executive directors payment
|
|
|
3,080
|
|
|
|
770
|
|
|
|
24
|
|
|
|
4
|
|
Extra
payment
|
|
|
35,586
|
|
|
|
8,897
|
|
|
|
352
|
|
|
|
-
|
|
Total
|
|
|
38,666
|
|
|
|
9,667
|
|
|
|
376
|
|
|
|
4
|
|
|
|
Year ended December 31, 2008
|
|
|
|
Ordinary
Shares
|
|
|
Ordinary Shares
post reverse split
(note 26)
|
|
|
Share
Premium
|
|
|
Retained
earnings
|
|
Non
executive directors payment
|
|
|
12,400
|
|
|
|
3,100
|
|
|
|
44
|
|
|
|
-
|
|
Extra
payment
|
|
|
16,897
|
|
|
|
4,224
|
|
|
|
145
|
|
|
|
-
|
|
“LTIP”
accrued current year
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
581
|
|
Total
|
|
|
29,297
|
|
|
|
7,324
|
|
|
|
189
|
|
|
|
581
|
|
|
|
Year ended December 31, 2009
|
|
|
|
Ordinary
Shares
|
|
|
Ordinary Shares
post reverse split
(note 26)
|
|
|
Share
Premium
|
|
|
Retained
earnings
|
|
Non
executive directors payment
|
|
|
33,910
|
|
|
|
8,477
|
|
|
|
38
|
|
|
|
-
|
|
Extra
payment
|
|
|
171,052
|
|
|
|
42,763
|
|
|
|
175
|
|
|
|
-
|
|
“LTIP”
shares issued
|
|
|
85,760
|
|
|
|
21,440
|
|
|
|
703
|
|
|
|
-
|
|
“
LTIP” reversal of prior
year accrual
|
|
|
-
|
|
|
|
|
|
|
|
-
|
|
|
|
(581
|
)
|
“LTIP”
accrued current year
|
|
|
-
|
|
|
|
|
|
|
|
-
|
|
|
|
17
|
|
“LTIP”
portion cancelled
|
|
|
-
|
|
|
|
|
|
|
|
-
|
|
|
|
1,402
|
|
Total
|
|
|
290,722
|
|
|
|
72,680
|
|
|
|
916
|
|
|
|
838
|
|
In May
2007, the Company agreed to pay two of its non-executive directors GBP12 ($22)
each in ordinary shares in the Company per annum, less any tax and/or National
Insurance contributions payable, quarterly in arrears. The relevant number of
shares is calculated based on the Company’s share price published in the
Financial Times on the date of issue. For the years ended December 31, 2009,
2008 and 2007, the Company recognized an expense of $38, $44 and $28,
respectively, in the consolidated statement of comprehensive income with a
corresponding increase in equity under share capital, share premium and retained
earnings.
GLOBUS
MARITIME LIMITED
NOTES
TO THE CONSOLIDATED FINANCIAL STATEMENTS
(Amounts
presented in thousands of U.S. Dollars - except for share and per share data,
unless otherwise stated)
13.
|
Share-Based
Payment (continued)
|
The board
of directors on December 12, 2007 decided to allot 35,586 (equivalent to 8,897
post 2010 reverse split) ordinary shares of the Company to the executive
directors of the Company and to various members of the personnel of the Manager
as extra payment for services rendered. The Group recorded an expense of $352
equal to the fair (market) value of the shares as of December 12, 2007 (the
grant date), which amount is included in the consolidated statement of
comprehensive income with a corresponding increase in equity, under share
capital and share premium. All shares were issued as of December 31,
2007.
The
remuneration committee on April 15, 2008 decided to allot 16,897 (equivalent to
4,224 post 2010 reverse split) ordinary shares of the Company to the chief
financial officer of the Company as an extra payment for services rendered. The
Company recorded an expense of $145 equal to the fair (market) value of the
shares on April 21, 2008 (the grant date), which amount is included in the
consolidated statement of comprehensive income, under share-based payments, with
a corresponding increase in equity under share capital and share premium. All
shares were issued on May 1, 2008.
The
remuneration committee on November 12, 2009 decided to allot 171,052 (equivalent
to 42,763 post 2010 reverse spilt) ordinary shares of the Company to the chief
executive officer of the Company as an extra payment for services rendered. The
Company recorded an expense of $175 equal to the fair (market) value of the
shares as of November 12, 2009 (the grant date), which amount is included in the
consolidated statement of comprehensive income, under share-based payments, with
a corresponding increase in equity under share capital and share premium. All
shares were issued and allotted on November 19, 2009.
The
remuneration committee on March 4, 2008 decided to grant a conditional award to
the chief executive officer of the Company of 237,342 (equivalent to 59,335 post
2010 reverse split) ordinary shares of the Company under the Long Term Incentive
Plan (“LTIP”), with the conditional right for the shares to be allotted and
delivered to him in the future at nil cost.
According
to the rules of the LTIP, subject to the executives continuing service, the
awarded shares will vest on a daily basis over the next three years, and one
third of the awarded shares will be allotted and delivered to the executive at
nil cost on each of the first, second and third anniversaries of the grant date.
If a cash dividend is paid during the vesting period, additional shares will be
granted calculated in accordance with the rules of the LTIP.
Due to
the Company paying cash dividends to shareholders after the date of grant of the
conditional award to the chief executive officer of the Company (note 18), the
Company added an additional 19,469 (equivalent to 4,867 post 2010 reverse split)
ordinary shares to the initial grant.
For the
year ended December 31, 2009, the Company recorded an expense of $122 (2008:
$581) relating to the LTIP in the consolidated statement of comprehensive income
with a corresponding increase in equity under retained earnings. On March 5,
2009, 85,760 (equivalent to 21,440 post 2010 reverse split) ordinary shares of
the Company were issued and allotted to the chief executive officer of the
Company pursuant to the terms of his grant. The fair (market) value as of March
4, 2008 (grant date) of the shares issued and allotted to the director on March
5, 2009 was $703. On April 21, 2009, the board of directors in agreement with
the chief executive officer of the Company decided to release the unvested
171,052 (equivalent to 42,763 post 2010 reverse split) ordinary shares awarded
to him under the LTIP on March 4, 2008. The Company accounted for the
cancellation of the award as an acceleration of vesting, and therefore
recognized immediately the amount that otherwise would have been recognized for
services received over the remaining of the vesting period to March 4, 2011. The
amount recognized due to the cancellation of the unvested award was $1,402 and
is included in the income statement component of the consolidated statement of
comprehensive income under share-based payments with a corresponding increase in
equity under retained earnings.
GLOBUS
MARITIME LIMITED
NOTES
TO THE CONSOLIDATED FINANCIAL STATEMENTS
(Amounts
presented in thousands of U.S. Dollars - except for share and per share data,
unless otherwise stated)
13.
|
Share-Based
Payment (continued)
|
The board of directors of
the Company on December 10, 2009 decided to grant a conditional award of an
aggregate of 575,199 (equivalent to 143,799 post 2010 reverse split) ordinary
shares to all employees of the Group existing as of that date under the LTIP,
with the conditional right for the shares to be allotted and delivered to them
in the future at nil cost. In addition to the LTIP rules, the award was subject
to (i) the employee remaining in employment on the date of vesting, and (ii) the
Company’s shares being listed on Nasdaq or have raised more than $30,000 from
third parties or both in the year ended December 31, 2010. For the year ended
December 31, 2009, the Company recorded an expense of $17 in the consolidated
statement of comprehensive income with a corresponding increase in equity under
retained earnings.
14.
|
Acquisition
of Non-controlling Interests
|
Non-controlling
interests in the equity of the consolidated subsidiaries at January 1, 2007
related to the participation in Adagio Marine S.A. by a company related through
common control. As of January 1, 2007, the related party owned 67% of the share
capital of Adagio Marine S.A. and the Group owned the remaining 33%. As the
Company had, by virtue of an agreement with the related party, full operational
control over Adagio Marine S.A. and power to appoint the board of directors of
Adagio Marine S.A., the latter was consolidated in the Group’s financial
statements with the capital invested by the related party and the net profit
attributable to the related party disclosed as non-controlling
interests.
On
January 11, 2007, the related party referred to above obtained a 52% ownership
in Abrosa Shipping Inc. (prior to January 11, 2007, 100% of Abrosa Shipping
Inc.’s issued share capital was owned by the Company).
The
Company had, by virtue of an agreement with the related party, full operational
control over Abrosa Shipping Inc. and power to appoint the board of directors of
this subsidiary, therefore, the latter was consolidated in the Group’s financial
statements, with the capital invested by the related party and the net profit
attributable to the related party disclosed as non-controlling
interests.
On March
21, 2007, the non-controlling interests sold its ownership in Adagio Marine S.A.
and Abrosa Shipping S.A. to a third party, Lipati Shipping Company Limited
(“Lipati”). On March 22, 2007, the share certificates of Lipati in the two
entities were cancelled and new share certificates in the name of the Company
were issued. As a result, as of March 22, 2007, the Company was the 100%
shareholder of all its subsidiaries.
On March
21, 2007, the Company issued 2,342 shares, with a nominal value of GBP1 each, to
Lipati as consideration for the shares held in Adagio Marine S.A. and Abrosa
Shipping S.A. As of that date, the non-controlling interests in these entities
was $10,113. This transaction was effectively treated as an acquisition by the
Company of the non-controlling interests with issuance of shares in the Company
as consideration. The difference between the carrying value of the
non-controlling interests at transaction date and the nominal value of share
capital issued as consideration ($4) was accounted for in accordance with the
Company’s policy for acquisition of non-controlling interests (entity concept
method), i.e., reflected as an equity transaction in share premium. There was no
cash flow impact as a result of the reorganization.
15.
|
Voyage
Expenses and Vessel Operating
Expenses
|
Voyage
expenses and vessel operating expenses in the consolidated statement of
comprehensive income consist of the following:
GLOBUS
MARITIME LIMITED
NOTES
TO THE CONSOLIDATED FINANCIAL STATEMENTS
(Amounts
presented in thousands of U.S. Dollars - except for share and per share data,
unless otherwise stated)
15.
|
Voyage
Expenses and Vessel Operating Expenses
(continued)
|
Voyage
expenses consist of:
|
|
Year ended December 31,
|
|
|
|
2009
|
|
|
2008
|
|
|
2007
|
|
Commissions
|
|
$
|
2,717
|
|
|
$
|
4,788
|
|
|
$
|
1,945
|
|
Bunkers
expenses
|
|
|
521
|
|
|
|
1,597
|
|
|
|
232
|
|
Other
voyage expenses
|
|
|
504
|
|
|
|
289
|
|
|
|
68
|
|
Total
|
|
$
|
3,742
|
|
|
$
|
6,674
|
|
|
$
|
2,245
|
|
Vessel
operating expenses consist of:
|
|
Year ended December 31,
|
|
|
|
2009
|
|
|
2008
|
|
|
2007
|
|
Crew
wages and related costs
|
|
$
|
5,268
|
|
|
$
|
5,930
|
|
|
$
|
3,684
|
|
Insurance
|
|
|
1,114
|
|
|
|
1,523
|
|
|
|
800
|
|
Spares,
repairs and maintenance
|
|
|
1,753
|
|
|
|
2,080
|
|
|
|
1,237
|
|
Lubricants
|
|
|
949
|
|
|
|
1,174
|
|
|
|
821
|
|
Stores
|
|
|
868
|
|
|
|
1,595
|
|
|
|
886
|
|
Other
|
|
|
185
|
|
|
|
235
|
|
|
|
211
|
|
Total
|
|
$
|
10,137
|
|
|
$
|
12,537
|
|
|
$
|
7,639
|
|
16.
|
Administrative
Expenses
|
The
amount shown in the consolidated statement of comprehensive income is analyzed
as follows:
|
|
Year ended December 31,
|
|
|
|
2009
|
|
|
2008
|
|
|
2007
|
|
Personnel
expenses
|
|
$
|
1,556
|
|
|
$
|
1,435
|
|
|
$
|
843
|
|
Audit
fees
|
|
|
78
|
|
|
|
96
|
|
|
|
126
|
|
Travelling
expenses
|
|
|
12
|
|
|
|
44
|
|
|
|
28
|
|
Consulting
fees
|
|
|
89
|
|
|
|
149
|
|
|
|
56
|
|
Communication
|
|
|
74
|
|
|
|
70
|
|
|
|
45
|
|
Stationery
|
|
|
7
|
|
|
|
14
|
|
|
|
13
|
|
Other
|
|
|
188
|
|
|
|
314
|
|
|
|
181
|
|
Total
|
|
$
|
2,004
|
|
|
$
|
2,122
|
|
|
$
|
1,292
|
|
17.
|
Interest
Expense and Finance Costs
|
The
amounts in the consolidated statement of comprehensive income are analyzed as
follows:
|
|
Year ended December 31,
|
|
|
|
2009
|
|
|
2008
|
|
|
2007
|
|
Interest
payable on long-term borrowings
|
|
$
|
2,669
|
|
|
$
|
6,872
|
|
|
$
|
5,377
|
|
Commitment
fees payable on long-term borrowings
|
|
|
71
|
|
|
|
37
|
|
|
|
14
|
|
Bank
charges
|
|
|
40
|
|
|
|
38
|
|
|
|
23
|
|
Amortization
of debt discount
|
|
|
130
|
|
|
|
386
|
|
|
|
137
|
|
Other
finance expenses
|
|
|
16
|
|
|
|
374
|
|
|
|
45
|
|
Total
|
|
$
|
2,926
|
|
|
$
|
7,707
|
|
|
$
|
5,596
|
|
GLOBUS
MARITIME LIMITED
NOTES
TO THE CONSOLIDATED FINANCIAL STATEMENTS
(Amounts
presented in thousands of U.S. Dollars - except for share and per share data,
unless otherwise stated)
Dividends
declared and paid during the years ended December 31, 2009, 2008 and 2007 are as
follows:
|
|
GBp per
share
|
|
|
US cents
per share
|
|
|
US$000s
|
|
Date declared
|
|
Date Paid
|
|
Extraordinary
interim dividend
|
|
|
-
|
|
|
|
10.4
|
|
|
|
2,100
|
|
May
31, 2007
|
|
September
24, 2007
|
|
Interim
dividend for 2007
|
|
|
1.44
|
|
|
|
2.9
|
|
|
|
817
|
|
August
21, 2007
|
|
September
7, 2007
|
|
Final
dividend for 2007
|
|
|
7.31
|
|
|
|
14.5
|
|
|
|
4,154
|
|
February
29, 2008
|
|
May
9, 2008
|
|
Interim
dividend for 2008
|
|
|
26.9
|
|
|
|
50.0
|
|
|
|
14,328
|
|
August
26, 2008
|
|
September
18, 2008
|
|
19.
|
Derivative
Financial Instruments
|
|
|
December 31,
|
|
|
|
2009
|
|
|
2008
|
|
|
|
Assets
|
|
|
Liabilities
|
|
|
Assets
|
|
|
Liabilities
|
|
Interest
rate swaps
|
|
|
-
|
|
|
$
|
1,220
|
|
|
|
-
|
|
|
$
|
1,373
|
|
Foreign
exchange forward contracts
|
|
|
-
|
|
|
|
10
|
|
|
|
-
|
|
|
|
-
|
|
Total
|
|
|
-
|
|
|
$
|
1,230
|
|
|
|
-
|
|
|
$
|
1,373
|
|
During
November 2008, the Group entered into an interest rate swap agreement of a
notional amount of $10,000 effective from November 28, 2008 to November 29,
2013. For the period from November 28, 2008 to November 23, 2010, the Group will
exchange 6 month LIBOR interest rate with a fixed interest rate of 2.4%. On
November 23, 2010, the swap counterparty has the option to select either (a) to
exchange 6 month LIBOR interest rate with a fixed interest rate of 3.6%, or (b)
to exchange 6 month LIBOR interest rate with 6 month LIBOR interest rate minus
20 basis points for the remaining period to maturity. As of December 31, 2009
and 2008, the aforementioned interest rate swap had a fair value of $430 and
$485, respectively, in favor of the swap counterparty.
During
November 2008, the Group entered into an interest rate swap agreement of a
notional amount of $15,000, effective from November 28, 2008 to November 28,
2013. For the period from November 28, 2008 to November 29, 2010, the Group will
exchange 3 month LIBOR interest rate with a fixed interest rate of
2.45%.
On
November 29, 2010, and for the remaining period to maturity, the swap
counterparty has the option to select either (a) to exchange 3 month LIBOR
interest rate with a fixed interest rate of 3.64%, or (b) to exchange 3 month
LIBOR interest rate with 3 month LIBOR interest rate minus 20 basis points. As
of December 31, 2009 and 2008, the aforementioned interest rate swap had a fair
value of $790 and $888, respectively, in favor of the swap
counterparty.
Gains and
losses on interest rate swap contracts are recognized in the income statement
component of the consolidated statement of comprehensive income in finance
costs.
20.
|
(Loss)/Gain
on Sale of Vessel
|
During
the year ended December 31, 2008, the Group sold the
m/v Ocean Globe
for
$37,000.
During
the year ended December 31, 2009, the Group sold the
m/v Island Globe
,
m/v Gulf Globe
and
m/v Lake Globe
for $19,100,
$15,500 and $16,500, respectively.
GLOBUS
MARITIME LIMITED
NOTES
TO THE CONSOLIDATED FINANCIAL STATEMENTS
(Amounts
presented in thousands of U.S. Dollars - except for share and per share data,
unless otherwise stated)
20.
|
(Loss)/Gain
on Sale of Vessel (continued)
|
The
(loss)/gain on the sale of the vessels was calculated as follows:
|
|
Year ended December 31,
|
|
|
|
2009
|
|
|
2008
|
|
|
2007
|
|
Proceeds
(note 5)
|
|
$
|
51,100
|
|
|
$
|
37,000
|
|
|
|
-
|
|
Carrying
amount of vessels sold (note 5)
|
|
|
(49,833
|
)
|
|
|
(21,657
|
)
|
|
|
-
|
|
Other
selling expenses
|
|
|
(2,069
|
)
|
|
|
(248
|
)
|
|
|
-
|
|
Net
(loss) / gain on sale
|
|
$
|
(802
|
)
|
|
$
|
15,095
|
|
|
|
-
|
|
Various
claims, suits and complaints, including those involving government regulations,
arise in the ordinary course of the shipping business. In addition, losses may
arise from disputes with charterers, environmental claims, agents and insurers
and from claims with suppliers relating to the operations of the Group’s
vessels. Currently, management is not aware of any such claims or contingent
liabilities that are material for disclosure.
Through
December 31, 2009, the Group entered into time charter arrangements on its
vessels. These non-cancellable arrangements had remaining terms between ten days
to five months as of December 31, 2009, and between one to twelve months as of
December 31, 2008, assuming redelivery at the earliest possible
date.
The
expected minimum gross future lease revenues receivable upon non-cancellable
operating leases as of December 31, 2009 and 2008 are as follows (vessel
off-hires, drydocking days and early delivery of the vessels that could occur
but are not currently known are not taken into consideration or accounted for
below):
|
|
2009
|
|
|
2008
|
|
Within
one year
|
|
$
|
2,925
|
|
|
$
|
26,380
|
|
After
one year but not more than five years
|
|
|
-
|
|
|
|
-
|
|
More
than five years
|
|
|
-
|
|
|
|
-
|
|
Total
|
|
$
|
2,925
|
|
|
$
|
26,380
|
|
These
amounts include consideration for other elements of the arrangement apart from
the right to use the vessel, such as maintenance and crewing and its related
costs.
As of
December 31, 2009 and 2008, the Group was a party to an operating lease
agreement as lessee. The operating lease relates to the office premises of the
Group (expiring in August 2015).
The
future minimum lease payments under this agreement as of December 31, 2009 and
2008, were as follows:
|
|
2009
|
|
|
2008
|
|
Within
one year
|
|
$
|
247
|
|
|
$
|
252
|
|
After
one year but not more than five years
|
|
|
1,051
|
|
|
|
1,144
|
|
More
than five years
|
|
|
185
|
|
|
|
545
|
|
Total
|
|
$
|
1,483
|
|
|
$
|
1,941
|
|
Total
rent expense under operating leases for the years ended December 31, 2009, 2008
and 2007, amounted to $239, $242 and $214 respectively.
GLOBUS
MARITIME LIMITED
NOTES
TO THE CONSOLIDATED FINANCIAL STATEMENTS
(Amounts
presented in thousands of U.S. Dollars - except for share and per share data,
unless otherwise stated)
Under
Article 123A of the Income Tax (Jersey) law 1961, as amended, the Company has
obtained Jersey exempt company status for the year and is therefore exempt from
Jersey income tax on non Jersey source income and bank interest (by concession).
A GBP600 annual exempt fee was payable by the Company. The exempt company regime
no longer applies as of January 1, 2009. The general rate of corporation tax for
companies resident in Jersey will be 0% from this date. Also, under the laws of
the respective jurisdictions of the consolidated subsidiaries of the Group, the
Group is not subject to tax on international shipping income. Instead, a tax is
levied based on the tonnage of the vessels, which is included in operating
expenses in the consolidated income statement.
Pursuant
to the Internal Revenue Code of the United States (the “Code”), U.S. source
income from the international operations of ships is generally exempt from U.S.
tax if the company operating the ships meets both of the following requirements:
(a) the company is incorporated in a foreign country that grants an equivalent
exception to corporations incorporated in the United States and (b) either (i)
more than 50% of the value of the company’s stock is owned, directly or
indirectly, by individuals who are “residents” of the company’s country of
incorporation or of another foreign country that grants an “equivalent
exemption” to corporations incorporated in the United States (50% Ownership
Test) or (ii) the company’s stock is “primarily and regularly traded on an
established securities market” in its country of incorporation, in another
country that grants an “equivalent exemption” to United States corporations, or
in the United States (Publicly-Traded Test). Under the regulations, company’s
stock will be considered to be “regularly traded” on an established securities
market if (1) one or more classes of stock representing 50% or more of its
outstanding shares, by voting power and value, is listed on the market and is
traded on the market, other than in minimal quantities, on at least 60 days
during the taxable year; and (2) the aggregate number of shares of stock traded
during the taxable year is at least 10% of the average number of shares of the
stock outstanding during the taxable year. Notwithstanding the foregoing, the
regulations provide, in pertinent part, that each class of the company’s stock
will not be considered to be “regularly traded” on an established securities
market for any taxable year in which 50% or more of the vote and value of the
outstanding shares of such class are owned, actually or constructively under
specified stock attribution rules, on more than half the days during the taxable
year by persons who each own 5% or more of the value of such class of the
company’s outstanding stock.
The Group
anticipates its income will continue to be exempt in the future, including U.S.
federal income tax. However, in the future, the Group may not continue to
satisfy certain criteria in the U.S. tax laws and as such, may become subject to
the U.S. federal income tax on future U.S. source shipping income.
24.
|
Financial
Risk Management Objectives and
Policies
|
The
Group’s financial liabilities are bank loans, trade and other payables. The main
purpose of these financial liabilities is to assist in the financing of Group’s
operations and the acquisition of vessels. The Group has various financial
assets such as trade accounts receivable, cash and bank balances and bank
deposits, which arise directly from its operations.
The main
risks arising from the Group’s financial instruments are cash flow interest rate
risk, credit risk, liquidity risk and foreign currency risk.
Interest
Rate Risk
Interest
rate risk is the risk that the fair value or future cash flows of a financial
instrument will fluctuate because of changes in market interest rates. The
Group’s exposure to the risk of changes in market interest rates relates
primarily to the Group’s long-term debt obligations with floating interest
rates. To manage this, the Group enters into interest rate swap, in which the
Group agrees to exchange, at specific intervals, the difference between fixed
and variable interest rate. Interest amounts are calculated by reference to an
agreed upon notional principal amount. After taking into account the effect of
interest rate swaps, approximately 35% of the Group’s borrowings as of December
31, 2009 and 16% as of December 31, 2008, were at a fixed rate of
interest.
GLOBUS
MARITIME LIMITED
NOTES
TO THE CONSOLIDATED FINANCIAL STATEMENTS
(Amounts
presented in thousands of U.S. Dollars - except for share and per share data,
unless otherwise stated)
24.
|
Financial
Risk Management Objectives and Policies
(continued)
|
Interest
Rate Risk Table
The
following table demonstrates the sensitivity to a reasonably possible change in
interest rates, with all other variables held constant, of the Group’s profit.
There is no impact on the Group’s equity.
|
|
Increase/Decrease in
basis points
|
|
|
Effect on profit
|
|
|
|
|
|
|
|
|
2009
|
|
|
|
|
|
|
LIBOR
|
|
|
+15
|
|
|
$
|
(219
|
)
|
|
|
|
-20
|
|
|
|
292
|
|
2008
|
|
|
|
|
|
|
|
|
LIBOR
|
|
|
+15
|
|
|
$
|
(257
|
)
|
|
|
|
-20
|
|
|
|
343
|
|
Foreign
Currency Risk
Foreign
currency risk is the risk that the fair value or future cash flows of a
financial instrument will fluctuate because of changes in foreign exchange
rates. The Group’s exposure to the risk of changes in foreign exchange rates
relates primarily to the Group’s operating activities.
Foreign
Currency Sensitivity
The
following table demonstrates the sensitivity to a reasonably possible change in
the Euro exchange rate, with all other variables held constant, of the Group’s
profit due to changes in the fair value of monetary assets and liabilities. The
Group’s exposure to foreign currency changes for all other currencies as of
December 31, 2009 and 2008 was not material.
|
|
Change in rate
|
|
|
Effect on profit
|
|
|
|
|
|
|
|
|
2009
|
|
|
+10
|
%
|
|
$
|
404
|
|
|
|
|
-10
|
%
|
|
|
(404
|
)
|
|
|
|
|
|
|
|
|
|
2008
|
|
|
+10
|
%
|
|
$
|
(46
|
)
|
|
|
|
-10
|
%
|
|
|
46
|
|
Credit
Risk
The Group
operates only with recognized, creditworthy third parties including major
charterers, commodity traders and government owned entities. Receivable balances
are monitored on an ongoing basis with the result that the Group’s exposure to
impairment on trade accounts receivable is not significant. The maximum exposure
is the carrying value of trade accounts receivable as indicated in the
consolidated statement of financial position. With respect to the credit risk
arising from other financial assets of the Group, such as cash and cash
equivalents, the Group’s exposure to credit risk arises from default of the
counterparties, which are recognized financial institutions. The Group performs
annual evaluations of the relative credit standing of these counterparties. The
exposure of these financial instruments is equal to their carrying amount as
indicated in the consolidated statement of financial position.
GLOBUS
MARITIME LIMITED
NOTES
TO THE CONSOLIDATED FINANCIAL STATEMENTS
(Amounts
presented in thousands of U.S. Dollars - except for share and per share data,
unless otherwise stated)
24.
|
Financial
Risk Management Objectives and Policies
(continued)
|
Concentration
of Credit Risk Table
The
following table provides information with respect to charterers who individually
accounted for more than 10% of the Group’s revenue for the years ended December
31, 2009, 2008 and 2007:
|
|
2009
|
|
|
2008
|
|
|
2007
|
|
Cosco
Bulk Carrier Co. Ltd.
|
|
|
-
|
|
|
$
|
15,756
|
|
|
$
|
16,943
|
|
Atlas
Shipping A/S
|
|
|
-
|
|
|
|
-
|
|
|
|
8,166
|
|
STX
Pan Ocean Co. Ltd.
|
|
|
-
|
|
|
|
-
|
|
|
|
6,777
|
|
D/S
Norden A/S
|
|
|
7,373
|
|
|
|
10,371
|
|
|
|
5,241
|
|
Korea
Line Corp.
|
|
|
23,162
|
|
|
|
21,553
|
|
|
|
-
|
|
Other
|
|
|
22,277
|
|
|
|
50,917
|
|
|
|
3,833
|
|
Total
|
|
$
|
52,812
|
|
|
$
|
98,597
|
|
|
$
|
40,960
|
|
Liquidity
Risk
The Group
mitigates liquidity risk by managing cash generation by its operations and
applying cash collection targets appropriately. The vessels are normally
chartered under time charter agreements where, in accordance with industry
practice, the charterer pays for the transportation service 15 days in advance,
supporting the management of cash generation. Vessel acquisitions are carefully
controlled, with authorization limits operating up to board level and cash
payback periods applied as part of the investment appraisal process. This way,
the Group maintains a good credit rating to facilitate fund raising. The Group’s
funding strategy objective is to maintain a balance between continuity of
funding and flexibility through the use of bank loans. Excess cash used in
managing liquidity is only invested in financial instruments exposed to
insignificant risk of changes in market value, such as being placed on interest
bearing deposits with maturities fixed at no more than 3 months. The Group
monitors its risk to shortage of funds by considering the maturity of its
financial liabilities and its projected cash flows from operations.
The table
below summarizes the maturity profile of the Group’s financial liabilities as of
December 31, 2009 and 2008, based on contractual undiscounted cash
flows.
Year ended December 31, 2009
|
|
On
demand
|
|
|
Less than
3 months
|
|
|
3 to 12
months
|
|
|
1 to 5
years
|
|
|
More than
5 years
|
|
|
Total
|
|
Long-term
debt
|
|
|
-
|
|
|
|
949
|
|
|
|
10,522
|
|
|
|
56,222
|
|
|
|
5,964
|
|
|
|
73,657
|
|
Interest
rate swap, net
|
|
|
-
|
|
|
|
44
|
|
|
|
615
|
|
|
|
2,340
|
|
|
|
-
|
|
|
|
2,999
|
|
Accrued
liabilities and other payables
|
|
|
-
|
|
|
|
1,095
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
1,095
|
|
Trade
accounts payable
|
|
|
-
|
|
|
|
1,158
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
1,158
|
|
Total
|
|
|
-
|
|
|
$
|
3,246
|
|
|
$
|
11,137
|
|
|
$
|
58,562
|
|
|
$
|
5,964
|
|
|
$
|
78,909
|
|
Year ended December 31, 2008
|
|
On
demand
|
|
|
Less than
3 months
|
|
|
3 to 12
months
|
|
|
1 to 5
years
|
|
|
More than
5 years
|
|
|
Total
|
|
Long-term
Debt
|
|
|
-
|
|
|
|
2,140
|
|
|
|
23,715
|
|
|
|
93,599
|
|
|
|
55,751
|
|
|
|
175,205
|
|
Interest
rate swap, net
|
|
|
-
|
|
|
|
25
|
|
|
|
177
|
|
|
|
1,796
|
|
|
|
-
|
|
|
|
1,998
|
|
Accrued
liabilities and other payables
|
|
|
-
|
|
|
|
707
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
707
|
|
Trade
accounts payable
|
|
|
-
|
|
|
|
2,212
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
2,212
|
|
Total
|
|
|
-
|
|
|
$
|
5,084
|
|
|
$
|
23,892
|
|
|
$
|
95,395
|
|
|
$
|
55,751
|
|
|
$
|
180,122
|
|
The
primary objective of the Group’s capital management is to ensure that it
maintains a strong credit rating and healthy capital ratios in order to support
its business and maximize shareholder value. The Group manages its capital
structure, and makes adjustments to it, in light of changes in economic
conditions. To maintain or adjust the capital structure, the Group may adjust
the dividend payment to shareholders, return capital to shareholders or issue
shares as well as managing the outstanding level of debt. No changes were made
in the objectives, policies or processes during the years ended December 31,
2009 and 2008.
GLOBUS
MARITIME LIMITED
NOTES
TO THE CONSOLIDATED FINANCIAL STATEMENTS
(Amounts
presented in thousands of U.S. Dollars - except for share and per share data,
unless otherwise stated)
24.
|
Financial
Risk Management Objectives and Policies
(continued)
|
Capital
Management (continued):
The Group
monitors capital using the ratio of net debt to book capitalization adjusted for
the market value of the Group’s vessels plus net debt. The Group includes within
net debt interest bearing loans gross of unamortized debt discount, less cash
and bank balances and bank deposits. Market values of the vessels are provided
by independent internationally recognized firms of shipbrokers.
Adjusted
book capitalization refers to total equity adjusted for the market value of the
Group’s vessels plus net debt. The Group’s policy is to keep the ratio described
above, below 60%
|
|
December 31,
|
|
|
|
2009
|
|
|
2008
|
|
Interest
bearing loans
|
|
$
|
70,562
|
|
|
$
|
157,600
|
|
Cash
and bank balances and bank deposits
|
|
|
(59,157
|
)
|
|
|
(65,342
|
)
|
Net
debt
|
|
|
11,405
|
|
|
|
92,258
|
|
|
|
|
|
|
|
|
|
|
Equity
|
|
|
113,458
|
|
|
|
121,783
|
|
Adjustment
for the market value of vessels (charter-free)
|
|
|
(36,696
|
)
|
|
|
(92,507
|
)
|
Book
capitalization
|
|
|
76,762
|
|
|
|
29,276
|
|
|
|
|
|
|
|
|
|
|
Adjusted
book capitalization plus net debt
|
|
$
|
88,167
|
|
|
$
|
121,534
|
|
Ratio
|
|
|
13
|
%
|
|
|
76
|
%
|
Net debt
as calculated above is not consistent with the IFRS definition of debt. The
following reconciliation is provided:
|
|
December 31,
|
|
|
|
2009
|
|
|
2008
|
|
Debt
in accordance with IFRS
|
|
$
|
70,075
|
|
|
$
|
156,983
|
|
Add:
Unamortized debt discount
|
|
|
487
|
|
|
|
617
|
|
|
|
|
70,562
|
|
|
|
157,600
|
|
Less:
Cash and bank balances and bank deposits
|
|
|
(59,157
|
)
|
|
|
(65,342
|
)
|
Net
debt
|
|
$
|
11,405
|
|
|
$
|
92,258
|
|
25.
|
Financial
Instruments
|
Fair Values
Derivative
financial instruments are recorded at fair value, while all other financial
assets and financial liabilities are recorded at amortized cost which
approximates fair value as of December 31, 2009 and 2008.
Fair
Value Hierarchy
The Group
uses the following hierarchy for determining and disclosing the fair value of
financial instruments by valuation technique:
|
Level
1:
|
quoted
(unadjusted) prices in active markets for identical assets or
liabilities.
|
GLOBUS
MARITIME LIMITED
NOTES
TO THE CONSOLIDATED FINANCIAL STATEMENTS
(Amounts
presented in thousands of U.S. Dollars - except for share and per share data,
unless otherwise stated)
25.
|
Financial
Instruments (continued)
|
Fair
Value Hierarchy (continued):
|
Level
2:
|
other
techniques for which all inputs which have a significant effect on the
recorded fair value are observable, either directly or
indirectly.
|
|
Level
3:
|
techniques
that use inputs that have a significant effect on the recorded fair value
that are not based on observable market
data.
|
As of
December 31, 2009 and 2008, the Group held the following financial instruments
measured at fair value:
Liabilities at fair value
|
|
December 31, 2009
|
|
|
Level 1
|
|
|
Level 2
|
|
|
Level 3
|
|
Interest
rate swaps
|
|
$
|
1,220
|
|
|
|
-
|
|
|
$
|
1,220
|
|
|
|
-
|
|
Foreign
exchange forward contracts
|
|
|
10
|
|
|
|
-
|
|
|
|
10
|
|
|
|
-
|
|
Total
|
|
$
|
1,230
|
|
|
|
-
|
|
|
$
|
1,230
|
|
|
|
-
|
|
Liabilities at fair value
|
|
December 31, 2008
|
|
|
Level 1
|
|
|
Level 2
|
|
|
Level 3
|
|
Interest
rate swaps
|
|
|
1,373
|
|
|
|
-
|
|
|
|
1,373
|
|
|
|
-
|
|
Total
|
|
$
|
1,373
|
|
|
|
-
|
|
|
$
|
1,373
|
|
|
|
-
|
|
26.
|
Events
after the Reporting Date
|
Delivery
of Vessels Sold
On
February 17, 2010, the
m/v Sea
Globe
and
m/v Coral
Globe
were delivered to their new owners (note 5).
Debt
Repayment
On
February 17, 2010, following the delivery of the aforementioned vessels, the
Company repaid outstanding debt of $27,007 relating to the loan in which the
aforementioned vessels were used as collateral (note 12).
Vessels
Acquisition
a)
|
On
March 26, 2010, Domina Maritime Ltd and Dulac Maritime S.A. (wholly owned
subsidiaries of the Company) entered into memoranda of agreement for the
purchase of two dry bulk sister ships, the
m/v Sky Globe
and
m/v Star Globe
respectively, for a total purchase price of $65,650. The vessels were
delivered to the Group on May 19, 2010 and May 25, 2010, respectively. The
acquisition of the vessels was financed partly by the $35,520 undrawn
committed borrowing facility (note 3, 12) and the remaining balance from
the Group’s available cash. The credit facility with Credit Suisse was
then fully drawn and no amounts were available for further
drawing.
|
b)
|
On
June 7, 2010, Kelty Marine Ltd., a wholly owned subsidiary of the Company,
entered into a memorandum of agreement for the purchase of a dry bulk
vessel, the
m/v Jin
Star
, with a bareboat agreement attached at a daily rate of $14,
for a purchase price of $41,112. The vessel was delivered to the Group on
June 29, 2010. The acquisition of the vessel was financed partly by the
issuance of new debt of $26,650 and the remaining balance from the Group’s
available cash.
|
GLOBUS
MARITIME LIMITED
NOTES
TO THE CONSOLIDATED FINANCIAL STATEMENTS
(Amounts
presented in thousands of U.S. Dollars - except for share and per share data,
unless otherwise stated)
26.
|
Events
after the Reporting Date
(continued)
|
Issuance
of Debt
On June
25, 2010, the Group entered into a loan agreement with the purpose of financing
part of the acquisition of the
m/v Jin Star
. The amount of
$26,650 was drawdown on June 28, 2010, and will be repaid in twenty-eight
quarterly installments of $500 each and a balloon payment of $12,650 payable
together with the final installment on the final maturity date. The loan bears
interest at LIBOR plus a margin as described below:
Loan
amount outstanding over the market value of
m/v Jin Star
(“LtV”)
|
|
Margin
|
|
|
|
|
|
|
Less
than 45%
|
|
|
2.25
|
%
|
|
|
|
|
|
45%
or greater and less than or equal to 60%
|
|
|
2.40
|
%
|
|
|
|
|
|
Greater
than 60% and less than or equal to 70%
|
|
|
2.50
|
%
|
|
|
|
|
|
Greater
than 70%
|
|
|
2.75
|
%
|
Reverse
Split
At the
annual general shareholders meeting which took place on July 28, 2010, the
shareholders of the Company approved a reverse split of four ordinary shares of
$0.001 each, in the capital of the Company into one ordinary share of $0.004
each. Such reverse split occurred on July 29, 2010.
Redomiciliation
On
November 24, 2010, the Company redomiciled from Jersey into the Marshall
Islands. Upon redomiciliation, the existence of the Company shall be deemed to
have commenced on the date the Company commenced its existence in Jersey. The
redomiciliation of the Company in the Marshall Islands does not affect any
obligations or liabilities of the Company incurred prior to its redomiciliation,
and property of every description, including rights of action and the business
of the Company shall continue to be vested in the Company. The registered
address of the Company in the Marshall Islands is located in Trust Company
Complex, Ajeltake Island, Ajeltake Road, Majuro, Marshall Islands MH96960. The
name of the Company’s registered agent at such address is The Trust Company of
the Marshall Islands, Inc.
GLOBUS
MARITIME LIMITED
INTERIM
CONDENSED CONSOLIDATED STATEMENT OF FINANCIAL POSITION
At
June 30, 2010
(Expressed
in thousands of U.S. Dollars)
|
|
|
|
June 30,
|
|
|
December 31,
|
|
|
|
|
|
2010
|
|
|
2009
|
|
|
|
Note
|
|
(Unaudited)
|
|
|
(Audited)
|
|
ASSETS
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
NON-CURRENT
ASSETS
|
|
|
|
|
|
|
|
|
Vessels,
net
|
|
5
|
|
|
196,184
|
|
|
|
93,166
|
|
Office
furniture and equipment
|
|
|
|
|
22
|
|
|
|
28
|
|
Other
non-current assets
|
|
|
|
|
10
|
|
|
|
10
|
|
Total
non-current assets
|
|
|
|
|
196,216
|
|
|
|
93,204
|
|
CURRENT
ASSETS
|
|
|
|
|
|
|
|
|
|
|
Cash
and bank balances and bank deposits
|
|
3
|
|
|
22,745
|
|
|
|
59,157
|
|
Trade
accounts receivable, net
|
|
|
|
|
253
|
|
|
|
336
|
|
Inventories
|
|
|
|
|
416
|
|
|
|
355
|
|
Prepayments
and other assets
|
|
|
|
|
958
|
|
|
|
1,488
|
|
Total
current assets
|
|
|
|
|
24,372
|
|
|
|
61,336
|
|
Non-current
assets classified as held for sale
|
|
5
|
|
|
-
|
|
|
|
33,030
|
|
|
|
|
|
|
24,372
|
|
|
|
94,366
|
|
TOTAL
ASSETS
|
|
|
|
|
220,588
|
|
|
|
187,570
|
|
|
|
|
|
|
|
|
|
|
|
|
EQUITY AND LIABILITIES
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
EQUITY
ATTRIBUTABLE TO SHAREHOLDERS OF GLOBUS MARITIME LIMITED
|
|
|
|
|
|
|
|
|
Share
capital
|
|
6
|
|
|
29
|
|
|
|
29
|
|
Share
premium
|
|
6
|
|
|
88,529
|
|
|
|
88,516
|
|
Retained
earnings
|
|
|
|
|
26,138
|
|
|
|
24,913
|
|
Total
equity
|
|
|
|
|
114,696
|
|
|
|
113,458
|
|
NON-CURRENT
LIABILITIES
|
|
|
|
|
|
|
|
|
|
|
Long-term
borrowings, net of current portion
|
|
8
|
|
|
90,785
|
|
|
|
36,175
|
|
Provision
for staff retirement indemnities
|
|
|
|
|
43
|
|
|
|
43
|
|
Total
non-current liabilities
|
|
|
|
|
90,828
|
|
|
|
36,218
|
|
CURRENT
LIABILITIES
|
|
|
|
|
|
|
|
|
|
|
Current
portion of long-term borrowings
|
|
8
|
|
|
10,902
|
|
|
|
33,900
|
|
Trade
accounts payable
|
|
|
|
|
935
|
|
|
|
1,158
|
|
Accrued
liabilities and other payables
|
|
|
|
|
698
|
|
|
|
1,095
|
|
Derivative
financial instruments
|
|
9
|
|
|
1,794
|
|
|
|
1,230
|
|
Deferred
revenue
|
|
|
|
|
735
|
|
|
|
511
|
|
Total
current liabilities
|
|
|
|
|
15,064
|
|
|
|
37,894
|
|
TOTAL
LIABILITIES
|
|
|
|
|
105,892
|
|
|
|
74,112
|
|
TOTAL
EQUITY AND LIABILITIES
|
|
|
|
|
220,588
|
|
|
|
187,570
|
|
The
accompanying notes are an integral part of these interim condensed consolidated
financial statements.
GLOBUS
MARITIME LIMITED
INTERIM
CONDENSED CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME
For
the six months ended June 30, 2010
(Expressed
in thousands of U.S. Dollars, except per share data)
|
|
|
|
|
(Unaudited)
|
|
|
|
|
|
|
Six months ended June 30,
|
|
|
|
Note
|
|
|
2010
|
|
|
2009
|
|
REVENUE:
|
|
|
|
|
|
|
|
|
|
Time
charter revenue
|
|
|
|
|
|
11,618
|
|
|
|
26,540
|
|
|
|
|
|
|
|
|
|
|
|
|
|
EXPENSES
& OTHER OPERATING INCOME:
|
|
|
|
|
|
|
|
|
|
|
|
Voyage
expenses
|
|
|
|
|
|
(845
|
)
|
|
|
(2,070
|
)
|
Vessels
operating expenses
|
|
|
|
|
|
(2,638
|
)
|
|
|
(5,678
|
)
|
Depreciation
|
|
5
|
|
|
|
(2,816
|
)
|
|
|
(6,989
|
)
|
Depreciation
of dry docking costs
|
|
5
|
|
|
|
(260
|
)
|
|
|
(836
|
)
|
Administrative
expenses
|
|
|
|
|
|
(1,005
|
)
|
|
|
(907
|
)
|
Administrative
expenses payable to related parties
|
|
4
|
|
|
|
(518
|
)
|
|
|
(541
|
)
|
Share-based
payments
|
|
6
|
|
|
|
(148
|
)
|
|
|
(1,542
|
)
|
Impairment
loss
|
|
|
|
|
|
-
|
|
|
|
(18,826
|
)
|
Gain
on sale of vessel
|
|
10
|
|
|
|
7
|
|
|
|
-
|
|
Other
expenses, net
|
|
|
|
|
|
(31
|
)
|
|
|
(20
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating
profit/(loss) before financial activities
|
|
|
|
|
|
3,364
|
|
|
|
(10,869
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest
income from bank balances & deposits
|
|
|
|
|
|
223
|
|
|
|
488
|
|
Interest
expense and finance costs
|
|
|
|
|
|
(977
|
)
|
|
|
(1,591
|
)
|
Gain/(loss)
on derivative financial instruments
|
|
9
|
|
|
|
(564
|
)
|
|
|
309
|
|
Foreign
exchange (losses)/gains, net
|
|
|
|
|
|
(956
|
)
|
|
|
34
|
|
Total
loss from financial activities
|
|
|
|
|
|
(2,274
|
)
|
|
|
(760
|
)
|
TOTAL
PROFIT/(LOSS) FOR THE PERIOD
|
|
|
|
|
|
1,090
|
|
|
|
(11,629
|
)
|
Other
comprehensive income
|
|
|
|
|
|
-
|
|
|
|
-
|
|
TOTAL
COMPREHENSIVE INCOME/(LOSS) FOR THE PERIOD
|
|
|
|
|
|
1,090
|
|
|
|
(11,629
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
Attributable
to:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Globus
Maritime Limited shareholders
|
|
|
|
|
|
1,090
|
|
|
|
(11,629
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
Earnings/(loss)
per share (U.S.$):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
-
Basic earnings/(loss) per share for the period
|
|
7
|
|
|
|
0.151
|
|
|
|
(1.619
|
)
|
-
Diluted earning/(loss) per share for the period
|
|
7
|
|
|
|
0.151
|
|
|
|
(1.619
|
)
|
The
accompanying notes are an integral part of these interim condensed consolidated
financial statements.
GLOBUS
MARITIME LIMITED
INTERIM
CONDENSED CONSOLIDATED STATEMENT OF CHANGES IN EQUITY
For
the six months ended June 30, 2010
(Expressed
in thousands of U.S. Dollars, except share and per share data)
|
|
Common Stock
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Post reverse split
equivalent (note 14)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Number
of Shares
|
|
|
Par
Value
|
|
|
Number
of Shares
|
|
|
Par
Value
|
|
|
Issued
Share
Capital
|
|
|
Share
Premium
|
|
|
Retained
Earnings
|
|
|
Total
Equity
|
|
Balance
as of January 1, 2010 (audited)
|
|
|
28,956,172
|
|
|
|
0.001
|
|
|
|
7,239,043
|
|
|
|
0.004
|
|
|
|
29
|
|
|
|
88,516
|
|
|
|
24,913
|
|
|
|
113,458
|
|
Profit
for the period
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
1,090
|
|
|
|
1,090
|
|
Other
comprehensive income
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
Total
comprehensive income for the period
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
1,090
|
|
|
|
1,090
|
|
Share-based
payment
|
|
|
7,236
|
|
|
|
0.001
|
|
|
|
1,809
|
|
|
|
0.004
|
|
|
|
-
|
|
|
|
13
|
|
|
|
135
|
|
|
|
148
|
|
Balance
as of June 30, 2010 (unaudited)
|
|
|
28,963,408
|
|
|
|
0.001
|
|
|
|
7,240,852
|
|
|
|
0.004
|
|
|
|
29
|
|
|
|
88,529
|
|
|
|
26,138
|
|
|
|
114,696
|
|
|
|
Common Stock
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Post reverse split
equivalent (note 14)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Number
of Shares
|
|
|
Par
Value
|
|
|
Number
of Shares
|
|
|
Par
Value
|
|
|
Issued
Share
Capital
|
|
|
Share
Premium
|
|
|
Retained
Earnings
|
|
|
Total
Equity
|
|
Balance
as of January 1, 2009 (audited)
|
|
|
28,665,450
|
|
|
|
0.001
|
|
|
|
7,166,363
|
|
|
|
0.004
|
|
|
|
29
|
|
|
|
87,600
|
|
|
|
34,154
|
|
|
|
121,783
|
|
Loss
for the period
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
(11,629
|
)
|
|
|
(11,629
|
)
|
Other
comprehensive income
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
Total
comprehensive loss for the period
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
(11,629
|
)
|
|
|
(11,629
|
)
|
Share-based
payment
|
|
|
102,210
|
|
|
|
0.001
|
|
|
|
25,552
|
|
|
|
0.004
|
|
|
|
-
|
|
|
|
721
|
|
|
|
821
|
|
|
|
1,542
|
|
Balance
as of June 30, 2009 (unaudited)
|
|
|
28,767,660
|
|
|
|
0.001
|
|
|
|
7,191,915
|
|
|
|
0.004
|
|
|
|
29
|
|
|
|
88,321
|
|
|
|
23,346
|
|
|
|
111,696
|
|
The
accompanying notes are an integral part of these interim condensed consolidated
financial statements.
GLOBUS
MARITIME LIMITED
INTERIM
CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWS
For
the six months ended June 30, 2010
(Expressed
in thousands of U.S. Dollars)
|
|
(Unaudited)
|
|
|
|
|
|
|
For the six months ended
June 30,
|
|
|
|
Note
|
|
|
2010
|
|
|
2009
|
|
Cash
Flows from Operating Activities:
|
|
|
|
|
|
|
|
|
|
Profit/(loss)
for the period
|
|
|
|
|
|
1,090
|
|
|
|
(11,629
|
)
|
Adjustments
for:
|
|
|
|
|
|
|
|
|
|
|
|
Depreciation
|
|
|
|
|
|
2,816
|
|
|
|
6,989
|
|
Depreciation
of deferred dry docking costs
|
|
|
|
|
|
260
|
|
|
|
836
|
|
Payment
of deferred dry docking costs
|
|
|
|
|
|
-
|
|
|
|
(312
|
)
|
Gain
on sale of vessel
|
|
10
|
|
|
|
(7
|
)
|
|
|
-
|
|
Impairment
loss
|
|
|
|
|
|
-
|
|
|
|
18,826
|
|
Provision
for staff retirement indemnity
|
|
|
|
|
|
-
|
|
|
|
7
|
|
Loss/(gain)
on derivative financial instruments
|
|
9
|
|
|
|
564
|
|
|
|
(309
|
)
|
Interest
expense and finance costs
|
|
|
|
|
|
977
|
|
|
|
1,591
|
|
Interest
income
|
|
|
|
|
|
(223
|
)
|
|
|
(488
|
)
|
Foreign
exchange losses/(gains), net
|
|
|
|
|
|
90
|
|
|
|
(34
|
)
|
Share-based
payment
|
|
6
|
|
|
|
148
|
|
|
|
1,542
|
|
(Increase)/Decrease
in:
|
|
|
|
|
|
|
|
|
|
|
|
Trade
accounts receivables, net
|
|
|
|
|
|
83
|
|
|
|
91
|
|
Inventories
|
|
|
|
|
|
(61
|
)
|
|
|
(46
|
)
|
Prepayments
and other assets
|
|
|
|
|
|
426
|
|
|
|
74
|
|
Increase/(Decrease)
in:
|
|
|
|
|
|
|
|
|
|
|
|
Trade
accounts payable
|
|
|
|
|
|
(223
|
)
|
|
|
(136
|
)
|
Accrued
liabilities and other payables
|
|
|
|
|
|
(294
|
)
|
|
|
62
|
|
Deferred
revenue
|
|
|
|
|
|
224
|
|
|
|
(138
|
)
|
Net
cash generated from operating activities
|
|
|
|
|
|
5,870
|
|
|
|
16,926
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash
Flows from Investing Activities:
|
|
|
|
|
|
|
|
|
|
|
|
Vessel
acquisitions
|
|
5
|
|
|
|
(106,084
|
)
|
|
|
-
|
|
Time
deposits with maturity of three months or more
|
|
|
|
|
|
-
|
|
|
|
10,000
|
|
Net
proceeds from sale of vessels
|
|
10
|
|
|
|
33,037
|
|
|
|
-
|
|
Purchase
of office furniture and equipment
|
|
|
|
|
|
(3
|
)
|
|
|
(1
|
)
|
Interest
received
|
|
|
|
|
|
327
|
|
|
|
770
|
|
Net
cash (used in)/generated from investing activities
|
|
|
|
|
|
(72,723
|
)
|
|
|
10,769
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash
Flows from Financing Activities:
|
|
|
|
|
|
|
|
|
|
|
|
Proceeds
from issuance of long-term debt
|
|
|
|
|
|
62,170
|
|
|
|
-
|
|
Repayment
of long-term debt
|
|
|
|
|
|
(30,583
|
)
|
|
|
(28,900
|
)
|
Pledged
bank deposits
|
|
|
|
|
|
5,000
|
|
|
|
3,800
|
|
Payment
of financing costs
|
|
|
|
|
|
(200
|
)
|
|
|
-
|
|
Interest
paid
|
|
|
|
|
|
(856
|
)
|
|
|
(1,593
|
)
|
Net
cash generated from/(used in) in financing activities
|
|
|
|
|
|
35,531
|
|
|
|
(26,693
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
Net
(decrease)/increase in cash and cash equivalents
|
|
|
|
|
|
(31,322
|
)
|
|
|
1,002
|
|
Foreign
exchange losses on cash and bank deposits
|
|
|
|
|
|
(90
|
)
|
|
|
-
|
|
Cash
and cash equivalents at the beginning of the period
|
|
3
|
|
|
|
53,157
|
|
|
|
33,942
|
|
Cash
and cash equivalents at the end of the period
|
|
3
|
|
|
|
21,745
|
|
|
|
34,944
|
|
The
accompanying notes are an integral part of these interim condensed consolidated
financial statements.
GLOBUS
MARITIME LIMITED
NOTES
TO THE INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Amounts
presented in thousands of U.S. Dollars - except for share and per share data,
unless otherwise stated)
The
interim condensed consolidated financial statements of Globus Maritime Limited
(the “Company”) and its subsidiaries (the “Group”) include the interim condensed
financial statements of the following companies:
Company
|
|
Country of
Incorporation
|
|
Date of
Incorporation
|
|
Activity
|
|
|
|
|
|
|
|
Globus
Maritime Limited
|
|
Jersey
|
|
July
26, 2006
|
|
Holding
Co.
|
|
|
|
|
|
|
|
Globus Shipmanagement Corp.
|
|
Marshall Islands
|
|
July 26, 2006
|
|
Management Co.
|
|
|
|
|
|
|
|
Globus
Shipmanagement Corp. (the “Manager”) is a wholly owned subsidiary of the
Company.
The
consolidated financial statements also include the interim condensed financial
statements of the following vessel-owning subsidiaries, all wholly owned by the
Company as of June 30, 2010 and 2009:
Company
|
|
Country of
Incorporation
|
|
Vessel Delivery
Date
|
|
Vessel Owned
|
|
|
|
|
|
|
|
Chantal
Maritime Co. (The company was dissolved on February 19,
2010)
|
|
Marshall
Islands
|
|
September
15, 2006
|
|
m/v Ocean Globe
(sold
in November 2008)
|
|
|
|
|
|
|
|
Sibelle
Marine Inc.
|
|
Marshall
Islands
|
|
September
26, 2006
|
|
m/v Sea Globe
(Sold in
February 2010)
|
|
|
|
|
|
|
|
Supreme
Navigation Co.
|
|
Marshall
Islands
|
|
November
14, 2006
|
|
m/v Coral Globe
(Sold
in February 2010)
|
|
|
|
|
|
|
|
Adagio
Marine S.A.
|
|
Marshall
Islands
|
|
December
6, 2006
|
|
m/v Lake Globe
(sold in
November 2009)
|
|
|
|
|
|
|
|
Abrosa
Shipping Inc.
|
|
Marshall
Islands
|
|
January
11, 2007
|
|
m/v Gulf Globe
(sold in
October 2009)
|
|
|
|
|
|
|
|
Eleanor
Maritime Limited
|
|
Marshall
Islands
|
|
July
9, 2007
|
|
m/v Island Globe
(sold
in September 2009)
|
|
|
|
|
|
|
|
Devocean
Maritime Ltd.
|
|
Marshall
Islands
|
|
December
18, 2007
|
|
m/v
River Globe
|
|
|
|
|
|
|
|
Elysium
Maritime Limited
|
|
Marshall
Islands
|
|
December
18, 2007
|
|
m/v
Tiara Globe
|
|
|
|
|
|
|
|
Domina
Maritime Ltd.
|
|
Marshall
Islands
|
|
May
19, 2010
|
|
m/v
Sky Globe
|
|
|
|
|
|
|
|
Dulac
Maritime S.A.
|
|
Marshall
Islands
|
|
May
25, 2010
|
|
m/v
Star Globe
|
|
|
|
|
|
|
|
Kelty Marine Ltd.
|
|
Marshall Islands
|
|
June 29, 2010
|
|
m/v Jin Star
|
|
|
|
|
|
|
|
The
principal business of the Group is the ownership and operation of a fleet of dry
bulk vessels, providing maritime services for the transportation of dry cargo
products on a worldwide basis. The Group conducts its operations through its
vessel-owning companies.
GLOBUS
MARITIME LIMITED
NOTES
TO THE INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Amounts
presented in thousands of U.S. Dollars - except for share and per share data,
unless otherwise stated)
1.
|
General Information
(continued)
|
On June
1, 2007, the Company concluded its initial public offering in the United Kingdom
and its shares were admitted for trading on the Alternative Investment Market on
the London Stock Exchange (“AIM”).
The
address of the registered office of the Company is Walker House, PO Box 498,
28-34 Hill Street, St Helier, Jersey, JE4 5TF, Channel Islands. On
November 24, 2010, the Company redomiciled from Jersey into the Marshall
Islands. Upon redomiciliation, the existence of the Company shall be deemed to
have commenced on the date the Company commenced its existence in Jersey (note
14).
The
operations of the vessels are managed by the Manager, a wholly owned Marshall
Islands corporation. The Manager has an office in Greece, located at 128
Vouliagmenis Avenue, 166 74 Glyfada, Greece and provides the commercial,
technical, cash management and accounting services necessary for the operation
of the fleet in exchange for a management fee. The management fee is eliminated
on consolidation.
2.
|
Basis
of Preparation and Significant Accounting
Policies
|
2.1
|
Basis of Preparation:
The interim condensed consolidated financial statements for the six
months ended June 30, 2010 have been prepared in accordance with
International Accounting Standard 34
Interim Financial
Reporting
(IAS 34), as issued by the International Accounting
Standards Board (“IASB”). The Company also previously prepared
consolidated financial statements for the six months ended June 30, 2010,
in accordance with IAS 34 as endorsed by the European Union (“EU”). There
are no significant differences between the Company’s consolidated
financial statements prepared in accordance with IFRS as issued by the
IASB and the Company’s consolidated financial statements prepared in
accordance with IFRS as endorsed by the
EU.
|
The
interim condensed consolidated financial statements do not include all the
information and disclosures required in the annual financial statements, and
should be read in conjunction with the Group’s annual financial statements as of
December 31, 2009.
2.2
|
Significant
Accounting Policies:
|
The
accounting policies were adopted in the preparation of the interim condensed
consolidated financial statements, and should be read in conjunction with the
Group’s annual financial statements as of December 31, 2009, except for the
adoption of new standards and interpretations as of January 1, 2010, noted
below:
|
·
|
IFRS 2 Share-based Payment:
Group Cash- settled Share- based Payment Transactions (Amended).
The standard has been amended to clarify the accounting for group
cash-settled share-based payment transactions. This amendment also
supersedes IFRIC 8 and IFRIC 11. The adoption of this amendment did not
have any impact on the financial position or performance of the
Group.
|
|
·
|
IAS 39 Financial Instruments:
Recognition and Measurement (Amended)- Eligible Hedged Items.
The
amendments address the designation of one-sided risk in a hedged item, and
the designation of inflation as a hedged risk or portion in particular
situations. The amendments had no effect on the financial position or the
performance of the Group.
|
|
·
|
IFRIC 17 Distributions of
Non-cash Assets to Owners.
The interpretation provides guidance on
accounting for arrangements whereby an entity distributes non-cash assets
to shareholders either as a distribution of reserve or as dividends. The
interpretation had no effect on the financial position or the performance
of the Group.
|
GLOBUS
MARITIME LIMITED
NOTES
TO THE INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Amounts
presented in thousands of U.S. Dollars - except for share and per share data,
unless otherwise stated)
2.
|
Basis
of Preparation and Significant Accounting Policies
(continued)
|
2.2
|
Significant
Accounting Policies (continued)
|
|
·
|
IFRS 3 Business Combinations
(Revised) and IAS 27 Consolidated and Separate Financial Statements
(Amended).
The revised IFRS 3 introduces a number of changes in the
accounting for business combinations, which will impact the amount of
goodwill recognised, the reported results in the period that an
acquisition occurs and future reported results. Such changes include the
expensing of acquisition-related costs and recognising subsequent changes
in fair value of contingent consideration in the profit or loss (rather
than by adjusting goodwill). The amended IAS 27 requires that a change in
ownership interest of a subsidiary is accounted for as an equity
transaction. Therefore, such a change will have no impact on goodwill, nor
will it give raise to a gain or loss. Furthermore, the amended standard
changes the accounting for losses incurred by the subsidiary as well as
the loss of control of a subsidiary. The interpretation had no effect on
the financial position or the performance of the
Group.
|
|
·
|
Improvements to IFRS (issued
May 2008).
All amendments issued are effective as at 31 December
2009, apart from: IFRS 5 Non-current Assets Held for Sale and Discontinued
Operations, which clarifies when a subsidiary is classified as held for
sale or all its assets and liabilities are classified as held for sale,
even when the entity remains a non-controlling interest after the sale
transaction. The amendment is applied
prospectively.
|
|
·
|
Improvements to IFRS (issued
April 2009).
In April 2009, the Board issued its second omnibus of
amendments to its standards, primarily with a view to removing
inconsistencies and clarifying wording. There are separate transitional
provisions for each standard. The adoption of the following amendments
resulted in changes to accounting policies but did not have any impact on
the financial position or performance of the
Group:
|
|
o
|
IFRS 8 Operating Segment
Information
|
|
o
|
IFRS 2 Share-based
Payment
|
|
o
|
IFRS 5 Non-current Assets Held
for Sale and Discontinued
Operations
|
|
o
|
IAS 1 Presentation of
Financial Statements
|
|
o
|
IAS 7 Statement of Cash
Flows
|
|
o
|
IAS 38 Intangible
Assets
|
|
o
|
IAS 39 Financial
Instruments
:
Recognition and
Measurement
|
|
o
|
IFRIC 9 Reassessment of
Embedded Derivatives
|
|
o
|
IFRIC 16 Hedges of a Net
Investment in a Foreign
Operation
|
|
o
|
IAS 36 Impairment of
Assets
|
The Group
has not adopted any other standard, interpretation or amendment that was issued
but is not yet effective.
3.
|
Cash
and Bank Balances and Bank Deposits
|
For the
purpose of the interim condensed consolidated statement of financial position,
cash and bank balances and bank deposits were comprised the
following:
|
|
June 30,
|
|
|
December 31,
|
|
|
|
2010
|
|
|
2009
|
|
Cash
on hand
|
|
$
|
14
|
|
|
$
|
8
|
|
Bank
balances
|
|
|
2,889
|
|
|
|
1,315
|
|
Bank
deposits
|
|
|
19,842
|
|
|
|
57,834
|
|
Total
|
|
$
|
22,745
|
|
|
$
|
59,157
|
|
Cash held
in banks earns interest at floating rates based on daily bank deposit rates.
Bank deposits are made for varying periods of between one day and three months,
depending on the immediate cash requirements of the Group, and earn interest at
the respective bank deposit rates. The fair value of cash and bank balances and
bank deposits as of June 30, 2010 was US$22,745 (December 31, 2009:
US$59,157).
GLOBUS
MARITIME LIMITED
NOTES
TO THE INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Amounts
presented in thousands of U.S. Dollars - except for share and per share data,
unless otherwise stated)
3.
|
Cash
and Bank Balances and Bank Deposits
(continued)
|
The Group
has pledged a part of its bank deposits in order to fulfil collateral
requirements.
For the
purpose of the interim consolidated statement of cash flow, the following
reconciliation with cash and cash equivalents is provided below:
|
|
June 30,
|
|
|
December 31,
|
|
|
|
2010
|
|
|
2009
|
|
Cash
and bank balances and bank deposits
|
|
$
|
22,745
|
|
|
$
|
59,157
|
|
Less:
pledged bank deposits
|
|
|
(1,000
|
)
|
|
|
(6,000
|
)
|
Cash
and cash equivalents
|
|
$
|
21,745
|
|
|
$
|
53,157
|
|
4.
|
Transactions
with Related Parties
|
The Group
is controlled by Firment Trading Limited (incorporated in Cyprus), which owns
61.8% of the Company’s shares. The remaining 38.2% of the shares are widely
held. The ultimate controlling party of the Group is Mr. George Feidakis. The
following are the major transactions, which have been entered into with related
parties during the six months ended June 30, 2010 and 2009:
Operating
Lease
On August
20, 2006, the Manager entered into a rental agreement for 350 square metres of
office space for its operations within a building owned by Cyberonica S.A. (a
company related through common control). Rental expense is Euro 14 (US$20) per
month up to August 20, 2009. The rental agreement provides for a yearly increase
in rent of 2% above the rate of inflation as set by the Bank of Greece. The
agreement runs for 9 years and can be terminated by the Group with 6 months
notice. During the six months’ ended June 30, 2010, rent expense was US$118
(2009: US$114).
Compensation
of Key Management Personnel of the Group
In May
2007, the Company agreed to pay its three non-executive directors a total of
Pound Sterling (“GBP”) 90 (US$143) cash in total and additionally GBP24 (US$38)
in total to two of the non-executive directors, in ordinary shares in the
Company per annum, less any tax and/or National Insurance contributions payable,
quarterly from the date the Company was admitted to the AIM in arrears. The
relevant number of shares is to be calculated based on the Company’s share price
published in the Financial Times on the date of issue. During the six months
ended June 30, 2010, total compensation to the Company’s non-executive directors
amounted to US$64 (2009: US$88).
Total
compensation to the Company’s executive directors for the six months ended June
30, 2010 amounted to US$431 (2009: US$479)
GLOBUS
MARITIME LIMITED
NOTES
TO THE INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Amounts
presented in thousands of U.S. Dollars - except for share and per share data,
unless otherwise stated)
Vessel Cost
|
|
Cost
|
|
|
Accumulated
Depreciation
|
|
|
Net Book Value
|
|
Balance
at January 1, 2010
|
|
$
|
153,152
|
|
|
$
|
(60,396
|
)
|
|
$
|
92,756
|
|
Vessel
additions, net
|
|
|
106,084
|
|
|
|
-
|
|
|
|
106,084
|
|
Depreciation
for the period
|
|
|
-
|
|
|
|
(2,806
|
)
|
|
|
(2,806
|
)
|
Balance
at June 30, 2010
|
|
$
|
259,236
|
|
|
$
|
(63,202
|
)
|
|
$
|
196,034
|
|
Dry docking Cost
|
|
Cost
|
|
|
Accumulated
Depreciation
|
|
|
Net Book Value
|
|
Balance
at January 1, 2010
|
|
$
|
1,381
|
|
|
$
|
(971
|
)
|
|
$
|
410
|
|
Depreciation
for the period
|
|
|
-
|
|
|
|
(260
|
)
|
|
|
(260
|
)
|
Balance
at June 30, 2010
|
|
|
1,381
|
|
|
|
(1,231
|
)
|
|
|
150
|
|
Vessel
Net Book Value at January 1, 2010
|
|
|
154,533
|
|
|
|
(61,367
|
)
|
|
|
93,166
|
|
Vessel
Net Book Value at June 30, 2010
|
|
$
|
260,617
|
|
|
$
|
(64,433
|
)
|
|
$
|
196,184
|
|
During
the six months ended June 30, 2010, the Group acquired the
m/v Star Globe
and
m/v Sky Globe
for a purchase
price of US$32,825 each, and the
m/v Jin Star
(with a bareboat
charter attached) for a purchase price of US$41,112. The depreciation expense of
the aforementioned vessels is expected to amount to approximately US$2,250 for
the year ending December 31, 2010.
During
February 2010, the
m/v Sea
Globe
and
m/v Coral
Globe
, which were classified as held for sale at December 31, 2009, were
delivered to their new owner (note 10).
6.
|
Share
Capital and Share Premium
|
The share
capital of the Company consisted of the following:
|
|
June 30,
|
|
|
June 30,
|
|
|
|
2010
|
|
|
2009
|
|
|
|
USD
|
|
|
USD
|
|
Authorized
|
|
|
|
|
|
|
100,000,000
Ordinary Shares of $0.001 each
|
|
|
100,000
|
|
|
|
100,000
|
|
25,000,000
Ordinary Shares of $0.004 each post reverse split (note
14)
|
|
|
100,000
|
|
|
|
100,000
|
|
Ordinary shares issued and fully paid
|
|
Number of
shares
|
|
|
Number of shares
post reverse split
(note 14)
|
|
|
USD
|
|
As
of January 1, 2009
|
|
|
28,665,450
|
|
|
|
7,166,363
|
|
|
|
28,665
|
|
Issued
during the period as part of share based compensation
|
|
|
102,210
|
|
|
|
25,552
|
|
|
|
102
|
|
As
of June 30, 2009
|
|
|
28,767,660
|
|
|
|
7,191,915
|
|
|
|
28,767
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
As
of January 1, 2010
|
|
|
28,956,172
|
|
|
|
7,239,043
|
|
|
|
28,956
|
|
Issued
during the period as part of share based compensation
|
|
|
7,236
|
|
|
|
1,809
|
|
|
|
7
|
|
As
of June 30, 2010
|
|
|
28,963,408
|
|
|
|
7,240,852
|
|
|
|
28,963
|
|
GLOBUS
MARITIME LIMITED
NOTES
TO THE INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Amounts
presented in thousands of U.S. Dollars - except for share and per share data,
unless otherwise stated)
6.
|
Share
Capital and Share Premium
(continued)
|
During
the six months ended June 30, 2010, the Company issued 7,236 (equivalent to
1,809 post 2010 reverse split) ordinary shares as share-based payments and
recorded an expense of US$11 (June 30, 2009: 102,210 (equivalent to 25,552 post
2010 reverse split) and recorded an expense of US$721). Accordingly, as of June
30, 2010, the Company’s issued share capital amounted to US$29.
At the
annual general shareholders meeting which took place on July 28, 2010, the
shareholders of the Company approved a reverse split of four ordinary shares of
$0.001 each, in the capital of the Company into one ordinary share of $0.004
each. Such reverse split occurred on July 29, 2010 (note 14). As a consequence,
authorised ordinary shares amounted to 25,000,000 of US$0.004 each and ordinary
shares issued as at June 30, 2010 amounted to 7,240,852.
Share
premium includes the contribution of the Group’s shareholders to the acquisition
of the Group’s vessels. Firment Trading Limited contributed US$1,275 in
connection with the purchase of the
m/v Gulf Globe
and US$0.3 in
connection with the advance payment for the purchase of the
m/v Island Globe
. Another
party, related through common control, contributed US$4,000 to the purchase
price of the
m/v Gulf
Globe
. Additionally, share premium includes the effects of the
acquisition of minority interest, the effects of the Company’s initial public
offering and the effects of share-based payments. Accordingly, as of June 30,
2010, the Company’s share premium amounted to US$88,529 (December 31, 2009:
US$88,516).
7.
|
Earnings/
(Loss) per Share
|
Basic
earnings/(loss) per share (“EPS”/“LPS”) are calculated by dividing the
profit/(loss) for the period attributable to the Company’s shareholders by the
weighted average number of shares issued, paid and outstanding.
Diluted
earnings per share amounts are calculated by dividing the net profit/(loss)
attributable to ordinary equity holders of the parent by the weighted average
shares outstanding during the period plus the weighted average number of
ordinary shares that would be issued on the conversion of all the dilutive
potential ordinary shares into ordinary shares.
The
following reflects the profit/(loss) and share data used in the basic and
diluted earnings per share computations:
|
|
Six months ended June 30,
|
|
|
|
2010
|
|
|
2009
|
|
Net
profit/(loss) attributable to ordinary equity holders
|
|
$
|
1,090
|
|
|
$
|
(11,629
|
)
|
Weighted
average number of shares for basic EPS
|
|
|
28,959,101
|
|
|
|
28,725,335
|
|
Adjusted
for the effect of reverse split that occurred on July 29,
2010:
|
|
|
|
|
|
|
|
|
Weighted
average number of shares for basic EPS Adjusted (note 14)
|
|
|
7,239,775
|
|
|
|
7,181,334
|
|
Effect
of dilution
|
|
|
-
|
|
|
|
-
|
|
Weighted
average number of shares adjusted for the effect of
dilution
|
|
|
7,239,775
|
|
|
|
7,181,334
|
|
GLOBUS
MARITIME LIMITED
NOTES
TO THE INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Amounts
presented in thousands of U.S. Dollars - except for share and per share data,
unless otherwise stated)
8. Long-Term
Debt, net
Long-term
debt in the interim consolidated statement of financial position is analysed as
follows:
|
Borrower
|
|
Loan
Balance
|
|
|
Unamortised Debt
Discount
|
|
|
Total Borrowings
|
|
(a)
|
Globus
Maritime Limited
|
|
$
|
75,500
|
|
|
$
|
(263
|
)
|
|
$
|
75,237
|
|
(b)
|
Kelty
Marine Ltd.
|
|
|
26,650
|
|
|
|
(200
|
)
|
|
|
26,450
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
as of June 30, 2010
|
|
|
102,150
|
|
|
|
(463
|
)
|
|
|
101,687
|
|
|
Less:
Current Portion
|
|
|
11,000
|
|
|
|
(98
|
)
|
|
|
10,902
|
|
|
Long-Term
Portion
|
|
|
91,150
|
|
|
|
(365
|
)
|
|
|
90,785
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
as of December 31, 2009
|
|
|
70,562
|
|
|
|
(487
|
)
|
|
|
70,075
|
|
|
Less:
Current Portion
|
|
|
34,157
|
|
|
|
(257
|
)
|
|
|
33,900
|
|
|
Long-Term
Portion
|
|
$
|
36,405
|
|
|
$
|
(230
|
)
|
|
$
|
36,175
|
|
|
(a)
|
In
November 2007, the Company entered into a secured reducing revolving
credit facility for US$120,000 with a bank in order to: (i) refinance the
then existing indebtedness on the
m/v Island Globe
(ii)
finance part of the purchase price of the
m/v Tiara Globe
and
m/v River Globe
,
and (iii) provide general working capital to the
Group.
|
The
US$120,000 facility is in the name of Globus Maritime Limited as borrower and
was guaranteed by the vessel owning subsidiaries of the
m/v Island Globe
,
m/v Tiara Globe
and
m/v River Globe
collateralized by first preferred mortgages over their vessels. The reducing
revolving credit facility bears interest at LIBOR plus a margin of 0.95% per
annum if the market values of the mortgaged vessels are less than 200% of the
outstanding loan balance and 0.75% per annum if the market values of the
mortgaged vessels are more than 200% of the outstanding loan balance. On
September 2, 2009, following the sale of the
m/v Island Globe
, an amount
of US$18,500 was repaid. During May 2010, following the acquisition of the
m/v
Star Globe
and
m/v
Sky Globe
,
an amount of US$35,520 was drawn down. The balance outstanding as of June
30, 2010 was US$75,500, payable in 11 equal semi-annual installments of US$4,500
starting November 2010, as well as a balloon payment of US$26,000 due together
with the 11th and final installment due in November 2015.
At the
current interest rate, the Group estimates additional interest expense for the
year ending December 31, 2010 of approximately US$265 as a result of the draw
downs relating to the acquisition of
m/v Star Globe
and
m/v Sky Globe
.
Following
the sale of the
m/v Island
Globe
on September 2009 and the acquisition of the
m/v Star Globe
and
m/v Sky Globe
on May 2010,
the loan is secured as follows:
|
·
|
First
preferred mortgage over the
m/v Tiara Globe
,
m/v River Globe
,
m/v Star Globe
and
m/v Sky
Globe
.
|
|
·
|
Guarantees
from the owning companies of such
vessels.
|
|
·
|
First
preferred assignment of all insurances and earnings of the mortgaged
vessels.
|
|
·
|
General
pledge of earnings account or any other accounts to be held with the
lender.
|
The
credit facility contains various covenants, including, amongst others,
restrictions as to (a) no changes in management and ownership of the mortgaged
vessel without prior written consent of the lender, (b) the incurrence of
additional indebtedness other than in the normal course of business without the
prior written consent of the lender, (c) mortgaging the vessel, (d) payment of
dividends that exceed 75% of the net income recorded for the preceding financial
year without the bank’s prior consent, (e) minimum requirements for the vessels’
market value and insured value in relation to the loan’s outstanding balance,
and (f) to maintain at the end of each accounting period and all other times
during the security period, cash and bank balances and bank deposits of at least
US$10,000.
GLOBUS
MARITIME LIMITED
NOTES
TO THE INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Amounts
presented in thousands of U.S. Dollars - except for share and per share data,
unless otherwise stated)
8.
|
Long-Term
Debt, net (continued)
|
|
(b)
|
In
June 2010, Kelty Marine Ltd. entered into a loan agreement for US$26,650
with a bank for the purpose of part financing the acquisition of the
m/v Jin Star
. The loan
facility is in the name of Kelty Marine Ltd. as the borrower and is
guaranteed by Globus Maritime Limited (“Guarantor”). The loan facility
bears interest at LIBOR plus a margin of 2.25% if the ratio of the loan
outstanding to the market value of the
m/v Jin Star
and any
additional security provided at the time being, plus any amount of minimum
free liquidity maintained with the bank (Loan to Value ratio or “LtV”) is
less than 45%, a margin of 2.40% if the LtV is equal to or exceeds 45% but
is less than or equal to 60%, a margin of 2.50% if the LtV exceeds 60% but
is less than or equal to 70% and a margin of 2.75% if the LtV exceeds 70%.
The balance outstanding at June 30, 2010 was US$26,650 payable in 28 equal
quarterly instalments of US$500 starting September 2010, as well as a
balloon payment of US$12,650 due together with the 28th and final
instalment due in June 2017.
|
The
interest expense on the aforementioned loan, at the current applicable interest
rate, is estimated to amount to approximately US$368 for the year ending
December 31, 2010.
The loan
is secured as follows:
|
·
|
First
preferred mortgage over the
m/v Jin
Star.
|
|
·
|
Guarantees
from Kelty Marine Ltd. and from the
Company.
|
|
·
|
First
preferred assignment of all insurances and earnings of the mortgaged
vessel as well as of the bareboat charter agreement attached to the
vessel.
|
The loan
agreement contains various covenants requiring Kelty Marine Ltd. to, amongst
others things, ensure that (a) Kelty Marine Ltd. does not undergo a change of
control; (b) the ratio of the Company’s shareholders’ equity to total assets is
not less than 25%; (c) the Guarantor must have a minimum equity of US$50
million; (d) minimum requirements for the vessel’s market value in relation to
the loan’s outstanding balance; and (e) the Borrower and/or the Guarantor to
maintain at the end of each accounting period and all other times during the
security period, cash and bank balances and bank deposits of at least
US$1,000.
|
(c)
|
In
March 2008, the Company entered into a credit facility of up to US$85,000
with a bank in order to: (i) refinance the then existing indebtedness on
the
m/v Coral
Globe
,
m/v Gulf
Globe
,
m/v Lake
Globe
,
m/v Ocean
Globe
, and
m/v
Sea Globe
and (ii) to provide general working capital to the Group.
The balance outstanding as of December 31, 2009 was US$27,007 and was
fully repaid during February 2010 following the sale of the
m/v Sea Globe
and
m/v Coral
Globe
.
|
9.
|
Derivative
Financial Instruments
|
|
|
As at June 30,
|
|
|
As at December 31,
|
|
|
|
2010
|
|
|
2009
|
|
|
|
Assets
|
|
|
Liabilities
|
|
|
Assets
|
|
|
Liabilities
|
|
Interest
rate swaps
|
|
|
-
|
|
|
$
|
1,794
|
|
|
|
-
|
|
|
$
|
1,220
|
|
Foreign
exchange forward contracts
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
10
|
|
Total
|
|
|
-
|
|
|
$
|
1,794
|
|
|
|
-
|
|
|
$
|
1,230
|
|
During
November 2008, the Group entered into an interest rate swap agreement of a
notional amount of US$10,000 effective from November 28, 2008 to November 29,
2013. For the period from November 28, 2008 to November 23, 2010 the Group will
exchange 6 month Libor interest rate with a fixed interest rate of
2.40%.
On November 23, 2010, the
swap counterparty has the option to select either (a) to exchange 6 month Libor
interest rate with a fixed interest rate of 3.60% or (b) to exchange 6 month
Libor interest rate with 6 month Libor interest rate minus 20 basis points for
the remaining period to maturity. As of June 30, 2010, the
aforementioned
interest rate swap had a fair value of US$707 (December 31, 2009: US$430) in
favor of the swap counterparty.
GLOBUS
MARITIME LIMITED
NOTES
TO THE INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Amounts
presented in thousands of U.S. Dollars - except for share and per share data,
unless otherwise stated)
9.
|
Derivative
Financial Instruments (continued)
|
During
November 2008, the Group entered into an interest rate swap agreement of a
notional amount of US$15,000 effective from November 28, 2008 to November 28,
2013. For the period from November 28, 2008 to November 29, 2010, the Group will
exchange 3 month Libor interest rate with a fixed interest rate of 2.45%. At
November 29, 2010, and for the remaining period to maturity the swap
counterparty has the option to select either (a) to exchange 3 month Libor
interest rate with a fixed interest rate of 3.64% or (b) to exchange 3 month
Libor interest rate with 3 month Libor interest rate minus 20 basis
points.
As of
June 30, 2010, the aforementioned interest rate swap had a fair value of
US$1,087 (December 31, 2009: US$ 790) in favor of the swap counterparty. Gains
and losses on interest rate swap contracts are recognized in the income
statement component of the interim consolidated statement of comprehensive
income in finance costs.
10.
|
Gain
on Sale of Vessel
|
During
the six months ended June 30, 2010, the Group sold the
m/v Sea Globe
and
m/v Coral Globe
for a selling
price of US$17,500 and US$16,500 respectively. The gain on the sale of the
vessels was calculated as follows:
|
|
For the six months ended 30,
|
|
|
|
2010
|
|
|
2009
|
|
Proceeds
|
|
$
|
34,000
|
|
|
|
-
|
|
Carrying
amount of vessel sold
|
|
|
(33,030
|
)
|
|
|
-
|
|
Other
selling expenses
|
|
|
(963
|
)
|
|
|
-
|
|
Net
gain on sale
|
|
$
|
7
|
|
|
|
-
|
|
Various
claims, suits and complaints, including those involving government regulations,
arise in the ordinary course of the shipping business. In addition, losses may
arise from disputes with charterers, environmental claims, agents and insurers
and from claims with suppliers relating to the operations of the Group’s
vessels. Currently, management is not aware of any such claims or contingent
liabilities, which are material for disclosure.
The Group
enters into time charter arrangements on its vessels. These non-cancellable
arrangements have remaining terms between two to fifty-five months as of June
30, 2010, assuming redelivery at the earliest possible date.
Future
gross minimum lease revenues receivable upon non-cancellable operating leases as
at June 30, 2010 and December 31, 2009 are as follows (vessel off-hires and
drydocking days that could occur but are not currently known are not taken into
consideration; in addition, early delivery of the vessels by the charterers is
not accounted for):
|
|
June 30,
|
|
|
December 31,
|
|
|
|
2010
|
|
|
2009
|
|
Within
one year
|
|
$
|
20,770
|
|
|
$
|
2,925
|
|
After
one year but not more than five years
|
|
|
22,671
|
|
|
|
-
|
|
More
than five years
|
|
|
-
|
|
|
|
-
|
|
Total
|
|
$
|
43,441
|
|
|
$
|
2,925
|
|
GLOBUS
MARITIME LIMITED
NOTES
TO THE INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Amounts
presented in thousands of U.S. Dollars - except for share and per share data,
unless otherwise stated)
12.
|
Commitments
(continued)
|
These
amounts include consideration for other elements of the arrangement apart from
the right to use the vessel such as maintenance and crewing and its related
costs.
At June
30, 2010 and December 31, 2009, the Group was a party to an operating lease
agreement as lessee. The operating lease relates to the office premises of the
Group (expiring in August 2015).
The
future minimum lease payments under this agreement as at June 30, 2010 and
December 31, 2009 are as follows:
|
|
June 30,
|
|
|
December 31,
|
|
|
|
2010
|
|
|
2009
|
|
Within
one year
|
|
$
|
250
|
|
|
$
|
247
|
|
After
one year but not more than five years
|
|
|
1,064
|
|
|
|
1,051
|
|
More
than five years
|
|
|
46
|
|
|
|
185
|
|
Total
|
|
$
|
1,360
|
|
|
$
|
1,483
|
|
Total
rent expense under operating leases for the six months ended June 30, 2010
amounted to US$118 (June 30, 2009: US$114).
13.
|
Financial
Instruments
|
Fair
Values
Derivative
financial instruments are recorded at fair value while all other financial
assets and financial liabilities are recorded at amortised cost which
approximates fair value at June 30, 2010.
Fair
Value Hierarchy
As of
June 30, 2010 and December 31, 2009, the Group held the following financial
instruments measured at fair value:
The Group
uses the following hierarchy for determining and disclosing the fair value of
financial instruments by valuation technique:
|
Level
1:
|
quoted
(unadjusted) prices in active markets for identical assets or
liabilities.
|
|
Level
2:
|
other
techniques for which all inputs which have a significant effect on the
recorded fair value are observable, either directly or
indirectly.
|
|
Level
3:
|
techniques
which use inputs which have a significant effect on the recorded fair
value that are not based on observable market
data.
|
Liabilities at fair value
|
|
June 30, 2010
|
|
|
Level 1
|
|
|
Level 2
|
|
|
Level 3
|
|
Interest
rate swaps
|
|
$
|
1,794
|
|
|
|
-
|
|
|
$
|
1,794
|
|
|
|
-
|
|
Total
|
|
$
|
1,794
|
|
|
|
-
|
|
|
$
|
1,794
|
|
|
|
-
|
|
Liabilities at fair value
|
|
December 31, 2009
|
|
|
Level 1
|
|
|
Level 2
|
|
|
Level 3
|
|
Interest
rate swaps
|
|
$
|
1,220
|
|
|
|
-
|
|
|
$
|
1,220
|
|
|
|
-
|
|
Foreign
exchange forward contracts
|
|
|
10
|
|
|
|
-
|
|
|
|
10
|
|
|
|
-
|
|
Total
|
|
$
|
1,230
|
|
|
|
-
|
|
|
$
|
1,230
|
|
|
|
-
|
|
GLOBUS
MARITIME LIMITED
NOTES
TO THE INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Amounts
presented in thousands of U.S. Dollars - except for share and per share data,
unless otherwise stated)
14.
|
Events
after the Interim Reporting Date
|
Reverse
split
At the
annual general shareholders meeting, which took place on July 28, 2010, the
shareholders of the Company approved a reverse split of four ordinary shares of
$0.001 each, in the capital of the Company into one ordinary share of $0.004
each. Such reverse split occurred on July 29, 2010.
Interim
Dividend Declared
By a
board of directors resolution dated September 6, 2010, an interim dividend
relating to the six months ended June 30, 2010 was declared. The interim
dividend of 7.3 pence (GBP) per share (US$0.8 million or US$11.29 cents per
share) was paid during September 2010.
Redomiciliation
On
November 24, 2010, the Company redomiciled from Jersey into the Marshall
Islands. Upon redomiciliation, the existence of the Company shall be deemed to
have commenced on the date the Company commenced its existence in Jersey. The
redomiciliation of the Company in the Marshall Islands does not affect any
obligations or liabilities of the Company incurred prior to its redomiciliation,
and property of every description, including rights of action and the business
of the Company shall continue to be vested in the Company. The registered
address of the Company in the Marshall Islands is located in Trust Company
Complex, Ajeltake Island, Ajeltake Road, Majuro, Marshall Islands MH96960. The
name of the Company’s registered agent at such address is The Trust Company of
the Marshall Islands, Inc.
No
dealer, salesperson or other person is authorized to give any information or to
represent anything not contained in this prospectus. You must not rely on any
unauthorized information or representations. This prospectus is an offer to sell
only the common shares offered hereby, but only under circumstances and in
jurisdictions where it is lawful to do so. The information contained in this
prospectus is current only as of its date.
6,117,389
Common Shares
PROSPECTUS
Until ,
2010 (the 25
th
day
after the date of this prospectus), all dealers that effect transactions in
these securities, whether or not participating in this offering, may be required
to deliver a prospectus. This is in addition to the dealers’ obligation to
deliver a prospectus when acting as underwriters and with respect to their
unsold allotments or subscriptions.
PART
II
INFORMATION
NOT REQUIRED IN THE PROSPECTUS
Item
6. Indemnification of Directors and Officers.
The
Articles of Incorporation of the Registrant provide as follows:
Section
7.1
Limitation of Director
Liability
. To the fullest extent that the BCA or any other law of the
Marshall Islands as it exists or as it may hereafter be amended permits the
limitation or elimination of the liability of directors, no director of the
Corporation shall be liable to the Corporation or its shareholders for monetary
damages for actions taken in their capacity as director or officer of the
Corporation, provided that such provision shall not eliminate or limit the
liability of a director for (i) any breach of such director’s duty of loyalty to
the Corporation or its shareholders, (ii) acts or omissions not undertaken in
good faith or which involve intentional misconduct or a knowing violation of law
or (iii) any transactions from which such director derived an improper personal
benefit. No amendment to or repeal of this Section 7.1 shall apply to or have
any effect on the liability or alleged liability of any director of the
Corporation for or with respect to any acts or omissions of such director
occurring prior to such amendment or repeal.
Section
7.2
Indemnification
.
The Corporation shall indemnify any person who was or is a party or is
threatened to be made a party to any threatened, pending or completed action,
suit or proceeding, whether civil, criminal, administrative or investigative,
(other than an action by or in the right of the Corporation) by reason of the
fact he or she is or was a director or officer of the Corporation or is or was
serving at the request of the Corporation, a director or officer of another
corporation, partnership, joint venture, trust or other enterprise (the
“Indemnitee”), against expenses (including attorneys’ fees), judgments, fines
and amounts paid in settlement actually and reasonably incurred by him or her in
connection with such action, suit or proceeding unless a final and unappealable
determination by a court of competent jurisdiction has been made that he or she
did not act in good faith or in a manner he or she did not reasonably believe to
be in or not opposed to the best interest of the Corporation, and, with respect
to any criminal action or proceeding, had reasonable cause to believe that his
or her conduct was unlawful.
The
termination of any action, suit or proceeding by judgment, order, settlement,
conviction or upon a plea of no contest, or its equivalent, shall not, of
itself, create a presumption that the person did not act in good faith and in a
manner which he or she reasonably believed to be in or not opposed to the best
interests of the Corporation, and, with respect to any criminal action or
proceeding, had reasonable cause to believe that his or her conduct was
unlawful.
The
purpose of this provision is to fully indemnify the Indemnitee to the fullest
extent permitted by Section 60 of the BCA or any successor statute.
Section
7.3
Expenses Payable in
Advance
. The right to be indemnified shall include, without limitation,
the right of an Indemnitee to be paid expenses in advance of the final
disposition of any proceeding upon receipt of an undertaking to repay such
amount if it shall ultimately be determined that he or she is not entitled to be
indemnified hereunder.
The
purpose of this provision is to advance funds to the fullest extent permitted by
Section 60 of the BCA or any successor statute.
Section
7.4
Expenses of
Enforcement
. An Indemnitee shall also be paid reasonable costs, expenses
and attorneys’ fees (including expenses) in connection with the enforcement of
rights to the indemnification granted hereunder
Section
7.5
Non-exclusivity of
Rights
. The rights of indemnification shall not be exclusive of any other
rights to which an Indemnitee may be entitled and shall not be limited by the
provisions of Section 60 of the BCA or any successor statute.
Section
7.6
Insurance
. The
Corporation shall have the power to purchase and maintain insurance on behalf of
any person who is or was a director or officer of the Corporation or serving in
such capacity in another corporation at the request of the Corporation against
any liability asserted against such person and incurred by such person in such
capacity whether or not the Corporation would have the power to indemnify such
person against such liability by law or under the provisions of these Articles
of Incorporation.
Section
7.7
Other Action
. The
Board of Directors may take such action as it deems necessary or desirable to
carry out the provisions set forth in this Article VII, including, without
limitation, adopting procedures for determining and enforcing the rights
guaranteed hereunder, and the Board of Directors is expressly empowered to
adopt, approve and amend from time to time such bylaws, resolutions or contracts
implementing such provisions or such further indemnification arrangement as may
be permitted by law.
Section
7.8
Amendment or Repeal of
Article VII
. Neither the amendment or repeal of this Article VII, nor the
adoption of any provision of these Articles of Incorporation inconsistent with
this Article VII, shall eliminate or reduce any right to indemnification
afforded by this Article VII to any person with respect to his or her status or
any activities in his or her official capacities prior to such amendment, repeal
or adoption.
Section
7.9
Amendment of BCA
.
If the BCA is amended after the date of the filing of these Articles of
Incorporation to authorize corporate action further eliminating or limiting the
personal liability of directors or permitting indemnification to a fuller
extent, then the liability of a director of the Corporation shall be eliminated
or limited, and indemnification shall be extended, in each case to the fullest
extent permitted by the BCA, as so amended from time to time. No repeal or
modification of this Section 7.9 by the shareholders shall adversely affect any
right or protection of a director of the Corporation existing by virtue of this
Section 7.9 at the time of such repeal or modification.
Section
60 of the Business Corporations Act of the Marshall Islands entitled
“Indemnification of directors and officers” provides as follows:
Indemnification
of directors and officers.
(1)
Actions not by or in right of
the corporation.
A corporation shall have the power to indemnify any
person who was or is a party or is threatened to be made a party to any
threatened, pending or completed action, suit or proceeding whether civil,
criminal, administrative or investigative (other than an action by or in the
right of the corporation) by reason of the fact that he is or was a director or
officer of the corporation, or is or was serving at the request of the
corporation as a director or officer of another corporation, partnership, joint
venture, trust or other enterprise, against expenses (including attorneys’
fees), judgments, fines and amounts paid in settlement actually and reasonably
incurred by him in connection with such action, suit or proceeding if he acted
in good faith and in a manner he reasonably believed to be in or not opposed to
the best interests of the corporation, and, with respect to any criminal action
or proceeding, had no reasonable cause to believe his conduct was unlawful. The
termination of any action, suit or proceeding by judgment, order, settlement,
conviction, or upon a plea of no contest, or its equivalent, shall not, of
itself, create a presumption that the person did not act in good faith and in a
manner which he reasonably believed to be in or not opposed to the best
interests of the corporation, and, with respect to any criminal action or
proceedings, had reasonable cause to believe that his conduct was
unlawful.
(2)
Actions by or in right of the
corporation.
A corporation shall have the power to indemnify any person
who was or is a party or is threatened to be made a party to any threatened,
pending or completed action or suit by or in the right of the corporation to
procure a judgment in its favor by reason of the fact that he is or was a
director or officer of the corporation, or is or was serving at the request of
the corporation as a director or officer of another corporation, partnership,
joint venture, trust or other enterprise against expenses (including attorneys’
fees) actually and reasonably incurred by him or in connection with the defense
or settlement of such action or suit if he acted in good faith and in a manner
he reasonably believed to be in or not opposed to the best interests of the
corporation and except that no indemnification shall be made in respect of any
claim, issue or matter as to which such person shall have been adjudged to be
liable for negligence or misconduct in the performance of his duty to the
corporation unless and only to the extent that the court in which such action or
suit was brought shall determine upon application that, despite the adjudication
of liability but in view of all the circumstances of the case, such person is
fairly and reasonably entitled to indemnity for such expenses which the court
shall deem proper.
(3)
When director or officer successful.
To the extent that a director or officer of a corporation has been
successful on the merits or otherwise in defense of any action, suit or
proceeding referred to in subsections (1) or (2) of this section, or
in the defense of a claim, issue or matter therein, he shall be indemnified
against expenses (including attorneys’ fees) actually and reasonably incurred by
him in connection therewith.
(4)
Payment of expenses in advance.
Expenses incurred in defending a civil or criminal action, suit or
proceeding may be paid in advance of the final disposition of such action, suit
or proceeding as authorized by the board of directors in the specific case upon
receipt of an undertaking by or on behalf of the director or officer to repay
such amount if it shall ultimately be determined that he is not entitled to be
indemnified by the corporation as authorized in this section.
(5)
Indemnification pursuant to other
rights.
The indemnification and advancement of expenses provided by, or
granted pursuant to, the other subsections of this section shall not be deemed
exclusive of any other rights to which those seeking indemnification or
advancement of expenses may be entitled under any bylaw, agreement, vote of
shareholders or disinterested directors or otherwise, both as to action in his
official capacity and as to action in another capacity while holding such
office.
(6)
Continuation of indemnification.
The indemnification and advancement of expenses provided by, or granted
pursuant to, this section shall, unless otherwise provided when authorized or
ratified, continue as to a person who has ceased to be a director, officer,
employee or agent and shall inure to the benefit of the heirs, executors and
administrators of such a person.
(7)
Insurance.
A corporation
shall have power to purchase and maintain insurance on behalf of any person who
is or was a director or officer of the corporation or is or was serving at the
request of the corporation as a director or officer against any liability
asserted against him and incurred by him in such capacity whether or not the
corporation would have the power to indemnify him against such liability under
the provisions of this section.
The
Registrant will also enter into indemnification agreements with its directors
and officers pursuant to which it will agree to indemnify its directors and
officers against certain liabilities and expenses incurred by such persons in
connection with claims made by reason of their being such a director or
officer.
Item
7. Recent Sales of Unregistered Securities.
There
were no sales of unregistered securities of the Registrant within the past three
years from the date of this Registration Statement.
Item
8. Exhibits and Financial Statement Schedules.
Exhibit
Index
Exhibit
Number
|
|
Description
|
3.1
|
|
Articles
of Incorporation of Globus Maritime Limited
|
3.2
|
|
Bylaws
of Globus Maritime Limited
|
5.1
|
|
Legal
opinion of Watson, Farley & Williams (New York) LLP as to the validity
of the common shares
|
8.1
|
|
Legal
opinion of Watson, Farley & Williams (New York) LLP with respect to
certain Marshall Islands tax matters
|
8.2
|
|
Legal
opinion of Watson, Farley & Williams (New York) LLP with respect to
certain U.S. tax matters
|
10.1
|
|
Credit
Facility between Credit Suisse and Global Maritime Limited, as
supplemented *
|
10.2
|
|
Loan
Agreement between Deutsche Schiffsbank Aktiengesellschaft and Kelty Marine
Ltd. *
|
10.3
|
|
Long
Term Incentive Plan of Globus Maritime Limited *
|
10.4
|
|
Business
Opportunities Agreement between Globus Maritime Limited and Georgios
Feidakis *
|
10.5
|
|
Registration
Rights Agreement between Globus Maritime Limited, Firment Trading Limited
and Kim Holdings S.A. *
|
21.1
|
|
Subsidiaries
of Globus Maritime Limited *
|
23.1
|
|
Consent
of Ernst & Young (Hellas) Certified Auditors Accountants
S.A.
|
23.2
|
|
Consent
of Drewry Shipping Consultants Ltd *
|
23.3
|
|
Consent
of Watson, Farley & Williams (New York) LLP (included in Exhibits 5.1,
8.1 and 8.2)
|
24.1
|
|
Power
of Attorney (included on signature page)
*
|
*
Previously filed as an
exhibit, under the same exhibit number as set forth in this exhibit index, to
the Registration Statement on Form F-1 (Reg. No. 333-170755) filed with the SEC
on November 22, 2010.
Item
9. Undertakings.
|
1.
|
Insofar
as indemnification for liabilities arising under the Securities Act of
1933 may be permitted to directors, officers and controlling persons of
the registrant pursuant to the foregoing provisions, or otherwise, the
registrant has been advised that in the opinion of the Securities and
Exchange Commission such indemnification is against public policy as
expressed in the Securities Act of 1933 and is, therefore, unenforceable.
In the event that a claim for indemnification against such liabilities
(other than the payment by the registrant of expenses incurred or paid by
a director, officer or controlling person of the registrant in the
successful defense of any action, suit or proceeding) is asserted by such
director, officer or controlling person in connection with the securities
being registered, the registrant will, unless in the opinion of its
counsel the matter has been settled by controlling precedent, submit to a
court of appropriate jurisdiction the question whether such
indemnification by it is against public policy as expressed in the
Securities Act of 1933 and will be governed by the final adjudication of
such issue.
|
|
2.
|
The
undersigned registrant hereby
undertakes:
|
|
a.
|
To
file, during any period in which offers or sales are being made, a
post-effective amendment to this Registration
Statement:
|
|
i.
|
To
include any Prospectus required by Section 10(a)(3) of the Securities Act
of 1933;
|
|
ii.
|
To
reflect in the Prospectus any facts or events arising after the effective
date of the registration statement (or the most recent post-effective
amendment thereof) which, individually or in the aggregate, represent a
fundamental change in the information set forth in the registration
statement. Notwithstanding the foregoing, any increase or decrease in
volume of securities offered (if the total dollar value of securities
offered would not exceed that which was registered) and any deviation from
the low or high end of the estimated maximum offering range may be
reflected in the form of Prospectus filed with the Securities and Exchange
Commission pursuant to Rule 424(b) if, in the aggregate, the changes in
volume and price represent no more than a 20 percent change in the maximum
aggregate offering price set forth in the “Calculation of Registration
Fee” table in the effective registration statement;
and
|
|
iii.
|
To
include any material information with respect to the plan of distribution
not previously disclosed in the registration statement or any material
change to such information in the registration
statement.
|
|
b.
|
That,
for the purpose of determining any liability under the Securities Act of
1933, each such post-effective amendment shall be deemed to be a new
registration statement relating to the securities offered therein, and the
offering of such securities at that time shall be deemed to be the initial
bona fide offering thereof.
|
|
c.
|
To
remove from registration by means of a post-effective amendment any of the
securities being registered which remain unsold at the termination of the
offering.
|
|
d.
|
If
the registrant is a foreign private issuer, to file a post-effective
amendment to the registration statement to include any financial
statements required by Item 8.A. of Form 20-F at the start of any delayed
offering or throughout a continuous offering. Financial statements and
information otherwise required by Section 10(a)(3) of the Securities Act
need not be furnished, provided that the registrant includes in the
prospectus, by means of a post-effective amendment, financial statements
required pursuant to this paragraph and other information necessary to
ensure that all other information in the prospectus is at least as current
as the date of those financial statements. Notwithstanding the foregoing,
with respect to registration statements on Form F-3 (17 C.F.R. 239.33), a
post-effective amendment need not be filed to include financial statements
and information required by Section 10(a)(3) of the Securities Act or 17
C.F.R. 210.3-19 if such financial statements and information are contained
in periodic reports filed with or furnished to the Commission by the
registrant pursuant to section 13 or section 15(d) of the Securities
Exchange Act of 1934 that are incorporated by reference in the Form
F-3.
|
|
e.
|
That,
for the purpose of determining any liability under the Securities Act of
1933, if the registrant is subject to Rule 430C under the Securities Act,
each prospectus filed pursuant to Rule 424(b) as part of a registration
statement relating to an offering, other than registration statements
relying on Rule 430B or other than prospectuses filed in reliance on Rule
430A, shall be deemed to be part of and included in the registration
statement as of the date it is first used after effectiveness. Provided,
however, that no statement made in a registration statement or prospectus
that is part of the registration statement or made in a document
incorporated or deemed incorporated by reference into the registration
statement or prospectus that is part of the registration statement will,
as to a purchaser with a time of contract of sale prior to such first use,
supersede or modify any statement that was made in the registration
statement or prospectus that was part of the registration statement or
made in any such document immediately prior to such date of first
use.
|
|
f.
|
That,
for the purpose of determining liability of the registrant under the
Securities Act of 1933 to any purchaser in the initial distribution of the
securities, the undersigned registrant undertakes that in a primary
offering of securities of the undersigned registrant pursuant to this
registration statement, regardless of the underwriting method used to sell
the securities to the purchaser, if the securities are offered or sold to
such purchaser by means of any of the following communications, the
undersigned registrant will be a seller to the purchaser and will be
considered to offer or sell such securities to such
purchaser:
|
(i) Any
preliminary prospectus or prospectus of the undersigned registrant relating to
the offering required to be filed pursuant to Rule 424;
(ii) Any
free writing prospectus relating to the offering prepared by or on behalf of the
undersigned registrant or used or referred to by the undersigned
registrant;
(iii) The
portion of any other free writing prospectus relating to the offering containing
material information about the undersigned registrant or its securities provided
by or on behalf of the undersigned registrant; and
(iv) Any
other communication that is an offer in the offering made by the undersigned
registrant to the purchaser.
SIGNATURES
Pursuant
to the requirements of the Securities Act of 1933, the registrant certifies that
it has reasonable grounds to believe that it meets all of the requirements for
filing on Form F-l and has duly caused this Registration Statement to be signed
on its behalf by the undersigned, thereunto duly authorized, in the City of
Athens, Greece on November 24, 2010.
Globus
Maritime Limited
|
|
By:
|
/s/ Georgios
Karageorgiou
|
|
Name:
Georgios Karageorgiou
|
|
Title:
Chief Executive Officer
|
Pursuant
to the requirements of the Securities Act of 1933, this Amendment No. 1 to the
Registration Statement has been signed below by the following persons on
November 24, 2010 in the capacities indicated.
|
|
|
|
|
|
/s/ Georgios
Feidakis
|
|
Chairman
and Director
|
Georgios
Feidakis
|
|
|
|
|
|
/s/
Georgios Karageorgiou
|
|
Chief
Executive Officer and Director
|
Georgios
Karageorgiou
|
|
|
|
|
|
/s/ Elias Deftereos
|
|
Chief
Financial Officer (principal accounting officer
|
Elias
Deftereos
|
|
and
principal financial officer) and Director
|
|
|
|
*
|
|
Director
|
Amir
Eilon
|
|
|
|
|
|
/s/ Jeffrey Parry
|
|
Director
|
Jeffrey
Parry
|
|
|
|
|
|
*By:
|
/s/ Elias Deftereos
|
|
|
|
Name:
Elias Deftereos
|
|
|
|
Attorney-in-Fact
|
|
|
Authorized
Representative
Pursuant
to the requirement of the Securities Act of 1933, the undersigned, the duly
authorized representative of the Registrant in the United States, has signed
this registration statement in the City of Newark, State of Delaware, on
November 24, 2010.
By:
|
/
s/ Donald J. Puglisi
|
|
|
Name:
Donald J. Puglisi
|
|
Title:
Managing Director
|
Exhibit
Index
Exhibit
Number
|
|
Description
|
3.1
|
|
Articles
of Incorporation of Globus Maritime Limited
|
3.2
|
|
Bylaws
of Globus Maritime Limited
|
5.1
|
|
Legal
opinion of Watson, Farley & Williams (New York) LLP as to the validity
of the common shares
|
8.1
|
|
Legal
opinion of Watson, Farley & Williams (New York) LLP with respect to
certain Marshall Islands tax matters
|
8.2
|
|
Legal
opinion of Watson, Farley & Williams (New York) LLP with respect to
certain U.S. tax matters
|
10.1
|
|
Credit
Facility between Credit Suisse and Global Maritime Limited, as
supplemented *
|
10.2
|
|
Loan
Agreement between Deutsche Schiffsbank Aktiengesellschaft and Kelty Marine
Ltd. *
|
10.3
|
|
Long
Term Incentive Plan of Globus Maritime Limited *
|
10.4
|
|
Business
Opportunities Agreement between Globus Maritime Limited and Georgios
Feidakis *
|
10.5
|
|
Registration
Rights Agreement between Globus Maritime Limited, Firment Trading Limited
and Kim Holdings S.A. *
|
21.1
|
|
Subsidiaries
of Globus Maritime Limited *
|
23.1
|
|
Consent
of Ernst & Young (Hellas) Certified Auditors Accountants
S.A.
|
23.2
|
|
Consent
of Drewry Shipping Consultants Ltd *
|
23.3
|
|
Consent
of Watson, Farley & Williams (New York) LLP (included in Exhibits 5.1,
8.1 and 8.2)
|
24.1
|
|
Power
of Attorney (included on signature page)
*
|
*
Previously filed as an
exhibit, under the same exhibit number as set forth in this exhibit index, to
the Registration Statement on Form F-1 (Reg. No. 333-170755) filed with the SEC
on November 22, 2010.