SEANERGY MARITIME HOLDINGS CORP.
As filed with the Securities and Exchange Commission on
September 17, 2009
Registration No.
UNITED STATES SECURITIES AND
EXCHANGE COMMISSION
Washington, D.C.
20549
Form F-1
REGISTRATION
STATEMENT
UNDER
THE SECURITIES ACT OF
1933
SEANERGY MARITIME HOLDINGS
CORP.
(Exact name of Registrant as
specified in its charter)
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Republic of the Marshall Islands
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4412
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Not Applicable
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(State or other jurisdiction
of
incorporation or organization)
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(Primary Standard Industrial
Classification Code Number)
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(I.R.S. Employer
Identification Number)
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1-3 Patriarchou Grigoriou
166 74 Glyfada
Athens, Greece
Tel: +30 210 9638461
(Address, including zip code,
and telephone number, including area code, of Registrants
principal executive offices)
Georgios Koutsolioutsos, Chairman of the Board of
Directors
Seanergy Maritime Holdings Corp.
1-3 Patriarchou Grigoriou
166 74 Glyfada
Athens, Greece
Tel: +30 210 9638461
(Address, including zip code,
and telephone number, including area code, of agent for
service)
With a copy to:
A. Jeffry Robinson, Esq.
Broad and Cassel
2 South Biscayne Blvd., 21st Floor
Miami, Florida 33131
Office: (305) 373-9400
Fax: (305) 373-9443
Approximate date of commencement of proposed sale to the
public: As soon as practicable after the
effective date of this registration statement.
If any of the securities being registered on this Form are to be
offered on a delayed or continuous basis pursuant to
Rule 415 under the Securities Act of 1933, check the
following
box. o
If this Form is filed to register additional securities for an
offering pursuant to Rule 462(b) under the Securities Act,
please check the following box and list the Securities Act
registration statement number of the earlier effective
registration statement for the same
offering. o
If this Form is a post-effective amendment filed pursuant to
Rule 462(c) under the Securities Act, check the following
box and list the Securities Act registration statement number of
the earlier effective registration statement for the same
offering. o
If this Form is a post-effective amendment filed pursuant to
Rule 462(d) under the Securities Act, check the following
box and list the Securities Act registration statement number of
the earlier effective registration statement for the same
offering. o
CALCULATION OF REGISTRATION FEE
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Proposed Maximum
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Proposed Maximum
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Amount of
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Title of Each Class of
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Amount to be
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Offering
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Aggregate
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Registration
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Securities to be Registered
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Registered(1)
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Price per Security(2)
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Offering Price(2)
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Fee
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Common Stock, par value US $0.0001 per share
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30,000,000 shares
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$4.4999
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$149,970,000.00
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$8,368.33
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(1) |
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Includes shares of common stock, if any that may be sold to
cover the exercise of an over-allotment option granted to the
underwriters. |
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(2) |
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Estimated solely for the purpose of calculating the registration
fee pursuant to Rule 457 under the Securities Act of 1933, based
on the average of the high and low prices for our common stock
as reported on the NASDAQ Capital Market on September 10,
2009. |
The Registrant hereby amends this to Registration Statement
on such date or dates as may be necessary to delay its effective
date until the Registrant shall file a further amendment which
specifically states that this Registration Statement shall
thereafter become effective in accordance with Section 8(a)
of the Securities Act of 1933 or until the Registration
Statement shall become effective on such date as the Commission,
acting pursuant to said Section 8(a), may determine.
The
information in this prospectus is not complete and may be
changed. We may not sell these securities until the registration
statement filed with the Securities and Exchange Commission is
effective. This prospectus is not an offer to sell these
securities and is not soliciting an offer to buy these
securities in any state where the offer or sale is not
permitted.
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SUBJECT TO COMPLETION,
SEPTEMBER 17, 2009
PRELIMINARY PROSPECTUS
Seanergy Maritime Holdings
Corp.
30,000,000 Shares of
Common Stock
We are offering 30,000,000 shares of common stock. Our
common stock is currently quoted on the NASDAQ Global Market
under the symbol SHIP. On September 14, 2009,
the closing price of our common stock was $4.11 per share.
Investing in our common stock
involves a high degree of risk. See Risk Factors
beginning on page 11 to read about the risks you should
consider before buying shares of our common stock.
Neither the Securities and Exchange Commission nor any state
securities commission has approved or disapproved of these
securities or passed upon the adequacy or accuracy of this
prospectus. Any representation to the contrary is a criminal
offense.
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Per Share
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Total
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Public offering price
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$
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$
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Underwriting discounts and commissions
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$
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$
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Proceeds to us, before expenses
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$
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$
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The underwriters have a
30-day
option to purchase up
to
additional shares of our common stock from us to cover any
over-allotments, if any, at the offering price, less
underwriting discounts and commissions.
The underwriters expect to deliver the shares to purchasers on
or
about ,
2009.
The date of this prospectus
is ,
2009
TABLE OF
CONTENTS
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Page
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ii
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F-1
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EX-16.1 |
EX-23.1 |
EX-23.2 |
You should rely only on the information contained or
incorporated by reference in this prospectus. We have not
authorized anyone to provide you with different information. We
are not making an offer of these securities in any jurisdiction
where the offer is not permitted.
We obtained statistical data, market data and other industry
data and forecasts used throughout this prospectus from publicly
available information. While we believe that the statistical
data, industry data, forecasts and market research are reliable,
we have not independently verified the data, and we do not make
any representation as to the accuracy of the information.
i
ENFORCEABILITY
OF CIVIL LIABILITIES
Seanergy Maritime Holdings Corp. is a Marshall Islands company
and our executive offices are located outside of the United
States in Athens, Greece. All of our directors, 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, 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 or Greece would enter judgments in original
actions brought in those courts predicated on U.S. federal
or state securities laws.
ii
PROSPECTUS
SUMMARY
This summary highlights certain information appearing
elsewhere in this prospectus. For a more complete understanding
of this offering, you should read the entire prospectus
carefully, including the risk factors and the financial
statements.
We use the term deadweight tons, or dwt, in
describing the capacity of our dry bulk carriers. Dwt, expressed
in metric tons, each of which is equivalent to 1,000 kilograms,
refers to the maximum weight of cargo and supplies that a vessel
can carry. Dry bulk carriers are categorized as Handysize,
Handymax/Supramax, Panamax and Capesize. The carrying capacity
of a Handysize dry bulk carrier generally ranges from 10,000 to
30,000 dwt and that of a Handymax dry bulk carrier generally
ranges from 30,000 to 60,000 dwt. Supramax is a
sub-category
of the Handymax category and typically has a cargo capacity of
between 50,000 and 60,000 dwt. By comparison, the carrying
capacity of a Panamax dry bulk carrier generally ranges from
60,000 to 100,000 dwt and the carrying capacity of a Capesize
dry bulk carrier is generally 100,000 dwt and above.
References in this prospectus to Seanergy,
we, us or our company refer
to Seanergy Maritime Holdings Corp. and our subsidiaries, but,
if the context otherwise requires, may refer only to Seanergy
Maritime Holdings Corp. References in this prospectus to
Seanergy Maritime refer to our predecessor, Seanergy
Maritime Corp. References in this prospectus to BET
refer to Bulk Energy Transport (Holdings) Limited and its wholly
owned subsidiaries. We acquired a 50% controlling interest in
BET in August 2009 through our right to appoint a majority of
the BET board of directors as provided in the shareholders
agreement.
The
Company
We are an international company providing worldwide
transportation of dry bulk commodities through our vessel-owning
subsidiaries and Bulk Energy Transport (Holdings) Limited, or
BET. Our existing fleet consists of one Handysize vessel, one
Handymax vessel, two Supramax vessels, three Panamax vessels and
four Capesize vessels. Our fleet carries a variety of dry bulk
commodities, including coal, iron ore, and grains, as well as
bauxite, phosphate, fertilizer and steel products.
We acquired our initial fleet of six dry bulk carriers on
August 28, 2008 from the Restis family, one of our major
shareholders. Less than one year later, we expanded our fleet by
acquiring a controlling interest in BET. We entered into a
shareholders agreement with Mineral Transport Holdings,
Inc., or Mineral Transport, that allows us, among other things
to appoint a majority of the members of the board of directors
of BET. As a result, we control BET. BETs fleet consists
of four Capesize vessels and one Panamax vessel. See Our
Business BET.
In order to expand our fleet, we have an option to purchase
additional vessels from unaffiliated parties. Our exercise of
the option is contingent upon the successful completion of this
offering. We expect to acquire additional vessels with the
proceeds of this offering.
Our acquisitions demonstrate both our ability to successfully
grow through acquisition and our strategy to grow quickly and
achieve critical mass. By acquiring dry bulk carriers of various
sizes, we are also able to serve a variety of needs of a variety
of charterers. Finally, by capitalizing on our relationship with
the Restis family and its affiliates, which have a long and
proven track record in dry bulk shipping, we are able to take
advantage of economies of scale. Furthermore, our management
teams experience results in innovative and accretive
solutions being achieved thus enhancing shareholder value.
1
Our
Fleet
We control and operate, through our vessel-owning subsidiaries
and BET, 11 dry bulk carriers, including two newly built
vessels, that transport a variety of dry bulk commodities. The
following table provides summary information about our fleet and
its current employment:
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Daily Time
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Year
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Terms of Time
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Charter
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Vessel/Flag
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Type
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Dwt
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Built
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Charter Party
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Hire Rate
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African Oryx/Bahamas
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Handysize
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24,110
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1997
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Expiring August 2011
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$7,000 plus a 50% profit share calculated on the average spot
Time Charter Routes derived from the Baltic Supramax Index
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African Zebra/Bahamas
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Handymax
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38,623
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1985
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Expiring August 2011
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$7,500 plus a 50% profit share calculated on the average spot
Time Charter Routes derived from the Baltic Supramax Index
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Bremen Max/Isle of Man
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Panamax
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73,503
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1993
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Expiring August 2010
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$15,500
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Hamburg Max/Isle of Man
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Panamax
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72,338
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1994
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Expiring September 2010
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$15,500
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Davakis G./Bahamas
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Supramax
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54,051
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2008
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Expiring in September 2009(1)
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$60,000
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Delos Ranger/Bahamas
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Supramax
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54,051
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2008
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Expiring in September 2009(1)
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$60,000
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BET Commander/Isle of Man(2)
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Capesize
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149,507
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1991
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Expiring in October 2009(3)
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$22,000
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BET Fighter/St. Vincent and the Grenadines(2)
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Capesize
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173,149
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1992
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Expiring in September 2011
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$25,000
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BET Prince/Isle of Man(2)
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Capesize
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163,554
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1995
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Expiring in November 2009(3)
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$19,000
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BET Scouter/Isle of Man(2)
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Capesize
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171,175
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1995
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Expiring in October 2011
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$26,000
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BET Intruder/Isle of Man(2)
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Panamax
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69,235
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1993
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Expiring in September 2011
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$15,500
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Total
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1,043,296
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(1) |
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Following expiration of its current charter party agreements,
the vessels will be employed in the spot market. |
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Vessels owned by BET. |
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We have secured new time charters for each of the BET Commander
and BET Prince commencing upon the expiration of the existing
time charters at daily charter rates of $24,000 and $25,000,
respectively, through December 2011 and January 2012,
respectively. |
The global dry bulk carrier fleet is divided into four
categories based on a vessels carrying capacity. These
categories are:
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Capesize. Capesize vessels have a carrying
capacity of 100,000-199,999 dwt. Only the largest ports around
the world possess the infrastructure to accommodate vessels of
this size. Capesize vessels are primarily used to transport iron
ore or coal and, to a much lesser extent, grains, primarily on
long-haul routes.
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Panamax. Panamax vessels have a carrying
capacity of between 60,000 and 100,000 dwt. These vessels are
designed to meet the physical restrictions of the Panama Canal
locks (hence their name
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Panamax the largest vessels able to
transit the Panama Canal, making them more versatile than larger
vessels). These vessels carry coal, grains, and, to a lesser
extent, minerals such as bauxite/alumina and phosphate rock. As
the availability of Capesize vessels has dwindled, Panamaxes
have also been used to haul iron ore cargoes.
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Handymax/Supramax. Handymax vessels have a
carrying capacity of between 30,000 and 60,000 dwt. These
vessels operate on a large number of geographically dispersed
global trade routes, carrying primarily grains and minor bulks.
The standard vessels are usually built with
25-30 ton
cargo gear, enabling them to discharge cargo where grabs are
required (particularly industrial minerals), and to conduct
cargo operations in countries and ports with limited
infrastructure. This type of vessel offers good trading
flexibility and can therefore be used in a wide variety of bulk
and neobulk trades, such as steel products. Supramax are a
sub-category
of this category typically having a cargo carrying capacity of
between 50,000 and 60,000 dwt.
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Handysize. Handysize vessels have a carrying
capacity of up to 30,000 dwt. These vessels are almost
exclusively carrying minor bulk cargo. 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.
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Management
of our Fleet
We currently have two executive officers, Mr. Dale
Ploughman, our chief executive officer, and Ms. Christina
Anagnostara, our chief financial officer. In addition, we employ
Ms. Theodora Mitropetrou, our general counsel, and a
support staff of seven employees. In the future, we intend to
employ such number of additional shore-based executives and
employees as may be necessary to ensure the efficient
performance of our activities.
We outsource the commercial brokerage and management of our
fleet to companies that are affiliated with members of the
Restis family. The commercial brokerage of our initial fleet of
six vessels has been contracted out to Safbulk Pty Ltd., or
Safbulk Pty, and the commercial brokerage of the BET fleet has
been contracted to Safbulk Maritime S.A., or Safbulk Maritime.
Safbulk Pty and Safbulk Maritime are sometimes collectively
referred to throughout this prospectus as Safbulk. The
management of our fleet and the BET fleet has been contracted
out to Enterprises Shipping and Trading, S.A., or EST. All three
of these entities are controlled by members of the Restis family.
Restis
Industry History and Relationship
Safbulk, EST, South African Marine Corporation, S.A., or SAMC,
Waterfront, S.A., or Waterfront, the
sub-lessor
of our executive offices, the sellers of the six initial vessels
that Seanergy acquired and certain of our shareholders are
affiliates of members of the Restis family. As of
September 9, 2009, the total beneficial ownership of the
Restis family in us, including shares actually owned, shares
issuable upon exercise of warrants exercisable within
60 days and shares governed by the voting agreement
described elsewhere in the prospectus, was 81.40%.
The Restis family has been engaged in the international shipping
industry for more than 40 years, including the ownership
and operation of more than 60 vessels in various segments
of the shipping industry, cargo and chartering interests. We
believe we will benefit from the extensive industry experience
and established relationships of our vessel manager and broker,
which are separate businesses controlled by members of the
Restis family. We believe that Safbulk has achieved a strong
reputation in the International shipping industry for efficiency
and reliability that should create new employment opportunities
for us with a variety of well known charterers.
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Our
Corporate History
Incorporation
of Seanergy and Seanergy Maritime
We were incorporated under the laws of the Republic of the
Marshall Islands pursuant to the Marshall Islands Business
Corporation Act, or the BCA, on January 4, 2008, originally
under the name Seanergy Merger Corp., as a wholly owned
subsidiary of Seanergy Maritime Corp., a Marshall Islands
corporation, or Seanergy Maritime. We changed our name to
Seanergy Maritime Holdings Corp. on July 11, 2008.
Seanergy Maritime was incorporated in the Marshall Islands on
August 15, 2006 as a blank check company formed to acquire,
through a merger, capital stock exchange, asset acquisition or
other similar business combination, one or more businesses in
the maritime shipping industry or related industries. Seanergy
Maritime, up to the date of the business combination, had not
commenced any business operations and was considered a
development stage enterprise. Seanergy Maritime is our
predecessor. See Dissolution and
Liquidation.
Initial
Public Offering of Seanergy Maritime
On September 28, 2007, Seanergy Maritime consummated its
initial public offering of 23,100,000 units, including
1,100,000 units issued upon the partial exercise of the
underwriters over-allotment option, with each unit
consisting of one share of its common stock and one warrant.
Each warrant entitled the holder to purchase one share of
Seanergy Maritime common stock at an exercise price of $6.50 per
share. The units sold in Seanergy Maritimes initial public
offering were sold at an offering price of $10.00 per unit,
generating gross proceeds of $231,000,000. This resulted in a
total of $227,071,000 in net proceeds, after deducting certain
deferred offering costs that were held in a trust account
maintained by Continental Stock Transfer &
Trust Company, which we refer to as the Seanergy Maritime
Trust Account.
Business
Combination
We acquired our initial fleet of six dry bulk carriers from the
Restis family for an aggregate purchase price of
(i) $367,030,750 in cash, (ii) $28,250,000 (face
value) in the form of a convertible promissory note, or the
Note, and (iii) up to an aggregate of 4,308,075 shares
of our common stock, subject to us meeting an Earnings Before
Interest, Taxes, Depreciation and Amortization, or EBITDA,
target of $72 million to be earned between October 1,
2008 and September 30, 2009. We believe the earn-out will
be achieved. This acquisition was made pursuant to the terms and
conditions of a Master Agreement dated May 20, 2008 by and
among us, Seanergy Maritime, our former parent, the several
sellers parties thereto who are affiliated with members of the
Restis family, and the several investors parties thereto who are
affiliated with members of the Restis family, and six separate
memoranda of agreement, which we collectively refer to as the
MOAs, between our vessel-owning subsidiaries and
each seller, each dated as of May 20, 2008. The acquisition
was completed with funds from the Seanergy Maritime
Trust Account and with financing provided by Marfin Egnatia
Bank S.A. of Greece, or Marfin.
On August 28, 2008, we completed our business combination
and took delivery, through our designated nominees (which are
wholly owned subsidiaries) of three of the six dry bulk vessels,
which included two 2008-built Supramax vessels and one
1997-built Handysize vessel. On that date, we took delivery of
the
M/V Davakis
G, the M/V Delos Ranger and the M/V African Oryx. On
September 11, 2008, we took delivery, through our
designated nominee, of the fourth vessel, the M/V Bremen Max, a
1993-built Panamax vessel. On September 25, 2008, we took
delivery, through our designated nominees, of the final two
vessels, the
M/V Hamburg
Max, a 1994-built Panamax vessel, and the M/V African Zebra, a
1985-built Handymax vessel. The purchase price paid does not
include any amounts that would result from the earn-out of the
4,308,075 shares of our common stock.
Dissolution
and Liquidation
On August 26, 2008, shareholders of Seanergy Maritime also
approved a proposal for the dissolution and liquidation of
Seanergy Maritime (the dissolution and liquidation,
which was originally filed with the SEC
4
on June 17, 2008, subsequently amended on July 31,
2008 and supplemented on August 22, 2008). Seanergy
Maritime proposed the dissolution and liquidation because
following the vessel acquisition, Seanergy Maritime was no
longer needed and its elimination is expected to save
substantial accounting, legal and compliance costs related to
the U.S. federal income tax filings necessary because of
Seanergy Maritimes status as a partnership for
U.S. federal income tax purposes.
In connection with the dissolution and liquidation of Seanergy
Maritime, on January 27, 2009, Seanergy Maritime filed
Articles of Dissolution with the Registrar of Corporations of
the Marshall Islands in accordance with Marshall Islands law and
distributed to each holder of shares of common stock of Seanergy
Maritime one share of our common stock for each share of
Seanergy Maritime common stock owned by such shareholders. All
outstanding warrants and the underwriters unit purchase
option of Seanergy Maritime concurrently become our obligations
and became exercisable to purchase our common stock. Following
the dissolution and liquidation of Seanergy Maritime, our common
stock and warrants began trading on the Nasdaq Stock Market on
January 28, 2009. For purposes of this prospectus all share
data and financial information for the period prior to
January 27, 2009 is that of Seanergy Maritime.
Purchase
of Controlling Interest in BET
We recently expanded the size of our fleet through the
acquisition of a 50% controlling interest in BET from
Constellation Bulk Energy Holdings, Inc. BETs other equity
owner is Mineral Transport, which is an affiliate of members of
the Restis family, one of our major shareholders. We entered
into a shareholders agreement with Mineral Transport that
allows us, among other things, to appoint a majority of the
members of the board of directors of BET. BETs fleet
consists of four Capesize vessels and one Panamax vessel. See
Our Business BET.
Executive
Offices
Our executive offices are located at 1-3 Patriarchou Grigoriou,
16674 Glyfada, Athens, Greece and our telephone number is
+30-210-963-8461.
Distinguishing
Factors and Business Strategy
The international dry bulk shipping industry is highly
fragmented and is comprised of approximately 6,300 ocean-going
vessels of tonnage size greater than 10,000 dwt which are owned
by approximately 1,500 companies. Seanergy competes with
other owners of dry bulk carriers, some of which may have a
different mix of vessel sizes in their fleet. It has, however,
identified the following factors that distinguish it in the dry
bulk shipping industry.
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Extensive Industry Visibility. Our management
and directors have extensive shipping and public company
experience as well as relationships in the shipping industry and
with charterers in the coal, steel and iron ore industries. We
capitalize on these relationships and contacts to gain market
intelligence, source sale and purchase opportunities and
identify chartering opportunities with leading charterers in
these core commodities industries, many of whom consider the
reputation of a vessel owner and operator when entering into
time charters.
|
|
|
|
Established Customer Relationships. We believe
that our directors and management team have established
relationships with leading charterers and a number of
chartering, sales and purchase brokerage houses around the
world. We believe that our directors and management team have
maintained relationships with, and have achieved acceptance by,
major national and private industrial users, commodity producers
and traders.
|
|
|
|
Experienced and Dedicated Management Team. We
believe that the members of our management team have developed
strong industry relationships with leading charterers,
shipbuilders, insurance underwriters, protection and indemnity
associations and financial institutions. Additionally, our
management team comes equipped with extensive shipping
experience and with a successful track record of
|
5
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|
|
creating shareholder value. All of our officers dedicate the
necessary amount of time and effort to fulfill their obligations
to Seanergy and its shareholders.
|
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|
Highly efficient operations. We believe that
our directors and executive officers long experience
in third-party technical management of dry bulk carriers enable
us to maintain cost-efficient operations. We actively monitor
and control vessel operating expenses while maintaining the high
quality of our fleet through regular inspections, comprehensive
planned maintenance systems and preventive maintenance programs
and by retaining and training qualified crew members.
|
|
|
|
Balanced Chartering Strategies. Nine of our
vessels are under medium-term charters with terms of 11 to 13
and 22 to 25 months and provide for fixed payments in
advance. We believe that these charters will provide us with
high fleet utilization and stable revenues. Two of our vessels
operate in the spot market. We may in the future pursue other
market opportunities for its vessels to capitalize on favorable
market conditions, including entering into short-term time and
voyage charters, pool arrangements or bareboat charters.
|
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|
Broad Fleet Profile. We focus on the dry bulk
sector including Capesize, Panamax, Handymax/Supramax and
Handysize dry bulk carriers. Our board fleet profile enables us
to serve our customers in both major and minor bulk trades. Our
vessels are able to trade worldwide in a multitude of trade
routes carrying a wide range of cargoes for a number of
industries. Our dry bulk carriers can carry coal and iron ore
for energy and steel production as well as grain and steel
products, fertilizers, minerals, forest products, ores, bauxite,
alumina, cement and other cargoes. Our fleet includes sister
ships. Operating sister and similar ships provides us with
operational and scheduling flexibility, efficiencies in employee
training and lower inventory and maintenance expenses. We
believe that operating sister ships allows us to maintain lower
operating costs and streamline its operations.
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|
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|
High Quality Fleet. We believe that our
ability to maintain and increase our customer base depends
largely on the quality and performance of our fleet. We believe
that owning a high quality fleet reduces operating costs,
improves safety and provides us with a competitive advantage in
obtaining employment for our vessels. We carry out regular
inspections and maintenance of our fleet in order to maintain
its high quality.
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|
Fleet Growth Potential. We have options to
purchase additional vessels from unaffiliated third parties.
Furthermore, we intend to acquire additional dry bulk carriers
or enter into new contracts through timely and selective
acquisitions of vessels in a manner that we determine will be
accretive to cash flow. We expect to fund the acquisition of the
additional vessels primarily from the proceeds of this offering
and any future acquisition of additional vessels using amounts
borrowed under our credit facility, future borrowings under
other agreements as well as with proceeds from the exercise of
the Warrants, if any, or through other sources of debt and
equity. However, there can be no assurance that we will be
successful in obtaining future funding or that any or all of the
Warrants will be exercised.
|
6
The
Offering
|
|
|
Common stock offered by us |
|
30,000,000 shares. |
|
Underwriters over-allotment option |
|
Up
to shares. |
|
Common stock outstanding after this offering(1) |
|
shares. |
|
Use of proceeds |
|
We estimate that we will receive net proceeds of approximately
$ from this offering assuming an
offering price of $ per share of
common stock, which is the last reported closing price of our
common stock
on ,
2009, after deducting underwriting discounts and commissions,
and offering expenses, and assuming the underwriters
over-allotment option is not exercised. |
|
|
|
We intend to use the proceeds of this offering for the purchase
of additional vessels and for general working capital purposes.
Each $1.00 increase (decrease) in the assumed public offering
public of $ per share would
increase (decrease) the net proceeds to us from this offering by
$ million, assuming that the
number of shares offered by us, as set forth on the cover page
of this prospectus, remains the same and after deducting the
estimated underwriting discounts and commissions and the
estimated expenses payable by us. See Use of
Proceeds. |
|
NASDAQ Global Market symbols |
|
Common stock SHIP
Warrants SHIP.W |
|
Risk factors |
|
Investing in our common stock involves substantial risk. You
should carefully consider all the information in this prospectus
prior to investing in our common stock. In particular, we urge
you to consider carefully the factors set forth in the section
of this prospectus entitled Risk Factors beginning
on page 11. |
|
|
|
(1) |
|
The number of shares of common stock outstanding after this
offering is based on 28,947,095 shares of our common stock
outstanding on September 9, 2009 and excludes the following: |
A. 38,984,667 shares of common stock reserved for
issuance upon the exercise of outstanding warrants, which
warrants have an exercise price of $6.50 per share and expire on
September 24, 2011;
B. 2,000,000 shares of common stock reserved for
issuance upon the exercise of the unit purchase option sold to
the lead underwriter in the initial public offering of our
predecessor, which unit purchase option expires
September 24, 2012 as follows:
|
|
|
|
|
1,000,000 shares of common stock included in the
1,000,000 units issuable upon exercise of the option at an
exercise price of $12.50 per unit;
|
|
|
|
1,000,000 shares of common stock issuable for $6.50 per
share upon exercise of the warrants underlying the units
issuable upon exercise of the option;
|
C. 4,308,075 shares issuable to certain Restis
affiliate shareholders if we achieve certain EBITDA targets
(which targets we do expect to achieve); and
D. shares that may be issued pursuant to the
underwriters over-allotment option.
7
Summary
Historical Financial Information and Other Data
The following selected historical statement of operations and
balance sheet data were derived from the audited financial
statements and accompanying notes for the years ended
December 31, 2008 and 2007 and for the period from
August 15, 2006 (Inception) to December 31, 2006 and
the unaudited financial statements and accompanying notes for
the three and six months ended June 30, 2009 and 2008,
included elsewhere in this prospectus. The information is only a
summary and should be read in conjunction with the financial
statements and related notes included elsewhere in this
prospectus and the sections entitled, Risk Factors
and Managements Discussion and Analysis of Financial
Condition and Results of Operations for Seanergy Maritime and
Seanergy. The historical data included below and elsewhere
in this prospectus is not necessarily indicative of our future
performance.
Since our vessel operations began upon the consummation of our
business combination on August 28, 2008, we cannot provide
a meaningful comparison of our results of operations for the
year ended December 31, 2008 to December 31, 2007 or
for the three and six months ended June 30, 2009 and
June 30, 2008. During the period from our inception to the
date of our business combination, we were a development stage
enterprise.
All amounts in the tables below are in thousands of
U.S. dollars, except for share data, fleet data and average
daily results.
|
|
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|
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|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
From
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Inception
|
|
|
|
|
|
|
|
|
|
Six Months
|
|
|
|
|
|
|
|
|
(August 15,
|
|
|
|
Three Months Ended
|
|
|
Ended
|
|
|
Years Ended
|
|
|
2006) to
|
|
|
|
June 30,
|
|
|
June 30,
|
|
|
December 31,
|
|
|
December 31,
|
|
|
|
2009
|
|
|
2008
|
|
|
2009
|
|
|
2008
|
|
|
2008
|
|
|
2007
|
|
|
2006
|
|
|
Statement of Operations Data:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Vessel revenue related party, net
|
|
|
22,067
|
|
|
|
|
|
|
|
48,309
|
|
|
|
|
|
|
|
34,453
|
|
|
|
|
|
|
|
|
|
Direct voyage expenses
|
|
|
(292
|
)
|
|
|
|
|
|
|
(438
|
)
|
|
|
|
|
|
|
(151
|
)
|
|
|
|
|
|
|
|
|
Vessel operating expense
|
|
|
(3,010
|
)
|
|
|
|
|
|
|
(5,821
|
)
|
|
|
|
|
|
|
(3,180
|
)
|
|
|
|
|
|
|
|
|
Voyage expenses related Party
|
|
|
(283
|
)
|
|
|
|
|
|
|
(619
|
)
|
|
|
|
|
|
|
(440
|
)
|
|
|
|
|
|
|
|
|
Management fees related party
|
|
|
(315
|
)
|
|
|
|
|
|
|
(617
|
)
|
|
|
|
|
|
|
(388
|
)
|
|
|
|
|
|
|
|
|
General and administration expenses
|
|
|
(1,285
|
)
|
|
|
(137
|
)
|
|
|
(2,141
|
)
|
|
|
(597
|
)
|
|
|
(1,840
|
)
|
|
|
(445
|
)
|
|
|
(5
|
)
|
General and administration expenses related party
|
|
|
(482
|
)
|
|
|
|
|
|
|
(1,021
|
)
|
|
|
|
|
|
|
(430
|
)
|
|
|
|
|
|
|
|
|
Depreciation
|
|
|
(7,758
|
)
|
|
|
|
|
|
|
(15,430
|
)
|
|
|
|
|
|
|
(9,929
|
)
|
|
|
|
|
|
|
|
|
Goodwill impairment loss
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(44,795
|
)
|
|
|
|
|
|
|
|
|
Vessels impairment loss
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(4,530
|
)
|
|
|
|
|
|
|
|
|
Interest income money market fund
|
|
|
116
|
|
|
|
1,057
|
|
|
|
256
|
|
|
|
2,612
|
|
|
|
3,361
|
|
|
|
1,948
|
|
|
|
1
|
|
Interest and finance costs
|
|
|
(1,354
|
)
|
|
|
|
|
|
|
(2,819
|
)
|
|
|
|
|
|
|
(4,077
|
)
|
|
|
(58
|
)
|
|
|
|
|
Foreign currency exchange (losses), net
|
|
|
(56
|
)
|
|
|
|
|
|
|
(55
|
)
|
|
|
|
|
|
|
(39
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income (loss)
|
|
|
7,167
|
|
|
|
920
|
|
|
|
19,283
|
|
|
|
2,015
|
|
|
|
(31,985
|
)
|
|
|
1,445
|
|
|
|
(4
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
8
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
June 30,
|
|
December 31,
|
|
|
2009
|
|
2008
|
|
2007
|
|
2006
|
|
Balance Sheet Data:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total current assets
|
|
|
48,198
|
|
|
|
29,814
|
|
|
|
235,213
|
|
|
|
376
|
|
Vessels, net
|
|
|
330,202
|
|
|
|
345,622
|
|
|
|
|
|
|
|
|
|
Total assets
|
|
|
383,025
|
|
|
|
378,202
|
|
|
|
235,213
|
|
|
|
632
|
|
Total current liabilities, including current portion of
long-term debt
|
|
|
28,389
|
|
|
|
32,999
|
|
|
|
5,995
|
|
|
|
611
|
|
Long-term debt, net of current portion
|
|
|
203,788
|
|
|
|
213,638
|
|
|
|
|
|
|
|
|
|
Total shareholders equity
|
|
|
150,848
|
|
|
|
131,565
|
|
|
|
148,369
|
|
|
|
20
|
|
Performance
Indicators
The figures shown below are non-GAAP statistical ratios used by
management to measure performance of our vessels and are not
included in financial statements prepared under United States
generally accepted accounting principles, or GAAP.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended
|
|
Six Months Ended
|
|
Year Ended
|
|
|
June 30, 2009
|
|
June 30, 2009
|
|
December 31, 2008
|
|
Fleet Data:
|
|
|
|
|
|
|
|
|
|
|
|
|
Average number of vessels(1)
|
|
|
6.0
|
|
|
|
6.0
|
|
|
|
5.5
|
|
Ownership days(2)
|
|
|
546
|
|
|
|
1,086
|
|
|
|
686
|
|
Available days(3)
|
|
|
417
|
|
|
|
916
|
|
|
|
686
|
|
Operating days(4)
|
|
|
411
|
|
|
|
909
|
|
|
|
678
|
|
Fleet utilization(5)
|
|
|
75.3
|
%
|
|
|
83.7
|
%
|
|
|
98.9
|
%
|
Average Daily Results:
|
|
|
|
|
|
|
|
|
|
|
|
|
Vessel TCE rate(6)
|
|
|
52,292
|
|
|
|
51,982
|
|
|
|
49,362
|
|
Vessel operating expenses(7)
|
|
|
5,513
|
|
|
|
5,360
|
|
|
|
4,636
|
|
Management fees(8)
|
|
|
577
|
|
|
|
568
|
|
|
|
566
|
|
Total vessel operating expenses(9)
|
|
|
6,090
|
|
|
|
5,928
|
|
|
|
5,202
|
|
|
|
|
(1) |
|
Average number of vessels is the number of vessels that
constituted our fleet for the relevant period, as measured by
the sum of the number of days each vessel was a part of our
fleet during the relevant period divided by the number of
calendar days in the relevant period. |
|
(2) |
|
Ownership days are the total number of days in a period during
which the vessels in a fleet have been owned. 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
recorded during a period. |
|
(3) |
|
Available days are the number of ownership days less the
aggregate number of days that vessels are
off-hire due
to major repairs, dry-dockings or special or intermediate
surveys. The shipping industry uses available days to measure
the number of ownership days in a period during which vessels
should be capable of generating revenues. During the three
months ended June 30, 2009, we incurred 129 off-hire days
for vessel scheduled dry-docking. During the six months ended
June 30, 2009, we incurred
170 off-hire
days for vessel scheduled dry-docking. |
|
(4) |
|
Operating days are the number of available days in a period less
the aggregate number of days that 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 actually generate revenues. |
|
(5) |
|
Fleet utilization is the percentage of time that our vessels
were generating revenue, and is determined by dividing operating
days by ownership days for the relevant period. |
9
|
|
|
(6) |
|
Time charter equivalent, or TCE, rates are defined as our time
charter revenues less voyage expenses during a period divided by
the number of our operating days during the period, which is
consistent with industry standards. Voyage expenses include port
charges, bunker (fuel oil and diesel oil) expenses, canal
charges and commissions. |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended
|
|
Six Months Ended
|
|
Year Ended
|
|
|
June 30, 2009
|
|
June 30, 2009
|
|
December 31, 2008
|
|
|
(In thousands of US dollars, except operating days)
|
|
Net revenues from vessels
|
|
|
22,067
|
|
|
|
48,309
|
|
|
|
34,453
|
|
Voyage expenses
|
|
|
(292
|
)
|
|
|
(438
|
)
|
|
|
(151
|
)
|
Voyage expenses related party
|
|
|
(283
|
)
|
|
|
(619
|
)
|
|
|
(440
|
)
|
Net operating revenues
|
|
|
21,492
|
|
|
|
47,252
|
|
|
|
33,862
|
|
Operating days
|
|
|
411
|
|
|
|
909
|
|
|
|
686
|
|
Time charter equivalent rate
|
|
|
52,292
|
|
|
|
51,982
|
|
|
|
49,362
|
|
|
|
|
(7) |
|
Average daily vessel operating expenses, which includes crew
costs, provisions, deck and engine stores, lubricating oil,
insurance, maintenance and repairs, are calculated by dividing
vessel operating expenses by ownership days for the relevant
time periods: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended
|
|
Six Months Ended
|
|
Year Ended
|
|
|
June 30, 2009
|
|
June 30, 2009
|
|
December 31, 2008
|
|
|
(In thousands of US dollars, except ownership days)
|
|
Operating expenses
|
|
|
3,010
|
|
|
|
5,821
|
|
|
|
3,180
|
|
Ownership days
|
|
|
546
|
|
|
|
1,086
|
|
|
|
686
|
|
Daily vessel operating expenses
|
|
|
5,513
|
|
|
|
5,360
|
|
|
|
4,636
|
|
|
|
|
(8) |
|
Daily management fees are calculated by dividing total
management fees by ownership days for the relevant time period. |
|
(9) |
|
Total vessel operating expenses, or TVOE, is a measurement of
total expenses associated with operating the vessels. TVOE is
the sum of vessel operating expenses and management fees. Daily
TVOE is calculated by dividing TVOE by fleet ownership days for
the relevant time period. |
10
RISK
FACTORS
An investment in our common stock involves a high degree of
risk. You should consider carefully all of the material risks
described below, together with the other information contained
in this prospectus before making a decision to invest in our
common stock. References in this prospectus to
Seanergy, we, us, or
our company refer to Seanergy Maritime Holdings
Corp. and our subsidiaries, but, if the context otherwise
requires, may refer only to Seanergy Maritime Holdings Corp.
References in this prospectus to BET refer to Bulk
Energy Transport (Holdings) Limited and its wholly owned
subsidiaries. We acquired a controlling interest in BET in
August 2009 through our right to appoint a majority of the BET
board of directors as provided in the shareholders agreement.
Risk
Factors Relating to Seanergy
We are
currently in compliance with the terms of our loan with Marfin
only because we have received waivers and/or amendments to the
Marfin loan agreement waiving our compliance with a certain
covenant for certain periods of time. The waivers and/or
amendments impose additional operating and financial
restrictions on us and modify the application of the terms of
our existing loan agreement. Any extensions of these waivers, if
needed, could contain additional restrictions and might not be
granted at all.
Our loan agreement with Marfin requires that we maintain certain
financial and other covenants. The current low dry bulk charter
rates and dry bulk vessel values have affected our ability to
comply with one covenant. A violation of this covenant
constitutes an event of default under our credit facility and
would provide Marfin with various remedies. In exercising these
remedies Marfin may require us to post additional collateral,
enhance our equity and liquidity, continue to withhold payment
of dividends, increase our interest payments, pay down our
indebtedness to a level where we are in compliance with this
loan covenant, or sell vessels in our fleet.,. Marfin could also
accelerate our indebtedness and foreclose its liens on our
vessels. The exercise of any of these remedies could materially
adversely impair our ability to continue to conduct our
business. Moreover, Marfin may require the payment of additional
fees, require prepayment of a portion of our indebtedness to it,
accelerate the amortization schedule for our indebtedness and
increase the interest rates they charge us on our outstanding
indebtedness.
As of December 31, 2008, we would not have been in
compliance with the loan covenant related to the value of our
vessels compared to the amounts of our loans, had we not later
obtained a certain retroactive waiver from Marfin. During the
first quarter of 2009, we obtained a waiver from Marfin of our
compliance with this covenant, which waiver was effective as of
December 31, 2008. This waiver expired in July 2009, when
the first of our original charters was replaced. On
September 9, 2009, we executed an addendum no. 1 to
the loan agreement with Marfin and obtained a waiver of this
loan covenant through July 1, 2010. In connection with the
amendment and waiver, Marfin made certain changes to our loan
agreement including increasing the interest payable during the
waiver period from LIBOR plus 1.5% to LIBOR plus 2.75%,
accelerating the due dates of certain principal installments and
limiting our ability to pay dividends without their prior
consent. As a result of this waiver, we are not currently in
default under our Marfin loan agreement. For more information,
see Managements Discussion and Analysis of Financial
Condition and Results of Operations Recent
Developments. If conditions in the dry bulk charter market
remain depressed or worsen, we may need to request additional
extensions of this waiver. There can be no assurance that Marfin
will provide such extensions. If we require extensions to the
waivers and are unable to obtain them, as described above, we
would be in default under our Marfin loan agreement and your
investment in our shares could lose most or all of its value.
As a result of these waivers, Marfin imposed operating and
financial restrictions on us. These restrictions limit our
ability to pay dividends without Marfins prior consent. If
we need to extend this covenant waiver, Marfin may impose
additional restrictions. In addition to the above restrictions,
Marfin may require the payment of additional fees, require
prepayment of a portion of our indebtedness to it, accelerate
the amortization schedule for our indebtedness, and increase the
interest rates it charges us on our outstanding indebtedness. We
might also be required to use a significant portion of the net
proceeds from this offering to
11
repay a portion of our outstanding indebtedness. These potential
restrictions and requirements may limit our ability to pay
dividends to you, finance our future operations, make
acquisitions or pursue business opportunities.
Our
debt financing contains restrictive covenants that may limit our
liquidity and corporate activities.
The Marfin loan agreement, the BET loan agreement, and any
future loan agreements we or our subsidiaries may execute may
impose, operating and financial restrictions on us or our
subsidiaries. These restrictions may, subject to certain
exceptions, limit our or our subsidiaries ability to:
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incur additional indebtedness;
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create liens on our or our subsidiaries assets;
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sell capital stock of our subsidiaries;
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engage in any business other than the operation of the vessels;
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pay dividends;
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change or terminate the management of the vessels or terminate
or materially amend the management agreement relating to each
vessel; and
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sell the vessels.
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The restrictions included in the Marfin loan agreement include
minimum financial standards we must comply with including:
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The ratio of total liabilities to total assets;
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The ratio of total net debt owed to LTM (last twelve months)
EBITDA;
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The ratio of LTM EBITDA to net interest expense;
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The ratio of cash deposits held to total debt; and
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A security margin, or the Security Margin Clause, whereby the
aggregate market value of the vessels and the value of any
additional security is required to be at least 135% of the
aggregate of the debt financing and any amount available for
drawing under the revolving facility, less the aggregate amount
of all deposits maintained. A waiver from Marfin has been
received with respect to this clause.
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The financial ratios are required to be tested by us on a
quarterly basis on a last-twelve-months basis.
Under the BET loan agreement, the BET subsidiaries are subject
to operating and financial covenants that may affect BETs
business. These restrictions may, subject to certain exceptions,
limit the BET subsidiaries ability to engage in many of
the activities listed above. Furthermore, the BET subsidiaries
must assure the lenders that the aggregate market value of the
BET vessels is not less than 125% of the outstanding amount of
the BET loan. If the market value of the vessels is less than
this amount, the BET subsidiaries must prepay an amount that
will result in the market value of the vessels meeting this
requirement or offer additional security to the lenders and a
portion of the debt may be required to be classified as current.
Therefore, we may need to seek permission from our lenders in
order to engage in some important corporate actions. Also, any
further decline in vessel values may cause BET to fail to meet
the market value covenants in its loan agreement and entitle the
lenders to assort certain rights. Our current and any future
lenders interests may be different from our interests, and
we cannot guarantee that we will be able to obtain such
lenders permission when needed. This may prevent us from
taking actions that are in our best interest.
Finally, the BET lenders have indicated their willingness to
provide their consent to our purchase of shares in BET,
including waiver of compliance with the vessels market
value covenant. We are currently in active negotiations to
finalize these arrangements following which we expect BET to be
in full compliance with its covenants. If BETs lenders
decline to approve this transaction, they could declare an event
of default under BETs loan agreement and a portion of the
debt may be required to be classified as current.
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The
value of our vessels has fluctuated, and may continue to
fluctuate significantly, due in large part to the sharp decline
in the world economy and the charter market. A significant
decline in vessel values could result in losses when we sell our
vessels or could result in a requirement that we write down
their carrying value, which would adversely affect our earnings.
In addition, a decline in vessel values could adversely impact
our ability to raise additional capital and would likely cause
us to violate certain covenants in our loan agreements that
relate to vessel value.
The market value of our vessels can and have fluctuated
significantly based on general economic and market conditions
affecting the shipping industry and prevailing charter hire
rates. Since the end of 2008, the market value of our vessels
has dropped significantly due to, among other things, the
substantial decline in charter rates. During the year ended
December 31, 2008, we recorded an impairment charge of
$4,530,000 on our vessels. There can be no assurance as to how
long charter rates and vessel values will remain at the current
low levels or whether they will improve to any significant
degree. Consequently we may have to record further impairments
of our vessels.
The market value of our vessels may increase or decrease in the
future depending on the following factors:
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economic and market conditions affecting the shipping industry
in general;
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supply of dry bulk vessels, including newbuildings;
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demand for dry bulk vessels;
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types and sizes of vessels;
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other modes of transportation;
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cost of newbuildings;
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new regulatory requirements from governments or self-regulated
organizations; and
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prevailing level of charter rates.
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Because the market value of our vessels may fluctuate
significantly, we may incur losses when we sell vessels, which
may adversely affect our earnings. In addition, on a quarterly
basis, we test the carrying value of our vessels in our
financial statements, based upon their earning capacity and
remaining useful lives. Earning capacity is measured by the
vessels expected earnings under their charters. If we
determine that our vessels carrying values should be
reduced, we would recognize an impairment charge on our
financial statements that would result in a potentially
significant charge against our earnings and a reduction in our
shareholders equity. Such impairment adjustment could also
hinder our ability to raise capital. If for any reason we sell
our vessels at a time when prices have fallen, the sale proceeds
may be less than that vessels carrying amount on our
financial statements, and we would incur a loss and a reduction
in earnings. Finally, a decline in vessel values would likely
cause us to violate certain covenants in our loan agreement that
require vessel values to equal or exceed a stated percentage of
the amount of our loans. Such violations could result in our
default under our loan agreements.
If we
fail to manage our growth properly, we may not be able to manage
our recently expanded fleet successfully, and we may not be able
to expand our fleet further if we desire to do so, adversely
affecting our overall financial position.
On August 12, 2009, we completed our acquisition of a 50%
controlling ownership interest in BET, pursuant to which we
acquired an additional five vessels. Concurrently with the
closing of the acquisition, BET entered into a technical
management agreement with EST and a commercial brokerage
agreement with Safbulk at terms similar to those that our
existing fleet has with these entities. Each of EST and Safbulk
are affiliated with members of the Restis family and are the
technical manager and commercial broker of our current fleet.
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We may continue to expand our fleet in the future if desirable
opportunities arise. Our further growth will depend on:
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locating and acquiring suitable vessels at competitive prices;
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identifying and consummating acquisitions or joint ventures;
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integrating any acquired vessels successfully with our existing
operations;
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enhancing our customer base;
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managing our expansion; and
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obtaining required financing, which could include debt, equity
or combinations thereof.
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Growing any business by acquisition presents numerous risks such
as undisclosed liabilities and obligations, difficulty
experienced in obtaining additional qualified personnel,
managing relationships with customers and suppliers, integrating
newly acquired operations into existing infrastructures,
identifying new and profitable charter opportunities for
vessels, and complying with new loan covenants. We have not
identified further expansion opportunities at this time, and the
nature and timing of any such expansion is uncertain. We may not
be successful in growing further and may incur significant
expenses and losses.
Our
charterers may terminate or default on their charters, which
could adversely affect our results of operations and cash
flow.
The ability and the willingness 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, the charter rates received for specific
types of vessels, hedging arrangements, the ability of
charterers to obtain letters of credit from their customers,
cash reserves, cash flow considerations and various operating
expenses. Many of these factors impact the financial viability
of our charterers. Given the downturn in world markets and the
factors described above, it is possible that some of our
charterers could declare bankruptcy or otherwise seek to evade
their obligations to us under the charters, and as a
consequence, default on their obligations to us. The costs and
delays associated with the termination of a charter or the
default by a charterer of a vessel may be considerable and may
adversely affect our business, results of operations, cash flows
and financial condition.
Servicing
debt will limit funds available for other purposes, including
capital expenditures and payment of dividends.
Marfin has extended to us a term loan of $165,000,000 and a
revolving facility in an amount equal to the lesser of
$72,000,000 and an amount in dollars which when aggregated with
the amount already drawn down under the term loan does not
exceed 70% of the aggregate market value of our vessels. We have
currently drawn down the full amount of the term loan and
$54,845,000 of the revolving facility. The term loan is
repayable by twenty-eight consecutive quarterly principal
installments out of which the first four principal installments
will be equal to $7,500,000 each, the next four principal
installments will be equal to $5,250,000 each and the final
twenty principal installments equal to $3,200,000 each, with a
balloon payment equal to $50,000,000 due concurrently with the
twenty-eighth principal installment.
The revolving facility is payable at maturity of the term loan.
BET financed the acquisition of its vessels with the proceeds of
a loan from Citibank International PLC, as agent for a syndicate
of banks and financial institutions. The outstanding principal
amount as of December 31, 2008 was $150,725,000. The amount
of the loan for each vessel was less than or equal to 70% of the
contractual purchase price for the applicable vessel. The loan
is repayable in semi-annual installments of principal in the
amount of $8,286,500 followed by a balloon payment due on
maturity in the amount of $51,289,000 as these installment
amounts were revised after the BET Performer sale. Interest is
due and payable quarterly based on interest periods selected by
BET.
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We are required to dedicate a substantial portion of our cash
flow from operations to pay the principal and interest on the
Marfin and BET debt. These payments limit funds otherwise
available for capital expenditures and other purposes, including
payment of dividends. We have not yet determined whether we will
incur debt in the near future in connection with any additional
vessel acquisitions. If we are unable to service our respective
debt, it could have a material adverse effect on our financial
condition and results of operations.
Credit
market volatility may affect our ability to refinance our
existing debt, borrow funds under our revolving credit facility
or incur additional debt.
The credit markets have recently experienced extreme volatility
and disruption, which has limited credit capacity for certain
issuers, and lenders have requested shorter terms and lower loan
to value ratios. The market for new debt financing is extremely
limited and in some cases not available at all. If current
levels of market disruption and volatility continue or worsen,
we may not be able to refinance our existing debt, draw upon our
revolving credit facility or incur additional debt, which may
require us to seek other funding sources to meet our liquidity
needs or to fund planned expansion. For example, our existing
term loan and revolving credit facility from Marfin are tied to
the market value of the vessels whereby the aggregate market
values of the vessels and the value of any additional security
should be at least 135% of the aggregate of the debt financing
and any amount available for drawing under the revolving
facility less the aggregate amount of all deposits maintained.
If the percentage is below 135%, then a prepayment of the loans
may be required or additional security may be requested. On
September 9, 2009, we executed an addendum no. 1 to
the loan agreement with Marfin and received a waiver with
respect to this clause through July 1, 2010. In connection
with the amendment and waiver, Marfin made certain changes to
our loan agreement including increasing the interest payable
during the waiver period from LIBOR plus 1.5% to LIBOR plus
2.75%, accelerating the due dates of certain principal
installments and limiting our ability to pay dividends without
their prior consent. The BET loan agreement contains a similar
covenant. If the market value of the BET vessels is less than
125% of the outstanding amount of the BET loan, the BET
subsidiaries must prepay an amount that will result in the
market value of the vessels meeting this requirement or offer
additional security to the lenders. Hence, we may need to seek
permission from our lenders in order to make further use of our
Marfin revolving credit facility or avoid prepayment obligations
under either the Marfin or BET loans, depending on the aggregate
market value of our vessels. We cannot assure you that we will
be able to obtain debt or other financing on reasonable terms,
or at all.
Increases
in interest rates could increase interest payable under our
variable rate indebtedness.
We are subject to interest rate risk in connection with our
Marfin and BET loans. Changes in interest rates could increase
the amount of our interest payments and thus negatively impact
our future earnings and cash flows. Fluctuations in interest
rates could be exacerbated in future periods as a result of the
current worldwide instability in the banking and credit markets.
Although neither party currently has hedging arrangements for
our variable rate indebtedness, we both expect to hedge interest
rate exposure at the appropriate time. However, these
arrangements may prove inadequate or ineffective.
In the
highly competitive international dry bulk shipping industry, we
may not be able to compete for charters with new entrants or
established companies with greater resources, which may
adversely affect our results of operations.
We employ our fleet in a highly competitive market that is
capital intensive and highly fragmented. Competition arises
primarily from other vessel owners, some of whom have
substantially greater resources than ours. Competition for the
transportation of dry bulk cargoes can be intense and depends on
price, location, size, age, condition and the acceptability of
the vessel and its managers to the charterers. Due in part to
the highly fragmented market, competitors with greater resources
could operate larger fleets through consolidations or
acquisitions that may be able to offer better prices and fleets.
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Because
SAMC is the sole counterparty on the time charters for seven of
our vessels, the failure of this counterparty to meet its
obligations could cause us to suffer losses, thereby decreasing
our revenues, operating results and cash flows.
Two of our six initial vessels and all five BET vessels are
chartered to SAMC, a company affiliated with members of the
Restis family. Therefore we are dependent on performance by our
charterer. Our charters may terminate earlier than the dates
indicated in this prospectus. Under our charter agreements, the
events or occurrences that will cause a charter to terminate or
give the charterer the option to terminate the charter generally
include a total or constructive total loss of the related
vessel, the requisition for hire of the related vessel or the
failure of the related vessel to meet specified performance
criteria. In addition, the ability of our charterer 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, the charter rates received for specific types
of vessels, the ability of the charterer to obtain letters of
credit from its customers and various operating expenses. It is
our understanding that SAMC operates some of the vessels on
period charters and some of the vessels in the spot market. The
spot market is highly competitive and spot rates fluctuate
significantly. Vessels operating in the spot market generate
revenues that are less predictable than those on period time
charters. Therefore, SAMC may be exposed to the risk of
fluctuating spot dry bulk charter rates, which may have an
adverse impact on its financial performance and its obligations.
The cost and delays associated with the default by a charterer
of a vessel may be considerable and may adversely affect our
business, results of operations, cash flows, financial condition
and our ability to pay dividends.
We may
not be able to take advantage of favorable opportunities in the
current spot market, if any, with respect to the majority of our
vessels, nine of which are employed on 11 to 13 and 22 to
25 month time charters.
Nine vessels in our fleet are employed under medium-term time
charters, with expiration dates ranging from 11 to
13 months and 22 to 25 months from the time of
delivery, expiring between October 2009 and September 2011.
Although medium-term time charters provide relatively steady
streams of revenue, vessels committed to medium-term charters
may not be available for spot voyages during periods of
increasing charter hire rates, when spot voyages might be more
profitable.
When
our charters expire, we may not be able to replace such charters
promptly or with profitable charters, which may adversely affect
our earnings.
We will generally attempt to recharter our vessels at favorable
rates with reputable charterers as our existing charters expire.
If the dry bulk shipping market is in a period of depression
when our vessels charters expire, it is likely that we may
be forced to re-charter them at substantially reduced rates, if
at all. If rates are significantly lower or if we are unable to
recharter our vessels, our earnings may be adversely affected.
We may
not be able to attract and retain key management personnel and
other employees in the shipping industry, which may negatively
affect the effectiveness of our management and our results of
operations.
Our success will depend to a significant extent upon the
abilities and efforts of our management team. We currently have
two executive officers, our chief executive officer and our
chief financial officer, and one general counsel and a support
staff. Our success will depend upon our ability to retain key
members of our management team and the ability of our management
to recruit and hire suitable employees. The loss of any of these
individuals could adversely affect our business prospects and
financial condition. Difficulty in hiring and retaining
personnel could adversely affect our results of operations.
We are
dependent on each of EST and Safbulk for the management and
commercial brokerage of our fleet.
We subcontract the management and commercial brokerage of our
fleet, including crewing, maintenance and repair, to each of EST
and Safbulk, both affiliates of members of the Restis family,
the loss of services of,
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or the failure to perform by, either of these entities could
materially and adversely affect our results of operations.
Although we may have rights against either of these entities if
they default on their obligations to us, you will have no
recourse directly against them. Further, we expect that we will
need to seek approval from our lenders to change our manager.
EST
and Safbulk are privately held companies and there is little or
no publicly available information about them.
The ability of EST and Safbulk to continue providing services
for our benefit will depend in part on their respective
financial strength. Circumstances beyond our control could
impair their financial strength, and because they are privately
held, it is unlikely that information about their financial
strength would become public unless any of these entities began
to default on their respective obligations. As a result, our
shareholders might have little advance warning of problems
affecting EST or Safbulk, even though these problems could have
a material adverse effect on us.
We
outsource, and expect to outsource, the management and
commercial brokerage of our fleet to companies that are
affiliated with members of the Restis family, which may create
conflicts of interest.
We outsource, and expect to outsource, the management and
commercial brokerage of our fleet to EST and Safbulk, companies
that are affiliated with members of the Restis family. Companies
affiliated with members of the Restis family own and may acquire
vessels that compete with our fleet. Both EST and Safbulk have
responsibilities and relationships to owners other than us which
could create conflicts of interest between us, on the one hand,
and EST or Safbulk, on the other hand. These conflicts may arise
in connection with the chartering of the vessels in our fleet
versus dry bulk carriers managed by other companies affiliated
with members of the Restis family. There can be no assurance
that they will resolve conflicts in our favor.
Purchasing
and operating second hand vessels may result in increased
operating costs and vessel off-hire, which could adversely
affect our earnings.
We have inspected the second hand vessels that we acquired from
the Restis sellers and in the acquisition of BET and considered
the age and condition of the vessels in budgeting for operating,
insurance and maintenance costs. If we acquire additional second
hand vessels in the future, we may encounter higher operating
and maintenance costs due to the age and condition of those
additional vessels.
However, our inspection of second hand vessels prior to purchase
does not provide us with the same knowledge about their
condition and cost of any required or anticipated repairs that
we would have had if these vessels had been built for and
operated exclusively by us. We will have the benefit of
warranties on newly constructed vessels, we will not receive the
benefit of warranties on second hand vessels.
In general, the costs to maintain a dry bulk carrier in good
operating condition increase with the age of the vessel. The
average age of our fleet, including the BET vessels, is
approximately 13 years, out of the expected useful life of
25 years. Older vessels, however, are typically less
fuel-efficient and more costly to maintain than more recently
constructed dry bulk carriers due to improvements in engine
technology. Cargo insurance rates 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 the vessels may
engage. As our vessels age, market conditions may not justify
those expenditures or enable us to operate our vessels
profitably during the remainder of their useful lives.
We may
not have adequate insurance to compensate us if we lose our
vessels, which may have a material adverse effect on our
financial condition and results of operation.
We have procured hull and machinery insurance and protection and
indemnity insurance, which includes environmental damage and
pollution insurance coverage and war risk insurance for our
fleet. We do not expect to maintain for all of our vessels
insurance against loss of hire, which covers business
interruptions that result
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from the loss of use of a vessel. We may not be adequately
insured against all risks. We may not be able to obtain adequate
insurance coverage for our fleet in the future. The insurers may
not pay particular claims. Our insurance policies may contain
deductibles for which we will be responsible and limitations and
exclusions which may increase our costs or lower our revenue.
Moreover, insurers may default on claims they are required to
pay. If our insurance is not enough to cover claims that may
arise, the deficiency may have a material adverse effect on our
financial condition and results of operations.
The
majority of the members of our shipping committee and our
nominees to the BET board of directors are appointees nominated
by affiliates of members of the Restis family, which could
create conflicts of interest detrimental to us.
Our board of directors has created a shipping committee, which
has been delegated exclusive authority to consider and vote upon
all matters involving shipping and vessel finance, subject to
certain limitations. The same people serve as our appointees to
the BET board of directors. Affiliates of members of the Restis
family have the right to appoint two of the three members of the
shipping committee and as a result such affiliates will
effectively control all decisions with respect to our shipping
operations that do not involve a transaction with a Restis
affiliate. Messrs. Dale Ploughman, Kostas Koutsoubelis and
Elias Culucundis currently serve on our shipping committee and
as our BET director appointees. Each of Messrs. Ploughman
and Koutsoubelis also will continue to serve as officers
and/or
directors of other entities affiliated with members of the
Restis family that operate in the dry bulk sector of the
shipping industry. The dual responsibilities of members of the
shipping committee in exercising their fiduciary duties to us
and other entities in the shipping industry could create
conflicts of interest. Although Messrs. Ploughman and
Koutsoubelis intend to maintain as confidential all information
they learn from one company and not disclose it to the other
entities for whom they serve; in certain instances this could be
impossible given their respective roles with various companies.
There can be no assurance that Messrs. Ploughman and
Koutsoubelis would resolve any conflicts of interest in a manner
beneficial to us.
Industry
Risk Factors Relating to Seanergy
Investment
in a company in the dry bulk shipping industry involves a high
degree of risk.
The abrupt and dramatic downturn in the dry bulk charter market,
from which we have derived substantially all of our revenues,
has severely affected the dry bulk shipping industry and has
harmed our business. The Baltic Dry Index, or BDI, fell 94% from
a peak of 11,793 in May 2008 to a low of 663 in December 2008.
It has since risen to 2,491 as of September 9, 2009. The
decline in charter rates is due to various factors, including
the decrease in available trade financing for purchases of
commodities carried by sea, which has resulted in a significant
decline in cargo shipments. There is no certainty that the dry
bulk charter market will experience any further recovery over
the next several months and the market could decline from its
current level. These circumstances, which result from the
economic dislocation worldwide and the disruption of the credit
markets, have had a number of adverse consequences for dry bulk
shipping, including, among other things:
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a decrease in available financing for vessels;
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no active secondhand market for the sale of vessels;
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a sharp decline in charter rates, particularly for vessels
employed in the spot market;
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charterers seeking to renegotiate the rates for existing time
charters;
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widespread loan covenant defaults in the dry bulk shipping
industry due to the substantial decrease in vessel
values; and
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declaration of bankruptcy by some operators, charterers and
shipowners.
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The
dry bulk shipping industry is cyclical and volatile, and this
may lead to reductions and volatility of charter rates, vessel
values and results of operations.
The degree of charter hire rate volatility among different types
of dry bulk carriers has varied widely. If we enter into a
charter when charter hire rates are low, our revenues and
earnings will be adversely affected. In addition, a decline in
charter hire rates likely will cause the value of the vessels
that we own, to decline and we may not be able to successfully
charter our vessels in the future at rates sufficient to allow
us to operate our business profitably or meet our obligations.
The factors affecting the supply and demand for dry bulk
carriers are outside of our control and are unpredictable. The
nature, timing, direction and degree of changes in dry bulk
shipping market conditions are also unpredictable.
Factors that influence demand for seaborne transportation of
cargo include:
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demand for and production of dry bulk products;
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the distance cargo is to be moved by sea;
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global and regional economic and political conditions;
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environmental and other regulatory developments; and
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changes in seaborne and other transportation patterns, including
changes in the distances over which cargo is transported due to
geographic changes in where commodities are produced and cargoes
are used.
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The factors that influence the supply of vessel capacity include:
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the number of new vessel deliveries;
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the scrapping rate of older vessels;
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vessel casualties;
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the price of steel;
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the number of vessels that are out of service;
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changes in environmental and other regulations that may limit
the useful life of vessels; and
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port or canal congestion.
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We anticipate that the future demand for our vessels will be
dependent upon continued economic growth in the worlds
economies, including China and India, seasonal and regional
changes in demand, changes in the capacity of the worlds
dry bulk carrier fleet and the sources and supply of cargo to be
transported by sea. If the global vessel capacity increases in
the dry bulk shipping market, but the demand for vessel capacity
in this market does not increase or increases at a slower rate,
the charter rates could materially decline. Adverse economic,
political, social or other developments could have a material
adverse effect on our business, financial condition, results of
operations and ability to pay dividends.
Future
growth in dry bulk shipping will depend on a return to economic
growth in the world economy that exceeds growth in vessel
capacity. A further decline in charter rates would adversely
affect our revenue stream and could have an adverse effect on
our financial condition and results of operations.
Our vessels are engaged in global seaborne transportation of
commodities, involving the loading or discharging of raw
materials and semi-finished goods around the world. As a result,
significant volatility in the world economy and negative changes
in global economic conditions, may have an adverse effect on our
business, financial position and results of operations, as well
as future prospects. In particular, in recent years China has
been one of the fastest growing economies in terms of gross
domestic product. Given the current global conditions, the
Chinese economy has experienced slowdown and stagnation and
there is no assurance that continuous growth will be sustained
or that the Chinese economy will not experience further
contraction or stagnation in the future. Moreover, any further
slowdown in the U.S. economy, the European Union or
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certain other Asian countries may continue to adversely affect
world economic growth. Negative world economic conditions may
result in global production cuts, changes in the supply and
demand for the seaborne transportation of dry bulk goods,
downward adjusted pricings for goods and freights and
cancellation of transactions/orders placed.
Charter rates for dry bulk carriers have been at extremely low
rates recently mainly due to the current global financial
crisis, which is also affecting this industry. We anticipate
that future demand for our vessels, and in turn future charter
rates, will be dependent upon a return to economic growth in the
worlds economy, particularly in China and India, as well
as seasonal and regional changes in demand and changes in the
capacity of the worlds fleet. The worlds dry bulk
carrier fleet increased in 2009 as a result of scheduled
deliveries of newly constructed vessels but it is expected to be
leveled off by higher forecasts for scrapping of existing
vessels as compared to 2008. However, this will vary depending
on vessel size, as the oldest segment of the worldwide dry bulk
fleet is the Handysize segment. A return to economic growth in
the world economy that exceeds growth in vessel capacity will be
necessary to sustain current charter rates. There can be no
assurance that economic growth will not continue to decline or
that vessel scrapping will occur at an even lower rate than
forecasted.
Due to the current volatility in the dry bulk sector, which is
primarily caused by, among other things, a decrease in letters
of credit being provided, a significant drop in demand for goods
being shipped, a reduction in volumes of goods and cancellation
of orders, there is a possibility that one or more of our
charterers could seek to renegotiate the time charter rates
either currently or at the time the charter expires. A decline
in charter rates would adversely affect our revenue stream and
could have a material adverse effect on our business, financial
condition and results of operations.
An
oversupply of dry bulk carrier capacity may lead to reductions
in charter rates and our profitability.
Orders for dry bulk carriers, primarily Capesize and Panamax
vessels, are high. Newly constructed vessels were delivered and
are expected to continue in significant numbers starting through
2009. As of August 2009, newly constructed vessels orders had
been placed for an aggregate of approximately 65.2% of the
current global dry bulk fleet, with deliveries expected during
the next 36 months. However, we have noticed order
cancellations by both shipowners and yards. An oversupply of dry
bulk carrier capacity may result in a reduction of our charter
rates. If such a reduction occurs, when our vessels
current charters expire or terminate, we may only be able to
re-charter our vessels at reduced or unprofitable rates or we
may not be able to charter these vessels at all. In turn, this
may result in the need to take impairment charges on one or more
of our vessels.
Changes
in the economic and political environment in China and policies
adopted by the government to regulate its economy may have a
material adverse effect on our business, financial condition and
results of operations.
The Chinese economy differs from the economies of most countries
belonging to the Organization for Economic Cooperation and
Development, or OECD, in such respects 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. 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. Although
limited price reforms were undertaken, with the result that
prices for certain commodities are principally determined by
market forces, many of the reforms are experimental and may be
subject to change or abolition. 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, 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, financial
condition and operating results.
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The
economic slowdown in the Asia Pacific region could have a
material adverse effect on our business, financial position and
results of operations.
A significant number of the port calls made by our vessels may
involve the loading or discharging of raw materials and
semi-finished products in ports in the Asia Pacific region. As a
result, a negative change in economic conditions in any Asia
Pacific country, but particularly in China or India, may have an
adverse effect on our future business, financial position and
results of operations, as well as our future prospects. In
recent years, China has been one of the worlds fastest
growing economies in terms of gross domestic product. We cannot
assure you that such growth will be sustained or that the
Chinese economy will not experience contraction in the future.
In particular, during the past year, the demand for dry bulk
goods from emerging markets, such as China and India, has
significantly declined as growth projections for these
nations economies have been adjusted downwards. Moreover,
the slowdown in the economies of the United States, the European
Union or certain Asian countries may adversely effect economic
growth in China and elsewhere. Our ability to re-charter our
ships at favorable rates will likely be materially and adversely
affected by an ongoing economic downturn in any of these
countries.
Risks
involved with operating ocean-going vessels could affect our
business and reputation, which would adversely affect our
revenues.
The operation of an ocean-going vessel carries inherent risks.
These risks include the possibility of:
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crew strikes
and/or
boycotts;
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marine disaster;
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piracy;
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environmental accidents;
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cargo and property losses or damage; and
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business interruptions caused by mechanical failure, human
error, war, terrorism, political action in various countries or
adverse weather conditions.
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Any of these circumstances or events could increase our costs or
lower our revenues.
Our
vessels may suffer damage and we may face unexpected dry-docking
costs, which could adversely affect our cash flow and financial
condition.
If our vessels suffer damage, they may need to be repaired at a
dry-docking facility. The costs of
dry-dock
repairs are unpredictable and can be substantial, and may be
higher than expected as a result of circumstances beyond our
control, such as delays experienced at the repair yard,
including those due to strikes. We may have to pay dry-docking
costs that our insurance does not cover. The loss of earnings
while these vessels are being repaired and reconditioned may not
be covered by insurance in full and thus these losses, as well
as the actual cost of these repairs, would decrease our earnings.
Turbulence
in the financial services markets and the tightening of credit
may affect the ability of purchasers of dry bulk cargo to obtain
letters of credit to purchase dry bulk goods, resulting in
declines in the demand for vessels.
Turbulence in the financial markets has led many lenders to
reduce, and in some cases cease to provide, credit, including
letters of credit to borrowers. Purchasers of dry bulk cargo
typically pay for cargo with letters of credit. The tightening
of the credit markets has reduced the issuance of letters of
credit and as a result decreased the amount of cargo being
shipped as sellers determine not to sell cargo without a letter
of credit. Reductions in cargo result in less business for
charterers and declines in the demand for vessels. Any material
decrease in the demand for vessels may decrease charter rates
and make it more difficult for Seanergy to charter its vessels
in the future at competitive rates. Reduced charter rates would
reduce Seanergys revenues.
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Rising
fuel prices may adversely affect our profits.
The cost of fuel is a significant factor in negotiating charter
rates. As a result, an increase in the price of fuel beyond our
expectations may adversely affect our profitability. The price
and supply of fuel is unpredictable and fluctuates based on
events outside our control, including geo-political
developments, supply and demand for oil, actions by members of
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 and regulations.
We may
become dependent on spot charters in the volatile shipping
markets which may have an adverse impact on stable cash flows
and revenues.
We may employ one or more of our vessels on spot charters,
including when time charters on one or more of our vessels
expires. The spot charter market is highly competitive and rates
within this market are subject to volatile fluctuations, while
longer-term period time charters provide income at predetermined
rates over more extended periods of time. If we decide to spot
charter our vessels, there can be no assurance that we will be
successful in keeping all our vessels fully employed in these
short-term markets or that future spot rates will be sufficient
to enable our vessels to be operated profitably. A significant
decrease in charter rates could affect the value of our fleet
and could adversely affect our profitability and cash flows with
the result that our ability to pay debt service to our lenders
could be impaired.
Our
operations are subject to seasonal fluctuations, which could
affect our operating results.
We operate our vessels in markets that have historically
exhibited seasonal variations in demand and, as a result, in
charter hire rates. This seasonality may result in volatility in
our operating results. The dry bulk carrier market 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. In addition,
unpredictable weather patterns in these months tend to disrupt
vessel scheduling and supplies of certain commodities. As a
result, revenues of dry bulk carrier operators in general have
historically been weaker during the fiscal quarters ended June
30 and September 30, and, conversely, been stronger in
fiscal quarters ended December 31 and March 31. This
seasonality may materially affect our operating results.
We are
subject to regulation and liability under environmental laws
that could require significant expenditures and affect our cash
flows and net income.
Our business and the operation of our vessels are materially
affected by government regulation in the form of international
conventions, national, state and local laws and regulations in
force in the jurisdictions in which our vessels operate, as well
as in the country or countries of their registration. Because
such conventions, laws, and regulations are often revised, 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. 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 and adversely affect our
operations. We are required by various governmental and
quasi-governmental agencies to obtain certain permits, licenses
and certificates with respect to our operations.
The operation of our vessels is affected by the requirements set
forth in the United Nations International Maritime
Organizations International Management Code for the Safe
Operation of Ships and Pollution Prevention, or ISM Code. The
ISM Code requires vessel owners, vessel 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 vessel owner 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. Each of our vessels is ISM code-certified but we
cannot assure that such certificate will be maintained
indefinitely.
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We maintain, for each of our vessels, pollution liability
coverage insurance in the amount of $1 billion per
incident. If the damages from a catastrophic incident exceeded
our insurance coverage, it could have a material adverse effect
on our financial condition and results of operations.
Acts
of piracy on ocean-going vessels have recently increased in
frequency, which could adversely affect our
business.
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
the frequency of piracy incidents increased significantly,
particularly in the Gulf of Aden off the coast of Somalia, with
dry bulk vessels and tankers particularly vulnerable to such
attacks. For example, in November 2008, the Sirius Star, a
tanker vessel not affiliated with us, was captured by pirates in
the Indian Ocean while carrying crude oil estimated to be worth
$100.0 million. If these piracy attacks result in regions
in which our vessels are deployed being characterized as
war risk zones by insurers, as the Gulf of Aden
temporarily was in May 2008, or as war and strikes
listed areas by the Joint War Committee, premiums payable for
such coverage could increase significantly and such insurance
coverage may be more difficult to obtain. In addition, crew
costs, including due to 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 of any of
our vessels, 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 in the future.
Terrorism
and other events outside our control may negatively affect our
operations and financial condition.
Because we operate our vessels worldwide, terrorist attacks such
as the attacks on the United States on September 11, 2001,
the bombings in Spain on March 11, 2004 and in London on
July 7, 2005, and the continuing response of the United
States to these attacks, as well as the threat of future
terrorist attacks, continue to cause uncertainty in the world
financial markets and may affect our business, results of
operations and financial condition. The continuing conflict in
Iraq 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 have a material adverse effect on 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.
Any of these occurrences could have a material adverse impact on
our operating results, revenues and costs.
Terrorist attacks and armed conflicts may also negatively affect
our operations and financial condition and directly impact our
vessels or our customers. Future terrorist attacks could result
in increased volatility of the financial markets in the United
States and globally and could result in an economic recession in
the United States or the world. Any of these occurrences
could have a material adverse impact on our financial condition.
The
operation of dry bulk carriers has particular operational risks
which could affect our earnings and cash flow.
The operation of certain vessel types, such as dry bulk
carriers, has certain particular risks. With a dry bulk carrier,
the cargo itself and its interaction with the vessel can be an
operational risk. By their nature, dry bulk cargoes are often
heavy, dense, easily shifted, and react badly to water exposure.
In addition, dry bulk carriers are often subjected to battering
treatment during unloading operations with grabs, jackhammers
(to pry encrusted cargoes out of the hold) and small bulldozers.
This treatment 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
carriers may lead to the flooding of the vessels holds. If
a dry bulk carrier 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 result in loss of life, vessel
and/or cargo
and negatively impact our business, financial condition, results
of operations and
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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.
If any
of our vessels fails to maintain its class certification and/or
fails any annual survey, intermediate survey, or special survey,
or if any scheduled dry-docks take longer or are more expensive
than anticipated, this could have a material adverse impact on
our financial condition and results of operations.
The hull and machinery of every commercial vessel must be
classed by a classification society authorized by its country of
registry. The classification society certifies that a vessel is
safe and seaworthy in accordance with the applicable rules and
regulations of the country of registry of the vessel and the
International Convention for the Safety of Life at Sea, or
SOLAS. Our vessels are classed with one or more classification
societies that are members of the International Association of
Classification Societies.
A vessel must undergo annual surveys, intermediate surveys,
dry-dockings and special surveys. In lieu of a special survey, a
vessels machinery may be on a continuous survey cycle,
under which the machinery would be surveyed periodically 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 dry-docked every
two to three years for inspection of the underwater parts of
such vessels. These surveys and dry-dockings can be costly and
can result in delays in returning a vessel to operation, as
occurred with the dry-docking of the African Zebra, which
entered its scheduled dry-dock on February 24, 2009 and was
returned to service on July 20, 2009 as a result of delays
at the repair yard. The cost of our dry-docks in 2009 is
expected to total $4,300,000. The African Onyx is scheduled to
be dry-docked in October 2010 at an estimated cost of $900,000.
If any vessel does not maintain its class
and/or fails
any annual survey, intermediate survey, dry-docking or special
survey, the vessel will be unable to carry cargo between ports
and will be unemployable and uninsurable. Any such inability to
carry cargo or be employed, or any such violation of covenants,
could have a material adverse impact on our financial condition
and results of operations.
Because
our seafaring employees are covered by industry-wide collective
bargaining agreements, failure of industry groups to renew those
agreements may disrupt our operations and adversely affect our
earnings.
Our vessel-owning subsidiaries employ a large number of
seafarers. All of the seafarers employed on the vessels in our
fleet are covered by industry-wide collective bargaining
agreements that set basic standards. We cannot assure you that
these agreements will prevent labor interruptions. Any labor
interruptions could disrupt our operations and harm our
financial performance.
Maritime
claimants could arrest our vessels, which could interrupt its
cash flow.
Crew members, suppliers of goods and services to a vessel,
shippers of cargo and other parties may be entitled to a
maritime lien against that vessel for unsatisfied debts, claims
or damages. In many jurisdictions, a maritime lien holder may
enforce its lien by arresting a vessel through foreclosure
proceedings. The arresting or attachment of one or more of our
vessels could interrupt our cash flow and require us to pay
large sums of funds to have the arrest lifted which would have a
material adverse effect on our financial condition and results
of operations.
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 claimants
maritime lien and any associated vessel, which is
any vessel owned or controlled by the same owner. Claimants
could try to assert sister ship liability against
one of our vessels for claims relating to another of our vessels.
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Governments
could requisition our vessels during a period of war or
emergency, resulting in loss of earnings.
A government could requisition for title or seize our vessels.
Requisition for title occurs when a government takes control of
a vessel and becomes the owner. Also, a government could
requisition our vessels for hire. 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.
Government requisition of one or more of our vessels could have
a material adverse effect on our financial condition and results
of operations.
Risk
Factors Relating to this Offering
The
market price of our common stock has been and may in the future
be subject to significant fluctuations.
The market price of our common stock has been and may in the
future be subject to significant fluctuations as a result of
many factors, some of which are beyond our control. Among the
factors that have in the past and could in the future affect our
stock price are:
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quarterly variations in our results of operations;
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our lenders willingness to extend our loan covenant
waivers, if necessary;
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changes in market valuations of similar companies and stock
market price and volume fluctuations generally;
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changes in earnings estimates or publication of research reports
by analysts;
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speculation in the press or investment community about our
business or the shipping industry generally;
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strategic actions by us or our competitors such as acquisitions
or restructurings;
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the thin trading market for our common stock, which makes it
somewhat illiquid;
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the current ineligibility of our common stock to be the subject
of margin loans because of its low current market price;
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regulatory developments;
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additions or departures of key personnel;
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general market conditions; and
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domestic and international economic, market and currency factors
unrelated to our performance.
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The stock markets in general, and the markets for dry bulk
shipping and shipping stocks in particular, have experienced
extreme volatility that has sometimes been unrelated to the
operating performance of individual companies. These broad
market fluctuations may adversely affect the trading price of
our common stock.
Investors
may experience significant dilution as a result of possible
future offerings.
We will have 58,947,095 shares of common stock outstanding
( shares
if the underwriters exercise their over-allotment option in
full), which represents in the aggregate an increase of 50.8%
( % if the underwriters exercise
their over-allotment option in full) in our issued and
outstanding shares of common stock. We may sell additional
shares of common stock following the conclusion of this offering
in order to fully implement our business plans. Such sales could
be made at prices below the price at which we sell the shares
offered by this prospectus, in which case, investors who
purchase shares in this offering could experience some dilution
of their investment, which could be significant.
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Our
board of directors has suspended the payment of cash dividends
as a result of certain restrictions in waivers we received from
Marfin relating to our loan covenants and prevailing market
conditions in the international shipping industry. Until such
market conditions improve, it is unlikely that we will reinstate
the payment of dividends.
In light of a lower freight environment and a highly challenging
financing environment that has resulted in a substantial decline
in the international shipping industry, our board of directors,
beginning in February 4, 2009, suspended the cash dividend
on our common stock. Our dividend policy will be assessed by our
board of directors from time to time; however, it is unlikely
that we will reinstate the payment of dividends until market
conditions improve. Further, the waiver we have received from
Marfin relating to our loan covenant restricts our ability to
pay dividends. See Managements Discussion and
Analysis of Financial Condition and Results of Operations for
Seanergy Maritime and Seanergy Recent
Developments. Therefore, there can be no assurances that,
if we were to determine to resume paying cash dividends, Marfin
would provide any required consent.
We are
incorporated in the Republic of the Marshall Islands, which does
not have a well-developed body of corporate law, which may
negatively affect the ability of shareholders to protect their
interests.
Our corporate affairs are governed by our amended and restated
articles of incorporation and amended and restated by-laws and
by 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 Republic of
the Marshall Islands interpreting the BCA. The rights and
fiduciary responsibilities of directors under the laws of the
Republic 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
U.S. jurisdictions. Shareholder rights may differ as well.
While the BCA does specifically incorporate the non-statutory
law, or judicial case law, of the State of Delaware and other
states with substantially similar legislative provisions,
shareholders may have more difficulty in protecting their
interests in the face of actions by the management, directors or
controlling shareholders than would shareholders of a
corporation incorporated in a U.S. jurisdiction.
We are
incorporated under the laws of the Republic of the Marshall
Islands and our directors and officers are
non-U.S.
residents. Although you may bring an original action in the
courts of the Marshall Islands or obtain a judgment against us
or our directors or management based on U.S. laws in the event
you believe your rights as a shareholder have been infringed, it
may be difficult to enforce judgments against us or our
directors or management.
We are incorporated under the laws of the Republic of the
Marshall Islands, and all of our assets are, and will be,
located outside of the United States. Our business is operated
primarily from our offices in Athens, Greece. In addition, our
directors and officers, are non-residents of the United States,
and all or 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. Even if you are successful in
bringing an action of this kind, the laws of the Marshall
Islands and of other jurisdictions may prevent or restrict you
from enforcing a judgment against our assets or the assets of
our directors and officers. Although you may bring an original
action against us or our affiliates in the courts of the
Marshall Islands based on U.S. laws, and the courts of the
Marshall Islands may impose civil liability, including monetary
damages, against us, or our affiliates for a cause of action
arising under Marshall Islands laws, it may impracticable for
you to do so given the geographic location of the Marshall
Islands. For more information regarding the relevant laws of the
Marshall Islands, please read Enforceability of Civil
Liabilities.
Anti-takeover provisions in our amended and restated articles of
incorporation and by-laws, as well as the terms and conditions
of a Voting Agreement, could make it difficult for shareholders
to replace or remove our current board of directors or could
have the effect of discouraging, delaying or preventing a merger
or acquisition, which could adversely affect the market price of
our common shares.
Several provisions of our amended and restated articles of
incorporation and by-laws, as well as the terms and conditions
of the Voting Agreement could make it difficult for shareholders
to change the composition of
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our board of directors in any one year, preventing them from
changing the composition of our management. In addition, the
same provisions may discourage, delay or prevent a merger or
acquisition that shareholders may consider favorable.
These provisions include those that:
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authorize our board of directors to issue blank
check preferred stock without shareholder approval;
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provide for a classified board of directors with staggered,
three-year terms;
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require a super-majority vote in order to amend the provisions
regarding our classified board of directors with staggered,
three-year terms;
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permit the removal of any director from office at any time, with
or without cause, at the request of the shareholder group
entitled to designate such director;
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allow vacancies on the board of directors to be filled by the
shareholder group entitled to name the director whose
resignation or removal led to the occurrence of the vacancy;
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require that our board of directors fill any vacancies on the
shipping committee with the nominees selected by the party that
nominated the person whose resignation or removal has caused
such vacancies; and
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prevent our board of directors from dissolving the shipping
committee or altering the duties or composition of the shipping
committee without an affirmative vote of not less than 80% of
the board of directors.
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These anti-takeover provisions could substantially impede the
ability of shareholders to benefit from a change in control and,
as a result, may adversely affect the market price of our common
stock and your ability to realize any potential change of
control premium.
We may
be classified as a passive foreign investment company, or PFIC,
which could result in adverse U.S. federal income tax
consequences to U.S. holders of our common stock.
We generally will be treated as a PFIC for any taxable year in
which either (1) at least 75% of our gross income (looking
through certain corporate subsidiaries) is passive income or
(2) at least 50% of the average value of our assets
(looking through certain corporate subsidiaries) produce, or are
held for the production of, passive income. Passive income
generally includes dividends, interest, rents, royalties, and
gains from the disposition of passive assets. If we were a PFIC
for any taxable year during which a U.S. Holder (as such
term is defined in the section entitled
Taxation U.S. Federal Income
Taxation General) held our common stock, the
U.S. Holder may be subject to increased U.S. federal
income tax liability and may be subject to additional reporting
requirements. Based on the current and expected composition of
our and our subsidiaries assets and income, it is not
anticipated that we will be treated as a PFIC. Our actual PFIC
status for any taxable year, however, will not be determinable
until after the end of such taxable year. Accordingly there can
be no assurances regarding our status as a PFIC for the current
taxable year or any future taxable year. See the discussion in
the section entitled Taxation
U.S. Federal Income Taxation
U.S. Holders Passive Foreign Investment Company
Rules. We urge U.S. Holders to consult with their own
tax advisors regarding the possible application of the PFIC
rules.
We may
have to pay tax on U.S. source income, which would reduce our
earnings.
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 corporation, such as our
subsidiaries and us, that is attributable to transportation that
begins or ends, but that does not both begin and end, in the
United States, exclusive of certain U.S. territories and
possessions may be subject to a 4% U.S. federal income tax
without allowance for deduction, unless that corporation
qualifies for exemption from tax under Section 883 of the
Code and the applicable Treasury Regulations recently
promulgated thereunder.
27
For the 2008 tax year, we claimed the benefits of the
Section 883 tax exemption for our ship-owning subsidiaries.
We expect that our ship-owning subsidiaries will again claim the
benefits of Section 883 for the 2009 tax year. However,
there are factual circumstances beyond our control that could
cause us or any one of our ship-operating companies to fail to
qualify for this tax exemption and thereby subject us to
U.S. federal income tax on our U.S. source income. For
example, we would fail to qualify for exemption under
Section 883 of the Code for a particular tax year if
shareholders, each of whom owned, actually or under applicable
constructive ownership rules, a 5% or greater interest in the
vote and value of the outstanding shares of our stock, owned in
the aggregate 50% or more of the vote and value of the
outstanding shares of our stock, and qualified
shareholders as defined by the regulations to
Section 883 did not own, directly or under applicable
constructive ownership rules, sufficient shares in our
closely-held block of stock to preclude the shares in the
closely-held block that are not so owned from representing 50%
or more of the value of our stock for more than half of the
number of days during the taxable year. Establishing such
ownership by qualified shareholders will depend upon the status
of certain of our direct or indirect shareholders as residents
of qualifying jurisdictions and whether those shareholders own
their shares through bearer share arrangements and will also
require these shareholders compliance with ownership
certification procedures attesting that they are residents of
qualifying jurisdictions, and each intermediarys or other
persons similar compliance in the chain of ownership
between us and such shareholders.
On August 12, 2009, we closed on the acquisition of a 50%
controlling interest in BET, as further described in the section
Our Business BET, which owns a fleet of
five vessels. Qualification of the BET fleet for U.S. tax
exemption for the 2008 and 2009 tax years has not yet been
achieved and depends on approval from the IRS for BET to make an
election with the IRS to be treated as a disregarded entity for
those tax years. If the IRS does not approve of this election,
then the vessels in the BET fleet will be subject to US taxation
on their US source income for the 2008 and 2009 tax years. We
have entered into an agreement with the parent company of the
former 50% owner of BET to indemnify us for any adverse tax
consequences to us should the IRS decide not to approve of the
election. Further, if the IRS does not approve of this election,
we will not qualify under Section 883 of the Code for a US
tax exemption on any US source income we receive from the BET
vessels for the 2010 tax year onward unless the other 50% owner
of the BET vessels also qualifies for a US tax exemption under
Section 883.
Due to the factual nature of the issues involved, we can give no
assurances on the tax-exempt status of the vessel owning
subsidiaries of the BET fleet, that of any of our other
subsidiaries, or us. If we or our subsidiaries are not entitled
to exemption under Section 883 for any taxable year, we or
our subsidiaries could be subject for those years to an
effective 4% U.S. federal income tax on the shipping income
these companies derive during the year that are attributable to
the transport of cargoes to or from the U.S. The imposition
of this taxation would have a negative effect on our business
and would result in decreased earnings available for
distribution to our shareholders.
We, as
a non-U.S.
company, have elected to comply with the less stringent
reporting requirements of the Exchange Act, as a foreign private
issuer.
We are a Marshall Islands company, and our corporate affairs are
governed by our amended and restated articles of incorporation,
the BCA and the common law of the Republic of the Marshall
Islands. We provide reports under the Exchange Act as a
non-U.S. company
with foreign private issuer status. Some of the differences
between the reporting obligations of a foreign private issuer
and those of a U.S. domestic company are as follows:
Foreign private issuers are not required to file their annual
report on
Form 20-F
until six months after the end of each fiscal year while
U.S. domestic issuers that are accelerated filers are
required to file their annual report of
Form 10-K
within 75 days after the end of each fiscal year. However,
in August 2008, the SEC adopted changes in the content and
timing of disclosure requirements for foreign private issuers,
including requiring foreign private issuers to file their annual
report on
Form 20-F
no later than four months after the end of each fiscal year,
after a three-year transition period. Additionally, other new
disclosure requirements that will be added to
Form 20-F
include disclosure of disagreements with or changes in
certifying accountants, and significant differences in corporate
governance practices as compared to United
28
States issuers. In addition, foreign private issuers are not
required to file regular quarterly reports on
Form 10-Q
that contain unaudited financial and other specified information.
However, if a foreign private issuer makes interim reports
available to shareholders, the foreign private issuer is
required to submit copies of such reports to the SEC on a
Form 6-K.
Foreign private issuers are also not required to file current
reports on
Form 8-K
upon the occurrence of specified significant events. However,
foreign private issuers are required to file reports on
Form 6-K
disclosing whatever information the foreign private issuer has
made or is required to make public pursuant to its home
countrys laws or distributes to its shareholders and that
is material to the issuer and its subsidiaries. Foreign private
issuers are also exempt from the requirements under the
U.S. proxy rules prescribing the content of proxy
statements and annual reports to shareholders. Although the
Nasdaq Stock Market does require that a listed company prepare
and deliver to shareholders annual reports and proxy statements
in connection with all meeting of shareholders, these documents
will not be required to comply with the detailed content
requirements of the SECs proxy regulations. Officers,
directors and 10% or more shareholders of foreign private
issuers are exempt from requirements to file Forms 3, 4 and
5 to report their beneficial ownership of the issuers
common stock under Section 16(a) of the Exchange Act and
are also exempt from the related short-swing profit recapture
rules under Section 16(b) of the Exchange Act. Foreign
private issuers are also not required to comply with the
provisions of Regulation FD aimed at preventing issuers
from making selective disclosures of material information.
In addition, as a foreign private issuer, we are exempt from,
and you may not be provided with the benefits of, some of the
Nasdaq Stock Market corporate governance requirements, including
that:
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a majority of our board of directors must be independent
directors;
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the compensation of our chief executive officer must be
determined or recommended by a majority of the independent
directors or a compensation committee comprised solely of
independent directors;
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our director nominees must be selected or recommended by a
majority of the independent directors or a nomination committee
comprised solely of independent directors; and
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certain issuances of 20% or more of our common stock must be
subject to shareholder approval.
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As a result, our independent directors may not have as much
influence over our corporate policy as they would if we were not
a foreign private issuer.
As a result of all of the above, our public shareholders may
have more difficulty in protecting their interests in the face
of actions taken by management, members of the board of
directors or controlling shareholders than they would as
shareholders of a U.S. company.
We are
a holding company and will depend on the ability of our
subsidiaries to distribute funds to us in order to satisfy
financial obligations or to make dividend
payments.
We are a holding company and our subsidiaries, all of which are,
or upon their formation will be, wholly owned by us either
directly or indirectly, 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 pay dividends.
You
may experience dilution as a result of the exercise of our
Warrants and issuance of our common stock upon meeting certain
EBITDA thresholds.
We have 38,984,667 warrants to purchase shares of our common
stock issued and outstanding at an exercise price of $6.50 per
share. In addition, we have assumed Seanergy Maritimes
obligation to issue 1,000,000 shares of common stock and
warrants to purchase 1,000,000 shares of our common stock
under the unit purchase option it granted the underwriter in its
initial public offering at an exercise price of $12.50 per unit.
We are also required to issue up to 4,308,075 shares of our
common stock contingent upon meeting
29
certain EBITDA thresholds as of September 30, 2009. As a
result, you may experience dilution if our outstanding warrants,
the underwriters unit purchase option or the warrants
underlying the underwriters unit purchase option are
exercised, or the EBITDA threshold is met.
The
Restis affiliate shareholders hold approximately 80.16% of our
outstanding common stock and the founding shareholders of
Seanergy Maritime hold approximately 11.40% of our outstanding
common stock. If we achieve certain earnings targets, the Restis
affiliate shareholders may receive an additional
4,308,075 shares of our common stock within the next month.
This may limit your ability to influence our
actions.
As of September 10, 2009, the total ownership of the Restis
family, not including shares issuable upon exercise of warrants
exercisable within 60 days or shares that may be issued
upon meeting certain EBITDA targets, in Seanergy was 80.16% (or
39.36% after giving effect to the issuance of shares in the
offering but assuming the underwriter does not exercise it
overallotment option).
The Restis affiliate shareholders own approximately 80.16% (or
39.36% after giving effect to the issuance of shares in the
offering but assuming the underwriter does not exercise it
overallotment option) of our outstanding common stock (including
70,000 shares of common stock owned by Argonaut SPC, a fund
whose investment manager is an affiliate of members of the
Restis family), or approximately 45.92% (or 36.45% after giving
effect to the issuance of shares in the offering but assuming
the underwriter does not exercise it overallotment option) of
our outstanding capital stock on a fully diluted basis, assuming
exercise of all outstanding Warrants. Assuming issuance of the
earn-out shares, which we expect will occur, the Restis
affiliate shareholders will own approximately 82.73% (or 43.49%
after giving effect to the issuance of shares in the offering
but assuming the underwriter does not exercise it overallotment
option) of our outstanding common stock, or approximately 49.06%
(or 34.94% after giving effect to the issuance of shares in the
offering but assuming the underwriter does not exercise it
overallotment option) of our outstanding common stock on a fully
diluted basis, assuming exercise of all outstanding Warrants.
The founding shareholders of Seanergy Maritime own approximately
11.40% (or 5.60% after giving effect to the issuance of shares
in the offering but assuming the underwriter does not exercise
it overallotment option) of our outstanding common stock, or
15.23% (or 10.85% after giving effect to the issuance of shares
in the offering but assuming the underwriter does not exercise
it overallotment option) of our outstanding capital stock on a
fully diluted basis, assuming exercise of all outstanding
warrants and issuance of the earn-out shares. In addition, we
have entered into the Voting Agreement with the Restis affiliate
shareholders and the founding shareholders of Seanergy Maritime
whereby the Restis affiliate shareholders and founding
shareholders jointly nominate our board of directors.
Collectively, the parties to the Voting Agreement own 91.56% (or
44.96% after giving effect to the issuance of shares in the
offering but assuming the underwriter does not exercise it
overallotment option) of our outstanding common stock, or
approximately 64.29% (or 45.79% after giving effect to the
issuance of shares in the offering but assuming the underwriter
does not exercise it overallotment option) on a fully diluted
basis, assuming exercise of all outstanding warrants and
issuance of the earn-out shares. Our major shareholders have the
power to exert considerable influence over our actions and
matters which require shareholder approval, which limits your
ability to influence our actions.
30
CAUTIONARY
NOTE REGARDING FORWARD-LOOKING STATEMENTS
This prospectus contains certain forward-looking statements. Our
forward-looking statements include, but are not limited to,
statements regarding our or our managements expectations,
hopes, beliefs, intentions or strategies regarding the future
and other statements other than statements of historical fact.
In addition, any statements that refer to projections, forecasts
or other characterizations of future events or circumstances,
including any underlying assumptions, are forward-looking
statements. The words anticipates,
believe, continue, could,
estimate, expect, intends,
may, might, plan,
possible, potential,
predicts, project, should,
would and similar expressions may identify
forward-looking statements, but the absence of these words does
not mean that a statement is not forward-looking.
Forward-looking statements in this prospectus may include, for
example, statements about our:
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our future operating or financial results;
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our financial condition and liquidity, including our ability to
obtain additional financing in the future to fund capital
expenditures, acquisitions and other general corporate
activities;
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our ability to pay dividends in the future;
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dry bulk shipping industry trends, including charter rates and
factors affecting vessel supply and demand;
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future, pending or recent acquisitions, business strategy, areas
of possible expansion, and expected capital spending or
operating expenses;
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the useful lives and changes in the value of our vessels and
their impact on our compliance with loan covenants;
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availability of crew, number of off-hire days, dry-docking
requirements and insurance costs;
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global and regional economic and political conditions;
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our ability to leverage Safbulks and ESTs
relationships and reputation in the dry bulk shipping industry;
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changes in seaborne and other transportation patterns;
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changes in governmental rules and regulations or actions taken
by regulatory authorities;
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potential liability from future litigation and incidents
involving our vessels;
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acts of terrorism and other hostilities; and
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other factors discussed in the section titled Risk
Factors.
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The forward-looking statements contained in this prospectus are
based on our current expectations and beliefs concerning future
developments and their potential effects on us. There can be no
assurance that future developments affecting us will be those
that we have anticipated. These forward-looking statements
involve a number of risks, uncertainties (some of which are
beyond our control) or other assumptions that may cause actual
results or performance to be materially different from those
expressed or implied by these forward-looking statements. These
risks and uncertainties include, but are not limited to, those
factors described under the heading Risk Factors.
Should one or more of these risks or uncertainties materialize,
or should any of our assumptions prove incorrect, actual results
may vary in material respects from those projected in these
forward-looking statements. We undertake no obligation to update
or revise any forward-looking statements, whether as a result of
new information, future events or otherwise, except as may be
required under applicable securities laws
and/or if
and when management knows or has a reasonable basis on which to
conclude that previously disclosed projections are no longer
reasonably attainable.
31
PER
MARKET SHARE INFORMATION
The table below sets forth, for the calendar periods indicated,
the high and low sales prices on the American Stock Exchange or
the Nasdaq Stock Market for our common stock, warrants and
units, as applicable:
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Common Stock
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Warrants
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Units*
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High
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Low
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High
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Low
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High
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Low
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Annual highs and lows
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2007
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$
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9.67
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$
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9.26
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$
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1.66
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$
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1.13
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$
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10.94
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$
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9.83
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2008
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$
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10.00
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$
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3.15
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$
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2.62
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$
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0.11
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$
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11.90
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$
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6.50
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Quarterly highs and lows
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2007
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Quarter ended 12/31/2007
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$
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9.48
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$
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9.08
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$
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1.66
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$
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1.13
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$
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10.94
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$
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10.17
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2008
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Quarter ended 03/31/2008
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$
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9.48
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$
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9.01
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$
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1.35
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$
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0.37
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$
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10.61
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$
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9.45
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Quarter ended 06/30/2008
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$
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10.00
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$
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9.15
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$
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2.62
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$
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0.42
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$
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12.31
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$
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9.47
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Quarter ended 09/30/02008
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$
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10.00
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$
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7.21
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$
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2.50
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$
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0.75
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$
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11.90
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$
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8.70
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Quarter ended 12/31/2008
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$
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8.55
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$
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3.15
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$
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0.92
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$
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0.11
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$
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9.10
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$
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6.50
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2009
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Quarter ended 3/31/2009**
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$
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5.35
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$
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3.68
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$
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0.22
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$
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0.06
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N/A
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N/A
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Quarter ended 6/30/2009**
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$
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4.50
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$
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3.25
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$
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0.28
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$
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0.08
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N/A
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N/A
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Monthly highs and lows
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2009
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March 2009**
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$
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4.20
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$
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3.68
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$
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0.10
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$
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0.06
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N/A
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N/A
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April 2009**
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$
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3.89
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$
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3.25
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$
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0.14
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$
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0.08
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N/A
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N/A
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May 2009**
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$
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4.25
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$
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3.49
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$
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0.20
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$
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0.14
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N/A
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N/A
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June 2009**
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$
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4.50
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$
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3.41
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$
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0.28
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$
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0.18
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N/A
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N/A
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July 2009**
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$
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4.39
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$
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3.56
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$
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0.28
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$
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0.25
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N/A
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N/A
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August 2009**
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$
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4.94
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$
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3.98
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$
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0.24
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$
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0.20
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N/A
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N/A
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* |
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Seanergy Maritimes common stock, warrants and units were
previously listed on the American Stock Exchange. On
October 15, 2008, Seanergy Maritimes common stock and
warrants commenced trading on the Nasdaq Stock Market. Seanergy
Maritimes units were separated prior to being listed on
the Nasdaq Stock Market and, therefore, were not listed on the
Nasdaq Stock Market. Seanergy Maritimes units stopped
trading on the American Stock Exchange on October 14, 2008
and were not listed on the Nasdaq Stock Market. |
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Following the dissolution of Seanergy Maritime, our common stock
started trading on the Nasdaq Stock Market on January 28,
2009. |
Dividend
Policy
Prior to the consummation of our business combination, we paid
quarterly dividends equal to each shareholders pro rata
share of the interest income earned on the Seanergy Maritime
Trust Account. Following the business combination, in light
of a lower freight environment and a highly challenging
financing environment that has resulted in a substantial decline
in the international shipping industry, our board of directors,
beginning in February 4, 2009, suspended the cash dividend
on our common stock. Our dividend policy will be assessed by our
board of directors from time to time; however, it is unlikely
that we will reinstate the payment of dividends until market
conditions improve. Further, the waiver we have received from
Marfin relating to our loan covenant restricts our ability to
pay dividends. See Managements Discussion and
Analysis of Financial Condition and Results of Operations for
Seanergy Maritime and Seanergy Recent
Developments. Therefore, there can be
32
no assurance that, if we were to determine to resume paying cash
dividends, Marfin would provide any required consent.
USE OF
PROCEEDS
We estimate that we will receive net proceeds of approximately
$ from this offering, assuming
that the underwriters over-allotment option is not
exercised and after deducting underwriting discounts and
commissions and offering expenses, based on
$ per share, which was the closing
price of our common stock
on ,
2009.
We intend to use the net proceeds of this offering to purchase
additional vessels and for general working capital purposes.
33
CAPITALIZATION
The following table sets forth our capitalization as of
June 30, 2009:
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on a historical basis without any adjustment to reflect
subsequent events;
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as adjusted to reflect the conversion of the convertible
promissory note in the principal amount of $28,250,000 into
6,585,868 shares of our common stock; and
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|
on an as further adjusted basis for the sale of
30,000,000 shares at an assumed offering price of
$ per share, which is the last
reported closing price of our common stock
on ,
2009, net of underwriters discounts and commissions,
offering expenses, and after receipt and application of net
proceeds.
|
Other than as set forth in the As Adjusted column,
there have been no material changes in our capitalization since
June 30, 2009.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
As
|
|
|
As Further
|
|
|
|
Historical
|
|
|
Adjusted
|
|
|
Adjusted
|
|
|
|
(In thousands)
|
|
|
Debt:
|
|
|
|
|
|
|
|
|
|
|
|
|
Convertible promissory note payable to Restis family
|
|
$
|
28,710
|
|
|
$
|
|
|
|
$
|
|
|
Long-term revolving credit financing (secured)
|
|
|
54,845
|
|
|
|
|
|
|
|
|
|
Long-term term facility financing (secured), including current
portion of $23,250
|
|
|
142,500
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total debt
|
|
$
|
226,055
|
|
|
$
|
|
|
|
$
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Shareholders equity:
|
|
|
|
|
|
|
|
|
|
|
|
|
Preferred stock, $0.0001 par value; 1,000,000 shares
authorized, none issued
|
|
$
|
|
|
|
$
|
|
|
|
$
|
|
|
Common stock, $0.0001 par value, authorized
200,000,000 shares; issued and outstanding
22,361,227 shares actual, 28,947,095 shares as
adjusted
and shares
as further adjusted
|
|
|
2
|
|
|
|
|
|
|
|
|
|
Additional paid-in capital
|
|
|
166,361
|
|
|
|
|
|
|
|
|
|
Accumulated deficit
|
|
|
(15,515
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total shareholders equity
|
|
$
|
150,848
|
|
|
$
|
|
|
|
$
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total capitalization
|
|
$
|
376,903
|
|
|
$
|
|
|
|
$
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
34
DILUTION
If you invest in our common stock, your interest will be diluted
to the extent of the difference between the public offering
price per share of our common stock and the pro forma net
tangible book value per share of our common stock after this
offering. Dilution results from the fact that the per-share
offering price of the common stock is greater than the net
tangible book value per share for the common stock outstanding
before this offering.
At June 30, 2009, we had net tangible book value of
$ , or
$ per share. As of August 12,
2009, we acquired a controlling interest in BET and on
August 19, 2009, the holders of the Note converted all
principal, accrued but unpaid interest and fees due on the Note
into 6,585,868 shares of our common stock. As a result of
such acquisition, and such conversion and the satisfaction of
the obligations under the Note but without giving effect to any
other changes in our total tangible assets and total
liabilities, as of June 30, 2009, we had as adjusted net
tangible book value of $ or
$ per share. After giving effect
to the issuance
of shares
of common stock in this offering at an offering price of
$ per share, the pro forma net
tangible book value and proforma as adjusted net tangible book
value at June 30, 2009 would have been
$ or
$ , respectively, or
$ per share or
$ per share, respectively. This
represents an immediate appreciation in net tangible book value
at June 30, 2009 of $ per
share or $ , respectively, to
existing shareholders and an immediate dilution of the net
tangible book value and adjusted net tangible value of
$ per share or
$ , respectively, to new investors.
The following table illustrates the pro forma per share dilution
and appreciation at June 30, 2009.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Adjusted as of
|
|
|
|
June 30, 2009
|
|
|
June 30, 2009(2)
|
|
|
Assumed offering price per share in this offering
|
|
|
|
|
|
|
|
|
Net tangible book value per share
|
|
|
|
|
|
|
|
|
Increase in net tangible book value per share attributable to
new investors in this offering
|
|
|
|
|
|
|
|
|
Pro forma net tangible book value per share after giving effect
to this Offering
|
|
|
|
|
|
|
|
|
Dilution per share to the new investors(1)
|
|
|
|
|
|
|
|
|
|
|
|
(1) |
|
Each $1.00 increase (decrease) in the assumed public offering
price of $ per share would
increase (decrease) our as adjusted net tangible book value by
$ million, or
$ per share, and increase
(decrease) dilution in net tangible book value per share to
investors in this offering by $
per share, assuming that the number of shares offered by us, as
set forth on the cover page of this prospectus, remains the same
and after deducting the estimated underwriting discounts and
commissions, and offering expenses. The information in the table
above is illustrative only, and following the completion of this
offering, our capitalization will be adjusted based on the
actual public offering price and other terms of this offering
determined at pricing. |
|
(2) |
|
Represents the dilution and appreciation as of June 30,
2009 after giving effect to the acquisition of a controlling
interest in BET, and conversion of the Note and issuance of
shares of our common stock. |
Net tangible book value per share of our common stock is
determined by dividing our tangible net worth, which consists of
tangible assets less liabilities, by the number of shares of our
common stock outstanding. Dilution is determined by subtracting
the net tangible book value per share of common stock after this
offering from the public offering price per share. Dilution per
share to new investors would be $
if the underwriters exercise in full their over-allotment option.
35
The following table summarizes, on a pro forma basis and on a
proforma as adjusted basis as of June 30, 2009, the
differences between the number of shares of common stock
acquired from us, the total amount paid and the average price
per share paid by the existing holders of shares of common stock
and by the investors in this offering based upon the price of
$ per share, which was the closing
price of our common stock
on ,
2009.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Pro Forma Shares
|
|
|
|
|
|
|
|
|
Average
|
|
|
|
Outstanding
|
|
|
Total Consideration
|
|
|
Price per
|
|
|
|
Number
|
|
|
Percentage
|
|
|
Amount
|
|
|
Percentage
|
|
|
Share
|
|
|
Existing shareholders
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Shareholders of shares issued upon conversion of Note
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
New investors
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Each $1.00 increase (decrease) in the assumed public offering
price of $ per share would
increase (decrease) total consideration paid by new investors
and total consideration paid by all shareholders by
$ million, assuming that the
number of shares offered by us, as set forth on the cover page
of this prospectus, remains the same. The information in the
table above is illustrative only, and following the completion
of this offering, will be adjusted based on the actual public
offering price and other terms of this offering determined at
pricing.
If the underwriters exercise their over-allotment option in
full, the following will occur:
|
|
|
|
|
the pro forma percentage of shares of our common stock held by
existing shareholders will decrease to
approximately % of the total number
of pro forma shares of our common stock outstanding after this
offering; and
|
|
|
|
the number of shares of our common stock held by new investors
will increase
to ,
or approximately % of the total
number of shares of our common stock outstanding after this
offering.
|
The information in the table above excludes (as of
September 9, 2009):
A. 38,984, 667 shares of common stock reserved for
issuance upon the exercise of outstanding warrants.
B. 2,000,000 shares of common stock reserved for
issuance upon the exercise of the unit purchase option sold to
the lead underwriter in the initial public offering of our
predecessor, which unit purchase option expires
September 24, 2012, as follows:
|
|
|
|
|
1,000,000 shares of common stock included in the units
issuable upon exercise of the option at an exercise price of
$12.50 per unit;
|
|
|
|
1,000,000 shares of common stock issuable for $6.50 per
share upon exercise of the warrants underlying the units
issuable upon exercise of the option;
|
C. 4,308,075 shares issuable to certain Restis
affiliate shareholders if we achieve certain EBITDA
targets; and
D. shares that may be issued pursuant to the
underwriters over-allotment option.
36
SELECTED
FINANCIAL DATA
The following selected historical statement of operations and
balance sheet data were derived from the audited financial
statements and accompanying notes for the years ended
December 31, 2008 and 2007 and for the period from
August 15, 2006 (Inception) to December 31, 2006 and
the unaudited financial statements and accompanying notes for
the three and six months ended June 30, 2009 and 2008,
included elsewhere in this prospectus. The information is only a
summary and should be read in conjunction with the financial
statements and related notes included elsewhere in this
prospectus and the sections entitled, Risk Factors
and Managements Discussion and Analysis of Financial
Condition and Results of Operations For Seanergy Maritime and
Seanergy. The historical data included below and elsewhere
in this prospectus is not necessarily indicative of our future
performance.
Since our vessel operations began upon the consummation of our
business combination we cannot provide a meaningful comparison
of our results of operations for the three and six months ended
June 30, 2009 and June 30, 2008 or for the year ended
December 31, 2008 to December 31, 2007. During the
period from our inception to the date of our business
combination, we were a development stage enterprise.
All amounts in the tables below are in thousands of
U.S. dollars, except for share data, fleet data and average
daily results.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
From
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Inception
|
|
|
|
|
|
|
|
|
|
Six Months
|
|
|
|
|
|
|
|
|
(August 15,
|
|
|
|
Three Months Ended
|
|
|
Ended
|
|
|
Years Ended
|
|
|
2006) to
|
|
|
|
June 30,
|
|
|
June 30,
|
|
|
December 31,
|
|
|
December 31,
|
|
|
|
2009
|
|
|
2008
|
|
|
2009
|
|
|
2008
|
|
|
2008
|
|
|
2007
|
|
|
2006
|
|
|
Statement of Operations Data:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Vessel revenue related party, net
|
|
|
22,067
|
|
|
|
|
|
|
|
48,309
|
|
|
|
|
|
|
|
34,453
|
|
|
|
|
|
|
|
|
|
Direct voyage expenses
|
|
|
(292
|
)
|
|
|
|
|
|
|
(438
|
)
|
|
|
|
|
|
|
(151
|
)
|
|
|
|
|
|
|
|
|
Vessel operating expense
|
|
|
(3,010
|
)
|
|
|
|
|
|
|
(5,821
|
)
|
|
|
|
|
|
|
(3,180
|
)
|
|
|
|
|
|
|
|
|
Voyage expenses related party
|
|
|
(283
|
)
|
|
|
|
|
|
|
(619
|
)
|
|
|
|
|
|
|
(440
|
)
|
|
|
|
|
|
|
|
|
Management fees related party
|
|
|
(315
|
)
|
|
|
|
|
|
|
(617
|
)
|
|
|
|
|
|
|
(388
|
)
|
|
|
|
|
|
|
|
|
General and administration expenses
|
|
|
(1,285
|
)
|
|
|
(137
|
)
|
|
|
(2,141
|
)
|
|
|
(597
|
)
|
|
|
(1,840
|
)
|
|
|
(445
|
)
|
|
|
(5
|
)
|
General and administration expenses related party
|
|
|
(482
|
)
|
|
|
|
|
|
|
(1,021
|
)
|
|
|
|
|
|
|
(430
|
)
|
|
|
|
|
|
|
|
|
Depreciation
|
|
|
(7,758
|
)
|
|
|
|
|
|
|
(15,430
|
)
|
|
|
|
|
|
|
(9,929
|
)
|
|
|
|
|
|
|
|
|
Goodwill impairment loss
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(44,795
|
)
|
|
|
|
|
|
|
|
|
Vessels impairment loss
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(4,530
|
)
|
|
|
|
|
|
|
|
|
Interest income money market fund
|
|
|
116
|
|
|
|
1,057
|
|
|
|
256
|
|
|
|
2,612
|
|
|
|
3,361
|
|
|
|
1,948
|
|
|
|
1
|
|
Interest and finance costs
|
|
|
(1,354
|
)
|
|
|
|
|
|
|
(2,819
|
)
|
|
|
|
|
|
|
(4,077
|
)
|
|
|
(58
|
)
|
|
|
|
|
Foreign currency exchange (losses), net
|
|
|
(56
|
)
|
|
|
|
|
|
|
(55
|
)
|
|
|
|
|
|
|
(39
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income (loss)
|
|
|
7,167
|
|
|
|
920
|
|
|
|
19,283
|
|
|
|
2,015
|
|
|
|
(31,985
|
)
|
|
|
1,445
|
|
|
|
(4
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
June 30,
|
|
|
December 31,
|
|
|
|
2009
|
|
|
2008
|
|
|
2007
|
|
|
2006
|
|
|
Balance Sheet Data:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total current assets
|
|
|
48,198
|
|
|
|
29,814
|
|
|
|
235,213
|
|
|
|
376
|
|
Vessels, net
|
|
|
330,202
|
|
|
|
345,622
|
|
|
|
|
|
|
|
|
|
Total assets
|
|
|
383,025
|
|
|
|
378,202
|
|
|
|
235,213
|
|
|
|
632
|
|
Total current liabilities, including current portion of
long-term debt
|
|
|
28,389
|
|
|
|
32,999
|
|
|
|
5,995
|
|
|
|
611
|
|
Long-term debt, net of current portion
|
|
|
203,788
|
|
|
|
213,638
|
|
|
|
|
|
|
|
|
|
Total shareholders equity
|
|
|
150,848
|
|
|
|
131,565
|
|
|
|
148,369
|
|
|
|
20
|
|
37
MANAGEMENTS
DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS FOR SEANERGY MARITIME AND
SEANERGY
You should read the following discussion and analysis of our
consolidated financial condition and results of operations
together with our consolidated financial statements and notes
thereto that appear elsewhere in this prospectus.
Seanergys consolidated financial statements have been
prepared in conformity with US GAAP. This discussion and
analysis contains forward-looking statements that involve risks,
uncertainties, and assumptions. Actual results may differ
materially from those anticipated in these forward-looking
statements.
The historical consolidated financial results of Seanergy
described below are presented in United States dollars.
Overview
We are an international provider of dry bulk marine
transportation services that was incorporated in the Marshall
Islands on January 4, 2008. We were initially formed as a
wholly owned subsidiary of Seanergy Maritime Corp., or Seanergy
Maritime, which was incorporated in the Marshall Islands on
August 15, 2006, as a blank check company created to
acquire, through a merger, capital stock exchange, asset
acquisition or other similar business combination, one or more
businesses in the maritime shipping industry or related
industries. Seanergy Maritime began operations on
August 28, 2008 after the closing of our business
combination.
The business combination was accounted for under the purchase
method of accounting and accordingly the assets (vessels)
acquired have been recorded at their fair values. No liabilities
were assumed nor were other tangible assets acquired. The
results of the vessel operations are included in our
consolidated statement of operations from August 28, 2008.
The aggregate acquisition cost, including direct acquisition
costs, amounted to $404,876,000. The fair value of our tangible
assets acquired as of August 28, 2008 amounted to
$360,081,000. The premium (non tax deductible goodwill) over the
fair value of our vessels acquired amounting to $44,795,000
arose resulting from the decline in the market value of the
vessels between the date of entering into the agreements to
purchase the business (May 20, 2008) and the actual
business combination date (August 28, 2008). There were no
other identifiable assets or liabilities.
We performed our annual impairment testing of goodwill as at
December 31, 2008. The current economic and market
conditions, including the significant disruptions in the global
credit markets, are having broad effects on participants in a
wide variety of industries. Since September 2008, the charter
rates in the dry bulk charter market have declined
significantly, and dry bulk vessel values have also declined. A
charge of $44,795,000 was recognized in 2008, as a result of the
impairment tests performed on goodwill at December 31, 2008.
On January 27, 2009, our parent company was liquidated and
dissolved and we became its successor. We distributed to each
holder of common stock of Seanergy Maritime one share of our
common stock for each share of Seanergy Maritime common stock
owned by the holder and all outstanding warrants of Seanergy
Maritime concurrently become our obligation.
Since our vessel operations began upon the consummation of our
business combination in August 2008, we cannot provide a
meaningful comparison of our results of operations for the year
ended December 31, 2008 to December 31, 2007. During
the period from our inception to the date of our business
combination we were a development stage enterprise.
As of June 30, 2009, we operated a total fleet of six
vessels, consisting of two Panamax vessels, one Handymax vessel,
one Handysize vessel and two Supramax vessels. Of these six
vessels, three were delivered on August 28, 2008 and the
remaining three in September 2008. As of June 30, 2009, our
operating fleet had a combined carrying capacity of 316,676 dwt
and an average age of approximately 11 years. As a result
of the BET acquisition, we now control and operate 11 dry bulk
carriers, including four Capesize vessels and one
38
Panamax vessel owned by BET. These ships have a combined
carrying capacity of 1,043,296 dwt and an average age of
approximately 13 years, out of an expected useful life of
25 years.
We generate revenues by charging customers for the
transportation of dry bulk cargo using our vessels. Nine of our
vessels are currently employed under time charters. Seven of our
charters are with SAMC, a company affiliated with members of the
Restis family. A time charter is a contract for the use of a
vessel for a specific period of time during which the charterer
pays substantially all of the voyage expenses, but the vessel
owner pays the vessel operating expenses.
Recent
Developments
Vessel
employment and charter rates:
The Baltic Dry Index, a daily average of charter rates in 26
shipping routes measured on a time charter and voyage basis and
covering dry bulk carriers, fell 94.4% from a peak of 11,793 in
May 2008 to a low of 663 in December 2008. It has since risen to
2,429 as of August 8, 2009. The Baltic Handymax Index fell
92.1% from a peak of 3,407 in May 2008 to a low of 268 in
December 2008. It has since risen 88% as of September 7,
2009. The Baltic Capesize Index fell 95% from a peak of 19,687
in June 2008 to a low of 830 in December 2008. It has since
risen to 3,595 as of September 7, 2009. The steep decline
in charter rates is due to various factors, including the lack
of trade financing for purchases of commodities carried by sea,
which has resulted in a significant decline 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. While we expect that charter rates will gradually recover
as economic activity improves during the course of the year,
those vessels that are redelivered to us earlier in the year are
expected to receive lower charter rates.
A prolonged period of extremely low charter rates may lead
owners to face difficulties in meeting their cash flow
obligations, and they may seek to find mutual accommodations
with charterers in which charterers may pay lower charter rates
over a longer period of time. Depending on their overall
financial condition, some weaker owners may not be able to
service their debt obligations, which may cause them to cease
operations or seek protection from creditors.
Pursuant to addenda dated July 24, 2009 to the individual
charter party agreements dated May 26, 2008 between SAMC
and each of Martinique Intl. Corp. (vessel Bremen Max) and
Harbour Business Intl. Corp. (vessel Hamburg Max), SAMC agreed
to extend the existing charter parties for the Bremen Max and
the Hamburg Max. Pursuant to the terms of the addendum, each
vessel will be chartered for a period of between
11-13 months,
at the charterers option. The charters commenced on
July 27, 2009 and August 12, 2009, respectively. The
daily gross charter rates paid by SAMC is $15,500 for each of
the Bremen Max and the Hamburg Max, which will generate revenues
of approximately $12.7 million. All charter rates are
inclusive of a commission of 1.25% payable to Safbulk as
commercial broker and 2.5% to SAMC as charterer. SAMC
sub-charters these vessels in the market and takes the risk that
the rate it receives is better than the period rate it is paying
Seanergy.
On July 14, 2009, the African Oryx and the African Zebra
were chartered for a period of 22 to 25 months at charter
rates equal to $7,000 per day and $7,500 per day, respectively.
Seanergy is also entitled to receive a 50% adjusted profit share
calculated on the average spot Time Charter Routes derived from
the Baltic Supramax.
Following expiration of its current charter party agreements in
September 2009, the Davakis G and the Delos Ranger will be
chartered in the spot market until such time as we find suitable
time charters for these vessels.
Pursuant to charter party agreements dated August 31, 2006,
each of the BET Commander and the BET Prince were chartered for
daily charter rates of $22,000 and $19,000, respectively, for
charters expiring in October 2009 and November 2009,
respectively. Upon expiration of these charters, pursuant to
charter party agreements dated as of July 7, 2009, the BET
Commander and the BET Prince will be chartered to SAMC at daily
charter rates of $24,000 and $25,000, respectively, for charters
expiring in December 2011 and January 2012, respectively.
39
Pursuant to charter party agreements dated as of July 7,
2009, each of the BET Fighter, BET Scouter and the BET Intruder
were chartered to SAMC at daily charter rates of $25,000,
$26,000 and $15,500, respectively, for charters expiring in
September 2011, October 2011 and September 2011, respectively.
All charter rates for the BET fleet are inclusive of a
commission of 1.25% payable to Safbulk as commercial broker and
2.5% to SAMC as charterer. SAMC sub-charters these vessels in
the market and takes the risk that the rates it receives are
better than the period rates it is paying BET.
We cannot predict whether our charterers will, upon the
expiration of their charters, re-charter our vessels on
favorable terms or at all. This decision is likely to depend
upon prevailing charter rates in the months prior to charter
expiration. If our charterers decide not to re-charter our
vessels, we may not be able to re-charter them on similar terms.
In the future, we may employ vessels in the spot 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 re-charter all of our vessels, our net
revenue will decrease.
Despite the recent economic crisis, we are currently able to
meet our working capital needs and debt obligations. The current
decline in charter rates should not affect our revenue as we
have charters locked in for 11 to 13 and 22 to 25 month
periods including BET vessels (expiring between October 2009 and
September 2011) and, therefore, absent a default by one or
more of our charterers, we have contractually secured
approximately $107 million of revenues, net of commissions
payable to Safbulk and its charterers (as mentioned above), for
the period August 1, 2009 to September 22, 2011.
Therefore, we have contractually secured 65% of our projected
fleet revenue for the period up to December 31, 2011. We
will have to make use of our cash flows not committed to the
repayment of the term loan, revolving facility and BET loan to
meet our financial obligations and put our expansion plans on
hold unless new capital is raised from the capital markets,
including this offering, or the warrants are exercised in which
case we will use capital generated from the capital markets and
the warrants for expansion purposes. We make no assurances that
funds will be raised through the capital markets or that the
warrants will be exercised, or if exercised, the quantity which
will be exercised or the period in which they will be exercised.
Exercise of the warrants is currently not likely considering
current market prices.
BET
acquisition:
On August 12, 2009, we closed on the acquisition of a 50%
interest in BET from Constellation Bulk Energy Holdings, Inc.,
which we refer to as the BET acquisition. We control
BET through our right to appoint a majority of the BET board of
directors. The purchase price was $1.00. The stock purchase was
accounted for under the purchase method of accounting and
accordingly the assets (vessels) owned by BET have been recorded
at their fair values. In addition to the vessels, the other
assets acquired include $37.75 million in cash and
$3.57 million in current receivables. The consolidated
financial statements for BET for 2006, 2007 and 2008 appear
elsewhere in this prospectus. The fair value of the vessels as
of the closing of the acquisition was $126 million and BET
owed $143.099 million under its credit facility as of such
date. The results of operations of BET will be included in our
consolidated statement of operations commencing on
August 12, 2009. The financial impact of BET on our results
of operations is reflected in the pro forma financial
information included in this prospectus. See Seanergy and
BET Unaudited Pro Forma Financial Statements. The tax
considerations related to the BET acquisition are reflected in
the Tax Considerations section in this prospectus.
Our acquisition of an interest in BET remains subject to the
approval of BETs lenders, who have indicated a willingness
to provide their consent. We are currently in active
negotiations to obtain their formal approval.
Amendment
and conversion of Note:
On August 19, 2009, we amended the Note in the principal
amount of $28,250,000 issued to certain Restis affiliate
shareholders as nominees for the sellers of the vessels we
acquired in our business combination in August 2008. The
convertible note was amended to reduce the conversion price of
such note to a price equal to the average closing price of our
common stock for the
five-day
period commencing on the date of the amendment, which amounted
to $4.45598. As a condition to such amendment, the holders
agreed to convert
40
the convertible note immediately. As a result of such
conversion, we issued an aggregate of 5,585,868 shares of
common stock to the holders and the convertible note was
extinguished.
Increase
in authorized stock:
On July 16, 2009, our shareholders approved an amendment to
our amended and restated articles of incorporation to increase
our authorized common stock to 200,000,000 shares, par
value $0.0001 per share. This should provide us additional
flexibility to raise equity capital to achieve our business plan.
Loan
covenant waivers:
Seanergys revolving credit facility is tied to the market
value of the vessels and not to the prevailing (spot) market
rates. For example, our existing term and revolving credit
facilities require that the aggregate market value of the
vessels and the value of any additional security must be at
least 135% of the aggregate of the outstanding debt financing
and any amount available for drawing under the revolving
facility less the aggregate amount of all deposits maintained.
If the percentage is below 135% then a prepayment of the loans
may be required or additional security may be requested. A
waiver from Marfin has been received with respect to this clause
through July 1, 2010.
Upon lenders request, BET must assure its lenders that the
aggregate market value of the BET vessels is not less than 125%
of the outstanding amount of the BET loan. If the market value
of the vessels is less than this amount, the BET subsidiaries
may be requested to prepay an amount that will result in the
market value of the vessels meeting this requirement or offer
additional security to the lenders. The BET lenders have
indicated their willingness to provide their consent to our
purchase of shares in BET, including waiver of compliance with
the vessels market value covenant. We are currently in
active negotiations to finalize these arrangements following
which we expect BET to be in full compliance with its covenants.
If BETs lenders decline to approve this transaction, they
could declare an event of default under BETs loan
agreement and a portion of the debt may be required to be
classified to current.
Dry-dock
of vessels:
On February 24, 2009, the African Zebra commenced its
scheduled dry-docking, which was completed on July 20, 2009
at a cost of $3.2 million. The delay was due to labor
strikes in the repairing yard and other unforeseen events. The
Hamburg Max commenced its scheduled dry-docking on May 17,
2009, which was completed on June 23, 2009 at a cost of
$1.1 million. The cost of our dry-docks in 2009 are
expected to total $4.3 million. The African Oryx is
scheduled to be dry-docked in October 2010 at an estimated cost
of $900,000.
Recent
Accounting Pronouncements
In December 2007, the Financial Accounting Standards Board, or
FASB, issued FASB Statement No. 141(R), Business
Combinations, and FASB Statement No. 160,
Non-controlling Interests in Consolidated Financial
Statements an amendment to ARB No. 51.
FASB Statements No. 141(R) and No. 160 require most
identifiable assets, liabilities, non-controlling interests, and
goodwill acquired in a business combination to be recorded at
full fair value and require non-controlling
interests (previously referred to as minority interests) to be
reported as a component of equity, which changes the accounting
for transactions with non-controlling interest holders. Both
Statements are effective for periods beginning on or after
December 15, 2008, and earlier adoption is prohibited. FASB
Statement No. 141(R) will be applied to business
combinations occurring after the effective date. FASB Statement
No. 160 will be applied prospectively to all
non-controlling interests, including any that arose before the
effective date. The adoption of FASB Statement No. 160 did
not impact our financial position and results of operations.
These Statements affect our acquisitions consummated after
January 1, 2009.
In March 2008, the FASB issued FASB Statement No. 161,
Disclosures about Derivative Instruments and Hedging
Activities an amendment of FASB Statement
No. 133. FASB Statement No. 161 amends and
expands the disclosure requirements of FASB Statement
No. 133, Accounting for Derivative Instruments and
41
Hedging Activities. The objective of FASB Statement
No. 161 is to provide users of financial statements with an
enhanced understanding of how and why an entity uses derivative
instruments, how derivative instruments and related hedged items
are accounted for under FASB Statement No. 133 and its
related interpretations, and how derivative instruments and
related hedged items affect an entitys financial position,
financial performance, and cash flows. FASB Statement
No. 161 requires qualitative disclosures about objectives
and strategies for using derivatives, quantitative disclosures
about fair value amounts of and gains and losses on derivative
instruments, and disclosures about credit-risk-related
contingent features in derivative agreements. FASB Statement
No. 161 applies to all derivative financial instruments,
including bifurcated derivative instruments (and non derivative
instruments that are designed and qualify as hedging instruments
pursuant to paragraphs 37 and 42 of FASB Statement
No. 133) and related hedged items accounted for under
FASB Statement No. 133 and its related interpretations.
FASB Statement No. 161 also amends certain provisions of
FASB Statement No. 131. FASB Statement No. 161 is
effective for financial statements issued for fiscal years and
interim periods beginning after November 15, 2008, with
early application encouraged. FASB Statement No. 161
encourages, but does not require, comparative disclosures for
earlier periods at initial adoption. The adoption of FASB
Statement No. 161 did not have any impact on our financial
statement presentation or disclosures.
In May 2009, the FASB issued FASB Statement No. 165,
Subsequent Events. FASB Statement No. 165
requires entities to disclose the date through which they have
evaluated subsequent events and whether the date corresponds
with the release of their financial statements. This statement
is effective for interim and annual periods ending after
June 15, 2009. FASB Statement No. 165 did not have any
effect in our financial statements.
In June 2009, the FASB issued FASB Statement No. 167,
Amendments to FASB Interpretation No. 46(R),
amending the consolidation guidance for variable-interest
entities under FIN 46(R). The amendments include:
(1) the elimination of the exemption for qualifying special
purpose entities, (2) a new approach for determining who
should consolidate a variable-interest entity, and
(3) changes to when it is necessary to reassess who should
consolidate a variable-interest entity. Calendar year-end
companies will have to apply FASB Statement No. 167 as of
January 1, 2010. We are in the process of evaluating the
effect of this standard in our financial statements.
In June 2009, the FASB issued FASB Statement No. 168, the
FASB accounting standards codification and the hierarchy of
Generally Accepted Accounting Principles. FASB Statement
No. 168 will become the single source of authoritative
nongovernmental GAAP, superseding existing FASB, American
Institute of Certified Public Accountants (AICPA),
Emerging Issues Task Force (EITF), and related
accounting literature. FASB Statement No. 168 reorganizes
hundreds of GAAP pronouncements into roughly 90 accounting
topics and displays them using a consistent structure. Also
included is relevant Securities and Exchange Commission guidance
organized using the same topical structure in separate sections.
FASB Statement No. 168 will be effective for financial
statements issued for reporting periods that end after
September 15, 2009. This will have an impact on our
financial statements since all future references to
authoritative accounting literature will be references in
accordance with FASB Statement No. 168.
In June 2008, the FASB ratified
EITF 07-5,
Determining Whether an Instrument (or Embedded Feature) is
Indexed to an Entitys Own Stock
(EITF 07-5).
EITF 07-5
addresses the determination of whether a financial instrument
(or an embedded feature) is indexed to an entitys own
stock.
EITF 07-5
is effective for fiscal years beginning after December 15,
2008, and interim periods within those fiscal years. We have
determined that our warrants are indexed to our own stock and
equity classified and therefore the adoption of this standard
did not have an effect on our financial statements.
FSP APB
14-1,
Accounting for Convertible Debt Instruments That May Be
Settled in Cash upon Conversion (Including Partial Cash
Settlement). FSP APB
14-1
requires issuers of convertible debt that may be settled wholly
or partly in cash upon conversion to account for the debt and
equity components separately. The FSP is effective for financial
statements issued for fiscal years beginning after
December 15, 2008 and interim periods within those years
and must be applied retrospectively to all periods presented.
Early adoption is prohibited. The application of FSP APB
14-1 did not
have any effect on our financial statements.
42
In April 2009, the FASB issued three related FSPs to clarify the
application of FASB Statement No. 157 to fair-value
measurements in the current economic environment, modify the
recognition of
other-than-temporary
impairments of debt securities, and require companies to
disclose the fair values of financial instruments in interim
periods. The final Staff Positions are effective for interim and
annual periods ending after June 15, 2009, with early
adoption permitted for periods ending after March 15, 2009,
if all three Staff Positions or both the fair-value measurements
and other-than-temporary impairment Staff Positions are adopted
simultaneously. These are FSP
No. FAS 157-4,
Determining Fair Value When the Volume and Level of
Activity for the Asset or Liability has Significantly Decreased
and Identifying Transactions That Are Not Orderly, FSP
No. 115-2
and
FAS 124-2,
Recognition and Presentation of Other-Than-Temporary
Impairments and FSP
No. 107-1
and APB
28-1,
Interim Disclosures about Fair Value of Financial
Instruments. The application of these FSPs did not have a
material effect on our financial statements.
FASB Staff Position
No. FAS 157-4
provides guidance on how to determine the fair value of assets
and liabilities under FASB Statement No. 157 in the current
economic environment and re-emphasizes that the objective of a
fair-value measurement remains an exit price. It does not change
the requirements on the use of Level 1 inputs, which are
defined in that Statement as quoted prices for an identical
asset or liability in an active market. It provides guidance to
determine whether there has been a significant decrease in the
volume and level of activity of the market when compared with
normal market activity, the objective of which is to
determine the point within the range of fair value estimates
that is most representative of fair value under current market
conditions FASB Staff Position
FAS No. 115-2
and
FAS 124-2
modify the requirements for recognizing other-than-temporarily
impaired debt securities and significantly changes the existing
impairment model for such securities. It also modifies the
presentation of other-than-temporary impairment losses and
increases the frequency of and expands already required
disclosures about other-than-temporary impairment for debt and
equity securities. The requirements on recognition apply to debt
securities that are classified as available for-sale and
held-to-maturity that are subject to existing
other-than-temporary impairment guidance. Equity securities are
not subject to the Staff Positions requirements on
recognition.
FASB Staff Position
FAS 107-1
and APB 28-1
requires public companies to disclose the fair value of
financial instruments within the scope of FASB Statement 107 in
interim financial statements, adding to the current annual
disclosure requirements, except with respect to concentration of
credit risks of all financial instruments. It also adds a
requirement for discussion of changes, if any, in the method
used and significant assumptions made during the period.
Critical
Accounting Policies and Estimates
Critical accounting policies are those that reflect significant
judgments or uncertainties and potentially result in materially
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.
Business
combination allocation of the purchase price in a
business combination
On August 28, 2008, we completed our business combination.
The acquisition was accounted for under the purchase method of
accounting and accordingly, the assets acquired have been
recorded at their fair values. No liabilities were assumed or
other tangible assets acquired. The results of operations are
included in the consolidated statement of operations from
August 28, 2008. The consideration paid for the business
combination has been recorded at fair value at the date of
acquisition and forms part of the cost of the acquisition. Total
consideration for the business combination was $404,876,000,
including direct transaction costs of $8,802,000, and excluding
the contingent earn-out component.
The allocation of the purchase price to the assets acquired on
the date of the business combination is a critical area due to
the subjectivity involved in identifying and allocating the
purchase price to intangible assets acquired. As at the date of
the business combination, the fair value of the vessels was
determined to be $360,081,000. No additional identifiable
intangibles were identified and the difference of $44,795,000
was
43
assigned to goodwill. Areas of subjectivity included whether
there were any values associated with intangible assets such as
customer relationships, right of first refusal agreements and
charter agreements.
On August 12, 2009, we completed our business acquisition
of 50% of BET. The acquisition was accounted for under the
purchase method of accounting and accordingly, the assets and
liabilities acquired have been recorded at their fair values.
The results of operations are included in the proforma
consolidated statement of operations as if the acquisition had
occurred at January 1, 2008. The consideration paid for the
business acquisition has been recorded at fair value at the date
of acquisition and forms part of the cost of the acquisition.
As at the date of the business combination, we have
preliminarily estimated that the fair value of the vessels is
$126 million while the fair value of total assets acquired
amounted to $167.5 million and liabilities assumed to
$151.8 million.
Impairment
of long-lived assets
We apply FASB Statement No. 144 Accounting for the
Impairment or Disposal of Long-lived Assets, which
addresses financial accounting and reporting for the impairment
or disposal of long-lived assets. Vessels are reviewed for
impairment whenever events or changes in circumstances indicate
that the carrying value may not be recoverable. An impairment
loss is recognized when the carrying amount of the long-lived
asset is not recoverable and exceeds its fair value. The
carrying amount of the long-lived asset is not recoverable if it
exceeds the sum of the undiscounted cash flows expected to
result from the use and eventual disposition of the asset. Any
impairment loss is measured as the amount by which the carrying
amount of the long-lived asset exceeds its fair value and is
recorded as a reduction in the carrying value of the related
asset and a charge to operating results. Once an impairment
results in a reduction in the carrying value, the carrying value
of such an asset cannot thereafter be increased. Fair value is
determined based on current market values received from
independent appraisers, when available, or from other acceptable
valuation techniques such as discounted cash flows models. We
recorded an impairment loss of $4,530,000 in 2008. It is
considered reasonably possible that continued declines in
volumes, charter rates and availability of letters of credit for
customers resulting from global economic conditions could
significantly impact our future impairment estimates.
Goodwill
impairment
We follow FASB Statement No. 142 Goodwill and Other
Intangible Assets. Goodwill represents the excess of the
aggregate purchase price over the fair value of the net
identifiable assets acquired in business combinations accounted
for under the purchase method. Goodwill is reviewed for
impairment at least annually on December 31 in accordance with
the provisions of FASB Statement No. 142. The goodwill
impairment test is a two-step process. Under the first step, the
fair value of the reporting unit is compared to the carrying
value of the reporting unit (including goodwill). If the fair
value of the reporting unit is less than the carrying value of
the reporting unit, goodwill impairment may exist, and the
second step of the test is performed. Under the second step, the
implied fair value of the goodwill is compared to the carrying
value of the goodwill and an impairment loss is recognized to
the extent that the carrying value of goodwill exceeds the
implied fair value of goodwill. The implied fair value of
goodwill is determined by allocating the fair value of the
reporting unit in a manner similar to a purchase price
allocation in accordance with FASB Statement No. 141
Business Combinations. The residual fair value after
this allocation is the implied fair value of the reporting unit
goodwill. Fair value of the reporting unit is determined using a
discounted cash flow analysis. If the fair value of the
reporting unit exceeds it carrying value, step two does not have
to be performed. We recorded a goodwill impairment loss of
$44,795,000 in 2008. It is considered at least reasonably
possible in the near term that any amounts recorded upon
achievement of the earn-out in 2009 may be impaired based
under current market conditions.
44
Vessel
depreciation
Depreciation is computed using the straight-line method over the
estimated useful lives of the vessels, after considering the
estimated salvage value. Each vessels salvage value is
equal to the product of its lightweight tonnage and estimated
scrap rate. Management estimates the useful lives of our vessels
to be 25 years from the date of initial delivery from the
shipyard. Secondhand vessels are depreciated from the date of
their acquisition through their remaining estimated useful
lives. However, 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. We constantly evaluate the useful life of our fleet
based on market factors and specific facts and circumstances
applicable to each vessel.
The estimated salvage value at December 31, 2008 was $270
per light weight ton.
The above four policies are considered to be critical accounting
policies because assessments need to be made due to the shipping
industry being highly cyclical experiencing volatility in
profitability, and changes in vessel value and fluctuations in
charter rates resulting from changes in the supply and demand
for shipping capacity. At present, the dry bulk market is
affected by the current international financial crisis which has
slowed down world trade and caused drops in charter rates. The
lack of financing, global steel production cuts and outstanding
agreements between iron ore producers and Chinese industrial
customers have temporarily brought the market to a stagnation.
In addition, there are significant assumptions used in applying
these policies such as possible future new charters, future
charter rates, future on-hire days, future market values and the
time value of money. Consequently, actual results could differ
from these estimates and assumptions used and we may need to
review such estimates and assumptions in future periods as
underlying conditions, prices and other mentioned variables
change. Our results of operations and financial position in
future periods could be significantly affected upon revision of
these estimates and assumptions or upon occurrence of events.
Due to the different scenarios under which such changes could
occur, it is not practical to quantify the range and possible
effects of such future changes in our financial statements.
Dry-docking
costs
There are two methods that are used by the shipping industry to
account for dry-dockings; first, the deferral method, whereby
specific costs associated with a dry-docking are capitalized
when incurred and amortized on a straight-line basis over the
period to the next scheduled dry-dock; and second, the direct
expensing method, whereby dry-docking costs are expensed in the
period incurred. We use the deferral method of accounting for
dry-dock expenses. Under the deferral method, dry-dock expenses
are capitalized and amortized on a straight-line basis until the
date that the vessel is expected to undergo its next dry-dock.
We believe the deferral method better matches costs with
revenue. We use judgment when estimating the period between
dry-docks performed, which can result in adjustments to the
estimated amortization of dry-dock expense, the duration of
which depends on the age of the vessel and the nature of
dry-docking repairs the vessel will undergo. We expect that our
vessels will be required to be dry-docked approximately every
2.5 years in accordance with class requirements for major
repairs and maintenance. Costs capitalized as part of the
dry-docking include actual costs incurred at the dry-dock yard
and parts and supplies used in undertaking the work necessary to
meet class requirements.
Variable
interest entities
We evaluate our relationships with other entities to identify
whether they are variable interest entities and to assess
whether we are the primary beneficiary of such entities. If it
is determined that we are the primary beneficiary, that entity
is included in our consolidated financial statements. We did not
participate in any variable interest entity.
45
Important
Measures for Analyzing Results of Operations Following the
Vessel Acquisition
We believe that the important non-GAAP measures and definitions
for analyzing our results of operations consist of the following:
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Ownership days. Ownership days are the total
number of calendar days in a period during which we owned each
vessel in our fleet. Ownership days are an indicator of the size
of the fleet over a period and affect both the amount of
revenues and the amount of expenses recorded during that period.
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Available days. Available days are the number
of ownership days less the aggregate number of days that our
vessels are off-hire due to major repairs, dry-dockings or
special or intermediate surveys. The shipping industry uses
available days to measure the number of ownership days in a
period during which vessels should be capable of generating
revenues.
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Operating days. Operating days are the number
of available days in a period less the aggregate number of days
that 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 actually generate revenues.
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Fleet utilization. Fleet utilization is
determined by dividing the number of operating days during a
period by the number of ownership days during that period. The
shipping industry uses fleet utilization to measure a
companys efficiency in finding suitable employment for its
vessels and minimizing the amount of days that its vessels are
off-hire for any reason excluding scheduled repairs, vessel
upgrades, dry-dockings or special or intermediate surveys.
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Off-hire. The period a vessel is unable to
perform the services for which it is required under a charter.
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Time charter. A time charter is a contract for
the use of a vessel for a specific period of time during which
the charterer pays substantially all of the voyage expenses,
including port costs, canal charges and fuel expenses. The
vessel owner pays the vessel operating expenses, which include
crew wages, insurance, technical maintenance costs, spares,
stores and supplies and commissions on gross voyage revenues.
Time charter rates are usually fixed during the term of the
charter. Prevailing time charter rates do fluctuate on a
seasonal and year-to-year basis and may be substantially higher
or lower from a prior time charter agreement when the subject
vessel is seeking to renew the time charter agreement with the
existing charterer or enter into a new time charter agreement
with another charterer. Fluctuations in time charter rates are
influenced by changes in spot charter rates.
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|
TCE. Time charter equivalent or TCE rates are
defined as our time charter revenues less voyage expenses during
a period divided by the number of our Operating days during the
period, which is consistent with industry standards. Voyage
expenses include port charges, bunker (fuel oil and diesel oil)
expenses, canal charges and commissions.
|
Revenues
Our revenues were driven primarily by the number of vessels we
operated, the number of operating days during which our vessels
generated revenues, and the amount of daily charter hire that
our vessels earned under charters. These, in turn, were affected
by a number of factors, including the following:
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The nature and duration of our charters;
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The amount of time that we spent repositioning our vessels;
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|
The amount of time that the Company vessels spent in
dry-dock undergoing repairs;
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Maintenance and upgrade work;
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The age, condition and specifications of our vessels;
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The levels of supply and demand in the dry bulk carrier
transportation market; and
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Other factors affecting charter rates for dry bulk carriers
under voyage charters.
|
46
A voyage charter is generally a contract to carry a specific
cargo from a load port to a discharge port for an
agreed-upon
total amount. Under voyage charters, voyage expenses such as
port, canal and fuel costs are paid by the vessel owner. A time
charter trip and a period time charter or period charter are
generally contracts to charter a vessel for a fixed period of
time at a set daily rate. Under time charters, the charterer
pays voyage expenses. Under both types of charters, the vessel
owners pay for vessel operating expenses, which include crew
costs, provisions, deck and engine stores, lubricating oil,
insurance, maintenance and repairs. The vessel owners are also
responsible for each vessels dry-docking and intermediate
and special survey costs.
Vessels operating on period time charters provide more
predictable cash flows, but can yield lower profit margins than
vessels operating in the spot charter market for single trips
during periods characterized by favorable market conditions.
Vessels operating in the spot charter market generate revenues
that are less predictable, but can yield increased profit
margins during periods of improvements in dry bulk rates. Spot
charters also expose vessel owners to the risk of declining dry
bulk rates and rising fuel costs. Our vessels were chartered on
period time charters during the year ended December 31,
2008. None of our vessels operated in the spot market during the
year ended December 31, 2008 or six month period ended
June 30, 2009.
A standard maritime industry performance measure is the
time charter equivalent or TCE. TCE
rates are defined as our time charter revenues less voyage
expenses during a period divided by the number of our available
days during the period, which is consistent with industry
standards. Voyage expenses include port charges, bunker (fuel
oil and diesel oil) expenses, canal charges and commissions. Our
average TCE rate for 2008 and the six months ended June 30,
2009 was $49,362 and $51,982, respectively.
Vessel
Operating Expenses
Vessel operating expenses include crew wages and related costs,
the cost of insurance, expenses relating to repairs and
maintenance, the costs of spares and consumable stores, tonnage
taxes and other miscellaneous expenses. Vessel operating
expenses generally represent costs of a fixed nature. Some of
these expenses are required, such as insurance costs and the
cost of spares.
Depreciation
Depreciation is computed using the straight-line method over the
estimated useful lives of the vessels, after considering the
estimated salvage value. Each vessels salvage value is
equal to the product of its lightweight tonnage and estimated
scrap rate. Management estimates the useful lives of our vessels
to be 25 years from the date of initial delivery from the
shipyard. Secondhand vessels are depreciated from the date of
their acquisition through their remaining estimated useful
lives. However, 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. We constantly evaluate the useful life of our fleet
based on market factors and specific facts and circumstances
applicable to each vessel.
The estimated salvage value at December 31, 2008 was $270
per light weight ton.
Seasonality
Coal, iron ore and grains, which are the major bulks of the dry
bulk shipping industry, are somewhat seasonal in nature. The
energy markets primarily affect the demand for coal, with
increases during hot summer periods when air conditioning and
refrigeration require more electricity and towards the end of
the calendar year in anticipation of the forthcoming winter
period. The demand for iron ore tends to decline in the summer
months because many of the major steel users, such as automobile
makers, reduce their level of production significantly during
the summer holidays. Grains are completely seasonal as they are
driven by the harvest within a climate zone. Because three of
the five largest grain producers (the United States of America,
Canada and the European Union) are located in the northern
hemisphere and the other two (Argentina and Australia) are
located in the southern hemisphere, harvests occur throughout
the year and grains require dry bulk shipping accordingly.
47
Principal
Factors Affecting Our Business
The principal factors that affected our financial position,
results of operations and cash flows included the following:
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Number of vessels owned and operated;
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Charter market rates and periods of charter hire;
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Vessel operating expenses and direct voyage costs, which were
incurred in both U.S. Dollars and other currencies,
primarily Euros;
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Depreciation expenses, which are a function of vessel cost, any
significant post-acquisition improvements, estimated useful
lives, estimated residual scrap values, and fluctuations in the
market value of our vessels;
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Financing costs related to indebtedness associated with the
vessels; and
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Fluctuations in foreign exchange rates.
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Performance
Indicators
The figures shown below are non-GAAP statistical ratios used by
management to measure performance of our vessels and are not
included in financial statements prepared under US GAAP.
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Three Months Ended
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Six Months Ended
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|
|
Year Ended
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June 30, 2009
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June 30, 2009
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December 31, 2008
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Fleet Data:
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|
|
|
|
|
|
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|
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Average number of vessels(1)
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|
6.0
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|
6.0
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5.5
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Ownership days(2)
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|
546
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|
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|
1,086
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|
686
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|
Available days(3)
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|
417
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|
|
|
916
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|
|
|
686
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|
Operating days(4)
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|
|
411
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|
|
|
909
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|
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|
678
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|
Fleet utilization(5)
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|
75.3
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%
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|
83.7
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%
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|
|
98.9
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%
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Average Daily Results:
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Vessel TCE rate(6)
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|
52,292
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|
51,982
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|
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|
49,362
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|
Vessel operating expenses(7)
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|
|
5,513
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|
|
|
5,360
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|
|
|
4,636
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|
Management fees(8)
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|
|
577
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|
|
|
568
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|
|
|
566
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|
Total vessel operating expenses(9)
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|
6,090
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|
|
|
5,928
|
|
|
|
5,202
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|
(1) |
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Average number of vessels is the number of vessels that
constituted our fleet for the relevant period, as measured by
the sum of the number of days each vessel was a part of our
fleet during the relevant period divided by the number of
calendar days in the relevant period. |
|
(2) |
|
Ownership days are the total number of days in a period during
which the vessels in a fleet have been owned. 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
recorded during a period. |
|
(3) |
|
Available days are the number of ownership days less the
aggregate number of days that vessels are
off-hire due
to major repairs, dry-dockings or special or intermediate
surveys. The shipping industry uses available days to measure
the number of ownership days in a period during which vessels
should be capable of generating revenues. During the three
months ended June 30, 2009, we incurred 129 off-hire days
for vessel scheduled dry-docking. During the six months ended
June 30, 2009, we incurred 170
off-hire
days for vessel scheduled dry-docking. |
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(4) |
|
Operating days are the number of available days in a period less
the aggregate number of days that 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 actually generate revenues. |
48
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(5) |
|
Fleet utilization is the percentage of time that our vessels
were generating revenue, and is determined by dividing operating
days by ownership days for the relevant period. |
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(6) |
|
Time charter equivalent, or TCE, rates are defined as our time
charter revenues less voyage expenses during a period divided by
the number of our operating days during the period, which is
consistent with industry standards. Voyage expenses include port
charges, bunker (fuel oil and diesel oil) expenses, canal
charges and commissions. |
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Three Months Ended
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Six Months Ended
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Year Ended
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|
June 30, 2009
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|
June 30, 2009
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|
December 31, 2008
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|
|
(In thousands of US dollars, except operating day amounts)
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|
|
Net revenues from vessels
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|
|
22,067
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|
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|
48,309
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|
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|
34,453
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|
Voyage expenses
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|
|
(292
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)
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|
|
(438
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)
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|
|
(151
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)
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Voyage expenses related party
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|
|
(283
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)
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|
(619
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)
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|
|
(440
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)
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Net operating revenues
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|
|
21,492
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|
|
|
47,252
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|
|
|
33,862
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|
Operating days
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|
|
411
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|
|
|
909
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|
|
|
686
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|
Time charter equivalent rate
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|
|
52,292
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|
|
|
51,982
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|
|
|
49,362
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|
|
|
|
(7) |
|
Average daily vessel operating expenses, which includes crew
costs, provisions, deck and engine stores, lubricating oil,
insurance, maintenance and repairs, are calculated by dividing
vessel operating expenses by ownership days for the relevant
time periods: |
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|
|
|
|
|
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|
|
|
|
|
|
|
|
Three Months Ended
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|
|
Six Months Ended
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|
|
Year Ended
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|
|
|
June 30, 2009
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|
|
June 30, 2009
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|
|
December 31, 2008
|
|
|
|
(In thousands of US dollars, except ownership days
amounts)
|
|
|
Operating expenses
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|
|
3,010
|
|
|
|
5,821
|
|
|
|
3,180
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|
Ownership days
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|
|
546
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|
|
|
1,086
|
|
|
|
686
|
|
Daily vessel operating expenses
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|
|
5,513
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|
|
|
5,360
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|
|
|
4,636
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|
|
|
|
(8) |
|
Daily management fees are calculated by dividing total
management fees by ownership days for the relevant time period. |
|
(9) |
|
Total vessel operating expenses, or TVOE, is a measurement of
total expenses associated with operating the vessels. TVOE is
the sum of vessel operating expenses and management fees. Daily
TVOE is calculated by dividing TVOE by fleet ownership days for
the relevant time period. |
Results
of Operations
Three
and six months ended June 30, 2009 as compared to three and
six months ended June 30, 2008
Vessel Revenue Related Party, Net
Net revenues for the three and six months ended June 30,
2009 were $22,067,000 and $48,309,000, respectively, after
address commissions of 2.5%, or $566,000 and $1,239,000,
respectively, as compared to $0 for the comparable periods in
2008. The increase in vessel revenue is a result of the
operation of the six vessels we acquired in the third quarter of
2008. During the three and six months ended June 30, 2008,
we did not own or operate any vessels.
Direct Voyage Expenses Direct voyage
expenses, which include bunkers and port expenses, amounted to
$292,000 and $438,000 for the three and six months ended
June 30, 2009 as compared to $0 for the comparable periods
in 2008. Direct voyage expenses consisted of port and bunker
expenses of $62,000 and $230,000, respectively for the three
months ended June 30, 2009, and $93,000 and $345,000,
respectively for the six months ended June 30, 2009. The
increase in direct voyage expenses is a result of the operation
of our six vessels during the relevant periods in 2009 as
compared to no operations during the comparable periods in 2008.
Vessel Operating Expenses For the three and
six months ended June 30, 2009, our vessel operating
expenses were $3,010,000 and $5,821,000, respectively, or an
average of $5,513 and $5,360 per ship per day, respectively, as
compared to $0 for the comparable periods in 2008. Vessel
operating expenses include crew wages and related costs, the
cost of insurance, expenses relating to repairs and maintenance,
chemicals and
49
lubricants, consumable stores, tonnage taxes and other
miscellaneous expenses. We operated an average of
6.0 vessels during the three and six months ended
June 30, 2009. Vessel operating expenses increased as a
result of the operation of the six vessels during the relevant
periods in 2009 as compared to no operations during the
comparable periods in 2008.
Voyage Expenses Related Party
These expenses represent commissions charged in
relation to the brokerage agreement we have with Safbulk, an
affiliate, for the provision of chartering services up to
May 20, 2010. The chartering commissions represent a
commission of 1.25% payable to Safbulk on the collected vessel
revenue. For the three and six months ended June 30, 2009,
commissions charged amounted to $283,000 and $619,000,
respectively, as compared to $0 in the comparable periods in
2008, for the same reasons described above.
Management Fees Related Party
For the three and six months ended June 30,
2009, management fees charged by EST, which is a related party,
amounted to $315,000 and $617,000, respectively as compared to
$0 in the comparable periods in 2008. The increase was due to
the same reasons described above. Management fees primarily
relate to the management agreement we have with EST for the
provision of technical management services. The fixed daily fee
per vessel is Euro 425.00.
General and Administration Expenses For the
three and six months ended June 30, 2009, we incurred
$1,285,000 and $2,141,000, respectively, of general and
administration expenses, compared to $137,000 and $597,000
respectively, for the comparable periods in 2008, an increase of
approximately 838% and 259%, respectively. Our general and
administration expenses primarily include audit fees, legal
expenses, consulting services and staff salaries. Our general
and administration expenses for the periods in 2009 were
comparatively higher than those in comparable periods in 2008
due to the fact that we had vessels operations, full-time
shoreside staff and related expenses during the periods in 2009
and had no staff or management team and only limited operations,
consisting of identifying a business combination candidate,
during the comparable periods in 2008.
General and Administration Expenses
Related Party For the three and six months
ended June 30, 2009, we incurred $482,000 and $1,021,000,
respectively, of related party general and administration
expenses, compared to $0 and $0, respectively, for the
comparable periods in 2008. Our related party general and
administration expenses are primarily comprised of salaries of
$324,000 for our executive officers, $343,000 of remuneration to
our board of directors, office rental fees of $344,000 and
consulting fees of $10,000. The increase in such fees is due to
the reasons described above.
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. Depreciation is based on the cost of
the vessel less its estimated residual value, which is estimated
at $270 per lightweight ton. Secondhand vessels are depreciated
from the date of their acquisition through their remaining
estimated useful life. However, 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. For the three and six months ended
June 30, 2009, we recorded $7,758,000 and $15,430,000,
respectively, of vessel depreciation charges as compared to $0
for the three and six months ended June 30, 2008. We did
not own any vessels during the three and six months ended
June 30, 2008.
Interest and Finance Costs Interest and
finance costs for the three and six months ended June 30,
2009 amounted to $1,354,000 and $2,819,000, respectively, as
compared to $0 for the comparable periods in 2008. The
significant increase in interest and finance costs is primarily
attributable to our revolving credit and term loan facilities,
which we obtained in August 2008 in order to fund our business
combination and vessel purchase and for working capital
purposes. More specifically, interest expense related to the
revolving credit facility amounted to $369,000 and $763,000 and
interest on our term facility amounted to $818,000 and
$1,684,000 for the three and six months ended June 30,
2009, respectively. We did not have any loan or credit
facilities during the six months ended June 30, 2008.
Interest and finance costs, shareholders
Interest and finance costs, shareholders, for the three and
six months ended June 30, 2009 was $172,000 and $312,000,
respectively, as compared to $0 for the comparable
50
periods in 2008. The increase in interest and finance costs,
shareholders, is a result of the issuance of a convertible
secured promissory note, in the aggregate of $28,250,000 face
value, to a shareholder in connection with our business
combination in August 2008.
Interest Income Money Market Funds
For the three and six months ended June 30,
2009, we earned interest on our money market funds of $116,000
and $256,000, respectively, as compared to $1,057,000 and
$2,612,000 for the comparable periods in 2008. The decrease in
interest income is a result of the decrease of our money market
funds that were used for the business combination in August 2008.
Net Income We earned net income of $7,167,000
and $19,283,000 for the three and six months ended June 30,
2009, respectively, as compared to $920,000 and $2,015,000 for
the comparable periods in 2008. The increase in our net income
resulted primarily from the closing of the business combination
and the commencement of our operations on August 28, 2008.
Year
ended December 31, 2008 (fiscal 2008) as
compared to year ended December 31, 2007 (fiscal
2007)
Vessel Revenue Related Party, Net
Net revenues for the year ended December 31, 2008 were
$34,453,000 after address commissions of 2.5%, or $880,000, as
compared to $0 in fiscal 2007. The increase in vessel revenue is
a result of the closing of the business combination and the
commencement of our operations on August 28, 2008. Our
gross revenues were $35,333,000. Our vessels Davakis G., Delos
Ranger and African Oryx commenced operations on August 28,
2008 for a daily charter fee of $60,000, $60,000 and $30,000,
respectively. Our vessel, Bremen Max, commenced operations on
September 11, 2008 for a daily charter fee of $65,000 and
our vessels, Hamburg Max and African Zebra, commenced operations
on September 25, 2008 for a daily charter fee of $65,000
and $36,000, respectively. Net revenues earned for the period
from August 28, 2008 to December 31, 2008 for each of
our vessels after address commissions amounted to $7,147,000 for
the Davakis G.; $7,162,000 for the Delos Ranger; $3,661,000 for
the African Oryx; $7,068,000 for the Bremen Max; $5,978,000 for
the Hamburg Max; and $3,437,000 for the African Zebra. The
vessels were employed under time charters with SAMC, an
affiliate, with initial terms of
11-13 months,
expiring in September 2009.
Direct Voyage Expenses Direct voyage
expenses, which include bunkers and port expenses, amounted to
$151,000 for the year ended December 31, 2008 as compared
to $0 for the comparable period in 2007. Direct voyage expenses
consisted of port and bunker expenses of $44,000 and $107,000,
respectively. The increase in direct voyage expenses is a result
of the closing of the business combination and the commencement
of our operations in August 2008.
Vessel Operating Expenses For the year ended
December 31, 2008, our vessel operating expenses were
$3,180,000, or an average of $4,636 per ship per day, as
compared to $0 in fiscal 2007. Vessel operating expenses
included crew wages and related costs, the cost of insurance,
expenses relating to repairs and maintenance, chemicals and
lubricants, consumable stores, tonnage taxes and other
miscellaneous expenses. We operated an average of
5.5 vessels from the date of consummation of the business
combination on August 28, 2008 through December 31,
2008. Vessel operating expenses increased as a result of the
closing of the business combination and the commencement of our
operations in August 2008.
Voyage Expenses Related Party
Voyage expenses related party
represent commissions charged in relation to the brokerage
agreement we have with Safbulk, an affiliate, for the provision
of chartering services up to May 20, 2010. The chartering
commissions represent a commission of 1.25% payable to Safbulk
on the collected vessel revenue. For the year ended
December 31, 2008, commissions charged amounted to $440,000
as compared to $0 in fiscal 2007, for the same reasons described
above.
Management Fees Related Party
For the year ended December 31, 2008,
management fees charged by a related party amounted to $388,000
as compared to $0 in fiscal 2007. The increase was due to the
same reasons described above. Management fees primarily relate
to the management agreement we have with EST, an affiliate, for
the provision of technical management services. The fixed daily
fee per vessel in operation is Euro 416.00 per vessel until
December 31, 2008. Thereafter the fixed daily fee was
re-negotiated to be Euro 425.00 per vessel.
51
General and Administration Expenses For the
year ended December 31, 2008, we incurred $1,840,000 of
general and administration expenses, compared to $445,000 for
the year ended December 31, 2007, an increase of
approximately 313%. Our general and administration expenses
primarily include auditing and accounting costs of $695,000,
legal fees of $432,000 and other professional fees of $371,000.
Our general and administration expenses for 2008 were
comparatively higher than those in the prior year due to the
fact that we commenced our vessel operations after the business
combination was consummated on August 28, 2008.
General and Administration Expenses
Related Party For the year ended
December 31, 2008, we incurred $430,000 of related party
general and administration expenses, compared to $0 for the year
ended December 31, 2007. Our related party general and
administration expenses are primarily comprised of salaries of
$139,000 for our executive officers, $155,000 of remuneration to
our board of directors, office rental fees of $88,000 and
consulting fees of $27,000. In addition, a service agreement was
signed with EST for consultancy services with respect to
financing and dealing with relations with third parties and for
assistance with the preparation of periodic reports to the
shareholders for a fixed monthly fee of $5,000 through
March 2, 2009 and amounted to $21,000. The increase in such
fees is due to the reasons described above.
We constantly evaluate the useful life of our fleet based on
market factors and specific facts and circumstances applicable
to each vessel.
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. Depreciation is based on the cost of
the vessel less its estimated residual value, which is estimated
at $270 per lightweight ton. Secondhand vessels are depreciated
from the date of their acquisition through their remaining
estimated useful life. However, 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. We constantly evaluate the useful
life of our fleet based on the market factors and specific facts
and circumstances applicable to each vessel.
For the year ended December 31, 2008, we recorded
$9,929,000 of vessel depreciation charges as compared to $0 in
fiscal 2007. These charges relate to our vessels of which three
vessels were placed into operations on August 28, 2008 and
the remaining three in September 2008.
Goodwill Impairment Loss We performed our
annual impairment testing of goodwill as at December 31,
2008. The current economic and market conditions, including the
significant disruptions in the global credit markets, are having
broad effects on participants in a wide variety of industries.
Since September 2008, the charter rates in the dry bulk charter
market have declined significantly, and dry bulk vessel values
have also declined. The fair value for goodwill impairment
testing was estimated using the expected present value of future
cash flows, using judgments and assumptions that management
believes were appropriate in the circumstances. The future cash
flows from operations were 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 a combination of Seanergys remaining
charter agreement rates,
2-year
forward freight agreements and the most recent
10-year
average historical 1 year time charter rates available for
each type of vessel) assuming an average annual inflation rate
of 2%. The weighted average cost of capital (WACC) used was 8%.
As a result, we recorded an impairment charge related to
goodwill of $44,795,000 in 2008 as compared to no impairment
charges in fiscal 2007 because we did not complete the business
combination until 2008.
Vessels Impairment Loss We evaluate
the carrying amounts of vessels and related dry-dock and special
survey costs and periods over which long-lived assets are
depreciated to determine if events have occurred which would
require modification to their carrying values or useful lives.
In evaluating useful lives and carrying values of long-lived
assets, we review certain indicators of potential impairment,
such as undiscounted projected operating cash flows, vessel
sales and purchases, business plans and overall market
conditions. The current economic and market conditions,
including the significant disruptions in the global credit
markets, are having broad effects on participants in a wide
variety of industries. Since September 2008, the charter rates
in the dry bulk charter market have declined significantly, and
dry bulk vessel values have also declined. We determine
undiscounted projected net operating cash flows for each vessel
and compare it to the vessels carrying value. The
projected net operating cash flows are determined by considering
the charter
52
revenues from existing time charters for the fixed fleet days
and an estimated daily time charter equivalent for the unfixed
days (based on a combination of our remaining charter agreement
rates, two-year forward freight agreements and the most recent
10-year
average historical 1 year time charter rates available for
each type of vessel) over the remaining economic life of each
vessel, net of brokerage and address commissions, expected
outflows for scheduled vessels maintenance, and vessel
operating expenses assuming an average annual inflation rate of
2%. Fleet utilization is assumed at 98.6% in our exercise,
taking into account each vessels off hire days based on
other companies operating in the dry bulk industry and our
historical performance.
A discount factor of 4.5% per annum, representing our
incremental borrowing rate, was applied to the undiscounted
projected net operating cash flows directly associated with and
expected to arise as a direct result of the use and eventual
disposition of the vessel, but only in the case where they were
lower than the carrying value of vessels. This resulted in an
impairment loss of $4,530,000 for fiscal 2008. There was no
impairment loss in 2007 because we did not acquire our vessels
until 2008.
Interest and Finance Costs The significant
increase in interest and finance costs of $4,077,000 in 2008 as
compared to $58,000 in 2007 is primarily attributable to our
revolving credit and term facilities, which we obtained in order
to fund our business combination and vessel purchase and for
working capital purposes. More specifically, interest expense
related to the revolving credit facility amounted to $799,000
and interest on our term facility amounted to $2,768,000 for the
year ended December 31, 2008. In 2008, our interest expense
primarily related to four months of operations since we drew
down our credit facilities on August 28, 2008, and obtained
our term loans in August and September 2008, respectively. Fees
incurred for obtaining new loans, including related legal and
other professional fees, are deferred and amortized using the
effective interest method over the life of the related debt.
Interest Income Money Market Funds
For the year ended December 31, 2008, we
earned interest on our money market funds of $3,361,000 as
compared to $1,948,000 for the year ended December 31,
2007. The increase in interest income of 72.5% is because we
obtained our trust funds from our initial public offering on
September 28, 2007 and therefore interest was earned for
approximately three months in 2007 as compared to approximately
eight months in 2008.
Net (Loss)/Income We incurred a net loss of
$31,985, 000 in 2008 as compared to a profit of $1,445,000 in
2007. The increase in our loss is a result of our vessel
operations commencing on August 28, 2008, income of
$18,095,000 set off by goodwill and vessel impairment charges of
$44,795,000 and $4,530,000, respectively, and set off by
increased interest and finance costs, which resulted in
$755,000 net finance expense in 2008 as compared to
$1,890,000 net finance income in 2007.
Year
Ended December 31, 2007 and the period from August 15,
2006 (Inception) to December 31, 2006
For the year ended December 31, 2007, we had a net income
of $1,445,000. The net income consisted of $1,948,000 of
interest income offset by operating expenses of $445,000 and
interest expenses of $58,000 ($45,000 related to the underwriter
and $13,000 related to shareholders). Operating expenses of
$445,000 consisted of consulting and professional fees of
$357,000, rent and office services expense of $22,000, insurance
expense of $25,000, investor relations expense of $33,000, and
other operating costs of $8,000.
For the period from August 15, 2006 (Inception) to
December 31, 2006, we had a net loss of $4,372,000. The net
loss consisted of $1,028,000 of interest income offset by
interest expense of $824,000, accounting fees of $1,000,000,
organization expenses of $3,450,000 and other operating expenses
of $126,000.
Liquidity
and Capital Resources
Our principal source of funds is operating cash flows, and our
revolving credit and term facilities. Our principal use of funds
has primarily been capital expenditures to establish our fleet,
close our business combination, maintain the quality of our dry
bulk carriers, comply with international shipping standards and
environmental laws and regulations, fund capital working
requirements, and make principal repayments on our outstanding
loan facilities.
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We believe that our current cash balance and our operating cash
flow will be sufficient to meet our current liquidity needs,
although the dry bulk charter market has sharply declined since
September 2008 and our results of operations may be adversely
affected if market conditions do not improve. We expect to rely
upon operating cash flow to meet our liquidity requirements
going forward.
Despite the recent economic crisis, we are currently able to
meet our working capital needs and debt obligations. The current
decline in charter rates will not affect our revenue as we have
the charters locked in for 11 to 13 and 22 to 25 month
periods including BET vessels (expiring between October 2009 and
September 2011) and, therefore, absent a default by one or
more of our charterers, we have contractually secured
approximately $107 million of revenues, net of commissions
payable to Safbulk and our charterers (as mentioned above), for
the period August 1, 2009 to September 22, 2011.
Therefore, we have contractually secured 65% of our projected
fleet revenue for the period up to December 31, 2011. We
will have to make use of our cash flows not committed to the
repayment of the term loan and revolving facility mentioned
above to meet our financial obligations and put our expansion
plans on hold, unless new capital is raised from the capital
markets, in the form of rights offerings or private placements
and the warrants are exercised in which case we will use capital
generated from the capital markets and the warrants for
expansion purposes. We make no assurances that funds will be
raised through capital markets or that the warrants will be
exercised, or if exercised, the quantity which will be exercised
or the period in which they will be exercised. Exercise of the
warrants is not likely considering current market prices.
Furthermore, our revolving credit facility is tied to the market
value of the vessels and not to the prevailing (spot) market
rates. For example, our existing term and revolving credit
facilities require that the aggregate market value of the
vessels and the value of any additional security must be at
least 135% of the aggregate of the outstanding debt financing
and any amount available for drawing under the revolving
facility less the aggregate amount of all deposits maintained.
If the percentage is below 135% then a prepayment of the loans
may be required or additional security may be requested. A
waiver from Marfin has been received with respect to this
covenant through July 1, 2010.
Under the BET loan agreement, the BET subsidiaries are subject
to operating and financial covenants that may affect BETs
business. These restrictions may, subject to certain exceptions,
limit the BET subsidiaries ability to engage in many of
the activities listed above. Furthermore, the BET subsidiaries
must assure the lenders that the aggregate market value of the
BET vessels is not less than 125% of the outstanding amount of
the BET loan. If the market value of the vessels is less than
this amount, the BET subsidiaries may at the request of the
lender prepay an amount that will result in the market value of
the vessels meeting this requirement or offer additional
security to the lenders. The BET lenders have indicated their
willingness to provide their consent to our purchase of shares
in BET, including waiver of compliance with the vessels
market value covenant. We are currently in active negotiations
to finalize these arrangements following which we expect BET to
be in full compliance with its covenants. If BETs lenders
decline to approve this transaction, they could declare an event
of default under BETs loan agreement, and a portion of the
debt may be required to be reclassified to current.
We acquired our dry bulk carriers using a combination of funds
received from equity investors and financed with our revolving
term credit facilities.
We intend to continue to expand our fleet in the future. Growth
will depend on locating and acquiring suitable vessels,
identifying and consummating acquisitions or joint ventures;
enhancing our customer base; obtaining required financing (debt
or equity or a combination of both); and obtaining favorable
terms in all cases.
In February 2009, our vessel African Zebra entered its scheduled
dry-docking, which was completed on July 20, 2009. The
delay was due to labor strikes in the repairing yard and other
unforeseen events. The cost for this dry-dock was
$3.2 million. On May 17, 2009, our vessel Hamburg Max
commenced its scheduled
dry-docking,
which was completed on June 23, 2009 at a cost of
$1.1 million. One vessel is scheduled for dry-docking in
2010 and three vessels in 2011. For the BET fleet, three
vessels, namely BET Prince, BET Scouter and BET Fighter are
scheduled for dry-docking in 2010 and one vessel, BET Intruder,
in 2011. BET Commander commenced its scheduled dry-docking in
August 2009 and is expected to be completed by October 2009 at a
cost of $1.2 million. The dry-docking costs related to 2010
and 2011 are estimated to be $0.9 million and
$2.6 million, respectively.
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Our short-term liquidity requirements relate to servicing our
debt (including principal payments on our term loan), payment of
operating costs, dry-docking costs of two vessels, funding
working capital requirements and maintaining cash reserves
against fluctuations in operating cash flows. Sources of
short-term liquidity are primarily our revenues earned from our
charters.
Our medium and long term liquidity requirements include
repayment of long-term debt balances, debt interest payments and
dry-docking costs. As of June 30, 2009, we had outstanding
borrowings of $197,345,000 due to Marfin. We have drawn down
$54,845,000 of our revolving credit facility. On August 28,
2009, the revolving facility was reduced to $72,000,000. This
reduction will be followed by five consecutive annual reductions
of $12,000,000 and any outstanding balance to be fully repaid
together with the balloon payment of the term loan. In 2009, we
have made or will make principal repayments on our Marfin term
facility amounting to $27,750,000.
BET financed the acquisition of its vessels with the proceeds of
a loan from Citibank International PLC, as agent for a syndicate
of banks and financial institutions. The outstanding principal
amount as of December 31, 2008 was $150,725,000. The loan
is repayable in semi-annual installments of principal in the
amount of $8,286,500 followed by a balloon payment due on
maturity in the amount of $51,289,000, as these installment
amounts were revised after the BET Performer sale. Interest is
due and payable quarterly based on interest periods selected by
BET. During 2009, we will make principal repayments on our BET
loan facility amounting to $16.63 million.
In 2010, we have principal repayments due of $18,950,000 and
$16,572,544 on the Marfin and BET loans, respectively.
As of June 30, 2009, Seanergy had available cash reserves
of $47,022,000, which is shown as cash and cash equivalent.
These amounts are not restricted.
Our revolving credit facility and term facility are from Marfin
(see Credit Facilities below), and in
addition, we had a Note due to shareholders amounting to
$28,250,000 (face value), which following an amendment dated as
of August 19, 2009 has been converted into
6,585,868 shares of common stock.
Between the January 1, 2008 and July 2008, we paid
dividends amounting to $4,254,000 to our public shareholders. We
currently have suspended the payment of dividends pursuant to
the waiver received from Marfin (see Credit
Facilities below) and dividends will not be declared
without the prior written consent of Marfin.
Our Private Warrants may be exercised by the holders on a
cashless basis. Each warrant entitles the holder to purchase one
share of common stock and expires on September 28, 2011.
More specifically, we have 38,984,667 warrants to purchase
shares of our common stock issued and outstanding at an exercise
price of $6.50 per share, of which 16,016,667 are exercisable on
a cashless basis. In addition, we have assumed Seanergy
Maritimes obligation to issue 1,000,000 shares of
common stock and warrants to purchase 1,000,000 shares of
our common stock under the unit purchase option it granted the
underwriter in its initial public offering at an exercise price
of $12.50 per unit. The exercise of the Warrants is not likely
taking into consideration current market prices.
Cash
Flows
Six
months ended June 30, 2009 compared to six months ended
June 30, 2008
Operating Activities: Net cash from operating
activities totaled $34,500,000 for the six months ended
June 30, 2009, as compared to $1,855,000 for the six months
ended June 30, 2008. This increase primarily reflected our
revenue from time charters and related vessel operating expenses.
Investing Activities: Net cash used in
investing activities totaled $21,000 for the six months ended
June 30, 2009, as compared to $510,000 for the six months
ended June 30, 2008. This is primarily a result of the use
of $510,000 for the payment of acquisition costs in 2008. There
was no addition to the fleet for the first six months of 2009.
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Financing activities: Net cash used in
financing activities totaled $15,000,000 for the six months
ended June 30, 2009, as compared to $3,173,000 for the six
months ended June 30, 2008. In the first six months of
2009, cash was used for the repayment of long-term debt
installments as compared to cash used in 2008 for dividend
payments.
Fiscal
2008 compared to Fiscal 2007 and the period from August 15,
2006 (Inception) to December 31, 2006
Operating activities: Net cash from operating
activities totaled $25,700,000 for the year ended
December 31, 2008, as compared to $1,585,000 for the year
ended December 31, 2007. This increase primarily reflected
our revenue from time charters, which commenced on
August 28, 2008 for three vessels and in September 2008 for
the remaining three vessels, and the related vessel operating
expenses. Net cash from operating activities totaled $1,585,000
for the year ended December 31, 2007, as compared to an
outflow of $20,000 for the period from August 15, 2006
(inception) to December 31, 2006.
Investing activities: Net cash used in
investing activities totaled $142,919,000 for the year ended
December 31, 2008, as compared to $232,923,000 used in
investing activities for the year ended December 31, 2007.
This decrease is primarily a result of the use of $375,883,000
in connection with the consummation of our business combination,
which was offset by using the funds held in trust of
$232,923,000. Net cash provided by investing activities for the
year ended December 31, 2007 totaled $232,923,000 as
compared to $0 for the period from August 15, 2006
(inception) to December 31, 2006. The increase in the use
of funds is due to the monies received in our IPO being placed
in trust to be used for the purpose of a business combination.
Financing activities: Net cash provided by
financing activities totaled $142,551,000 for the year ended
December 31, 2008, as compared to $233,193,000 for the year
ended December 31, 2007. In 2008, cash was provided from
the proceeds of our revolving credit and term facilities in the
amount of $219,845,000 and from warrant exercises in the amount
of $858,000 which was offset by the payment of $63,705,000
relating to the redemption of common shares in connection with
the closing of our business combination, principal loan
repayments of $7,500,000, debt issuance costs of $2,693,000 and
dividends paid of $4,254,000. In 2007, the net cash provided was
as a result of our private and public offering of common stock
totaling $233,619,000, net of the offering costs. For the period
from August 15, 2006 (inception) to December 31, 2006,
the net cash from financing activities amounted to $376,000.
Credit
Facilities
Revolving
Credit Facility
As of June 30, 2009, we had utilized $54,845,000 of the
amount available under our revolving credit facility, which is
equal to the lesser of $90,000,000 and an amount in dollars
which when aggregated with the amounts already drawn down under
the term facility does not exceed 70% of the aggregate market
values of the vessels and other securities held in favor of the
lender for the business combination and working capital
purposes. As of June 30, 2009, we had available
$35.155 million under the revolving credit facility.
The revolving credit facility bears interest at LIBOR plus 2.25%
per annum. A commitment fee of 0.25% per annum is calculated on
the daily aggregate un-drawn balance and un-cancelled amount of
the revolving credit facility, payable quarterly in arrears from
the date of the signing of the loan agreements.
On August 28, 2009, the revolving facility was reduced to
$72,000,000. This reduction will be followed by five consecutive
annual reductions of $12,000,000 and any outstanding balance
must be fully repaid together with the balloon payment of the
term loan.
Term
Facility
The initial vessel acquisition was financed with an amortizing
term loan from Marfin equal to $165,000,000, representing 42% of
the vessels aggregate acquisition costs, excluding any
amounts associated with the earn-out provision. In December
2008, we repaid $7,500,000 of the term facility.
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The loan is repayable commencing three months from the last
drawdown, or March 31, 2009, whichever is earlier, through
twenty-eight consecutive quarterly principal installments, of
which the first four principal installments will be equal to
$7,500,000 each, the next four principal installments will be
equal to $5,250,000 each and the final twenty principal
installments will be equal to $3,200,000 each, with a balloon
payment equal to $50,000,000 due concurrently with the
twenty-eighth principal installment. On September 9, 2009,
we executed addendum no. 1 to the loan agreement. In
connection with the amendment, Marfin accelerated the due date
of installment no. 5 to September 25, 2009 and of
installment nos. 6 and 7 to January 4, 2010.
The loan bears interest at an annual rate of three-month-LIBOR
plus 1.5%, if our ratio of total assets to total liabilities is
greater than 165%, which increased to 1.75% if the ratio is
equal or less than 165%. In connection with the addendum, during
the time any waiver period is in effect, the interest payable
increases to three-month-LIBOR plus 2.75%, if our ratio of total
assets to total liabilities is greater than 165%, which
increased to 3.25% if the ratio is equal or less than 165%
The term facility is secured by the following: a first priority
mortgage on the vessels, on a joint and several basis; a first
priority general assignment of any and all earnings, insurances
and requisition compensation of the vessels and the respective
notices and acknowledgements thereof; a first priority specific
assignment of the benefit of all charters exceeding 12 calendar
months duration and all demise charters in respect of the
vessels and the respective notices and acknowledgements thereof
to be effected in case of default or potential event of default
to the absolute discretion of Marfin; assignments, pledges and
charges over the earnings accounts held in the name of each
borrower with the security trustee; undertakings by the
technical and commercial managers of the vessels; negative
pledge of the non-voters shares acquired by Seanergy;
subordination agreement between Martin and the holder of the
Note. All of the aforementioned security will be on a full cross
collateral basis.
The term facility includes covenants, among others, that require
the borrowers and the corporate guarantor, to maintain vessel
insurance for an aggregate amount greater than the vessels
aggregate market value or an amount equal to 130% of the
aggregate of (a) the outstanding amount under both the
revolving credit and term facilities and (b) the amount
available for drawing under the revolving facility. The
vessels insurance is to include as a minimum cover hull
and machinery, war risk and protection and indemnity insurance,
$1,000,000,000 for oil pollution and for excess oil spillage and
pollution liability insurance. In relation to the protection and
indemnity insurance, no risk should be excluded or the
deductibles as provided by the P&I Association materially
altered or increased to amounts exceeding $150,000 without the
prior written consent of Marfin. In addition mortgagees
interest insurance on the vessels and the insured value must be
at least 110% of the aggregate of the revolving credit and term
facility.
In addition, if a vessel is sold or becomes a total loss or the
mortgage on the vessel is discharged on its disposal, we are
required to repay such part of the facilities as is equal to the
higher of the amount related to such vessel or the amount
necessary to maintain the security clause margin.
Other covenants include the following:
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not to borrow any money or permit such borrowings to continue
other than by way of subordinated shareholders loans or
enter into any agreement for deferred terms, other than in any
customary suppliers credit terms or any equipment lease or
contract hire agreement other than in ordinary course of
business;
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no loans, advances or investments in, any person, firm,
corporation or joint venture or to any officer director,
shareholder or customer;
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not to assume, guarantee or otherwise undertake the liability of
any person, firm, or company;
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not to authorize any capital commitments;
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not to declare or pay dividends in any amount greater than 60%
of the net cash flow of Seanergy, on a consolidated basis as
determined by the lender on the basis of the most recent annual
audited financial statements provided, or repay any
shareholders loans or make any distributions in excess of
the above
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amount without the lenders prior written consent (see
below for terms of waiver obtained on December 31, 2008);
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not to change our Chief Executive Officer
and/or
Chairman without the prior written consent of the lender;
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not to assign, transfer, sell or otherwise dispose of vessels or
any of the property, assets or rights without the prior written
consent of the lender;
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to ensure that the members of the Restis and Koutsolioutsos
families (or companies affiliated with them) own at all times an
aggregate of at least 10% of our issued share capital;
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no change of control without the written consent of the lender;
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not to engage in any business other than the operation of the
vessels without the prior written consent of the lender; and
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not to violate the security margin clause, which provides that:
the aggregate market values of the vessels and the value of any
additional security shall not be less than (or at least) 135% of
the aggregate of the outstanding amounts under the revolving
credit and term facilities and any amount available for drawing
under the revolving facility, less the aggregate amount of all
deposits maintained. As of December 31, 2008, we would not
have been in compliance with the security margin clause under
the Marfin loan agreement had we not later obtained certain
retroactive waivers from Marfin. During the first quarter of
2009, we obtained waivers from Marfin of our compliance with
these various financial and other covenants, which waivers were
effective as of December 31, 2008. These waivers expired in
July 2009, when the first of our original charterers was
replaced. On September 9, 2009, we executed addendum
no. 1 to the loan agreement and obtained a waiver from
Marfin through July 1, 2010. In connection with the
amendment and waiver, Marfin made certain changes to our loan
agreement including increasing the interest payable during the
waiver period from LIBOR plus 1.5% to LIBOR plus 2.75%,
accelerating the due dates of certain principal installments and
limiting our ability to pay dividends without their prior
consent. As a result of these waivers, we are not currently in
default under our Marfin loan agreement.
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Financial covenants include the following:
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ratio of financial indebtedness to earnings, before interest,
taxes, depreciation and amortization (EBITDA) shall be less than
6.5:1 (financial indebtedness or net debt are defined is the sum
of all outstanding debt facilities minus cash and cash
equivalents). The covenant is to be tested quarterly on an LTM
basis (the last twelve months). The calculation of
the covenant is not applicable for the quarter ended
December 31, 2008.
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the ratio of LTM (last twelve months) EBITDA to net
interest expense shall not be less than 2:1. The covenant is to
be tested quarterly on a LTM basis. The calculation of the
covenant is not applicable for the quarter ended
December 31, 2008.
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the ratio of total liabilities to total assets shall not exceed
0.70:1;
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unrestricted cash deposits, other than in favor of the lender
shall not be less than 2.5% of the financial
indebtedness; and
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average quarterly unrestricted cash deposits, other than in
favor of the lender, shall not be less than 5% of the financial
indebtedness.
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The last three financial covenants listed above are to be tested
on a quarterly basis, commencing on December 31, 2008
(where applicable). We were in compliance with our loan
covenants as of June 30, 2009.
BET
Loan Agreement
The six wholly-owned subsidiaries of BET financed the
acquisition of their respective vessels with the proceeds of an
amortizing loan from Citibank International PLC, as agent for
the syndicate of banks and
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financial institutions set forth in the loan agreement, in the
principal amount of $222,000,000. The loan agreement dated
June 26, 2007 is guaranteed by BET. The BET subsidiaries
drew down on agreed portions of the loan facility to acquire
each of the original six vessels in the BET fleet. The amount of
the loan for each vessel was less than or equal to 70% of the
contractual purchase price for the applicable vessel. The loan
bears interest at the annual rate of LIBOR plus 0.75%. As of
August 12, 2009, the principal amount due under the BET
loan was $143,099,000.
The loan is repayable commencing on December 28, 2007
through 15 equal semi-annual installments of principal in the
amount of $8,286,500 followed by a balloon payment due six
months thereafter in the amount of $51,289,000, as these
installment amounts were revised after the BET Performer sale.
The borrowers are required to deposit one-sixth of the next
principal payment in a retention account each month to fund each
semi-annual principal payment. Interest in due and payable based
on interest periods selected by BET equal to one month, two
months, three months, six months, or a longer period up to
12 months. For interest periods longer than three months,
interest is due in three-month installments.
The BET loan facility is secured by the following: the loan
agreement, a letter agreement regarding payment of certain fees
and expenses by BET; a first priority mortgage on each of the
BET vessels; the BET guaranty of the loan; a general assignment
or deed of covenant of any and all earnings, insurances and
requisition compensation of each of the vessels; pledges over
the earnings accounts and retention accounts held in the name of
each borrower; undertakings by the technical managers of the BET
vessels; and the trust deed executed by Citibank for the benefit
of the other lenders, among others.
The ship security documents include covenants, among others,
that require the borrowers to maintain vessel insurance for an
aggregate amount equal to the greater of the vessels
aggregate market value or an amount equal to 125% of the
outstanding amount under the loan. The vessels insurance
is to include as a minimum cover fire and usual marine risks,
war risk and protection and indemnity insurance, and
$1,000,000,000 for oil pollution. In addition, the borrowers
agree to reimburse the mortgagee for mortgagees interest
insurance on the vessels in an amount of up to 110% of the
outstanding amount under the loan.
In addition, if a vessel is sold or becomes a total loss, BET is
required to repay such part of the loan as is equal to the
greater of the relevant amount for such vessel, or such amount
as is necessary to maintain compliance with the minimum security
covenant in the loan agreement. This covenant requires the
borrowers to assure that the market value of the BET vessels is
not less than 125% of the outstanding amount under the loan. On
July 10, 2008, BET, through its wholly owned subsidiary
sold the BET Performer and paid an amount on the loan equal to
$41,453,000, as required by the loan agreement.
The Borrowers also must assure that the aggregate market value
of the BET vessels is not less than 125% of the outstanding
amount of the loan. If the market value of the vessels is less
than this amount, the Borrowers must prepay an amount that will
result in the market value of the vessels meeting this
requirement or offer additional security to the lender with a
value sufficient to meet this requirement, which additional
security must be acceptable to the lender. The value of the BET
vessels shall be determined when requested by the lender, and
such determination shall be made by any two of the lenders
approved shipbrokers, one of which shall be nominated by the
lender and one of which shall be nominated by the borrowers.
Other covenants include the following:
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Not to permit any lien to be created over all or any part of the
borrowers present or future undertakings, assets, rights
or revenues to secure any present or future indebtedness;
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Not to merge or consolidate with any other person;
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Not to sell, transfer, dispose of or exercise direct control
over any part of the borrowers assets, rights or revenue
without the consent of the lender;
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Not to undertake any business other than the ownership and
operation of vessels and the chartering of vessels to third
parties;
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Not to acquire any assets other than the BET vessels;
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Not to incur any obligations except under the loan agreement and
related documents or contracts entered into in the ordinary
course of business;
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Not to borrow money other than pursuant to the loan agreement,
except that the borrowers may borrow money from their
shareholders or directors or their related companies as long as
such borrowings are subordinate to amounts due under the loan
agreement;
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Not to guarantee, indemnify or become contingently liable for
the obligations of another person or entity except pursuant to
the loan agreement and related documents, except, in general,
for certain guarantees that arise in the ordinary course of
business;
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Not to make any loans or grant any credit to any person, except
that the borrowers make loans to BET or the borrowers
related companies as long as they are made on an arms
length basis in the ordinary course of business and are fully
subordinated to the rights of the lender;
|
|
|
|
Not to redeem their own shares of stock;
|
|
|
|
Not to permit any change in the legal or beneficial ownership of
any of the borrowers or BET or cause any change in the
shareholders agreement or constitutional documents related
to BET; and
|
|
|
|
Not to enter into any related party transactions except on an
arms length basis and for full value.
|
In connection with our acquisition of BET, the lender has
indicated its willingness to provide its consent to the change
in the shareholders and the change in control of BET, including
waiver of compliance with the vessels market value
covenant. We are currently in active negotiations to finalize
these arrangements following which we expect BET to be in full
compliance with its covenants. If BETs lenders decline to
approve this transaction, they could declare an event of default
under BETs loan agreement and a portion of the debt may be
required to be classified to current.
Promissory
Note
As of June 30, 2009, we had a convertible unsecured
promissory note issued to certain Restis affiliate shareholders
amounting in aggregate to $28.25 million (face value). The
note accrued interest at a rate of 2.9% per annum and matured in
May 2010. The note was initially convertible into common stock
at the option of the holders at a conversion price of $12.50 per
share. On August 19, 2009, we amended the note to reduce
the conversion price to the average closing price of our common
stock for the five trading days commencing on the effective date
of the amendment, which amounted to $4.45598 per share. As a
condition to such amendment, the holders agreed to convert their
note at the time of the amendment. Upon conversion, the holders
received 6,585,868 shares of our common stock and the Note
was extinguished.
Debt
Repayment and Terms
Capital
Requirements
Our capital expenditures have thus far related solely to the
purchase of our six vessels included in our business combination
and the routine dry-docking of our vessels. We funded the
business combination through our trust fund proceeds, our
revolving credit and term facilities and the Note.
60
In addition, the following table summarizes our next anticipated
dry-docks:
|
|
|
|
|
|
|
Vessel
|
|
Next Schedule Dry-Dock
|
|
Estimated Cost
|
|
|
African Oryx
|
|
October 2010
|
|
$
|
900,000
|
|
African Zebra
|
|
February 2011
|
|
$
|
1,000,000
|
|
Bremen Max
|
|
June 2011
|
|
$
|
1,000,000
|
|
Hamburg Max
|
|
June 2012
|
|
$
|
1,000,000
|
|
Davakis G.
|
|
May 2011
|
|
$
|
500,000
|
|
Delos Ranger
|
|
August 2011
|
|
$
|
500,000
|
|
BET Commander*
|
|
August 2009
|
|
$
|
1,200,000
|
|
BET Fighter*
|
|
September 2010
|
|
$
|
1,200,000
|
|
BET Prince*
|
|
May 2010
|
|
$
|
1,200,000
|
|
BET Scouter*
|
|
April 2010
|
|
$
|
1,200,000
|
|
BET Intruder*
|
|
March 2011
|
|
$
|
1,000,000
|
|
The annual principal payments required to be made after
June 30, 2009 (based on the amount drawn down as of
June 30, 2009 and assuming the Note had been converted into
common stock as of such date), are as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Reducing Revolving
|
|
|
|
|
|
|
Term Facility
|
|
|
Credit Facility
|
|
|
Total
|
|
|
|
(Dollars in thousands)
|
|
|
2009
|
|
|
12,750
|
|
|
|
|
|
|
|
12,750
|
|
2010
|
|
|
18,950
|
|
|
|
|
|
|
|
18,950
|
|
2011
|
|
|
12,800
|
|
|
|
6,845
|
|
|
|
19,645
|
|
2012
|
|
|
12,800
|
|
|
|
12,000
|
|
|
|
24,800
|
|
2013
|
|
|
12,800
|
|
|
|
12,000
|
|
|
|
24,800
|
|
Thereafter
|
|
|
72,400
|
|
|
|
24,000
|
|
|
|
96,400
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
142,500
|
|
|
|
54,845
|
|
|
|
197,345
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Quantitative
and Qualitative Disclosures of Market Risk
Interest
rate risk
We are subject to interest-rate risk relating to the
floating-rate interest on our revolving credit facility and term
facility with Marfin and the BET loan. These facilities bear
interest at LIBOR plus a spread. The Marfin term facilitys
spread also fluctuates if the ratio of total assets to total
liabilities is greater than 165%. In such case, the spread
increases from 1.5% to 1.75%. At December 31, 2008 and
June 30, 2009, the interest rate was 2.16% and 2.064%,
respectively, on the Marfin term loan. At December 31,
2008, the interest rate was 1.22% on the BET loan. A 1% increase
in LIBOR would have resulted in an increase in interest expense
for the year ended December 31, 2008 of approximately
$691,000, on the Marfin term loan, and $1,940,000, respectively,
on the BET loan, had we owned an interest in BET on such dates.
Currency
and Exchange Rates
We generate all of our revenue in U.S. Dollars. The
majority of our operating expenses are in U.S. Dollars
except primarily for our management fees and our executive
office rental expenses which are denominated in Euros. This
difference could lead to fluctuations in net income due to
changes in the value of the U.S. Dollar relative to the
EURO, but we do not expect such fluctuations to be material.
As of June 30, 2009, we had no open foreign currency
exchange contracts.
61
Inflation
We do not consider inflation to be a significant risk to direct
expenses in the current and foreseeable future.
Off-balance
Sheet Arrangements
As of June 30, 2009, we did not have any off-balance sheet
arrangements as defined in Item 303(a)(4)(ii) of
Regulation S-K.
Contractual
Obligations and Commercial Commitments
The following tables summarize our contractual obligations as of
June 30, 2009 based on the contractual terms of the
arrangements and do not reflect any potential acceleration due
to non-compliance with covenant terms (dollars in thousands).
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2014 and
|
|
|
|
|
|
|
2009
|
|
|
2010
|
|
|
2011
|
|
|
2012
|
|
|
2013
|
|
|
Thereafter
|
|
|
Total
|
|
|
Seanergy
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Revolving credit facility(1)
|
|
|
|
|
|
|
|
|
|
|
6,845
|
|
|
|
12,000
|
|
|
|
12,000
|
|
|
|
24,000
|
|
|
|
54,845
|
|
Interest on revolving credit facility(2)
|
|
|
1,165
|
|
|
|
2,331
|
|
|
|
2,185
|
|
|
|
1,785
|
|
|
|
1,275
|
|
|
|
1,147
|
|
|
|
9,888
|
|
Property leases(3)
|
|
|
327
|
|
|
|
655
|
|
|
|
655
|
|
|
|
673
|
|
|
|
|
|
|
|
|
|
|
|
2,310
|
|
Term facility
|
|
|
12,750
|
|
|
|
18,950
|
|
|
|
12,800
|
|
|
|
12,800
|
|
|
|
12,800
|
|
|
|
72,400
|
|
|
|
142,500
|
|
Interest on term facility(4)
|
|
|
2,742
|
|
|
|
4,570
|
|
|
|
3,975
|
|
|
|
3,495
|
|
|
|
3,015
|
|
|
|
4,121
|
|
|
|
21,918
|
|
Management fees(5)
|
|
|
327
|
|
|
|
655
|
|
|
|
655
|
|
|
|
573
|
|
|
|
|
|
|
|
|
|
|
|
2,210
|
|
BET
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Term Facility
|
|
|
8,319
|
|
|
|
16,573
|
|
|
|
16,573
|
|
|
|
16,573
|
|
|
|
16,573
|
|
|
|
67,861
|
|
|
|
142,472
|
|
Interest on Term Facility(6)
|
|
|
894
|
|
|
|
1,633
|
|
|
|
3,138
|
|
|
|
2,682
|
|
|
|
2,226
|
|
|
|
2,598
|
|
|
|
13,171
|
|
|
|
|
(1) |
|
Commencing one year from signing the loan agreement, the
revolving facility shall be reduced to the applicable limit
available on such reduction date. The first annual reduction
will reduce the available credit amount by $18,000,000 i.e. to
($72,000,000) in August 2009, followed by five consecutive
annual reductions of $12,000,000 and any outstanding balance to
be fully repaid together with the balloon payment of the term
loan. The annual principal payments on the revolving credit
facility are based on the amount drawn down as of
December 31, 2008. |
|
(2) |
|
The revolving credit facility bears interest at LIBOR plus
2.25%. In addition, an availability fee of 0.25% is computed on
the un-drawn un-cancelled amount. Interest has been computed by
using a LIBOR rate of 2% for all years presented. |
|
(3) |
|
The property lease reflects our lease agreement with Waterfront
for the lease of our executive offices. The initial lease term
is for a period of three years with an option to extend for one
more year. The lease payments are EURO 42,000 per month. The
monthly payment due under property lease in dollars has been
computed by using a rate of EURO/$1.30. |
|
(4) |
|
The term facility bears interest at a three-month LIBOR plus
1.5%, if our ratio of total assets to total liabilities is
greater than 165%, which is increased to 1.75% if the ratio is
equal or less that 165%. Interest has been computed by using a
LIBOR rate of 2% for all years presented and a rate of 1.75%
assuming that the ratio of total assets to total liabilities is
less than 165%. |
|
(5) |
|
Management fees for 2009 are Euro 425 per vessel per day, which
thereafter are adjusted on an annual basis as defined per the
agreement. Management fees in dollars have been computed by
using a rate of EURO/$1.30, an assumption of 2% increase
annually and 365 days per year. |
|
(6) |
|
The term facility for BET bears interest at a three month LIBOR
plus 0.75%. Interest has been computed by using a LIBOR rate of
0.5% for 2010 and 2% thereafter. |
62
MANAGEMENTS
DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS FOR THE VESSELS PREVIOUSLY OWNED BY
SELLERS
The following managements discussion and analysis should
be read in conjunction with the combined annual and condensed
combined interim financial statements and accompanying notes
prepared in accordance with International Financial Reporting
Standards as issued by the International Accounting Standards
Board (IASB), included elsewhere in this prospectus,
of Goldie Navigation Ltd., Pavey Services Ltd., Shoreline
Universal Ltd., Valdis Marine Corp., Kalistos Marine S.A. and
Kalithea Marine S.A. (together, the Group). This
discussion relates to the operations and financial condition of
the dry bulk vessels acquired from the Restis family (sellers)
and not of Seanergy. Although as of September 25, 2008, we
had purchased the six vessels that are included in the
sellers financial statements, we did not purchase the
other assets of the sellers or assume any of their liabilities.
In addition, although we charter these vessels and earn revenue
from charter hire, as the sellers did, we have chartered the
vessels to different charterers on different terms than the
sellers. The expense structure of the sellers is also different
from ours, as the sellers, which are part of a larger group of
companies controlled by members of the Restis family, do not
employ any executive officers. Certain vessel-related fees, such
as management fees, will also vary from the amount that was
previously paid by the sellers. As a result, the sellers
financial statements and this discussion of them may not be
indicative of what our historical results of operations would
have been for the comparable periods had we operated these
vessels at that time nor the results if the sellers had operated
these vessels on a stand-alone basis. In addition, the
sellers results of operations and financial condition may
not be indicative of what our results of operations and
financial condition might be in the future.
This discussion contains forward-looking statements that reflect
our current views with respect to future events and financial
performance. Our actual results may differ materially from those
anticipated in these forward-looking statements as a result of
various factors, such as those set forth in the section entitled
Risk Factors and elsewhere in this prospectus.
General
The sellers are six ship-owning companies that collectively
owned and operated four vessels in the dry bulk shipping market.
In addition, two newly built vessels were delivered to the
sellers in May 2008 and August 2008, both of which had no
operating history. These vessels represented a portion of the
vessels owned
and/or
operated by companies associated with members of the Restis
family. As of September 25, 2008, the sellers had sold
these vessels, including the two newly built vessels, to us
pursuant to the Master Agreement and the MOAs during August 2008
and September 2008. The combined financial statements of the
Group for 2005, 2006 and 2007 include the assets, liabilities
and results of operations for four of the vessels from the dates
they were placed in service by the sellers in 2005. The
condensed combined interim financial statements for the six
months ended June 30, 2008 include the assets, liabilities
and results from operations of these four vessels for the entire
period and one vessel delivered and placed in service in May
2008. The final vessel was delivered in August 2008 and had no
operations through June 30, 2008.
The operations of the sellers vessels were managed by EST,
which is an affiliate of members of the Restis family. Following
the vessel acquisition, EST continued to manage the vessels
pursuant to the Management Agreement. EST provided the sellers
with a wide range of shipping services. These services included,
at a daily fee per vessel (payable monthly), the required
technical management, such as managing day-to-day vessel
operations including supervising the crewing, supplying,
maintaining and dry-docking of the vessels. Safbulk, which is
also an affiliate of the sellers, provided commercial brokerage
services to the sellers and earned fees in connection with the
charter of the vessels. Safbulk continues to provide these
services for us pursuant to the Brokerage Agreement.
63
The following table details the vessels owned by the sellers
that were sold to us:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Date of Delivery to
|
Vessel Name
|
|
Dwt
|
|
|
Vessel Type
|
|
Built
|
|
|
Seanergy
|
|
African Oryx
|
|
|
24,110
|
|
|
Handysize
|
|
|
1997
|
|
|
August 28, 2008
|
African Zebra
|
|
|
38,632
|
|
|
Handymax
|
|
|
1985
|
|
|
September 25, 2008
|
Bremen Max
|
|
|
73,503
|
|
|
Panamax
|
|
|
1993
|
|
|
September 11, 2008
|
Hamburg Max
|
|
|
73,498
|
|
|
Panamax
|
|
|
1994
|
|
|
September 25, 2008
|
Davakis G. (ex. Hull NO. KA 215)
|
|
|
54,000
|
|
|
Supramax
|
|
|
2008
|
|
|
August 28, 2008
|
Delos Ranger (ex. Hull No. KA 216)
|
|
|
54,000
|
|
|
Supramax
|
|
|
2008
|
|
|
August 28, 2008
|
Important
Measures for Analyzing the Sellers Results of
Operations
The sellers believe that the important non-GAAP/non-IFRS
measures and definitions for analyzing their results of
operations consist of the following:
|
|
|
|
|
Ownership days. Ownership days are the total
number of calendar days in a period during which the sellers
owned each vessel in their fleet. Ownership days are an
indicator of the size of the fleet over a period and affect both
the amount of revenues and the amount of expenses recorded
during that period.
|
|
|
|
Available days. Available days are the number
of ownership days less the aggregate number of days that the
sellers vessels are off-hire due to major repairs,
dry-dockings or special or intermediate surveys. The shipping
industry uses available days to measure the number of ownership
days in a period during which vessels are actually capable of
generating revenues.
|
|
|
|
Operating days. Operating days are the number
of available days in a period less the aggregate number of days
that 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 actually generate revenues.
|
|
|
|
Fleet utilization. Fleet utilization is
determined by dividing the number of operating days during a
period by the number of ownership days during that period. The
shipping industry uses fleet utilization to measure a
companys efficiency in finding suitable employment for its
vessels and minimizing the amount of days that its vessels are
off-hire for any reason including scheduled repairs, vessel
upgrades, dry-dockings or special or intermediate surveys.
|
|
|
|
Off-hire. The period a vessel is unable to
perform the services for which it is required under a charter.
|
|
|
|
Time charter. A time charter is a contract for
the use of a vessel for a specific period of time during which
the charterer pays substantially all of the voyage expenses,
including port costs, canal charges and fuel expenses. The
vessel owner pays the vessel operating expenses, which include
crew wages, insurance, technical maintenance costs, spares,
stores and supplies and commissions on gross voyage revenues.
Time charter rates are usually fixed during the term of the
charter. Prevailing time charter rates do fluctuate on a
seasonal and year-to-year basis and may be substantially higher
or lower from a prior time charter agreement when the subject
vessel is seeking to renew the time charter agreement with the
existing charterer or enter into a new time charter agreement
with another charterer. Fluctuations in time charter rates are
influenced by changes in spot charter rates.
|
|
|
|
Voyage charter. A voyage charter is an
agreement to charter the vessel for an agreed per-ton amount of
freight from specified loading port(s) to specified discharge
port(s). In contrast to a time charter, the vessel owner is
required to pay substantially all of the voyage expenses,
including port costs, canal charges and fuel expenses, in
addition to the vessel operating expenses.
|
|
|
|
TCE. Time charter equivalent, or TCE, is a
measure of the average daily revenue performance of a vessel on
a per voyage basis. The sellers method of calculating TCE
is consistent with industry standards and is determined by
dividing operating revenues (net of voyage expenses) by
operating days for the relevant time period. Voyage expenses
primarily consist of port, canal and fuel costs that are
|
64
|
|
|
|
|
unique to a particular voyage, which would otherwise be paid by
the charterer under a time charter contract. TCE is a standard
shipping industry performance measure used primarily to compare
period-to-period
changes in a shipping companys 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
between the periods.
|
Revenues
The sellers revenues were driven primarily by the number
of vessels they operated, the number of operating days during
which their vessels generated revenues, and the amount of daily
charter hire that their vessels earned under charters. These, in
turn, were affected by a number of factors, including the
following:
|
|
|
|
|
The nature and duration of the sellers charters;
|
|
|
|
The amount of time that the sellers spent repositioning
their vessels;
|
|
|
|
The amount of time that the sellers vessels spent in
dry-dock undergoing repairs;
|
|
|
|
Maintenance and upgrade work;
|
|
|
|
The age, condition and specifications of the sellers
vessels;
|
|
|
|
The levels of supply and demand in the dry bulk carrier
transportation market; and
|
|
|
|
Other factors affecting charter rates for dry bulk carriers
under voyage charters.
|
A voyage charter is generally a contract to carry a specific
cargo from a load port to a discharge port for an
agreed-upon
total amount. Under voyage charters, voyage expenses such as
port, canal and fuel costs are paid by the vessel owner. A time
charter trip and a period time charter or period charter are
generally contracts to charter a vessel for a fixed period of
time at a set daily rate. Under time charters, the charterer
pays voyage expenses. Under both types of charters, the vessel
owners pay for vessel operating expenses, which include crew
costs, provisions, deck and engine stores, lubricating oil,
insurance, maintenance and repairs. The vessel owners are also
responsible for each vessels dry-docking and intermediate
and special survey costs.
Vessels operating on period time charters provide more
predictable cash flows, but can yield lower profit margins than
vessels operating in the spot charter market for single trips
during periods characterized by favorable market conditions.
Vessels operating in the spot charter market generate revenues
that are less predictable, but can yield increased profit
margins during periods of improvements in dry bulk rates. Spot
charters also expose vessel owners to the risk of declining dry
bulk rates and rising fuel costs. The sellers vessels were
chartered on period time charters during the six months ended
June 30, 2008, fiscal 2007, fiscal 2006 and fiscal 2005.
A standard maritime industry performance measure is the
time charter equivalent or TCE. TCE
revenues are voyage revenues minus voyage expenses divided by
the number of operating days during the relevant time period.
Voyage expenses primarily consist of port, canal and fuel costs
that are unique to a particular voyage and that would otherwise
be paid by a charterer under a time charter. Some companies in
our industry believe that the daily TCE neutralizes the
variability created by unique costs associated with particular
voyages or the employment of dry bulk carriers on time charter
or on the spot market and presents a more accurate
representation of the revenues generated by dry bulk carriers.
The sellers average TCE rates for 2007, 2006 and 2005 were
$25,256, $18,868 and $23,170, respectively, and $35,812 and
$24,706 for the six months ended June 30, 2008 and 2007,
respectively.
Vessel
Operating Expenses
Vessel operating expenses include crew wages and related costs,
the cost of insurance, expenses relating to repairs and
maintenance, the costs of spares and consumable stores, tonnage
taxes and other miscellaneous expenses. Vessel operating
expenses generally represent costs of a fixed nature. Some of
these expenses are required, such as insurance costs and the
cost of spares.
65
Depreciation
During the years ended December 31, 2007, 2006 and 2005 and
the six months ended June 30, 2008, the sellers
depreciated their vessels on a straight-line basis over their
then remaining useful lives after considering the residual
value. The residual value for 2008 was increased to $500 from
$175 in 2007 per light weight tonnage reflecting an increase in
steel scrap prices. The estimated useful lives as of
June 30, 2008 were between 3 and 16 years, based on an
industry-wide accepted estimated useful life of 25 years
from the original build dates of the vessels, for financial
statement purposes. The sellers capitalized the total
costs associated with a dry-docking and amortized these costs on
a straight-line basis over the period before the next
dry-docking
became due, which was generally 2.5 years.
Seasonality
Coal, iron ore and grains, which are the major bulks of the dry
bulk shipping industry, are somewhat seasonal in nature. The
energy markets primarily affect the demand for coal, with
increases during hot summer periods when air conditioning and
refrigeration require more electricity and towards the end of
the calendar year in anticipation of the forthcoming winter
period. The demand for iron ore tends to decline in the summer
months because many of the major steel users, such as automobile
makers, reduce their level of production significantly during
the summer holidays. Grains are completely seasonal as they are
driven by the harvest within a climate zone. Because three of
the five largest grain producers (the United States of America,
Canada and the European Union) are located in the northern
hemisphere and the other two (Argentina and Australia) are
located in the southern hemisphere, harvests occur throughout
the year and grains require dry bulk shipping accordingly.
Principal
Factors Affecting the Sellers Business
The principal factors that affected the sellers financial
position, results of operations and cash flows included the
following:
|
|
|
|
|
Number of vessels owned and operated;
|
|
|
|
Charter market rates and periods of charter hire;
|
|
|
|
Vessel operating expenses and voyage costs, which were incurred
in both U.S. Dollars and other currencies, primarily Euros;
|
|
|
|
Cost of dry-docking and special surveys;
|
|
|
|
Depreciation expenses, which were a function of the cost, any
significant post-acquisition improvements, estimated useful
lives and estimated residual scrap values of sellers
vessels;
|
|
|
|
Financing costs related to indebtedness associated with the
vessels; and
|
|
|
|
Fluctuations in foreign exchange rates.
|
66
Performance
Indicators
The sellers believe that the unaudited information provided
below is important for measuring trends in the results of
operations. The figures shown below are statistical
ratios/non-GAAP/non-IFRS financial measures and definitions used
by management to measure performance of the vessels. They are
not included in financial statements prepared under IFRS.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Twelve Months Ended
|
|
|
|
Six Months Ended June 30,
|
|
|
December 31,
|
|
|
|
2007
|
|
|
2008
|
|
|
2007
|
|
|
2006
|
|
|
2005
|
|
|
Fleet Data:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Average number of vessels(1)
|
|
|
4.21
|
|
|
|
3.83
|
|
|
|
3.85
|
|
|
|
3.81
|
|
|
|
3.21
|
|
Ownership days(2)
|
|
|
769
|
|
|
|
724
|
|
|
|
1,460
|
|
|
|
1,460
|
|
|
|
1,250
|
|
Available days(3) (equals operating days for the periods
listed(4))
|
|
|
767
|
|
|
|
693
|
|
|
|
1,411
|
|
|
|
1,393
|
|
|
|
1,166
|
|
Fleet utilization(5)
|
|
|
99.7
|
%
|
|
|
95.7
|
%
|
|
|
96.6
|
%
|
|
|
95.4
|
%
|
|
|
93.3
|
%
|
Average Daily Results:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Average TCE rate(6)
|
|
|
35,812
|
|
|
|
24,706
|
|
|
|
25,256
|
|
|
|
18,868
|
|
|
|
23,170
|
|
Vessel operating expenses(7)
|
|
|
5,168
|
|
|
|
3,887
|
|
|
|
4,130
|
|
|
|
3,849
|
|
|
|
4,049
|
|
Management fees(8)
|
|
|
535
|
|
|
|
535
|
|
|
|
535
|
|
|
|
515
|
|
|
|
515
|
|
Total vessel operating expenses(9)
|
|
|
5,703
|
|
|
|
4,422
|
|
|
|
4,665
|
|
|
|
4,364
|
|
|
|
4,564
|
|
|
|
|
(1) |
|
Average number of vessels is the number of vessels the sellers
owned for the relevant period, as measured by the sum of the
number of days each vessel was owned during the period divided
by the number of available days in the period. |
|
(2) |
|
Ownership days are the total number of days in a period during
which the sellers owned each vessel. Ownership days are an
indicator of the size of the sellers fleet over a period
and affect both the amount of revenues and the amount of
expenses that sellers recorded during a period. |
|
(3) |
|
Available days are the number of ownership days less the
aggregate number of days that the sellers vessels were
off-hire due to major repairs, dry-dockings or special or
intermediate surveys. The shipping industry uses available days
to measure the number of ownership days in a period during which
vessels should be capable of generating revenues. |
|
(4) |
|
Operating days are the number of available days in a period less
the aggregate number of days that the sellers vessels were
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
actually generate revenues. |
|
(5) |
|
Fleet utilization is determined by dividing the number of
operating days during a period by the number of ownership days
during that period. The shipping industry uses fleet utilization
to measure a companys efficiency in finding suitable
employment for its vessels and minimizing the amount of days
that its vessels are off-hire for any reason excluding scheduled
repairs, vessel upgrades, dry-dockings or special or
intermediate surveys. |
|
(6) |
|
Time charter equivalent, is a measure of the average daily
revenue performance of a vessel on a per voyage basis. The
sellers method of calculating TCE was consistent with
industry standards and was determined by dividing operating
revenues (net of voyage expenses and commissions) by operating
days for the relevant time period. Voyage expenses primarily
consist of port, canal and fuel costs that are unique to a
particular voyage, which would otherwise be paid by the
charterer under a time charter contract. TCE is a standard
shipping industry performance measure used primarily to compare
period-to-period changes in a |
67
|
|
|
|
|
shipping companys 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
between the periods: |
|
|
|
The following table is unaudited and includes information that
is extracted directly from the combined financial statements, as
well as other information used by the sellers for monitoring
performance. |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Six Months Ended
|
|
Twelve Months Ended
|
|
|
June 30,
|
|
December 31,
|
|
|
2008
|
|
2007
|
|
2007
|
|
2006
|
|
2005
|
|
|
(Dollars in thousands except per diem amounts)
|
|
Operating revenues
|
|
|
28,227
|
|
|
|
17,181
|
|
|
|
35,717
|
|
|
|
26,347
|
|
|
|
27,156
|
|
Voyage revenues
|
|
|
(759
|
)
|
|
|
(60
|
)
|
|
|
(82
|
)
|
|
|
(64
|
)
|
|
|
(139
|
)
|
Net operating revenues
|
|
|
27,468
|
|
|
|
17,121
|
|
|
|
35,635
|
|
|
|
26,283
|
|
|
|
27,017
|
|
Operating days
|
|
|
767
|
|
|
|
693
|
|
|
|
1,411
|
|
|
|
1,393
|
|
|
|
1,166
|
|
Average TCE daily rate
|
|
|
35,812
|
|
|
|
24,706
|
|
|
|
25,256
|
|
|
|
18,868
|
|
|
|
23,170
|
|
|
|
|
(7) |
|
Average daily vessel operating expenses, which includes crew
costs, provisions, deck and engine stores, lubricating oil,
insurance, maintenance and repairs, is calculated by dividing
vessel operating expenses by ownership days for the relevant
time periods: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Six Months Ended
|
|
Twelve Months Ended
|
|
|
June 30,
|
|
December 31,
|
|
|
2008
|
|
2007
|
|
2007
|
|
2006
|
|
2005
|
|
|
(Dollars in thousands except per diem amounts)
|
|
Crew costs and other operating expenses
|
|
|
3,974
|
|
|
|
2,814
|
|
|
|
6,031
|
|
|
|
5,619
|
|
|
|
5,061
|
|
Ownership days
|
|
|
769
|
|
|
|
724
|
|
|
|
1,460
|
|
|
|
1,460
|
|
|
|
1,250
|
|
Daily vessel operating expense
|
|
|
5,168
|
|
|
|
3,887
|
|
|
|
4,130
|
|
|
|
3,849
|
|
|
|
4,049
|
|
|
|
|
(8) |
|
Daily management fees are calculated by dividing total
management fees expensed on vessels owned by ownership days for
the relevant time period. |
|
(9) |
|
Total vessel operating expenses, is a measurement of total
expenses associated with operating sellers vessels. TVOE
is the sum of daily vessel operating expense and daily
management fees. Daily TVOE is calculated by dividing TVOE by
fleet ownership days for the relevant time period. |
Critical
Accounting Policies
The discussion and analysis of the sellers financial
condition and results of operations is based upon their combined
financial statements, which have been prepared in accordance
with International Financial Reporting Standards as issued by
the IASB, or IFRS. The preparation of those financial statements
requires the sellers to make estimates and judgments that affect
the reported amount of assets and liabilities, revenues and
expenses and related disclosure of contingent assets and
liabilities at the date of their financial statements. Actual
results may differ from these estimates under different
assumptions or conditions.
Critical accounting policies are those that reflect significant
judgments or uncertainties, and potentially result in materially
different results under different assumptions and conditions.
The sellers have described below what they believe are the
estimates and assumptions that have the most significant effect
on the amounts recognized in their combined financial
statements. These estimates and assumptions relate to useful
lives of their vessels, valuation and impairment losses on
vessels, and dry-docking costs because the sellers believe that
the shipping industry is highly cyclical, experiencing
volatility in profitability, vessel values and charter rates
resulting from changes in the supply of and demand for shipping
capacity. In addition, the dry bulk market is affected by the
current international financial crisis which has slowed down
world trade and caused drops in charter rates. The lack of
financing, global steel production cuts and outstanding
agreements between iron ore producers and Chinese industrial
customers have temporarily brought the market to a stagnation.
Useful Lives of Vessels. The sellers evaluated
the periods over which their vessels were depreciated to
determine if events or changes in circumstances had occurred
that would require modification to their useful lives. In
evaluating useful lives of vessels, the sellers review certain
indicators of potential impairment, such as
68
the age of the vessels. The sellers depreciated each of their
vessels on a straight-line basis over its estimated useful life,
which during the six months ended June 30, 2008 was
estimated to be between 3 and 16 years. Newly constructed
vessels were depreciated using an estimated useful life of
25 years from the date of their initial delivery from the
shipyard. Depreciation was based on cost less the estimated
residual scrap value. Furthermore, the sellers estimated the
residual values of their vessels to be $500.00 per lightweight
ton as of June 30, 2008 as compared to $175.00 as of
December 31, 2007, due to substantial increases in the
price of steel. An increase in the useful life of a vessel or in
the residual value would have the effect of decreasing the
annual depreciation charge and extending it into later periods.
A decrease in the useful life of the vessel or in the residual
value would have the effect of increasing the annual
depreciation charge. However, when regulations place limitations
on the ability of a vessel to trade on a worldwide basis, the
vessels useful life was adjusted to end at the date such
regulations become effective.
Valuation of Vessels and Impairment. The sellers
originally valued their vessels at cost less accumulated
depreciation and accumulated impairment losses. Vessels were
subsequently measured at fair value on an annual basis.
Increases in an individual vessels carrying amount as a
result of the revaluation was recorded in recognized income and
expense and accumulated in equity under the caption revaluation
surplus. The increase is recorded in the combined statements of
income to the extent that it reversed a revaluation decrease of
the related asset. Decreases in an individual vessels
carrying amount is recorded in the combined statements of income
as a separate line item. However, the decrease were recorded in
recognized income and expense to the extent of any credit
balance existing in the revaluation surplus in respect of the
related asset. The decrease recorded in recognized income and
expense reduced the amount accumulated in equity under the
revaluation surplus. The fair value of a vessel was determined
through market value appraisal, on the basis of a sale for
prompt, charter-free delivery, for cash, on normal commercial
terms, between willing sellers and willing buyers of a vessel
with similar characteristics.
The sellers consider this to be a critical accounting policy
because assessments need to be made due to the shipping industry
being highly cyclical, experiencing volatility in profitability,
vessel values and fluctuation in charter rates resulting from
changes in the supply of and demand for shipping capacity. In
the current time the dry bulk market is affected by the current
international financial crisis which has slowed down world trade
and caused drops in charter rates. The lack of financing, global
steel production cuts and outstanding agreements between iron
ore producers and Chinese industrial customers have temporarily
brought the market to a stagnation.
To determine whether there is an indication of impairment, we
compare the recoverable amount of the vessel, which is the
greater of the fair value less costs to sell or value in use.
Fair value represents the market price of a vessel in an active
market, and value in use is based on estimations on future cash
flows resulting from the use of each vessel less operating
expenses and its eventual disposal. The assumptions to be used
to determine the greater of the fair value or value in use
requires a considerable degree of estimation on the part of our
management team. Actual results could differ from those
estimates, which could have a material effect on the
recoverability of the vessels.
The most significant assumptions used are: the determination of
the possible future new charters, future charter rates, on-hire
days which are estimated at levels that are consistent with the
on-hire statistics, future market values, time value of money.
Estimates are based on market studies and appraisals made by
leading independent shipping analysts and brokers, and
assessment by management on the basis of market information,
shipping newsletters, chartering and sale of comparable vessels
reported in the press and historical charter rates for similar
vessels.
An impairment loss will be recognized if the carrying value of
the vessel exceeds its estimated recoverable amount.
Dry-docking Costs. From time to time the
sellers vessels were required to be dry-docked for
inspection and re-licensing at which time major repairs and
maintenance that could not be performed while the vessels were
in operation were generally performed (generally every
2.5 years). At the date of acquisition of a second hand
vessel, management estimated the component of the cost that
corresponded to the economic benefit to be derived from
capitalized dry-docking cost, until the first scheduled
dry-docking of the vessel under the
69
ownership of the sellers, and this component was depreciated on
a straight-line basis over the remaining period to the estimated
dry-docking date.
Results
of Operations
Six
months ended June 30, 2008 as compared to six months ended
June 30, 2007
Revenues Operating revenues for the six
months ended June 30, 2008 were $28,227,000, an increase of
$11,046,000, or 64.29%, over the comparable period in 2007.
Revenues increased primarily as a result of improved time
charter rates and a higher number of operating days. Revenue
from Swiss Marine Services S.A., an affiliate of the sellers,
amounted to $0 in the six months ended June 30, 2008 and
$3,430,000 for the comparable period in 2007. Related party
revenue decreased as a result of third party charterers
completely replacing related party charterers.
Direct Voyage Expenses Direct voyage
expenses, which include classification fees and surveys, fuel
expenses, port expenses, tugs, commissions and fees, and
insurance and other voyage expenses, totaled $759,000 for the
six months ended June 30,2008, as compared to $60,000 for
the comparable period in 2007, which represents an increase of
1,165%. This increase of $699,000 in direct voyage expenses
primarily reflects increased bunkers expenses due to the
inclusion of Davakis G. (delivered on May 20,
2008) fuel.
Crew Costs Crew costs for the six months
ended June 30, 2008 were $2,143,000, an increase of
$800,000, or 59.6%, compared to the comparable period in 2007.
This increase is primarily due to (a) salary increases
which became effective as of January 1, 2008, (b) the
addition of crew cost for the Davakis G, which was delivered on
May 20, 2008, and (c) increased bonuses to the crews
of certain vessels.
Management Fees Related Party
Management fees related party represent a fixed fee
per day for each vessel in operation paid to EST for technical
management services. The fee per day amounted to $535 for the
six months ended June 30, 2008 and $535 for the six months
ended June 30, 2007. Total management fees
related party for the six months ended June 30, 2008
totaled $411,000, as compared to $387,000 for the six months
ended June 30, 2007. This increase of 6.2% was due to the
increase in operating days in 2008 resulting from the delivery
of the Davakis G on May 20, 2008.
Other Operating Expenses Other operating
expenses were $1,831,000 for the six months ended June 30,
2008, an increase of $360,000, or 24.5%, over $1,471,000 for the
comparable period in 2007. Other operating expenses include the
costs of chemicals and lubricants, repairs and maintenance,
insurance and administration expenses for the vessels. These
expenses increased during the six months ended June 30,
2008, primarily due to increases in prices for these items and
the addition of the Davakis G on May 20, 2008.
Depreciation For the six months ended
June 30, 2008, depreciation expense totaled $16,314,000, as
compared to $6,260,000 for the comparable period in 2007, which
represented an increase of $10,054,000, or 106.61%. This
increase resulted from the higher carrying amount of the vessels
because the vessels were revalued to a higher fair value at the
end of fiscal 2007 and due to additional depreciation from the
Davakis G delivered on May 20, 2008, partially reduced by
lower depreciation charges of $1,053,000 in 2008 due to the
increase in the estimated residual value of the vessels used in
calculating depreciation from $175 to $500 per light-weight
tonnage due to the increase in steel prices compared to 2007.
Results From Operating Activities For the six
months ended June 30, 2008, operating income was
$6,769,000, which represents a decrease of $891,000, or 11.6%,
compared to operating income of $7,660,000 for the comparable
period in 2007. The primary reason for the decline in operating
income was the increase in depreciation and amortization cost in
the six months ended June 30, 2008 by $10,054,000, which
amount was partially offset by the improvement in revenue by
$11,046,000.
Net Finance Costs Net finance cost for the
six months ended June 30, 2008 was $978,000, which
represents a decrease of $481,000, or 32.9%, compared to
$1,459,000 for the comparable period in 2007. The net decrease
in finance costs resulted primarily from the timing of
repayments of the sellers loan outstanding during the six
months ended June 30, 2007, as compared to June 30,
2008.
70
Net Profit The net profit for the six months
ended June 30, 2008 was $5,791,000, as compared to
$6,201,000 for the comparable period in 2007. This decrease of
$410,000, or 11.6%, is primarily due the increase in
depreciation and amortization cost in the six months ended
June 30, 2008 by $10,054,000, which amount was partially
offset by the improvement in revenue for the six months ended
June 30, 2008 by $11,046,000.
Year
ended December 31, 2007 (fiscal 2007) as
compared to year ended December 31, 2006 (fiscal
2006)
Revenues Operating revenues for fiscal 2007
were $35,717,000, an increase of $9,370,000, or 35.6%, over
fiscal 2006. Revenues increased primarily as a result of
improved time charter rates and a higher number of operating
days. Revenue from Swiss Marine Services S.A., an affiliate of
the sellers, amounted to $3,420,000 in fiscal 2007 and
$10,740,000 in fiscal 2006, a decrease of 68.2%. Related party
revenue decreased as a result of third party charterers
replacing related party charterers.
Direct Voyage Expenses Direct voyage
expenses, which include classification fees and surveys, fuel
expenses, port expenses, tugs, commissions and fees, and
insurance and other voyage expenses, totaled $82,000 for fiscal
2007, as compared to $64,000 for fiscal 2006, which represents
an increase of 28%. This increase of $18,000 in direct voyage
expenses primarily reflects additional fuel consumed in
positioning the M/V Hamburg Max for dry-docking. No vessels were
in dry-dock during fiscal 2006.
Crew Costs Crew costs for fiscal 2007 were
$2,803,000, an increase of $26,000, of 0.9%, compared to fiscal
2006. This increase is primarily due to an increase in basic
wages and crew signing-on expenses (including fees charged by
the flag state for endorsement of seafarer certificates).
Management Fees Related Party
Management fees related party represent a fixed fee
per day for each vessel in operation paid to EST for technical
management services. The fee per day amounted to $535 in 2007
and $515 in 2006. Total Management fees related
party for fiscal 2007 totaled $782,000, as compared to $752,000
for fiscal 2006. This increase of 4% was mutually agreed for
2007 between the sellers and EST to offset increases in the
overhead of EST.
Other Operating Expenses Other operating
expenses were $3,228,000 for fiscal 2007, an increase of
$386,000, or 13.58%, over $2,842,000 for fiscal 2006. Other
operating expenses include the costs of chemicals and
lubricants, repairs and maintenance, insurance and
administration expenses for the vessels. These expenses
increased in fiscal 2007 primarily due to increases in prices
for these items (in particular an approximately 33% increase in
the costs of lubricants) and repairs and maintenance to the M/V
Hamburg Max.
Depreciation For fiscal 2007, depreciation
expense totaled $12,625,000, as compared to $6,567,000 for
fiscal 2006, which represented an increase of $6,058,000, or
92.24%. This increase resulted from the higher carrying amount
of the vessels because the vessels were revalued to a higher
fair value at the end of fiscal 2006.
Impairment Reversal (Loss) At year end the
sellers adjust their vessels to fair value. During fiscal 2006,
the sellers reversed an impairment loss associated with the
value of each of the vessels amounting in total to $19,311,000.
No such reversals were made by the sellers during fiscal 2007.
The primary reason for the reversal of the impairment loss in
fiscal 2006 was the increase in the fair value of the vessels in
the year ended December 31, 2006. At December 31,
2006, due to changing market conditions, the fair value of the
vessels exceeded the carrying value by $44,430,000, and
accordingly, an amount of $19,311,000 was recorded as an
impairment reversal. The remaining surplus of $25,119,000 was
recorded as recognized income and expense under the caption
revaluation reserve in the combined statement of changes in
equity. At December 31, 2007, due to prevailing positive
market conditions, the fair value of the individual vessels
exceeded the carrying amount again and a revaluation surplus of
$129,265,000 arose and is recorded as recognized income and
expense under the caption revaluation reserve in the combined
statement of changes in equity.
Results From Operating Activities For fiscal
2007, results from operating activities were $16,197,000, which
represents a decrease of $16,459,000, or 50.4%, compared to
operating income of $32,656,000 for fiscal 2006. The primary
reasons for the decline in the results from operating activities
were the reversal of the impairment loss in fiscal 2006, which
increased operating income by $19,311,000, and the increase in
71
depreciation and amortization cost in fiscal 2007 by $6,058,000,
which amounts were partially offset by the improvement in
revenue during fiscal 2007 by $9,370,000.
Net Finance Costs Net finance cost for fiscal
2007 was $2,837,000, which represents a decrease of $342,000, or
10.7%, compared to $3,179,000 fiscal 2006. The net decrease in
finance costs resulted primarily from the reduction in the
principal amount of sellers loan outstanding during fiscal
2007.
Net Profit The net profit for fiscal 2007 was
$13,360,000, as compared to $29,477,000 for fiscal 2006. This
decrease of $16,117,000, or 54.67%, is primarily due to the
reversal of the impairment loss in fiscal 2006 in the amount of
$19,311,000 together with the increase in depreciation in fiscal
2007 by $6,058,000, which was partially offset by the increase
in revenue during fiscal 2007 by $9,370,000.
Year
Ended December 31, 2006 (fiscal 2006) as
compared to year ended December 31, 2005 (fiscal
2005)
Revenues Operating revenues for fiscal 2006
were $26,347,000, a decrease of $809,000, or 2.97%, over fiscal
2005. Revenues decreased primarily as a result of decreased
charter rates and TCE, which decrease was partially offset by
the increased number of operating days in fiscal 2006. The
sellers acquired four vessels in fiscal 2005, and thus the
vessels were not operated by the sellers for the full fiscal
year. Revenue from Swiss Marine Services S.A., an affiliate of
the sellers, amounted to $10,740,000 in fiscal 2006 and
$10,140,000 in fiscal 2005, which represents an increase of
5.9%. Related party revenue increased as a result of increased
operating days under the related party charters in fiscal 2006.
Direct Voyage Expenses Direct voyage expenses
totaled $64,000 for fiscal 2006, as compared to $139,000 for
fiscal 2005, which represents a decrease of 53.95%. This
decrease of $75,000 is due to the favorable (compared to market)
fixed values at which the sellers repurchased fuel remaining on
board the vessels at the time of their redeliveries to the
sellers from time charterers.
Crew Costs Crew costs for fiscal 2006 were
$2,777,000, an increase of $801,000, of 40.53%, compared to
fiscal 2005. This increase is primarily due to the increase in
the number of ownership days from 1,250 in 2005 to 1,460 in 2006
and thus the number of days the sellers paid crew wages.
Management Fees Related Party
Management fees related party represent a fixed fee
per day for each vessel in operation paid to EST for technical
management services. The fee per day amounted to $515 in 2006
and 2005. Total Management fees related party for
fiscal 2006 were $752,000, as compared to $644,000 for fiscal
2005. This increase of 16.77% resulted primarily from the
increase in the number of ownership days from 1,250 in 2005 to
1,460 in 2006.
Other Operating Expenses Other operating
expenses were $2,842,000 for fiscal 2006, a decrease of
$243,000, or 7.87%, over $3,085,000 for fiscal 2005. Other
operating expenses decreased in fiscal 2006 primarily due to a
charge of $716,000 in fiscal 2005 representing reimbursements to
time charterers.
Depreciation For fiscal 2006, depreciation
expense totaled $6,567,000, as compared to $6,970,000 for fiscal
2005, which represented a decrease of $403,000, or 5.78%. This
decrease resulted from the lower carrying amount of the vessels
during 2006 because the fair value of the vessels had declined,
and thus they were impaired as of December 31, 2005.
Impairment Reversal (Loss) At
December 31, 2006 due to changing market conditions, the
fair value of vessels exceeded the carrying value by
$44,430,000, and accordingly, an amount of $19,311,000 was
recorded as an impairment reversal. The impairment loss of
$19,311,000 was originally recorded as of December 31,
2005. The primary reason for the recording of the impairment
loss was a decrease in the fair value of vessels in the dry bulk
market generally, which caused a decrease in the fair value of
sellers vessels. The sellers determined that the
impairment loss should be reversed in fiscal 2006 when the
market for dry bulk vessels rebounded. The remaining surplus of
$25,119,000 is recorded as recognized income and expense under
the caption revaluation reserve in the combined
statement of changes in equity.
Results From Operating Activities For fiscal
2006, results from operating activities were $32,656,000, which
represents an increase of $37,625,000, compared to an operating
loss of $4,969,000 for fiscal 2005. The primary reasons for the
improvement in the results from operating activities in fiscal
2006 were the reversal of
72
the impairment loss originally recorded in fiscal 2005, which
increased operating income by $19,311,000 in fiscal 2006 as well
as decreasing operating income by this same amount during fiscal
2005, and the absence of any other impairment losses during
fiscal 2006.
Net Finance Cost Net finance cost for fiscal
2006 was $3,179,000, which represents an increase of $811,000,
or 34.2%, compared to $2,368,000 in fiscal 2005. The increase
was primarily due to an increase in the LIBOR rate associated
with the sellers long-term debt during fiscal 2006 and the
higher principal balance of sellers long-term debt during
all of fiscal 2006, which reflects the greater number of
ownership days in fiscal 2006 compared to fiscal 2005.
Net Profit (Loss) The net profit for fiscal
2006 was $29,477,000, as compared to a net loss of $7,337,000
for fiscal 2005. This improvement of $36,814,000 is primarily
due to the reversal of the impairment loss in fiscal 2006, which
loss was originally recorded in fiscal 2005, which reversal
improved net income by $19,311,000, and the absence of any other
impairment losses during fiscal 2006.
Liquidity
and Capital Resources
The sellers principal sources of funds have been equity
provided by their shareholders, operating cash flows and
long-term borrowings. Their principal uses of funds have been
capital expenditures to acquire and maintain their fleet,
payments of dividends, working capital requirements and
principal repayments on outstanding loan facilities. Based on
current market conditions, the sellers expect to rely upon
operating cash flows to fund their working capital needs in the
near future. On May 20, 2008 and August 22, 2008,
Hull KA 215 (Davakis G.) and Hull KA 216 (Delos
Ranger), respectively were delivered to the sellers. Sellers do
not anticipate any other capital expenditures in the foreseeable
future due to the sale of these vessels to Seanergy on
August 28, 2008.
Because the sellers are part of a larger group of companies in
the shipping business associated with members of the Restis
family, the sellers (other than the owners of the two newly
built vessels) obtained, together with other affiliated
companies as co-borrowers, a syndicated loan in the amount of
$500,000,000 on December 24, 2004. The loan is allocated to
each of the sellers (other than the owners of the two newly
built vessels), among other affiliates of Lincoln Finance Corp.,
an affiliate of the sellers, based upon the acquisition cost of
each vessel at the date of acquisition. The syndicated loan is
payable in variable principal installments plus interest at
variable rates (LIBOR plus a spread of 0.875%) with an original
balloon installment due in March 2015 of $45,500,000 (which as
of June 30, 2008 was $23,702,000). This debt was secured by
a mortgage on each of the vessels, assignments of earnings,
insurance and requisition compensation of the mortgaged vessel
and is guaranteed by Lincoln Finance Corp. and Nouvelle
Enterprises S.A., which is the sole shareholder of Lincoln. The
sellers that own the second hand vessels used the syndicated
loan to finance some or all of the acquisition costs of their
respective vessels. As of June 30, 2008, December 31,
2007 and 2006, the long-term debt of the sellers represented the
allocated amount of the remaining balance of the syndicated loan
after taking into account vessel sales. The long-term debt
applicable to the sellers as of June 30, 2008,
December 31, 2007 and 2006 was $60,884,000, $48,330,000 and
$49,774,000, respectively. We have not assumed any portion of
this loan, and the sellers delivered the four vessels to us free
and clear of all liens and encumbrances.
On December 24, 2004, certain of the sellers entered into
memoranda of agreement with third parties pursuant to which they
agreed to purchase the African Oryx f/k/a the M.V. Gangga
Nagara, the African Zebra f/k/a the M.V. Handy Tiger, the Bremen
Max f/k/a the M.V. Bunga Saga Satu and the Hamburg Max f/k/a the
Bunga Saga Empat for a purchase price of $20.5 million,
$14.0 million, $29.0 million and $32.0 million,
respectively. The African Oryx, the African Zebra, the Bremen
Max and the Hamburg Max were delivered to the respective sellers
on April 4, 2005, January 3, 2005, January 26,
2005 and April 1, 2005, respectively.
On June 23, 2006, the sellers that own the two newly built
vessels and a third vessel-owning company that is not one of the
sellers, entered into a loan facility of up to $20,160,000 and a
guarantee of up to $28,800,000 each to be used to partly finance
and guarantee payment to the shipyard for the newly constructed
vessels. The loan bears interest at variable rates (LIBOR plus a
spread of 0.65%) and was repayable in full at the earlier of
May 18, 2009 or the date the newly constructed vessels are
delivered by the shipyard. This loan
73
has been paid in full. We have not assumed any portion of this
loan and the sellers delivered the two newly constructed vessels
to us free and clear of all liens and encumbrances.
The sellers financed the purchase price of the vessels as
follows:
|
|
|
|
|
|
|
|
|
Vessel
|
|
Financed(1)
|
|
|
Cash(2)
|
|
|
Africa Oryx
|
|
$
|
13,851,850
|
|
|
$
|
6,648,150
|
|
Africa Zebra
|
|
$
|
9,459,800
|
|
|
$
|
4,540,200
|
|
Bremen Max
|
|
$
|
19,595,300
|
|
|
$
|
9,404,700
|
|
Hamburg Max
|
|
$
|
21,622,400
|
|
|
$
|
10,377,600
|
|
Davakis G (ex. Hull No. KA 215)
|
|
$
|
16,674,000
|
|
|
$
|
7,146,000
|
|
Delos Ranger (ex. Hull No. KA 216)
|
|
$
|
16,674,000
|
|
|
$
|
7,146,000
|
|
|
|
|
(1) |
|
Financed with the credit facilities described above. |
|
(2) |
|
Cash provided to the sellers by their shareholders. |
The dry bulk carriers the sellers owned had an average age of
10.5 years as of June 30, 2008. For financial
statement purposes, the sellers used an estimated remaining
useful life as June 30, 2008 of between 3 and 16 years
for its vessels other than the newly constructed vessels, which
vessels life it estimated as 25 years. However, economics,
rather than a set number of years, determines the actual useful
life of a vessel. As a vessel ages, the maintenance costs rise
particularly with respect to the cost of surveys. So long as the
revenue generated by the vessel sufficiently exceeds its
maintenance costs, the vessel will remain in use, which time
period could well exceed the useful life estimate described
above. If the revenue generated or expected future revenue does
not sufficiently exceed the maintenance costs, or if the
maintenance costs exceed the revenue generated or expected
future revenue, then the vessel owner usually sells the vessel
for scrap.
Cash
Flows
Operating Activities Net cash from operating
activities totaled $17,993,000 during the six months ended
June 30, 2008, as compared to $4,094,000 during the
comparable period in 2007. This increase reflected is primarily
due to increased revenue as a result of improved time charter
rates and higher operating days. Net cash from operating
activities totaled $25,577,000 during fiscal 2007, as compared
to $19,161,000 during fiscal 2006. This increase reflected
primarily the increase in vessel revenues received in 2007. The
decrease in net cash from operating activities from fiscal 2006
as compared to fiscal 2005, during which net cash from operating
activities totaled $26,169,000, resulted primarily from a slight
decrease in charter revenue during 2006 and the repayment of
amounts due to related parties in 2006.
Investing Activities The sellers used
$21,499,000 of cash in investing activities during the six month
period ended June 30, 2008 as compared to $5,534,000 used
in investing activities during the comparable period in 2007.
The increase was primarily a result of amounts paid under the
vessel construction contracts for the two newly constructed
vessels during the first six months of 2008, one of which was
delivered and put into operation in May 2008. The sellers used
$13,531,000 of cash in investing activities during fiscal 2007
as compared to $6,474,000 used in investing activities during
fiscal 2006. The increase was primarily a result of amounts paid
under the vessel construction contracts for the newly
constructed vessels in fiscal 2007. The sellers used $86,711,000
of cash in investing activities during fiscal 2005, which
related primarily to the purchase of four vessels.
Financing Activities Net cash provided by
financing activities during the six months ended June 30,
2008 was $7,646,000, which includes $12,812,000 of dividend
payments to the shareholders of sellers and $9,081,000 of
repayments of long term debt, offset by $7,904,000 of capital
contributions and $21,635,000 of proceeds from long term debt
used to finance vessel acquisitions. Net cash used in financing
activities during fiscal 2007 was $13,471,000, which includes
$15,932,000 of dividend payments to the shareholders of the
sellers and $9,844,000 of repayments of long term debt,
partially offset by capital contributions from the sellers
shareholders of $3,905,000 and proceeds from long-term debt of
$8,400,000. Net cash used in financing activities in fiscal 2006
was $11,248,000, which primarily reflects $11,838,000 of
dividend payments
74
to the shareholders of the sellers and $7,573,000 of repayments
of long term debt, partially offset by capital contributions
from the sellers shareholders of $8,163,000. Net cash
provided by financing activities in fiscal 2005 was $60,549,000,
which primarily reflects proceeds of borrowings of $55,070,000
used by the sellers to acquire four vessels and capital
contributions from the sellers shareholders of
$15,980,000, which was partially offset by $3,319,000 of
dividend payments to the shareholders of the sellers and
repayment of long-term debt of $7,182,000.
Quantitative
and Qualitative Disclosures of Market Risk
Interest
rate risk
The sellers long-term debt in relation to the four vessels
and the new buildings bears an interest rate of LIBOR plus a
spread of 0.875% and 0.65%, respectively. A 100 basis-point
increase in LIBOR would result in an increase to the finance
cost of $568,000 in the next year. The sellers have no further
obligation, with respect to their long-term debt, in relation to
the six vessels it sold to Seanergy in August and September 2008.
Foreign
exchange risk
The sellers generated revenue in U.S. dollars and incurred
minimal expenditures relating to consumables in foreign
currencies. The foreign currency risk was minimal.
Inflation
The sellers did not consider inflation to be a significant risk
to direct expenses in the current and foreseeable future.
Capital
Requirements
On May 20, 2008 and August 22, 2008, the Davakis G
(Hull No. KA 215) and the Delos Ranger
(ex. Hull No. KA 216), respectively, were
delivered to the sellers. As of June 30, 2008, the capital
commitment was approximately $11.8 million. The sellers did
not anticipate any other capital expenditures during the year
ended December 31, 2008 as these vessels had been sold to
Seanergy on August 28, 2008.
Off-Balance
Sheet Arrangements
As of December 31, 2007 and June 30, 2008, the sellers
did not have off-balance sheet arrangements.
Contractual
Obligations and Commercial Commitments
The following tables summarize the sellers contractual
obligations as of December 31, 2007 and June 30, 2008.
The sellers neither have capital leases nor operating leases.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Payments Due by Period
|
|
|
|
|
|
|
Less Than
|
|
|
|
|
|
|
|
|
More Than
|
|
December 31, 2007
|
|
Total
|
|
|
1 Year
|
|
|
1-2 Years
|
|
|
2-5 Years
|
|
|
5 Years
|
|
|
|
(Dollars in thousands)
|
|
|
Long-term debt(1)
|
|
|
48,330
|
|
|
|
9,750
|
|
|
|
4,724
|
|
|
|
14,171
|
|
|
|
19,685
|
|
Management fees(2)
|
|
|
3,317
|
|
|
|
973
|
|
|
|
1,172
|
|
|
|
1,172
|
|
|
|
|
|
Capital commitments for vessel construction
|
|
|
30,840
|
|
|
|
30,840
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total obligations
|
|
|
82,487
|
|
|
|
41,563
|
|
|
|
5,896
|
|
|
|
15,343
|
|
|
|
19,685
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
75
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Payments Due by Period
|
|
|
|
|
|
|
Less Than
|
|
|
|
|
|
|
|
|
More Than
|
|
June 30, 2008
|
|
Total
|
|
|
1 Year
|
|
|
1-2 Years
|
|
|
2-5 Years
|
|
|
5 Years
|
|
|
|
(Dollars in thousands)
|
|
|
Long-term debt(1)
|
|
|
60,884
|
|
|
|
12,364
|
|
|
|
5,643
|
|
|
|
16,931
|
|
|
|
25,946
|
|
Management fees(2)
|
|
|
2,901
|
|
|
|
1,143
|
|
|
|
1,172
|
|
|
|
586
|
|
|
|
|
|
Capital commitment for vessel construction
|
|
|
11,820
|
|
|
|
11,820
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total obligations
|
|
|
75,605
|
|
|
|
25,327
|
|
|
|
6,815
|
|
|
|
17,517
|
|
|
|
25,946
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1) |
|
The long-term debt has been repaid or reallocated as of the
dates the vessels were delivered to Seanergy in August and
September 2008. |
|
(2) |
|
EST provides management services in exchange for a fixed fee per
day for each vessel in operation. These agreements are entered
into with an initial three-year term until terminated by the
other party. The amounts indicated above are based on a
management fee of $535 dollars per day per vessel. This
management fee agreement has been terminated as of the dates the
vessels were delivered to Seanergy in August and September 2008. |
Recent
Accounting Pronouncements
A number of new standards, amendments to standards and
interpretations were not yet effective for the year ended
December 31, 2007 or the six months ended June 30,
2008, and have not been applied in preparing the sellers
combined financial statements:
(i) IFRS 8 Operating Segments introduces the
management approach to segment reporting. IFRS 8,
which becomes mandatory for the financial statements of 2009,
will require the disclosure of segment information based on the
internal reports regularly reviewed by the sellers Chief
Operating Decision Maker in order to assess each segments
performance and to allocate resources to them. The sellers are
evaluating the impact of this standard on the combined financial
statements.
(ii) Revised IAS 23 Borrowing Costs removes the option to
expense borrowing costs and requires that an entity capitalize
borrowing costs directly attributable to the acquisition,
construction or production of a qualifying asset as part of the
cost of that asset. Currently, the sellers capitalize borrowing
costs directly attributable to the construction of the vessels
and therefore the revised IAS 23 which will become mandatory for
the sellers 2009 financial statements is not expected to
have a significant effect.
(iii) IFRIC 11 IFRS 2 Group and Treasury Share Transactions
requires a share-based payment arrangement in which an entity
receives goods or services as consideration for its own equity
instruments to be accounted for as an equity-settled share-based
payment transaction, regardless of how the equity instruments
are obtained. IFRIC 11 will become mandatory for the
sellers 2008 financial statements, with retrospective
application required. This standard does not have an effect on
the combined financial statements as it is not relevant to the
sellers operations.
(iv) IFRIC 12 Service Concession Arrangements provides
guidance on certain recognition and measurement issues that
arise in accounting for public-to-private service concession
arrangements. IFRIC 12, which becomes mandatory for the
sellers 2008 financial statements. IFRIC 12 does not have
an effect on the combined financial statements as it is not
relevant to the sellers operations.
(v) IFRIC 13 Customer Loyalty Programs addresses the
accounting by entities that operate, or otherwise participate
in, customer loyalty programs for their customers. It relates to
customer loyalty programs under which the customer can redeem
credits for awards such as free or discounted goods or services.
IFRIC 13, which becomes mandatory for the sellers 2009
financial statements, is not expected to have any impact on the
combined financial statements.
76
(vi) IFRIC 14 IAS 19 The Limit on a Defined Benefit Asset,
Minimum Funding Requirements and their Interaction clarifies
when refunds or reductions in future contributions in relation
to defined benefit assets should be regarded as available and
provides guidance on the impact of minimum funding requirements
(MFR) on such assets. It also addresses when a MFR might give
rise to a liability. IFRIC 14 will become mandatory for the
sellers 2008 financial statements, with retrospective
application required. IFRIC 14 does not have an effect on the
combined financial statements as it is not relevant to the
sellers operations.
(vii) Revision to IAS 1, Presentation of Financial
Statements: The revised standard is effective for annual periods
beginning on or after January 1, 2009. The revision to IAS
1 is aimed at improving users ability to analyze and
compare the information given in financial statements. The
changes made are to require information in financial statements
to be aggregated on the basis of shared characteristics and to
introduce a statement of comprehensive income. This will enable
readers to analyze changes in equity resulting from transactions
with owners in their capacity as owners (such as dividends and
share repurchases) separately from non-owner changes
(such as transactions with third parties). In response to
comments received through the consultation process, the revised
standard gives preparers of financial statements the option of
presenting items of income and expense and components of other
comprehensive income either in a single statement of
comprehensive income with sub-totals, or in two separate
statements (a separate income statement followed by a statement
of comprehensive income). Management is currently assessing the
impact of this revision on the sellers financial
statements.
(viii) Revision to IFRS 3 Business Combinations and an
amended version of IAS 27 Consolidated and Separate Financial
Statements: These versions were issued by IASB on
January 10, 2008, which take effect on July 1, 2009.
The main changes to the existing standards include:
(i) minority interests (now called non-controlling
interests) are measured either as their proportionate interest
in the net identifiable assets (the existing IFRS 3 requirement)
or at fair value; (ii) for step acquisitions, goodwill is
measured as the difference at acquisition date between the fair
value of any investment in the business held before the
acquisition, the consideration transferred and the net assets
acquired (therefore there is no longer the requirement to
measure assets and liabilities at fair value at each step to
calculate a portion of goodwill); (iii) acquisition-related
costs are generally recognized as expenses (rather than included
in goodwill); (iv) contingent consideration must be
recognized and measured at fair value at acquisition date with
any subsequent changes in fair value recognized usually in the
profit or loss (rather than by adjusting goodwill) and (v)
transactions with non-controlling interests which do not result
in loss of control are accounted for as equity transactions.
Management is currently assessing the impact that these
revisions will have on the sellers.
(ix) Revision to IFRS 2 Share-based Payment: The
revision is effective for annual periods on or after
January 1, 2009 and provides clarification for the
definition of vesting conditions and the accounting treatment of
cancellations. It clarifies that vesting conditions are service
conditions and performance conditions only. Other features of a
share-based payment are not vesting conditions. It also
specifies that all cancellations, whether by the entity or other
parties, should receive the same accounting treatment. The
sellers do not expect this standard to affect its combined
financial statements as currently there are no share-based
payment plans.
77
MANAGEMENTS
DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS FOR BET
The following managements discussion and analysis should
be read in conjunction with the consolidated financial
statements and accompanying notes prepared in accordance with
International Financial Reporting Standards as issued by the
International Accounting Standards Board (IASB),
included elsewhere in this prospectus, of BET. This discussion
relates to the operations and financial condition of BET
including its wholly owned subsidiaries prior to the time we
acquired a 50% interest in BET. We control BET through our right
to appoint a majority of the BET board of directors. Although,
BET charters the vessels it owns and earns revenue from charter
hire, as it did prior to the time we purchased a controlling
interest in BET, we have chartered some of the vessels to
different charterers on different terms than existed prior to
our acquisition of a controlling interest in BET. The
pre-acquisition expense structure of BET was also different from
ours, as BET, which was a joint venture between Constellation
and an affiliate of the Restis family, did not employ any
executive officers or staff except crew on board each of its
vessels. Certain vessel-related fees, such as management fees,
will also vary from the amount that was previously paid by BET.
As a result, BETs financial statements and this discussion
may not be indicative of what our historical results of
operations would have been for the comparable periods had we
owned a 50% interest in BET at that time. In addition,
BETs results of operations and financial condition may not
be indicative of what our results of operations and financial
condition might be in the future.
This discussion contains forward-looking statements that reflect
our current views with respect to future events and financial
performance. Our actual results may differ materially from those
anticipated in these forward-looking statements as a result of
various factors, such as those set forth in the section entitled
Risk Factors and elsewhere in this prospectus.
General
BET is a provider of worldwide ocean transportation services
through the ownership of five dry bulk carriers. BET was
incorporated in December 2006 under the laws of the Republic of
the Marshall Islands, as a joint venture between Constellation
and Mineral Transport.
The operations of BETs vessels were managed by EST, which
is an affiliate of members of the Restis family and which
manages our other vessels. Following our acquisition of a 50%
interest in BET, EST is continuing to manage BETs vessels
pursuant to a management agreement. EST provides BET with a wide
range of shipping services. These services include, at a daily
fee per vessel (payable monthly), the required technical
management, such as managing day-to-day vessel operations
including supervising the crewing, supplying, maintaining and
dry-docking of the vessels. Constellation Energy Commodities
Group Limited, a company affiliated with Constellation, provided
commercial brokerage services to BET and earned fees in
connection with the charter of the vessels prior to our
acquisition of an interest in BET. Following our acquisition of
a 50% interest in BET, Safbulk Maritime is providing these
services to BET pursuant to a brokerage agreement.
The following table details the vessels owned by BET:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Vessel Name
|
|
Dwt
|
|
|
Vessel Type
|
|
|
Built
|
|
|
Date of Delivery
|
|
BET Commander
|
|
|
149,507
|
|
|
|
Capesize
|
|
|
|
1991
|
|
|
December 17, 2007
|
BET Scouter
|
|
|
171,175
|
|
|
|
Capesize
|
|
|
|
1995
|
|
|
July 23, 2007
|
BET Fighter
|
|
|
173,149
|
|
|
|
Capesize
|
|
|
|
1992
|
|
|
August 29, 2007
|
BET Intruder
|
|
|
69,235
|
|
|
|
Panamax
|
|
|
|
1993
|
|
|
March 20, 2008
|
BET Prince
|
|
|
163,554
|
|
|
|
Capesize
|
|
|
|
1995
|
|
|
January 7, 2008
|
78
Important
Measures for Analyzing BETS Results of
Operations
BET believes that the important non-GAAP/non-IFRS measures and
definitions for analyzing its results of operations consist of
the following:
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Ownership days. Ownership days are the total
number of calendar days in a period during which BET owned each
vessel in its fleet. Ownership days are an indicator of the size
of the fleet over a period and affect both the amount of
revenues and the amount of expenses recorded during that period.
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Available days. Available days are the number
of ownership days less the aggregate number of days that a
companys vessels are off-hire due to major repairs,
dry-dockings or special or intermediate surveys. The shipping
industry uses available days to measure the number of ownership
days in a period during which vessels should be capable of
generating revenues.
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Operating days. Operating days are the number
of available days in a period less the aggregate number of days
that 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 actually generate revenues.
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Fleet utilization. Fleet utilization is
determined by dividing the number of operating days during a
period by the number of ownership days during that period. The
shipping industry uses fleet utilization to measure a
companys efficiency in finding suitable employment for its
vessels and minimizing the amount of days that its vessels are
off-hire for any reason excluding scheduled repairs, vessel
upgrades, dry-dockings or special or intermediate surveys.
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Off-hire. The period a vessel is unable to
perform the services for which it is required under a charter.
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Time charter. A time charter is a contract for
the use of a vessel for a specific period of time during which
the charterer pays substantially all of the voyage expenses,
including port costs, canal charges and fuel expenses. The
vessel owner pays the vessel operating expenses, which include
crew wages, insurance, technical maintenance costs, spares,
stores and supplies and commissions on gross voyage revenues.
Time charter rates are usually fixed during the term of the
charter. Prevailing time charter rates do fluctuate on a
seasonal and year-to-year basis and may be substantially higher
or lower from a prior time charter agreement when the subject
vessel is seeking to renew the time charter agreement with the
existing charterer or enter into a new time charter agreement
with another charterer. Fluctuations in time charter rates are
influenced by changes in spot charter rates.
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TCE. Time charter equivalent or TCE rates are
defined as our time charter revenues less voyage expenses during
a period divided by the number of our operating days during the
period, which is consistent with industry standards. Voyage
expenses include port charges, bunker (fuel oil and diesel oil)
expenses, canal charges and commissions.
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Revenues
BETS revenues were driven primarily by the number of
vessels it operated, the number of operating days during which
its vessels generated revenues, and the amount of daily charter
hire that its vessels earned under charters. These, in turn,
were affected by a number of factors, including the following:
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The nature and duration of BETs charters;
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The amount of time that BETs spent repositioning its
vessels;
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The amount of time that BETs vessels spent in dry-dock
undergoing repairs;
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Maintenance and upgrade work;
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The age, condition and specifications of BETs vessels;
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The levels of supply and demand in the dry bulk carrier
transportation market; and
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Other factors affecting charter rates for dry bulk carriers
under voyage charters.
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79
A voyage charter is generally a contract to carry a specific
cargo from a load port to a discharge port for an
agreed-upon
total amount. Under voyage charters, voyage expenses such as
port, canal and fuel costs are paid by the vessel owner. A time
charter trip and a period time charter or period charter are
generally contracts to charter a vessel for a fixed period of
time at a set daily rate. Under time charters, the charterer
pays voyage expenses. Under both types of charters, the vessel
owners pay for vessel operating expenses, which include crew
costs, provisions, deck and engine stores, lubricating oil,
insurance, maintenance and repairs. The vessel owners are also
responsible for each vessels dry-docking and intermediate
and special survey costs.
Vessels operating on period time charters provide more
predictable cash flows, but can yield lower profit margins than
vessels operating in the spot charter market for single trips
during periods characterized by favorable market conditions.
Vessels operating in the spot charter market generate revenues
that are less predictable, but can yield increased profit
margins during periods of improvements in dry bulk rates. Spot
charters also expose vessel owners to the risk of declining dry
bulk rates and rising fuel costs. BETs vessels were
chartered on spot and period time charters during the six months
ended June 30, 2009, and during fiscal 2008 and fiscal 2007.
A standard maritime industry performance measure is the
time charter equivalent or TCE. TCE
revenues are voyage revenues minus voyage expenses divided by
the number of operating days during the relevant time period.
Voyage expenses primarily consist of port, canal and fuel costs
that are unique to a particular voyage and that would otherwise
be paid by a charterer under a time charter. Some companies in
our industry believe that the daily TCE neutralizes the
variability created by unique costs associated with particular
voyages or the employment of dry bulk carriers on time charter
or on the spot market and presents a more accurate
representation of the revenues generated by dry bulk carriers.
BETs average TCE rates for 2008 and 2007 were $32,604 and
$13,553, respectively.
Vessel
Operating Expenses
Vessel operating expenses include management fees, crew wages
and related costs, the cost of insurance, expenses relating to
repairs and maintenance, the costs of spares and consumable
stores, tonnage taxes and other miscellaneous expenses. Vessel
operating expenses generally represent costs of a fixed nature.
Some of these expenses are required, such as insurance costs and
the cost of spares.
Depreciation
During the years ended December 31, 2008 and 2007 and the
six months ended June 30, 2009, BET depreciated its vessels
on a straight-line basis over their then remaining useful lives
after considering the residual value of the vessels. The
residual value for the six months ended June 30, 2009 and
for fiscal 2008 and fiscal 2007 was $500 per light weight
tonnage. The estimated useful lives as of June 30, 2009
were 25 years, based on an industry-wide accepted estimated
useful life of 25 years from the original build dates of
the vessels, for financial statement purposes. BETs total
costs associated with dry-docking and special surveys were
deferred and amortized on a straight-line basis over a period of
between two to five years.
Seasonality
Coal, iron ore and grains, which are the major bulks of the dry
bulk shipping industry, are somewhat seasonal in nature. The
energy markets primarily affect the demand for coal, with
increases during hot summer periods when air conditioning and
refrigeration require more electricity and towards the end of
the calendar year in anticipation of the forthcoming winter
period. The demand for iron ore tends to decline in the summer
months because many of the major steel users, such as automobile
makers, reduce their level of production significantly during
the summer holidays. Grains are completely seasonal as they are
driven by the harvest within a climate zone. Because three of
the five largest grain producers (the United States of America,
Canada and the European Union) are located in the northern
hemisphere and the other two (Argentina and Australia) are
located in the southern hemisphere, harvests occur throughout
the year and grains require dry bulk shipping accordingly.
80
Principal
Factors Affecting BETs Business
The principal factors that affected BETs financial
position, results of operations and cash flows included the
following:
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Number of vessels owned and operated;
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Charter market rates and periods of charter hire;
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Vessel operating expenses and voyage costs, which were incurred
in both U.S. Dollars and other currencies, primarily Euros;
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Cost of dry-docking and special surveys;
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Depreciation expenses, which were a function of the cost, any
significant post-acquisition improvements, estimated useful
lives and estimated residual scrap values of sellers
vessels;
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Financing costs related to indebtedness associated with the
vessels;
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Fluctuations in foreign exchange rates; and
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Impairment losses on vessels.
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Performance
Indicators
BET believes that the unaudited information provided below is
important for measuring trends in its results of operations. The
figures shown below are statistical ratios/non-GAAP/non-IFRS
financial measures and definitions used by management to measure
performance of the vessels. They are not included in financial
statements prepared under IFRS.
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Twelve Months Ended
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December 31,
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2008
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2007
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Fleet Data:
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Average number of vessels(1)
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Ownership days(2)
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1,937
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399
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Available days(3) (equals operating days for the periods
listed(4))
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1,811
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394
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Fleet utilization(5)
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93.5
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%
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98.75
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%
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Average Daily Results:
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Average TCE rate(6)
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32,604
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13,553
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Vessel operating expenses(7)
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12,001
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2,815
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Management fees(8)
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|
|
1,941
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|
441
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Total vessel operating expenses(9)
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|
|
13,942
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3,256
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(1) |
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Average number of vessels is the number of vessels that
constituted BETs fleet for the relevant period, as
measured by the sum of the number of days each vessel was a part
of BETs fleet during the relevant period divided by the
number of calendar days in the relevant period. |
|
(2) |
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Ownership days are the total number of days in a period during
which the vessels in a fleet have been owned. Ownership days are
an indicator of the size of BETs fleet over a period and
affect both the amount of revenues and the amount of expenses
that BET recorded during a period. |
|
(3) |
|
Available days are the number of ownership days less the
aggregate number of days that vessels are
off-hire due
to major repairs, dry-dockings or special or intermediate
surveys. The shipping industry uses available days to measure
the number of ownership days in a period during which vessels
should be capable of generating revenues. |
|
(4) |
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Operating days are the number of available days in a period less
the aggregate number of days that vessels are off-hire due to
any reason, including unforeseen circumstances. The shipping
industry uses operating |
81
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|
days to measure the aggregate number of days in a period during
which vessels actually generate revenues. |
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(5) |
|
Fleet utilization is the percentage of time that BETs
vessels were generating revenue, and is determined by dividing
operating days by ownership days for the relevant period. |
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(6) |
|
Time charter equivalent, or TCE, rates are defined as the time
charter revenues less voyage expenses during a period divided by
the number of our operating days during the period, which is
consistent with industry standards. Voyage expenses include port
charges, bunker (fuel oil and diesel oil) expenses, canal
charges and commissions. |
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The following table is unaudited and includes information that
is extracted directly from the financial statements, as well as
other information used by BET for monitoring performance. |
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Twelve Months Ended
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December 31,
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|
2008
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2007
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(Dollars in thousands except per diem amounts)
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|
Vessel revenues
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|
61,027
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|
5,362
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|
Voyage expenses
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1,981
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|
|
|
(22
|
)
|
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Net operating revenues
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|
|
59,046
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|
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|
5,340
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Operating days
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1,811
|
|
|
|
394
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|
Average TCE daily rate
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32,604
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13,553
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|
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(7) |
|
Average daily vessel operating expenses, which includes crew
costs, provisions, deck and engine stores, lubricating oil,
insurance, maintenance and repairs, are calculated by dividing
vessel operating expenses by ownership days for the relevant
time periods: |
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Twelve Months Ended
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|
December 31,
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|
|
2008
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|
2007
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|
|
(Dollars in thousands except per diem amounts)
|
|
Vessel operating expenses
|
|
|
13,942
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|
|
|
3,256
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|
Ownership days
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|
|
1,937
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|
|
|
399
|
|
Daily vessel operating expense
|
|
|
72
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|
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|
816
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|
|
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(8) |
|
Daily management fees are calculated by dividing total
management fees by ownership days for the relevant time period. |
|
(9) |
|
Total vessel operating expenses, or TVOE, is a measurement of
total expenses associated with operating the vessels. TVOE is
the sum of vessel operating expenses and management fees. Daily
TVOE is calculated by dividing TVOE by fleet ownership days for
the relevant time period |
Critical
Accounting Policies
The discussion and analysis of BETs financial condition
and results of operations is based upon its financial
statements, which have been prepared in accordance with IFRS.
The preparation of those financial statements requires BET to
make estimates and judgments that affect the reported amount of
assets and liabilities, revenues and expenses and related
disclosure of contingent assets and liabilities at the date of
its financial statements. Actual results may differ from these
estimates under different assumptions or conditions.
Critical accounting policies are those that reflect significant
judgments or uncertainties, and potentially result in materially
different results under different assumptions and conditions.
BET has described below what it believes are the estimates and
assumptions that have the most significant effect on the amounts
recognized in its financial statements. These estimates and
assumptions relate to useful lives of its vessels, valuation and
82
impairment losses on vessels, and dry-docking costs because BET
believes that the shipping industry is highly cyclical,
experiencing volatility in profitability, vessel values and
charter rates resulting from changes in the supply of and demand
for shipping capacity. In addition, the dry bulk market is
affected by the current international financial crisis which has
slowed down world trade and caused drops in charter rates. The
lack of financing, global steel production cuts and outstanding
agreements between iron ore producers and Chinese industrial
customers have temporarily brought the market to a stagnation.
Useful Lives of Vessels. BET evaluated the
periods over which its vessels were depreciated to determine if
events or changes in circumstances had occurred that would
require modification to their useful lives. In evaluating the
useful lives of its vessels, BET reviewed certain indicators of
potential impairment, such as the age of the vessels. BET
depreciated each of its vessels on a straight-line basis over
its estimated useful life, which during the year ended
December 31, 2008 was estimated to be 25 years.
Depreciation was based on cost less the estimated residual scrap
value. Furthermore, BET estimated the residual values of its
vessels to be $500 per lightweight ton. An increase in the
useful life of a vessel or in the residual value would have the
effect of decreasing the annual depreciation charge and
extending it into later periods. A decrease in the useful life
of the vessel or in the residual value would have the effect of
increasing the annual depreciation charge. However, when
regulations place limitations on the ability of a vessel to
trade on a worldwide basis, the vessels useful life was
adjusted to end at the date such regulations become effective.
Valuation of Vessels and Impairment. BET
originally valued its vessels at cost less accumulated
depreciation and accumulated impairment losses. Vessels were
subsequently measured at fair value on an annual basis.
Increases in an individual vessels carrying amount as a
result of the revaluation were recorded in recognized income and
expense and accumulated in equity under the caption revaluation
reserve. The increase was recorded in the statements of income
to the extent that it reversed a revaluation decrease of the
related asset. Decreases in an individual vessels carrying
amount were recorded in the statements of income as a separate
line item. However, the decrease was recorded in recognized
income and expense to the extent of any credit balance existing
in the revaluation reserve in respect of the related asset. The
decrease recorded in recognized income and expense reduced the
amount accumulated in equity under the revaluation reserve. The
fair value of a vessel was determined through market value
appraisal, on the basis of a sale for prompt, charter-free
delivery, for cash, on normal commercial terms, between willing
sellers and willing buyers of a vessel with similar
characteristics, without physical inspection of the vessel.
BET considers this to be a critical accounting policy because
assessments need to be made due to the shipping industry being
highly cyclical, experiencing volatility in profitability,
vessel values and fluctuation in charter rates resulting from
changes in the supply of and demand for shipping capacity. In
the current time the dry bulk market is affected by the current
international financial crisis which has slowed down world trade
and caused drops in charter rates. The lack of financing, global
steel production cuts and outstanding agreements between iron
ore producers and Chinese industrial customers have temporarily
brought the market to a stagnation.
To determine whether there was an indication of impairment, BET
compared the recoverable amount of the vessel, which is the
greater of the fair value less costs to sell or value in use.
Fair value represents the market price of a vessel in an active
market, and value in use is based on estimations on future
undiscounted cash flows resulting from the use of each vessel
less operating expenses and its eventual disposal. The
assumptions to be used to determine the greater of the fair
value or value in use required a considerable degree of
estimation on the part of BETs management team. Actual
results could differ from those estimates, which could have a
material effect on the recoverability of the vessels.
The most significant assumptions used were: the determination of
the possible future new charters, future charter rates, on-hire
days which were estimated at levels that are consistent with the
on-hire statistics, future market values, and time value of
money. Estimates were based on market studies and appraisals
made by leading independent shipping analysts and brokers, and
assessment by management on the basis of market information,
shipping newsletters, chartering and sale of comparable vessels
reported in the press and historical charter rates for similar
vessels.
83
An impairment loss was recognized if the carrying value of the
vessel exceeded its estimated recoverable amount, as was the
case between December 31, 2008 and August 12, 2009,
the date we acquired a 50% interest in BET.
Dry-docking Costs. From time to time
BETs vessels were required to be dry-docked for inspection
and re-licensing at which time major repairs and maintenance
that could not be performed while the vessels were in operation
were generally performed (generally every 2.5 years). At
the date of acquisition of a second hand vessel, management
estimated the component of the cost that corresponds to the
economic benefit to be derived from capitalized dry-docking
cost, until the first scheduled dry-docking of the vessel under
the ownership of BET, and this component was depreciated on a
straight-line basis over the remaining period to the estimated
dry-docking date.
Year
ended December 31, 2008 (fiscal 2008) as
compared to year ended December 31, 2007 (fiscal
2007)
Vessel Revenues Vessel revenues for fiscal
2008 were $61,027,000, an increase of $55,665,000 or 1,038.1%
over fiscal 2007. Revenues increased primarily as a result of
the operation of three of BETs vessels for an entire
twelve months as compared to less than five months of operations
and the addition of two additional vessels during fiscal 2008,
offset by the loss of revenue generated by the BET Performer,
which was sold on July 10, 2008 and which operated for
three months during 2007.
Voyage Expenses Voyage expenses, which
include classification fees and surveys, fuel expenses, port
expenses, tugs, commissions and fees, and insurance and other
voyage expenses, totaled $1,981,000 for fiscal 2008, as compared
to $22,000 for fiscal 2007, which represents an increase of 99%.
This increase of $1,959,000 in direct voyage expenses primarily
reflects the increase in vessels operated in 2008.
Vessel Operating Expenses Vessel operating
expenses were $13,942,000 for fiscal 2008, an increase of
$10,686,000, or 328.19%, over $3,256,000 for fiscal 2007. Vessel
operating expenses include the costs of chemicals and
lubricants, repairs and maintenance, insurance and
administration expenses for the vessels. These expenses
increased in fiscal 2008 primarily due to the increase in the
number of operating days.
Gain on Sale of Vessels During fiscal 2008,
BET recorded a gain on sale of vessels of $59,068,000 resulting
from the sale of the BET Performer on July 10, 2008. During
fiscal 2007, BET did not sell any vessels.
Impairment Loss At December 31, 2008,
BET adjusted its vessels to fair value. During fiscal 2008, due
to changing market conditions, BET recorded an impairment loss,
which included a revaluation reserve of $142,239,000 associated
with the value of each of the vessels, amounting in total to
$2,649,000. No such losses were incurred by BET during fiscal
2007.
Depreciation and Amortization For fiscal
2008, depreciation and amortization expense totaled $41,824,000,
as compared to $4,350,000 for fiscal 2007, which represented an
increase of $37,474, 000 or 861.47%. This increase resulted from
the increase in the number of vessels operated in 2008.
Results from Operating Activities For fiscal
2008, results from operating activities were $59,699,000, which
represents an increase of $61,965,000, or 2,734.6%, compared to
an operating loss of $2,266,000 for fiscal 2007. The primary
reasons for the increase in the results from operating
activities were the increase in revenues as described above and
the gain on the sale of the BET Performer, offset by the
increased vessel operating expenses and depreciation and
amortization.
Net Finance Costs Net finance cost for fiscal
2008 was $14,966,000, which represents an increase of
$12,508,000, or 503%, compared to $2,488,000 fiscal 2007. The
net increase in finance costs resulted primarily from the
increase in loan principal outstanding under the BET loan
facility.
Net Profit The net profit for fiscal 2008 was
$44,703,000, as compared to a net loss of $4,754,000 for fiscal
2007. This increase of $49,457,000, or 1,041%, is primarily due
to the gain on sale of the BET Performer and the increase in
vessel revenue offset by the increase in vessel operating
expenses and depreciation and amortization.
84
Liquidity
and Capital Resources
BETs principal sources of funds have been equity provided
by its shareholders, operating cash flows and long-term
borrowings. Its principal uses of funds have been capital
expenditures to acquire and maintain its fleet, payments of
dividends, working capital requirements and principal repayments
on outstanding loan facilities.
The six wholly-owned subsidiaries of BET financed the
acquisition of their respective vessels with the proceeds of an
amortizing loan from Citibank International PLC, as agent for a
syndicate of banks and financial institutions set forth in the
loan agreement, in the principal amount of $222,000,000. The
loan agreement dated June 26, 2007 is guaranteed by BET.
The BET subsidiaries drew down on agreed portions of the loan
facility to acquire each of the original six vessels in the BET
fleet. The amount of the loan for each vessel was less than or
equal to 70% of the contractual purchase price for the
applicable vessel. The loan bears interest at the annual rate of
LIBOR plus 0.75%. On July 10, 2008, BET, through its wholly
owned subsidiary, sold the BET Performer and paid an amount on
the loan equal to $41,453,000, as required by the loan agreement.
The loan is repayable commencing on December 28, 2007
through 15 equal semi-annual installments of principal in the
amount of $8,286,500 followed by a balloon payment due six
months thereafter in the amount of $51,289,000, as these
installment amounts were revised after the BET Performer sale.
The borrowers are required to deposit one-sixth of the next
principal payment in a retention account each month to fund each
semi-annual principal payment. Interest is due and payable based
on interest periods selected by BET equal to one month, two
months, three months, six months, or a longer period up to
12 months. For interest periods longer than three months,
interest is due in three-month installments.
The BET loan facility is secured by the following: the loan
agreement, a letter agreement regarding payment of certain fees
and expenses by BET; a first priority mortgage on each of the
BET vessels; the BET guaranty of the loan; a general assignment
or deed of covenant of any and all earnings, insurances and
requisition compensation of each of the vessels; pledges over
the earnings accounts and retention accounts held in the name of
each borrower; undertakings by the technical managers of the BET
vessels; and the trust deed executed by Citibank for the benefit
of the other lenders, among others.
The Borrowers also must assure that the aggregate market value
of the BET vessels is not less than 125% of the outstanding
amount of the loan. If the market value of the vessels is less
than this amount, the Borrowers must prepay an amount that will
result in the market value of the vessels meeting this
requirement or offer additional security to the lender with a
value sufficient to meet this requirement, which additional
security must be acceptable to the lender. The value of the BET
vessels shall be determined when requested by the lender, and
such determination shall be made by any two of the lenders
approved shipbrokers, one of which shall be nominated by the
lender and one of which shall be nominated by the borrowers.
Other covenants include the following:
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|
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|
|
Not to permit any lien to be created over all or any part of the
borrowers present or future undertakings, assets, rights
or revenues to secure any present or future indebtedness;
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|
|
Not to merge or consolidate with any other person;
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|
|
|
Not to sell, transfer, dispose of or exercise direct control
over any part of the borrowers assets, rights or revenue
without the consent of the lender;
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|
|
|
Not to undertake any business other than the ownership and
operation of vessels and the chartering of vessels to third
parties;
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|
|
Not to acquire any assets other than the BET vessels;
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|
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|
Not to incur any obligations except under the loan agreement and
related documents or contracts entered into in the ordinary
course of business;
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85
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|
|
Not to borrow money other than pursuant to the loan agreement,
except that the borrowers may borrow money from their
shareholders or directors or their related companies as long as
such borrowings are subordinate to amounts due under the loan
agreement;
|
|
|
|
Not to guarantee, indemnify or become contingently liable for
the obligations of another person or entity except pursuant to
the loan agreement and related documents, except, in general,
for certain guarantees that arise in the ordinary course of
business;
|
|
|
|
Not to make any loans or grant any credit to any person, except
that the borrowers make loans to BET or the borrowers
related companies as long as they are made on an arms
length basis in the ordinary course of business and are fully
subordinated to the rights of the lender;
|
|
|
|
Not to redeem their own shares of stock;
|
|
|
|
Not to permit any change in the legal or beneficial ownership of
any of the borrowers or BET or cause any change in the
shareholders agreement or constitutional documents related
to BET; and
|
|
|
|
Not to enter into any related party transactions except on an
arms length basis and for full value.
|
BETs lenders have indicated their willingness to provide
their formal consent for our purchase of an interest in BET,
including waiver of compliance with the vessels market
value covenant. We are currently in active negotiations to
finalize these arrangements following which we expect BET to be
in full compliance with its covenants. If BETs lenders
decline to approve this transaction, they could declare an event
of default under BETs loan agreement and a portion of the
debt may be required to be reclassified to current.
Cash
Flows
Operating Activities Net cash from operating
activities totaled $35,712,000 during fiscal 2008, as compared
to net cash used in operating activities of $131,000 during
fiscal 2007. This increase reflected primarily the increase in
vessels revenue in fiscal 2008 compared to the prior year
due to increased operations in the current year.
Investing Activities Net cash from investing
activities was $28,306,000 for fiscal 2008 as compared to net
cash used in investing activities of $225,841,000 in fiscal
2007. This increase was primarily due to BETs acquisition
of three vessels in 2007 versus two vessels in 2008 and the sale
of the BET Performer in 2008.
Financing Activities Net cash used in
financing activities during fiscal 2008 was $55,573,000, which
includes $53,888,000 of dividend payments to the shareholders of
BET and $59,858,000 of repayments of long-term debt, partially
offset by proceeds from long-term debt of $73,500,000 and
capital contributions from shareholders of $8,185,000. Net cash
provided by financing activities in fiscal 2007 was
$252,637,000, which reflects capital contributions from
BETs shareholders of $115,553,000 and proceeds from
long-term debt of $148,500,000, partially offset by $11,416,000
of repayments of long-term debt.
Quantitative
and Qualitative Disclosures of Market Risk
Interest
rate risk
BETs long-term debt in relation to its vessels bears an
interest rate of LIBOR plus a spread of 0.75%. A 100 basis-point
increase in LIBOR would result in an increase to the finance
cost of $138,000 in the next year.
BET has entered into interest rate swap agreements denominated
in US Dollars. The notional contract amount of the swaps at
December 31, 2008 amounted to $130,000,000. The interest
rate swap agreements mature over the next five years and have an
average fixed swap rate of 3.46%. The swap agreements are
classified as a financial instrument stated at their fair value
since they do not qualify for hedge accounting.
Foreign
exchange risk
BET generated revenue in U.S. dollars and incurred minimal
expenditures relating to consumables in foreign currencies. The
foreign currency risk was minimal.
86
Inflation
BET did not consider inflation to be a significant risk to
direct expenses in the current and foreseeable future.
Capital
Requirements
BETs capital requirements include only the routine dry
docking of its vessels. BET anticipates capital expenditures of
$1.2 million for the BET Commander during the year ending
December 31, 2009, which will be funded from its operations:
Off-Balance
Sheet Arrangements
As of December 31, 2008, BET did not have off-balance sheet
arrangements.
Contractual
Obligations and Commercial Commitments
The following table summarizes BETs contractual
obligations as of December 31, 2008 based on the
contractual terms of the arrangements and do not reflect any
potential acceleration due to non-compliance with covenant
terms. BET does not have any capital leases or operating leases.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Payments Due by Period
|
|
|
|
|
|
|
Less
|
|
|
|
|
|
|
|
|
More
|
|
|
|
|
|
|
Than 1
|
|
|
1-2
|
|
|
2-5
|
|
|
Than 5
|
|
December 31, 2008
|
|
Total
|
|
|
Year
|
|
|
Years
|
|
|
Years
|
|
|
Years
|
|
|
|
(Dollars in thousands)
|
|
|
Long-term debt
|
|
|
150,725
|
|
|
|
16,573
|
|
|
|
33,145
|
|
|
|
49,718
|
|
|
|
51,289
|
|
Interest on long-term debt
|
|
|
14,118
|
|
|
|
1,841
|
|
|
|
4,771
|
|
|
|
6,678
|
|
|
|
828
|
|
Management fees
|
|
|
8,166
|
|
|
|
1,381
|
|
|
|
2,632
|
|
|
|
4,153
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total obligations
|
|
|
173,009
|
|
|
|
19,795
|
|
|
|
40,548
|
|
|
|
60,549
|
|
|
|
52,117
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Recent
Accounting Pronouncements
A number of new standards, amendments to standards and
interpretations were not yet effective for the year ended
December 31, 2008, and were not applied in preparing
BETs financial statements:
(i) IFRS 8 Operating Segments introduces the
management approach to segment reporting. IFRS 8,
which becomes mandatory for the financial statements of 2009,
will require the disclosure of segment information based on the
internal reports regularly reviewed by BETs Chief
Operating Decision Maker in order to assess each segments
performance and to allocate resources to them. BET is evaluating
the impact of this standard on the financial statements.
(ii) Revised IAS 23 Borrowing Costs removes the option to
expense borrowing costs and requires that an entity capitalize
borrowing costs directly attributable to the acquisition,
construction or production of a qualifying asset as part of the
cost of that asset. Currently, BET capitalize borrowing costs
directly attributable to the construction of the vessels and
therefore the revised IAS 23 which will become mandatory for
BETs 2009 financial statements is not expected to have a
significant effect.
(iii) IFRIC 11 IFRS 2 Group and Treasury Share Transactions
requires a share-based payment arrangement in which an entity
receives goods or services as consideration for its own equity
instruments to be accounted for as an equity-settled share-based
payment transaction, regardless of how the equity instruments
are obtained. IFRIC 11 will become mandatory for BETs 2008
financial statements, with retrospective application required.
This standard does not have an effect on the financial
statements as it is not relevant to BETs operations.
(iv) IFRIC 12 Service Concession Arrangements provides
guidance on certain recognition and measurement issues that
arise in accounting for public-to-private service concession
arrangements. IFRIC
87
12, which becomes mandatory for BETs 2008 financial
statements. IFRIC 12 does not have an effect on the financial
statements as it is not relevant to BETs operations.
(v) IFRIC 13 Customer Loyalty Programs addresses the
accounting by entities that operate, or otherwise participate
in, customer loyalty programs for their customers. It relates to
customer loyalty programs under which the customer can redeem
credits for awards such as free or discounted goods or services.
IFRIC 13, which becomes mandatory for BETs 2009 financial
statements, is not expected to have any impact on the financial
statements.
(vi) IFRIC 14 IAS 19 The Limit on a Defined Benefit Asset,
Minimum Funding Requirements and their Interaction clarifies
when refunds or reductions in future contributions in relation
to defined benefit assets should be regarded as available and
provides guidance on the impact of minimum funding requirements
(MFR) on such assets. It also addresses when a MFR might give
rise to a liability. IFRIC 14 will become mandatory for
BETs 2008 financial statements, with retrospective
application required. IFRIC 14 does not have an effect on the
financial statements as it is not relevant to BETs
operations.
(vii) Revision to IAS 1, Presentation of Financial
Statements: The revised standard is effective for annual periods
beginning on or after January 1, 2009. The revision to IAS
1 is aimed at improving users ability to analyze and
compare the information given in financial statements. The
changes made are to require information in financial statements
to be aggregated on the basis of shared characteristics and to
introduce a statement of comprehensive income. This will enable
readers to analyze changes in equity resulting from transactions
with owners in their capacity as owners (such as dividends and
share repurchases) separately from non-owner changes
(such as transactions with third parties). In response to
comments received through the consultation process, the revised
standard gives preparers of financial statements the option of
presenting items of income and expense and components of other
comprehensive income either in a single statement of
comprehensive income with sub-totals, or in two separate
statements (a separate income statement followed by a statement
of comprehensive income). Management is currently assessing the
impact of this revision on BETs financial statements.
(viii) Revision to IFRS 3 Business Combinations and an
amended version of IAS 27 Consolidated and Separate Financial
Statements: These versions were issued by IASB on
January 10, 2008, which take effect on July 1, 2009.
The main changes to the existing standards include:
(i) minority interests (now called non-controlling
interests) are measured either as their proportionate interest
in the net identifiable assets (the existing IFRS 3 requirement)
or at fair value; (ii) for step acquisitions, goodwill is
measured as the difference at acquisition date between the fair
value of any investment in the business held before the
acquisition, the consideration transferred and the net assets
acquired (therefore there is no longer the requirement to
measure assets and liabilities at fair value at each step to
calculate a portion of goodwill); (iii) acquisition-related
costs are generally recognized as expenses (rather than included
in goodwill); (iv) contingent consideration must be
recognized and measured at fair value at acquisition date with
any subsequent changes in fair value recognized usually in the
profit or loss (rather than by adjusting goodwill) and
(v) transactions with non-controlling interests which do
not result in loss of control are accounted for as equity
transactions. Management is currently assessing the impact that
these revisions will have on BET.
(ix) Revision to IFRS 2 Share-based Payment: The
revision is effective for annual periods on or after
January 1, 2009 and provides clarification for the
definition of vesting conditions and the accounting treatment of
cancellations. It clarifies that vesting conditions are service
conditions and performance conditions only. Other features of a
share-based payment are not vesting conditions. It also
specifies that all cancellations, whether by the entity or other
parties, should receive the same accounting treatment. BET does
not expect this standard to affect its financial statements as
currently there are no share-based payment plans.
(x) IFRIC 15 Agreements for the
Construction of Real Estate: This interpretation is effective
for annual periods beginning on or after January 1, 2009
and will not have any impact to the consolidated financial
statements.
88
(xi) IFRIC 16 Hedges of a Net Investment
in a Foreign Operation: This interpretation is effective for
annual periods beginning on or after October 1, 2008 and
will not have any impact to the financial statements.
(xii) Reclassification of Financial Assets: Amendments to
IAS 39 Financial Investments: Recognition and measurement and
IFRS 7 Financial Instruments: Disclosure: These amendments are
applicable from July 1, 2008 prospectively. Furthermore,
amendments have been made to IFRS 7 to ensure disclosure is made
of the above reclassifications, which are also applicable from
July 1, 2008 and will not have any impact to the
consolidated financial statements.
(xiii) Eligible Hedged Items Amendment to IAS 39
Financial Instruments: Recognition and measurement: These
amendments are applicable retrospectively for annual periods
beginning on or after July 1, 2009 and will not have any
impact to the consolidated financial statements.
(xiv) IFRIC 17 Distribution of Non-cash Assets
to Owners: This interpretation is applicable prospectively for
annual periods beginning on or after July 1, 2009.
Retrospective application is not permitted and this IFRIC will
not have any impact to the consolidated financial statements.
(xv) IFRIC 18 Transfer of Assets from
Customers: This interpretation should be applied prospectively
to transfers of assets from customers received on or after
July 1, 2009 and will not have any impact to the
consolidated financial statements.
89
SEANERGY
AND BET UNAUDITED PRO FORMA FINANCIAL STATEMENTS
Accounting
Treatment
On August 12, 2009, Seanergy completed the acquisition of a
50% ownership interest in Bulk Energy Transport (Holdings)
Limited. We control BET through our right to appoint a majority
of the BET board of directors. The acquisition was accounted for
under the purchase method of accounting and accordingly, the net
assets acquired have been recorded at their fair values.
Basis of Accounting The consolidated
financial statements have been prepared in accordance with
accounting principles generally accepted in the United States of
America (US GAAP), assuming that the business combination had
occurred at the beginning of the fiscal year 2008 for pro forma
statement of operation data and at December 31, 2008 for
proforma balance sheet data.
The unaudited pro forma summary financial information is for
illustrative purposes only. You should not rely on the unaudited
pro forma statement of operations for the year ended
December 31, 2008 as being indicative of the historical
financial position and results of operations that would have
been achieved had the business combination been consummated as
of January 1, 2008. See Risk Factors,
Consolidated Financial Statements at
December 31, 2008 and Managements Discussion
and Analysis of Financial Condition and Results of Operations
for Seanergy Maritime and Seanergy at December 31,
2008.
The unaudited pro forma balance sheet for the year ended
December 31, 2008 has been derived from the consolidated
(historical) balance sheet of Seanergy and its wholly acquired
subsidiaries for the year ended December 31, 2008 and the
unaudited consolidated balance sheet of BET as of
December 31, 2008 as converted to US GAAP from IFRS. The
unaudited pro forma statement of operations for the year ended
December 31, 2008 has been derived from (i) the
unaudited pro forma statement of operations for the year ended
December 31, 2008, which had been derived from the
unaudited combined statement of operations of the Restis family
affiliated vessels acquired for the period January 1, 2008
to August 27, 2008 and from the consolidated (historical)
statement of operations of Seanergy and its wholly acquired
subsidiaries for the entire year ended December 31 2008; and
(ii) the unaudited statement of operations of BET for the
year ended December 31, 2008 as converted to US GAAP from
IFRS.
The pro forma adjustments primarily relate to the allocation of
the purchase price, including adjusting assets and liabilities
to fair value with related changes in depreciation and
amortization expense.
91
Seanergy
Maritime Holdings and Bulk Energy Transport (Holdings)
Limited
Unaudited
Proforma Condensed Balance Sheet as of December 31,
2008
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Proforma Including Fair Value
|
|
|
|
|
|
|
Seanergy
|
|
|
Bulk Energy
|
|
|
Adjustments
|
|
|
Proforma
|
|
|
|
Maritime
|
|
|
Transport
|
|
|
Debit
|
|
|
Credit
|
|
|
Combined
|
|
|
|
(In thousands of US dollars, except for share and per share
data, unless otherwise stated)
|
|
|
ASSETS
|
Current assets:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash and cash equivalents
|
|
|
27,543
|
|
|
|
35,110
|
|
|
|
|
|
|
|
|
|
|
|
62,653
|
|
Trade accounts and other receivables
|
|
|
577
|
|
|
|
2,025
|
|
|
|
|
|
|
|
|
|
|
|
2,602
|
|
Inventories
|
|
|
872
|
|
|
|
1,217
|
|
|
|
|
|
|
|
|
|
|
|
2,089
|
|
Due from related parties
|
|
|
822
|
|
|
|
16,094
|
|
|
|
|
|
|
|
|
|
|
|
16,916
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total current assets
|
|
|
29,814
|
|
|
|
54,446
|
|
|
|
|
|
|
|
|
|
|
|
84,260
|
|
Vessels
|
|
|
345,622
|
|
|
|
221,387
|
|
|
|
|
|
|
|
95,387
|
(1)
|
|
|
471,622
|
|
Office equipment, net
|
|
|
9
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
9
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total fixed assets
|
|
|
345,631
|
|
|
|
221,387
|
|
|
|
|
|
|
|
|
|
|
|
471,631
|
|
Deferred Dry docking Costs
|
|
|
|
|
|
|
4,059
|
|
|
|
|
|
|
|
4,059
|
(2)
|
|
|
|
|
Deferred Finance Charges
|
|
|
2,757
|
|
|
|
661
|
|
|
|
|
|
|
|
661
|
(3)
|
|
|
2,757
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total Assets
|
|
|
378,202
|
|
|
|
280,553
|
|
|
|
|
|
|
|
|
|
|
|
558,648
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
LIABILITIES
|
Current liabilities:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Current portion of long-term debt
|
|
|
27,750
|
|
|
|
16,573
|
|
|
|
|
|
|
|
|
|
|
|
44,323
|
|
Due to related parties
|
|
|
|
|
|
|
59
|
|
|
|
|
|
|
|
|
|
|
|
59
|
|
Trade accounts and accrued expenses
|
|
|
1,381
|
|
|
|
3,009
|
|
|
|
|
|
|
|
|
|
|
|
4,390
|
|
Fair value of interest rate swap
|
|
|
|
|
|
|
6,935
|
|
|
|
|
|
|
|
|
|
|
|
6,935
|
|
Amounts due to underwriter
|
|
|
419
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
419
|
|
Accrued charges on convertible promissory note
|
|
|
420
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
420
|
|
Deferred revenue related party
|
|
|
3,029
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
3,029
|
|
Deferred revenue
|
|
|
|
|
|
|
212
|
|
|
|
|
|
|
|
1,092
|
(4)
|
|
|
1,304
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total current liabilities
|
|
|
32,999
|
|
|
|
26,788
|
|
|
|
|
|
|
|
|
|
|
|
60,879
|
|
Long-term debt, excluding current portion
|
|
|
184,595
|
|
|
|
134,813
|
|
|
|
|
|
|
|
|
|
|
|
319,408
|
|
Convertible promissory note
|
|
|
29,043
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
29,043
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total liabilities
|
|
|
246,637
|
|
|
|
161,601
|
|
|
|
|
|
|
|
|
|
|
|
409,330
|
|
Common stock subject to possible redemption
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Shareholders equity
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Common stock
|
|
|
2
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2
|
|
Additional paid-in capital
|
|
|
166,361
|
|
|
|
100,226
|
|
|
|
100,226
|
(5)
|
|
|
|
|
|
|
166,361
|
|
Accumulated deficit
|
|
|
(34,798
|
)
|
|
|
18,726
|
|
|
|
95,387
|
(1)
|
|
|
91,349
|
(5)
|
|
|
(25,922
|
)
|
|
|
|
|
|
|
|
|
|
|
|
4,059
|
(2)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
661
|
(3)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
1,092
|
(4)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Noncontrolling interest
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
8,877
|
(5)
|
|
|
8,877
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total shareholders equity
|
|
|
131,565
|
|
|
|
118,952
|
|
|
|
|
|
|
|
|
|
|
|
149,318
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total liabilities and shareholders equity
|
|
|
378,202
|
|
|
|
280,553
|
|
|
|
|
|
|
|
|
|
|
|
558,648
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
92
Seanergy
Maritime Holdings and Bulk Energy Transport
Unaudited
Pro Forma Condensed Consolidated Statement of Operations
Year
Ended December 31, 2008
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Pro Forma
|
|
|
|
|
|
|
|
|
|
|
|
|
Including
|
|
|
|
|
|
|
|
|
|
Bulk
|
|
|
Fair Value
|
|
|
|
|
|
|
Seanergy
|
|
|
Energy
|
|
|
Adjustments
|
|
|
Total
|
|
|
|
Maritime(9)
|
|
|
Transport(10)
|
|
|
Debit
|
|
|
Credit
|
|
|
Proforma
|
|
|
Revenues:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Vessel revenue related party
|
|
|
77,574
|
|
|
|
168
|
|
|
|
|
|
|
|
|
|
|
|
77,742
|
|
Revenue from vessels
|
|
|
|
|
|
|
60,859
|
|
|
|
|
|
|
|
|
|
|
|
60,859
|
|
Commissions related party
|
|
|
(880
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(880
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Vessel revenue related party, net
|
|
|
76,694
|
|
|
|
61,027
|
|
|
|
|
|
|
|
|
|
|
|
137,721
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Expenses:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Direct voyage expenses
|
|
|
(954
|
)
|
|
|
(1,981
|
)
|
|
|
|
|
|
|
|
|
|
|
(2,935
|
)
|
Vessel operating expenses
|
|
|
(9,160
|
)
|
|
|
(12,001
|
)
|
|
|
|
|
|
|
|
|
|
|
(21,161
|
)
|
Voyage expenses related party
|
|
|
(440
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(440
|
)
|
Management fees related party
|
|
|
(973
|
)
|
|
|
(1,941
|
)
|
|
|
|
|
|
|
|
|
|
|
(2,914
|
)
|
General and administration expenses
|
|
|
(1,840
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1,840
|
)
|
General and administration expenses related party
|
|
|
(1,012
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1,012
|
)
|
Depreciation
|
|
|
(29,427
|
)
|
|
|
(23,119
|
)
|
|
|
|
|
|
|
14,366
|
(6)
|
|
|
(38,180
|
)
|
Amortization of deferred dry-docking costs
|
|
|
(605
|
)
|
|
|
(1,843
|
)
|
|
|
|
|
|
|
|
|
|
|
(2,448
|
)
|
Goodwill impairment loss
|
|
|
(44,795
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(44,795
|
)
|
Vessels impairment loss
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating Income (Loss)
|
|
|
(12,512
|
)
|
|
|
20,142
|
|
|
|
|
|
|
|
|
|
|
|
21,996
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Gain on sale of vessels
|
|
|
|
|
|
|
57,222
|
|
|
|
|
|
|
|
|
|
|
|
57,222
|
|
Other Expenses:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest and finance costs
|
|
|
(7,121
|
)
|
|
|
(16,094
|
)
|
|
|
|
|
|
|
|
|
|
|
(23,215
|
)
|
Interest and finance costs shareholders
|
|
|
(838
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(838
|
)
|
Interest income money market funds
|
|
|
36
|
|
|
|
1,098
|
|
|
|
|
|
|
|
|
|
|
|
1,134
|
|
Foreign currency exchange gains (losses), net
|
|
|
(39
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(39
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other Income (Expense)
|
|
|
(7,962
|
)
|
|
|
(14,996
|
)
|
|
|
|
|
|
|
|
|
|
|
(22,958
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income (loss)
|
|
|
(20,474
|
)
|
|
|
62,368
|
|
|
|
|
|
|
|
14,366
|
|
|
|
56,260
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Noncontrolling interest
|
|
|
|
|
|
|
(38,367
|
)(7)
|
|
|
|
|
|
|
|
|
|
|
(38,367
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net Income attributable to Seanergy
|
|
|
(20,474
|
)
|
|
|
24,001
|
|
|
|
|
|
|
|
14,366
|
|
|
|
17,893
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net (Income)/Loss per common share
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic
|
|
|
(0.92
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
0.80
|
|
Diluted
|
|
|
(0.92
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
0.26
|
|
Weighted average common shares outstanding (Note 8)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic
|
|
|
22,361,227
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
22,361,227
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Diluted
|
|
|
22,361,227
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
69,913,969
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
ProForma Adjustments and Eliminations (In thousands of US
Dollars, except for share and per share data, unless otherwise
stated): |
|
|
|
(1) |
|
To record the vessels at their fair value as of the date of
acquisition. |
93
|
|
|
(2) |
|
To eliminate dry-docking costs that are included in the fair
value of the vessels. |
|
(3) |
|
To eliminate deferred finance costs due to fair value
adjustments. |
|
(4) |
|
To adjust the time charter contracts acquired at their fair
value. |
|
(5) |
|
To record the negative goodwill and non controlling interest
resulting from the acquisition of BET |
|
(6) |
|
To adjust depreciation expense based on the fair value of the
vessels as of the date of acquisition. |
|
(7) |
|
To reflect noncontrolling interest of 50% ownership in BET. |
|
(8) |
|
The calculation of net income (loss) per common share is
summarized below. |
|
(9) |
|
As previously reported under F1 |
|
(10) |
|
As reported under USGAAP |
|
|
|
|
|
|
|
2008
|
|
|
Basic:
|
|
|
|
|
Net (loss) income
|
|
$
|
17,893
|
|
|
|
|
|
|
Actual number of common shares outstanding basic
|
|
|
22,361,227
|
|
|
|
|
|
|
Net income (loss) per common share-basic
|
|
$
|
0.80
|
|
|
|
|
|
|
Diluted:
|
|
|
|
|
Net (loss) income
|
|
$
|
17,893
|
|
|
|
|
|
|
Weighted average common shares outstanding
|
|
|
22,361,227
|
|
|
|
|
|
|
Effect of dilutive common stock equivalents
|
|
|
47,552,742
|
|
|
|
|
|
|
Pro forma weighted average number of common shares
outstanding diluted
|
|
|
69,913,969
|
|
Net income (loss) per common share-diluted
|
|
$
|
0.26
|
|
|
|
|
|
|
As of December 31, 2008, securities that could potentially
dilute basic EPS in the future that were included in the
computation of diluted EPS as mentioned above are:
|
|
|
|
|
Private warrants
|
|
|
16,016,667
|
|
Public warrants
|
|
|
22,968,000
|
|
Underwriters purchase options common shares
|
|
|
1,000,000
|
|
Underwriters purchase options warrants
|
|
|
1,000,000
|
|
Convertible note to related party
|
|
|
2,260,000
|
|
Contingently-issuable shares earn-out (Note 5)
|
|
|
4,308,075
|
|
|
|
|
|
|
Total
|
|
|
47,552,742
|
|
|
|
|
|
|
94
Bulk
Energy Transport (Holdings) Limited (BET)
Unaudited Consolidated Balance Sheet
Conversion from IFRS to US GAAP
December 31, 2008
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
As
|
|
|
Adjustments to Convert
|
|
|
As Presented
|
|
|
|
Reported
|
|
|
IFRS to US GAAP
|
|
|
Under
|
|
|
|
Under IFRS
|
|
|
Debit
|
|
|
Credit
|
|
|
US GAAP
|
|
|
|
(In thousands of US dollars)
|
|
|
ASSETS
|
Current assets
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash and cash equivalents
|
|
|
35,110
|
|
|
|
|
|
|
|
|
|
|
|
35,110
|
|
Restricted cash
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Money market funds held in trust
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Trade accounts and other receivables
|
|
|
2,025
|
|
|
|
|
|
|
|
|
|
|
|
2,025
|
|
Inventories
|
|
|
1,217
|
|
|
|
|
|
|
|
|
|
|
|
1,217
|
|
Due from related parties
|
|
|
16,094
|
|
|
|
|
|
|
|
|
|
|
|
16,094
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total current assets
|
|
|
54,446
|
|
|
|
|
|
|
|
|
|
|
|
54,446
|
|
Restricted cash
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Deferred loan costs
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Vessels
|
|
|
276,753
|
|
|
|
2,649
|
(A4)
|
|
|
4,059
|
(A1)
|
|
|
221,387
|
|
|
|
|
|
|
|
|
139,590
|
(A5)
|
|
|
208,562
|
(A2)
|
|
|
|
|
|
|
|
|
|
|
|
15,016
|
(A3)
|
|
|
|
|
|
|
|
|
Dry-docking
|
|
|
|
|
|
|
4,059
|
(A1)
|
|
|
|
|
|
|
4,059
|
|
Deferred finance charges
|
|
|
|
|
|
|
661
|
(A6)
|
|
|
|
|
|
|
661
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total assets
|
|
|
331,199
|
|
|
|
161,975
|
|
|
|
212,621
|
|
|
|
280,553
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
LIABILITIES
|
Current liabilities
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Current portion of long-term debt
|
|
|
16,573
|
|
|
|
|
|
|
|
|
|
|
|
16,573
|
|
Due to related parties
|
|
|
59
|
|
|
|
|
|
|
|
|
|
|
|
59
|
|
Trade accounts payable and accrued expenses
|
|
|
3,009
|
|
|
|
|
|
|
|
|
|
|
|
3,009
|
|
Fair value of interest rate swap
|
|
|
6,935
|
|
|
|
|
|
|
|
|
|
|
|
6,935
|
|
Amounts due to underwriter FV of charters attached
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Deferred revenue
|
|
|
212
|
|
|
|
|
|
|
|
|
|
|
|
212
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total current liabilities
|
|
|
26,788
|
|
|
|
|
|
|
|
|
|
|
|
26,788
|
|
Long-term, excluding current portion
|
|
|
134,152
|
|
|
|
|
|
|
|
661
|
(A6)
|
|
|
134,813
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total liabilities
|
|
|
160,940
|
|
|
|
|
|
|
|
661
|
|
|
|
161,601
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Common stock subject to possible redemption
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Shareholders equity
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Common stock, no par value
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Additional paid-in capital
|
|
|
100,226
|
|
|
|
|
|
|
|
|
|
|
|
100,226
|
|
Revaluation reserve
|
|
|
68,972
|
|
|
|
208,562
|
(A2)
|
|
|
139,590
|
(A5)
|
|
|
|
|
Retained earnings
|
|
|
1,061
|
|
|
|
|
|
|
|
2,649
|
(A4)
|
|
|
18,726
|
|
|
|
|
|
|
|
|
|
|
|
|
15,016
|
(A3)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total shareholders equity
|
|
|
170,259
|
|
|
|
208,562
|
|
|
|
157,255
|
|
|
|
118,952
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total liabilities and shareholders equity
|
|
|
331,199
|
|
|
|
208,562
|
|
|
|
157,916
|
|
|
|
280,553
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
US GAAP Adjustments and Eliminations to convert from
IFRS to US GAAP (in thousands of US Dollars):
|
|
|
(A1) |
|
Reclassification of dry docking expenses that under IFRS are
considered a component of the asset. |
|
(A2) |
|
Reversal of the revaluation on vessels recorded under IFRS. |
|
(A3) |
|
Recalculation of depreciation in accordance with the historical
cost basis. |
|
(A4) |
|
Reversal of impairment loss as carrying value was calculated
using undiscounted cash flows compared to discounted cash flows
under IFRS. |
|
(A5) |
|
Reversal of the decrease in revaluation reverse recorded under
IFRS. |
|
(A6) |
|
Reclassification of deferred finance expenses. |
95
Bulk
Energy Transport
Unaudited Condensed Consolidated Statement of Operations
Conversion From IFRS to U.S. GAAP
For the year ended December 31, 2008
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
As
|
|
Adjustments to Convert
|
|
As Presented
|
|
|
Reported
|
|
IFRS to U.S. GAAP
|
|
Under U.S.
|
|
|
Under IFRS
|
|
Debit
|
|
Credit
|
|
GAAP
|
|
|
(In thousands of U.S. dollars)
|
|
Revenue from vessels
|
|
|
60,859
|
|
|
|
|
|
|
|
|
|
|
|
60,859
|
|
Revenue from vessels related party
|
|
|
168
|
|
|
|
|
|
|
|
|
|
|
|
168
|
|
|
|
|
61,027
|
|
|
|
|
|
|
|
|
|
|
|
61,027
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Direct voyage expenses
|
|
|
1,981
|
|
|
|
|
|
|
|
|
|
|
|
1,981
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
59,046
|
|
|
|
|
|
|
|
|
|
|
|
59,046
|
|
Gain on sale of vessels
|
|
|
59,068
|
|
|
|
1,846
|
(A3)
|
|
|
|
|
|
|
57,222
|
|
Operating expenses
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Crew costs
|
|
|
5,213
|
|
|
|
|
|
|
|
|
|
|
|
5,213
|
|
Management fees related party
|
|
|
1,941
|
|
|
|
|
|
|
|
|
|
|
|
1,941
|
|
Other operating expenses
|
|
|
6,788
|
|
|
|
|
|
|
|
|
|
|
|
6,788
|
|
Impairment loss
|
|
|
2,649
|
|
|
|
|
|
|
|
2,649
|
(A4)
|
|
|
|
|
Depreciation expense
|
|
|
41,824
|
|
|
|
|
|
|
|
1,843
|
(A1)
|
|
|
23,119
|
|
|
|
|
|
|
|
|
|
|
|
|
15,016
|
(A2)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
1,846
|
(A3)
|
|
|
|
|
Amortization of dry docking
|
|
|
|
|
|
|
1,843
|
(A1)
|
|
|
|
|
|
|
1,843
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total operating expenses
|
|
|
58,415
|
|
|
|
1,843
|
|
|
|
21,354
|
|
|
|
38,904
|
|
Operating income
|
|
|
59,699
|
|
|
|
|
|
|
|
|
|
|
|
77,364
|
|
Other income (expense)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest income
|
|
|
1,098
|
|
|
|
|
|
|
|
|
|
|
|
1,098
|
|
Interest expense
|
|
|
(16,094
|
)
|
|
|
|
|
|
|
|
|
|
|
(16,094
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total other income (expense)
|
|
|
(14,996
|
)
|
|
|
|
|
|
|
|
|
|
|
(14,996
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income
|
|
|
44,703
|
|
|
|
3,689
|
|
|
|
21,354
|
|
|
|
62,368
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Adjustments to Convert From IFRS to U.S. GAAP (in thousands
of U.S. Dollars, unless otherwise noted):
|
|
|
(A1) |
|
To reclassify the amortization of dry docking expenses that are
considered a component of depreciation under IFRS I |
|
(A2) |
|
To eliminate depreciation expense relating to the revaluation of
the vessels to their fair value under IFRS. |
|
(A3) |
|
To eliminate depreciation expense relating to the revaluation of
the sold vessel recorded under IFRS. |
|
(A4) |
|
To eliminate the impairment loss calculated using discounted
cash flows compared to US GAAP that anticipate undiscounted cash
flows in step 1 of the impairment test. |
96
SEANERGY
MARITIME HOLDINGS CORP. AND SUBSIDIARIES AND
RESTIS FAMILY AFFILIATED
VESSELS ACQUIRED
UNAUDITED PRO FORMA SUMMARY FINANCIAL DATA
Accounting
Treatment
Vessel Acquisition and Other Intangible
Assets On August 28, 2008, Seanergy
Maritime completed its business combination. The acquisition was
accounted for under the purchase method of accounting and
accordingly, the assets acquired have been recorded at their
fair values. No liabilities were assumed or other tangible
assets acquired. The consideration paid for the business
combination has been recorded at fair value at the date of
acquisition and forms part of the cost of the acquisition.
Dissolution and Liquidation Upon the
dissolution and liquidation of Seanergy Maritime on
January 27, 2009, Seanergy Maritime distributed to each
holder of shares of common stock of Seanergy Maritime one share
of Seanergy common stock for each share of common stock of
Seanergy Maritime.
Basis of Accounting The consolidated
financial statements have been prepared in accordance with US
GAAP and include the results of operations of Seanergy for the
full year and its wholly acquired subsidiaries and results of
operations and cash flows from August 28, 2008 (the date of
the completion of the business combination) to December 31,
2008.
The following unaudited pro forma statement of operations for
the year ended December 31, 2008 has been prepared assuming
that the business combination had occurred on January 1,
2008.
The unaudited pro forma statement of operations for the year
ended December 31, 2008 is for illustrative purposes only.
You should not rely on the unaudited pro forma statement of
operations for the year ended December 31, 2008 as being
indicative of the historical financial position and results of
operations that would have been achieved had the business
combination been consummated as of January 1, 2008. See
Risk Factors, Consolidated Financial
Statements at December 31, 2008 and
Managements Discussion and Analysis of Financial
Condition and Results of Operations for Seanergy Maritime and
Seanergy at December 31, 2008.
The pro-forma adjustments primarily relate to revenue and
operating expenses, vessel depreciation, interest income and
interest expense, as if the business combination had been
consummated as of January 1, 2008, assuming that the used
vessels were fully operating under effective contracts as from
acquisition date and effective historical revenues under
Restis family management and assuming that each new
building started operations as from the delivery date in 2008.
Impairment of goodwill was assumed to be the same as recorded in
the consolidated financial statements.
The unaudited pro forma statement of operations for the year
ended December 31, 2008 has been derived from the unaudited
combined statement of operations of the Restis family affiliated
vessels acquired for the period January 1, 2008 to
August 27, 2008 and from the consolidated (historical)
statement of operations of Seanergy and its wholly acquired
subsidiaries for the entire year ended December 31, 2008.
97
Seanergy
Maritime Holdings Corp. and Subsidiaries and Restis Family
Affiliated Vessels Acquired
Unaudited
Pro Forma Condensed Consolidated Statement of Operations
Year Ended December 31, 2008
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Seanergy Maritime
|
|
|
Restis Family
|
|
|
Proforma Adjustments and
|
|
|
|
|
|
|
|
|
|
Holdings Corp. and
|
|
|
Affiliated Vessels
|
|
|
Eliminations
|
|
|
|
|
|
|
|
|
|
Subsidiaries (A)
|
|
|
Acquired (Note B)
|
|
|
Debit
|
|
|
Credit
|
|
|
Proforma
|
|
|
|
|
|
Revenues:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Vessel revenue related party
|
|
|
35,333
|
|
|
|
28,227
|
|
|
|
|
|
|
|
14,014
|
(1)
|
|
|
77,574
|
|
|
|
|
|
Commissions related party
|
|
|
(880
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(880
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Vessel revenue related party, net
|
|
|
34,453
|
|
|
|
28,227
|
|
|
|
|
|
|
|
|
|
|
|
76.694
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Expenses:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Direct voyage expenses
|
|
|
(151
|
)
|
|
|
(759
|
)
|
|
|
(44
|
)(1)
|
|
|
|
|
|
|
(954
|
)
|
|
|
|
|
Vessel operating expenses
|
|
|
(3,180
|
)
|
|
|
(3,974
|
)
|
|
|
(2,006
|
)(1)
|
|
|
|
|
|
|
(9,160
|
)
|
|
|
|
|
Voyage expenses related party
|
|
|
(440
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(440
|
)
|
|
|
|
|
Management fees related party
|
|
|
(388
|
)
|
|
|
(411
|
)
|
|
|
(159
|
)(1)
|
|
|
|
|
|
|
(973
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(15
|
)(10)
|
|
|
|
|
|
|
|
|
|
|
|
|
General and administration expenses
|
|
|
(1,840
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1,840
|
)
|
|
|
|
|
General and administration expenses related party
|
|
|
(430
|
)
|
|
|
|
|
|
|
(582
|
)(11)
|
|
|
|
|
|
|
(1,012
|
)
|
|
|
|
|
Depreciation
|
|
|
(9,929
|
)
|
|
|
(4,779
|
)
|
|
|
(14,719
|
)(9)
|
|
|
|
|
|
|
(29,427
|
)
|
|
|
|
|
Amortization of dry docking
|
|
|
|
|
|
|
(605
|
)
|
|
|
|
|
|
|
|
|
|
|
(605
|
)
|
|
|
|
|
Goodwill impairment loss
|
|
|
(44,795
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(44,795
|
)
|
|
|
|
|
Vessels impairment loss
|
|
|
(4,530
|
)
|
|
|
|
|
|
|
|
|
|
|
4,530
|
(12)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating income (loss)
|
|
|
(31,230
|
)
|
|
|
17,699
|
|
|
|
|
|
|
|
|
|
|
|
(12,512
|
)
|
|
|
|
|
Other expenses, net:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest and finance costs
|
|
|
(3,895
|
)
|
|
|
(1,014
|
)
|
|
|
(243
|
)(2)
|
|
|
1,014
|
(7)
|
|
|
(7,121
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1,814
|
)(3)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1,110
|
)(4)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(59
|
)(8)
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest and finance costs shareholders
|
|
|
(182
|
)
|
|
|
|
|
|
|
(656
|
)(5)
|
|
|
|
|
|
|
(838
|
)
|
|
|
|
|
Interest income money market funds
|
|
|
3,361
|
|
|
|
36
|
|
|
|
(3,361
|
)(6)
|
|
|
|
|
|
|
36
|
|
|
|
|
|
Foreign currency exchange gains (losses), net
|
|
|
(39
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(39
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(755
|
)
|
|
|
(978
|
)
|
|
|
|
|
|
|
|
|
|
|
(7,962
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net (loss) income
|
|
|
(31,985
|
)
|
|
|
16,721
|
|
|
|
|
|
|
|
|
|
|
|
(20,474
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net (loss) income per common share
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(0.92
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Diluted
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(0.92
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted average common shares outstanding
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
22,361,227
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Diluted
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
22,361,227
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
98
Pro Forma Adjustments (in thousands of U.S. Dollars, except
for share and per share data, unless otherwise noted):
|
|
|
(1) |
|
Represents the additional revenue and direct vessel operating
expenses for the vessels operating from July 1, 2008 to
August 28, 2008. |
|
(2) |
|
To record amortization of deferred loan facility arrangement and
underwriting fees based on provisions of the facility agreements
($2,550 / 84 mo X 8 mo). |
|
(3) |
|
To record interest expense on the 7 year Marfin term loan
facility as if it had been in place from the beginning of the
period presented. Pursuant to the term loan facility, interest
is calculated based upon the 3 month LIBOR rate, plus an
applicable margin, as defined in the agreement. For calculation
purposes, the LIBOR rate at March 27, 2009 of 1.23% per
annum, plus a margin of 1.75% was utilized. For each
1/8 percentage point change in the annual interest rate
charged, the resulting interest expense would change by $256
during the twelve month period. |
|
(4) |
|
To record interest expense on the 7 year Marfin revolving
facility as if it had been in place from the beginning of the
period presented. Pursuant to the revolving facility, interest
is calculated based upon the 3 month LIBOR rate, plus an
applicable margin of 2.25%, as defined in the agreement. For
calculation purposes, the LIBOR rate at March 27, 2009 of
1.23% per annum was utilized. For each 1/8 percentage point
change in the annual interest rate charged, the resulting
interest expense would change by $192 during the twelve month
period. |
|
(5) |
|
To record interest expense on the unsecured convertible note
payable to Restis family as if it had been in place from the
beginning of the period presented. Interest at 2.9% per annum is
due at maturity, in two years. Additionally, an arrangement fee
of $288 is due at maturity and note prepayment is not permitted.
($28,250 X 2.9% / 12 mo X 8 mo + $288 / 21 mo X 8 mo = $656) |
|
(6) |
|
To eliminate interest income earned on funds held in trust. |
|
(7) |
|
To eliminate, effective January 1, 2008, interest expense
on indebtedness of the Restis family affiliates to be acquired
that was repaid pursuant to the agreements. |
|
(8) |
|
To record commitment fee on 7 year revolving facility at
0.25% per annum, payable quarterly in arrears, on the un-drawn
revolving facility amount. These pro formas are based upon the
assumption that operations are sufficient to fund working
capital and dividend payment needs and any drawdown on the
revolving facility will be for the purpose of funding the
redemption of common stock. [($90,000 $54,845)
X 0.25% / 12 mo X 8 mo = $59] |
|
(9) |
|
To record additional depreciation expense with respect to the
four vessels in operation from January 1, 2008, as a result
of the
step-up in
basis related to the purchase of the vessels. One newly built
vessel was put into operation on May 20, 2008 and one newly
built vessel put into operation on August 28, 2008 and
therefore depreciation has been recorded from the delivery date
until August 28, 2008. |
|
(10) |
|
To record increment in management fees per the management
agreement dated May 20, 2008 of Euro 416 (US$549 at
March 27, 2009) per day for the first year of the
agreement. (New daily fee of $549 less former daily fee of $535,
times 241 days, times 4 vessels, plus new daily fee of
$549 less former daily fee of $535, times 100 days for a
vessel put into operation on May 20, 2008). The sixth
vessel was placed into operation on August 28, 2008. |
|
(11) |
|
Rental expense for the period January 1, 2008 to
November 16, 2008. |
|
(12) |
|
Vessel impairment would not arise after giving effect to Note
(9) above, as the fair market value of the impaired vessel
would be greater than its carrying value. |
Pro Forma Notes (in thousands of U.S. Dollars, except for
share and per share data, unless otherwise noted):
|
|
|
(A) |
|
Derived from the consolidated statement of operations of
Seanergy Maritime Holdings Corp. and subsidiaries for the year
ended December 31, 2008. |
|
(B) |
|
Six vessels owned by the following Restis Family Affiliates were
acquired by Seanergy: Goldie Navigation Ltd., Pavey Services
Ltd., Shoreline Universal Ltd., Valdis Marine Corp., Kalistos
Maritime |
99
|
|
|
|
|
S.A. and Kalithea Maritime S.A. Two of the six vessels are
newly-built, delivered and put into service in May and August
2008, respectively. |
|
(C) |
|
No consideration has been given to up to 4,308,075 shares
of Seanergy common stock potentially issuable to the Restis
family as additional investment shares based upon attaining
certain earnings thresholds. Management currently believes the
earnings based thresholds can be achieved with the charters
executed on the acquisition date, subject to achieving expected
utilization and budgeted operating expense levels. Any shares
issued upon attainment of these earnings thresholds will be
treated as additional purchase consideration. It is reasonably
possible in the near future that any amounts recorded upon
achievement of the earn-out in 2009 may be impaired based
on current market conditions. See also Note D below. |
|
(D) |
|
On August, 26, 2008, shareholders of Seanergy Maritime approved
the business combination with holders of 6,514,175 shares
voting against the vessel acquisition. Of the shareholders
voting against the vessel acquisition, holders of
6,370,773 shares properly demanded redemption of their
shares and were paid $63,707,730, or $10.00 per share, which
included a forfeited portion of the deferred underwriters
contingent fee. |
|
|
|
(E) |
|
The margin on the Marfin term facility is 1.5% per annum, if the
Total Assets to Total Liabilities ratio is greater than 165% and
1.75% if the ratio is less than 165%, to be tested quarterly.
Based upon the December 31, 2008 balance sheet, the ratio
of Total Assets to Total Liabilities is 153%; accordingly, a
margin of 1.75% has been utilized in these proformas. |
100
Restis
Family Affiliated Vessels Acquired
Unaudited
Condensed Combined Statement of Operations
Conversion From IFRS to U.S. GAAP
Six Months Ended June 30, 2008
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
As
|
|
|
Adjustments to Convert
|
|
|
As Presented
|
|
|
|
Reported
|
|
|
IFRS to U.S. GAAP
|
|
|
Under U.S
|
|
|
|
Under IFRS
|
|
|
Debit
|
|
|
Credit
|
|
|
GAAP
|
|
|
|
(In thousands of U.S. dollars)
|
|
|
Revenue from vessels
|
|
|
28,227
|
|
|
|
|
|
|
|
|
|
|
|
28,227
|
|
Direct voyage expenses
|
|
|
(759
|
)
|
|
|
|
|
|
|
|
|
|
|
(759
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
27,468
|
|
|
|
|
|
|
|
|
|
|
|
27,468
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating expenses
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Crew costs
|
|
|
2,143
|
|
|
|
|
|
|
|
|
|
|
|
2,143
|
|
Management fees related party
|
|
|
411
|
|
|
|
|
|
|
|
|
|
|
|
411
|
|
Other operating expenses
|
|
|
1,831
|
|
|
|
|
|
|
|
|
|
|
|
1,831
|
|
Depreciation expense
|
|
|
16,314
|
|
|
|
|
|
|
|
605
|
(1)
|
|
|
4,779
|
|
|
|
|
|
|
|
|
|
|
|
|
10,930
|
(2)
|
|
|
|
|
Amortization of dry docking
|
|
|
|
|
|
|
605
|
(1)
|
|
|
|
|
|
|
605
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total operating expenses
|
|
|
20,699
|
|
|
|
|
|
|
|
|
|
|
|
9,769
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating income
|
|
|
6,769
|
|
|
|
|
|
|
|
|
|
|
|
17,699
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other income (expense)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest income
|
|
|
36
|
|
|
|
|
|
|
|
|
|
|
|
36
|
|
Interest expense
|
|
|
(1,014
|
)
|
|
|
|
|
|
|
|
|
|
|
(1,014
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total other income (expense)
|
|
|
(978
|
)
|
|
|
|
|
|
|
|
|
|
|
(978
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income
|
|
|
5,791
|
|
|
|
|
|
|
|
|
|
|
|
16,721
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Adjustments to Convert From IFRS to U.S. GAAP (in thousands
of U.S. Dollars, unless otherwise noted):
|
|
|
(1) |
|
To reclassify the amortization of dry docking expenses that are
considered a component of depreciation under IFRS. |
|
(2) |
|
To eliminate depreciation expense relating to the revaluation of
the vessels to their fair value under IFRS. |
Note:
These adjustments represent only certain significant adjustments
from IFRS to U.S. GAAP and may not capture full conversion
to U.S. GAAP.
101
OUR
BUSINESS
We are an international company providing worldwide
transportation of dry bulk commodities through our vessel-owning
subsidiaries and, Bulk Energy Transport (Holdings) Limited, or
BET. Our existing fleet consists of one Handysize vessel, one
Handymax vessel, two Supramax vessels, three Panamax vessels and
four Capesize vessels. Our fleet carries a variety of dry bulk
commodities, including coal, iron ore, and grains, as well as
bauxite, phosphate, fertilizer and steel products.
We acquired our initial fleet of six dry bulk carriers on
August 28, 2008 from the Restis family, one of our major
shareholders. Less than one year later, we expanded our fleet by
acquiring a controlling interest in BET. We entered into a
shareholders agreement with Mineral Transport Holdings, Inc., or
Mineral Transport, that allows us, among other things to appoint
a majority of the members of the board of directors of BET. As a
result, we control BET. BETs fleet consists of four
Capesize vessels and one Panamax vessel. See
BET.
In order to expand our fleet, we have an option to purchase
additional vessels from unaffiliated parties. Our exercise of
the option is contingent upon the successful completion of this
offering. We expect to acquire the additional vessels with the
proceeds of this offering.
Our acquisitions demonstrate both our ability to successfully
grow through acquisition and our strategy to grow quickly and
achieve critical mass. By acquiring dry bulk carriers of various
sizes, we are also able to serve a variety of needs of a variety
of charterers. Finally, by capitalizing on our relationship with
the Restis family and its affiliates, which have a long and
proven track record in dry bulk shipping, we are able to
identify quality charterers for our vessels.
Our
Fleet
We control and operate, through our vessel-owning subsidiaries
and BET, 11 dry bulk carriers, including two newly built vessels
that transport a variety of dry bulk commodities. The following
table provides summary information about our fleet and its
current employment:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year
|
|
Terms of Time
|
|
Daily Time
|
Vessel/Flag
|
|
Type
|
|
Dwt
|
|
Built
|
|
Charter Party
|
|
Charter Hire Rate
|
|
African Oryx/Bahamas
|
|
Handysize
|
|
|
24,110
|
|
|
|
1997
|
|
|
Expiring August 2011
|
|
$7,000 plus a 50% profit share
calculated on the
average spot Time
Charter Routes derived
from the Baltic
Supramax Index
|
African Zebra/Bahamas
|
|
Handymax
|
|
|
38,623
|
|
|
|
1985
|
|
|
Expiring August 2011
|
|
$7,500 plus a 50%
profit share
calculated on the
average spot Time
Charter Routes derived
from the Baltic
Supramax Index
|
Bremen Max/Isle of Man
|
|
Panamax
|
|
|
73,503
|
|
|
|
1993
|
|
|
Expiring August 2010
|
|
$15,500
|
Hamburg Max/Isle of Man
|
|
Panamax
|
|
|
72,338
|
|
|
|
1994
|
|
|
Expiring September 2010
|
|
$15,500
|
Davakis G./Bahamas
|
|
Supramax
|
|
|
54,051
|
|
|
|
2008
|
|
|
Expiring in September 2009(1)
|
|
$60,000
|
Delos Ranger/Bahamas
|
|
Supramax
|
|
|
54,051
|
|
|
|
2008
|
|
|
Expiring in September 2009(1)
|
|
$60,000
|
BET Commander/Isle of Man(2)
|
|
Capesize
|
|
|
149,507
|
|
|
|
1991
|
|
|
Expiring in October 2009(3)
|
|
$22,000
|
BET Fighter/St. Vincent and the Grenadines(2)
|
|
Capesize
|
|
|
173,149
|
|
|
|
1992
|
|
|
Expiring in September 2011
|
|
$25,000
|
BET Prince/Isle of Man(2)
|
|
Capesize
|
|
|
163,554
|
|
|
|
1995
|
|
|
Expiring in November 2009(3)
|
|
$19,000
|
BET Scouter/Isle of Man(2)
|
|
Capesize
|
|
|
171,175
|
|
|
|
1995
|
|
|
Expiring in October 2011
|
|
$26,000
|
BET Intruder/Isle of Man(2)
|
|
Panamax
|
|
|
69,235
|
|
|
|
1993
|
|
|
Expiring in September 2011
|
|
$15,500
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
|
|
|
1,043,296
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1) |
|
Following expiration of its current charter party agreements,
the vessels will be employed in the spot market. |
102
|
|
|
(2) |
|
Vessels owned by BET. |
|
(3) |
|
We have secured new time charters for each of the BET Commander
and BET Prince commencing upon the expiration of the existing
time charters at daily charter rates of $24,000 and $25,000,
respectively, through December 2011 and January 2012,
respectively. |
The global dry bulk carrier fleet is divided into three
categories based on a vessels carrying capacity. These
categories are:
|
|
|
|
|
Capesize. Capesize vessels have a carrying
capacity of 100,000-199,999 dwt. Only the largest ports around
the world possess the infrastructure to accommodate vessels of
this size. Capesize vessels are primarily used to transport iron
ore or coal and, to a much lesser extent, grains, primarily on
long-haul routes.
|
|
|
|
Panamax. Panamax vessels have a carrying
capacity of between 60,000 and 100,000 dwt. These vessels are
designed to meet the physical restrictions of the Panama Canal
locks (hence their name Panamax the
largest vessels able to transit the Panama Canal, making them
more versatile than larger vessels). These vessels carry coal,
grains, and, to a lesser extent, minerals such as
bauxite/alumina
and phosphate rock. As the availability of Capesize vessels has
dwindled, Panamaxes have also been used to haul iron ore cargoes.
|
|
|
|
Handymax/Supramax. Handymax vessels have a
carrying capacity of between 30,000 and 60,000 dwt. These
vessels operate on a large number of geographically dispersed
global trade routes, carrying primarily grains and minor bulks.
The standard vessels are usually built with
25-30 ton
cargo gear, enabling them to discharge cargo where grabs are
required (particularly industrial minerals), and to conduct
cargo operations in countries and ports with limited
infrastructure. This type of vessel offers good trading
flexibility and can therefore be used in a wide variety of bulk
and neobulk trades, such as steel products. Supramax are a
sub-category of this category typically having a cargo carrying
capacity of between 50,000 and 60,000 dwt.
|
|
|
|
Handysize. Handysize vessels have a carrying
capacity of up to 30,000 dwt. These vessels are almost
exclusively carrying minor bulk cargo. 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.
|
The supply of dry bulk carriers is dependent on the delivery of
new vessels and the removal of vessels from the global fleet.
The demand for dry bulk carrier capacity is determined by the
underlying demand for commodities transported in dry bulk
carriers which in turn is influenced by trends in the global
economy.
Vessel
Employment
A vessel trading in the spot market may be employed under a
voyage charter or a time charter of short duration, generally
less than three months. A time charter is a contract to charter
a vessel for an agreed period of time at a set daily rate. A
voyage charter is a contract to carry a specific cargo for a per
ton carry amount. Under voyage charters, Seanergy would pay
voyage expenses such as port, canal and fuel costs. Under time
charters, the charterer would pay these voyage expenses. Under
both types of charters, Seanergy would pay for vessel operating
expenses, which include crew costs, provisions, deck and engine
stores, lubricating oil, insurance, maintenance and repairs.
Seanergy would also be responsible for each vessels
intermediate dry-docking and special survey costs.
Alternatively, vessels can be chartered under
bareboat contracts whereby the charterer is
responsible for the vessels maintenance and operations, as
well as all voyage expenses.
Vessels operating on time charter provide more predictable cash
flows, but can yield lower profit margins, than vessels
operating in the spot market during periods characterized by
favorable market conditions. Vessels operating in the spot
market generate revenues that are less predictable but may
enable Seanergy to increase profit margins during periods of
increasing dry bulk rates. However, Seanergy would then be
exposed to the risk of declining dry bulk rates, which may be
higher or lower than the rates at which Seanergy chartered its
103
vessels. Seanergy constantly evaluates opportunities for time
charters, but only expects to enter into additional time
charters if it can obtain contract terms that satisfy its
criteria.
Pursuant to addendums dated July 24, 2009 to the individual
charter party agreements dated May 26, 2008 between SAMC
and each of Martinique Intl. Corp. (vessel Bremen Max) and
Harbour Business Intl. Corp. (vessel Hamburg Max), SAMC agreed
to extend the existing charter parties for the Bremen Max and
the Hamburg Max. Pursuant to the terms of the addendum, each
vessel will be chartered for a period of between
11-13 months,
at the charterers option, commencing on July 27, 2009
and August 12, 2009. The daily gross charter rates paid by
SAMC is $15,500 for each of the Bremen Max and the Hamburg Max.
All charter rates are inclusive of a commission of 1.25% payable
to Safbulk as commercial broker and 2.5% to SAMC as charterer.
SAMC sub-charters these vessels in the market and takes the risk
that the rate it receives is better than the period rate it is
paying Seanergy.
On July 14, 2009, the African Oryx and the African Zebra
were chartered for a period of 22 to 25 months at charter
rates equal to $7,000 per day and $7,500 per day, respectively.
Seanergy is also entitled to receive a 50% adjusted profit share
calculated on the average spot Time Charter Routes derived from
the Baltic Supramax.
Following expiration of its current charter party agreements in
September 2009, the Davakis G and the Delos Ranger will be
chartered in the spot market until such time as we find suitable
time charters for these vessels.
Pursuant to charter party agreements dated August 31, 2006,
each of the BET Commander and the BET Prince were chartered for
daily charter rates of $22,000 and $19,000, respectively, for
charters expiring in October 2009 and November 2009,
respectively. Upon expiration of these charters, pursuant to
charter party agreements dated as of July 7, 2009, the BET
Commander and the BET Prince will be chartered to SAMC at daily
charter rates of $24,000 and $25,000, respectively, for charters
expiring in December 2011 and January 2012, respectively.
Pursuant to charter party agreements dated as of July 7,
2009, each of the BET Fighter, BET Scouter and the BET Intruder
were chartered to SAMC at daily charter rates of $25,000,
$26,000 and $15,500, respectively, for charters expiring in
September 2011, October 2011 and September 2011, respectively.
All charter rates for the BET fleet are inclusive of a
commission of 1.25% payable to Safbulk as commercial broker and
2.5% to SAMC as charterer. SAMC sub-charters these vessels in
the market and takes the risk that the rate it receives will be
better than the period rate it is paying us.
Management
of the Fleet
We currently have two executive officers, Mr. Dale
Ploughman, our chief executive officer, and Ms. Christina
Anagnostara, our chief financial officer, In addition, we employ
Ms. Theodora Mitropetrou, our general counsel and a support
staff of seven employees. We intend to employ such number of
additional shore-based executives and employees as may be
necessary to ensure the efficient performance of our activities.
We outsource the commercial brokerage and management of our
fleet to companies that are affiliated with members of the
Restis family. The commercial brokerage of our initial fleet of
six vessels and the BET fleet has been contracted out to
Safbulk. The management of our fleet has been contracted out to
EST. All three of these entities are controlled by members of
the Restis family.
Brokerage
Agreement
Under the terms of the brokerage agreements entered into by
Safbulk Pty, as exclusive commercial broker, with Seanergy
Management, for our initial fleet of six vessels, and Safbulk
Maritime and BET for the BET fleet, Safbulk provides commercial
brokerage services to our subsidiaries and the subsidiaries of
BET, which include, among other things, seeking and negotiating
employment for the vessels owned by the vessel-owning
subsidiaries in accordance with the instructions of Seanergy
Management and BET, as the case may
104
be. Safbulk is entitled to receive a commission of 1.25%
calculated on the collected gross hire/freight/demurrage payable
when such amounts are collected. The brokerage agreement with
Safbulk Pty is for a term of two years expiring in August 2010.
The brokerage agreement with Safbulk Maritime is for a term of
one year expiring in August 2010. Each brokerage agreement is
automatically renewable for consecutive periods of one year,
unless either party is provided with three months written
notice prior to the termination of such period.
Management
Agreement
Under the terms of the management agreement entered into by EST,
as manager of all vessels owned by Seanergys subsidiaries,
with Seanergy Management, and EST, as manager of all vessels
owned by BET, with BET, EST performs certain duties that include
general administrative and support services necessary for the
operation and employment of all vessels owned by all
subsidiaries of Seanergy and BET, including, without limitation,
crewing and other technical management, insurance, freight
management, accounting related to vessels, provisions,
bunkering, operation and, subject to Seanergys
instructions, sale and purchase of vessels.
Under the terms of the management agreement with Seanergy
Management, EST was initially entitled to receive a daily fee of
Euro 416.00 per vessel until December 31, 2008, which
fee may thereafter be increased annually by an amount equal to
the percentage change during the preceding period in the
Harmonised Indices of Consumer Prices All Items for Greece
published by Eurostat from time to time. Such fee is payable
monthly in advance on the first business day of each following
month. The fee has been increased to Euro 425.00 per vessel
through December 31, 2009. Under the terms of the
management agreement with BET, the management fee is also
Euro 425.00 per vessel through December 31, 2009.
EST is also an affiliate of members of the Restis family. EST
has been in business for over 34 years and manages
approximately 95 vessels (inclusive of new vessel build
supervision), including the fleet of vessels of affiliates of
members of the Restis family. As with Safbulk, we believe that
EST has achieved a strong reputation in the international
shipping industry for efficiency and reliability and has
achieved economies of scale that should result in the cost
effective operation of our vessels.
Safbulk, EST, SAMC, Waterfront, the sellers of the vessels that
we acquired and the Restis affiliate shareholders are affiliates
of members of the Restis family. The Restis family has been
engaged in the international shipping industry for more than
40 years, including the ownership and operation of more
than 60 vessels in various segments of the shipping
industry, including cargo and chartering interests. The separate
businesses controlled by members of the Restis family, when
taken together, comprise one of the largest independent
shipowning and management groups in the dry bulk sector of the
shipping industry. Through our separate agreements with
affiliates of members of the Restis family in respect of the
management and chartering of the vessels in our initial fleet,
we believe we benefit from their extensive industry experience
and established relationships. We believe that Safbulk has
achieved a strong reputation in the international shipping
industry for efficiency and reliability that should create new
employment opportunities for us with a variety of well known
charterers.
Shipping
Committee
We have established a shipping committee. The purpose of the
shipping committee is to consider and vote upon all matters
involving shipping and vessel finance. The shipping industry
often demands very prompt review and decision-making with
respect to business opportunities. In recognition of this, and
in order to best utilize the experience and skills that the
Restis family board appointees bring to us, our board of
directors has delegated all such matters to the shipping
committee. Transactions that involve the issuance of our
securities or transactions that involve a related party,
however, will not be delegated to the shipping committee but
instead will be considered by our entire board of directors. The
shipping committee is comprised of three directors. In
accordance with the Voting Agreement, the Master Agreement and
the amended and restated by-laws of Seanergy, two of the
directors are nominated by the Restis affiliate shareholders and
one of the directors is nominated by the founding shareholders
of Seanergy Maritime. The initial members of the shipping
committee are Messrs. Dale Ploughman and Kostas
Koutsoubelis, who are the Restis affiliate
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shareholders nominees, and Mr. Elias M. Culucundis,
who is the founding shareholders nominee. The Voting
Agreement further requires that the directors appoint the
selected nominees and that the directors fill any vacancies on
the shipping committee with the nominees selected by the party
that nominated the person whose resignation or removal caused
the vacancy.
The members of the shipping committee also serve as our
appointees to the BET board of directors. In the event that at
any time the BET board of directors must vote upon a transaction
with any of the BET affiliates, our appointees to the BET board
shall present such transaction to our full board of directors
for consideration. Our appointees to the BET board of directors
shall then vote in accordance with the recommendation of our
full board of directors.
Our
Business Combination
On August 26, 2008, shareholders of Seanergy Maritime
approved a proposal to acquire a business comprising of six dry
bulk carriers from six entity sellers that are controlled by
members of the Restis family, including two newly built vessels.
This acquisition was made pursuant to the Master Agreement and
the several MOAs in which we agreed to purchase these vessels
for an aggregate purchase price of (i) $367,030,750 in cash
to the sellers, (ii) $28,250,000 (face value) in the form
of the Note, which was initially convertible into
2,260,000 shares of our common stock, issued to the Restis
affiliate shareholders as nominees for the sellers, and
(iii) up to an aggregate of 4,308,075 shares of our
common stock issued to the Restis affiliate shareholders as
nominees for the sellers, subject to us meeting an EBITDA target
of $72 million to be earned between October 1, 2008
and September 30, 2009. The Restis affiliate shareholders,
United Capital Investment Corp., Atrion Shipholding S.A.,
Plaza Shipholding Corp., and Comet Shipholding Inc., and the
sellers are owned and controlled by the following members of the
Restis family: Victor Restis, Bella Restis, Katia Restis and
Claudia Restis. The Restis affiliate shareholders are four
personal investment companies. Each company is controlled by one
of these four individuals. Each seller is a single purpose
entity organized for the purpose of owning and operating one of
the six dry bulk carriers sold pursuant to the terms of the
Master Agreement and the individual related MOA. Following the
sale of the vessels under the Master Agreement and related MOAs,
the sellers have had no further operations. The Restis affiliate
shareholders purchased shares of Seanergy Maritimes common
stock from two of Seanergy Maritimes original founders,
Messrs. Panagiotis and Simon Zafet, and serve as nominees
of the sellers for purposes of receiving payments under the Note
and the shares issuable upon meeting the EBITDA targets
described above. The Restis affiliate shareholders do not have
any direct participation in our operations as they are not
officers, directors or employees of Seanergy. Pursuant to the
terms of the Voting Agreement, the Restis affiliate shareholders
have the right to nominate members to our Board of Directors and
to appoint officers as described more fully below.
The Master Agreement also provided that Seanergy Maritime and
Seanergy cause their respective officers to resign as officers,
other than Messrs. Ploughman and Koutsolioutsos, and the
Restis affiliate shareholders have the right to appoint such
other officers as they deem appropriate in their discretion. The
Master Agreement also required that directors resign and be
appointed so as to give effect to the Voting Agreement. Pursuant
to the Master Agreement, Seanergy Maritime and Seanergy also
established shipping committees of three directors and delegated
to them the exclusive authority to consider and vote upon all
matters involving shipping and vessel finance, subject to
certain limitations. Messrs. Ploughman, Koutsoubelis and
Culucundis were appointed to such committees. See
Seanergys Business Shipping
Committee. In addition, in connection with the Master
Agreement, Seanergy entered into the Management Agreement and
the Brokerage Agreement, whereby Seanergy agreed to outsource
the management and commercial brokerage of its fleet to
affiliates of the Restis family.
On August 28, 2008, we completed the acquisition, through
our designated nominees, of three of the six dry bulk vessels,
which included two 2008-built Supramax vessels and one Handysize
vessel. On that date, we took delivery of the M/V Davakis G, the
M/V Delos Ranger and the M/V African Oryx. On September 11,
2008, we took delivery, through our designated nominee, of the
fourth vessel, the M/V Bremen Max, a
1993-built
Panamax vessel. On September 25, 2008, Seanergy took
delivery, through its designated nominees, of the final two
vessels, the M/V Hamburg Max, a 1994-built Panamax vessel, and
the M/V African Zebra, a
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1985-built Handymax vessel. These purchase prices do not include
any amounts that would result from the earn-out of the
4,308,075 shares of our common stock.
BET
On July 14, 2009, we entered into a share purchase
agreement with Constellation to acquire 250 shares of
BETs capital stock owned by Constellation, which
represents a 50% ownership interest in BET for nominal cash
consideration. The remaining 50% of BET is owned by Mineral
Transport, an affiliate of the Restis family. The share purchase
agreement contained customary representations regarding
Constellations ownership of the BET shares free and clear
of liens, but did not contain additional representations and
warranties. In connection with considering the acquisition of an
interest in BET, our board of directors received a fairness
opinion from Ladenburg Thalmann & Co. Inc. Ladenburg
determined, based upon and subject to the assumptions,
qualifications and limitations set forth in its written fairness
opinion, that the consideration to be paid to Constellation was
fair from a financial point of view to our shareholders other
than those affiliated with members of the Restis family. The
acquisition was approved by a majority of the members of our
board of directors not affiliated with members of the Restis
family. The members of our board of directors affiliated with
members of the Restis family abstained from voting on the
transaction. The closing was conditioned upon receipt of the
consent of BETs lenders and Marfin and the termination of
certain agreements between BET and certain Constellation
affiliates. The BET lenders have indicated their willingness to
provide their consent to our purchase of shares in BET. We are
currently in active negotiations to finalize this arrangement.
On August 12, 2009, we closed on the purchase of the 50%
ownership interest in BET.
Shareholders
Agreement
In connection with the closing of our purchase of an interest in
BET, we entered into a shareholders agreement with Mineral
Transport, which sets forth, among other things, the parties
rights with respect to the corporate governance and control of
BETs business and operations and the ownership and
transfer of the stock owned by the two shareholders.
The shareholders agreement provides for a board of directors
composed of five directors, of which we have the right to
appoint three directors and Mineral Transport has the right to
appoint two directors. If at any time the size of the board is
increased, each of the shareholders has the right to appoint
additional directors; provided, however, that we will always
have the right to appoint one more director than Mineral
Transport. Each shareholder has the right to remove, and appoint
the replacement of, any of its board appointees. We also have
the right to have one of our director appointees serve as
BETs president or managing director, as applicable. The
Board of Directors has the power to direct the operating,
investing and financing activities of BET.
The shareholders agreement further provides that certain
actions, including, but not limited to, the borrowing and
repayment of funds from a shareholder, the increase in the
authorized number of, or the acceptance of subscriptions for,
shares of BETs common stock, and the dissolution and
winding down of the affairs of BET, require the consent of both
the shareholders.
Commencing one year after the effective date of the shareholders
agreement, each shareholder (the Offeror) has the
right, by giving notice to BET and the other shareholder (the
Offeree), to force the Offeree to either sell all of
its shares, or to buy all of the shares of the Offeror, at the
price set by the Offeror. The Offeree shall have 60 days to
make its election and the purchase and sale of the shares shall
close no later than 30 days after the expiration of the
60-day
period referenced above. During the pendency of any purchase and
sale, all actions of the board of directors shall require the
unanimous consent of the directors. In the event that the buyer
of the shares does not close on the purchase the seller shall
have the right by giving written notice to the buyer to
(i) treat the offer price due for its shares as a debt and
to take whatever action may be necessary and reasonable
(including legal action) to recover such amounts; or
(ii) purchase the shares of buyer at the offer price. If
either the buyer or seller of shares defaults in its obligations
to complete the purchase and sale in accordance with the
preceding sentence, the shareholders agreement will be
terminated and BET will commence winding down.
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BET
Loan Agreement
The six wholly-owned subsidiaries of BET financed the
acquisition of their respective vessels with the proceeds of an
amortizing loan from Citibank International PLC, as agent for
the syndicate of banks and financial institutions set forth in
the loan agreement, in the principal amount of $222,000,000. The
loan agreement dated June 26, 2007 is guaranteed by BET.
The BET subsidiaries drew down on agreed portions of the loan
facility to acquire each of the original six vessels in the BET
fleet. The amount of the loan for each vessel was less than or
equal to 70% of the contractual purchase price for the
applicable vessel. The loan bears interest at the annual rate of
LIBOR plus 0.75%.
The loan is repayable commencing on December 28, 2007
through 15 equal semi-annual installments of principal in the
amount of $8,286,500 followed by a balloon payment due six
months thereafter in the amount of $51,289,000, as these
installment amounts were revised after the BET Performer sale.
Interest in due and payable based on interest periods selected
by BET equal to one month, two months, three months, six months,
or a longer period up to 12 months. For interest periods
longer than three months, interest is due in three-month
installments.
The BET loan facility is secured by the following: the loan
agreement, a letter agreement regarding payment of certain fees
and expenses by BET; a first priority mortgage on each of the
BET vessels; the BET guaranty of the loan; a general assignment
or deed of covenant of any and all earnings, insurances and
requisition compensation of each of the vessels; pledges over
the earnings accounts and retention accounts held in the name of
each borrower; undertakings by the technical managers of the BET
vessels; and the trust deed executed by Citibank for the benefit
of the other lenders, among others. See Managements
Discussion and Analysis of Financial Condition and Results of
Operations for Seanergy Maritime and Seanergy
Liquidity and Capital Resources Loan
Agreement BET Loan Agreement.
Finally, although the BET lenders have indicated their
willingness to provide their consent to our purchase of shares
in BET, including waiver of compliance with the vessels
market value covenant, they have not yet granted their formal
approval. We are currently in active negotiations to finalize
these arrangements following which we expect BET to be in full
compliance with its covenants. If BETs lenders decline to
approve this transaction, they could declare an event of default
under BETs loan agreement and a portion of the debt may be
required to be classified to current.
Distinguishing
Factors and Business Strategy
The international dry bulk shipping industry is highly
fragmented and is comprised of approximately 6,300 ocean-going
vessels of tonnage size greater than 10,000 dwt which are owned
by approximately 1,500 companies. Seanergy competes with
other owners of dry bulk carriers, some of which may have a
different mix of vessel sizes in their fleet. It has, however,
identified the following factors that distinguish it in the dry
bulk shipping industry.
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Extensive Industry Visibility. Our management
and directors have extensive shipping and public company
experience as well as relationships in the shipping industry and
with charterers in the coal, steel and iron ore industries. We
capitalize on these relationships and contacts to gain market
intelligence, source sale and purchase opportunities and
identify chartering opportunities with leading charterers in
these core commodities industries, many of whom consider the
reputation of a vessel owner and operator when entering into
time charters.
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Established Customer Relationships. We believe
that our directors and management team have established
relationships with leading charterers and a number of
chartering, sales and purchase brokerage houses around the
world. We believe that our directors and management team have
maintained relationships with, and have achieved acceptance by,
major national and private industrial users, commodity producers
and traders.
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Experienced and Dedicated Management Team. We
believe that the members of our management team have developed
strong industry relationships with leading charterers,
shipbuilders, insurance underwriters, protection and indemnity
associations and financial institutions. Additionally, our
management team comes equipped with extensive shipping
experience and with a successful track
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record of creating shareholder value. All of our officers
dedicate the necessary amount of time and effort to fulfill
their obligations to Seanergy and its shareholders.
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Highly Efficient Operations. We believe that
our directors and executive officers long experience
in third-party technical management of dry bulk carriers enable
us to maintain cost-efficient operations. We actively monitor
and control vessel operating expenses while maintaining the high
quality of our fleet through regular inspections, comprehensive
planned maintenance systems and preventive maintenance programs
and by retaining and training qualified crew members.
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Balanced Chartering Strategies. Nine of our
vessels are under medium-term charters with terms of 11 to
13 and 22 to 25 months and provide for fixed payments in
advance. We believe that these charters will provide us with
high fleet utilization and stable revenues. Two of our vessels
operate in the spot market. We may in the future pursue other
market opportunities for its vessels to capitalize on favorable
market conditions, including entering into short-term time and
voyage charters, pool arrangements or bareboat charters.
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Broad Fleet Profile. We focus on the dry bulk
sector including Capesize, Panamax,
Handymax/Supramax
and Handysize dry bulk carriers. Our board fleet profile enables
us to serve our customers in both major and minor bulk trades.
Our vessels are able to trade worldwide in a multitude of trade
routes carrying a wide range of cargoes for a number of
industries. Our dry bulk carriers can carry coal and iron ore
for energy and steel production as well as grain and steel
products, fertilizers, minerals, forest products, ores, bauxite,
alumina, cement and other cargoes. Our fleet includes sister
ships. Operating sister and similar ships provides us with
operational and scheduling flexibility, efficiencies in employee
training and lower inventory and maintenance expenses. We
believe that operating sister ships allows us to maintain lower
operating costs and streamline its operations.
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High Quality Fleet. We believe that our
ability to maintain and increase our customer base depends
largely on the quality and performance of our fleet. We believe
that owning a high quality fleet reduces operating costs,
improves safety and provides us with a competitive advantage in
obtaining employment for our vessels. We carry out regular
inspections and maintenance of our fleet in order to maintain
its high quality.
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Fleet Growth Potential. We have options to
purchase a total of six additional vessels from unaffiliated
third parties. Furthermore, we intend to acquire additional dry
bulk carriers or enter into new vessel construction contracts
through timely and selective acquisitions of vessels in a manner
that we determine will be accretive to cash flow. We expect to
fund the acquisition of the additional vessels primarily from
the proceeds of this offering and any future acquisition of
additional vessels using amounts borrowed under our credit
facility, future borrowings under other agreements as well as
with proceeds from the exercise of the Warrants, if any, or
through other sources of debt and equity. However, there can be
no assurance that we will be successful in obtaining future
funding or that any or all of the Warrants will be exercised.
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Charter
Hire Rates
Charter hire rates fluctuate by varying degrees among dry bulk
carrier size categories. The volume and pattern of trade in a
small number of commodities (major bulks) affect demand for
larger vessels. Therefore, charter rates and vessel values of
larger vessels often show greater volatility. Conversely, trade
in a greater number of commodities (minor bulks) drives demand
for smaller dry bulk carriers. Accordingly, charter rates and
vessel values for those vessels are subject to less volatility.
Charter hire rates paid for dry bulk carriers are primarily a
function of the underlying balance between vessel supply and
demand, although at times other factors may play a role.
Furthermore, the pattern seen in charter rates is broadly
mirrored across the different charter types and the different
dry bulk carrier categories. However, because demand for larger
dry bulk vessels is affected by the volume and pattern of trade
in a relatively small number of commodities, charter hire rates
(and vessel values) of larger ships tend to be more volatile
than those for smaller vessels.
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In the time charter market, rates vary depending on the length
of the charter period and vessel specific factors such as age,
speed and fuel consumption.
In the voyage charter market, rates are influenced by cargo
size, commodity, port dues and canal transit fees, as well as
commencement and termination 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 than routes with low port dues and no canals to
transit. Voyages with a load port within a region that includes
ports where vessels usually discharge cargo or a discharge port
within a region with ports where vessels load cargo also are
generally quoted at lower rates, because such voyages generally
increase vessel utilization 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 charter hire rate
references most likely to be monitored are the freight rate
indices issued by the Baltic Exchange. 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.
Properties
We lease our executive office space in Athens, Greece pursuant
to the terms of a sublease agreement between Seanergy Management
and Waterfront, a company which is beneficially owned by Victor
Restis. The sublease fee is EURO 504,000 per annum, or
EURO 42,000 per month. The initial term is from
November 17, 2008 to November 16, 2011. We have the
option to extend the term until February 2, 2014. The
premises are approximately 1,000 square meters in a prime
location in the Southern suburbs of Athens. The agreement
includes furniture, parking space and building maintenance.
Seanergy Management has been granted Ministerial Approval
(issued in the Greek Government Gazette) for the establishment
of an office in Greece under Greek Law 89/67 (as amended).
Competition
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 its reputation. Safbulk negotiates the
terms of our charters (whether voyage charters, period time
charters, bareboat charters or pools) based on market
conditions. Ownership of dry bulk carriers is highly fragmented
and is divided among state controlled and independent bulk
carrier owners.
Environmental
and Other Regulations
Government regulation significantly affects the ownership and
operation of our vessels. The vessels are subject to
international conventions, national, state and local laws and
regulations in force in the countries in which our vessels may
operate or are registered.
A variety of governmental and private entities subject our
vessels to both scheduled and unscheduled inspections. These
entities include the local port authorities (U.S. Coast
Guard, harbor master or equivalent), classification societies,
flag state administration (country of registry) and charterers.
Certain of these entities require us to obtain permits, licenses
and certificates for the operation of its vessels.
Failure to maintain necessary permits or approvals could cause
us to incur substantial costs or temporarily suspend operation
of one or more of its vessels.
We believe that the heightened level of environmental and
quality concerns among insurance underwriters, regulators and
charterers is leading to greater inspection and safety
requirements on all vessels and may accelerate the scrapping of
older vessels throughout the dry bulk shipping industry.
Increasing environmental concerns have created a demand for
vessels that conform to stricter environmental standards. We are
required to maintain operating standards for all of our vessels
that emphasize operational safety, quality maintenance,
continuous training of its officers and crews and compliance
with United States and international regulations. We believe
that the operation of our vessels is in substantial compliance
with applicable environmental laws and regulations applicable to
us.
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International
Maritime Organization
The IMO has negotiated international conventions that impose
liability for oil pollution in international waters and in each
signatorys territorial waters. In September 1997, the IMO
adopted Annex VI to the International Convention for the
Prevention of Pollution from Ships to address air pollution from
ships. Annex VI was ratified in May 2004, and became
effective in May 2005. Annex VI set limits on sulfur oxide
and nitrogen oxide emissions from ship exhausts and prohibits
deliberate emissions of ozone depleting substances, such as
chlorofluorocarbons. Annex VI also includes a global cap on
the sulfur content of fuel oil and allows for special areas to
be established with more stringent controls on sulfur emissions.
Our fleet has conformed to the Annex VI regulations. In
October 2008, Annex VI was amended to change the sulfur
oxide and nitrogen oxide emission standards with the global
sulphur cap reduced initially to 3.50% (from the current 4.50%),
effective from January 2012; then progressively to 0.50%,
effective from January 2020. Under the 2008 amendment to
Annex VI, the limits applicable in Sulphur Emission Control
Areas (SECAs) will be reduced to 1.00%, beginning on July 2010
(from the current 1.50%); being further reduced to 0.10%,
effective from January 2015. As a result of these amendments to
Annex VI, Seanergy may incur costs to comply with these new
standards in future years. Additional or new conventions, laws
and regulations may also be adopted that could adversely affect
our ability to operate our vessels.
The operation of our vessels is also affected by the
requirements set forth in the ISM Code. The ISM Code requires
shipowners 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 management company to comply with the ISM Code
may subject such party to increased liability, may decrease
available insurance coverage for the affected vessels, and may
result in a denial of access to, or detention in, certain ports.
Each of our vessels is ISM Code-certified. However, there can be
no assurance that such certification will be maintained
indefinitely.
The
United States Oil Pollution Act of 1990
The United States Oil Pollution Act of 1990, or OPA, established
an extensive regulatory and liability regime for the protection
and cleanup of the environment from oil spills. 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 OPA, vessel owners, operators, charterers and management
companies 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 threatened
discharges of oil from their vessels, including bunkers (fuel).
OPA previously limited the liability of responsible parties for
dry bulk vessels to the greater of $600 per gross ton or
$0.5 million (subject to possible adjustment for
inflation). Amendments to OPA signed into law in July 2006
increased these limits on the liability of responsible parties
for dry bulk vessels to the greater of $950 per gross ton or
$0.8 million. These limits of liability do not apply if an
incident was directly caused by violation of applicable United
States federal safety, construction or operating regulations or
by a responsible partys 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.
We maintain pollution liability coverage insurance for each of
our vessels in the amount of $1 billion per incident. If
the damages from a catastrophic pollution liability incident
exceed its insurance coverage, it could have a material adverse
effect on our financial condition and results of operations.
OPA requires owners and operators of vessels to establish and
maintain with the U.S. Coast Guard evidence of financial
responsibility sufficient to meet their potential liabilities
under the OPA. In December 1994, the Coast Guard
implemented regulations requiring evidence of financial
responsibility in the amount of $900 per gross ton, which
includes the OPA limitation on liability of $600 per gross ton
and the
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U.S. Comprehensive Environmental Response, Compensation,
and Liability Act, or CERCLA, liability limit of $300 per gross
ton. Under the regulations, vessel owners and operators may
evidence their financial responsibility by showing proof of
insurance, surety bond, self-insurance, or guaranty. In 2008,
the U.S. Coast Guard amended its financial responsibility
regulations to increase the required amount of evidence of
financial responsibility to reflect the higher limits on
liability imposed by the 2006 amendments to OPA, as described
above. We may incur costs to comply with these new standards.
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 comply with
all applicable state regulations in the ports where its vessels
call.
The
United States Clean Water Act
The U.S. Clean Water Act, or CWA, prohibits the discharge
of oil or hazardous substances in navigable waters and imposes
strict liability in the form of penalties for any unauthorized
discharges. The CWA also imposes substantial liability for the
costs of removal, remediation and damages and complements the
remedies available under the more recent OPA and CERCLA.
As of February 2009, all vessels operating as a means of
transportation that discharge ballast water or other incidental
discharges into waters of the United States will require
coverage under the EPAs Vessel General Permit, or VGP, to
discharge ballast water into U.S. waters. EPA had
historically exempted ballast water discharges, and other
discharges incidental to the normal operation of vessels
(incidental discharges) from the CWA. The new VGP
requires vessel owners and operators to comply with a range of
best management practices, reporting, and other requirements,
for a number of incidental discharge types and incorporates
U.S. Coast Guard requirements for ballast water management
and exchange. No earlier than June 19, 2009, owners and
operators of vessels greater than or equal to 300 gross
tons and 2,113 gallons of ballast water capacity must submit a
Notice of Intent, or NOI, to receive permit coverage to the EPA.
The NOI states that the vessel operator will comply with the
permit. In order to remain covered by the VGP, vessels will need
to comply with numerous inspection, monitoring, reporting and
recordkeeping requirements. Vessel owners/operators must, among
other things, conduct and document routine self-inspection to
track compliance with the VGP, and must conduct a comprehensive
vessel inspection every 12 months. We will likely incur
certain costs to obtain coverage under the VGP for its vessels
and to meet its requirements.
Other
Environmental Initiatives
The European Union is considering legislation that will affect
the operation of vessels and the liability of owners for oil
pollution. It is difficult to predict what legislation, if any,
may be promulgated by the European Union or any other country or
authority. In 2005, the European Union adopted a directive on
ship-source pollution, imposing criminal sanctions for
intentional, reckless or negligent pollution discharges by
ships. The directive could result in criminal liability for
pollution from vessels in waters of European countries that
adopt implementing legislation. Criminal liability for pollution
may result in substantial penalties or fines and increased civil
liability claims.
Although the United States is not a party thereto, many
countries have ratified and currently follow the liability plan
adopted by the IMO and set out in the International Convention
on Civil Liability for Oil Pollution Damage of 1969, or the 1969
Convention. Under this convention, and depending on whether the
country in which the damage results is a party to the 1992
Protocol to the International Convention on Civil Liability for
Oil Pollution Damage, a vessels 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 complete 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 in November
2003, for vessels of 5,000 to 140,000 gross tons, 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
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is limited to 89.77 million SDR. The exchange rate between
SDRs and U.S. dollars was 0.640366 SDR per U.S. dollar
on August 24, 2009. Under the 1969 Convention, the right to
limit liability is forfeited where the spill is caused by the
owners actual fault; under the 1992 Protocol, a shipowner
cannot limit liability where the spill is caused by the
owners intentional or reckless conduct. Vessels trading in
jurisdictions that are parties to these conventions must provide
evidence of insurance covering the liability of the owner. In
jurisdictions where the 1969 Convention has not been adopted,
including the United States, various legislative schemes or
common law govern, and liability is imposed either on the basis
of fault or in a manner similar to that convention. We believe
that our protection and indemnity insurance will cover the
liability under the plan adopted by the IMO.
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 ships in foreign ports. The U.S. Coast
Guard adopted regulations under NISA, which became effective in
August 2004, that impose mandatory ballast water management
practices for all vessels equipped with ballast water tanks
entering U.S. waters. These requirements can be met by
performing mid-ocean ballast exchange, which is the exchange of
ballast water on the waters beyond the exclusive economic zone
from an area more than 200 miles from any shore, by
retaining ballast water on board the ship, or by using
environmentally sound alternative ballast water management
methods approved by the U.S. Coast Guard. (However,
mid-ocean ballast exchange is mandatory for ships heading to the
Great Lakes or Hudson Bay, or vessels engaged in the foreign
export of Alaskan North Slope crude oil.) Mid-ocean ballast
exchange is the primary method for compliance with the
U.S. Coast Guard regulations, since holding ballast water
can prevent ships from performing cargo operations upon arrival
in the United States, and alternative methods are still under
development. Vessels that are unable to conduct mid-ocean
ballast exchange due to voyage or safety concerns may discharge
minimum amounts of ballast water (in areas other than the Great
Lakes and the Hudson River), provided that they comply with
recordkeeping requirements and document the reasons they could
not follow the required ballast water management requirements.
The U.S. Coast Guard has commenced rulemaking to develop
ballast water discharge standards, which could set maximum
acceptable discharge limits for various invasive species,
and/or lead
to requirements for active treatment of ballast water. A number
of bills relating to regulation of ballast water management have
been recently introduced in the U.S. Congress, but it is
difficult to predict which, if any, will be enacted into law.
The IMO adopted an International Convention for the Control and
Management of Ships Ballast Water and Sediments, or the
BWM Convention, in February 2004. The BWM Conventions
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 be in force until
12 months after it has been adopted by 30 countries, the
combined merchant fleets of which represent not less than 35% of
the gross tonnage of the worlds merchant shipping. As of
June 30, 2009, the BWM Convention had been adopted by
18 states, representing approximately 15% of world tonnage.
Vessel
Security Regulations
Since the terrorist attacks of September 11, 2001, there
have been a variety of initiatives by United States authorities
intended to enhance vessel security. On November 25, 2002,
the Maritime Transportation Security Act of 2002, or 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 the SOLAS,
created a new chapter of the convention dealing specifically
with maritime security. The new chapter went into effect in July
2004, and imposes various detailed security obligations on
vessels and port authorities, most of which are contained in the
newly created International Ship and Port Facility Security
Code, or ISPS Code. Among the various requirements are:
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on-board installation of automatic information systems to
enhance vessel-to-vessel and vessel-to-shore communications;
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on-board installation of ship security alert systems;
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the development of vessel security plans; and
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compliance with flag state security certification requirements.
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The U.S. Coast Guard regulations, intended to align 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 vessels compliance with
SOLAS security requirements and the ISPS Code. Our vessels are
in compliance with the various security measures addressed by
the MTSA, SOLAS and the ISPS Code. We do not believe these
additional requirements will have a material financial impact on
our operations.
Inspection
by Classification Societies
The hull and machinery of every commercial vessel must be
classed by a classification society authorized by its country of
registry. The classification society certifies that a vessel is
safe and seaworthy in accordance with the applicable rules and
regulations of the country of registry of the vessel and the
SOLAS. Seanergys vessels are classed with a classification
society that is a member of the International Association of
Classification Societies.
A vessel must undergo annual surveys, intermediate surveys,
dry-dockings and special surveys. In lieu of a special survey, a
vessels machinery may be on a continuous survey cycle,
under which the machinery would be surveyed periodically 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 dry-docked every
two to three years for inspection of the underwater parts of
such vessel. The following table sets forth information
regarding the next scheduled dry-dock for the existing vessels
in the fleet and the estimated cost for each next scheduled
dry-dock.
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Vessel
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Next Scheduled Dry-Dock
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Estimated Cost
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African Oryx
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October 2010
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$
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900,000
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African Zebra
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February 2011
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$
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1,000,000
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Bremen Max
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June 2011
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$
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1,000,000
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Hamburg Max
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June 2012
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$
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1,000,000
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Davakis G.
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May 2011
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$
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500,000
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Delos Ranger
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August 2011
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$
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500,000
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BET Commander*
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August 2009
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$
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1,200,000
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BET Fighter*
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September 2010
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$
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1,200,000
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BET Prince*
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May 2010
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$
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1,200,000
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BET Scouter*
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April 2010
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$
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1,200,000
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BET Intruder*
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March 2011
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$
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1,000,000
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If any vessel does not maintain its class
and/or fails
any annual survey, intermediate survey, dry-docking or special
survey, the vessel will be unable to carry cargo between ports
and will be unemployable and uninsurable. Any such inability to
carry cargo or be employed, or any such violation of covenants,
could have a material adverse impact on our financial condition
and results of operations.
At an owners 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 insurance underwriters make it a condition for insurance
coverage and lending that a vessel be certified as in
class by a classification society which is a member of the
International Association of
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Classification Societies. Seanergys vessels are certified
as being in class by classification societies that
are members of the International Association of Classification
Societies.
Risk of
Loss and Liability Insurance
General
The operation of any cargo vessel includes risks such as
mechanical failure, physical damage, collision, property loss,
cargo loss or damage and business interruption due to political
circumstances in foreign countries, hostilities and labor
strikes. In addition, there is always an inherent possibility of
marine disaster, including oil spills and other environmental
mishaps, and the liabilities arising from owning and operating
vessels in international trade. OPA, which imposes virtually
unlimited liability upon owners, operators and demise charterers
of any vessel trading in the United States exclusive economic
zone for certain oil pollution accidents in the United States,
has made liability insurance more expensive for ship owners and
operators trading in the United States market. While we believe
that our insurance coverage is adequate, not all risks can be
insured, and there can be no guarantee that any specific claim
will be paid, or that we will always be able to obtain adequate
insurance coverage at reasonable rates.
Hull
and Machinery Insurance
We maintain marine hull and machinery and war risk insurance,
which includes the risk of actual or constructive total loss,
for all of its vessels. The vessels are covered up to at least
fair market value, with deductibles in amounts of approximately
$100,000 to $172,500.
We arrange, as necessary, increased value insurance for its
vessels. With the increased value insurance, in case of total
loss of the vessel, Seanergy will be able to recover the sum
insured under the increased value policy in addition to the sum
insured under the hull and machinery policy. Increased value
insurance also covers excess liabilities which are not
recoverable in full by the hull and machinery policies by reason
of under insurance. We expect to maintain delay cover insurance
for certain of its vessels. Delay cover insurance covers
business interruptions that result in the loss of use of a
vessel.
Protection
and Indemnity Insurance
Protection and indemnity insurance is provided by mutual
protection and indemnity associations, or
P&I Associations, which cover our third-party
liabilities in connection with its shipping activities. This
includes third-party liability and other related expenses of
injury or death of crew, passengers and other third parties,
loss or damage to cargo, claims arising from collisions with
other vessels, damage to other third-party property, pollution
arising from oil or other substances, and salvage, towing and
other related costs, including wreck removal. Protection and
indemnity insurance is a form of mutual indemnity insurance,
extended by protection and indemnity mutual associations.
Our protection and indemnity insurance coverage for pollution is
$1.0 billion per vessel per incident. The 13 P&I
Associations that comprise the International Group insure
approximately 90% of the worlds commercial tonnage and
have entered into a pooling agreement to reinsure each
associations liabilities. Each of Seanergys vessels
entered with P&I Associations of the International Group.
Under the International Group reinsurance program, each P&I
club in the International Group is responsible for the first
$7.0 million of every claim. In every claim the amount in
excess of $7.0 million and up to $50.0 million is
shared by the clubs under a pooling agreement. In every claim
the amount in excess of $50.0 million is reinsured by the
International Group under the general excess of loss reinsurance
contract. This policy currently provides an additional
$3.0 billion of coverage. Claims which exceed this amount
are pooled by way of overspill calls. As a member of
a P&I Association, which is a member of the International
Group, Seanergy is subject to calls payable to the associations
based on its claim records as well as the claim records of all
other members of the individual associations, and members of the
pool of P&I Associations comprising the International
Group. The P&I Associations policy year commences on
February 20th. Calls are levied by means of estimated total
costs, or ETC, and the amount of the final installment of the
ETC varies according to the actual total premium ultimately
required by the club for a particular policy year. Members have
a liability to pay supplementary
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calls which might be levied by the board of directors of the
club if the ETC is insufficient to cover amounts paid out by the
club.
Legal
Proceedings
We are not currently a party to any material lawsuit that, if
adversely determined, would have a material adverse effect on
its financial position, results of operations or liquidity.
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
Seanergys shares.
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MANAGEMENT
Directors
and Executive Officers
Set forth below are the names, ages and positions of our current
directors and executive officers:
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Name
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Age
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Position
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Class
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Georgios Koutsolioutsos
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39
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Chairman of the Board of Directors
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C
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Dale Ploughman
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62
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Chief Executive Officer and Director
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B
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Christina Anagnostara
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38
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Chief Financial Officer and Director
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B
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Ioannis Tsigkounakis
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42
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Secretary and Director
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B
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Alexios Komninos
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42
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Director
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B
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Kostas Koutsoubelis
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53
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Director
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C
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Elias M. Culucundis
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65
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Director
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A
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George Taniskidis
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47
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Director
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A
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Kyriakos Dermatis
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61
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Director
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C
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Alexander Papageorgiou
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35
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Director
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C
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Dimitrios N. Panagiotopoulos
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47
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Director
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A
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George Tsimpis
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62
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Director
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B
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Dimitris Anagnostopoulos
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62
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Director
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A
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The business address of each of our directors and executive
officers listed below is 1-3 Patriarchou Grigoriou; 166 74
Glyfada; Athens, Greece. Our board of directors is divided into
three classes, Class A, Class B and Class C, with
only one class of directors being elected in each year,
beginning at the 2010 annual meeting. The term of office of the
Class A directors, consisting of Messrs. Elias M.
Culucundis, George Taniskidis, Dimitrios N. Panagiotopoulos and
Dimitris Anagnostopoulos will expire at our 2010 annual meeting
of shareholders. The term of office of the Class B
directors, consisting of Messrs. Alexios Komninos, Ioannis
Tsigkounakis, Dale Ploughman, George Tsimpis and
Ms. Christina Anagnostara will expire at the 2011 annual
meeting. The term of office of the Class C directors,
consisting of Messrs. George Koutsolioutsos, Kostas
Koutsoubelis, Kyriakos Dermatis and Alexander Papageorgiou will
expire at the 2012 annual meeting.
Georgios Koutsolioutsos has served as sole Chairman of
our board of directors since May 20, 2008. From our
inception to May 19, 2008, Mr. Koutsolioutsos served
as our president and co-chairman of the board of directors.
Mr. Koutsolioutsos has significant experience in the
management and operations of public companies. He began his
career at Folli Follie S.A. (ATSE: FOLLI) in 1992. Folli Follie
is an international company with a multinational luxury goods
brand and over three hundred points of sale (POS).
Mr. Koutsolioutsos is currently the vice-president and an
executive member of the board of directors. In 1999,
Mr. Koutsolioutsos became a member of the board of
directors of Hellenic Duty Free Shops S.A. (HDFS
(ATSE: HDF)) and subsequently, as of May 2006, became the
chairman of the board of directors. HDFS is the exclusive
duty-free operator in Greece. In 2003, Mr. Koutsolioutsos
was awarded Manager of the Year in Greece. Mr. Georgios
Koutsolioutsos received his B.Sc. in business and marketing from
the University of Hartford, Connecticut. He is fluent in five
languages.
Dale Ploughman has served as a member of our board of
directors and our chief executive officer since May 20,
2008. He has over 43 years of shipping industry experience.
Since 1999, Mr. Ploughman has been the chairman of South
African Marine Corporation (Pty) Ltd., a dry bulk shipping
company based in South Africa and affiliate to members of the
Restis family, and the chairman of the Bahamas Ship Owners
Association. In addition, Mr. Ploughman has served as
president, chief executive officer and a director of Golden
Energy Marine Corp. since February 2005. Mr. Ploughman also
serves as president and chief executive officer of numerous
private shipping companies controlled by members of the Restis
family. From 1989 to 1999, Mr. Ploughman was the president
of Great White Fleet, a fleet owned by Chiquita Brands
International Inc., which was one of the largest shipping
carriers to and from Central America. Mr. Ploughman has
previously worked as president and chief executive officer of
Lauritzen Reefers A.S., a shipping company based in
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Denmark, the managing director of Dammers and Vander Hiede
Shipping and Trading Inc., a shipping company based in the
Netherlands and as the chairman of Mackay Shipping, a shipping
company based in New Zealand. He holds degrees in Business
Administration and Personnel Management and Masters
level Sea Certificates and was educated at the Thames
Nautical Training College, HMS Worcester.
Christina Anagnostara has served as our chief financial
officer since November 17, 2008. Prior to joining us, she
served as chief financial officer and a board member for Global
Oceanic Carriers Ltd, a dry bulk shipping company listed on the
Alternative Investment Market of the London Stock Exchange, or
AIM, since February 2007. Between 1999 and 2006, she was a
senior manager at EFG Audit & Consulting Services, the
auditors of the Geneva-based EFG Group, an international banking
group specializing in global private banking and asset
management. Prior to EFG Group, she worked from 1998 to 1999 in
the internal audit group of Eurobank EFG, a bank with a leading
position in Greece; and between 1995 and 1998 as a senior
auditor at Ernst & Young Hellas, SA, Greece, the
international auditing firm. Ms. Anagnostara studied
Economics in Athens and has been a Certified Chartered
Accountant since 2002.
Ioannis Tsigkounakis has been our secretary and a member
of our board of directors since our inception. Since 1992, he
has been a practicing lawyer specializing in Shipping and
Capital Markets law. In 1994, he joined the law firm of
Vgenopoulos and Partners, one of the largest international
practice firms in Greece. Mr. Tsigkounakis advises Greek
issuers, brokers, investment firms and banking institutions on
capital markets and investment banking matters. He has been
involved in capital finance transactions, mergers and
acquisitions, take-overs and buy-outs, both in Greece and
abroad, including: (i) the acquisition through the Athens
Exchange of a controlling interest in Proton Bank of Greece by
IRF European Finance Investments Ltd., in May 2006, a company
listed on AIM, (ii) the public tender offer made by Laiki
Bank Public Co. Ltd. of Cyprus to Egnatia Bank and Marfin
Holdings of Greece, in September 2006, (iii) the
acquisition of Links of London Ltd., in July 2006, and
(iv) the issuance of a bond loan by HSBC, Alfa Bank,
Piraeus Bank, BNP Paribas and National Bank of Greece. Since
2002, he has been a member of the board of directors of
Aspropirgos Maritime Ltd., a company that owns a crude oil
tanker and is a subsidiary of Paradise Tankers Corp., a tanker
carrier group. Between 2003 and 2004, he was also a
non-executive member of the board of directors of Marfin Bank
Private Fund. He is currently an executive member of the board
of directors of Hellenic Duty Free Shops, a company listed on
the Athens Exchange (ATSE: HDF). Mr. Tsigkounakis received
his law degree from the National University of Athens and a
masters degree (DEA) in International and Banking Law from
the University of Pantheon, Sorbonne I, France. Since 2005,
he has been a member of the Greek Legal Society of Banking and
Capital Markets Law.
Alexios Komninos has been a member of our board of
directors since our inception and was our chief financial
officer from our inception through November 16, 2008. Since
1991, he has been a major shareholder and chief operating
officer of N. Komninos Securities SA, one of the oldest members
of the Athens Stock Exchange and member of the Athens
Derivatives Exchange. He has been involved in more than twenty
successful initial public offerings and secondary offerings of
companies listed on the Athens Stock Exchange, including Rokkas
Energy S.A. (ATSE: ROKKA), a windmill parks company, Folli
Follie S.A. (ATSE: FOLLI), a luxury goods company, Flexopack
S.A. (ATSE: FLEXO), a packaging company, Eurobrokers S.A. (ATSE:
EUBRK), an insurance broking company, and Edrasi S.A. (ATSE:
EDRA), a specialized construction company. Mr. Komninos is
primarily engaged in the business of securities portfolio
management. Throughout 2004 and 2005, he was a financial adviser
to Capital Maritime & Trading Corp. Mr. Komninos
also advises numerous other public companies in Greece on
capital restructuring, mergers and acquisitions and buy-out
projects. Mr. Komninos received his B.Sc. in economics from
the University of Sussex in the United Kingdom and his M.Sc. in
Shipping Trade and Finance from the City University Business
School in London.
Kostas Koutsoubelis has been a member of our board of
directors since May 20, 2008. Mr. Kostas Koutsoubelis
is the group financial director of the Restis group of companies
and also the chairman of Golden Energy Marine Corp. Furthermore,
he is a member of the board of the directors of the following
public listed companies: FreeSeas Inc., Hellenic Seaways S.A.,
FG Europe, Imperio Argo Group A.M.E., First Business Bank, South
African Marine Corp. and Swissmarine Corporation Ltd.
Mr. Koutsoubelis is also the vice president and treasurer
of FreeSeas. Before joining the Restis group he served as head
of shipping of Credit Lyonnais, Greece. After graduating from
St. Louis University, St. Louis, Missouri, he held various
positions in
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Mobil Oil Hellas S.A. and after his departure he joined
International Reefer Services, S.A., a major shipping company,
as financial director. In the past he has also served as
director in Egnatia Securities S.A., a stock exchange company,
and Egnatia Mutual Fund S.A. He is a governor in the
Propeller Club Port of Piraeus and member of the
Board of the Association of Banking and Financial Executives of
Hellenic Shipping.
Elias M. Culucundis has been a member of our board of
directors since our inception. Since 2002, Mr. Culucundis
has been a member of the board of directors of Folli Follie S.A.
and since 2006 an executive member of the board of directors of
Hellenic Duty Free Shops S.A. Since 1999, Mr. Culucundis
has been president, chief executive officer and director of
Equity Shipping Company Ltd., a company specializing in
starting, managing and operating commercial and technical
shipping projects. Additionally, from 1996 to 2000, he was a
director of Kassian Maritime Shipping Agency Ltd., a vessel
management company operating a fleet of ten bulk carriers.
During this time, Mr. Culucundis was also a director of
Point Clear Navigation Agency Ltd, a marine project company.
From 1981 to 1995, Mr. Culucundis was a director of Kassos
Maritime Enterprises Ltd., a company engaged in vessel
management. While at Kassos, he was initially a technical
director and eventually ascended to the position of chief
executive officer, overseeing a large fleet of Panamax, aframax
and VLCC tankers, as well as overseeing new vessel building
contracts, specifications and the construction of new vessels.
From 1971 to 1980, Mr. Culucundis was a director and the
chief executive officer of Off Shore Consultants Inc. and Naval
Engineering Dynamics Ltd. Off Shore Consultants Inc. worked in
FPSO (Floating Production, Storage and Offloading vessel,
FPSO) design and construction and responsible for
the technical and commercial supervision of a pentagon-type
drilling rig utilized by Royal Dutch Shell plc. Seven
FPSOs were designed and constructed that were subsequently
utilized by Pertamina, ARCO, Total and Elf-Aquitaine. Naval
Engineering Dynamics Ltd. was responsible for purchasing,
re-building and operating vessels that had suffered major
damage. From 1966 to 1971, Mr. Culucundis was employed as a
Naval Architect for A.G. Pappadakis Co. Ltd., London,
responsible for tanker and bulk carrier new buildings and
supervising the technical operation of our fleet. He is a
graduate of Kings College, Durham University,
Great Britain, with a degree in Naval Architecture and
Shipbuilding. He is a member of several industry organizations,
including the Council of the Union of Greek Shipowners and
American Bureau of Shipping. Mr. Culucundis is a fellow of
the Royal Institute of Naval Architects and a Chartered Engineer.
George Taniskidis is the chairman and managing director
of Millennium Bank, a position he had held since 2002.
Mr. Taniskidis is a member of the board of directors of
Euroseas Limited, a shipping company, where he has served since
2005. He is also a member of the board of directors of
Millennium Bank, Turkey and a member of the executive committee
of the Hellenic Banks Association. From 2003 until 2005, he was
a member of the board of directors of Visa International Europe,
elected by the Visa issuing banks of Cyprus, Malta, Portugal,
Israel and Greece. From 1990 to 1998, Mr. Taniskidis worked
at XIOSBANK (until its acquisition by Piraeus Bank in
1998) in various positions, with responsibility for the
banks credit strategy and network. Mr. Taniskidis
studied law at the National University of Athens and at the
University of Pennsylvania Law School, where he received an
LL.M. After law school, he joined the law firm of
Rogers & Wells in New York, where he worked from
1986 until 1989 and was also a member of the New York State Bar
Association. He is a member of the Young Presidents Organization.
Kyriakos G. Dermatis has extensive experience in
brokering and negotiating the sale and acquisition of commercial
vessels, chartering, ship management and operations. He founded
and became president of Intermodal Shipbrokers Co., a ship
brokering company involved in ship sale and purchase, new
building contracting and special project activities.
Mr. Dermatis began his career in October 1965 as a deck
apprentice on seagoing tankers vessels. He quickly climbed up to
Chief mate with various shipping companies and ships until 1975
when he moved on shore and continued his career as a shipbroker
with Thenamaris SA in July 1976. Later he joined
Balkanfracht Hamburg as a shipbroker for
approximately a year. He returned to Greece in October 1978 and
joined Balkanfracht Piraeus as Senior Dry Cargo
Broker. In 1976, he moved to A. Bacolitsas
S.A. a shipowning company, operating a fleet
of 18 ships of several types and sizes, as chartering manager
and was soon promoted to General Manager of the subject company
where he stayed until April 1983. From April 1983 until
September 1983, he was chartering Director in Greece for
European Navigation Fleet. In January 1985, he established
Intermodal Shipmanagement Inc., a company
specializing in the sale and purchase of ships, tanker
chartering, management of small tankers and other more
specialized
119
projects. In 1992, the company was renamed Intermodal
Shipbrokers Co. In 2003, Mr. Dermatis moved the
companys headquarters in North Athens and in 2005 he
established a branch office in Shanghai, China in order to
support the constantly rising new building activity. Since 2004,
Intermodal has negotiated contracts for more than 120 ships in
China and 6 Prototype RoRo-tankers in Romania for major Greek,
as well as UAE, Argentinean, Malaysian and Italian, shipowners.
Kyriakos Dermatis remains an active board member of The Hellenic
Shipbrokers Association, a member of the Mediterranean committee
of China Classification Society, a member of Shell Marine panel
as an external professional advisor to Shell for the past
20 years, and a member of marine club. Mr. Kyriakos
Dermatis graduated from the University of Piraeus in March, 1973
by obtaining a BSC in Economics and he attended the London
School of Foreign Trade based in London from
1974-1975
where he obtained a diploma in Shipping Business. Then he
completed the Post Graduate Diploma in Port & Shipping
Administration in 1976 from the University of Wales with
recommendation. In 1984, he received an MSC in maritime studies
from Cardiff University.
Alexander Papageorgiou has been the chief executive
officer of Assos Capital Limited since the establishment of the
company in May 2006. Between March 2005 and May 2006, he was the
chief financial officer of Golden Energy Marine Corp., an
international shipping company transporting a variety of crude
oil and petroleum products based in Athens, Greece. From March
2004 to March 2005, Mr. Papageorgiou served as a director
in the equities group in the London office of Citigroup Global
Markets Inc. where he was responsible for the management and
development of Citigroups Portfolio Products business in
the Nordic region. From March 2001 to March 2004,
Mr. Papageorgiou served as a vice president in the equities
group in the London office of Morgan Stanley & Co.,
where hew was responsible for Portfolio Product sales and
sales-trading coverage for the Nordic region and the Dutch
institutional client base. From April 1997 to March 2001, he was
an associate at J.P. Morgan Securities Ltd. in the Fixed
Income and Investment Banking divisions. Mr. Papageorgiou
holds an MSC in Shipping, Trade and Finance from City University
Business School in London, Great Britain and a BA (Hons) in
Business Economics from Vrije Universiteit in Brussels, Belgium.
Dimitrios Panagiotopoulos is the head of shipping and
corporate banking of Proton Bank, a Greek private bank, where he
has served since April 2004. From January 1997 to March 2004, he
served as deputy head of the Greek shipping desk of BNP Paribas
and before that for four years as senior officer of the shipping
department of Credit Lyonnais Greece. From 1990 to 1993, he
worked as chief accountant in Ionia Management, a Greek shipping
company. He also served his obligatory military duty as an
officer of the Greek Special Forces and today is a captain of
the reserves of the Hellenic Army.
George Tsimpis served as shipping advisor at BNP Paribas,
Greece, from 2006 through 2007, upon retiring as Head of the
Greek Shipping Desk from BNP Paribas in 2006, a position he had
held since 1992. From 1986 to 1992, Mr. Tsimpis served as
chief financial officer of Pirelli Tyres. From 1978 to 1986,
Mr. Tsimpis was Delegate Manager and Treasurer at Bank of
America, Greece. Mr. Tsimpis joined Citibank, Greece in
1971, where he served as chief trader from 1974 to 1978.
Mr. Tsimpis holds a Bachelor of Arts Degree in Economics
from the University of Piraeus.
Dimitris Anagnostopoulos has over forty years of
experience in hipping and ship finance. His career began in the
1970s at Athens University of Economics followed by four
years with the Onassis Group in Monaco. Mr. Anagnostopoulos
also held various posts at the National Investment Bank of
Industrial Development (ETEBA), Continental Illinois National
Bank of Chicago, Greyhound Corporation, and with ABN AMRO, where
he has spent nearly two decades with the Bank, holding positions
of Senior Vice-President and Head of Shipping.
Mr. Anagnostopoulos has been a speaker and panelist in
various shipping conferences in Europe, and a regular guest
lecturer at the City University Cass Business School in London
and the Erasmus University in Rotterdam. He is a member (and ex
vice chairman) of the Association of Banking and Financial
Executives of Greek Shipping. He was recently named by the
Lloyds Organization as Shipping Financier of the Year for
2008.
120
Voting
Agreement
Pursuant to the Voting Agreement, our board of directors is
required to consist of 13 persons. The Restis affiliate
shareholders, on the one hand, and the founding shareholders on
the other have agreed to vote or cause to be voted certain
shares they own or control in Seanergy so as to cause
(i) six people named by the Restis affiliate shareholders
to be elected to our board of directors, (ii) six people
named by the founding shareholders to be elected to our board of
directors, and (iii) one person jointly selected by the
Restis affiliate shareholders and the founding shareholders to
be elected to our board of directors.
The six members of our board of directors designated by each of
the Restis affiliate shareholders and the founding shareholders
have been divided as equally as possible among Class A,
Class B and Class C directors. The six members of our
board of directors designated by each of the Restis affiliate
shareholders, on the one hand, and the founding shareholders, on
the other hand, will include at least three
independent directors, as defined in the rules of
the SEC and the rules of any applicable stock exchange.
Both Messrs. Ploughman and Koutsoubelis were selected as
directors by the Restis affiliate shareholders pursuant to the
Voting Agreement. Because each of Messrs. Ploughman and
Koutsoubelis was appointed by the Restis affiliate shareholders
and employed by affiliates of the Restis affiliate shareholders
in other vessel-owning ventures, the Restis affiliate
shareholders are in a position to exert influence over such
individuals in their capacities as directors of Seanergy.
Accordingly, these board members may encounter conflicts of
interest in considering future acquisitions of vessels on behalf
of Seanergy.
Any director may be removed from office at any time, with or
without cause, at the request of the shareholder group entitled
to designate such director, and a director so removed shall be
replaced by a nominee selected by the shareholder group entitled
to designate such director. Vacancies on the board of directors
will also be filled by the shareholder group entitled to name
the director whose resignation or removal led to the occurrence
of the vacancy.
In addition, pursuant to the Voting Agreement, our board of
directors established a shipping committee consisting of three
directors to consider and vote upon all matters involving
shipping and vessel finance. The Voting Agreement requires that
our board of directors appoint selected nominees as described
below and that the board of directors fill any vacancies on the
shipping committee with the nominees selected by the party that
nominated the person whose resignation or removal has caused the
vacancy. See Management Board
Committees Shipping Committee.
With respect to our officers, the parties agreed that
Messrs. Dale Ploughman and Georgios Koutsolioutsos would
serve as chief executive officer and chairman of the board of
directors, respectively. If Mr. Ploughman is unable or
unwilling to serve in such position, the Restis affiliate
shareholders shall have the right to appoint his replacement.
The Voting Agreement terminates on May 20, 2010, provided
that the Restis affiliate shareholders and the founding
shareholders may terminate the Voting Agreement prior such date
if the other shareholder group at any time owns less than 50% of
the shares subject to the Voting Agreement.
Board
Committees
Our board of directors has an audit committee, a compensation
committee, a nominating committee and a shipping committee. Our
board of directors has adopted a charter for each of these
committees.
Audit
Committee
Our audit committee consists of Messrs. Dimitris
Anagnostopoulos, Dimitrios N. Panagiotopoulos and George
Tsimpis, each of whom is an independent director.
Mr. Dimitrios N. Panagiotopoulos has been designated the
Audit Committee Financial Expert under the SEC rules
and the current listing standards of the Nasdaq Marketplace
Rules.
The audit committee has powers and performs the functions
customarily performed by such a committee (including those
required of such a committee under the Nasdaq Marketplace Rules
and the SEC). The audit
121
committee is responsible for selecting and meeting with our
independent registered public accounting firm regarding, among
other matters, audits and the adequacy of our accounting and
control systems.
Compensation
Committee
Our compensation committee consists of Messrs. Kyriakos
Dermatis, George Taniskidis and George Tsimpis, each of whom is
an independent director. The compensation committee reviews and
approves the compensation of our executive officers.
Nominating
Committee
Our nominating committee consists of Messrs. Elias M.
Culucundis, Dimitrios N. Panagiotopoulos and George Tsimpis,
each of whom is an independent director. The nominating
committee is responsible for overseeing the selection of persons
to be nominated to serve on our board of directors, subject to
the terms of the Voting Agreement.
Shipping
Committee
We have established a shipping committee. The purpose of the
shipping committee is to consider and vote upon all matters
involving shipping and vessel finance. The shipping industry
often demands very prompt review and decision-making with
respect to business opportunities. In recognition of this, and
in order to best utilize the experience and skills that the
Restis family board appointees bring to us, our board of
directors has delegated all such matters to the shipping
committee. Transactions that involve the issuance of our
securities or transactions that involve a related party,
however, shall not be delegated to the shipping committee but
instead shall be considered by the entire board of directors.
The shipping committee is comprised of three directors. In
accordance with the Voting Agreement, the Master Agreement and
our by-laws, two of the directors are nominated by the Restis
affiliate shareholders and one of the directors is nominated by
Seanergy Maritimes founding shareholders. The initial
members of the shipping committee are Messrs. Dale
Ploughman and Kostas Koutsoubelis, who are the Restis affiliate
shareholders nominees, and Mr. Elias M. Culucundis,
who is the founding shareholders nominee. The Voting
Agreement further requires that the directors appoint the
selected nominees and that the directors fill any vacancies on
the shipping committee with the nominees selected by the party
that nominated the person whose resignation or removal caused
the vacancy.
In order to assure the continued existence of the shipping
committee, our board of directors has agreed that the shipping
committee may not be dissolved and that the duties or
composition of the shipping committee may not be altered without
the affirmative vote of not less that 80% of our board of
directors. In addition, the duties and powers of Seanergys
chief executive officer, which is currently Mr. Ploughman,
may not be altered without a similar vote. These duties and
powers include voting the shares of stock that Seanergy owns in
its subsidiaries. The purpose of this provision is to ensure
that Seanergy will cause each of its shipping-related
subsidiaries to have a board of directors with members that are
identical to the shipping committee. In addition to these
agreements, Seanergy has amended certain provisions in its
articles of incorporation and by-laws to incorporate these
requirements. As a result of these various provisions, in
general, all shipping-related decisions will be made by the
Restis family appointees to our board of directors unless 80% of
the board members vote to change the duties or composition of
the shipping committee.
Director
Independence
Our securities are listed on the Nasdaq Stock Market and we are
exempt from certain Nasdaq listing requirements including the
requirement that our board be composed of a majority of
independent directors. The board of directors has evaluated
whether each of Messrs. Dimitris Anagnostopoulos, Elias M.
Culucundis, Kyriakos Dermatis, Dimitrios N. Panagiotopoulos,
Alexander Papageorgiou, George Taniskidis, and George Tsimpis is
an independent director within the meaning of the
listing requirements of Nasdaq. The Nasdaq independence
definition includes a series of objective tests, such as that
the director is not our employee and has not engaged in various
types of business dealings with us. In addition, as further
required by the Nasdaq requirements, the board of directors made
a subjective determination as to each of
Messrs. Elias M. Culucundis,
122
Kyriakos Dermatis, Dimitrios N. Panagiotopoulos, Alexander
Papageorgiou, George Taniskidis, and George Tsimpis that no
relationships exist which, in the opinion of the board of
directors, would interfere with the exercise of his independent
judgment in carrying out the responsibilities of a director. In
making this determination, the board of directors reviewed and
discussed information provided by each of Messrs. Dimitris
Anagnostopoulos, Elias M. Culucundis, Kyriakos Dermatis,
Dimitrios N. Panagiotopoulos, Alexander Papageorgiou, George
Taniskidis, and George Tsimpis with regard to his business and
personal activities as they may relate to us and our management.
After reviewing the information presented to it, our board of
directors has determined that each of Messrs. Dimitris
Anagnostopoulos, Elias M. Culucundis, Kyriakos Dermatis,
Dimitrios N. Panagiotopoulos, Alexander Papageorgiou, George
Taniskidis, and George Tsimpis is independent within
the meaning of such rules. Our independent directors will meet
in executive session as often as necessary to fulfill their
duties, but no less frequently than annually.
Our by-laws provide that transactions must be approved by a
majority of our independent and disinterested directors (i.e.,
those directors that are not expected to derive any personal
financial benefit from the transaction).
Code of
Conduct and Ethics
We have adopted a code of conduct and ethics applicable to our
directors, officers and employees in accordance with applicable
federal securities laws and the Nasdaq Marketplace Rules.
Compensation
of Directors and Executive Officers
For the period ended December 31, 2008, our executive
officers and directors received compensation of $321,000 from
Seanergy. No service contract exists between any director and us
or any of our subsidiaries providing for benefits upon
termination of employment.
123
PRINCIPAL
SHAREHOLDERS
The following table sets forth information regarding the
beneficial ownership of our common stock as of September 9,
2009, based upon filings publicly available as at
September 9, 2009, by:
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Each person known by us to be the beneficial owner of more than
5% of our outstanding shares of common stock;
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Each of our officers and directors; and
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Our officers and directors as a group.
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Unless otherwise indicated, we believe that all persons named in
the table have sole voting and investment power with respect to
all shares of common stock beneficially owned by them.
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Percentage of Outstanding
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Percentage of Outstanding
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Common Stock
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Common Stock
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Name and Address of
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Before
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After
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Investment
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Before
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After
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Beneficial Owner(1)
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Voting Power
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Offering
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Offering(2)
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Power
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Offering
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Offering(2)
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Georgios Koutsolioutsos
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28,224,029
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(3)(4)(5)
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79.12
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%
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42.98
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%
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9,568,380
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(6)
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26.28
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%
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14.57
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%
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Alexios Komninos
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22,339,246
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(3)(4)
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74.89
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%
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37.34
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%
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1,183,417
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(6)
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3.97
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%
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1.98
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%
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Ioannis Tsigkounakis
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21,858,745
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(3)(4)
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74.48
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%
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36.83
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%
|
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557,916
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(6)
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1.90
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%
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0.94
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%
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Kostas Koutsoubelis
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0
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*
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*
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0
|
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*
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*
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Elias M. Culucundis
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0
|
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*
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*
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0
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*
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|
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*
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Christina Anagnostara
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0
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|
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*
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|
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*
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|
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0
|
|
|
|
*
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|
|
|
*
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George Taniskidis
|
|
|
0
|
|
|
|
*
|
|
|
|
*
|
|
|
|
0
|
|
|
|
*
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|
|
|
*
|
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Kyriakos Dermatis
|
|
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0
|
|
|
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*
|
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*
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|
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0
|
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*
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|
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*
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Alexander Papageorgiou
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0
|
|
|
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*
|
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*
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0
|
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|
|
*
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|
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*
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|
Dimitrios N. Panagiotopoulos
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0
|
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|
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*
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*
|
|
|
|
0
|
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|
|
*
|
|
|
|
*
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George Tsimpis
|
|
|
0
|
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|
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*
|
|
|
|
*
|
|
|
|
0
|
|
|
|
*
|
|
|
|
*
|
|
Dale Ploughman
|
|
|
0
|
|
|
|
*
|
|
|
|
*
|
|
|
|
0
|
|
|
|
*
|
|
|
|
*
|
|
Dimitris Anagnostopoulos
|
|
|
0
|
|
|
|
*
|
|
|
|
*
|
|
|
|
0
|
|
|
|
*
|
|
|
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*
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|
United Capital Investments Corp.
|
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25,866,038
|
(4)(6)(8)(9)
|
|
|
81.41
|
%
|
|
|
41.87
|
%
|
|
|
9,416,372
|
(6)
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|
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29.64
|
%
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|
|
15.24
|
%
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Atrion Shipholding S.A.
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24,581,287
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(4)(8)(9)
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79.42
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%
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40.33
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%
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7,518,620
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(6)
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24.29
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%
|
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12.34
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%
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Plaza Shipholding Corp.
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24,714,881
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(4)(6)(8)(9)
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79.86
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%
|
|
|
40.55
|
%
|
|
|
7,652,214
|
(6)
|
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24.73
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%
|
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12.56
|
%
|
Comet Shipholding Inc.
|
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24,581,578
|
(4)(8)(9)
|
|
|
79.43
|
%
|
|
|
40.33
|
%
|
|
|
7,518,911
|
(6)
|
|
|
24.29
|
%
|
|
|
12.34
|
%
|
Benbay Limited
|
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9,416,372
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(7)
|
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29.64
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%
|
|
|
15.24
|
%
|
|
|
9,416,372
|
(6)
|
|
|
29.64
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%
|
|
|
15.24
|
%
|
United Capital Trust, Inc.
|
|
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9,416,372
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(7)
|
|
|
29.64
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%
|
|
|
15.24
|
%
|
|
|
9,416,372
|
(6)
|
|
|
29.64
|
%
|
|
|
15.24
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%
|
Aldebaran Investments LLC(10)
|
|
|
3,085,257
|
|
|
|
10.66
|
%
|
|
|
5.23
|
%
|
|
|
3,085,257
|
|
|
|
10.66
|
%
|
|
|
5.23
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%
|
Brian Taylor(11)
|
|
|
3,475,938
|
|
|
|
12.00
|
%
|
|
|
5.90
|
%
|
|
|
3,475,938
|
|
|
|
12.00
|
%
|
|
|
5.90
|
%
|
Integrated Core Strategies (US) LLC(12)
|
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|
1,647,408
|
|
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|
5.69
|
%
|
|
|
2.79
|
%
|
|
|
1,647,408
|
|
|
|
5.69
|
%
|
|
|
2.79
|
%
|
All directors and executive officers as a group (13 individuals)
|
|
|
28,224,029
|
(3)(4)(5)
|
|
|
79.12
|
%
|
|
|
42.98
|
%
|
|
|
11,309,713
|
|
|
|
30.60
|
%
|
|
|
16.89
|
%
|
|
|
|
* |
|
Less than one (1) percent |
|
(1) |
|
Unless otherwise indicated, the business address of each of the
shareholders is 1-3 Patriarchou Grigoriou, 166 74 Glyfada,
Athens, Greece. |
|
(2) |
|
Assumes underwriters do not exercise overallotment option. |
|
(3) |
|
Includes 6,727,000, 880,927, and 400,416 shares of our
common stock for Mr. Koutsolioutsos, Mr. Komninos and
Mr. Tsigkounakis, respectively, issuable upon exercise of
warrants, as to which each of Mr. Koutsolioutsos,
Mr. Komninos, and Mr. Tsigkounakis have sole voting
power. |
124
|
|
|
(4) |
|
Includes an aggregate of 18,265,649 shares of our common
stock owned by the Restis affiliated shareholders, United
Capital Investments, Atrion, Plaza and Comet, and Seanergy
Maritimes founding shareholders, which are subject to the
Voting Agreement, as amended, described above. |
|
(5) |
|
Includes 38,700 shares of our common stock, as to which
Mr. Koutsolioutsos has sole voting power. |
|
(6) |
|
Includes 70,000 shares of common stock owned by Argonaut
SPC, a fund managed by Oxygen Capital AEPEY, which is an entity
affiliated with Victor Restis and Katia Restis. |
|
(7) |
|
None of the Restis affiliate shareholders, other shareholders
who are affiliates of the Restis family, or Seanergy
Maritimes founding shareholders has shared investment
power with respect to any of the shares beneficially owned,
except for (i) 9,416,372 shares included for United
Capital Investments Corp., United Capital Trust, Inc. and
Benbay Limited as to which each of United Capital Investments,
United Capital Trust and Benbay have shared investment
power; and (ii) 70,000 shares included for Plaza
Shipholding Corp. as to which each of United and Plaza have
shared investment power. |
|
(8) |
|
Does not include up to an aggregate of 4,308,075 shares of
Seanergy common stock issuable to these entities if Seanergy
achieves certain definitive predetermined criteria described in
this prospectus. Each of United Capital Investments Corp.,
Atrion Shipholding S.A., Plaza Shipholding Corp. and Comet
Shipholding Inc. is an affiliate of members of the Restis
family. The address of each of United Capital Investments Corp.,
Atrion Shipholding S.A., Plaza Shipholding Corp., and Comet
Shipholding Inc., is
c/o 11
Poseidonos Avenue, 16777 Elliniko, Athens, Greece, Attn: Evan
Breibart. |
|
(9) |
|
Includes 2,826,584, 2,002,038, 2,002,084, and
2,002,083 shares of our common stock for United Capital
Investments, Atrion, Plaza and Comet, respectively, in
connection with the exercise of the warrants, as to which each
of United Capital Investments, Atrion, Plaza and Comet have sole
voting power. |
|
(10) |
|
Based on Schedule 13G filed on February 17, 2009.
Includes shares issuable upon exercise of warrants which became
exercisable on September 24, 2008. The address is 500 Park
Avenue, 5th Floor, New York, NY 10022. |
|
(11) |
|
Based on Schedule 13G/A filed on January 20, 2009.
Mr. Brian Taylor, who is the sole member of Pine River
Capital Management LLC, the general partner of Pine River
Capital Management, L.P. and director of Nisswa Acquisition
Master Fund Ltd., and Pine River Capital Management L.P.,
Nisswa Acquisition Master Funds investment manager,
initially had shared voting power and shared investment power
for 3,475,938 shares. Nisswa Acquisition Master
Fund Ltd. has shared voting power and shared investment
power for 3,261,326 shares. The address of each of
Mr. Taylor, Pine River Capital Management L.P. and Nisswa
Acquisition Master Fund Ltd. is
c/o Pine
River Capital Management L.P., 601 Carlson Parkway,
Suite 330, Minnetonka, MN 55305. |
|
(12) |
|
Based on Schedule 13G filed on February 5, 2008.
Includes shares issuable upon exercise of Warrants which became
exercisable on September 24, 2008. Integrated Core
Strategies (US) LLC, Millennium Management LLC and Israel A.
Englander have shared voting power and shared investment power
for these 1,647,408 shares. The address is
c/o Millennium
Management LLC, 666 Fifth Avenue, New York, NY 10103. |
Escrow of
Shares Held by Seanergy Maritimes Founding
Shareholders
The 5,500,000 shares initially owned by Seanergy
Maritimes founding shareholders, including those that were
transferred by Seanergy Maritimes former chief executive
officer and former chief operating officer to the Restis
affiliate shareholders, have been placed in an escrow account
maintained by Continental Stock Transfer &
Trust Company, as escrow agent. These shares were exchanged
for shares of our common stock. In connection with the
dissolution and liquidation of Seanergy Maritime, we executed a
joinder to the stock escrow agreement and as a result the shares
of our common stock owned by such shareholders remained in
escrow until 12 months after the vessel acquisition. In
September 2009 pursuant to the terms of the escrow agreement,
these shares were released by the escrow agent to the founding
shareholders, including the Restis affiliate shareholders.
125
CERTAIN
RELATIONSHIPS AND RELATED TRANSACTIONS
Master
Agreement
On August 26, 2008, shareholders of Seanergy Maritime
approved a proposal to acquire six dry bulk carriers from six
individual sellers that are controlled by members of the Restis
family, including two newly built vessels. This acquisition was
made pursuant to the Master Agreement and the several MOAs in
which Seanergy agreed to purchase these vessels for an aggregate
purchase price of (i) $367,030,750 in cash to the sellers,
(ii) $28,250,000 in the form of the Note, which was
convertible into 2,260,000 shares of Seanergys common
stock, issued to the Restis affiliate shareholders as nominees
for the sellers, and (iii) up to an aggregate of
4,308,075 shares of common stock of Seanergy issued to the
Restis affiliate shareholders as nominees for the sellers,
subject to Seanergy meeting an EBITDA target of $72 million
to be earned between October 1, 2008 and September 30,
2009. We expect to meet the EBITDA target. On August 19,
2009, in connection with an amendment to the Note to reduce the
conversion price, the holders of the Note converted it to
6,585,868 shares of our common stock. The Restis affiliate
shareholders, United Capital Investments Corp., Atrion
Shipholding S.A., Plaza Shipholding Corp., and Comet Shipholding
Inc., and the sellers are owned and controlled by the following
members of the Restis family: Victor Restis, Bella Restis, Katia
Restis and Claudia Restis. The Restis affiliate shareholders are
four personal investment companies. Each company is controlled
by one of these four individuals. Each seller is a single
purpose entity organized for the purpose of owning and operating
one of the six dry bulk carriers sold pursuant to the terms of
the Master Agreement and the individual related MOA. Following
the sale of the vessels under the Master Agreement and related
MOAs, the sellers have had no further operations. The Restis
affiliate shareholders purchased shares of Seanergys
common stock from two of our original founders,
Messrs. Panagiotis and Simon Zafet, and serve as nominees
of the sellers for purposes of receiving payments under the Note
and the shares issuable upon meeting the EBITDA targets
described above. The Restis affiliate shareholders do not have
any direct participation in our operations as they are not
officers, directors or employees of Seanergy Maritime or
Seanergy. Pursuant to the terms of the Voting Agreement, the
Restis affiliate shareholders have the right to nominate members
to the Board of Directors and to appoint officers as described
more fully below.
The Master Agreement also provided that Seanergy Maritime and
Seanergy cause their respective officers to resign as officers,
other than Messrs. Ploughman and Koutsolioutsos, and the
Restis affiliate shareholders have the right to appoint such
other officers as they deem appropriate in their discretion. The
Master Agreement also required that directors resign and be
appointed so as to give effect to the Voting Agreement. Pursuant
to the Master Agreement, Seanergy Maritime and Seanergy also
established shipping committees of three directors and delegated
to them the exclusive authority to consider and vote upon all
matters involving shipping and vessel finance, subject to
certain limitations. Messrs. Ploughman, Koutsoubelis and
Culucundis were appointed to such committees. See
Ours Business Shipping Committee.
In addition, in connection with the Master Agreement, Seanergy
entered into the Management Agreement and the Brokerage
Agreement, whereby Seanergy agreed to outsource the management
and commercial brokerage of its fleet to affiliates of the
Restis family.
Registration
Rights
Pursuant to a Registration Rights Agreement, no later than
thirty days from the effective date of the dissolution and
liquidation, we were obligated to file a registration statement
with the Securities and Exchange Commission registering the
resale of the 5,500,000 shares in the aggregate owned by
Seanergy Maritimes founding shareholders and the Restis
affiliate shareholders and the 16,016,667 shares of common
stock underlying their private placement warrants. However, the
5,500,000 shares will not be released from escrow before
the first year anniversary of the consummation of the vessel
acquisition. In addition, we agreed to register for resale in
such registration statement an aggregate of
6,568,075 shares of common stock, consisting of
4,308,075 shares of common stock issuable to the Restis
affiliate shareholders if we achieve certain earnings targets
and 2,260,000 shares of common stock issuable upon
conversion of the Note. We have filed such registration
statement with the SEC and it was declared effective on
February 19, 2009. On August 28,
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2009, in connection with the amendment to the Note, we filed a
registration statement pursuant to Rule 462(b) for the
additional 4,325,868 shares of our common stock issued upon
conversion of the Note, as amended.
The holders of such securities are also entitled to certain
piggy-back registration rights on registration
statements filed subsequent to such date. We will bear the
expenses incurred in connection with any such registration
statements, other than underwriting discounts
and/or
commissions.
Management
of the Fleet
We outsource the commercial brokerage and management of our
fleet to companies that are affiliated with members of the
Restis family. The commercial brokerage of our initial fleet of
six vessels and the BET fleet has been contracted out to
Safbulk. The management of our fleet has been contracted out to
EST. All three of these entities are controlled by members of
the Restis family.
Brokerage
Agreement
Under the terms of the brokerage agreements entered into by
Safbulk Pty, as exclusive commercial broker, with Seanergy
Management, for our initial fleet of six vessels, and Safbulk
Maritime and BET for the BET fleet, Safbulk provides commercial
brokerage services to our subsidiaries and the subsidiaries of
BET, which include, among other things, seeking and negotiating
employment for the vessels owned by the vessel-owning
subsidiaries in accordance with the instructions of Seanergy
Management and BET, as the case may be. Safbulk is entitled to
receive a commission of 1.25% calculated on the collected gross
hire/freight/demurrage payable when such amounts are collected.
The brokerage agreement with Safbulk Pty is for a term of two
years expiring in August 2010. The brokerage agreement with
Safbulk Maritime is for a term of one year expiring in August
2010. Each brokerage agreement is automatically renewable for
consecutive periods of one year, unless either party is provided
with three months written notice prior to the termination
of such period.
Management
Agreement
Under the terms of the management agreement entered into by EST,
as manager of all vessels owned by Seanergys subsidiaries,
with Seanergy Management, and EST, as manager of all vessels
owned by BET, and BET, EST performs certain duties that include
general administrative and support services necessary for the
operation and employment of all vessels owned by all
subsidiaries of Seanergy and BET, including, without limitation,
crewing and other technical management, insurance, freight
management, accounting related to vessels, provisions,
bunkering, operation and, subject to Seanergys
instructions, sale and purchase of vessels.
Under the terms of the management agreement with Seanergy
Management, EST was initially entitled to receive a daily fee of
Euro 416.00 per vessel until December 31, 2008, which
fee may thereafter be increased annually by an amount equal to
the percentage change during the preceding period in the
Harmonised Indices of Consumer Prices All Items for Greece
published by Eurostat from time to time. Such fee is payable
monthly in advance on the first business day of each following
month. The fee has been increased to Euro 425.00 per vessel
through December 31, 2009. Under the terms of the
management agreement with BET, the management fee is also
Euro 425.00 per vessel through December 31, 2009.
Shipping
Committee
We have established a shipping committee. The purpose of the
shipping committee is to consider and vote upon all matters
involving shipping and vessel finance. The shipping industry
often demands very prompt review and decision-making with
respect to business opportunities. In recognition of this, and
in order to best utilize the experience and skills that the
Restis family board appointees bring to us, our board of
directors has delegated all such matters to the shipping
committee. Transactions that involve the issuance of our
securities or transactions that involve a related party,
however, shall not be delegated to the shipping committee but
instead shall be considered by the entire board of directors.
The shipping committee is comprised of three directors. In
accordance with the Voting Agreement, the Master Agreement and
our by-laws, two of the directors are nominated by the Restis
affiliate shareholders and one of the directors is nominated by
Seanergy
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Maritimes founding shareholders. The initial members of
the shipping committee are Messrs. Dale Ploughman and
Kostas Koutsoubelis, who are the Restis affiliate
shareholders nominees, and Mr. Elias M. Culucundis,
who is the founding shareholders nominee. The Voting
Agreement further requires that the directors appoint the
selected nominees and that the directors fill any vacancies on
the shipping committee with nominees selected by the party that
nominated the person whose resignation or removal caused the
vacancy.
In order to assure the continued existence of the shipping
committee, our board of directors has agreed that the shipping
committee may not be dissolved and that the duties or
composition of the shipping committee may not be altered without
the affirmative vote of not less that 80% of our board of
directors. In addition, the duties of our chief executive
officer, which is currently Mr. Ploughman, may not be
altered without a similar vote. These duties include voting the
shares of stock that Seanergy owns in its subsidiaries. The
purpose of this provision is to ensure that we will cause each
of its shipping-related subsidiaries to have a board of
directors with members that are identical to the shipping
committee. In addition to these agreements, we have amended
certain provisions in its articles of incorporation and by-laws
to incorporate these requirements. As a result of these various
provisions, in general, all shipping-related decisions will be
made by the Restis family appointees to our board of directors
unless 80% of the board members vote to change the duties or
composition of the shipping committee.
The members of the shipping committee also serve as our
appointees to the BET board of directors.
The
Charters
In connection with our business combination, our relevant
vessel-owning subsidiaries entered into time charter parties for
all six vessels with SAMC, a company associated with members of
the Restis family. Each charter party reflected rates for a
period of 11 to 13 months as follows (inclusive of a total
of 2.5% address and charter commission in favor of parties
nominated by the sellers): (i) $30,000 per day for the
African Oryx; (ii) $36,000 per day for the African Zebra;
(iii) $60,000 per day for the Davakis G. (ex. Hull
No. KA215); (iv) $60,000 per day for the Delos Ranger
(ex. Hull No. KA216); (v) $65,000 per day for the
Bremen Max; and (vi) $65,000 per day for the Hamburg Max,
with some flexibility permitted with regard to the per vessel
type charters secured by the sellers so long as the operating
day and duration weighted average revenues are consistent with
the foregoing. On July 24, 2009, SAMC and Seanergy executed
addendums to the charter parties relating to the Bremen Max and
the Hamburg Max pursuant to which the daily charter rate was
reduced to $15,500 for each vessel and the charter period was
extended for an additional
11-13 months
commencing on July 27, 2009 and August 12, 2009,
respectively.
Upon expiration of the current charters for the BET Commander
and the BET Prince in October 2009 and November 2009,
respectively, pursuant to charter party agreements dated as of
July 7, 2009, the BET Commander and the BET Prince will be
chartered to SAMC at daily charter rates of $24,000 and $25,000,
respectively, for charters expiring in December 2011 and January
2012, respectively.
Pursuant to charter party agreements dated as of July 7,
2009, each of the BET Fighter, BET Scouter and the BET Intruder
were chartered to SAMC at daily charter rates of $25,000,
$26,000 and $15,500, respectively, for charters expiring in
September 2011, October 2011 and September 2011, respectively.
All charter rates for the BET fleet are inclusive of a
commission of 1.25% payable to Safbulk as commercial broker and
2.5% payable to SAMC as charterer.
SAMC is an affiliate of members of the Restis family. We believe
the terms of the charters with SAMC are at least as favorable to
us as those we could have obtained from an unaffiliated third
party.
Voting
Agreement
Pursuant to the Voting Agreement, our board of directors is
required to consist of 13 persons. The Restis affiliate
shareholders, on the one hand, and the founding shareholders on
the other have agreed to vote or cause to be voted certain
shares they own or control in Seanergy so as to cause
(i) six people named by the Restis affiliate shareholders
to be elected to our board of directors, (ii) six people
named by the founding
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shareholders to be elected to our board of directors, and
(iii) one person jointly selected by the Restis affiliate
shareholders and the founding shareholders to be elected to our
board of directors.
The six members of our board of directors designated by each of
the Restis affiliate shareholders and the founding shareholders
will be divided as equally as possible among Class A,
Class B and Class C directors. The six members of our
board of directors designated by each of the Restis affiliate
shareholders, on the one hand, and the founding shareholders, on
the other hand, will include at least three
independent directors, as defined in the rules of
the SEC and the rules of any applicable stock exchange.
Both Messrs. Ploughman and Koutsoubelis were selected as
directors by the Restis affiliate shareholders pursuant to the
Voting Agreement. Because each of Messrs. Ploughman and
Koutsoubelis was appointed by the Restis affiliate shareholders
and is employed by affiliates of the Restis affiliate
shareholders in other vessel-owning ventures, the Restis
affiliate shareholders are in a position to exert influence over
such individuals in their capacities as directors of Seanergy.
Accordingly, these board members may encounter conflicts of
interest in considering future acquisitions of vessels on behalf
of Seanergy.
Any director may be removed from office at any time, with or
without cause, at the request of the shareholder group entitled
to designate such director, and a director so removed shall be
replaced by a nominee selected by the shareholder group entitled
to designate such director. Vacancies on the board of directors
shall also be filled by the shareholder group entitled to name
the director whose resignation or removal led to the occurrence
of the vacancy.
In addition, pursuant to the Voting Agreement, our board of
directors established a shipping committee consisting of three
directors to consider and vote upon all matters involving
shipping and vessel finance. The Voting Agreement requires that
our board of directors appoint selected nominees as described
above and that the board of directors fill any vacancies on the
shipping committee with the nominees selected by the party that
nominated the person whose resignation or removal has caused the
vacancy. See Management Board
Committees Shipping Committee.
With respect to our officers, the parties agreed that
Messrs. Dale Ploughman and Georgios Koutsolioutsos will
serve as chief executive officer and chairman of the board of
directors, respectively. If Mr. Ploughman is unable or
unwilling to serve in such position, the Restis affiliate
shareholders shall have the right to appoint his replacement.
The Voting Agreement terminates on May 20, 2010, provided
that the Restis affiliate shareholders and the founding
shareholders may terminate the Voting Agreement prior such date
if the other shareholder group at any time owns less than 50% of
the shares subject to the Voting Agreement.
Stock
Purchase Agreement
On May 20, 2008, the Restis affiliate shareholders
purchased the beneficial interests in all of the securities of
Seanergy Maritime owned by Messrs. Panagiotis Zafet and
Simon Zafet, the former chief executive officer and chief
operating officer of Seanergy Maritime, respectively. The
securities owned by the Zafets consisted of 2,750,000 founding
shares and 8,008,334 private placement warrants. The aggregate
purchase price for the founding shares and private placement
warrants, which was negotiated between the Zafets and the Restis
affiliate shareholders, was $25,000,000.
Because the securities purchased by the Restis affiliate
shareholders were founding shares and private placement
warrants, they were subject to a number of restrictions not
applicable to Seanergy Maritime common stock and warrants. The
founding shares were held in escrow and could not be transferred
until 12 months after a business combination, which is why
the Restis affiliate shareholders could only purchase the
beneficial interests in such shares, including voting rights, as
the founding shares remained in the registered names of the
Zafets until September 7, 2009, when they were transferred
into the names of the Restis affiliate shareholders and released
from escrow.
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In connection with the purchase by the Restis affiliate
shareholders of all of the Zafets beneficial interest in
the founding shares and private placement warrants, the Zafets
agreed to resign as directors and officers of Seanergy Maritime
and terminated all business relationships they had with Seanergy
Maritime.
Neither Seanergy nor Seanergy Maritime was a party to the stock
purchase agreement and neither was involved in the negotiation
of the purchase price. Accordingly, Seanergy and Seanergy
Maritime believe that the fair value of the founding shares and
private placement warrants sold by the Zafets to the Restis
affiliate shareholders was the contractual purchase price of
$25,000,000. In addition, because none of Seanergy Maritime,
Seanergy or the founding shareholders other than the Zafets was
a party to the stock purchase agreement, the parties to the
stock purchase agreement could not and did not enter into a
voting agreement. The Voting Agreement was entered into in
connection with the Master Agreement between Seanergy Maritime
and the certain nominees of the sellers, among others.
Vgenopoulos
and Partners
Mr. Ioannis Tsigkounakis, a member of our board of
directors, is a partner of Vgenopoulos and Partners. During the
fiscal year ended December 31, 2008, Seanergy Maritime paid
Mr. Tsigkounakis law firm $340,000. Seanergy
anticipates continued retention of Mr. Tsigkounakis
law firm for the near future.
Sublease
Agreement
We lease our executive office space in Athens, Greece pursuant
to the terms of a sublease agreement between Seanergy Management
and Waterfront, a company which is beneficially owned by Victor
Restis. The sublease fee is approximately EURO 500,000 per
annum. The initial term is from November 17, 2008 to
November 16, 2011. Seanergy has the option to extend the
term until February 2, 2014. The premises are approximately
1,000 square meters in a prime location in the Southern
suburbs of Athens. The agreement includes furniture, parking
space and building maintenance.
Consultancy
Agreement
On December 15, 2008, Seanergy Management entered into an
agreement with CKA Company S.A., a related party entity
incorporated in the Marshall Islands. CKA Company S.A. is
beneficially owned by our chief financial officer. Under the
agreement, CKA Company S.A. provides the services of the
individual who serves in the position of our chief financial
officer. The agreement is for $220,000 per annum, payable
monthly on the last working day of every month in twelve
installments.
BET
Shareholders Agreement
In connection with the closing of our purchase of an interest in
BET, on August 12, 2009, we entered into a shareholders
agreement with Mineral Transport, an affiliate of members of the
Restis family, which sets forth, among other things, the parties
rights with respect to the corporate governance and control of
BETs business and operations and the ownership and
transfer of the stock owned by the two shareholders. See
Our Business BET Shareholders
Agreement.
SHARES
ELIGIBLE FOR FUTURE SALE
Upon completion of this offering, we will
have shares
of common stock outstanding
or shares
if the underwriters over-allotment option is exercised in
full. The 30,000,000 shares sold in this offering,
or shares
if the underwriters over-allotment option is exercised in
full, will be freely transferable in the United States without
restriction under the Securities Act, except for any shares
purchased by one of our affiliates, which will be
subject to the resale limitations of Rule 144 under
Securities Act.
After the consummation of this offering, our existing
shareholders will continue to
own shares
of common stock, which were acquired in private transactions not
involving a public offering and these shares are therefore
treated as restricted securities for purposes of
Rule 144. The restricted securities held by certain of
these existing shareholders, our officers, directors and certain
other parties will be subject to the
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underwriters -day
lock-up
agreement. Restricted securities may not be resold except in
compliance with the registration requirements of the Securities
Act or under an exemption from those registration requirements,
such as the exemptions provided by Rule 144, Regulation S
and other exemptions under the Securities Act. Securities
currently registered under our existing Form F-1 resale
registration statement may continue to be registered and sold
thereunder by some of our shareholders but may not be sold by
certain of our shareholders during
the -day
lock-up
period with respect to those shareholders that have executed
lock-up
agreements.
In general, under Rule 144 as currently in effect, a person
or persons whose shares are aggregated, who owns shares that
were acquired from the issuer or an affiliate at least six
months ago, would be entitled to sell within any three-month
period, a number of shares that does not exceed the greater of
(i) 1% of the then outstanding shares of the applicable
class of stock, or (ii) an amount equal to the average
weekly reported volume of trading in shares of the applicable
class of stock on all national securities exchanges
and/or
reported through the automated quotation system of registered
securities associations during the four calendar weeks preceding
the date on which notice of the sale is filed with the
Securities and Exchange Commission. Sales in reliance on
Rule 144 are also subject to other requirements regarding
the manner of sale, notice and availability of current public
information about us. A person or persons whose shares are
aggregated, who is not deemed to have been one of our affiliates
at any time during the 90 days immediately preceding the
sale may sell restricted securities in reliance on Rule 144
without regard to the limitations described above, provided that
one year has elapsed since the later of the date on which the
same restricted securities were acquired from us or one of our
affiliates. As defined in Rule 144, an
affiliate of an issuer is a person that directly, or
indirectly through on or more intermediaries, controls, or is
controlled by, or is under common control with, that same issuer.
Our directors and officers and certain of our existing
affiliated shareholders, who collectively
own shares,
may not offer, sell, contract to sell or otherwise dispose of
any of our securities that are substantially similar to our
common stock or that are exercisable for common stock, without
the prior written consent
of
during the period beginning from the date of the prospectus and
continuing to and including the date 60 days after the date
of this prospectus,.
As a result of these
lock-up
agreements and rules of the securities act, the restricted
shares will be available for sale in the public market, in some
cases subject to certain volume and other restrictions, as
mentioned above, as follows:
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Days After the Date
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Number of Shares
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of this Prospectus
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Eligible for Sales
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Comment
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Date of prospectus
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Shares not locked up and eligible for sale freely or under Rule
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60 days
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lock-up released
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Prior to this offering, there has been a limited public market
for our common stock, but no prediction can be made as to the
effect, if any, that future sales or the availability of shares
for sale will have on the market price of our common stock
prevailing from time to time. Nevertheless, sales of substantial
amounts of our common stock in the public market, or the
perception that those sales may occur, could adversely affect
prevailing market prices for our common stock.
DESCRIPTION
OF SECURITIES
Seanergy is a corporation organized under the laws of the
Republic of the Marshall Islands and is subject to the
provisions of Marshall Islands law.
Below is a summary of the material features of Seanergys
securities. This summary is not a complete discussion of the
amended and restated articles of incorporation and amended and
restated by-laws of Seanergy that create the rights of its
shareholders. You are urged to read carefully the amended and
restated articles of incorporation and amended and restated
by-laws of Seanergy.
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General
We are authorized to issue 200,000,000 shares of common
stock, par value $0.0001, of which 28,947,095 shares of
common stock are outstanding as of September 9, 2009 and
1,000,000 shares of preferred stock, par value $0.0001, of
which none are outstanding as of the date of this prospectus.
Common
Stock
We have outstanding 28,947,095 shares of common stock. In
addition, we have 40,984,667 shares of common stock
reserved for issuance upon the exercise of warrants and the
underwriters unit purchase option described below, and
4,308,075 shares reserved for issuance to the Restis
affiliate shareholders upon meeting an EBITDA target of
$72 million to be earned between October 1, 2008 and
September 30, 2009.
Each outstanding share of common stock entitles the holder to
one vote on all matters submitted to a vote of shareholders.
Subject to preferences that may be applicable to any outstanding
shares of preferred stock, holders of shares of common stock are
entitled to receive ratably all dividends, if any, declared by
our board of directors out of funds legally available for
dividends. Certain of our shareholders have agreed with us to
subordinate their right to receive dividends with respect to
5,500,000 shares of our common stock owned by them for a
period of one year commencing on the second full quarter
following the initial closing of the vessel acquisition to the
extent that we have insufficient funds to make such dividend
payments. Holders of common stock do not have conversion,
redemption or preemptive rights to subscribe to any of our
securities. All outstanding shares of common stock are fully
paid and non-assessable. The rights, preferences and privileges
of holders of common stock are subject to the rights of the
holders of any shares of preferred stock which we may issue in
the future.
There are no limitations on the right of non-residents of the
Republic of the Marshall Islands to hold or vote shares of our
common stock.
Preferred
Stock
Our amended and restated articles of incorporation authorizes
the issuance of 1,000,000 shares of blank check preferred
stock with such designation, rights and preferences as may be
determined from time to time by our board of directors.
Accordingly, our board of directors is empowered, without
shareholder approval, to issue preferred stock with dividend,
liquidation, conversion, voting or other rights which could
adversely affect the voting power or other rights of the holders
of our common stock. The preferred stock could be utilized as a
method of discouraging, delaying or preventing a change in
control of us. Although there is no current intent to issue any
shares of preferred stock, we cannot assure you that we will not
do so in the future.
Warrants
We have outstanding an aggregate of 38,984,667 warrants, which
are exercisable at a price of $6.50 per share, subject to
adjustment as discussed below. Our warrants will expire on
September 24, 2011 at 5:00 p.m., New York City time.
We may call the warrants for redemption:
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in whole and not in part;
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at a price of $0.01 per warrant at any time;
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upon not less than 30 days prior written notice of
redemption to each warrant holder; and
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if, and only if, the reported last sale price of the Common
Shares equals or exceeds $14.25 per share, for any 20 trading
days within a 30 trading day period ending on the third business
day prior to the notice of redemption to warrant holders;
provided that a current registration statement under the
Securities Act relating to the shares issuable upon exercise of
the warrant, or Warrant Share, is effective.
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This criterion was established to provide warrant holders with a
(i) adequate notice of exercise only after the then
prevailing Common Share price is substantially above the warrant
exercise price and (ii) a sufficient differential between
the then prevailing Common Share price and the warrant exercise
price so there is a reasonable cushion against a negative market
reaction, if any, to our redemption call. A total of 16,066,667
warrants issued by Seanergy Maritime in the pre-offering private
placement and which we assumed following the dissolution and
liquidation of Seanergy Maritime, which we will refer to as the
private placement warrants, may not be redeemed if held by the
initial holders or their permitted assigns.
The exercise price and number of Warrant Shares may be adjusted
in certain circumstances including in the event of a stock
dividend, or our recapitalization, reorganization, merger or
consolidation. However, the warrants will not be adjusted for
issuances of common stock at a price below their exercise price.
The warrants may be exercised upon surrender of the warrant
certificate on or prior to the expiration date at the offices of
the warrant agent, with the exercise form on the reverse side of
the warrant certificate completed and executed as indicated,
accompanied by full payment of the exercise price, by certified
check payable to us, for the number of warrants being exercised.
The warrant holders do not have the rights or privileges of
holders of common stock and any voting rights until they
exercise their warrants and receive shares of our common stock.
After the issuance of Warrant Shares, each holder will be
entitled to one vote for each share held of record on all
matters to be voted on by shareholders.
No warrants will be exercisable unless at the time of exercise a
prospectus relating to Warrants Shares is current and the
Warrant Shares have been registered or qualified or deemed to be
exempt under the securities laws of the state of residence of
the holder of the warrants. Under the terms of the warrant
agreement, we will agree to meet these conditions and use our
best efforts to maintain a current prospectus relating to
Warrant Shares until the expiration of the Warrants. If we are
unable to maintain the effectiveness of such registration
statement until the expiration of the warrants, and therefore
are unable to deliver registered shares, the warrants may become
worthless and we will not be required to net-cash settle the
warrants. In such a case, the purchasers of units will have paid
the full purchase price of the units solely for the Common
Shares underlying such units. Additionally, the market for the
warrants may be limited if the prospectus relating to the
Warrant Shares is not current or if the Warrant Shares are not
qualified or exempt from qualification in the jurisdictions in
which the holders of the warrants reside. In no event will the
registered holders of a warrant be entitled to receive a
net-cash settlement, stock, or other consideration in lieu of
physical settlement in Common Shares.
The private placement warrants are identical to our warrants,
except that (i) the private placement warrants are not
subject to redemption if held by the initial holders or their
permitted assigns and (ii) the warrants may be exercised on
a cashless basis. Because the private placement warrants were
originally issued pursuant to an exemption from the registration
requirements under the federal securities laws, the holders of
such warrants will be able to exercise their warrants even if,
at the time of exercise, a prospectus relating to the common
stock issuable upon exercise of such warrants is not current. As
described above, the holders of the warrants purchased in the
initial public offering will not be able to exercise them unless
we have a current registration statement covering the shares
issuable upon their exercise.
No fractional shares will be issued upon exercise of the
warrants. If, upon exercise of the warrants, a holder would be
entitled to receive a fractional interest in a share, we will,
upon exercise, round up to the nearest whole number the Warrant
Shares to be issued to the warrant holder.
Purchase
Option
Upon the dissolution and liquidation of Seanergy Maritime, we
assumed Seanergy Maritimes obligation under the
underwriters unit purchase option it granted to Maxim
Group LLC for the purchase up to a total of 1,000,000 units
at a per unit price of $12.50. The units issuable upon exercise
of the option will consist of one share of our common stock and
one warrant. The warrant will be identical to the warrants
described above.
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Dividends
We had initially expressed an intent to pay dividends in the
aggregate amount of $1.20 per share on a quarterly basis during
the one-year period commencing with the second full quarter
following the initial closing of the vessel acquisition, which
is the quarter ending March 31, 2009. We have, however,
determined to temporarily suspend the payment of any dividends
based on restrictions imposed on us by our senior lender. We
have not yet determined when any dividend payments will be
resumed. In the event we determine to resume any dividend
payments, under the terms of the waiver obtained with respect to
our loan facilities security margin clause, the written
approval of Marfin will be required before the payment of any
dividends. Certain of our shareholders have agreed with us for
such one-year period to subordinate their rights to receive
dividends with respect to the 5,500,000 owned by them, but only
to the extent that we have insufficient funds to make such
dividend payments. The declaration and payment of any dividend
is subject to the discretion of our board of directors. The
timing and amount of dividend payments will be in the discretion
of our board of directors and be dependent upon our earnings,
financial condition, cash requirements and availability, fleet
renewal and expansion, restrictions in our loan agreements, the
provisions of Marshall Islands law affecting the payment of
dividends to shareholders and other factors. Our board of
directors may review and amend our dividend policy from time to
time in light of our plans for future growth and other factors.
Our
Transfer Agent and Warrant Agent
The transfer agent for our common stock and warrant agent for
our warrants is Continental Stock Transfer &
Trust Company.
MARSHALL
ISLANDS COMPANY CONSIDERATIONS
Our corporate affairs are governed by our amended and restated
articles of incorporation and amended and restated by-laws and
by the Business Corporations Act of the Republic of the Marshall
Islands, or BCA. The provisions of the BCA resemble provisions
of the corporation laws of a number of states in the
United States. For example, the BCA allows the adoption of
various anti-takeover measures such as shareholder
rights plans. While the BCA also 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 U.S. courts. Thus, you may have more
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 relating to shareholders rights.
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Marshall Islands
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Delaware
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Shareholders Meetings
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Held at a time and place as designated
in the by-laws
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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
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May be held within or outside the
Marshall Islands
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May be held within or outside Delaware
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Notice:
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Notice:
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Whenever shareholders are required to
take action at a meeting, written notice shall state the place,
date and hour of the meeting and, unless it is the annual
meeting, indicate that it is being issued by or at the direction
of the person or persons calling the meeting. Notice of a
special
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Whenever shareholders
are required or permitted to take any action at a meeting, a
written notice of the meeting shall be given which shall state
the place, if any, date and hour of the meeting, and the means
of remote communication, if any
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Marshall Islands
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Delaware
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meeting shall also state the purpose for which the meeting is
called.
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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
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Written notice shall be
given not less than 10 nor more than 60 days before the
date of the meeting
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Shareholders Voting Rights
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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
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Stockholders may act by written
consent to elect directors
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Any person authorized to vote may
authorize another person to act for him by proxy
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Any person authorized to vote may
authorize another person or persons to act for him by proxy
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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. Once a quorum is present to organize a meeting, it is
not broken by the subsequent withdrawal of any shareholders
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For non-stock corporations,
certificate of incorporation or bylaws may specify the number of
members necessary to constitute a quorum. In the absence of
this, one-third of the members shall constitute a quorum
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The articles of incorporation may
provide for cumulative voting in the election of directors
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For stock corporations, certificate of
incorporation or bylaws may specify the number of members
necessary to constitute a quorum but in no event shall a quorum
consist of less than one-third of the shares entitled to vote at
the meeting. In the absence of such specifications, a majority
of shares entitled to vote at the meeting shall constitute a
quorum
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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 stockholder meeting
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The certificate of incorporation may
provide for cumulative voting
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Any sale, lease, exchange or other
disposition of all or substantially all the assets of a
corporation, if not made in the corporations 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
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Any two or more corporations existing
under the laws of 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
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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 so authorized by a
resolution adopted by the holders of a majority of the
outstanding stock of a corporation entitled to vote
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Any domestic corporation owning at
least 90% of the outstanding shares of each class of another
domestic corporation may merge such other
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Any corporation owning at least 90% 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
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Marshall Islands
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Delaware
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corporation into itself without the authorization of the
shareholders of any corporation
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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
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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 or approval off the shareholders is required
pursuant to the BCA
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Any mortgage or pledge of a
corporations property and assets may be authorized without
vote or consent of stockholders, except to the extent that the
certificate of incorporation otherwise provides
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Directors
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Board must consist of at least one
member
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Board must consist of at least one
member
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Number of members can be changed by an
amendment to the by-laws, by the shareholders, or by action of
the board under the specific provisions of a bylaw
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Number of board members shall be fixed
by the bylaws, unless the certificate of incorporation fixes the
number of directors
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If the board is authorized to change
the number of directors, it can only do so by majority of the
entire board and so long as no decrease in the number shall
shorten the term of any incumbent director
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If the number of directors is fixed by
the certificate of incorporation, a change in the number shall
be made only by an amendment of the certificate
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Removal
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Removal
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Any or all of the directors may be
removed for cause by vote of the shareholders
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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 unless the
certificate of incorporation otherwise provides
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If the articles of incorporation or
the by-laws so provide, any or all of the directors may be
removed without cause by vote of the shareholders
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In the case of a
classified board, stockholders may effect removal of any or all
directors only for cause
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Dissenters Rights of Appraisal
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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
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With limited exceptions, appraisal
rights shall be available for the shares of any class or series
of stock of a corporation in a merger or consolidation
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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:
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Alters or abolishes any preferential
right of any outstanding shares having preference; or
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Creates, alters or abolishes any
provision or right in respect to the redemption of any
outstanding shares; or
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Alters or abolishes any preemptive
right of such holder to acquire shares or other securities; or
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Marshall Islands
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Delaware
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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
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Shareholders Derivative Actions
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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 the
transaction of which he complains, or that has shares or his
interest therein devolved upon him by operation of law
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In any derivative suit instituted by a
stockholder of a corporation, it shall be averred in the
complaint that the plaintiff was a stockholder of the
corporation at the time of the transaction of which he complains
or such stockholders stock must have thereafter devolved
upon such stockholder by operation of law
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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
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Other requirements regarding
derivative suits have been created by judicial decision,
including that a stockholder may not bring a derivative suit
unless he or she first demands that the corporation sue on its
own behalf and that demand is refused (unless it is shown that
such demand would have been futile)
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Such action shall not be discontinued,
compromised or settled, without the approval of the High Court
of the Republic
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Reasonable expenses including
attorneys fees may be awarded if the action is successful
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Corporation may require a plaintiff
bringing a derivative suit to give security for reasonable
expenses if the plaintiff owns less than 5% of any class of
stock and shares have a value of less than $50,000
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TAXATION
The following is a summary of the material U.S. federal and
Marshall Islands income tax consequences of the ownership and
disposition of our common stock. The discussion below of the
U.S. federal income tax consequences to
U.S. Holders will apply to a beneficial owner
of our common stock that is treated for U.S. federal income
tax purposes as:
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an individual citizen or resident of the United States;
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a corporation (or other entity treated as a corporation for
U.S. federal income tax purposes) that is created or
organized (or treated as created or organized) in or under the
laws of the United States, any state thereof or the District of
Columbia;
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an estate whose income is includible in gross income for
U.S. federal income tax purposes regardless of its source;
or a trust if (i) a U.S. court can exercise primary
supervision over the trusts administration and one or more
U.S. persons are authorized to control all substantial
decisions of the trust, or (ii) it has a valid election in
effect under applicable U.S. Treasury regulations to be
treated as a U.S. person.
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If you are not described as a U.S. Holder and are not an
entity treated as a partnership or other pass-through entity for
U.S. federal income tax purposes, you will be considered a
Non-U.S. Holder.
The
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U.S. federal income tax consequences applicable to
Non-U.S. Holders
is described below under the heading
Non-U.S. Holders.
This summary is based on the Code, its legislative history,
Treasury regulations promulgated thereunder, published rulings
and court decisions, all as currently in effect. These
authorities are subject to change, possibly on a retroactive
basis.
This summary does not address all aspects of U.S. federal
income taxation that may be relevant to any particular holder
based on such holders individual circumstances. In
particular, this discussion considers only holders that will own
and hold our common stock as capital assets within the meaning
of Section 1221 of the Code and does not address the
potential application of the alternative minimum tax or the
U.S. federal income tax consequences to holders that are
subject to special rules, including:
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financial institutions or financial services
entities;
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broker-dealers;
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taxpayers who have elected mark-to-market accounting;
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tax-exempt entities;
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governments or agencies or instrumentalities thereof;
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insurance companies;
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regulated investment companies;
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real estate investment trusts;
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certain expatriates or former long-term residents of the United
States;
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persons that actually or constructively own 10% or more of our
voting shares;
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persons that hold our warrants;
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persons that hold our common stock or warrants as part of a
straddle, constructive sale, hedging, conversion or other
integrated transaction; or
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persons whose functional currency is not the U.S. dollar.
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This summary does not address any aspect of U.S. federal
non-income tax laws, such as gift or estate tax laws, or state,
local or
non-U.S. tax
laws. Additionally, this discussion does not consider the tax
treatment of partnerships or other pass-through entities or
persons who hold our common stock through such entities. If a
partnership (or other entity classified as a partnership for
U.S. federal income tax purposes) is the beneficial owner
of our common stock, the U.S. federal income tax treatment
of a partner in the partnership generally will depend on the
status of the partner and the activities of the partnership.
We have not sought, nor will we seek, a ruling from the Internal
Revenue Service, or the IRS, or an opinion of counsel as to any
U.S. federal income tax consequence described herein. The
IRS may disagree with the description herein, and its
determination may be upheld by a court.
BECAUSE OF THE COMPLEXITY OF THE TAX LAWS AND BECAUSE THE TAX
CONSEQUENCES TO ANY PARTICULAR HOLDER OF OUR COMMON STOCK MAY BE
AFFECTED BY MATTERS NOT DISCUSSED HEREIN, EACH SUCH HOLDER IS
URGED TO CONSULT WITH ITS TAX ADVISOR WITH RESPECT TO THE
SPECIFIC TAX CONSEQUENCES OF THE OWNERSHIP AND DISPOSITION OF
OUR COMMON STOCK, INCLUDING THE APPLICABILITY AND EFFECT OF
STATE, LOCAL AND
NON-U.S. TAX
LAWS, AS WELL AS U.S. FEDERAL TAX LAWS.
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United
States Federal Income Tax Consequences
Taxation
of Operating Income: In General
Unless exempt from United States federal income taxation under
the rules discussed below, a foreign corporation is subject to
United States federal income taxation in respect of any income
that is derived from the use of vessels, from the hiring or
leasing of vessels for use on a time, voyage or bareboat charter
basis, from the participation in a shipping pool, partnership,
strategic alliance, joint operating agreement, code sharing
arrangements or other joint venture it directly or indirectly
owns or participates in that generates such income, or from the
performance of services directly related to those uses, which we
refer to as shipping income, to the extent that the
shipping income is derived from sources within the United
States. For these purposes, 50% of shipping income that is
attributable to transportation that begins or ends, but that
does not both begin and end, in the United States, exclusive of
certain US territories and possessions, constitutes income from
sources within the United States, which we refer to as
U.S.-Source
Gross Transportation Income or USSGTI.
Shipping income attributable to transportation that both begins
and ends in the United States is considered to be 100% from
sources within the United States. US law prohibits us from
engaging in transportation that produces income considered to be
100% from sources within the United States.
Shipping income attributable to transportation exclusively
between
non-U.S. ports
will be considered to be 100% derived from sources outside the
United States. Shipping income derived from sources outside the
United States will not be subject to any United States federal
income tax.
In the absence of exemption from tax under Section 883, our
USSGTI would be subject to a 4% tax imposed without allowance
for deductions as described below.
Exemption
of Operating Income from United States Federal Income
Taxation
Under Section 883 of the Code, we will be exempt from
United States federal income taxation on our
U.S.-source
shipping income if:
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we are organized in a foreign country (our country of
organization) that grants an equivalent
exemption to corporations organized in the United
States; and
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more than 50% of the value of our stock is owned, directly or
indirectly, by qualified shareholders, that are
persons (i) who are residents of our country of
organization or of another foreign country that grants an
equivalent exemption to corporations organized in
the United States, and (ii) who comply with certain
documentation requirements, which we refer to as the 50%
Ownership Test, or
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our stock is primarily and regularly traded on one or more
established securities markets in our country of organization,
in another country that grants an equivalent
exemption to United States corporations, or in the United
States, which we refer to as the Publicly-Traded
Test.
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The jurisdictions where we and our ship-owning subsidiaries are
incorporated, grant equivalent exemptions to United
States corporations. Therefore, we will be exempt from United
States federal income taxation with respect to our
U.S.-source
shipping income if we satisfy either the 50% Ownership Test or
the Publicly-Traded Test.
For the 2008 tax year, we claimed the benefits of the
Section 883 tax exemption for our ship-owning subsidiaries
on the basis of the Publicly-Traded Test.
For 2009 and subsequent tax years, we anticipate that we will
need to satisfy the Publicly-Traded Test in order to qualify for
benefits under Section 883. Our ability to satisfy the
Publicly-Traded Test is discussed below.
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The
Publicly-Traded Test
The regulations provide, in pertinent part, that the stock of a
foreign 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 stock that are traded
during the taxable year on all established securities markets in
that country exceed the number of shares in each such class that
are traded during that year on established securities markets in
any other single country. Our common stock, our sole class of
our issued and outstanding stock, is primarily
traded on the NASDAQ Global Market.
Under the regulations, our stock will be considered to be
regularly traded if one or more classes of our stock
representing 50% or more of our outstanding shares, by total
combined voting power of all classes of stock entitled to vote
and by total combined value of all classes of stock, are listed
on one or more established securities markets, which we refer to
as the listing threshold. Our common stock, our sole
class of issued and outstanding stock, is listed on the NASDAQ
Global Market, and accordingly, we will satisfy this listing
requirement.
The regulations further require that with respect to each class
of stock relied upon to meet the listing requirement:
(i) such class of the stock is traded on the market, other
than in minimal quantities, on at least 60 days during the
taxable year or 1/6 of the days in a short taxable year; and
(ii) the aggregate number of shares of such class of stock
traded on such market is at least 10% of the average number of
shares of such class of stock outstanding during such year or as
appropriately adjusted in the case of a short taxable year. We
believe we will satisfy the trading frequency and trading volume
tests. Even if this were not the case, the regulations provide
that the trading frequency and trading volume tests will be
deemed satisfied by a class of stock if, as we expect to be the
case with our common stock, such class of stock is traded on an
established market in the United States and such class of stock
is regularly quoted by dealers making a market in such stock.
Notwithstanding the foregoing, the regulations provide, in
pertinent part, that a class of 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 of stock 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 directly or indirectly 5% or more
of the vote and value of such class of stock, who we refer to as
5% Shareholders. We refer to this restriction in the
regulations as the Closely-Held Test. The
Closely-Held Test will not disqualify us, however, if we can
establish that our qualified 5% Shareholders own sufficient
shares in our closely-held block of stock to preclude the shares
in the closely-held block that are owned by non-qualified 5%
Shareholders from representing 50% or more of the value of such
class of stock for more than half of the days during the tax
year, which we refer to as the exception to the Closely-Held
Test.
Establishing such qualification and ownership by our direct and
indirect 5% Shareholders will depend on their meeting the
requirements of one of the qualified shareholder tests set out
under the regulations applicable to 5% Shareholders and
compliance with certain ownership certification procedures by
each intermediary or other person in the chain of ownership
between us and such qualified 5% Shareholders. Further, the
regulations preclude, and we must certify, that no person in the
chain of qualified ownership owns shares used for qualification
that are registered to bearer rather than in nominal
form.
For purposes of being able to determine our 5% Shareholders, the
regulations permit us to rely on Schedule 13G and
Schedule 13D filings with the Securities and Exchange
Commission. The regulations further provide that an investment
company that is registered under the Investment Company Act of
1940, as amended, will not be treated as a 5% Shareholder for
such purposes.
There can be no assurance regarding whether we will be subject
to the Closely-Held Test for any year or whether in
circumstances where it would otherwise apply we will be able to
qualify for the exception to the Closely-Held Test. For this and
other reasons, there can be no assurance that we or any of our
subsidiaries will qualify for the benefits of Section 883
of the Code for any year.
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Taxation
in Absence of Exemption
To the extent the benefits of Section 883 are unavailable,
our USSGTI, to the extent not considered to be effectively
connected with the conduct of a U.S. trade or
business, as described below, would be subject to a 4% tax
imposed by Section 887 of the Code on a gross basis,
without the benefit of deductions, otherwise referred to as the
4% Tax. Since under the sourcing rules described
above, no more than 50% of our shipping income would be treated
as being derived from U.S. sources, the maximum effective
rate of U.S. federal income tax on our shipping income
would never exceed 2% under the 4% gross basis tax regime.
To the extent the benefits of the Section 883 exemption are
unavailable and our USSGTI is considered to be effectively
connected with the conduct of a U.S. trade or
business, as described below, any such effectively
connected
U.S.-source
shipping income, net of applicable deductions, would be subject
to the U.S. federal corporate income tax currently imposed
at rates of up to 35%. In addition, we may be subject to the 30%
branch profits taxes on earnings effectively
connected with the conduct of such trade or business, as
determined after allowance for certain adjustments, and on
certain interest paid or deemed paid attributable to the conduct
of its U.S. trade or business.
Our
U.S.-source
shipping income would be considered effectively
connected with the conduct of a U.S. trade or
business only if:
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We have, or are considered to have, a fixed place of business in
the United States involved in the earning of shipping
income; and
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substantially all of our
U.S.-source
shipping income is attributable to regularly scheduled
transportation, such as the operation of a vessel that follows a
published schedule with repeated sailings at regular intervals
between the same points for voyages that begin or end in the
United States.
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We do not intend to have, or permit circumstances that would
result in having any vessel operating to the United States on a
regularly scheduled basis. Based on the foregoing and on the
expected mode of our shipping operations and other activities,
we believe that none of our
U.S.-source
shipping income will be effectively connected with
the conduct of a U.S. trade or business.
United
States Taxation of Gain on Sale of Vessels
Regardless of whether we qualify for exemption under
Section 883, we will not be subject to United States
federal income taxation with respect to gain realized on a sale
of a vessel, provided 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. It is expected that any
sale of a vessel by us will be considered to occur outside of
the United States.
United
States Tax Taxation Related to the BET Fleet
As further described in Our Business BET
section under the Recent Developments portion of the
Managements Discussion and Analysis of Financial
Conditions and Results of Operations for Seanergy Maritime and
Seanergy of this prospectus, on August 12, 2009, we
closed on the acquisition of a 50% controlling interest in BET
from Constellation Bulk Energy Holdings, Inc. During the course
of Mineral Transport Holdings, Inc.s joint venture with
Constellation Bulk Energy Holdings, Inc. and its parent
corporation, Constellation Energy Group, Inc., for the operation
of the BET fleet, BET failed to timely file an election to be
treated as a disregarded entity for US tax purposes, which is
commonly referred to as a check-the-box election.
Without this check-the-box election, the USSGTI of each
ship-owning corporation in the BET fleet will be subject to the
4% Tax on its USSGTI for the 2008 and 2009 tax years since the
ship-owning corporations cannot otherwise qualify for
Section 883 relief under the Section 883 regulations.
Concurrent with the BET acquisition, BET requested the IRS
permission to make a check-the-box election after the fact as if
the check-the-box election was made at the formation of BET,
which we call 9100 relief after the Codes
regulatory section that describes the conditions for making such
a request. Along with
141
the BET acquisition and the 9100 relief application,
Constellation Energy Group, Inc., BET, Mineral Transport, and we
entered into an indemnification agreement. The indemnification
agreement states in part that Constellation Energy Group, Inc.
will indemnify us for any costs and unfavorable tax consequences
resulting from the failure of BET to make the check-the-box
election. As part of the indemnification agreement,
Constellation Energy Group, Inc. agreed to deposit with a third
party an amount we estimate to more than cover any potential tax
cost from the failure to make the check-the-box election for the
2008 and 2009 tax years. The indemnification agreement specifies
that this money will be returned to Constellation Energy Group,
Inc. either after any amounts necessary to cover the relevant
tax obligations and fees have been paid or if the IRS permits
the check-the-box election and grants a refund of the tax
payments since the BET ship-owning companies will then qualify
for a US tax exemption under Section 883.
If the IRS decides not to grant the 9100 relief to allow BET to
make a check-the-box election after the fact, then the BET
fleets ship-owning companies will be required to pay the
4% Tax on their USSGTI for the 2008 through 2009 tax years.
Constellation Energy Group, Inc. already paid the 4% Tax on the
USSGTI for the one ship-owning company in the BET group of
companies that earned USSGTI during 2008, and as stated in the
preceding paragraph, Constellation Energy Group, Inc. deposited
amounts with a third party estimated to cover any 4% tax due on
the 2009 USSGTI earned by BET vessels.
However, if the IRS decides not to grant the 9100 relief, then
our ability to exempt the BET vessels USSGTI from US
taxation for the 2010 tax year onward will depend on the ability
of our affiliated 50% owner of the BET vessels, Mineral
Transport, to qualify for a US tax exemption under the 50%
Ownership Test of the Section 883 regulations discussed
above under the heading, Exemption of Operating Income
from United States Federal Income Taxation. While
Mineral Transport qualifies for a US tax exemption under the
Section 883 regulations at this time, allowing us to claim
a US tax exemption on income we receive from the BET fleet if
the IRS decides not to grant the 9100 relief, we can give no
assurance that Mineral Transport will continue to so qualify.
Passive
Foreign Investment Company Regulations
United
States Federal Income Taxation of U.S. Holders
Taxation of Distributions Paid on Common
Stock. Subject to the passive foreign investment
company, or PFIC, rules discussed below, a U.S. Holder
generally will be required to include in gross income the amount
of any distribution paid on our common stock. A distribution on
such common stock should be treated as a dividend for
U.S. federal income tax purposes to the extent the
distribution is paid out of our current or accumulated earnings
and profits (as determined under U.S. federal income tax
principles). Such dividend should not be eligible for the
dividends-received deduction generally allowed to
U.S. corporations in respect of dividends received from
other U.S. corporations. Distributions in excess of such
earnings and profits should be applied against and reduce the
U.S. Holders tax basis in our common stock (but not
below zero) and, to the extent in excess of such basis, should
be treated as gain from the sale or exchange of such common
stock.
With respect to non-corporate U.S. Holders of our common
stock, for taxable years beginning before January 1, 2011,
dividends may be taxed at the lower rate applicable to long-term
capital gains (see the section entitled
Taxation on the Disposition of Common
Stock, below) provided that (1) our common stock is
readily tradable on an established securities market in the
United States, (2) we are not a PFIC, as discussed below,
for either the taxable year in which the dividend was paid or
the preceding taxable year, and (3) certain holding period
requirements are met. Under published IRS guidance, for purposes
of clause (1) above, common stock is considered to be
readily tradable on an established securities market in the
United States only if it is listed on certain exchanges,
which include the Nasdaq Stock Market. We expect that our stock
will be listed on the Nasdaq Stock Market. Nevertheless, you
should consult with your own tax advisors regarding the
availability of the lower capital gains tax rate for any
dividends paid with respect to our common stock.
142
Taxation
on the Disposition of Common Stock
Upon a sale or other taxable disposition of our common stock
(which, in general, would include a redemption of our common
stock), and subject to the PFIC rules discussed below, a
U.S. Holder generally should recognize capital gain or loss
in an amount equal to the difference between the amount realized
on such disposition and the U.S. Holders tax basis in
the common stock.
Capital gains recognized by a U.S. Holder generally are
subject to U.S. federal income tax at the same rate as
ordinary income, except that long-term capital gains recognized
by a non-corporate U.S. Holder are generally subject to
U.S. federal income tax at a maximum rate of 15% for
taxable years beginning before January 1, 2011, and 20%
thereafter. Capital gain or loss will constitute long-term
capital gain or loss if the U.S. Holders holding
period under the Code for the common stock exceeds one year. The
deductibility of capital losses is subject to various
limitations.
Passive Foreign Investment Company Rules. A
foreign corporation will be a PFIC if at least 75% of its gross
income in a taxable year, including its pro rata share of the
gross income of any company in which it is considered to own at
least 25% of the shares by value, is passive income.
Alternatively, a foreign corporation will be a PFIC if at least
50% of its assets in a taxable year, ordinarily determined based
on fair market value and averaged quarterly over the year,
including its pro rata share of the assets of any company in
which it is considered to own at least 25% of the shares by
value, are held for the production of, or produce, passive
income. Passive income generally includes dividends, interest,
rents, royalties, and gains from the disposition of passive
assets.
Based on the current and expected composition of the assets and
income of us and our subsidiaries, it is not anticipated that we
will be treated as a PFIC. For purposes of determining whether
we are a PFIC, the gross income we derive or are deemed to
derive from the time chartering and voyage chartering activities
of our wholly owned subsidiaries should constitute services
income, rather than rental income. Correspondingly, such income
should not constitute passive income, and the assets that we or
our wholly-owned subsidiaries own and operate in connection with
the production of such income, in particular, the vessels,
should not constitute passive assets for purposes of determining
whether we are a PFIC. IRS pronouncements concerning the
characterization of income derived from time charters and voyage
charters as services income for other tax purposes support this
position. However, a recent case reviewing the deductibility of
commissions by a foreign sales corporation decided that time
charter income constituted rental income under the law due to
specific characteristics of the time charters in that case.
Tidewater Inc. v. U.S., 565 F.3d 299
(5th Cir.,
Apr. 13, 2009). While the IRS believed in the Tidewater
case that the time charter income should be considered
services income, in the absence of any legal authority
specifically relating to the statutory provisions governing
PFICs and time charter income, the IRS or a court could disagree
with our position. In addition, although we intend to conduct
our affairs in a manner to avoid being classified as a PFIC with
respect to any taxable year, we cannot assure you that the
nature of our operations will not change in the future.
If we were a PFIC for any taxable year during which a
U.S. Holder held our common stock, and such
U.S. Holder did not make a timely qualified electing fund,
or QEF, election for the first taxable year of its holding
period for the common stock or mark-to-market election, as
described below, such holder should be subject to special rules
with respect to:
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any gain recognized (or deemed recognized) by the
U.S. Holder on the sale or other taxable disposition of our
common stock; and
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any excess distribution made to the U.S. Holder
(generally, any distributions to such holder during a taxable
year that are greater than 125% of the average annual
distributions received by such holder in respect of our common
stock during the three preceding taxable years or, if shorter,
such holders holding period for the common stock).
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Under these rules,
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the U.S. Holders gain or excess distribution will be
allocated ratably over the U.S. Holders holding
period for the common stock;
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143
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the amount allocated to the taxable year in which the
U.S. Holder recognized the gain or received the excess
distribution, or to any taxable year prior to the first taxable
year in which we are a PFIC, will be taxed as ordinary income;
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the amount allocated to other taxable years will be taxed at the
highest tax rate in effect for that year and applicable to the
U.S. Holder; and
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the interest charge generally applicable to underpayments of tax
will be imposed in respect of the tax attributable to each such
other taxable year.
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In addition, if we were a PFIC, a distribution to a
U.S. Holder that is characterized as a dividend and is not
an excess distribution generally should not be eligible for the
reduced rate of tax applicable to certain dividends paid before
2011 to non-corporate U.S. Holders, as discussed above.
Furthermore, if we were a PFIC, a U.S. Holder that acquires
our common stock from a deceased U.S. Holder who dies
before January 1, 2010, generally should be denied the
step-up of
U.S. federal income tax basis in such stock to their fair
market value at the date of the deceased holders death.
Instead, such U.S. Holder would have a tax basis in such
stock equal to the deceased holders tax basis, if lower.
In general, a U.S. Holder may avoid the PFIC tax
consequences described above in respect of our common stock by
making a timely QEF election to include in income such
holders pro rata share of our net capital gains (as
long-term capital gain) and other earnings and profits (as
ordinary income), on a current basis, in each case whether or
not distributed. A U.S. Holder may make a separate election
to defer the payment of taxes on undistributed income inclusions
under the QEF rules, but if deferred, any such taxes will be
subject to an interest charge.
The QEF election is made on a
shareholder-by-shareholder
basis and, once made, can be revoked only with the consent of
the IRS. A U.S. Holder generally makes a QEF election by
attaching a completed IRS Form 8621 (Return by a
Shareholder of a Passive Foreign Investment Company or Qualified
Electing Fund), including the information provided in a PFIC
annual information statement, to a timely filed
U.S. federal income tax return for the tax year to which
the election relates. Retroactive QEF elections may only be made
by filing a protective statement with such return or with the
consent of the IRS.
In order to comply with the requirements of a QEF election, a
U.S. Holder must receive certain information from us. There
is no assurance, however, that we will have timely knowledge of
our status as a PFIC in the future or that we will be willing or
able to provide a U.S. Holder with the information needed
to support a QEF election.
If a U.S. Holder makes a QEF election with respect to our
common stock, and the special tax and interest charge rules do
not apply to such stock (because of a timely QEF election for
the first tax year of the U.S. Holders holding period
for such stock or a purge of the PFIC taint pursuant to a
purging election), any gain recognized on the appreciation of
such stock generally should be taxable as capital gain and no
interest charge should be imposed. As discussed above, if a
U.S. Holder has made a QEF election, such holder should be
currently taxed on its pro rata share of our earnings and
profits, whether or not distributed. In such case, a subsequent
distribution of such earnings and profits that were previously
included in income should not be taxable as a dividend. The
U.S. Holders tax basis in shares will be increased by
amounts that are included in income pursuant to the QEF election
and decreased by amounts distributed but not taxed as dividends
under the above rules. Similar basis adjustments apply to
property if by reason of holding such property the
U.S. Holder is treated under the applicable attribution
rules as owning shares in a PFIC with respect to which a QEF
election was made.
Although a determination as to our PFIC status will be made
annually, an initial determination that we are a PFIC generally
should apply for subsequent years if the U.S. Holder held
our common stock while we were a PFIC, whether or not we met the
test for PFIC status in those subsequent years. However, if a
U.S. Holder makes the QEF election discussed above for the
first tax year in which the such holder holds (or is deemed to
hold) our common stock and for which we are determined to be a
PFIC, such holder should not be subject to the PFIC tax and
interest charge rules (or the denial of basis
step-up at
death) discussed above with respect to such stock. In addition,
such U.S. Holder should not be subject to the QEF inclusion
regime
144
with respect to such stock for the tax years in which we are not
a PFIC. On the other hand, if the QEF election is not effective
for each of the tax years in which we are a PFIC and the
U.S. Holder holds (or is deemed to hold) our common stock,
the PFIC rules discussed above will continue to apply to such
stock unless the holder makes a purging election and pays the
tax and interest charge with respect to the gain inherent in
such stock attributable to the pre-QEF election period.
Alternatively, if a U.S. Holder owns common stock in a PFIC
that is treated as marketable stock, the U.S. Holder may
make a mark-to-market election. If the U.S. Holder makes a
valid mark-to-market election for the first tax year in which
the U.S. Holder holds (or is deemed to hold) our common
stock and for which we are determined to be a PFIC, such holder
generally should not be subject to the PFIC rules described
above in respect of such common stock. Instead, the
U.S. Holder generally should include as ordinary income
each year the excess, if any, of the fair market value of our
common stock at the end of such holders taxable year over
its tax basis in our common stock. The U.S. Holder also
should be allowed to take an ordinary loss in respect of the
excess, if any, of its tax basis in our common stock over the
fair market value of such stock at the end of such holders
taxable year (but only to the extent of the net amount of
previously included income as a result of the mark-to-market
election). The U.S. Holders tax basis in our common
stock will be adjusted to reflect any such income or loss
amounts, and any further gain recognized on a sale or other
taxable disposition of the common stock should be treated as
ordinary income.
The mark-to-market election generally is available only for
stock that is regularly traded on a national securities exchange
that is registered with the Securities and Exchange Commission
(e.g., the Nasdaq Stock Market) or on a foreign exchange or
market that the IRS determines has rules sufficient to ensure
that the market price represents a legitimate and sound fair
market value. While we expect that our common stock will be
regularly traded on the Nasdaq Stock Market, there can be no
assurance of that. U.S. Holders should consult with their
own tax advisors regarding the availability and tax consequences
of a mark-to-market election in respect of our common stock
under their particular circumstances.
If we are a PFIC and, at any time, have a
non-U.S. subsidiary
that is classified as a PFIC, a U.S. Holder generally
should be deemed to own a portion of the shares of such
lower-tier PFIC, and generally could incur liability for
the deferred tax and interest charge described above if we
receive a distribution from, or dispose of all or part of our
interest in, the lower-tier PFIC. There is no assurance,
however, that we will have timely knowledge of the status of any
such subsidiary as a PFIC in the future or that we will be
willing or able to provide a U.S. Holder with the
information needed to support a QEF election with respect to a
lower-tier PFIC. U.S. Holders are urged to consult
their own tax advisors regarding the tax issues raised by
lower-tier PFICs.
If a U.S. Holder owns (or is deemed to own) stock in a PFIC
during any year, such holder may have to file an IRS
Form 8621 (whether or not a QEF or mark-to-market election
is made).
The rules dealing with PFICs and with the QEF and mark-to-market
elections are very complex and are affected by various factors
in addition to those described above. Accordingly,
U.S. Holders should consult their own tax advisors
concerning the application of the PFIC rules to our common stock
under their particular circumstances.
Non-U.S.
Holders
Dividends paid to a
Non-U.S. Holder
with respect to our common stock generally should not be subject
to U.S. federal income tax, unless the dividends are
effectively connected with the
Non-U.S. Holders
conduct of a trade or business within the United States (and, if
required by an applicable income tax treaty, are attributable to
a permanent establishment or fixed base that such holder
maintains in the United States).
In addition, a
Non-U.S. Holder
generally should not be subject to U.S. federal income tax
on any gain attributable to a sale or other disposition of our
common stock unless such gain is effectively connected with its
conduct of a trade or business in the United States (and, if
required by an applicable income tax treaty, is attributable to
a permanent establishment or fixed base that such holder
maintains in the United States) or the
Non-U.S. Holder
is an individual who is present in the United States for
183 days or more in the taxable year
145
of sale or other disposition and certain other conditions are
met (in which case such gain from United States sources may be
subject to tax at a 30% rate or a lower applicable tax treaty
rate).
Dividends and gains that are effectively connected with the
Non-U.S. Holders
conduct of a trade or business in the United States (and, if
required by an applicable income tax treaty, are attributable to
a permanent establishment or fixed base in the United States)
generally should be subject to tax in the same manner as for a
U.S. Holder and, if the
Non-U.S. Holder
is a corporation for U.S. federal income tax purposes, it
also may be subject to an additional branch profits tax at a 30%
rate or a lower applicable tax treaty rate.
Backup
Withholding and Information Reporting
In general, information reporting for U.S. federal income
tax purposes should apply to distributions made on our common
stock within the United States to a non-corporate
U.S. Holder and to the proceeds from sales and other
dispositions of our common stock to or through a
U.S. office of a broker by a non-corporate
U.S. Holder. Payments made (and sales and other
dispositions effected at an office) outside the United States
will be subject to information reporting in limited
circumstances.
In addition, backup withholding of U.S. federal income tax,
currently at a rate of 28%, generally should apply to
distributions paid on our common stock to a non-corporate
U.S. Holder and the proceeds from sales and other
dispositions of our common stock by a non-corporate
U.S. Holder, who:
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fails to provide an accurate taxpayer identification number;
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is notified by the IRS that backup withholding is
required; or
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in certain circumstances, fails to comply with applicable
certification requirements.
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A
Non-U.S. Holder
generally may eliminate the requirement for information
reporting and backup withholding by providing certification of
its foreign status, under penalties of perjury, on a duly
executed applicable IRS
Form W-8
or by otherwise establishing an exemption.
Backup withholding is not an additional tax. Rather, the amount
of any backup withholding generally should be allowed as a
credit against a U.S. Holders or a
Non-U.S. Holders
U.S. federal income tax liability and may entitle such
holder to a refund, provided that certain required information
is timely furnished to the IRS.
Marshall
Islands Tax Consequences
Seanergy is incorporated in the Marshall Islands. Under current
Marshall Islands law, Seanergy is not subject to tax on income
or capital gains, no Marshall Islands withholding tax will be
imposed upon payment of dividends by Seanergy to its
shareholders, and holders of common stock of Seanergy that are
not residents of or domiciled or carrying on any commercial
activity in the Marshall Islands will not be subject to Marshall
Islands tax on the sale or other disposition of such common
stock.
146
UNDERWRITING
Under the terms and subject to the conditions contained in an
underwriting agreement
dated ,
2009, we have agreed to sell to the underwriters named below,
for
whom
is acting as representative, the following respective numbers of
shares of common stock:
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Number of
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Underwriter
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Shares
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Total
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The underwriting agreement provides that the underwriters are
obligated to purchase all the shares of common stock in the
offering if any are purchased, other than those shares covered
by the over-allotment option described below. The underwriting
agreement also provides that if an underwriter defaults, then
the purchase commitments of non-defaulting underwriters may be
increased or the offering may be terminated.
We have granted to the underwriters a
30-day
option to purchase on a pro rata basis up
to
additional shares at the initial public offering price less the
underwriting discounts and commissions. The option may be
exercised only to cover any over-allotments of common stock.
The underwriters propose to offer the shares of common stock
initially at the public offering price on the cover page of this
prospectus. The underwriters may allow a discount of
$ per share on sales to other
broker/dealers. After the initial public offering, the
underwriters may change the public offering price and concession
and discount to broker/dealers.
The following table summarizes the compensation and estimated
expenses we will pay:
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Per Share
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Total
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Without
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With
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Without
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With
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Over-
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Over-
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Over-
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Over-
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Allotment
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Allotment
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Allotment
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Allotment
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Underwriting discounts and commissions paid by us
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$
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$
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$
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$
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Expenses payable by us
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$
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$
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$
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$
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We have agreed that we will not offer, sell, contract to sell,
pledge or otherwise dispose of, directly or indirectly, or file
with the securities and exchange commission a registration
statement under the securities act relating to, any shares of
our common stock or securities convertible into or exchangeable
or exercisable for any shares of our common stock, or publicly
disclose the intention to make any offer, sale, pledge,
disposition or filing, without the prior written consent
of
for a period of 90 days after the date of this prospectus.
however in the event that either (1) during the last
17 days of the
lock-up
period, we release earnings results or material news or a
material event relating to us occurs or (2) prior to the
expiration of the
lock-up
period, we announce that we will release earnings results during
the 16-day
period beginning on the last day of the
lock-up
period, then in either case the expiration of the
lock-up
will be extended until the expiration of the
18-day
period beginning on the date of the release of the earnings
results or the occurrence of the material news or event, as
applicable,
unless
waives, in writing, such an extension.
Our officers and directors have agreed that they will not offer,
sell, contract to sell, pledge or otherwise dispose of, directly
or indirectly, any shares of our common stock or warrant
exercisable for any shares of our common stock, enter into a
transaction that would have the same effect, or enter into any
swap, hedge or other arrangement that transfers, in whole or in
part, any of the economic consequences of ownership of our
common stock, whether any of these transactions are to be
settled by delivery of our common stock or other securities, in
cash or otherwise, or publicly disclose the intention to make
any offer, sale, pledge or disposition, or to enter into any
transaction, swap, hedge or other arrangement, without, in each
case, the prior written consent
of
for a period of 90 days after the date of this prospectus.
However, in the event that either (1) during the last
17 days of the
lock-up
period, we release earnings results or material news or a
material event relating to us occurs or (2) prior to the
expiration of the
lock-up
period, we announce that we will
147
release earnings results during the
16-day
period beginning on the last day of the
lock-up
period, then in either case the expiration of the
lock-up
will be extended until expiration of the
18-day
period beginning on the date of the release of the earnings
results or the occurrence of the material news or event, as
applicable,
unless
waives, in writing, such an extension.
We have agreed to indemnify the underwriters against liabilities
under the Securities Act, or contribute to payments that the
underwriters may be required to make in that respect.
Our common stock is currently quoted on the NASDAQ Capital
Market under the symbol SHIP and our warrants are
currently quoted on the NASDAQ Capital Market under symbol
SHIP.W
In connection with the offering, the underwriters may engage in
stabilizing transactions, over-allotment transactions, syndicate
covering transactions and penalty bids.
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Stabilizing transactions permit bids to purchase the underlying
security so long as stabilizing bids do not exceed a specified
maximum.
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Over-allotment involves sales by the underwriters of shares in
excess of the number of shares the underwriters are obligated to
purchase, which creates a syndicate short position. The short
position may be either a covered short position or a naked short
position. In a covered short position, the number of shares
over-allotted by the underwriter is not greater than the number
of shares that they may purchase in the over-allotment option.
In a naked short position, the number of shares involved is
greater than the number of shares in the over-allotment option.
The underwriters may close out any covered short position by
either exercising their over-allotment option
and/or
purchasing shares in the open market.
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Syndicate covering transactions involve purchases of the common
stock in the open market after the distribution has been
completed in order to cover syndicate short positions. In
determining the source of shares to close out the short
position, the underwriters will consider, among other things,
the price of shares available for Purchase in the open market as
compared to the price at which they may purchase shares through
the over-allotment option. If the underwriters sell more shares
than could be covered by the over-allotment option, a naked
short position, the position can only be closed out by buying
shares in the open market. A naked short position is more likely
to be created if the underwriters are concerned that there could
be downward pressure on the price of the shares in the open
market after pricing that could adversely affect investors who
purchase in the offering.
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Penalty bids permit the representatives to reclaim a selling
concession from a syndicate member when common stock originally
sold by the syndicate member is purchased in a stabilizing or
syndicate covering transaction to cover syndicate short
positions.
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These stabilizing transactions, syndicate covering transactions
and penalty bids may have the effect of raising or maintaining
the market price of our common stock or preventing or retarding
a decline in the market price of the common stock. As a result,
the price of our common stock may be higher than the price that
might otherwise exist in the open market. These transactions may
be effected on the NASDAQ Global Market or otherwise and, if
commenced, may be discontinued at any time.
A prospectus in electronic format may be available on the web
sites maintained by one or more of the underwriters
participating in this offering and one or more of the
underwriters participating in this offering may distribute
prospectus electronically. The representatives may agree to
allocate a number of shares to underwriters for sale to their
online brokerage account holders. Internet distributions will be
allotted by the underwriters that will make internet
distributions on the same basis as other allocations.
148
EXPENSES
RELATING TO THIS OFFERING
Set forth below is an itemization of the total expenses that we
expect to incur in connection with this distribution. With the
exception of the SEC registration fee, all amounts are estimates.
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SEC registration fee
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$
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Printing expenses
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$
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Legal fees and expenses
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$
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Accounting fees and expenses
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$
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Miscellaneous
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$
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Total
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$
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The above expenses will be paid by us.
LEGAL
MATTERS
The validity of the securities offered in this prospectus are
being passed upon for us by Reeder &
Simpson, P.C., Piraeus, Greece. Broad and Cassel, Miami,
Florida, a general partnership including professional
associations, is acting as counsel to Seanergy connection with
United States securities laws. The underwriters have been
represented
by .
EXPERTS
The financial statements of Seanergy Maritime Corp. as of and
for the year ended December 31, 2007 and the period from
August 15, 2006 (Inception) to December 31, 2006
included in this prospectus and in the registration statement
have been audited by Weinberg & Company, P.A.,
independent registered public accounting firm, to the extent and
for the period set forth in their report appearing elsewhere in
this prospectus and in the registration statement. The financial
statements and the report of Weinberg & Company, P.A.
are included in reliance upon their report given upon the
authority of Weinberg & Company, P.A. as experts in
auditing and accounting.
The consolidated financial statements of (1) Seanergy
Maritime Holdings Corp. (successor to Seanergy Maritime Corp.)
as of and for the year ended December 31, 2008,
(2) Bulk Energy Transport (Holdings) Limited as of
December 31, 2008 and 2007, and for each of the years in
the two-year period ended December 31, 2008 and the period
from December 18, 2006 (inception) to December 31,
2006, and (3) the combined financial statements of Goldie
Navigation Ltd., Pavey Services Ltd., Shoreline Universal Ltd.,
Valdis Marine Corp., Kalistos Maritime S.A. and Kalithea
Maritime S.A. (together the Group) as of
December 31, 2007 and 2006, and for each of the years in
the three-year period ended December 31, 2007 have been
included herein and in this registration statement in reliance
upon the reports of KPMG Certified Auditors AE, independent
registered public accounting firm, appearing elsewhere herein
and upon the authority of said firm as experts in accounting and
auditing. Our report on the combined financial statements of the
Group, contains an explanatory paragraph stating that the
combined financial statements present the aggregated financial
information of the six vessel-owning companies and an allocation
of long-term debt and that the combined financial statements may
not necessarily be indicative of the Groups financial
position, results of operations, or cash flows had the Group
operated as a separate entity during the periods presented or
for future periods.
INDEPENDENT
REGISTERED PUBLIC ACCOUNTANTS
Effective December 18, 2008, the audit committee of
Seanergy Maritime dismissed Seanergy Maritimes principal
accountant, Weinberg & Company, P.A.
(Weinberg).
The termination of Weinberg is not a result of any disagreements
with Weinberg on any matter of accounting principles or
practices, financial statement disclosure, or auditing scope or
procedure. Weinbergs report on Seanergy Maritimes
financial statements for the year ended December 31, 2007,
period from
149
August 15, 2006 (Inception) to December 31, 2006, and
August 15, 2006 (Inception) to December 31, 2007, did
not contain an adverse opinion or a disclaimer of opinion nor
was such report qualified or modified as to uncertainty, audit
scope or accounting principles.
Further to Seanergy Maritimes transfer of its accounting
functions to Greece, it retained KPMG Certified Auditors AE
(KPMG) in Athens, Greece as its new independent
registered public accounting firm for the fiscal year ending
December 31, 2008.
Effective May 19, 2009, our audit committee dismissed our
principal accountant, KPMG.
The termination of KPMG was not a result of any disagreements
with KPMG on any matter of accounting principles or practices,
financial statement disclosure, or auditing scope or procedure.
KPMGs report on our financial statements for the year
ended December 31, 2008, did not contain an adverse opinion
or a disclaimer of opinion nor was such report qualified or
modified as to uncertainty, audit scope or accounting principles.
The audit committee selected PricewaterhouseCoopers, S.A. as its
independent registered public accounting firm for the fiscal
year ending December 31, 2009.
WHERE YOU
CAN FIND ADDITIONAL INFORMATION
We have filed with the SEC a registration statement on
Form F-1,
which includes exhibits, schedules and amendments, under the
Securities Act, with respect to this offering of our securities.
Although this prospectus, which forms a part of the registration
statement, contains all material information included in the
registration statement, parts of the registration statement have
been omitted as permitted by rules and regulations of the SEC.
We refer you to the registration statement and its exhibits for
further information about us, our securities and this offering.
The registration statement and its exhibits, as well as our
other reports filed with the SEC, can be inspected and copied at
the SECs public reference room at 100 F Street,
N.E.,
Washington, D.C. 20549-1004.
The public may obtain information about the operation of the
public reference room by calling the SEC at
1-800-SEC-0330.
In addition, the SEC maintains a web site at
http://www.sec.gov
which contains the
Form F-1
and other reports, proxy and information statements and
information regarding issuers that file electronically with the
SEC.
150
INDEX TO
FINANCIAL STATEMENTS
|
|
|
|
|
|
|
Page
|
|
Consolidated Financial Statements of Seanergy Maritime
Holdings Corp. and subsidiaries
|
|
|
|
|
|
|
|
F-2
|
|
|
|
|
F-3
|
|
|
|
|
F-4
|
|
|
|
|
F-5
|
|
|
|
|
F-6
|
|
|
|
|
F-7
|
|
|
|
|
F-8
|
|
|
|
|
F-38
|
|
|
|
|
F-39
|
|
|
|
|
F-40
|
|
|
|
|
F-41
|
|
|
|
|
F-42
|
|
Combined Financial Statements of Goldie Navigation Ltd.,
Pavey Services Ltd., Shoreline Universal Ltd., Valdis Marine
Corp., Kalistos Maritime S.A., and Kalithea Maritime S.A.
|
|
|
|
|
|
|
|
F-65
|
|
|
|
|
F-66
|
|
|
|
|
F-67
|
|
|
|
|
F-68
|
|
|
|
|
F-69
|
|
|
|
|
F-70
|
|
|
|
|
F-91
|
|
|
|
|
F-92
|
|
|
|
|
F-93
|
|
|
|
|
F-94
|
|
|
|
|
F-95
|
|
Consolidated Financial Statements of Bulk Energy Transport
(Holdings) Limited
|
|
|
|
|
|
|
|
F-106
|
|
|
|
|
F-107
|
|
|
|
|
F-108
|
|
|
|
|
F-109
|
|
|
|
|
F-110
|
|
|
|
|
F-111
|
|
F-1
REPORT OF
INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
To the Board of Directors and the Shareholders
of Seanergy Maritime Holdings Corp. (successor to Seanergy
Maritime Corp.):
We have audited the accompanying consolidated balance sheet of
Seanergy Maritime Holdings Corp. (successor to Seanergy Maritime
Corp.) and its subsidiaries (the Company) as of
December 31, 2008, and the related consolidated statements
of operations, shareholders equity, and cash flows for the
year then ended. These consolidated financial statements are the
responsibility of the Companys management. Our
responsibility is to express an opinion on these consolidated
financial statements based on our audit.
We conducted our audit 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. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in
the financial statements. An audit also includes assessing the
accounting principles used and significant estimates made by
management, as well as evaluating the overall financial
statement presentation. We believe that our audit provides a
reasonable basis for our opinion.
In our opinion, the consolidated financial statements referred
to above present fairly, in all material respects, the financial
position of Seanergy Maritime Holdings Corp. (successor to
Seanergy Maritime Corp.) and its subsidiaries as of
December 31, 2008 and the results of their operations and
their cash flows for the year then ended, in conformity with
U.S. generally accepted accounting principles.
/s/ KPMG
Certified Auditors AE
Athens, Greece
March 27, 2009
F-2
REPORT OF
INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
To the Board of Directors and Shareholders
Seanergy Maritime Corp.
We have audited the accompanying balance sheet of Seanergy
Maritime Corp. (the Company) as of December 31,
2007, and the related statements of operations,
shareholders equity and cash flows for the year ended
December 31, 2007 and the period from August 15, 2006
(Inception) to December 31, 2006. These (Inception)
financial statements are the responsibility of the
Companys 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 audits to obtain
reasonable assurance about whether the financial statements are
free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in
the financial statements. An audit also includes 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 financial position
of Seanergy Maritime Corp. as of December 31, 2007, and the
results of its operations and its cash flows for the year ended
December 31, 2007 and the period from August 15, 2006
(Inception) to December 31, 2006, in conformity with
accounting principles generally accepted in the United States of
America.
Weinberg & Company, P.A.
Boca Raton, Florida
March 12, 2008
F-3
Seanergy
Maritime Holdings Corp. (successor to Seanergy Maritime Corp.)
and subsidiaries
December 31,
2008 and 2007
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Notes
|
|
|
2008
|
|
|
2007
|
|
|
|
(In thousands of US Dollars, except for share and per share
data, unless otherwise stated)
|
|
|
ASSETS
|
Current assets:
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash and cash equivalents
|
|
|
6
|
|
|
|
27,543
|
|
|
|
2,211
|
|
Money market funds held in trust
|
|
|
6
|
|
|
|
|
|
|
|
232,923
|
|
Advances (trade) to related party
|
|
|
7
|
|
|
|
577
|
|
|
|
|
|
Inventories
|
|
|
|
|
|
|
872
|
|
|
|
|
|
Prepaid insurance expenses
|
|
|
|
|
|
|
574
|
|
|
|
79
|
|
Prepaid expenses and other current assets related
parties
|
|
|
4
|
|
|
|
248
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total current assets
|
|
|
|
|
|
|
29,814
|
|
|
|
235,213
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Fixed assets:
|
|
|
|
|
|
|
|
|
|
|
|
|
Vessels, net
|
|
|
8
|
|
|
|
345,622
|
|
|
|
|
|
Office equipment, net
|
|
|
8
|
|
|
|
9
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total fixed assets
|
|
|
|
|
|
|
345,631
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other assets
|
|
|
|
|
|
|
|
|
|
|
|
|
Deferred finance charges
|
|
|
9
|
|
|
|
2,757
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
TOTAL ASSETS
|
|
|
|
|
|
|
378,202
|
|
|
|
235,213
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
LIABILITIES AND SHAREHOLDERS EQUITY
|
Current liabilities:
|
|
|
|
|
|
|
|
|
|
|
|
|
Current portion of long-term debt
|
|
|
12
|
|
|
|
27,750
|
|
|
|
|
|
Trade accounts and other payables
|
|
|
|
|
|
|
674
|
|
|
|
588
|
|
Due to underwriters
|
|
|
13
|
|
|
|
419
|
|
|
|
5,407
|
|
Accrued expenses
|
|
|
|
|
|
|
541
|
|
|
|
|
|
Accrued interest
|
|
|
|
|
|
|
166
|
|
|
|
|
|
Accrued charges on convertible promissory note due to
shareholders
|
|
|
11
|
|
|
|
420
|
|
|
|
|
|
Deferred revenue related party
|
|
|
10
|
|
|
|
3,029
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total current liabilities
|
|
|
|
|
|
|
32,999
|
|
|
|
5,995
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Long-term debt, net of current portion
|
|
|
12
|
|
|
|
184,595
|
|
|
|
|
|
Convertible promissory note due to shareholders
|
|
|
11
|
|
|
|
29,043
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total liabilities
|
|
|
|
|
|
|
246,637
|
|
|
|
5,995
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Common stock subject to possible redemption
8,084,999 shares at $10.00 per share
|
|
|
13
|
|
|
|
|
|
|
|
80,849
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Consolidated shareholders equity:
|
|
|
|
|
|
|
|
|
|
|
|
|
Preferred stock, $0.0001 par value; authorized
1,000,000 shares; issued none
|
|
|
13
|
|
|
|
|
|
|
|
|
|
Common stock, $0.0001 par value; authorized shares
-89,000,000; issued and outstanding (2008:
22,361,227 shares; 2007: 28,600,000 shares, inclusive
of 8,084,999 shares subject to possible redemption)
|
|
|
13
|
|
|
|
2
|
|
|
|
3
|
|
Additional paid-in capital
|
|
|
13
|
|
|
|
166,361
|
|
|
|
146,925
|
|
Retained earnings (accumulated deficit)
|
|
|
|
|
|
|
(34,798
|
)
|
|
|
1,441
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total consolidated shareholders equity
|
|
|
|
|
|
|
131,565
|
|
|
|
148,369
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Commitments and contingencies
|
|
|
16
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
TOTAL LIABILITIES AND SHAREHOLDERS EQUITY
|
|
|
|
|
|
|
378,202
|
|
|
|
235,213
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
See accompanying notes to consolidated financial statements.
F-4
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year Ended
|
|
|
Year Ended
|
|
|
August 15, 2006 to
|
|
|
|
Notes
|
|
|
December 31, 2008
|
|
|
December 31, 2007
|
|
|
December 31, 2006
|
|
|
|
(In thousands of US Dollars, except for share and per share
data, unless otherwise stated)
|
|
|
Revenues:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Vessel revenue related party
|
|
|
|
|
|
|
35,333
|
|
|
|
|
|
|
|
|
|
Commissions related party
|
|
|
3
|
|
|
|
(880
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Vessel revenue related party, net
|
|
|
17
|
|
|
|
34,453
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Expenses:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Direct voyage expenses
|
|
|
18
|
|
|
|
(151
|
)
|
|
|
|
|
|
|
|
|
Vessel operating expenses
|
|
|
19
|
|
|
|
(3,180
|
)
|
|
|
|
|
|
|
|
|
Voyage expenses related party
|
|
|
3
|
|
|
|
(440
|
)
|
|
|
|
|
|
|
|
|
Management fees related party
|
|
|
3
|
|
|
|
(388
|
)
|
|
|
|
|
|
|
|
|
General and administration expenses
|
|
|
20
|
|
|
|
(1,840
|
)
|
|
|
(445
|
)
|
|
|
(5
|
)
|
General and administration expenses-related party
|
|
|
21
|
|
|
|
(430
|
)
|
|
|
|
|
|
|
|
|
Depreciation
|
|
|
8
|
|
|
|
(9,929
|
)
|
|
|
|
|
|
|
|
|
Goodwill impairment loss
|
|
|
5
|
|
|
|
(44,795
|
)
|
|
|
|
|
|
|
|
|
Vessels impairment loss
|
|
|
8
|
|
|
|
(4,530
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating (loss)
|
|
|
|
|
|
|
(31,230
|
)
|
|
|
(445
|
)
|
|
|
(5
|
)
|
Other income (expense), net:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest and finance costs
|
|
|
22
|
|
|
|
(3,895
|
)
|
|
|
(45
|
)
|
|
|
|
|
Interest and finance costs shareholders
|
|
|
9, 11
|
|
|
|
(182
|
)
|
|
|
(13
|
)
|
|
|
|
|
Interest income money market funds
|
|
|
|
|
|
|
3,361
|
|
|
|
1,948
|
|
|
|
1
|
|
Foreign currency exchange gains (losses), net
|
|
|
|
|
|
|
(39
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(755
|
)
|
|
|
1,890
|
|
|
|
1
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net (loss) income
|
|
|
|
|
|
|
(31,985
|
)
|
|
|
1,445
|
|
|
|
(4
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net (loss) income per common share
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic
|
|
|
15
|
|
|
|
(1.21
|
)
|
|
|
0.12
|
|
|
|
(0.00
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Diluted
|
|
|
15
|
|
|
|
(1.21
|
)
|
|
|
0.10
|
|
|
|
(0.00
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted average common shares outstanding
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic
|
|
|
15
|
|
|
|
26,452,291
|
|
|
|
11,754,095
|
|
|
|
7,264,893
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Diluted
|
|
|
15
|
|
|
|
26,452,291
|
|
|
|
15,036,283
|
|
|
|
7,264,893
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
See accompanying notes to consolidated financial statements.
F-5
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Common Stock
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Additional
|
|
|
Retained Earnings
|
|
|
Total
|
|
|
|
|
|
|
Par
|
|
|
Paid-in
|
|
|
(Accumulated
|
|
|
Shareholders
|
|
|
|
# of Shares
|
|
|
Value
|
|
|
Capital
|
|
|
Deficit)
|
|
|
Equity
|
|
|
|
(In thousands of US Dollars, except for share and per share
data,
|
|
|
|
unless otherwise stated)
|
|
|
Balance, August 15, 2006 (Inception)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Sale of shares to founding shareholders at $0.0034 per share
|
|
|
7,264,893
|
|
|
|
1
|
|
|
|
24
|
|
|
|
|
|
|
|
25
|
|
Net loss for the period from August 15, 2006 (Inception) to
December 31, 2006
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(4
|
)
|
|
|
(4
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance December 31, 2006
|
|
|
7,264,893
|
|
|
|
1
|
|
|
|
24
|
|
|
|
(4
|
)
|
|
|
21
|
|
Shares surrendered and cancelled
|
|
|
(1,764,893
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Sales of shares and warrants in private placement and public
offering, net of offering costs of $18,063
|
|
|
23,100,000
|
|
|
|
2
|
|
|
|
227,350
|
|
|
|
|
|
|
|
227,352
|
|
Capital contributed by founding shareholders
|
|
|
|
|
|
|
|
|
|
|
400
|
|
|
|
|
|
|
|
400
|
|
Shares reclassified to Common stock subject to mandatory
redemption
|
|
|
|
|
|
|
|
|
|
|
(80,849
|
)
|
|
|
|
|
|
|
(80,849
|
)
|
Net income for the year ended December 31, 2007
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
1,445
|
|
|
|
1,445
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance, December 31, 2007
|
|
|
28,600,000
|
|
|
|
3
|
|
|
|
146,925
|
|
|
|
1,441
|
|
|
|
148,369
|
|
Net (loss) for the year ended December 31, 2008
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(31,985
|
)
|
|
|
(31,985
|
)
|
Dividends paid (Note 14)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(4,254
|
)
|
|
|
(4,254
|
)
|
Reclassification of common stock no longer subject to redemption
(Note 13)
|
|
|
(6,370,773
|
)
|
|
|
|
|
|
|
17,144
|
|
|
|
|
|
|
|
17,144
|
|
Reversal of underwriter fees forfeited to redeeming shareholders
(Note 13)
|
|
|
|
|
|
|
|
|
|
|
1,433
|
|
|
|
|
|
|
|
1,433
|
|
Liquidation and dissolution common stock exchange (Note 25)
|
|
|
|
|
|
|
(1
|
)
|
|
|
1
|
|
|
|
|
|
|
|
|
|
Warrants exercised (Note 13)
|
|
|
132,000
|
|
|
|
|
|
|
|
858
|
|
|
|
|
|
|
|
858
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance December 31, 2008
|
|
|
22,361,227
|
|
|
|
2
|
|
|
|
166,361
|
|
|
|
(34,798
|
)
|
|
|
131,565
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
See accompanying notes to consolidated financial statements.
F-6
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Period From
|
|
|
|
|
|
|
|
|
|
August 15, 2006
|
|
|
|
Year Ended
|
|
|
Year Ended
|
|
|
(Inception) to
|
|
|
|
December 31, 2008
|
|
|
December 31, 2007
|
|
|
December 31, 2006
|
|
|
|
(In thousands of US Dollars, except for share and per share
data, unless otherwise stated)
|
|
|
Cash flows from operating activities:
|
|
|
|
|
|
|
|
|
|
|
|
|
Net (loss) income
|
|
|
(31,985
|
)
|
|
|
1,445
|
|
|
|
(4
|
)
|
Adjustments to reconcile net (loss) income to net cash
provided by (used in) operating activities:
|
|
|
|
|
|
|
|
|
|
|
|
|
Impairment of goodwill
|
|
|
44,795
|
|
|
|
|
|
|
|
|
|
Impairment of vessels
|
|
|
4,530
|
|
|
|
|
|
|
|
|
|
Depreciation
|
|
|
9,929
|
|
|
|
|
|
|
|
|
|
Amortization of deferred finance charges
|
|
|
224
|
|
|
|
|
|
|
|
|
|
Changes in operating assets and liabilities:
|
|
|
|
|
|
|
|
|
|
|
|
|
(Increase) decrease in
|
|
|
|
|
|
|
|
|
|
|
|
|
Advances (trade) to related party
|
|
|
(577
|
)
|
|
|
|
|
|
|
|
|
Inventories
|
|
|
(872
|
)
|
|
|
|
|
|
|
|
|
Prepaid insurance expenses
|
|
|
(495
|
)
|
|
|
(60
|
)
|
|
|
(20
|
)
|
Prepaid expenses and other current assets related
parties
|
|
|
(248
|
)
|
|
|
|
|
|
|
|
|
Trade accounts and other payables
|
|
|
86
|
|
|
|
155
|
|
|
|
3
|
|
Due to underwriters
|
|
|
(3,555
|
)
|
|
|
46
|
|
|
|
|
|
Accrued expenses
|
|
|
541
|
|
|
|
|
|
|
|
|
|
Accrued interest on convertible note due to shareholders
|
|
|
132
|
|
|
|
(1
|
)
|
|
|
1
|
|
Accrued interest
|
|
|
166
|
|
|
|
|
|
|
|
|
|
Deferred revenue related party
|
|
|
3,029
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net cash (used in) provided by operating activities
|
|
|
25,700
|
|
|
|
1,585
|
|
|
|
(20
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash flows from investing activities:
|
|
|
|
|
|
|
|
|
|
|
|
|
Acquisition of business, net of cash acquired of $NIL
|
|
|
(375,833
|
)
|
|
|
|
|
|
|
|
|
Increase in trust account from interest earned on funds held in
trust
|
|
|
|
|
|
|
(1,923
|
)
|
|
|
|
|
Funds placed in (used from) trust account from offerings
|
|
|
232,923
|
|
|
|
(231,000
|
)
|
|
|
|
|
Additions to office furniture and equipment
|
|
|
(9
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net cash used in investing activities
|
|
|
(142,919
|
)
|
|
|
(232,923
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash flows from financing activities:
|
|
|
|
|
|
|
|
|
|
|
|
|
Proceeds from initial sale of common stock
|
|
|
|
|
|
|
|
|
|
|
25
|
|
Gross proceeds from private placement
|
|
|
|
|
|
|
14 415
|
|
|
|
|
|
Gross proceeds from public offering
|
|
|
|
|
|
|
231,000
|
|
|
|
|
|
Payment of offering costs
|
|
|
|
|
|
|
(11,796
|
)
|
|
|
(75
|
)
|
Redemption of common shares
|
|
|
(63,705
|
)
|
|
|
|
|
|
|
|
|
Proceeds from warrants exercised
|
|
|
858
|
|
|
|
|
|
|
|
|
|
Proceeds from long term debt and revolving facility
|
|
|
219,845
|
|
|
|
|
|
|
|
|
|
Repayment of long term debt
|
|
|
(7,500
|
)
|
|
|
|
|
|
|
|
|
Dividends paid
|
|
|
(4,254
|
)
|
|
|
|
|
|
|
|
|
Proceeds from shareholders loans
|
|
|
|
|
|
|
|
|
|
|
350
|
|
Repayment of shareholders loans
|
|
|
|
|
|
|
(451
|
)
|
|
|
|
|
Advances from shareholders, net
|
|
|
|
|
|
|
25
|
|
|
|
76
|
|
Deferred finance charges
|
|
|
(2,693
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net cash provided by financing activities
|
|
|
142,551
|
|
|
|
233,193
|
|
|
|
376
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net increase in cash
|
|
|
25,332
|
|
|
|
1,855
|
|
|
|
356
|
|
Cash at beginning of period
|
|
|
2,211
|
|
|
|
356
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash at end of period
|
|
|
27,543
|
|
|
|
2,211
|
|
|
|
356
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash paid for:
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest
|
|
|
3,402
|
|
|
|
14
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income taxes (U.S. source income taxes)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Supplemental disclosure of non-cash financing activities:
|
|
|
|
|
|
|
|
|
|
|
|
|
Capital contributed by founding shareholders in the form of
legal fees paid
|
|
|
|
|
|
|
400
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Increase in accrued offering costs and placement fees
|
|
|
|
|
|
|
5,610
|
|
|
|
181
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Amount of forfeited underwriters fee
|
|
|
1,433
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Shareholder advances converted to notes payable
|
|
|
|
|
|
|
101
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Common stock subject to possible redemption
|
|
|
|
|
|
|
80,849
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Par value of common stock surrendered and cancelled
|
|
|
|
|
|
|
176
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Issuance of $28,250 convertible promissory note due to
shareholders (fair value at issue)
|
|
|
29,043
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Arrangement fee on convertible promissory note due to
shareholders
|
|
|
288
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Common stock no longer subject to redemption
|
|
|
17,144
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
See accompanying notes to consolidated financial statements.
F-7
|
|
1.
|
Basis of
Presentation and General Information:
|
Seanergy Maritime Corp. was incorporated in the Marshall Islands
on August 15, 2006, originally under the name Seanergy
Maritime Acquisition Corp., as a blank check company formed to
acquire, through a merger, capital stock exchange, asset
acquisition or other similar business combination, one or more
businesses in the maritime shipping industry or related
industries. Seanergy Maritime Acquisition Corp. changed its name
to Seanergy Maritime Corp. on February 20, 2007. Seanergy
Maritime Corp. formed a wholly-owned subsidiary, Seanergy Merger
Corp., under the laws of the Marshall Islands on January 4,
2008. Seanergy Merger Corp. changed its name to Seanergy
Maritime Holdings Corp. (Seanergy or the
Company) on July 11, 2008. Seanergy is engaged
in the transportation of dry-bulk cargo through the ownership
and operation of dry-bulk carriers.
Seanergy Maritime Corp. as of December 31, 2007 and 2006
and until the date of the business combination had not yet
commenced any business operations and was therefore considered a
corporation in the development stage. All activity
through to the date of the business combination, August 28,
2008, related to Seanergy Maritime Corp.s formation and
capital raising efforts, as described below. Seanergy Maritime
Corp. was subject to the risks associated with development stage
companies.
On January 27, 2009, Seanergy Maritime Corp. was liquidated
and in connection with its liquidation and dissolution, it
distributed to each of its holders of its common stock, one
share of common stock of Seanergy for each share of Seanergy
Maritime Corp. common stock owned by the holder, which resulted
in a decrease in common stock and was given retrospective
effect. All outstanding warrants and the underwriters unit
purchase option of Seanergy Maritime Corp. concurrently became
obligations of Seanergy (see Note 25).
The accompanying consolidated financial statements as of and for
the year ended December 31, 2008 include the accounts of
Seanergy Maritime Holdings Corp. (successor to Seanergy Maritime
Corp.) and its acquired wholly owned subsidiaries and the
results of operations and cash flows from the period
August 28, 2008 (the date of the completion of the business
combination) to December 31, 2008 (see also Note 5).
The accompanying consolidated financial statements as of
December 31, 2007 and for the period from August 15,
2006 (date of inception) through December 31, 2006 include
the accounts of Seanergy Maritime Corp.
On September 28, 2007, Seanergy Maritime Corp., pursuant to
its public offering, sold 23,100,000 units, which included
1,100,000 units issued upon the partial exercise of the
underwriters over-allotment option, at a price of $10.00
per unit (see also Note 13(a)).
On September 28, 2007, and prior to the consummation of the
public offering described above, Seanergy Maritime Corp.s
executive officers purchased from Seanergy Maritime Corp. an
aggregate of 16,016,667 warrants at $0.90 per warrant in a
Private Placement (see also Note 13(d)).
On May 20, 2008 companies affiliated with certain
members of the Restis family (the Restis affiliated
shareholders) collectively acquired a 9.62% interest in
Seanergy Maritime Corp. for $25,000 in cash from its existing
shareholders and officers (the Founders) via the
acquisition of 2,750,000 shares of the common stock of
Seanergy Maritime Corp. and 8,008,334 warrants to purchase
shares of Seanergy Maritime Corp.s common stock. The
common stock is subject to an Escrow Agreement dated
September 24, 2007 entered into by the Founders pursuant to
which the shares remain in escrow with an escrow agent until the
date that is 12 months after the consummation of a business
combination (the Business Combination). The warrants
were subject to a
lock-up
agreement dated September 24, 2007 also entered into by the
Founders pursuant to which the warrants would not be transferred
until the consummation of the Business Combination.
On May 20, 2008 Seanergy Maritime Corp. and Seanergy
entered into a Master Agreement (the Master
Agreement), to purchase an aggregate of six dry bulk
vessels from companies affiliated with certain members
F-8
Seanergy
Maritime Holdings Corp. and subsidiaries
Notes to
the Consolidated Financial
Statements (Continued)
December 31,
2008 and 2007
of the Restis family, for an aggregate purchase price of
(i) $367,031 in cash, (ii) $28,250 in the form of a
convertible promissory note due in May 2010, and (iii) up
to 4,308,075 shares of Seanergy common stock subject to
Seanergy meeting certain Earnings Before Interest, Taxes,
Depreciation and Amortization (EBITDA), target of $72,000 to be
earned between October 1, 2008 and September 30, 2009.
Information on the six dry bulk vessels acquired follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Remaining
|
|
|
|
|
|
|
|
|
|
|
|
|
Estimated Useful
|
|
|
|
Dead Weight
|
Seller
|
|
Jurisdiction
|
|
Vessel
|
|
Built
|
|
Life
|
|
Flag
|
|
Ton (Dwt)
|
|
Valdis Marine Corp.
|
|
Marshall Islands
|
|
African Oryx
|
|
1997
|
|
14 years
|
|
Bahamas
|
|
24,110
|
Goldie Navigation Ltd.
|
|
Marshall Islands
|
|
African Zebra
|
|
1985
|
|
2 years
|
|
Bahamas
|
|
38,623
|
Kalistos Maritime S.A.
|
|
Marshall Islands
|
|
Davakis G
|
|
2008
|
|
24 years
|
|
Bahamas
|
|
54,051
|
Kalithea Maritime S.A.
|
|
Marshall Islands
|
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Delos Ranger
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2008
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|
25 years
|
|
Bahamas
|
|
54,051
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Pavey Services Ltd.
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|
British Virgin Islands
|
|
Bremen Max
|
|
1993
|
|
9 years
|
|
Isle of Man
|
|
73,503
|
Shoreline Universal Ltd.
|
|
British Virgin Islands
|
|
Hamburg Max
|
|
1994
|
|
10 years
|
|
Isle of Man
|
|
72,338
|
Upon the execution of the Master Agreement, Seanergys
board of directors consisted of seven persons and was increased
to thirteen persons on December 18, 2008. Through
May 20, 2010, the Restis affiliated shareholders, on the
one hand, and the Founders, on the other hand, have agreed to
vote or cause to be voted, certain shares they own or control in
Seanergy so as to cause (i) six people named by the Restis
affiliated shareholders to be elected to the board of directors
(ii) six people named by the Founders to be elected to the
board of directors, and (iii) one person jointly selected
by the Restis affiliated shareholders and the Founders, to be
elected to the board of directors.
On August 26, 2008 Seanergy obtained shareholder approval
for the business combination including the purchase of the six
vessels which became effective on August 28, 2008.
Shareholders of 6,514,175 common stock voted against the vessel
acquisition. Of the shareholders voting against the vessel
acquisition, the shareholders of 6,370,773 common stock demanded
redemption of their shares and were paid $63,707, or $10.00 per
share, which included a forfeited portion of the deferred
underwriters contingent fee amounting to $1,433.
On August 28, 2008 the shareholders of Seanergy Maritime
Corp. also approved a proposal for the dissolution and
liquidation of Seanergy Maritime Corp. which became effective on
January 27, 2009. In connection with the liquidation and
dissolution, Seanergy Maritime Corp. distributed to each of its
holders of its common stock, one share of common stock of
Seanergy for each share of Seanergy Maritime Corp. common stock
owned by the holder, resulting in a decrease in common stock of
six hundred and thirty seven dollars, which was given
retrospective effect in 2008. In addition, all outstanding
warrants of Seanergy Maritime Corp. concurrently became
obligations of Seanergy. As a result, the authorized capital of
the Company becomes that of Seanergy Maritime Holdings Corp. and
amounts to 100,000,000 shares of common stock with a par
value of $0.0001 per share (see Note 25).
Seanergy Maritime Holdings Corp. began operations on
August 28, 2008 with the delivery of its first three
vessels; Davakis G., Delos Ranger and African Oryx. On
September 11, 2008, Seanergy took delivery of its vessel
Bremen Max and on September 25, 2008, Seanergy took
delivery of its vessels Hamburg Max and African Zebra.
F-9
Seanergy
Maritime Holdings Corp. and subsidiaries
Notes to
the Consolidated Financial
Statements (Continued)
December 31,
2008 and 2007
The wholly-owned subsidiaries of Seanergy Maritime Holdings
Corp. (successor to Seanergy Maritime Corp.) (the Group)
included in these consolidated financial statements are as
follows:
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Country of
|
|
Date of
|
|
|
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Company
|
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Incorporation
|
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Incorporation
|
|
Vessel Name
|
|
Date of Delivery
|
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Seanergy Management Corp.
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Marshall Islands
|
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May 9 , 2008
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N/A
|
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N/A
|
Amazons Management Inc.
|
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Marshall Islands
|
|
April 21 , 2008
|
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Davakis G.
|
|
August 28, 2008
|
Lagoon Shipholding Ltd.
|
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Marshall Islands
|
|
April 21, 2008
|
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Delos Ranger
|
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August 28, 2008
|
Cynthera Navigation Ltd.
|
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Marshall Islands
|
|
March 18, 2008
|
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African Oryx
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August 28, 2008
|
Martinique International Corp.
|
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British Virgin Islands
|
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May 14, 2008
|
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Bremen Max.
|
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September 11, 2008
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Harbour Business International Corp.
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British Virgin Islands
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April 1, 2008
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Hamburg Max.
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September 25, 2008
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Waldeck Maritime Co.
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Marshall Islands
|
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April 21, 2008
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African Zebra
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September 25, 2008
|
On various dates from June 5, 2008 to December 3,
2008 companies affiliated with members of the Restis family
purchased 13,383,915 shares of common stock from
shareholders of Seanergy Maritime Corp. or from the open market
for an aggregate purchase price of $112,436.
Following the shareholders approval on August 26,
2008, the non-voting shareholders redeemed 6,370,773 shares
of common stock.
The total interest of the Restis family as of December 31,
2008 amounted to approximately 72% (see Note 3).
Seanergy Maritime Corp. common stock and warrants started
trading on NASDAQ Market on October 15, 2008 under the
symbols SHIP and SHIP.W, respectively.
Previously, the common stock and warrants were listed on the
American Stock Exchange up to October 14, 2008.
|
|
2.
|
Significant
Accounting Policies:
|
|
|
(a)
|
Principles
of Consolidation
|
The accompanying consolidated financial statements have been
prepared in accordance with generally accepted accounting
principles in the United States of America (US GAAP) and include
the accounts and operating results of Seanergy and its
wholly-owned subsidiaries where Seanergy has control. Control is
presumed to exist when Seanergy through direct or indirect
ownership retains the majority of voting interest.
In addition Seanergy evaluates its relationships with other
entities to identify whether they are variable interest entities
as defined by Financial Accounting Standards Board (FASB)
Interpretation No. 46 (R) Consolidation of Variable
Interest Entities (FIN 46R) and to assess
whether it is the primary beneficiary of such entities. If the
determination is made that the Company is the primary
beneficiary, then that entity is included in the consolidated
financial statements in accordance with FIN 46R. When the
Company does not have a controlling interest in an entity, but
exerts a significant influence over the entity, the Company
applies the equity method of accounting.
All significant intercompany balances and transactions and any
intercompany profit or loss on assets remaining with the Group
have been eliminated in the accompanying consolidated financial
statements.
The preparation of financial statements in conformity with
generally accepted accounting principles in the United States
(US GAAP) requires management to make estimates and assumptions
that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of
the consolidated financial statements and the reported amounts
of revenues and expenses during the reporting
F-10
Seanergy
Maritime Holdings Corp. and subsidiaries
Notes to
the Consolidated Financial
Statements (Continued)
December 31,
2008 and 2007
period. Actual results could differ from those estimates.
Significant items subject to such estimates include evaluation
of relationships with other entities to identify whether they
are variable interest entities, determination of vessel useful
lives, allocation of purchase price in a business combination,
determination of vessels impairment and determination of
goodwill impairment. The current economic environment has
increased the level of uncertainty inherent in those estimates
and assumptions.
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(c)
|
Foreign
Currency Translation
|
Seanergys functional currency is the United States dollar
since the Companys vessels operate in international
shipping markets and therefore primarily transact business in
US Dollars. The Companys books of accounts are
maintained in US Dollars. Transactions involving other
currencies are translated into the United States dollar using
exchange rates, which are in effect at the time of the
transaction. At the balance sheet dates, monetary assets and
liabilities, which are denominated in other currencies, are
translated to United States dollars at the foreign exchange rate
prevailing at year-end. Gains or losses resulting from foreign
currency translation are reflected in the consolidated
statements of operations.
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(d)
|
Cash
and Cash Equivalents
|
Seanergy considers time deposits and all highly liquid
investments with an original maturity of three months or less to
be cash equivalents. Restricted cash is excluded from cash and
cash equivalents.
Inventories consist of lubricants which are stated at the lower
of cost or market value. Cost is determined by the first in,
first out method.
Vessels are initially stated at cost, which consists of the
contract price less discounts, plus any material expenses
incurred upon acquisition (delivery expenses and other
expenditures to prepare the vessel for her initial voyage) and
borrowing costs incurred during the construction period.
Subsequent expenditures for conversions and major improvements
are also capitalized when they appreciably extend the life,
increase the earning capacity or improve the efficiency or
safety of the vessels.
Depreciation is computed using the straight-line method over the
estimated useful life of the vessels, after considering the
estimated salvage value. Salvage value is estimated by the
Company by taking the cost of steel times the weight of the ship
noted in lightweight ton (LWT). Management estimates the useful
life of the Companys vessels to be 25 years from the
date of initial delivery from the shipyard.
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(h)
|
Impairment
of Long-Lived Assets (Vessels)
|
Seanergy applies FASB Statement No. 144 Accounting
for the Impairment or Disposal of Long-lived Assets, which
addresses financial accounting and reporting for the impairment
or disposal of long-lived assets. Long-lived vessels are
reviewed for impairment whenever events or changes in
circumstances indicate that the carrying value may not be
recoverable. An impairment loss is recognized when the carrying
amount of the long-lived asset is not recoverable and exceeds
its fair value. The carrying amount of the long-lived asset is
not recoverable if it exceeds the sum of the undiscounted cash
flows expected to result from the use and eventual disposition
of the asset. Any impairment loss is measured as the amount by
which the carrying amount of the long-lived asset exceeds its
fair value and is recorded as a reduction in the carrying value
of the
F-11
Seanergy
Maritime Holdings Corp. and subsidiaries
Notes to
the Consolidated Financial
Statements (Continued)
December 31,
2008 and 2007
related asset and a charge to operating results. Once an
impairment results in a reduction in the carrying value, the
carrying value of such an asset cannot thereafter be increased.
Fair value is determined based on current market values received
from independent appraisers, when available, or from other
acceptable valuation techniques such as discounted cash flows
models. The Company recorded an impairment loss of $4,530 in
2008 (see Note 8). It is considered at least reasonably
possible that continued declines in volumes, charter rates and
availability of letters of credit for customers resulting from
current global economic conditions could significantly impact
the Companys future impairment estimates.
Seanergy follows FASB Statement No. 142 Goodwill and
Other Intangible Assets. Goodwill represents the excess of
the aggregate purchase price over the fair value of the net
identifiable assets acquired in business combinations accounted
for under the purchase method. Goodwill is reviewed for
impairment at least annually on December 31 in accordance with
the provisions of FASB Statement No. 142. The goodwill
impairment test is a two-step process. Under the first step, the
fair value of the reporting unit is compared to the carrying
value of the reporting unit (including goodwill). If the fair
value of the reporting unit is less than the carrying value of
the reporting unit, goodwill impairment may exist, and the
second step of the test is performed. Under the second step, the
implied fair value of the goodwill is compared to the carrying
value of the goodwill and an impairment loss is recognized to
the extent that the carrying value of goodwill exceeds the
implied fair value of goodwill. The implied fair value of
goodwill is determined by allocating the fair value of the
reporting unit in a manner similar to a purchase price
allocation in accordance with FASB Statement No. 141
Business Combinations. The residual fair value after
this allocation is the implied fair value of the reporting unit
goodwill. Fair value of the reporting unit is determined using a
discounted cash flow analysis. If the fair value of the
reporting unit exceeds it carrying value, step two does not have
to be performed. The Company recorded an impairment loss of
$44,795 in 2008 (see Note 5).
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(j)
|
Dry-Docking
and Special Survey Costs
|
The Company follows the deferral method of accounting for
dry-docking costs and special survey costs whereby actual costs
incurred which extend the economic life of the vessels are
deferred and are amortized on a straight-line basis over the
period through the expected date of the next dry-docking which
is scheduled to become due in 2 to 3 years. Dry-docking
costs which are not fully amortized by the next dry-docking
period are expensed.
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(k)
|
Pension
and Retirement Benefit Obligations
|
The ship-owning companies included in the consolidation employ
the crew on board the vessels under short-term contracts
(usually up to nine months) and, accordingly, they are not
liable for any pension or post-retirement benefits.
Administrative employees are covered by state-sponsored pension
funds. Both employees and the Company are required to contribute
a portion of the employees gross salary to the
state-sponsored pension fund.
Upon retirement, the state-sponsored pension funds are
responsible for paying the employees retirement benefits and
accordingly Seanergy has no obligation. Employers
contributions for the years ended December 31, 2008 and
2007 and for the period August 15, 2006 (inception) to
December 31, 2006 amounted to $NIL, $NIL and $NIL,
respectively.
F-12
Seanergy
Maritime Holdings Corp. and subsidiaries
Notes to
the Consolidated Financial
Statements (Continued)
December 31,
2008 and 2007
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(l)
|
Commitments
and Contingencies
|
Liabilities for loss contingencies, arising from claims,
assessments, litigations, fines and penalties, environmental and
remediation obligations and other sources are recorded when it
is probable that a liability has been incurred and the amount of
the loss can be reasonably estimated.
The Company follows Staff Accounting Bulletin (SAB)
No. 104, Revenue Recognition, issued by the Securities and
Exchange Commission (SEC) in December 2003.
SAB 104 summarizes certain of the SECs staff views in
applying U.S. generally accepted accounting principles to
revenue recognition in financial statements. Revenue is recorded
when a charter agreement exists and collection of the related
revenue is reasonably assured. Revenue is recognized as it is
earned, on a straight line basis over the duration of each time
charter, as adjusted for the off hire days that the vessel
spends undergoing repairs, maintenance and upgrade work.
Deferred revenue represents cash received prior to the balance
sheet date and it is related to revenue applicable to periods
after such date. Address commission of 2.5% is deducted from
vessel revenue.
Commissions are paid in the same period as related charter
revenues are recognized. Commissions paid by Seanergy are
included in Voyage expenses. Commissions of 1.25% are paid to
Safbulk Pty Ltd (Safbulk), an affiliate, as commercial brokerage
services and 2.5% address commission is withheld on the charter
statement revenue with South African Marine Corporation S.A.,
(SAMC), an affiliate.
|
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(o)
|
Vessel
voyage expenses
|
Vessel voyage expenses primarily consist of port, canal and
bunker expenses that are unique to a particular charter and are
paid for by the charterer under time charter agreements and
other non-specified voyage expenses such as commissions that are
paid by the Company.
|
|
(p)
|
Repairs
and Maintenance
|
All repair and maintenance expenses, including major overhauling
and underwater inspection expenses are expensed in the year
incurred. Such costs are included in Vessel operating expenses
in the accompanying consolidated statements of operations.
|
|
(q)
|
Research
and Development and Advertising Costs
|
Research and development and advertising costs are expensed as
incurred. There were no research and development and advertising
costs during 2008, 2007 and 2006.
|
|
(r)
|
Financing
Costs and Capitalized Interest
|
Underwriting, legal and other direct costs incurred with the
issuance of long-term debt or to refinancing existing ones are
deferred and amortized to interest expense over the life of the
related debt using the effective interest method. Unamortized
fees relating to loans repaid or refinanced are expensed in the
period the repayment or refinancing is made. Interest costs
incurred on debt during the construction of vessels are
capitalized. There were no interest costs capitalized as of
December 31, 2008, 2007 and 2006.
F-13
Seanergy
Maritime Holdings Corp. and subsidiaries
Notes to
the Consolidated Financial
Statements (Continued)
December 31,
2008 and 2007
Income taxes are accounted for under the asset and liability
method. Deferred tax assets and liabilities are recognized, when
applicable, for the future tax consequences attributable to
differences between the financial statement carrying amounts of
existing assets and liabilities and their respective tax bases
and operating loss and tax credit carry forwards. Deferred tax
assets and liabilities are measured using enacted tax rates
expected to apply to taxable income in the years in which those
temporary differences are expected to be recovered or settled.
The effect on deferred tax assets and liabilities of a change in
tax rates is recognized in income in the period that includes
the enactment date. Beginning with the adoption of FASB
Interpretation No. 48, Accounting for Uncertainty in Income
Taxes as of January 1, 2008, the Company recognizes the
effect of income tax positions only if those positions are more
likely than not of being sustained. Recognized income tax
positions are measured at the largest amount that is greater
than 50% likely of being realized. Changes in recognition or
measurement are reflected in the period in which the change in
judgment occurs. Prior to the adoption of FIN 48, the
Company recognized the effect of income tax positions only if
such positions were probable of being sustained.
The Company records interest related to unrecognized tax
benefits in interest expense and penalties in general and
administration expenses.
The Company is not currently subject to income taxes as Seanergy
is incorporated in the Marshall Islands. Under current Marshall
Islands law, Seanergy is not subject to tax on income or capital
gains and no Marshall Islands withholding tax will be imposed
upon payment of dividends by Seanergy to its shareholders.
|
|
(t)
|
Earnings
(Losses) per Share
|
Seanergy computes earning per share (EPS) in accordance with
FASB Statement No. 128, Earnings per Share and SEC Staff
Accounting Bulletin No. 98 (SAB 98). FASB
Statement No. 128 requires companies with complex capital
structures to present basic and diluted EPS. Basic earnings
(losses) per common share are computed by dividing net income
(loss) available to common shareholders by the weighted average
number of common shares outstanding during the period. Diluted
earnings (losses) per share, reflects the potential dilution
that could occur if securities or other contracts to issue
common stock were exercised or converted at the beginning of the
periods presented, or issuance date, if later. Potential common
shares that have an anti-dilutive effect (i.e. those that
increase income per share or decrease loss per share) are
excluded from the calculation of diluted earnings per share.
Seanergy reports financial information and evaluates its
operations by total charter revenues and not by the length of
vessel employment, customer, or type of charter. 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, Seanergy has determined
that it operates under one reportable segment. Furthermore, when
Seanergy charters a vessel to a charterer, the charterer is free
to trade the vessel worldwide and, as a result, disclosure of
geographic information is impracticable (see Note 3(b)).
Seanergy follows FASB Statement No. 133, Accounting for
Derivative Instruments and Hedging Activities, as amended, to
account for derivatives and hedging activities, which requires
that every derivative instrument (including certain derivative
instruments embedded in other contracts) be recorded in the
balance sheet as either an asset or liability measured at its
fair value, with changes in the derivatives fair value
F-14
Seanergy
Maritime Holdings Corp. and subsidiaries
Notes to
the Consolidated Financial
Statements (Continued)
December 31,
2008 and 2007
recognized currently in earnings unless specific hedge
accounting criteria are met. During 2008, 2007 and 2006 Seanergy
did not engage in any transaction with derivative instruments or
have any hedging activities.
|
|
(w)
|
Share-Based
Compensation
|
Seanergy accounts for share-based payments pursuant to Statement
of FASB Statement No. 123R, Share-Based Payments. FASB
Statement No. 123R requires all share-based payments,
including grants of employee stock options to employees, to be
recognized as an expense in the financial statements and that
such cost be measured at the fair value of the award. As of
December 31, 2008, 2007 and 2006 Seanergy did not have any
share-based payments.
|
|
(x)
|
Fair
Value Measurements
|
On January 1, 2008, the Company adopted the provisions FASB
Statement No. 157, Fair Value Measurements, for fair value
measurements of financial assets and financial liabilities and
for fair value measurements of nonfinancial items that are
recognized or disclosed at fair value in the financial
statements on a recurring basis. FASB Statement No. 157
defines fair value as the price that would be received to sell
an asset or paid to transfer a liability in an orderly
transaction between market participants at the measurement date.
FASB Statement No. 157 also establishes a framework for
measuring fair value and expands disclosures about fair value
measurements (Note 24) FASB Staff Position
FAS 157-2,
Effective Date of FASB Statement No. 157,
delays the effective date of FASB Statement No. 157 until
fiscal years beginning after November 15, 2008 for all
nonfinancial assets and nonfinancial liabilities that are
recognized or disclosed at fair value in the financial
statements on a nonrecurring basis. In accordance with FSP
FAS 157-2,
the Company has not applied the provisions of FASB Statement
No. 157 to such assets and liabilities. The Company is in
the process of evaluating the impact, if any, of applying these
provisions on its financial position and results of operations.
In October 2008, the FASB issued FASB Staff Position
FAS 157-3,
Determining the Fair Value of a Financial Asset When the Market
for That Asset is Not Active, which was effective immediately.
FSP
FAS 157-3
clarifies the application of FASB Statement No. 157 in
cases where the market for a financial instrument is not active
and provides an example to illustrate key considerations in
determining fair value in those circumstances. The Company has
considered the guidance provided by FSP
FAS 157-3
in its determination of estimated fair values during 2008.
In February 2007, the FASB issued FASB Statement No. 159,
The Fair Value Option for Financial Assets and Financial
Liabilities which provides companies with an option to
report selected financial assets and liabilities at fair value.
FASB Statement No. 159s objective is to reduce both
complexity in accounting for financial instruments and the
volatility in earnings caused by measuring related assets and
liabilities differently. Generally accepted accounting
principles have required different measurement attributes for
different assets and liabilities that can create artificial
volatility in earnings. FASB Statement No. 159 helps to
mitigate this type of accounting-induced volatility by enabling
companies to report related assets and liabilities at fair
value, which would likely reduce the need for companies to
comply with detailed rules for hedge accounting. FASB Statement
No. 159 also establishes presentation and disclosure
requirements designed to facilitate comparisons between
companies that choose different measurement attributes for
similar types of assets and liabilities. FASB Statement
No. 159 requires companies to provide additional
information that will help investors and other users of
financial statements to more easily understand the effect of the
companys choice to use fair value on its earnings.
FASB Statement No. 159 also requires companies to display
the fair value of those assets and liabilities for which the
company has chosen to use fair value on the face of the balance
sheet. FASB Statement No. 159
F-15
Seanergy
Maritime Holdings Corp. and subsidiaries
Notes to
the Consolidated Financial
Statements (Continued)
December 31,
2008 and 2007
does not eliminate disclosure requirements included in other
accounting standards, including requirements for disclosures
about fair value measurements included in FASB Statement
No. 157 and FASB Statement No. 107. FASB Statement
No. 159 is effective as of the beginning of a
companys first fiscal year beginning after
November 15, 2007. Early adoption is permitted as of the
beginning of the previous fiscal year provided the company makes
that choice in the first 120 days of that fiscal year and
also elects to apply the provisions of FASB Statement
No. 157. The Company has not opted to fair value any of its
financial assets and liabilities.
|
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(z)
|
Hierarchy
of Generally Accepted Accounting principles
|
Seanergy follows FASB Statement No. 162 The Hierarchy
of Generally Accepted Accounting Principles which provides
a framework, or hierarchy, for selecting the principles to be
used in preparing financial statements for non-governmental
entities under US GAAP.
|
|
(aa)
|
Recent
accounting pronouncements
|
In December 2007, the FASB issued FASB Statement
No. 141(R), Business Combinations, and FASB Statement
No. 160, Non-controlling Interests in Consolidated
Financial Statements an amendment to ARB
No. 51. FASB Statements No. 141(R) and No. 160
require most identifiable assets, liabilities, non-controlling
interests, and goodwill acquired in a business combination to be
recorded at full fair value and require
non-controlling interests (previously referred to as minority
interests) to be reported as a component of equity, which
changes the accounting for transactions with non-controlling
interest holders. Both Statements are effective for periods
beginning on or after December 15, 2008, and earlier
adoption is prohibited. FASB Statement No. 141(R) will be
applied to business combinations occurring after the effective
date. FASB Statement No. 160 will be applied prospectively
to all non-controlling interests, including any that arose
before the effective date. All of the Companys
subsidiaries are wholly owned, so the adoption of Statement 160
is not expected to impact its financial position and results of
operations. Seanergy does not have a business combination that
was consummated on or after December 15, 2008.
In March 2008, the FASB issued FASB Statement No. 161,
Disclosures about Derivative Instruments and Hedging
Activities an amendment of FASB Statement
No. 133. FASB Statement No. 161 amends and
expands the disclosure requirements of FASB Statement
No. 133, Accounting for Derivative Instruments and
Hedging Activities. The objective of FASB Statement
No. 161 is to provide users of financial statements with an
enhanced understanding of how and why an entity uses derivative
instruments, how derivative instruments and related hedged items
are accounted for under FASB Statement No. 133 and its
related interpretations, and how derivative instruments and
related hedged items affect an entitys financial position,
financial performance, and cash flows. FASB Statement
No. 161 requires qualitative disclosures about objectives
and strategies for using derivatives, quantitative disclosures
about fair value amounts of and gains and losses on derivative
instruments, and disclosures about credit-risk-related
contingent features in derivative agreements. FASB Statement
No. 161 applies to all derivative financial instruments,
including bifurcated derivative instruments (and non derivative
instruments that are designed and qualify as hedging instruments
pursuant to paragraphs 37 and 42 of FASB Statement
No. 133) and related hedged items accounted for under
FASB Statement No. 133 and its related interpretations.
FASB Statement No. 161 also amends certain provisions of
FASB Statement No. 131. FASB Statement No. 161 is
effective for financial statements issued for fiscal years and
interim periods beginning after November 15, 2008, with
early application encouraged. FASB Statement No. 161
encourages, but does not require, comparative disclosures for
earlier periods at initial adoption. The Company does not
currently anticipate that the adoption of FASB Statement
No. 161 will have any impact on its financial statement
presentation or disclosures.
In June 2008, the FASB ratified Emerging Issues Task Force
(EITF)
07-5,
Determining Whether an Instrument (or Embedded Feature) is
Indexed to an Entitys Own Stock
(EITF 07-5).
EITF 07-5
addresses
F-16
Seanergy
Maritime Holdings Corp. and subsidiaries
Notes to
the Consolidated Financial
Statements (Continued)
December 31,
2008 and 2007
the determination of whether a financial instrument (or an
embedded feature) is indexed to an entitys own stock.
EITF 07-5
is effective for fiscal years beginning after December 15,
2008, and interim periods within those fiscal years. Seanergy
has determined that its financial instruments, warrants, are
indexed to its own stock and equity classified and therefore the
adoption of this standard will not have a material effect on the
consolidated financial statement presentation or disclosure.
FSP APB
14-1,
Accounting for Convertible Debt Instruments That May Be
Settled in Cash upon Conversion (Including Partial Cash
Settlement). FSP APB
14-1
requires issuers of convertible debt that may be settled wholly
or partly in cash upon conversion to account for the debt and
equity components separately. The FSP is effective for financial
statements issued for fiscal years beginning after
December 15, 2008 and interim periods within those years
and must be applied retrospectively to all periods presented.
Early adoption is prohibited. Seanergy has determined that the
application of FSP APB
14-1 will
not have a significant effect on its financial statements.
|
|
3.
|
Transactions
with Related Parties:
|
On May 20, 2008 companies affiliated with certain
members of the Restis family collectively acquired a 9.62%
interest in Seanergy Maritime Corp. On the same date, the
Company also entered into the following agreements with
companies wholly-owned by member(s) of the Restis family:
|
|
|
|
|
The Master Agreement to purchase an aggregate of six dry bulk
vessels from companies affiliated with certain members of the
Restis family, for an aggregate purchase price of $404,876
including direct transaction costs plus contingent consideration
(see Note 5).
|
|
|
|
A management agreement concluded with EST for the provision of
technical management services relating to vessels for an initial
period of two years from the date of signing.
|
|
|
|
A brokerage agreement was concluded with Safbulk, for the
provision of chartering services for an initial period of two
years from the date of signing.
|
On May 26, 2008, time charter agreements for
11-13 month
periods, were concluded for the vessels with SAMC, a company
also owned by certain members of the Restis family.
On November 17, 2008, a lease agreement was entered into
between Waterfront S.A., a company beneficially owned by a
member of the Restis family, for the lease of the executive
offices.
On various dates from June 5, 2008 to December 3,
2008 companies affiliated with members of the Restis family
purchased 13,383,915 shares of common stock from
shareholders of Seanergy Maritime Corp.
On August 26, 2008 Seanergy obtained shareholders
approval for the business combination including the purchase of
the six vessels from the Restis family which became effective on
August 28, 2008. At this time the non-voting shareholders
redeemed 6,370,773 shares of common stock thereby bring the
total interest of the Restis family to approximately 72% as of
December 31, 2008.
|
|
(a)
|
Management
Agreement:
|
On May 20, 2008, a management agreement was concluded
between the wholly owned subsidiary of the Company, Seanergy
Management Corp. (Seanergy Management), an
affiliate, for the provision of technical management services
relating to vessels for an initial period of two years from the
date of signing. The agreement will be automatically extended
for successive one year periods, unless three months written
notice by either party is given prior to commencement of the
next period. The fixed daily fee per vessel in operation was
EUR 416 (four hundred and sixteen Euros) until
December 31, 2008 thereafter adjusted on an annual
F-17
Seanergy
Maritime Holdings Corp. and subsidiaries
Notes to
the Consolidated Financial
Statements (Continued)
December 31,
2008 and 2007
basis as defined. The fixed daily fee for the year ended
December 31, 2009 was agreed at EUR 425 (four hundred
and twenty-five Euros) (see Note 25).
The related expense for 2008 amounted to $388 and it is included
under Management fees related party in the
accompanying consolidated statements of operations.
On September 2, 2008, a service agreement was signed
between the Company and EST, a company beneficially owned by the
Restis family, for consultancy services with respect to
financing, dealing and relations with third parties and
assistance in the preparation of periodic reports to
shareholders for a fixed monthly fee of $5. The agreement
expired on December 2, 2008 and was extended for a period
of 3 months ending March 2, 2009.
The related expense for 2008 amounted to $21 and is included
under general and administrative expenses related
party (Note 21) in the accompanying consolidated
statements of operations.
On May 26, 2008, time charter agreements for
11-13 month
periods, expiring in September 2009, at a time charter daily
rate of between $30 and $65, were concluded for the vessels with
SAMC, a company beneficially owned by certain members of the
Restis family. The charter agreements provide for an address
commission of 2.5% in favor of SAMC. The address commission
amounted to $880 and is recorded net of revenue as
commissions related party in the accompanying 2008
consolidated statements of operations.
On May 20, 2008, a brokerage agreement was concluded with
Safbulk, a company beneficially owned by certain members of the
Restis family, for the provision of chartering services for an
initial period of two years from the date of signing. Safbulk
will receive a chartering commission of 1.25% on the collected
vessel revenue. The fees charged by Safbulk are separately
reflected as voyage expenses related party in the
accompanying 2008 consolidated statements of operations.
On November 17, 2008, a lease agreement was entered into
between Waterfront S.A., a company beneficially owned by a
member of the Restis family, for the lease of the executive
offices. The initial lease term is from November 17, 2008
to November 16, 2011. Seanergy has the option to extend the
term until February 2, 2014. The monthly lease payment is
EUR 42. The rent for 2008 of $88 charged by Waterfront S.A.
is separately reflected as General and Administrative
expenses related party in the accompanying 2008
consolidated statements of operations (Note 21). The
related rental guarantee of $180 is reflected in prepaid
expenses and other current assets related party in
the accompanying 2008 consolidated balance sheet (see
Note 4).
|
|
(e)
|
Consultancy
Agreement:
|
On December 15, 2008, Seanergy Management concluded an
agreement with CKA Company S.A., a related party entity
incorporated in the Marshall Islands. CKA Company S.A. is
beneficially owned by the Companys Chief Financial
Officer. Under the agreement, CKA Company S.A. provides the
services of the individual who serves in the position of
Seanergys Chief Financial Officer. The agreement is for
$220 per annum, payable monthly on the last working day of every
month in twelve installments. The related expense for 2008
amounted to $27 and is included in General and Administrative
expenses related party in the accompanying 2008
consolidated statements of operations.
F-18
Seanergy
Maritime Holdings Corp. and subsidiaries
Notes to
the Consolidated Financial
Statements (Continued)
December 31,
2008 and 2007
|
|
(f)
|
V&P
Law Firm (Vgenopoulos Partners):
|
Mr. Ioannis Tsigkounakis, a member of our Board of
Directors is a partner of V&P Law Firm, which Seanergy
Maritime has retained in connection with certain matters
relating to vessel acquisitions and the drafting of a definitive
agreement. Seanergy has paid Mr. Tsigkounakis law
firm $340 for the year ended December 31, 2008, which was
recorded in goodwill acquisition costs since it
related to legal consultancy fees with respect to the business
combination.
|
|
(g)
|
Employment
Agreements:
|
Seanergy entered into an employment agreement with its Chief
Executive Officer. Under the agreement, the officers
annual base salary is $400 which is subject to increases as may
be approved by the Board of Directors.
The related expense for 2008 amounted to $139 and it is included
under general and administrative expenses related
party in the accompanying consolidated statements of operations
(Note 21).
Seanergy Management has entered into an employment agreement
with its Chief Financial Officer. The total net annual
remuneration amounts to EUR 23.8 subject to any increases
made from time to time by Seanergy Management or by an
appropriate committee.
All the members of the Board of Directors receive fees of $40
per year. In addition, the three members of the Shipping
Committee receive additional fees of $60 per year. The amounts
for the year ended December 31, 2008 of $155 are recorded
in general and administrative expenses related party
in the accompanying consolidated statements of operations.
|
|
4.
|
Prepaid
Expenses and Other Current Assets Related
Parties
|
The amounts in the accompanying consolidated balance sheets are
analyzed as follows:
|
|
|
|
|
|
|
|
|
|
|
2008
|
|
|
2007
|
|
|
Prepaid commission on hire (SAMC) (see
Note 3(b))
|
|
|
68
|
|
|
|
|
|
Office rental deposit (Waterfront SA (see
Note 3(d))
|
|
|
180
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
248
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
On August 28, 2008, Seanergy completed its business
combination as discussed in Note 1. The acquisition was
accounted for under the purchase method of accounting and
accordingly, the assets acquired have been recorded at their
fair values. No liabilities were assumed or other tangible
assets acquired. The results of operations are included in the
consolidated statement of operations from August 28, 2008.
The consideration paid for the business combination has been
recorded at fair value at the date of acquisition and forms part
of the cost of the acquisition.
F-19
Seanergy
Maritime Holdings Corp. and subsidiaries
Notes to
the Consolidated Financial
Statements (Continued)
December 31,
2008 and 2007
The aggregate acquisition cost and fair value of assets acquired
were as follows:
|
|
|
|
|
Cash paid
|
|
$
|
367,031
|
|
Convertible promissory note related party
(Note 11)
|
|
$
|
29,043
|
|
Direct transaction costs
|
|
$
|
8,802
|
|
|
|
|
|
|
Aggregate acquisition cost
|
|
$
|
404,876
|
|
Less: Fair value of assets acquired Vessels
|
|
$
|
360,081
|
|
|
|
|
|
|
Goodwill on acquisition
|
|
$
|
44,795
|
|
|
|
|
|
|
The convertible promissory note with a face value of $28,250 was
recorded at fair market value using a trinomial Tree valuation
model that considered both the debt and conversion features. The
model used takes into account the interest rate curve of the
currency of the convertible note, the credit spread of the
company that issues the note, as well as the dividends paid by
the company that underlie the note, resulting in an imputed
interest rate of 1.38%.
Contingent consideration consists of the issuance of
4,308,075 shares of common stock subject to Seanergy
meeting certain targeted EBITDA of $72,000 to be earned between
October 1, 2008 and September 30, 2009. Contingent
consideration will be recorded as additional purchase price once
the contingency is settled. It is reasonably possible in the
near term that any amounts recorded upon achievement of the
earn-out in 2009 may be impaired based on current market
conditions.
The premium (i.e. non tax deductible goodwill) over the fair
value of the tangible assets acquired resulted from the decline
in the market value of the dry-bulk vessels between the date of
entering into the agreements to purchase the business
(May 20, 2008) and the actual business acquisition
date (August 28, 2008). If the business combination was to
take place at the beginning of each of the years 2008 and 2007
instead of the effective dates, consolidated revenues
(unaudited), net profit (loss) (unaudited) and earnings (loss)
per share, basic (unaudited) would have been $76,694, $20,474
and $(0.92) for 2008 and $35,635, $(47,864) and $(2.15) for
2007, respectively.
The pro-forma adjustments primarily relate to revenue and
operating expenses, vessel depreciation, interest income and
interest expense, as if the business combination had been
consummated at the beginning of each 2008 and 2007 year,
assuming that the used vessels were fully operating under
effective contracts as from acquisition date and effective
historical revenues under Restis family management and
assuming that each new building started operations as from the
delivery date in 2008. Impairment of goodwill was assumed to be
the same in both 2008 and 2007.
Management performed its annual impairment testing of goodwill
as at December 31, 2008. The current economic and market
conditions, including the significant disruptions in the global
credit markets, are having broad effects on participants in a
wide variety of industries. 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;
conditions that the Company considers indicators of a potential
impairment.
The fair value for goodwill impairment testing was estimated
using the expected present value of future cash flows, using
judgments and assumptions that management believes were
appropriate in the circumstances. The future cash flows from
operations were 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 a combination of Seanergys remaining charter
agreement rates,
2-year
forward freight agreements and the most recent
10-year
average historical 1 year time charter rates available for
each type of vessel) assuming an average annual inflation rate
of 2%. The weighted average cost of capital (WACC) used was 8%.
F-20
Seanergy
Maritime Holdings Corp. and subsidiaries
Notes to
the Consolidated Financial
Statements (Continued)
December 31,
2008 and 2007
As a result, the Company recorded an impairment charge related
to goodwill of $44,795 in 2008 which is recorded as a separate
line item in the accompanying 2008 consolidated statement of
operations.
The change in the carrying value for goodwill for the year ended
December 31, 2008 is:
|
|
|
|
|
Balance beginning of year
|
|
|
|
|
Goodwill acquired on August 28, 2008
|
|
|
44,795
|
|
Impairment loss
|
|
|
(44,795
|
)
|
|
|
|
|
|
Balance end of year
|
|
|
|
|
|
|
|
|
|
|
|
6.
|
Cash and
Cash Equivalents and Money Market Funds Held in
Trust:
|
Cash and cash equivalents in the accompanying balance sheets are
analyzed as follows:
|
|
|
|
|
|
|
|
|
|
|
2008
|
|
|
2007
|
|
|
Cash at bank
|
|
|
9,011
|
|
|
|
710
|
|
Term deposits
|
|
|
18,532
|
|
|
|
1,501
|
|
|
|
|
|
|
|
|
|
|
|
|
|
27,543
|
|
|
|
2,211
|
|
|
|
|
|
|
|
|
|
|
Money Market funds held in trust at
December 31, 2007 consists primarily of an investment in
the BlackRock MiniFund with the market value of $232,923 and an
annualized tax-exempt yield of 3.16% at December 31, 2007.
All proceeds in the trust account were released to Seanergy to
complete the business combination as discussed in Note 1.
As of December 31, 2008, no funds were held in trust
accounts.
|
|
7.
|
Advances
(Trade) to Related Party:
|
Advances (trade) to related party represent advances given to
EST for working capital purposes of the six vessels
operating activities in accordance with terms of the management
agreement dated May 20, 2008 (see Note 3(a)).
According to this agreement, EST obtains cash advances as a
manager of vessels and performs certain duties that include
technical management and support services necessary for the
operation and employment of the vessels.
F-21
Seanergy
Maritime Holdings Corp. and subsidiaries
Notes to
the Consolidated Financial
Statements (Continued)
December 31,
2008 and 2007
The amounts in the accompanying consolidated balance sheets are
analyzed as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Office Furniture
|
|
|
|
|
|
|
Vessel Cost
|
|
|
and Fittings
|
|
|
Total Value
|
|
|
Cost:
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance beginning of period
|
|
|
|
|
|
|
|
|
|
|
|
|
Additions
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance, December 31, 2007
|
|
|
|
|
|
|
|
|
|
|
|
|
Additions (Note 5)
|
|
|
360,081
|
|
|
|
9
|
|
|
|
360,090
|
|
Impairment charge
|
|
|
(4,530
|
)
|
|
|
|
|
|
|
(4,530
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance December 31, 2008
|
|
|
355,551
|
|
|
|
9
|
|
|
|
355,560
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Accumulated depreciation:
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance beginning of period
|
|
|
|
|
|
|
|
|
|
|
|
|
Depreciation charge for the year
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance, December 31, 2007
|
|
|
|
|
|
|
|
|
|
|
|
|
Depreciation charge for the year
|
|
|
(9,929
|
)
|
|
|
|
|
|
|
(9,929
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance December 31, 2008
|
|
|
(9,929
|
)
|
|
|
|
|
|
|
(9,929
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net book value December 31, 2008
|
|
|
345,622
|
|
|
|
9
|
|
|
|
345,631
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net book value December 31, 2007
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net book value January 1, 2007
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Following the business combination Seanergy took delivery of the
six vessels indicated in Note 1.
The Company evaluates the carrying amounts of vessels and
related dry-dock and special survey costs and periods over which
long-lived assets are depreciated to determine if events have
occurred which would require modification to their carrying
values or useful lives. In evaluating useful lives and carrying
values of long-lived assets, management reviews certain
indicators of potential impairment, such as undiscounted
projected operating cash flows, vessel sales and purchases,
business plans and overall market conditions.
The current economic and market conditions, including the
significant disruptions in the global credit markets, are having
broad effects on participants in a wide variety of industries.
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; conditions that the Company considers
indicators of a potential impairment.
The Company determines undiscounted projected net operating cash
flows for each vessel and compares it to the vessels
carrying value. The projected net operating 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 a
combination of Seanergys remaining charter agreement
rates,
2-year
forward freight agreements and the most recent
10-year
average historical 1 year time charter rates available for
each type of vessel) over the remaining economic life of each
vessel, net of brokerage and address commissions, expected
outflows for scheduled vessels maintenance, and vessel
operating expenses assuming an average annual inflation rate of
2%. Fleet utilization is assumed at 98.6% in the Companys
F-22
Seanergy
Maritime Holdings Corp. and subsidiaries
Notes to
the Consolidated Financial
Statements (Continued)
December 31,
2008 and 2007
exercise, taking into account each vessels off hire days
of other companies operating in the dry bulk industry and
historical performance.
A discount factor of 4.5% per annum, representing a hypothetical
finance lease charge, was applied to the undiscounted projected
net operating cash flows directly associated with and expected
to arise as a direct result of the use and eventual disposition
of the vessel, but only in the case where they were lower than
the carrying value of vessels. This resulted in an impairment
loss of $4,530 which was identified and charged in a separate
line item in the accompanying 2008 statement of operations.
The vessels, having a total carrying value of $345,622 at
December 31, 2008, have been provided as collateral to
secure the loans of each respective vessel discussed under
Note 12.
|
|
9.
|
Deferred
Finance Charges:
|
Deferred finance charges are analyzed as follows:
|
|
|
|
|
|
|
|
|
|
|
2008
|
|
|
2007
|
|
|
Arrangement fee convertible promissory note, net of amortization
(Note 11)
|
|
|
238
|
|
|
|
|
|
Long term debt issuance costs, net of amortization (Note 12)
|
|
|
2,519
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2,757
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
The amortization of the promissory note arrangement fee and the
debt issuance costs is included in interest and finance costs in
the accompanying consolidated statements of operations and
amounted to $224 ($50 and $174 for the promissory note
arrangement fee and debt issuance costs, respectively), $NIL,
and $NIL for the years ended December 31, 2008 and 2007,
and for the period August 15, 2006 (inception) to
December 31, 2006, respectively.
|
|
10.
|
Deferred
Revenue Related Party
|
Deferred revenue in the accompanying balance sheet as at
December 31, 2008 and 2007 was $3,029 and $NIL,
respectively. The amount represents cash received from SAMC
prior to the balance sheet date and relates to revenue
applicable to periods after such date.
|
|
11.
|
Convertible
Promissory Note Due to Shareholders:
|
On December 14, 2006, Seanergy Maritime Corp. issued a
series of unsecured promissory notes totaling $350 to its
Initial Shareholders. The notes bear interest at the rate of
4.0% per annum and were repaid on September 28, 2007.
Interest expense for the year ended December 31, 2007
amounted to $11 and is included in interest and finance costs
shareholders in the accompanying consolidated statements of
operations.
Prior to December 31, 2006, three of Seanergys
Initial Shareholders had advanced a total of $76 in cash and
other expenditures to the Company on a non-interest bearing
basis. On January 5, 2007, an additional $25 was similarly
advanced. On January 12, 2007, these advances were
converted into unsecured promissory notes bearing interest at
the rate of 4.0% per annum and were repaid on September 28,
2007. Interest expense for the year ended December 31, 2007
amounted to $2 and is included in interest and finance costs
shareholder.
In connection with the business combination, a convertible
secured promissory note in the aggregate of $28,250 face value
was issued to United Capital Investments Corp., Atrion
Shipholding S.A., Plaza Shipholding Corp. and Comet Shipholding
Inc., Restis affiliate shareholders. The note is convertible
into 2,260,000 shares of common stock at a conversion price
of $12.50 per share. The note bears interest at a rate of 2.9%
per annum, payable upon the maturity date and matures in May
2010. The note was recorded at fair value on issuance at $29,043
(see Note 5). An arrangement fee of $288 is payable upon
the notes maturity
F-23
Seanergy
Maritime Holdings Corp. and subsidiaries
Notes to
the Consolidated Financial
Statements (Continued)
December 31,
2008 and 2007
date and is included in deferred charges with the offsetting
credit to accrued charges on convertible promissory note due to
shareholders (see Note 9). At the maturity date the holder
has the option to convert the note into common stock at a
conversion price of $12.50 per share. Interest expense net of
premium amortization ($151) for the year ended December 31,
2008 amounted to $132 and is included in interest and finance
costs shareholders in the accompanying consolidated
statements of operations.
|
|
|
|
|
|
|
|
|
Borrower(s)
|
|
2008
|
|
|
2007
|
|
|
(a) Reducing revolving credit facility
|
|
|
54,845
|
|
|
|
|
|
(b) Term facility
|
|
|
157,500
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
|
212,345
|
|
|
|
|
|
Less- current portion
|
|
|
(27,750
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Long-term portion
|
|
|
184,595
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
The long term debt (Facility) of up to $255,000 has been
provided by Marfin Egnatia Bank S.A. (Marfin or lender) being
available in two Facilities as described below. The corporate
guarantors of the Facility are Seanergy Maritime Corp. and
Seanergy Maritime Holdings Corp. and the individual vessel
owning companies. An arrangement fee of $2,550 was paid on the
draw down date and is included net of amortization in Deferred
finance charges in the accompanying consolidated balance sheet
(see Note 9).
|
|
(a)
|
Reducing
Revolving Credit Facility
|
As of December 31, 2008 the Company had utilized $54,845 of
the available reducing revolving credit facility which is equal
to the lesser of $90,000 and an amount in dollars which when
aggregated with the amounts already drawn down under the term
facility does not exceed 70% of the aggregate market values of
the vessels and other securities held in favor of the lender to
be used for the business combination and working capital
purposes.
The reducing revolving credit facility bears interest at LIBOR
plus 2.25% per annum. A commitment fee of 0.25% per annum is
calculated on the daily aggregate un-drawn balance and
un-cancelled amount of the revolving credit facility, payable
quarterly in arrears from the date of the signing of the loan
agreements. The relevant commitment fee on the un-drawn balance
of $39 is recorded in interest and finance costs in the
accompanying consolidated statements of operations (see
Note 21).
Commencing one year from signing the loan agreement, the
revolving facility shall be reduced to the applicable limit
available on such reduction date. The first annual reduction
will reduce the available credit amount by $18,000 i.e. to
$72,000 in August 2009, followed by five consecutive annual
reductions of $12,000 and any outstanding balance to be fully
repaid together with the balloon payment of the Term loan i.e.
the available credit amount in August 2010 will be $60,000, in
August 2011 it will be $48,000, and so on.
Interest expense for the period ended December 31, 2008
amounted to $799 and is recorded in interest and finance costs
in the accompanying consolidated statement of operations (see
Note 22).
The weighted average interest rate on the revolving credit
facility, including the spread, for 2008 was approximately
5.053%.
F-24
Seanergy
Maritime Holdings Corp. and subsidiaries
Notes to
the Consolidated Financial
Statements (Continued)
December 31,
2008 and 2007
The amounts in the accompanying consolidated balance sheets are
analyzed as follows:
|
|
|
|
|
|
|
|
|
|
|
Borrower(s)
|
|
Vessel Name
|
|
2008
|
|
|
2007
|
|
|
(a) Amazons Management Inc.
|
|
Davakis G.
|
|
|
35,175
|
|
|
|
|
|
(b) Lagoon Shipholding Ltd.
|
|
Delos Ranger
|
|
|
35,175
|
|
|
|
|
|
(c) Cynthera Navigation
|
|
African Oryx
|
|
|
17,659
|
|
|
|
|
|
(d) Martinique International Corp.
|
|
Bremen Max
|
|
|
27,491
|
|
|
|
|
|
(e) Harbour Business International Corp.
|
|
Hamburg Max
|
|
|
28,636
|
|
|
|
|
|
(f) Waldeck Maritime Co.
|
|
African Zebra
|
|
|
13,364
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
|
|
|
157,500
|
|
|
|
|
|
Less-current portion
|
|
|
|
|
(27,750
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Long-term portion
|
|
|
|
|
129,750
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
The vessel acquisition was financed by Marfin Egnatia Bank SA by
an amortizing term facility equal to $165,000, representing 42%
of the Vessels aggregate acquisition costs, excluding any
amounts associated with the earn-out provision. In December
2008, the Company repaid $7,500 of the term facility.
The loan is repayable, commencing three months from the last
drawdown or March 31, 2009, whichever is earlier, through
twenty eight consecutive quarterly principal installments out of
which the first four principal installments will be equal to
$7,500 each, the next four principal installments will be equal
to $5,250 each and the final twenty principal installments equal
to $3,200 each, with a balloon payment equal to $50,000 due
concurrently with the twenty eighth principal installment.
The loan bears interest at an annual rate of 3 month-LIBOR
plus 1.5%, if the Companys ratio of total assets to total
liabilities is greater than 165%, which is to be increased to
1.75% if the ratio is equal or less than 165%
The weighted average interest rate on the term facility,
including the spread, for 2008 was approximately 5.214%.
Long-term debt is denominated in U.S. Dollars. Long-term
debt interest expense for 2008 amounted to $2,768, and is
included in interest and finance costs in the accompanying
consolidated statements of operations (see Note 22).
The annual principal payments on the term facility and the
reducing revolving credit facility (based on the amount drawn
down as of December 31, 2008) required to be made
after December 31, 2008, are as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Reducing Revolving
|
|
|
|
|
|
|
Term Facility
|
|
|
Credit Facility
|
|
|
Total
|
|
|
2009
|
|
|
27,750
|
|
|
|
|
|
|
|
27,750
|
|
2010
|
|
|
18,950
|
|
|
|
|
|
|
|
18,950
|
|
2011
|
|
|
12,800
|
|
|
|
6,845
|
|
|
|
19,645
|
|
2012
|
|
|
12,800
|
|
|
|
12,000
|
|
|
|
24,800
|
|
2013
|
|
|
12,800
|
|
|
|
12,000
|
|
|
|
24,800
|
|
Thereafter
|
|
|
72,400
|
|
|
|
24,000
|
|
|
|
96,400
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
157,500
|
|
|
|
54,845
|
|
|
|
212,345
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
F-25
Seanergy
Maritime Holdings Corp. and subsidiaries
Notes to
the Consolidated Financial
Statements (Continued)
December 31,
2008 and 2007
The Facility is secured by a first priority mortgage on the
vessels, on a joint and several basis; first priority general
assignment of any and all earnings, insurances and requisition
compensation of the vessels and the respective notices and
acknowledgements thereof; first priority specific assignment of
the benefit of all charterers exceeding 12 calendar months
duration and all demise charters in respect of the vessels and
the respective notices and acknowledgements thereof to be
effected in case of default or potential event of default to the
absolute discretion of Marfin Egnatia Bank S.A.; assignment,
pledges and charges over the earnings accounts held in the name
of each borrower with the security trustee; undertakings by the
technical and commercial managers of the vessels; negative
pledge of the non-voters shares to be acquired; subordination
agreement between the Facility and the Sellers Note. All
of the aforementioned securities will be on a full cross
collateral basis.
The Facility includes covenants, among others, that require the
borrowers and the corporate guarantor to maintain vessel
insurance for an aggregate amount greater than the vessels
aggregate market value or an amount equal to 130% of the
aggregate of (a) the outstanding amount under both the
revolving credit and term facilities and (b) the amount
available for drawing under the revolving facility. The
vessels insurance is to include as a minimum cover hull
and machinery, war risk and protection and indemnity insurance,
$1,000,000 for oil pollution and for excess oil spillage and
pollution liability insurance. In relation to the protection and
indemnity insurance no risk should be excluded or the
deductibles as provide by the P&I Association materially
altered or increased to amounts exceeding $150 without the prior
written consent of Marfin Egnatia Bank SA. In addition
mortgagees interest insurance on the vessels and the
insured value to be at least 110% of the aggregate of the
revolving credit and term facility.
In addition if a vessel is sold or becomes a total loss or the
mortgage of the vessel is discharged on the disposal, Seanergy
shall repay such part of the facilities as equal to the higher
of the relevant amount or the amount in Dollars to maintain the
security clause margin.
Other covenants include the following:
|
|
|
|
|
not to borrow any money or permit such borrowings to continue
other than by way of subordinated shareholders loan or
enter into any agreement for deferred terms, other than in any
customary suppliers credit terms or any equipment lease or
contract hire agreement other than in ordinary course of
business;
|
|
|
|
no loans, advances or investments in, any person, firm,
corporation or joint venture or to officer director, shareholder
or customer or any such person;
|
|
|
|
not to assume, guarantee or otherwise undertake the liability of
any person, firm, company;
|
|
|
|
not to authorize any capital commitments;
|
|
|
|
not to declare or pay dividends in any amount greater than 60%
of the net cash flow of the Group as determined by the lender on
the basis of the most recent annual audited financial statements
provided, or repay any shareholders loans or make any
distributions in excess of the above amount without the lenders
prior written consent (see below for terms of waiver obtained on
December 31, 2008);
|
|
|
|
not to change the Chief Executive Officer
and/or
Chairman of the corporate guarantor without the prior written
consent of the lender;
|
|
|
|
not to assign, transfer, sell or otherwise or dispose vessels or
any of the property, assets or rights without prior written
consent of the lender (see also Note 14);
|
|
|
|
to ensure that the members of the Restis and Koutsolioutsos
families (or companies affiliated with them) own at all times an
aggregate of at least 10% of the issued share capital of the
corporate guarantor;
|
F-26
Seanergy
Maritime Holdings Corp. and subsidiaries
Notes to
the Consolidated Financial
Statements (Continued)
December 31,
2008 and 2007
|
|
|
|
|
no change of control in either the corporate guarantor without
the written consent of the lender;
|
|
|
|
not to engage in any business other than the operation of the
vessels without the prior written consent of the lender;
|
|
|
|
Security margin clause: the aggregate market values of the
vessels and the value of any additional security shall not be
less than (or at least) 135% of the aggregate of the outstanding
revolving credit and term facilities and any amount available
for drawing under the revolving facility, less the aggregate
amount of all deposits maintained. A waiver dated
December 31, 2008 has been received for the period that the
vessels continue to be under their current charter agreements
(see Note 3(b)). The waiver also stipulates that dividends
will not be declared
and/or any
shareholders loans repaid without the prior written
consent of Marfin Egnatia Bank S.A.
|
Financial covenants include the following:
|
|
|
|
|
ratio of financial indebtedness to earnings, before interest,
taxes, depreciation and amortization (EBITDA) shall be less than
6.5:1 (financial indebtedness or Net Debt are defined as the sum
of all outstanding debt facilities minus cash and cash
equivalents). The covenant is to be tested quarterly on a LTM
basis (the last twelve months). The calculation of
the covenant is not applicable for the quarter ended
December 31, 2008.
|
|
|
|
the ratio of LTM (last twelve months) EBITDA to Net
Interest Expense shall not be less than 2:1. The covenant is to
be tested quarterly on a LTM basis. The calculation of the
covenant is not applicable for the quarter ended
December 31, 2008.
|
|
|
|
the ratio of total liabilities to total assets shall not exceed
0.70:1;
|
|
|
|
unrestricted cash deposits, other than in the favor of the
lender shall not be less than 2.5% of the financial indebtedness.
|
|
|
|
average quarterly unrestricted cash deposits, other than in the
favor of the lender shall not be less than 5% of the financial
indebtedness.
|
The last three financial covenants listed above are to be tested
on a quarterly basis, commencing on December 31, 2008
(where applicable). Seanergy was in compliance with its loan
covenants as of December 31, 2008.
Seanergy Maritime Corp. was authorized to issue
89,000,000 shares of its common stock with a par value
$0.0001 per share. On October 31, 2006, Seanergy Maritime
Corp.s Initial Shareholders subscribed to
7,264,893 shares of common stock and additional paid in
capital for a total of $25. All subscriptions were paid in full
in November 2006.
On February 20, 2007, an aggregate of 1,764,893 shares
of common stock were surrendered to Seanergy for cancellation by
the Initial Shareholders on a pro rata basis, thus reducing the
common shares outstanding on such date to 5,500,000 shares.
On July 6, 2007, Seanergy Maritime Corp. approved a
resolution to effect a one and one-half-for-one stock split in
the form of a stock dividend, which resulted in the issuance of
an additional 1,250,000 shares of Seanergy Maritime
Corp.s common stock to its shareholders; on August 6,
2007, Seanergy Maritime Corp. approved a resolution to effect a
one and one-third-for-one stock split in the form of a stock
dividend which resulted in the issuance of an additional
1,250,000 shares of the Seanergy Maritime Corp.s
common stock to
F-27
Seanergy
Maritime Holdings Corp. and subsidiaries
Notes to
the Consolidated Financial
Statements (Continued)
December 31,
2008 and 2007
its shareholders; and on September 24, 2007, Seanergy
approved a resolution to effect a one and one-tenth-for-one
stock split in the form of a stock dividend which resulted in
the issuance of an additional 500,000 shares of the
Maritime Corp.s common stock to its shareholders. These
financial statements give retrospective effect to all such stock
splits for all periods presented.
On September 28, 2007, the Initial Shareholders contributed
$400 to the capital of Seanergy Maritime Corp. in the form of
legal fees paid on the Seanergy Maritime Corp.s behalf.
On September 28, 2007 the Company pursuant to its public
offering sold 23,100,000 units which included
1,100,000 units executed pursuant to the underwriters
overallotment option at a price of $10.00 per unit. Each unit
consisted of one share of the Companys common stock of
$0.0001 par value and one redeemable common stock purchase
warrant (see Note 13(d)).
On August 26, 2008, shareholders of Seanergy Maritime Corp.
approved the proposal for the business combination, and holders
of fewer than 35% of Seanergy Maritime Corp.s shares
issued in its initial public offering voted against the proposal
and properly exercised their redemption rights. As a result, on
August 28, 2008, 6,370,773 shares of common stock were
redeemed for $63,705.
There are 5,500,000 issued and outstanding common stock that are
held in escrow and will not be released from escrow before the
first year anniversary of the business combination.
|
|
(b)
|
Common
Stock Subject to Redemption
|
Holders of common stock of Seanergy Maritime Corp. had the right
to redeem their shares for cash by voting against the vessel
acquisition. Accordingly, at December 31, 2007, Seanergy
Maritime Corp. had a liability of $80,849 due to the possible
redemption of 8,084,999 shares of common stock. Upon
completion of the vessel acquisition in August 2008,
6,370,773 shares of common stock were redeemed and the
remaining liability of $17,144 was reclassified as additional
paid-in-capital
during the year ended December 31, 2008. Deferred
underwriters fees, forfeited to redeeming shareholders of $0.225
per share amounting to $1,433 were reversed and were
reclassified as additional paid-in capital.
Seanergy Maritime Corp. is authorized to issue
1,000,000 shares of preferred stock with a par value
$0.0001 per share, with such designations, voting and other
rights and preferences, as may be determined from time to time
by the Board of Directors.
On September 28, 2007, Seanergy Maritime Corp., pursuant to
its public offering, sold 23,100,000 units, which included
1,100,000 units exercised pursuant to the
underwriters over-allotment option, at a price of $10.00
per unit. Each unit consisted of one share of Seanergy Maritime
Corp.s common stock, $0.0001 par value, and one
redeemable common stock purchase warrant. Each warrant entitles
the holder to purchase from Seanergy Maritime Corp. one share of
common stock at an exercise price of $6.50 per share commencing
the later of the completion of a business combination with a
target business or one year from the effective date of the
public offering (September 30, 2008) and expires on
September 28, 2011, four years from the date of the initial
public offering prospectus.
On September 28, 2007, and prior to the consummation of the
public offering described above, all of Seanergy Maritime
Corp.s executive officers purchased from the company an
aggregate of 16,016,667
F-28
Seanergy
Maritime Holdings Corp. and subsidiaries
Notes to
the Consolidated Financial
Statements (Continued)
December 31,
2008 and 2007
warrants at $0.90 per warrant in a Private Placement. All
warrants issued in the Private Placement are identical to the
warrants in the units sold in the public offering, except that:
(i) subject to certain limited exceptions, none of the
warrants are transferable or saleable until after Seanergy
Maritime Corp. completes a business combination;
(ii) the warrants are not subject to redemption if held by
the initial holders thereof; and
(iii) the warrants may be exercised on a cashless basis if
held by the initial holders thereof by surrendering these
warrants for that number of shares of common stock equal to the
quotient obtained by dividing the product of the number of
shares of common stock underlying the warrants, multiplied by
the difference between the warrant price and fair value. The
fair value is defined to mean the average reported last sales
price of common stock for the 10 trading days ending on the
third business day prior to the date on which notice of exercise
is received. A portion of the proceeds from the sale of these
insider warrants has been added to the proceeds from the public
offering held in the Trust Account pending the completion
of the Companys initial business combination, with the
balance held outside the Trust Account to be used for
working capital purposes. No placement fees were payable on the
warrants sold in the Private Placement. The sale of the warrants
to executive officers did not result in the recognition of any
stock-based compensation expense because they were sold at
approximate fair market value.
Seanergy Maritime Corp. may call the warrants for redemption:
|
|
|
|
|
in whole and not in part,
|
|
|
|
at a price of $0.10 per warrant at any time,
|
|
|
|
upon a minimum of 30 days prior written notice of
redemption, and if, and only if, the last sale price of the
common stock equals or exceeds $14.25 per share for any 20
trading days within a 30 trading day period ending three
business days prior to the notice of redemption to the warrant
holders.
|
There is no cash settlement for the warrants.
Subsequently, the underwriter notified Seanergy Maritime Corp.
that it was not going to exercise any of the remaining units as
part of its over-allotment option. The common stock and warrants
included in the units began to trade separately on
October 26, 2007. The fair market value of the warrants as
of December 31, 2008 was $0.11 per warrant.
The total number of common stock purchase warrants amounted to
39,116,667 of which 132,000 warrants were exercised in 2008 at a
price of $6.50 per share or $858. As of December 31, 2008
Seanergy Maritime Corp. has 38,984,667 of common stock purchase
warrants issued and outstanding at an exercise price of $6.50
per share, which became Seanergys obligations upon
completion of Seanergy Maritime Corp.s dissolution and
liquidation (see Note 25).
The holders of the Companys 5,500,000 issued and
outstanding shares immediately prior to the completion of the
public offering and the holders of the warrants to purchase
16,016,667 shares of common stock acquired in the private
placement are entitled to registration rights covering the
resale of their shares and the resale of their warrants and
shares acquired upon exercise of the warrants. The holders of
the majority of these shares are entitled to make up to two
demands that the Company register their shares, warrants and
shares that they are entitled to acquired upon the exercise of
warrants. The holders of the majority of these shares can elect
to exercise these registration rights at any time after the date
on which these shares of common stock are released from escrow.
In addition, these shareholders have certain piggy-back
registration
F-29
Seanergy
Maritime Holdings Corp. and subsidiaries
Notes to
the Consolidated Financial
Statements (Continued)
December 31,
2008 and 2007
rights on registration statements filed subsequent to the date
on which these shares of common stock are released from escrow.
The Company will bear the expenses incurred in connection with
the filing of any of the forgoing registration statements (see
Note 25).
The unit purchase option and its underlying securities have been
registered under the registration statement for the public
offering; however, the option also grants holders demand and
piggy- back registration rights for periods of five
and seven years, respectively, from the date of the public
offering. These rights apply to all of the securities directly
and indirectly issuable upon exercise of the option. The Company
will bear all fees and expenses attendant to registering the
securities issuable on the exercise of the option, other than
underwriting commissions incurred and payable by the holders
(see Note 25).
Pursuant to the Seanergys second amended and restated
articles of incorporation dividends are required to be made to
its public shareholders on a quarterly basis, equivalent to the
interest earned on the trust less any taxes payable and
exclusive of (i) up to $420 of interest earned on the
Maxims deferred underwriting compensation and (ii) up
to $742 of interest income on the proceeds in the Trust account
that Seanergy was permitted to draw down in the event the
over-allotment option was exercised in full on a pro-rata basis
to its public shareholders until the earlier of the consummation
of a business combination or liquidation, of which the date of
the business combination was August 28, 2008.
On January 2, 2008, April 1, 2008 and July 1,
2008 Seanergy paid dividends totaling $4,254, or $0.1842 per
share, less permitted adjustments for interest earned on the
deferred underwriting commission of $106 and $248 relating to
the over-allotment option.
Seanergy Maritime Corp.s founding shareholders and the
Restis affiliate shareholders have agreed for such one-year
period to subordinate their rights to receive dividends with
respect to the 5,500,000 original shares owned by them to the
rights of Seanergy Maritime Corp.s public shareholders,
but only to the extent that Seanergy has insufficient funds to
make such dividend payments.
Subsequent to the business combination the declaration and
payment of any dividend is subject to the discretion of
Seanergys board of directors and be dependent upon its
earnings, financial condition, cash requirements and
availability, fleet renewal and expansion, restrictions in its
loan agreements, the provisions of Marshall Islands law
affecting the payment of dividends to shareholders and other
factors. Seanergys board of directors may review and amend
its dividend policy from time to time in light of its plans for
future growth and other factors.
As a condition of the waiver from Marfin Egnatia Bank S.A. (see
Note 12), dividends will not be declared without the prior
written consent of Marfin Egnatia Bank S.A.
F-30
Seanergy
Maritime Holdings Corp. and subsidiaries
Notes to
the Consolidated Financial
Statements (Continued)
December 31,
2008 and 2007
The calculation of net income (loss) per common share is
summarized below. The calculation of diluted weighted average
common shares outstanding for the years ended December 31,
2008 and 2007 is based on the average closing price of common
stock as quoted on the American Stock Exchange and after
October 14, 2008 on NASDAQ.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2008
|
|
|
2007
|
|
|
2006
|
|
|
Basic:
|
|
|
|
|
|
|
|
|
|
|
|
|
Net (loss) income
|
|
$
|
(31,985
|
)
|
|
$
|
1,445
|
|
|
$
|
(4
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted average common shares outstanding
|
|
|
26,452,291
|
|
|
|
11,754,095
|
|
|
|
7,264,893
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income (loss) per common share-basic
|
|
$
|
(1.21
|
)
|
|
$
|
0.12
|
|
|
$
|
(0.00
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Diluted:
|
|
|
|
|
|
|
|
|
|
|
|
|
Net (loss)income
|
|
$
|
(31,985
|
)
|
|
$
|
1,445
|
|
|
$
|
(4
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted average common shares outstanding
|
|
|
26,452,291
|
|
|
|
11,754,095
|
|
|
|
7,264,893
|
|
Effect of dilutive warrants
|
|
|
|
|
|
|
3,282,188
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Diluted weighted average common shares outstanding
|
|
|
26,452,291
|
|
|
|
15,036,283
|
|
|
|
7,264,893
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income (loss) per common share-diluted
|
|
$
|
(1.21
|
)
|
|
$
|
0.10
|
|
|
$
|
(0.00
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
As of December 31, 2008 all outstanding warrants and
options to acquire 38,984,667 shares of common stock were
antidilutive as the company reported a net loss. The convertible
note to acquire 2,260,000 shares of common stock and the
underwriters purchase options (common shares of 1,000,000
and warrants of 1,000,000 were also antidilutive. Furthermore,
4,308,075 of shares of common stock whose issuance is contingent
upon satisfaction of certain conditions were anti-dilutive and
the contingency has not been satisfied.
Thus, as of December 31, 2008, securities that could
potentially dilute basic EPS in the future that were not
included in the computation of diluted EPS as mentioned above
are:
|
|
|
|
|
Private warrants
|
|
|
16,016,667
|
|
Public warrants
|
|
|
22,968,000
|
|
Underwriters purchase options common shares
|
|
|
1,000,000
|
|
Underwriters purchase options warrants
|
|
|
1,000,000
|
|
Convertible note to related party
|
|
|
2,260,000
|
|
Contingently-issuable shares earn-out (Note 5)
|
|
|
4,308,075
|
|
|
|
|
|
|
Total
|
|
|
47,552,742
|
|
|
|
|
|
|
|
|
16.
|
Commitments
and Contingencies:
|
Various claims, suits, and complaints, including those involving
government regulations and product liability, arise in the
ordinary course of the shipping business. In addition, losses
may arise from disputes with charterers, agents, insurance and
other claims with suppliers relating to the operations of the
Companys vessels. Currently, management is not aware of
any such claims or contingent liabilities, which should be
disclosed, or for which a provision should be established in the
accompanying consolidated financial statements.
F-31
Seanergy
Maritime Holdings Corp. and subsidiaries
Notes to
the Consolidated Financial
Statements (Continued)
December 31,
2008 and 2007
The Company accrues for the cost of environmental liabilities
when management becomes aware that a liability is probable and
is able to reasonably estimate the probable exposure. Currently,
management is not aware of any such claims or contingent
liabilities, which should be disclosed, or for which a provision
should be established in the accompanying combined financial
statements. A minimum of up to $1,000,000 of the liabilities
associated with the individual vessels actions, mainly for sea
pollution, are covered by the Protection and Indemnity
(P&I) Club insurance.
Rental expense for the years ended December 31, 2008 and
December 31, 2007 and for the period August 15, 2006
(inception) to December 31, 2006, was $88, $NIL and $NIL,
respectively. Fixed future minimum rent commitments as of
December 31, 2008, based on a Euro/U.S. dollar
exchange rate of 1.00:$1.32 and without taking into
account any annual inflation increase were as follows:
|
|
|
|
|
|
Rental commitments
|
|
|
|
|
2009
|
|
|
666
|
|
2010
|
|
|
682
|
|
2011
|
|
|
700
|
|
|
|
|
|
|
Total
|
|
|
2,048
|
|
|
|
|
|
|
Future minimum rental receipts, based on vessels committed to
non-cancelable long-term time charter contracts, assuming 15 to
20 days off hire due to any scheduled dry-docking and a 98%
utilization rate of the vessel during a year, for unscheduled
off hire days, net of commissions as of December 31, 2008
will be:
|
|
|
|
|
|
Rental receipts
|
|
|
|
|
2009
|
|
|
78,490
|
|
|
|
|
|
|
|
|
17.
|
Vessel
Revenue Related Party, net:
|
At December 31, 2008, the Companys six vessels were
employed under time charters with SAMC, with initial terms of
11-13 months,
expiring in September 2009. Revenue on time charterer is shown
net of the address commission of 2.5% amounting to $880 and net
of off-hire expenses of $107.
|
|
18.
|
Direct
Voyage Expenses:
|
The amounts in the accompanying consolidated statements of
operations are analyzed as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2008
|
|
|
2007
|
|
|
2006
|
|
|
Bunkers
|
|
|
107
|
|
|
|
|
|
|
|
|
|
Port expenses
|
|
|
44
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
|
151
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
19.
|
Vessel
Operating Expenses:
|
The amounts in the accompanying consolidated statements of
operations are analyzed as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2008
|
|
|
2007
|
|
|
2006
|
|
|
Crew wages and related costs
|
|
|
1,734
|
|
|
|
|
|
|
|
|
|
Chemicals and lubricants
|
|
|
591
|
|
|
|
|
|
|
|
|
|
Repairs and maintenance
|
|
|
449
|
|
|
|
|
|
|
|
|
|
Insurance
|
|
|
300
|
|
|
|
|
|
|
|
|
|
Miscellaneous expenses
|
|
|
106
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
|
3,180
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
F-32
Seanergy
Maritime Holdings Corp. and subsidiaries
Notes to
the Consolidated Financial
Statements (Continued)
December 31,
2008 and 2007
|
|
20.
|
General
and Administration Expenses:
|
The amounts in the accompanying consolidated statements of
operations are analyzed as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2008
|
|
|
2007
|
|
|
2006
|
|
|
Auditors and accountants fees
|
|
|
695
|
|
|
|
|
|
|
|
|
|
Legal expenses
|
|
|
432
|
|
|
|
|
|
|
|
|
|
D&O Insurance
|
|
|
96
|
|
|
|
25
|
|
|
|
|
|
Subscriptions
|
|
|
38
|
|
|
|
|
|
|
|
|
|
Transportation expenses
|
|
|
37
|
|
|
|
|
|
|
|
|
|
Professional fees
|
|
|
371
|
|
|
|
357
|
|
|
|
|
|
Other
|
|
|
171
|
|
|
|
63
|
|
|
|
5
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
|
1,840
|
|
|
|
445
|
|
|
|
5
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
21.
|
General
and Administration Expenses Related Party:
|
The amounts in the accompanying consolidated statements of
operations are analyzed as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2008
|
|
|
2007
|
|
|
2006
|
|
|
Office rental (Note 3(d))
|
|
|
88
|
|
|
|
|
|
|
|
|
|
Consulting fees (Note 3(e))
|
|
|
27
|
|
|
|
|
|
|
|
|
|
Salaries (Note 3(g))
|
|
|
139
|
|
|
|
|
|
|
|
|
|
Administrative fee (Note 3(a))
|
|
|
21
|
|
|
|
|
|
|
|
|
|
BoD remuneration (Note 3(g))
|
|
|
155
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
|
430
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
22.
|
Interest
and Finance Costs:
|
The amounts in the accompanying consolidated statements of
operations are analyzed as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2008
|
|
|
2007
|
|
|
2006
|
|
|
Interest on long-term debt
|
|
|
2,768
|
|
|
|
|
|
|
|
|
|
Interest on revolving credit facility
|
|
|
799
|
|
|
|
|
|
|
|
|
|
Amortization of debt issuance costs
|
|
|
174
|
|
|
|
|
|
|
|
|
|
Commitment fee on un-drawn revolving credit facility
|
|
|
39
|
|
|
|
|
|
|
|
|
|
Other
|
|
|
115
|
|
|
|
45
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
|
3,895
|
|
|
|
45
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Seanergy is incorporated in the Marshall Islands. Under current
Marshall Islands law, Seanergy is not subject to tax on income
or capital gains, no Marshall Islands withholding tax will be
imposed upon payment of dividends by Seanergy to its
shareholders, and holders of common stock or warrants of
Seanergy that are not residents of or domiciled or carrying on
any commercial activity in the Marshall Islands will not be
subject to Marshall Islands tax on the sale or other disposition
of such common stock or warrants.
Effective January 1, 2007, Seanergy Maritime Corp. was
classified as a partnership up to January 27, 2009, the
date of its dissolution and liquidation.
Pursuant to Section 883 of the Internal Revenue Code of the
United States, as (the Code), U.S. source
income from the international operations of ships is generally
exempt from U.S. tax if the company operating
F-33
Seanergy
Maritime Holdings Corp. and subsidiaries
Notes to
the Consolidated Financial
Statements (Continued)
December 31,
2008 and 2007
the ships meets both of the following criteria: (a) the
Company is organized in a foreign country that grants an
equivalent exception to corporations organized in the United
States and (b) either (i) more than 50% of the value
of the Companys stock is owned, directly or indirectly, by
individuals who are residents of the Companys
country of organization or of another foreign country that
grants an equivalent exemption to corporations
organized in the United States (the 50% Ownership
Test) or (ii) the Companys stock is
primarily and regularly traded on an established
securities market in its country of organization, in
another country that grants an equivalent exemption
to United States corporations, or in the United States (the
Publicly-Traded Test).
For the year ended December 31, 2008, Seanergy determined
that it does qualify for exemption under section 883 of the
Code for taxable years beginning on or after the
3rd quarter of 2008. The United States source shipping
income is subject to a 4% tax. For taxation purposes, United
States source shipping income is defined as 50% of shipping
income that is attributable to transportation that begins or
ends, but does not both begin and end, in the United States.
Shipping income from each voyage is equal to the product of
(i) the number of days in each voyage and (ii) the
daily charter rate paid to the Company by the Charterer. For
calculating taxable shipping income, days spend loading and
unloading cargo in the port were not included in the number of
days in the voyage.
As a result, income taxes of approximately $NIL, $ NIL and $NIL
were recognized in the accompanying 2008, 2007 and 2006
consolidated statements of operation.
The Company believes that its position of excluding days spent
loading and unloading cargo in a United States port meets
the more likely that not criterion (required by
FIN 48) to be sustained upon a future tax examination;
however, there can be no assurance that the Internal Revenue
Service would agree with the Companys position. Had the
Company included the days spent loading and unloading cargo in
the port, additional taxes of $74, $NIL and $NIL should have
been recognized in the accompanying consolidated statements of
operations for 2008, 2007 and 2006.
|
|
24.
|
Financial
Instruments:
|
The principal financial assets of the Company consist of cash
and cash equivalents, money market funds held in trust, and
advances (trade) to related party. The principal financial
liabilities of the Company consist of long-term bank debt, trade
accounts payable, a convertible promissory note and deferred
revenue related party.
|
|
(a)
|
Significant
Risks and Uncertainties, including Business and Credit
Concentration
|
As of December 31, 2008, the Company operates a total fleet
of 6 vessels, consisting of 2 Panamax vessels, 2 Handysize
vessels and 2 Supramax vessels. Of these 6 vessels, we
acquired 3 on August 28, 2008 one on September 11,
2008 and the remaining two on September 25, 2008. As of
December 31, 2008, our operating fleet had a combined
carrying capacity of 317,743 dwt.
Vessel revenue is generated by charging customers for the
transportation of dry bulk cargo. Vessel revenue is generated
from time charters with SAMC, a company affiliated with members
of the Restis family, which expire in September 2009. The
Companys vessel revenue in 2008 has been generated 100%
from SAMC.
The Company can not predict whether SAMC will, upon the
expiration of its charters, re-charter the vessels on favorable
terms or at all. If SAMC decides not to re-charter the
Companys vessels, the Company may not be able to
re-charter them on similar terms. In the future, the Company may
employ vessels in the spot market, which is subject to greater
rate fluctuation than the time charter market. If the Company
receives lower charter rates under replacement charters or is
unable to re-charter all of the vessels, net revenue, operating
income and operating cash flows will decrease or become negative.
F-34
Seanergy
Maritime Holdings Corp. and subsidiaries
Notes to
the Consolidated Financial
Statements (Continued)
December 31,
2008 and 2007
The Company generally does not have trade accounts receivable
since the time charters are collected in advance. The vessels
are chartered under time-charter agreements where, the charterer
pays for the transportation service within one week of issue of
the hire statement (invoice) which is issued approximately
15 days prior to the service, thereby supporting management
of the trade accounts receivable.
Turbulence in the financial markets has led many lenders to
reduce, and in some cases, cease to provide credit, including
letters of credit, to borrowers. Purchasers of dry bulk cargo
typically pay for cargo with letters of credit. The tightening
of the credit markets has reduced the issuance of letters of
credit and as a result decreased the amount of cargo being
shipped as sellers determine not to sell cargo with out a letter
of credit. Reductions in cargo result in less business for
charterers and declines in the demand for vessels.
These factors, combined with the general slow-down in consumer
spending caused by uncertainty about future market conditions,
impact the shipping business. As such, it is reasonably possible
that future charter rates may further deteriorate which would
have a significant impact on the Companys operations.
The Companys interest rates and long-term loan repayment
terms are described in Note 12.
Financial instruments, which potentially subject the Company to
significant concentrations of credit risk, consist principally
of cash and cash equivalents. The Company places its temporary
cash and cash equivalents with Marfin Egnatia Bank S.A. Given
their high credit ratings, management does not expect any
counterparty to fail to meet its obligations.
|
|
(c)
|
Fair
Value of Financial Instruments
|
The following table presents the carrying amounts and estimated
fair values of the Companys financial instruments at
December 31, 2007 and 2008. The fair value of a financial
instrument is the amount that would be received to sell an asset
or paid to transfer a liability in an orderly transaction
between market participants at the measurement date.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2008
|
|
|
2007
|
|
|
|
Carrying Value
|
|
|
Fair Value
|
|
|
Carrying Value
|
|
|
Fair Value
|
|
|
Financial assets
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash and cash equivalents
|
|
|
27,543
|
|
|
|
27,543
|
|
|
|
2,211
|
|
|
|
2,211
|
|
Money market funds held in trust
|
|
|
|
|
|
|
|
|
|
|
232,923
|
|
|
|
232,923
|
|
Advances (trade) to related party
|
|
|
577
|
|
|
|
577
|
|
|
|
|
|
|
|
|
|
Prepaid insurance expenses
|
|
|
574
|
|
|
|
574
|
|
|
|
79
|
|
|
|
79
|
|
Prepaid expenses and other current assets related
parties
|
|
|
248
|
|
|
|
248
|
|
|
|
|
|
|
|
|
|
Financial liabilities:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Long-term debt
|
|
|
212,345
|
|
|
|
212,345
|
|
|
|
|
|
|
|
|
|
Convertible promissory note due to shareholders
|
|
|
29,043
|
|
|
|
28,453
|
|
|
|
|
|
|
|
|
|
Trade accounts and other payables
|
|
|
674
|
|
|
|
674
|
|
|
|
588
|
|
|
|
588
|
|
Due to underwriters
|
|
|
419
|
|
|
|
419
|
|
|
|
5,407
|
|
|
|
5,047
|
|
Accrued expenses
|
|
|
541
|
|
|
|
541
|
|
|
|
|
|
|
|
|
|
Accrued interest
|
|
|
166
|
|
|
|
166
|
|
|
|
|
|
|
|
|
|
Deferred revenue related party
|
|
|
3,029
|
|
|
|
3,029
|
|
|
|
|
|
|
|
|
|
The carrying amounts shown in the table are included in the
consolidated balance sheets under the indicated captions.
The fair values of the financial instruments shown in the above
table as of December 31, 2008 represent managements
best estimate of the amounts that would be received to sell
those assets or that would be paid to
F-35
Seanergy
Maritime Holdings Corp. and subsidiaries
Notes to
the Consolidated Financial
Statements (Continued)
December 31,
2008 and 2007
transfer those liabilities in an orderly transaction between
market participants at that date. Those fair value measurements
maximize the use of observable inputs. However, in situations
where there is little, if any, market activity for the asset or
liability at the measurement date, the fair value measurement
reflects the Companys own judgments about the assumptions
that market participants would use in pricing the asset or
liability. Those judgments are developed by the Company based on
the best information available in the circumstances.
The following methods and assumptions were used to estimate the
fair value of each class of financial instruments:
|
|
|
|
|
Cash and cash equivalents, money market funds
held in trust, advances (trade) to related party, prepaid
insurance expenses, prepaid expenses and other current
assets related parties, trade accounts and other
payables, due to underwriters, accrued expenses, accrued
interest and deferred revenue related party: The
carrying amounts approximate fair value because of the short
maturity of these instruments.
|
|
|
|
|
|
Convertible promissory note: The fair value is
determined by a trinomial Tree approach that takes a single
volatility as an input and takes into account the interest rate
curve of the currency of the convertible note, the credit spread
of the Company, the stock volatility, as well as any dividends
paid by the Company, resulting in an imputed interest rate of
1.38%
|
|
|
|
Long-term debt: The carrying value
approximates the fair market value as the long-term debt bears
interest at floating interest rates.
|
The Company adopted FASB Statement No. 157 on
January 1, 2008, for fair value measurements of financial
assets and financial liabilities and for fair value measurements
of non-financial items that are recognized or disclosed at fair
value in the financial statements on a recurring basis. This
statement establishes a fair value hierarchy that prioritizes
the inputs to valuation techniques used to measure fair value.
The hierarchy gives the highest priority to unadjusted quoted
prices in active markets for identical assets or liabilities
(Level 1 measurements) and the lowest priority to
measurement involving significant unobservable inputs
(Level 3 measurement) The three levels of the fair value
hierarchy are as follows:
Level 1: Quoted market prices in active
markets for identical assets or liabilities;
Level 2: Observable market based inputs
or unobservable inputs that are corroborated by market data;
Level 3: Unobservable inputs that are not
corroborated by market data.
As of December 31, 2008 no fair value measurements of
assets or liabilities were recognized in the consolidated
financial statements.
Statement 159 provides entities with an option to measure many
financial instruments and certain other items at fair value.
Under Statement 159, unrealized gains and losses on items for
which the fair value option has been elected are reported in
earnings at each reporting period. Upon adoption of Statement
159 on January 1, 2008, the Company has not elected to
record its bank loans or fixed rate convertible promissory
note related party at fair value.
On January 26, 2009, Seanergys registration statement
for 22,361,227 shares of common stock, 38,984,667 common
stock purchase warrants, 38,984,667 shares of common stock
underlying the warrants, 1,000,000 shares of common stock
in the underwriters unit purchase option, 1,000,000
warrants included as
F-36
Seanergy
Maritime Holdings Corp. and subsidiaries
Notes to
the Consolidated Financial
Statements (Continued)
December 31,
2008 and 2007
part of the underwriters unit purchase option and
1,000,000 shares of common stock underlying the warrants
included as part of the underwriters unit purchase option
was declared effective by the Securities & Exchange
Commission (SEC).
On January 27, 2009, Seanergy Maritime Corp.was liquidated
and in connection with its liquidation and dissolution, it
distributed to each of its holders of its common stock, one
share of common stock of Seanergy for each share of Seanergy
Maritime Corp. common stock owned by the holder. All outstanding
warrants of Seanergy Maritime Corp. concurrently became
obligations of Seanergy (Note 1). As a result, the
authorized capital of the Company becomes that of Seanergy
Maritime Holdings Corp. and amounts to 100,000,000 shares
of common stock with a par value of $0.0001 per share.
In accordance with the management agreement (see
Note 3(a)), the daily fixed management fee applicable for
the year ended December 31, 2009 was increased to
Euro 425 (four hundred and twenty-five Euros) from
Euro 416 (four hundred and sixteen Euros).
On February 19, 2009, Seanergys registration
statement for the resale by certain selling shareholders of
12,068,075 shares of common stock which includes the
5,500,000 initial shares of common stock, 4,308,075 shares
of common stock and 2,260,000 shares of common stock and
16,016,667 common stock purchase warrants and
16,016,667 shares of common stock underlying the warrants
was declared effective by the SEC.
On February 24, 2009 the African Zebra commenced its
scheduled dry-docking which is estimated to be completed by
mid-April 2009.
On March 12, 2009, Mr. Lambros Papakostantinou, member
of the Board of Directors, has resigned from his position as
Director effective immediately.
On March 26, 2009, the Company made a principal repayment
of $7,500 on the term facility.
F-37
Seanergy
Maritime Holdings Corp. and subsidiaries
as of
June 30, 2009 and December 31, 2008
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
June 30,
|
|
|
December 31,
|
|
|
|
Notes
|
|
|
2009
|
|
|
2008
|
|
|
|
(In thousands of US dollars, except for share and per share
data, unless otherwise stated)
|
|
|
|
(Unaudited)
|
|
|
ASSETS
|
Current assets:
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash and cash equivalents
|
|
|
5
|
|
|
|
47,022
|
|
|
|
27,543
|
|
Advances (trade) to related party
|
|
|
6
|
|
|
|
|
|
|
|
577
|
|
Inventories
|
|
|
|
|
|
|
696
|
|
|
|
872
|
|
Prepaid insurance expenses
|
|
|
|
|
|
|
185
|
|
|
|
574
|
|
Prepaid expenses and other current assets related
parties
|
|
|
4
|
|
|
|
268
|
|
|
|
248
|
|
Other current assets
|
|
|
|
|
|
|
27
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total current assets
|
|
|
|
|
|
|
48,198
|
|
|
|
29,814
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Fixed assets:
|
|
|
|
|
|
|
|
|
|
|
|
|
Vessels, net
|
|
|
7
|
|
|
|
330,202
|
|
|
|
345,622
|
|
Office equipment, net
|
|
|
7
|
|
|
|
20
|
|
|
|
9
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total fixed assets
|
|
|
|
|
|
|
330,222
|
|
|
|
345,631
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other assets
|
|
|
|
|
|
|
|
|
|
|
|
|
Deferred charges
|
|
|
8
|
|
|
|
4,605
|
|
|
|
2,757
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
TOTAL ASSETS
|
|
|
|
|
|
|
383,025
|
|
|
|
378,202
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
LIABILITIES AND SHAREHOLDERS EQUITY
|
Current liabilities:
|
|
|
|
|
|
|
|
|
|
|
|
|
Current portion of long-term debt
|
|
|
11
|
|
|
|
23,250
|
|
|
|
27,750
|
|
Trade accounts and other payables
|
|
|
|
|
|
|
465
|
|
|
|
674
|
|
Due to related parties
|
|
|
6
|
|
|
|
218
|
|
|
|
|
|
Due to underwriters
|
|
|
|
|
|
|
133
|
|
|
|
419
|
|
Accrued expenses
|
|
|
24
|
|
|
|
1,864
|
|
|
|
541
|
|
Accrued interest
|
|
|
|
|
|
|
112
|
|
|
|
166
|
|
Deferred revenue related party
|
|
|
9
|
|
|
|
2,347
|
|
|
|
3,029
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total current liabilities
|
|
|
|
|
|
|
28,389
|
|
|
|
32,579
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Long-term debt, net of current portion
|
|
|
11
|
|
|
|
174,095
|
|
|
|
184,595
|
|
Accrued charges on convertible promissory note due to
shareholders
|
|
|
10
|
|
|
|
983
|
|
|
|
420
|
|
Convertible promissory note due to shareholders
|
|
|
10
|
|
|
|
28,710
|
|
|
|
29,043
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total liabilities
|
|
|
|
|
|
|
232,177
|
|
|
|
246,637
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Consolidated shareholders equity
|
|
|
|
|
|
|
|
|
|
|
|
|
Preferred stock, $0.0001 par value; 1,000,000 shares
authorized; none issued
|
|
|
|
|
|
|
|
|
|
|
|
|
Common stock, $0.0001 par value; 100,000,000 and 89,000,000
authorized shares as at June 30, 2009 and December 31,
2008, respectively; 22,361,227 shares, issued and
outstanding as at June 30, 2009 and December 31, 2008,
respectively
|
|
|
12
|
|
|
|
2
|
|
|
|
2
|
|
Additional paid-in capital
|
|
|
|
|
|
|
166,361
|
|
|
|
166,361
|
|
Accumulated deficit
|
|
|
|
|
|
|
(15,515
|
)
|
|
|
(34,798
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total consolidated shareholders equity
|
|
|
|
|
|
|
150,848
|
|
|
|
131,565
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Commitments and contingencies
|
|
|
15
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
TOTAL LIABILITIES AND SHAREHOLDERS EQUITY
|
|
|
|
|
|
|
383,025
|
|
|
|
378,202
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
See accompanying notes to condensed consolidated financial
statements.
F-38
Seanergy
Maritime Holdings Corp. and subsidiaries
for the
three and six months ended June 30, 2009 and
2008
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended June 30,
|
|
|
Six Months Ended June 30,
|
|
|
|
Notes
|
|
|
2009
|
|
|
2008
|
|
|
2009
|
|
|
2008
|
|
|
|
(In thousands of US dollars, except for share and per share
data, unless otherwise stated)
|
|
|
|
(Unaudited)
|
|
|
Revenues:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Vessel revenue related party
|
|
|
|
|
|
|
22,633
|
|
|
|
|
|
|
|
49,548
|
|
|
|
|
|
Commissions related party
|
|
|
3,16
|
|
|
|
(566
|
)
|
|
|
|
|
|
|
(1,239
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Vessel revenue related party, net
|
|
|
16
|
|
|
|
22,067
|
|
|
|
|
|
|
|
48,309
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Expenses:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Direct voyage expenses
|
|
|
17
|
|
|
|
(292
|
)
|
|
|
|
|
|
|
(438
|
)
|
|
|
|
|
Vessel operating expenses
|
|
|
18
|
|
|
|
(3,010
|
)
|
|
|
|
|
|
|
(5,821
|
)
|
|
|
|
|
Operating expenses
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Voyage expenses related party
|
|
|
3
|
|
|
|
(283
|
)
|
|
|
|
|
|
|
(619
|
)
|
|
|
|
|
Management fees related party
|
|
|
3
|
|
|
|
(315
|
)
|
|
|
|
|
|
|
(617
|
)
|
|
|
|
|
General and administration expenses
|
|
|
19
|
|
|
|
(1,285
|
)
|
|
|
(137
|
)
|
|
|
(2,141
|
)
|
|
|
(597
|
)
|
General and administration expenses related party
|
|
|
20
|
|
|
|
(482
|
)
|
|
|
|
|
|
|
(1,021
|
)
|
|
|
|
|
Amortization of deferred dry-docking costs
|
|
|
|
|
|
|
(9
|
)
|
|
|
|
|
|
|
(9
|
)
|
|
|
|
|
Depreciation
|
|
|
7
|
|
|
|
(7,758
|
)
|
|
|
|
|
|
|
(15,430
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating income (loss)
|
|
|
|
|
|
|
8,633
|
|
|
|
(137
|
)
|
|
|
22,213
|
|
|
|
(597
|
)
|
Other income (expense), net:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest and finance costs
|
|
|
21
|
|
|
|
(1,354
|
)
|
|
|
|
|
|
|
(2,819
|
)
|
|
|
|
|
Interest and finance costs shareholders
|
|
|
8,10
|
|
|
|
(172
|
)
|
|
|
|
|
|
|
(312
|
)
|
|
|
|
|
Interest income money market funds
|
|
|
22
|
|
|
|
116
|
|
|
|
1,057
|
|
|
|
256
|
|
|
|
2,612
|
|
Foreign currency exchange gains (losses), net
|
|
|
|
|
|
|
(56
|
)
|
|
|
|
|
|
|
(55
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1,466
|
)
|
|
|
1,057
|
|
|
|
(2,930
|
)
|
|
|
2,612
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income
|
|
|
|
|
|
|
7,167
|
|
|
|
920
|
|
|
|
19,283
|
|
|
|
2,015
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income per common share
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic
|
|
|
14
|
|
|
|
0.32
|
|
|
|
0.03
|
|
|
|
0.86
|
|
|
|
0.07
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Diluted
|
|
|
14
|
|
|
|
0.30
|
|
|
|
0.02
|
|
|
|
0.80
|
|
|
|
0.05
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted average common shares outstanding
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic
|
|
|
14
|
|
|
|
22,361,227
|
|
|
|
28,600,000
|
|
|
|
22,361,227
|
|
|
|
28,600,000
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Diluted
|
|
|
14
|
|
|
|
24,621,227
|
|
|
|
41,148,398
|
|
|
|
24,621,227
|
|
|
|
40,867,846
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
See accompanying notes to condensed consolidated financial
statements.
F-39
Seanergy
Maritime Holdings Corp. and subsidiaries
for the
six months ended June 30, 2009 and 2008
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Common stock
|
|
|
Additional
|
|
|
Accumulated
|
|
|
Total Shareholders
|
|
|
|
# of Shares
|
|
|
Par Value
|
|
|
Paid-in Capital
|
|
|
Deficit
|
|
|
Equity
|
|
|
|
(In thousands of US dollars, except for share and per share
data, unless otherwise stated)
|
|
|
|
(Unaudited)
|
|
|
Balance December 31, 2007
|
|
|
28,600,000
|
|
|
|
3
|
|
|
|
146,925
|
|
|
|
1,441
|
|
|
|
148,369
|
|
Net (loss) for the year ended December 31, 2008
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(31,985
|
)
|
|
|
(31,985
|
)
|
Dividends paid
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(4,254
|
)
|
|
|
(4,254
|
)
|
Reclassification of common stock no longer subject to redemption
|
|
|
(6,370,773
|
)
|
|
|
|
|
|
|
17,144
|
|
|
|
|
|
|
|
17,144
|
|
Reversal of underwriter fees forfeited to redeeming shareholders
|
|
|
|
|
|
|
|
|
|
|
1,433
|
|
|
|
|
|
|
|
1,433
|
|
Liquidation and dissolution common stock exchange
|
|
|
|
|
|
|
(1
|
)
|
|
|
1
|
|
|
|
|
|
|
|
|
|
Warrants exercised
|
|
|
132,000
|
|
|
|
|
|
|
|
858
|
|
|
|
|
|
|
|
858
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance December 31, 2008
|
|
|
22,361,227
|
|
|
|
2
|
|
|
|
166,361
|
|
|
|
(34,798
|
)
|
|
|
131,565
|
|
Net income for the six months ended June 30, 2009
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
19,283
|
|
|
|
19,283
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance June 30, 2009
|
|
|
22,361,227
|
|
|
|
2
|
|
|
|
166,361
|
|
|
|
(15,515
|
)
|
|
|
150,848
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
See accompanying notes to condensed consolidated financial
statements.
F-40
Seanergy
Maritime Holdings Corp. and subsidiaries
for the
six months ended June 30, 2009 and 2008
|
|
|
|
|
|
|
|
|
|
|
Six Months Ended June 30,
|
|
|
|
2009
|
|
|
2008
|
|
|
|
(In thousands of
|
|
|
|
US dollars, except for share and per share data, unless
otherwise stated)
|
|
|
|
(Unaudited)
|
|
|
Cash flows from operating activities:
|
|
|
|
|
|
|
|
|
Net income
|
|
|
19,283
|
|
|
|
2,015
|
|
Adjustments to reconcile net income to net cash provided by
(used in) operating activities:
|
|
|
|
|
|
|
|
|
Depreciation
|
|
|
15,430
|
|
|
|
|
|
Deferred dry-docking costs
|
|
|
(2,245
|
)
|
|
|
|
|
Amortization of deferred finance charges and dry-dock
|
|
|
397
|
|
|
|
|
|
Changes in operating assets and liabilities:
|
|
|
|
|
|
|
|
|
(Increase) decrease in
|
|
|
|
|
|
|
|
|
Advances (trade) to related party
|
|
|
795
|
|
|
|
|
|
Inventories
|
|
|
176
|
|
|
|
|
|
Other current assets
|
|
|
(27
|
)
|
|
|
|
|
Prepaid insurance expenses
|
|
|
389
|
|
|
|
|
|
Prepaid expenses and other current assets related
parties
|
|
|
(20
|
)
|
|
|
|
|
Prepaid expenses and other current assets
|
|
|
|
|
|
|
52
|
|
Accrued expenses
|
|
|
1,323
|
|
|
|
|
|
Trade accounts and other payables
|
|
|
(209
|
)
|
|
|
(212
|
)
|
Due to underwriters
|
|
|
(286
|
)
|
|
|
|
|
Accrued charges on convertible note due to shareholders
|
|
|
411
|
|
|
|
|
|
Premium amortization on convertible note due to shareholders
|
|
|
(181
|
)
|
|
|
|
|
Accrued interest
|
|
|
(54
|
)
|
|
|
|
|
Deferred revenue related party
|
|
|
(682
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net cash provided by operating activities
|
|
|
34,500
|
|
|
|
1,855
|
|
|
|
|
|
|
|
|
|
|
Cash flows from investing activities:
|
|
|
|
|
|
|
|
|
Increase in trust account from interest earned on funds held in
trust
|
|
|
|
|
|
|
(3,670
|
)
|
Withdrawals from trust account
|
|
|
|
|
|
|
4,501
|
|
Payment of acquisition costs
|
|
|
|
|
|
|
(321
|
)
|
Additions to vessels
|
|
|
(6
|
)
|
|
|
|
|
Additions to office furniture and equipment
|
|
|
(15
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net cash provided by/(used in) investing activities
|
|
|
(21
|
)
|
|
|
510
|
|
|
|
|
|
|
|
|
|
|
Cash flows from financing activities:
|
|
|
|
|
|
|
|
|
Dividends paid
|
|
|
|
|
|
|
(3,173
|
)
|
Repayment of long term debt
|
|
|
(15,000
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net cash used in financing activities
|
|
|
(15,000
|
)
|
|
|
(3,173
|
)
|
|
|
|
|
|
|
|
|
|
Net increase (decrease) in cash and cash equivalents
|
|
|
19,479
|
|
|
|
(808
|
)
|
Cash and cash equivalents at beginning of period
|
|
|
27,543
|
|
|
|
2,211
|
|
|
|
|
|
|
|
|
|
|
Cash and cash equivalents at end of period
|
|
|
47,022
|
|
|
|
1,403
|
|
|
|
|
|
|
|
|
|
|
Cash paid for:
|
|
|
|
|
|
|
|
|
Interest
|
|
|
2,501
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
See accompanying notes to condensed consolidated financial
statements
F-41
SEANERGY
MARITIME HOLDINGS CORP.
(All
amounts in footnotes in thousands of US Dollars, except for
share and per share data)
|
|
1.
|
Basis of
Presentation and General Information:
|
Seanergy Maritime Holdings Corp. (the Company or
Seanergy) was formed under the laws of the Republic
of the Marshall Islands on January 4, 2008, as a wholly
owned subsidiary of Seanergy Maritime Corp. Seanergy Maritime
Corp. was formed on August 15, 2006, under the laws of the
Republic of the Marshall Islands with executive offices located
in Athens, Greece. On August 28, 2008, the Company
completed a business combination with the acquisition, through
its designated nominees, of six dry bulk vessels. On that date,
the Company took delivery of the M/V Davakis G., the M/V Delos
Ranger and the M/V African Oryx. On September 11, 2008, it
took delivery, through its designated nominee, of the fourth
vessel, the M/V Bremen Max. On September 25, 2008, Seanergy
took delivery, through its designated nominees, of the final two
vessels, the M/V Hamburg Max, and the M/V African Zebra, vessel.
Since the consummation of the business acquisition, the Company
provides global transportation solutions in the dry bulk
shipping sector through its vessel-owning subsidiaries for a
broad range of dry bulk cargoes, including coal, iron ore, and
grains or major bulks, as well as bauxite, phosphate,
fertilizers and steel products or minor bulks.
The above acquisition was accounted for under the purchase
method of accounting and accordingly, the assets acquired were
recorded at their fair values. No liabilities were assumed or
other tangible assets acquired. The consideration paid for the
business combination, excluding a contingent consideration, was
recorded at fair value at the date of acquisition and amounted
to $404,876 and consisted of cash paid of $367,031, the fair
value of a convertible promissory note from a related party of
$29,043 and direct transaction costs of $8,802. The fair value
of the assets (vessels) acquired amounted to $360,081, thereby
resulting in a premium (i.e. non-tax deductible goodwill) of
$44,795.
As of December 31, 2008, the Company performed its annual
goodwill impairment analysis and recorded a non cash goodwill
impairment charge of $44,795 thereby, fully writing off its
goodwill.
The contingent consideration forming part of the business
combination consists of the issuance of 4,308,075 shares of
common stock subject to Seanergy meeting certain targeted EBITDA
of $72,000 to be earned between October 1, 2008 and
September 30, 2009. Contingent consideration will be
recorded, as additional purchase price, once the contingency is
settled. It is considered at least reasonably possible in the
near term that any additional goodwill amounts recorded upon
achievement of the earn-out in 2009, may be impaired based on
current market conditions.
The wholly-owned subsidiaries of Seanergy Maritime Holdings
Corp. (the Group) included in these unaudited condensed
consolidated financial statements are as follows:
|
|
|
|
|
|
|
|
|
|
|
Country of
|
|
Date of
|
|
|
|
|
Company
|
|
Incorporation
|
|
Incorporation
|
|
Vessel Name
|
|
Date of Delivery
|
|
Seanergy Management Corp.
|
|
Marshall Islands
|
|
May 9 , 2008
|
|
N/A
|
|
N/A
|
Amazons Management Inc.
|
|
Marshall Islands
|
|
April 21 , 2008
|
|
Davakis G.
|
|
August 28, 2008
|
Lagoon Shipholding Ltd.
|
|
Marshall Islands
|
|
April 21, 2008
|
|
Delos Ranger
|
|
August 28, 2008
|
Cynthera Navigation Ltd.
|
|
Marshall Islands
|
|
March 18, 2008
|
|
African Oryx
|
|
August 28, 2008
|
Martinique International Corp.
|
|
British Virgin Islands
|
|
May 14, 2008
|
|
Bremen Max.
|
|
September 11, 2008
|
Harbour Business International Corp.
|
|
British Virgin Islands
|
|
April 1, 2008
|
|
Hamburg Max.
|
|
September 25, 2008
|
Waldeck Maritime Co.
|
|
Marshall Islands
|
|
April 21, 2008
|
|
African Zebra
|
|
September 25, 2008
|
The accompanying unaudited condensed consolidated financial
statements have been prepared in accordance with generally
accepted accounting principles in the United States, and the
rules and regulations of the Securities and Exchange Commission
(SEC) which apply to interim financial statements.
Accordingly, they do not include all of the information and
footnotes normally included in consolidated financial statements
prepared in conformity with generally accepted accounting
principles in the United States. They should be
F-42
SEANERGY
MARITIME HOLDINGS CORP.
NOTES TO
THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited) (Continued)
(All
amounts in footnotes in thousands of US Dollars, except for
share and per share data)
read in conjunction with the consolidated financial statements
and notes thereto included in the Companys annual report
on
Form 20-F.
The accompanying unaudited condensed consolidated financial
statements include all adjustments (consisting of normal
recurring adjustments) that management considers necessary for a
fair presentation of its consolidated financial position and
results of operations for the interim periods and are not
necessarily indicative of the results that may be expected for
the entire year.
|
|
2.
|
Significant
Accounting Policies:
|
|
|
(a)
|
Recent
accounting pronouncements
|
In December 2007, the FASB issued FASB Statement
No. 141(R), Business Combinations, and FASB Statement
No. 160, Non-controlling Interests in Consolidated
Financial Statements an amendment to ARB
No. 51. FASB Statements No. 141(R) and No. 160
require most identifiable assets, liabilities, non-controlling
interests, and goodwill acquired in a business combination to be
recorded at full fair value and require
non-controlling interests (previously referred to as minority
interests) to be reported as a component of equity, which
changes the accounting for transactions with non-controlling
interest holders. Both Statements are effective for periods
beginning on or after December 15, 2008, and earlier
adoption is prohibited. FASB Statement No. 141(R) will be
applied to business combinations occurring after the effective
date. FASB Statement No. 160 will be applied prospectively
to all non-controlling interests, including any that arose
before the effective date. All of the Companys
subsidiaries are wholly owned, so the adoption of Statement 160
did not impact its financial position and results of operations.
These Statements affect Seanergys acquisitions consummated
after January 1, 2009.
In March 2008, the FASB issued FASB Statement No. 161,
Disclosures about Derivative Instruments and Hedging
Activities an amendment of FASB Statement
No. 133. FASB Statement No. 161 amends and
expands the disclosure requirements of FASB Statement
No. 133, Accounting for Derivative Instruments and
Hedging Activities. The objective of FASB Statement
No. 161 is to provide users of financial statements with an
enhanced understanding of how and why an entity uses derivative
instruments, how derivative instruments and related hedged items
are accounted for under FASB Statement No. 133 and its
related interpretations, and how derivative instruments and
related hedged items affect an entitys financial position,
financial performance, and cash flows. FASB Statement
No. 161 requires qualitative disclosures about objectives
and strategies for using derivatives, quantitative disclosures
about fair value amounts of and gains and losses on derivative
instruments, and disclosures about credit-risk-related
contingent features in derivative agreements. FASB Statement
No. 161 applies to all derivative financial instruments,
including bifurcated derivative instruments (and non derivative
instruments that are designed and qualify as hedging instruments
pursuant to paragraphs 37 and 42 of FASB Statement
No. 133) and related hedged items accounted for under
FASB Statement No. 133 and its related interpretations.
FASB Statement No. 161 also amends certain provisions of
FASB Statement No. 131. FASB Statement No. 161 is
effective for financial statements issued for fiscal years and
interim periods beginning after November 15, 2008, with
early application encouraged. FASB Statement No. 161
encourages, but does not require, comparative disclosures for
earlier periods at initial adoption. The adoption of FASB
Statement No. 161 did not have any impact on the
Companys financial statement presentation or disclosures.
In May 2009, the FASB issued Statement No. 165, Subsequent
Events (SFAS 165). SFAS 165 requires
entities to disclose the date through which they have evaluated
subsequent events and whether the date corresponds with the
release of their financial statements. This statement is
effective for interim and annual periods ending after
June 15, 2009. SFAS 165 has been adopted in these
financial statements (see Note 25).
F-43
SEANERGY
MARITIME HOLDINGS CORP.
NOTES TO
THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited) (Continued)
(All
amounts in footnotes in thousands of US Dollars, except for
share and per share data)
In June 2009 the FASB issued FASB Statement No. 167,
Amendments to FASB Interpretation No. 46(R) (FAS 167),
amending the consolidation guidance for variable-interest
entities under FIN 46(R). The amendments include:
(1) the elimination of the exemption for qualifying special
purpose entities, (2) a new approach for determining who
should consolidate a variable-interest entity, and
(3) changes to when it is necessary to reassess who should
consolidate a variable-interest entity. Calendar year-end
companies will have to apply FAS 167 as of January 1,
2010. The Company is in the process of evaluating the effect of
this standard in its financial statements.
In June 2009, the FASB issued Statement No. 168, the FASB
accounting standards codification and the hierarchy of Generally
Accepted Accounting Principles (SFAS 168).SFAS
168 will become the single source of authoritative
nongovernmental U.S. generally accepted accounting
principles (GAAP), superseding existing FASB,
American Institute of Certified Public Accountants
(AICPA), Emerging Issues Task Force
(EITF), and related accounting literature.
SFAS 168 reorganizes hundreds of GAAP pronouncements into
roughly 90 accounting topics and displays them using a
consistent structure. Also included is relevant Securities and
Exchange Commission guidance organized using the same topical
structure in separate sections. SFAS 168 will be effective
for financial statements issued for reporting periods that end
after September 15, 2009. This will have an impact on the
Companys financial statements since all future references
to authoritative accounting literature will be references in
accordance with SFAS 168.
In June 2008, the FASB ratified Emerging Issues Task Force
(EITF)
07-5,
Determining Whether an Instrument (or Embedded Feature) is
Indexed to an Entitys Own Stock
(EITF 07-5).
EITF 07-5
addresses the determination of whether a financial instrument
(or an embedded feature) is indexed to an entitys own
stock.
EITF 07-5
is effective for fiscal years beginning after December 15,
2008, and interim periods within those fiscal years. Seanergy
has determined that its warrants are indexed to its own stock
and equity classified and therefore the adoption of this
standard did not have an effect on the Companys financial
statements.
FSP APB
14-1,
Accounting for Convertible Debt Instruments That May Be
Settled in Cash upon Conversion (Including Partial Cash
Settlement). FSP APB
14-1
requires issuers of convertible debt that may be settled wholly
or partly in cash upon conversion to account for the debt and
equity components separately. The FSP is effective for financial
statements issued for fiscal years beginning after
December 15, 2008 and interim periods within those years
and must be applied retrospectively to all periods presented.
Early adoption is prohibited. The application of FSP APB
14-1 did not
have any effect on the Companys financial statements.
In April 2009, the FASB issued three related FSPs to clarify the
application of FASB Statement No. 157 to fair-value
measurements in the current economic environment, modify the
recognition of
other-than-temporary
impairments of debt securities, and require companies to
disclose the fair values of financial instruments in interim
periods. The final Staff Positions are effective for interim and
annual periods ending after June 15, 2009, with early
adoption permitted for periods ending after March 15, 2009,
if all three Staff Positions or both the fair-value measurements
and
other-than-temporary
impairment Staff Positions are adopted simultaneously. These are
FSP
No. FAS 157-4,
Determining Fair Value When the Volume and Level of
Activity for the Asset or Liability has Significantly Decreased
and Identifying Transactions That Are Not Orderly, FSP
No. 115-2
and
FAS 124-2,
Recognition and Presentation of
Other-Than-Temporary
Impairments and FSP
No. 107-1
and APB
28-1,
Interim Disclosures about Fair Value of Financial
Instruments. The application of these FSPs did not have a
material effect on the Companys financial statements.
FASB Staff Position
No. FAS 157-4
provides guidance on how to determine the fair value of assets
and liabilities under FASB Statement No. 157 in the current
economic environment and re-emphasizes that the objective of a
fair-value measurement remains an exit price. It does not change
the requirements on the use of Level 1 inputs, which are
defined in that Statement as quoted prices for an identical
asset or liability in an active market. It provides guidance to
determine whether there has been a significant decrease in the
volume
F-44
SEANERGY
MARITIME HOLDINGS CORP.
NOTES TO
THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited) (Continued)
(All
amounts in footnotes in thousands of US Dollars, except for
share and per share data)
and level of activity of the market when compared with
normal market activity, the objective of which is to
determine the point within the range of fair value estimates
that is most representative of fair value under current market
conditions FASB Staff Position
FAS No. 115-2
and
FAS 124-2
modify the requirements for recognizing
other-than-temporarily
impaired debt securities and significantly changes the existing
impairment model for such securities. It also modifies the
presentation of
other-than-temporary
impairment losses and increases the frequency of and expands
already required disclosures about
other-than-temporary
impairment for debt and equity securities. The requirements on
recognition apply to debt securities that are classified as
available for-sale and
held-to-maturity
that are subject to existing
other-than-temporary
impairment guidance. Equity securities are not subject to the
Staff Positions requirements on recognition.
FASB Staff Position
FAS 107-1
and APB 28-1
requires public companies to disclose the fair value of
financial instruments within the scope of FASB Statement 107 in
interim financial statements, adding to the current annual
disclosure requirements, except with respect to concentration of
credit risks of all financial instruments. It also adds a
requirement for discussion of changes, if any, in the method
used and significant assumptions made during the period.
|
|
3.
|
Transactions
with Related Parties:
|
On May 20, 2008, companies affiliated with certain members
of the Restis family collectively acquired a 9.62% interest in
Seanergy Maritime Corp. On the same date, the Company also
entered into the following agreements with companies
wholly-owned by member(s) of the Restis family:
|
|
|
|
|
The Master Agreement to purchase an aggregate of six dry bulk
vessels from companies affiliated with certain members of the
Restis family, for an aggregate purchase price of $404,876
including direct transaction costs plus contingent consideration
(see Note 1).
|
|
|
|
A management agreement concluded with Enterprises Shipping and
Trading S.A. (EST), a company wholly owned by a
member of the Restis family, for the provision of technical
management services relating to vessels for an initial period of
two years from the date of signing.
|
|
|
|
A brokerage agreement was concluded with Safbulk Pty Ltd
(Safbulk), a company wholly owned by the Restis
family, for the provision of chartering services for an initial
period of two years from the date of signing.
|
On May 26, 2008, time charter agreements for
11-13 month
periods, were concluded for the vessels with South African
Maritime Corporation S.A. (SAMC), a company also
owned by certain members of the Restis family (Notes 9 and
16).
On November 17, 2008, a lease agreement was entered into
between Waterfront S.A, a company wholly owned by a member of
the Restis family, for the lease of the executive offices.
On August 26, 2008, Seanergy obtained shareholders
approval for the business combination, including the purchase of
the six vessels from the Restis family which became effective on
August 28, 2008. At this time the non-voting shareholders
redeemed 6,370,773 shares of common stock thereby bring the
total interest of the Restis family to approximately 74% which
remains unchanged as of June 30, 2009.
On various dates from June 5, 2008 to May 14,
2009 companies affiliated with members of the Restis family
purchased 13,777,415 shares of common stock from
shareholders of Seanergy Maritime Holdings (the successor of
Seanergy Maritime Corp.)
F-45
SEANERGY
MARITIME HOLDINGS CORP.
NOTES TO
THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited) (Continued)
(All
amounts in footnotes in thousands of US Dollars, except for
share and per share data)
|
|
(a)
|
Management
Agreement:
|
On May 20, 2008, a management agreement was concluded
between the wholly owned subsidiary of the Company, Seanergy
Management Corp. (Seanergy Management), and EST, an
affiliate, for the provision of technical management services
relating to vessels for an initial period of two years from the
date of signing. The agreement will be automatically extended
for successive one year periods, unless three months written
notice by either party is given prior to commencement of the
next period. The fixed daily fee per vessel in operation for the
year ending December 31, 2009, was agreed at EUR 425
(four hundred and twenty-five Euros).
The related expense for the three and six months ended
June 30, 2009, amounted to $315 and $617 respectively and
is included under management fees related party in
the accompanying condensed consolidated statements of operations.
On September 2, 2008, a service agreement was signed
between the Company and EST, for consultancy services with
respect to financing, dealing and relations with third parties
and assistance in the preparation of periodic reports to
shareholders for a fixed monthly fee of $5. The agreement
expired on December 2, 2008 and was extended for a period
of 3 months ending March 2, 2009.
The related expense for the three and six months ended
June 30, 2009 amounted to $NIL and $10 respectively, and is
included under general and administration expenses
related party (Note 20) in the accompanying condensed
consolidated statements of operations.
Any services provided by EST to the Company for consultancy,
financing, accounting, IT, legal or other expenses are invoiced
as they incur.
On May 26, 2008, time charter agreements for
11-13 month
periods, expiring in September 2009, at a time charter daily
rate of between $30 and $65, were concluded for the vessels with
SAMC. The charter agreements provide for an address commission
of 2.5% in favor of SAMC. The address commission amounted to
$566 and $1,239 for the three and six months period ended
June 30, 2009 respectively and is recorded net of revenue
as commissions related party in the accompanying
condensed consolidated statements of operations.
On May 20, 2008, a brokerage agreement was concluded with
Safbulk, for the provision of chartering services for an initial
period of two years from the date of signing. Safbulk will
receive a chartering commission of 1.25% on the collected vessel
revenue. The fees charged by Safbulk amounted to $283 and $619
for the three and six months ended June 30, 2009
respectively and are separately reflected as voyage
expenses related party in the accompanying condensed
consolidated statements of operations.
On November 17, 2008, a lease agreement was entered into
between Waterfront S.A, for the lease of the executive offices.
The initial lease term is from November 17, 2008 to
November 16, 2011. Seanergy has the option to extend the
term until February 2, 2014. The monthly lease payment is
EUR 42 . The rent charged by Waterfront S.A. for the three
and six months ended June 30, 2009 amounted to $150 and
$344 respectively (see Note 15) and is included under
general and administration expenses related party in
the accompanying consolidated statements of operations
(Note 20). The related rental guarantee of $180 is
reflected in prepaid
F-46
SEANERGY
MARITIME HOLDINGS CORP.
NOTES TO
THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited) (Continued)
(All
amounts in footnotes in thousands of US Dollars, except for
share and per share data)
expenses and other current assets related party in
the accompanying June 30, 2009 condensed consolidated
balance sheet (see Note 4).
|
|
(e)
|
Consultancy
Agreement:
|
On December 15, 2008, Seanergy Management concluded an
agreement with CKA Company S.A., a related party entity
incorporated in the Marshall Islands. CKA Company S.A. is
beneficially owned by the Companys Chief Financial
Officer. Under the agreement, CKA Company S.A. provides the
services of the individual who serves in the position of
Seanergys Chief Financial Officer. The agreement is for
$220 per annum, payable monthly on the last working day of every
month in twelve installments and is subject to increases as
maybe approved by the compensation committee. The related
expense for the three and six months ended June 30, 2009
amounted to $55 and $110 respectively and is included in general
and administration expenses related party in the
accompanying condensed consolidated statements of operations,
|
|
(f)
|
V&P
Law Firm (Vgenopoulos Partners):
|
Mr. Ioannis Tsigkounakis, a member of our Board of
Directors is a partner of V&P Law Firm, which the Company
has retained in connection with certain matters relating to
vessel acquisitions and the drafting of a definitive agreement.
There were no such expenses incurred for the six months ended
June 30, 2009 and 2008.
|
|
(g)
|
Employment
Agreements:
|
Seanergy entered into an employment agreement with its Chief
Executive Officer. Under the agreement, the officers
annual base salary is $400 and increases are subject to approval
by the compensation committee.
The related expense for the three and six months ended
June 30, 2009 amounted to $100 and $200 respectively and is
included under general and administration expenses
related party in the accompanying condensed consolidated
statements of operations (see Note 20).
Seanergy Management has entered into an employment agreement in
March 2009 with its Chief Executive Officer. The total net
annual remuneration amounts to EUR 30.8 subject to any
increases made from time to time by the compensation committee.
The related expense for the three and six months ended
June 30, 2009, included in general and administrative
expenses related party, is amounted to $9 and $9
respectively.
Seanergy Management has entered into an employment agreement
with its Chief Financial Officer. The total net annual
remuneration amounts to EUR 23.8 subject to any increases
made from time to time by compensation committee.
The related expense for the three and six months ended
June 30, 2009 amounted to $7 and $14 respectively and it is
included under general and administration expenses
related party in the accompanying condensed consolidated
statements of operations (see Note 20).
All the members of the Board of Directors receive fees of $40
per year each. In addition, the three members of the Shipping
Committee receive additional fees of $60 per year each. The
amounts for the three and six months ended June 30, 2009
totaled $170 and $343 respectively and are recorded in general
and administration expenses related party (see
Note 20) in the accompanying condensed consolidated
statements of operations.
F-47
SEANERGY
MARITIME HOLDINGS CORP.
NOTES TO
THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited) (Continued)
(All
amounts in footnotes in thousands of US Dollars, except for
share and per share data)
|
|
4.
|
Prepaid
Expenses and Other Current Assets Related
Parties
|
The amounts in the accompanying condensed consolidated balance
sheets are analyzed as follows:
|
|
|
|
|
|
|
|
|
|
|
June 30,
|
|
|
December 31,
|
|
|
|
2009
|
|
|
2008
|
|
|
Prepaid commission on hire (see
Note 3(b-c))
|
|
|
88
|
|
|
|
68
|
|
Office rental deposit (Waterfront SA (see
Note 3(d))
|
|
|
180
|
|
|
|
180
|
|
|
|
|
|
|
|
|
|
|
|
|
|
268
|
|
|
|
248
|
|
|
|
|
|
|
|
|
|
|
|
|
5.
|
Cash and
Cash Equivalents:
|
Cash and cash equivalents in the accompanying condensed
consolidated balance sheets are analyzed as follows:
|
|
|
|
|
|
|
|
|
|
|
June 30,
|
|
|
December 31,
|
|
|
|
2009
|
|
|
2008
|
|
|
Cash at bank
|
|
|
4,161
|
|
|
|
9,011
|
|
Term deposits
|
|
|
42,861
|
|
|
|
18,532
|
|
|
|
|
|
|
|
|
|
|
|
|
|
47,022
|
|
|
|
27,543
|
|
|
|
|
|
|
|
|
|
|
|
|
6.
|
Advances
(Trade) to /Due to Related Party:
|
Advances (trade) to related party represent advances given to
EST for working capital purposes of the six vessels
operating activities in accordance with terms of the management
agreement dated May 20, 2008 (see Note 3(a)).
According to this agreement, EST obtains cash advances as a
manager of vessels and performs certain duties that include
technical management and support services necessary for the
operation and employment of the vessels.
As of June 30, 2009, the amount due to EST amounted to $218.
F-48
SEANERGY
MARITIME HOLDINGS CORP.
NOTES TO
THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited) (Continued)
(All
amounts in footnotes in thousands of US Dollars, except for
share and per share data)
The amounts in the accompanying condensed consolidated balance
sheets are analyzed as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Office Furniture
|
|
|
|
|
|
|
Vessel Cost
|
|
|
and Fittings
|
|
|
Total Value
|
|
|
Cost:
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance, December 31, 2007
|
|
|
|
|
|
|
|
|
|
|
|
|
Additions (Note 1)
|
|
|
360,081
|
|
|
|
9
|
|
|
|
360,090
|
|
Impairment charge
|
|
|
(4,530
|
)
|
|
|
|
|
|
|
(4,530
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance December 31, 2008
|
|
|
355,551
|
|
|
|
9
|
|
|
|
355,560
|
|
Additions
|
|
|
6
|
|
|
|
15
|
|
|
|
21
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance June 30, 2009
|
|
|
355,557
|
|
|
|
24
|
|
|
|
355,581
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Accumulated depreciation:
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance, December 31, 2007
|
|
|
|
|
|
|
|
|
|
|
|
|
Depreciation charge for the year
|
|
|
(9,929
|
)
|
|
|
|
|
|
|
(9,929
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance December 31, 2008
|
|
|
(9,929
|
)
|
|
|
|
|
|
|
(9,929
|
)
|
Depreciation charge for the six months ended
June 30, 2009
|
|
|
(15,426
|
)
|
|
|
(4
|
)
|
|
|
(15,430
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance June 30, 2009
|
|
|
(25,355
|
)
|
|
|
(4
|
)
|
|
|
(25,359
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net book value June 30, 2009
|
|
|
330,202
|
|
|
|
20
|
|
|
|
330,222
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net book value December 31, 2008
|
|
|
345,622
|
|
|
|
9
|
|
|
|
345,631
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Following the business combination Seanergy took delivery of the
six vessels indicated in Note 1.
The Company evaluates the carrying amounts of vessels and
related dry-dock costs and periods over which long-lived assets
are depreciated to determine if events have occurred which would
require modification to their carrying values or useful lives.
In evaluating useful lives and carrying values of long-lived
assets, management reviews certain indicators of potential
impairment, such as undiscounted projected operating cash flows,
vessel sales and purchases, business plans and overall market
conditions.
The current economic and market conditions, including the
significant disruptions in the global credit markets, are having
broad effects on participants in a wide variety of industries.
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; conditions that the Company considered
indicators of a potential impairment as of December 31,
2008.
The Company determines undiscounted projected net operating cash
flows for each vessel and compares it to the vessels
carrying value. The projected net operating 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 a
combination of Seanergys remaining charter agreement
rates,
2-year
forward freight agreements and the most recent
10-year
average historical 1 year time charter rates available for
each type of vessel) over the remaining economic life of each
vessel, net of brokerage and address commissions, expected
outflows for scheduled vessels maintenance, and vessel
operating expenses assuming an average annual inflation rate of
2%. Fleet utilization was assumed at 98.6% in the Companys
F-49
SEANERGY
MARITIME HOLDINGS CORP.
NOTES TO
THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited) (Continued)
(All
amounts in footnotes in thousands of US Dollars, except for
share and per share data)
exercise, taking into account each vessels off hire days
of other companies operating in the dry bulk industry and
historical performance.
A discount factor of 4.5% per annum, representing the
Companys incremental borrowing rate, was applied to the
undiscounted projected net operating cash flows directly
associated with and expected to arise as a direct result of the
use and eventual disposition of the vessel, but only in the case
where they were lower than the carrying value of vessels. This
resulted in an impairment loss of $4,530 as at December 31,
2008.
There were no triggering events for further vessel impairment as
of June 30, 2009.
The vessels, having a total carrying value of $330,202 at
June 30, 2009, have been provided as collateral to secure
the loans of each respective vessel discussed under Note 11.
On February 24, 2009, the African Zebra commenced its
scheduled dry docking which was completed on July 20, 2009.
Additionally the Hamburg Max commenced its scheduled dry docking
on May 17, 2009 which was completed on June 23, 2009.
Deferred finance charges are analyzed as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Dry-Docking
|
|
|
Financing Costs
|
|
|
Total
|
|
|
December 31, 2008
|
|
|
|
|
|
|
2,757
|
|
|
|
2,757
|
|
Additions
|
|
|
2,245
|
|
|
|
|
|
|
|
2,245
|
|
Written-off
|
|
|
|
|
|
|
|
|
|
|
|
|
Amortization
|
|
|
(9
|
)
|
|
|
(388
|
)
|
|
|
(397
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
June 30, 2009
|
|
|
2,236
|
|
|
|
2,369
|
|
|
|
4,605
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Amortization of Vessel
Dry-docking. Amortization of vessel dry-docking
amounted to $9 and $9 for the three and six months ended
June 30, 2009, respectively primarily due to timing of
dry-docking costs relating to M/V Hamburg Max.
Deferred finance charges are analyzed as follows:
|
|
|
|
|
|
|
|
|
|
|
June 30,
|
|
|
December 31,
|
|
|
|
2009
|
|
|
2008
|
|
|
Arrangement fee convertible promissory note due to shareholders,
net of amortization (Note 10)
|
|
|
147
|
|
|
|
238
|
|
Long term debt issuance costs, net of amortization (Note 11)
|
|
|
2,222
|
|
|
|
2,519
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2,369
|
|
|
|
2,757
|
|
|
|
|
|
|
|
|
|
|
The amortization of the promissory note arrangement fee and the
debt issuance costs is included in interest and finance costs
and interest and finance costs due to shareholders in the
accompanying consolidated statements of operations and amounted
to $183 ($32 and $150 for the promissory note arrangement fee
and debt issuance costs, respectively) for the three months
ended June 30, 2009 and $388 ($81 and $307 for the
promissory note arrangement fee and debt issuance costs,
respectively) for the six months ended June 30, 2009.
F-50
SEANERGY
MARITIME HOLDINGS CORP.
NOTES TO
THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited) (Continued)
(All
amounts in footnotes in thousands of US Dollars, except for
share and per share data)
|
|
9.
|
Deferred
Revenue Related Party
|
Deferred revenue in the accompanying condensed consolidated
balance sheet as at June 30, 2009 and December 31,
2008 was $2,347 and $3,029, respectively. The amounts represent
cash received from SAMC prior to the balance sheet dates and
relate to revenue applicable to periods after such dates.
|
|
10.
|
Convertible
Promissory Note Due to Shareholders:
|
In connection with the business combination, a convertible
secured promissory note in the aggregate of $28,250 (face value)
was issued to United Capital Investments Corp., Atrion
Shipholding S.A., Plaza Shipholding Corp. and Comet Shipholding
Inc., Restis affiliate shareholders. The note is convertible
into 2,260,000 shares of common stock at a conversion price
of $12.50 per share. The note bears interest at a rate of 2.9%
per annum, payable upon the maturity date and matures in August
2010. The note was recorded at fair value on issuance at $29,043
(see Note 1). An arrangement fee of $288 is payable upon the
notes maturity date and was included in deferred charges
with the offsetting credit to accrued charges on convertible
promissory note due to shareholders (see Note 8). At the
maturity date the holder has the option to convert the note into
common stock at a conversion price of $12.50 per share. Interest
expense net of premium amortization ($67 and $181) for the three
and six months ended June 30, 2009, amounted to $140 and
$231 respectively, and is included in interest and finance
costs shareholders in the accompanying condensed
consolidated statements of operations.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
June 30,
|
|
|
December 31,
|
|
|
|
|
|
|
2009
|
|
|
2008
|
|
|
|
(a
|
)
|
|
Reducing revolving credit facility
|
|
|
54,845
|
|
|
|
54,845
|
|
|
(b
|
)
|
|
Term facility
|
|
|
142,500
|
|
|
|
157,500
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
|
197,345
|
|
|
|
212,345
|
|
|
|
|
|
Less-current portion
|
|
|
(23,250
|
)
|
|
|
(27,750
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Long-term portion
|
|
|
174,095
|
|
|
|
184,595
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
The long term debt (the Facility) of up to $255,000
has been provided by Marfin Egnatia Bank S.A. (Marfin or lender)
being available in two Facilities as described below. The
Facility is guaranteed by Seanergy Maritime Holdings Corp., the
Corporate Guarantor, and by the individual vessel owning
companies. An arrangement fee of $2,550 was paid on the
draw-down date and is included net of amortization in deferred
finance charges in the accompanying condensed consolidated
balance sheet (see Note 8).
|
|
(a)
|
Reducing
Revolving Credit Facility
|
As of June 30, 2009, the Company had utilized $54,845 of
the available reducing revolving credit facility which is equal
to the lesser of $90,000 and an amount in dollars, which when
aggregated with the amounts already drawn down under the term
facility does not exceed 70% of the aggregate market values of
the vessels and other securities held in favor of the lender to
be used for the business combination and working capital
purposes.
The reducing revolving credit facility bears interest at LIBOR
plus 2.25% per annum. A commitment fee of 0.25% per annum is
calculated on the daily aggregate un-drawn balance and
un-cancelled amount of the revolving credit facility, payable
quarterly in arrears from the date of the signing of the loan
agreements. The relevant commitment fee for the six months ended
June 30, 2009 on the un-drawn balance of $14 is recorded in
interest and finance costs in the accompanying condensed
consolidated statements of operations (see Note 21).
F-51
SEANERGY
MARITIME HOLDINGS CORP.
NOTES TO
THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited) (Continued)
(All
amounts in footnotes in thousands of US Dollars, except for
share and per share data)
Commencing one year from signing the loan agreement, the
revolving facility shall be reduced to the applicable limit
available on such reduction date. The first annual reduction
will reduce the available credit amount by $18,000 i.e. to
$72,000 in August 2009, followed by five consecutive annual
reductions of $12,000 and any outstanding balance to be fully
repaid together with the balloon payment of the Term loan
facility i.e. the available credit amount in August 2010 will be
$60,000, in August 2011 it will be $48,000, and so on.
Interest expense for the six months ended June 30, 2009
amounted to $763 and is recorded in interest and finance costs
in the accompanying condensed consolidated statement of
operations (see Note 21).
The weighted average interest rate on the revolving credit
facility, including the spread, for the six months ended
June 30, 2009 was approximately 2.765%.
The amounts in the accompanying condensed consolidated balance
sheets are analyzed as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
June 30,
|
|
|
December 31,
|
|
Borrower(s)
|
|
Vessel name
|
|
2009
|
|
|
2008
|
|
|
|
(a
|
)
|
|
Amazons Management Inc.
|
|
Davakis G.
|
|
|
31,825
|
|
|
|
35,175
|
|
|
(b
|
)
|
|
Lagoon Shipholding Ltd.
|
|
Delos Ranger
|
|
|
31,825
|
|
|
|
35,175
|
|
|
(c
|
)
|
|
Cynthera Navigation Ltd
|
|
African Oryx
|
|
|
15,977
|
|
|
|
17,659
|
|
|
(d
|
)
|
|
Martinique International Corp.
|
|
Bremen Max
|
|
|
24,873
|
|
|
|
27,491
|
|
|
(e
|
)
|
|
Harbour Business International Corp.
|
|
Hamburg Max
|
|
|
25,909
|
|
|
|
28,636
|
|
|
(f
|
)
|
|
Waldeck Maritime Co.
|
|
African Zebra
|
|
|
12,091
|
|
|
|
13,364
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
|
|
|
142,500
|
|
|
|
157,500
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Less-current portion
|
|
|
|
|
(23,250
|
)
|
|
|
(27,750
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Long-term portion
|
|
|
|
|
119,250
|
|
|
|
129,750
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
The vessel acquisition was financed by Marfin by an amortizing
term facility equal to $165,000, representing 42% of the Vessels
aggregate acquisition costs, excluding any amounts associated
with the earn-out provision. On June 25, 2009, the Company
repaid the third principal installment equal to $7,500 on the
term facility.
The loan is repayable, commencing three months from the last
drawdown or June 30, 2009, whichever is earlier, through
twenty eight consecutive quarterly principal installments out of
which the first four principal installments will be equal to
$7,500 each, the next four principal installments will be equal
to $5,250 each and the final twenty principal installments equal
to $3,200 each, with a balloon payment equal to $50,000 due
concurrently with the twenty eighth principal installment.
The loan bears interest at an annual rate of 3 month-LIBOR
plus 1.5%, if the Companys ratio of total assets to total
liabilities is greater than 165%, which is to be increased to
1.75% if the ratio is equal or less than 165%
The weighted average interest rate on the term facility,
including the spread, for the six months ended June 30,
2009 was approximately 2.186%. Long-term debt is denominated in
U.S. Dollars. Long-term debt interest expense for the first
six-months ended June 30, 2009 amounted to $1,684 and is
included in interest and finance costs in the accompanying
condensed consolidated statements of operations (see
Note 21).
F-52
SEANERGY
MARITIME HOLDINGS CORP.
NOTES TO
THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited) (Continued)
(All
amounts in footnotes in thousands of US Dollars, except for
share and per share data)
The annual principal payments on the term facility and the
reducing revolving credit facility (based on the amount drawn
down as of June 30, 2009) required to be made after
June 30, 2009, is as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Reducing Revolving
|
|
|
|
|
|
|
Term Facility
|
|
|
Credit Facility
|
|
|
Total
|
|
|
July 1, 2009 - June 30, 2010
|
|
|
23,250
|
|
|
|
|
|
|
|
23,250
|
|
July 1, 2010 - June 30, 2011
|
|
|
14,850
|
|
|
|
|
|
|
|
14,850
|
|
July 1, 2011 - June 30, 2012
|
|
|
12,800
|
|
|
|
6,845
|
|
|
|
19,645
|
|
July 1, 2012 - June 30, 2013
|
|
|
12,800
|
|
|
|
12,000
|
|
|
|
24,800
|
|
July 1, 2013 - June 30, 2014
|
|
|
12,800
|
|
|
|
12,000
|
|
|
|
24,800
|
|
Thereafter
|
|
|
66,000
|
|
|
|
24,000
|
|
|
|
90,000
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
142,500
|
|
|
|
54,845
|
|
|
|
197,345
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
The Facility is secured by a first priority mortgage on the
vessels, on a joint and several basis; first priority general
assignment of any and all earnings, insurances and requisition
compensation of the vessels and the respective notices and
acknowledgements thereof; first priority specific assignment of
the benefit of all charterers exceeding 12 calendar months
duration and all demise charters in respect of the vessels and
the respective notices and acknowledgements thereof to be
effected in case of default or potential event of default to the
absolute discretion of Marfin Egnatia Bank S.A.; assignment,
pledges and charges over the earnings accounts held in the name
of each borrower with the security trustee; undertakings by the
technical and commercial managers of the vessels; negative
pledge of the non-voters shares to be acquired; subordination
agreement between the Facility and the Sellers Note. All
of the aforementioned securities will be on a full cross
collateral basis.
The Facility includes covenants, among others, that require the
borrowers and the corporate guarantor to maintain vessel
insurance for an aggregate amount greater than the vessels
aggregate market value or an amount equal to 130% of the
aggregate of (a) the outstanding amount under both the
revolving credit and term facilities and (b) the amount
available for drawing under the revolving facility. The
vessels insurance is to include as a minimum cover hull
and machinery, war risk and protection and indemnity insurance,
$1,000,000 for oil pollution and for excess oil spillage and
pollution liability insurance. In addition mortgagees
interest insurance on the vessels and the insured value to be at
least 110% of the aggregate of the revolving credit and term
facility.
In addition if a vessel is sold or becomes a total loss or the
mortgage of the vessel is discharged on the disposal, Seanergy
shall repay such part of the facilities as equal to the higher
of the relevant amount or the amount in Dollars to maintain the
security clause margin.
Other covenants include the following:
|
|
|
|
|
not to borrow any money or permit such borrowings to continue
other than by way of subordinated shareholders loan or
enter into any agreement for deferred terms, other than in any
customary suppliers credit terms or any equipment lease or
contract hire agreement other than in ordinary course of
business;
|
|
|
|
no loans, advances or investments in, any person, firm,
corporation or joint venture or to officer, director,
shareholder or customer or any such person;
|
|
|
|
not to assume, guarantee or otherwise undertake the liability of
any person, firm, company;
|
|
|
|
not to authorize any capital commitments;
|
F-53
SEANERGY
MARITIME HOLDINGS CORP.
NOTES TO
THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited) (Continued)
(All
amounts in footnotes in thousands of US Dollars, except for
share and per share data)
|
|
|
|
|
not to declare or pay dividends in any amount greater than 60%
of the net cash flow of the Group as determined by the lender on
the basis of the most recent annual audited financial statements
provided, or repay any shareholders loans or make any
distributions in excess of the above amount without the lenders
prior written consent (see below for terms of waiver obtained on
December 31, 2008);
|
|
|
|
not to change the Chief Executive Officer
and/or
Chairman of the corporate guarantor without the prior written
consent of the lender;
|
|
|
|
not to assign, transfer, sell or otherwise or dispose vessels or
any of the property, assets or rights without prior written
consent of the lender;
|
|
|
|
to ensure that the members of the Restis and Koutsolioutsos
families (or companies affiliated with them) own at all times an
aggregate of at least 10% of the issued share capital of the
corporate guarantor;
|
|
|
|
no change of control in the corporate guarantor without the
written consent of the lender;
|
|
|
|
not to engage in any business other than the operation of the
vessels without the prior written consent of the lender;
|
|
|
|
Security margin clause: the aggregate market values of the
vessels and the value of any additional security shall not be
less than (or at least) 135% of the aggregate of the outstanding
revolving credit and term facilities and any amount available
for drawing under the revolving facility, less the aggregate
amount of all deposits maintained. A waiver dated
December 31, 2008 has been received for the period that the
vessels continue to be under their current charter agreements
(see Note 3(b)). The waiver also stipulates that dividends
will not be declared
and/or any
shareholders loans repaid without the prior written
consent of Marfin.
|
Financial covenants include the following:
|
|
|
|
|
ratio of financial indebtedness to earnings, before interest,
taxes, depreciation and amortization (EBITDA) shall be less than
6.5:1 (financial indebtedness or Net Debt are defined as the sum
of all outstanding debt facilities minus cash and cash
equivalents). The covenant is to be tested quarterly on a LTM
basis (the last twelve months);
|
|
|
|
the ratio of last twelve months EBITDA to Net Interest Expense
shall not be less than 2:1. The ratio of total liabilities to
total assets shall not exceed 0.70:1;
|
|
|
|
unrestricted cash deposits, other than in the favor of the
lender shall not be less than 2.5% of the financial
indebtedness; and
|
|
|
|
average quarterly unrestricted cash deposits, other than in the
favor of the lender shall not be less than 5% of the financial
indebtedness.
|
The last three financial covenants listed above are to be tested
on a quarterly basis, commencing on December 31, 2008
(where applicable). Seanergy was in compliance with these
financial covenants as of June 30, 2009. On
September 9, 2009 the Company received from the Marfin Bank
extension for the Minimum Value Clause waiver up until
July 1st,
2010, (see Note 25(e)).
F-54
SEANERGY
MARITIME HOLDINGS CORP.
NOTES TO
THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited) (Continued)
(All
amounts in footnotes in thousands of US Dollars, except for
share and per share data)
Seanergy Maritime Holdings Corp. was authorized to issue
100,000,000 shares of its common stock with a par value of
$0.0001 per share. Seanergy Maritime Corp. was authorized to
issue 89,000,000 shares of its common stock with a par
value of $0.0001 per share.
There are 5,500,000 issued and outstanding shares of common
stock that are held in escrow and will not be released from
escrow before the first year anniversary of the business
combination.
On September 28, 2007, Seanergy Maritime Corp., pursuant to
its public offering, sold 23,100,000 units, which included
1,100,000 units exercised pursuant to the
underwriters over-allotment option, at a price of $10.00
per unit. Each unit consisted of one share of Seanergy Maritime
Corp.s common stock, $0.0001 par value, and one
redeemable common stock purchase warrant. Each warrant entitles
the holder to purchase from Seanergy Maritime Corp. one share of
common stock at an exercise price of $6.50 per share commencing
the later of the completion of a business combination with a
target business or one year from the effective date of the
public offering (September 30, 2008) and expires on
September 28, 2011.
On September 28, 2007, and prior to the consummation of the
public offering described above, all of Seanergy Maritime
Corp.s executive officers purchased from the Company an
aggregate of 16,016,667 warrants at $0.90 per warrant in a
Private Placement. All warrants issued in the Private Placement
are identical to the warrants in the units sold in the public
offering, except that:
(i) subject to certain limited exceptions, none of the
warrants are transferable or saleable until after Seanergy
Maritime Corp. completes a business combination;
(ii) the warrants are not subject to redemption if held by
the initial holders thereof; and
(iii) the warrants may be exercised on a cashless basis if
held by the initial holders thereof by surrendering these
warrants for that number of shares of common stock equal to the
quotient obtained by dividing the product of the number of
shares of common stock underlying the warrants, multiplied by
the difference between the warrant price and fair value. The
fair value is defined to mean the average reported last sales
price of common stock for the 10 trading days ending on the
third business day prior to the date on which notice of exercise
is received. A portion of the proceeds from the sale of these
insider warrants has been added to the proceeds from the public
offering held in the Trust Account pending the completion
of the Companys initial business combination, with the
balance held outside the Trust Account to be used for
working capital purposes. No placement fees were payable on the
warrants sold in the Private Placement. The sale of the warrants
to executive officers did not result in the recognition of any
stock-based compensation expense because they were sold at
approximate fair market value.
Seanergy Maritime Corp. may call the warrants for redemption:
|
|
|
|
|
in whole and not in part,
|
|
|
|
at a price of $0.01 per warrant at any time,
|
|
|
|
upon a minimum of 30 days prior written notice of
redemption, and if, and only if, the last sale price of the
common stock equals or exceeds $14.25 per share for any 20
trading days within a 30 trading day period ending three
business days prior to the notice of redemption to the warrant
holders.
|
There is no cash settlement for the warrants.
F-55
SEANERGY
MARITIME HOLDINGS CORP.
NOTES TO
THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited) (Continued)
(All
amounts in footnotes in thousands of US Dollars, except for
share and per share data)
Subsequently, the underwriter notified Seanergy Maritime Corp.
that it was not going to exercise any of the remaining units as
part of its over-allotment option. The common stock and warrants
included in the units began to trade separately on
October 26, 2007.
The total number of common stock purchase warrants amounted to
39,116,667 of which 132,000 warrants were exercised in 2008 at a
price of $6.50 per share or $858. As of December 31, 2008
Seanergy Maritime Holdings Corp. has 38,984,667 common stock
purchase warrants issued and outstanding at an exercise price of
$6.50 per share, which became Seanergys obligations upon
completion of Seanergy Maritime Corp.s dissolution and
liquidation. The fair market value of the warrants as of
June 30, 2009, was $0.20 per warrant and at
December 31, 2008 was $0.11 per warrant.
The holders of the Companys 5,500,000 issued and
outstanding shares immediately prior to the completion of the
public offering and the holders of the warrants to purchase
16,016,667 shares of common stock acquired in the private
placement are entitled to registration rights covering the
resale of their shares and the resale of their warrants and
shares acquired upon exercise of the warrants. The holders of
the majority of these shares are entitled to make up to two
demands that the Company register their shares, warrants and
shares that they are entitled to acquire upon the exercise of
warrants. The holders of the majority of these shares can elect
to exercise these registration rights at any time after the date
on which these shares of common stock are released from escrow.
In addition, these shareholders have certain piggy-back
registration rights on registration statements filed
subsequent to the date on which these shares of common stock are
released from escrow. The Company will bear the expenses
incurred in connection with the filing of any of the forgoing
registration statements.
The unit purchase option and its underlying securities have been
registered under the registration statement for the public
offering; however, the option also grants holders demand and
piggy- back registration rights for periods of five
and seven years, respectively, from the date of the public
offering. These rights apply to all of the securities directly
and indirectly issuable upon exercise of the option. The Company
will bear all fees and expenses attendant to registering the
securities issuable on the exercise of the option, other than
underwriting commissions incurred and payable by the holders.
Pursuant to the Seanergys second amended and restated
articles of incorporation dividends are required to be made to
its public shareholders on a quarterly basis, equivalent to the
interest earned on the trust less any taxes payable and
exclusive of (i) up to $420 of interest earned on the
Maxims deferred underwriting compensation and (ii) up
to $742 of interest income on the proceeds in the Trust account
that Seanergy was permitted to draw down in the event the
over-allotment option was exercised in full on a pro-rata basis
to its public shareholders until the earlier of the consummation
of a business combination or liquidation, of which the date of
the business combination was August 28, 2008.
On April 9, 2008 Seanergy paid dividends totaling $1,542 or
$0.0668 per share, less permitted adjustments for interest
earned on the deferred underwriting commission of $37.
Seanergy Maritime Corp.s founding shareholders and the
Restis affiliate shareholders have agreed for such one-year
period to subordinate their rights to receive dividends with
respect to the 5,500,000 original shares owned by them to the
rights of Seanergy Maritime Corp.s public shareholders,
but only to the extent that Seanergy has insufficient funds to
make such dividend payments.
Subsequent to the business combination the declaration and
payment of any dividend is subject to the discretion of
Seanergys board of directors and is dependent upon its
earnings, financial condition, cash
F-56
SEANERGY
MARITIME HOLDINGS CORP.
NOTES TO
THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited) (Continued)
(All
amounts in footnotes in thousands of US Dollars, except for
share and per share data)
requirements and availability, fleet renewal and expansion,
restrictions in its loan agreements, the provisions of Marshall
Islands law affecting the payment of dividends to shareholders
and other factors. Seanergys board of directors may review
and amend its dividend policy from time to time in light of its
plans for future growth and other factors.
As a condition of the waiver from Marfin Egnatia Bank S.A. (see
Note 11), dividends will not be declared without the prior
written consent of Marfin Egnatia Bank S.A.
The calculation of net income per common share is summarized
below. The calculation of diluted weighted average common shares
outstanding for the three and six months ended June 30,
2009 and 2008 is based on the average closing price of the
Companys common stock.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
3-Months Ended June 30,
|
|
|
6-Months Ended June 30,
|
|
|
|
2009
|
|
|
2008
|
|
|
2009
|
|
|
2008
|
|
|
Basic:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income
|
|
$
|
7,167
|
|
|
$
|
920
|
|
|
$
|
19,283
|
|
|
$
|
2,015
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted average common shares outstanding
|
|
|
22,361,227
|
|
|
|
28,600,000
|
|
|
|
22,361,227
|
|
|
|
28,600,000
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income per common share-basic
|
|
$
|
0.32
|
|
|
$
|
0.03
|
|
|
$
|
0.86
|
|
|
$
|
0.07
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Diluted:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income
|
|
$
|
7,167
|
|
|
$
|
920
|
|
|
$
|
19,283
|
|
|
$
|
2,015
|
|
Interest expense on convertible promissory note due to
shareholders
|
|
$
|
172
|
|
|
$
|
|
|
|
$
|
311
|
|
|
$
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Diluted net income
|
|
$
|
7,340
|
|
|
$
|
2,015
|
|
|
$
|
19,594
|
|
|
$
|
2,015
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted average common shares outstanding
|
|
|
22,361,227
|
|
|
|
28,600,000
|
|
|
|
22,361,227
|
|
|
|
28,600,000
|
|
Effect of dilutive shares
|
|
|
2,260,000
|
|
|
|
12,548,398
|
|
|
|
2,260,000
|
|
|
|
12,267,846
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Diluted weighted average common shares outstanding
|
|
|
24,621,227
|
|
|
|
41,148,398
|
|
|
|
24,621,227
|
|
|
|
40,867,846
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income per common share-diluted
|
|
$
|
0.30
|
|
|
$
|
0.02
|
|
|
$
|
0.80
|
|
|
$
|
0.05
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
As of June 30, 2009 all outstanding warrants to acquire
38,984,667 shares of common stock were anti-dilutive. The
underwriters purchase options (common shares of 1,000,000
and warrants of 1,000,000) were anti-dilutive. Also
anti-dilutive are 4,308,075 of shares of common stock, whose
issuance is contingent upon satisfaction of certain conditions,
which have not been satisfied.
F-57
SEANERGY
MARITIME HOLDINGS CORP.
NOTES TO
THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited) (Continued)
(All
amounts in footnotes in thousands of US Dollars, except for
share and per share data)
Thus, as of June 30, 2009, securities that could
potentially dilute basic EPS in the future that were not
included in the computation of diluted EPS as mentioned above
are:
|
|
|
|
|
Private warrants
|
|
|
16,016,667
|
|
Public warrants
|
|
|
22,968,000
|
|
Underwriters purchase options common shares
|
|
|
1,000,000
|
|
Underwriters purchase options warrants
|
|
|
1,000,000
|
|
Contingently-issuable shares earn-out (Note 1)
|
|
|
4,308,075
|
|
|
|
|
|
|
Total
|
|
|
45,292,742
|
|
|
|
|
|
|
|
|
15.
|
Commitments
and Contingencies:
|
Various claims, lawsuits, and complaints, including those
involving government regulations and product liability, arise in
the ordinary course of the shipping business. In addition,
losses may arise from disputes with charterers, agents,
insurance and other claims with suppliers relating to the
operations of the Companys vessels. Currently, management
is not aware of any such claims or contingent liabilities, which
should be disclosed, or for which a provision should be
established in the accompanying condensed consolidated financial
statements.
The Company accrues for the cost of environmental liabilities
when management becomes aware that a liability is probable and
is able to reasonably estimate the probable exposure. Currently,
management is not aware of any such claims or contingent
liabilities, which should be disclosed, or for which a provision
should be established in the accompanying condensed consolidated
financial statements. A minimum of up to $1,000,000 of
liabilities associated with the individual vessels actions,
mainly for sea pollution, are covered by the Protection and
Indemnity (P&I) Club insurance.
Rental expense for the six months ended June 30, 2009
amounted to $344 (see Note 3(d)). Fixed future minimum rent
commitments as of June 30, 2009, were as follows:
|
|
|
|
|
Rental commitments
|
|
|
|
|
July 1, 2009 - June 30, 2010
|
|
|
713
|
|
July 1, 2010 - June 30, 2011
|
|
|
732
|
|
July 1, 2011 - June 30, 2012
|
|
|
281
|
|
Thereafter
|
|
|
|
|
|
|
|
|
|
Total
|
|
|
1,726
|
|
|
|
|
|
|
|
|
16.
|
Vessel
Revenue Related Party, net:
|
For the three and six months ended June 30, 2009, the
Companys six vessels were employed under time charters
with SAMC, with initial terms of
11-13 months,
expiring in September 2009. Revenue on time charterer , of
$22,067 and $48,309 is shown net of the address commission of
2.5%, amounting to $566 and $1,239, and net of off-hire expenses
of $349 and $397 for the three and six months ended
June 30, 2009 respectively.
F-58
SEANERGY
MARITIME HOLDINGS CORP.
NOTES TO
THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited) (Continued)
(All
amounts in footnotes in thousands of US Dollars, except for
share and per share data)
|
|
17.
|
Direct
Voyage Expenses:
|
The amounts in the accompanying condensed consolidated
statements of operations are analyzed as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended June 30,
|
|
|
Six Months Ended June 30,
|
|
|
|
2009
|
|
|
2008
|
|
|
2009
|
|
|
2008
|
|
|
Bunkers
|
|
|
230
|
|
|
|
|
|
|
|
345
|
|
|
|
|
|
Port expenses
|
|
|
13
|
|
|
|
|
|
|
|
13
|
|
|
|
|
|
Other
|
|
|
49
|
|
|
|
|
|
|
|
80
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
|
292
|
|
|
|
|
|
|
|
438
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
18.
|
Vessel
Operating Expenses:
|
The amounts in the accompanying condensed consolidated
statements of operations are analyzed as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended June 30,
|
|
|
Six Months Ended June 30,
|
|
|
|
2009
|
|
|
2008
|
|
|
2009
|
|
|
2008
|
|
|
Crew wages and related costs
|
|
|
1,422
|
|
|
|
|
|
|
|
2,801
|
|
|
|
|
|
Chemicals and lubricants
|
|
|
373
|
|
|
|
|
|
|
|
916
|
|
|
|
|
|
Repairs and maintenance
|
|
|
902
|
|
|
|
|
|
|
|
1,534
|
|
|
|
|
|
Insurance
|
|
|
218
|
|
|
|
|
|
|
|
453
|
|
|
|
|
|
Miscellaneous expenses
|
|
|
95
|
|
|
|
|
|
|
|
117
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
|
3,010
|
|
|
|
|
|
|
|
5,821
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
19.
|
General
and Administration Expenses:
|
The amounts in the accompanying condensed consolidated
statements of operations are analyzed as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended June 30,
|
|
|
Six Months Ended June 30,
|
|
|
|
2009
|
|
|
2008
|
|
|
2009
|
|
|
2008
|
|
|
Auditors and accountants fees
|
|
|
418
|
|
|
|
|
|
|
|
482
|
|
|
|
|
|
Legal expenses
|
|
|
180
|
|
|
|
|
|
|
|
554
|
|
|
|
|
|
D&O Insurance
|
|
|
28
|
|
|
|
|
|
|
|
55
|
|
|
|
|
|
Other employee salaries
|
|
|
48
|
|
|
|
|
|
|
|
72
|
|
|
|
|
|
Subscriptions
|
|
|
9
|
|
|
|
|
|
|
|
20
|
|
|
|
|
|
Transportation expenses
|
|
|
15
|
|
|
|
|
|
|
|
21
|
|
|
|
|
|
Professional fees
|
|
|
340
|
|
|
|
|
|
|
|
493
|
|
|
|
|
|
Other
|
|
|
247
|
|
|
|
137
|
|
|
|
444
|
|
|
|
597
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
|
1,285
|
|
|
|
137
|
|
|
|
2,141
|
|
|
|
597
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
F-59
SEANERGY
MARITIME HOLDINGS CORP.
NOTES TO
THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited) (Continued)
(All
amounts in footnotes in thousands of US Dollars, except for
share and per share data)
|
|
20.
|
General
and Administration Expenses Related Party:
|
The amounts in the accompanying condensed consolidated
statements of operations are analyzed as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended June 30,
|
|
|
Six Months Ended June 30,
|
|
|
|
2009
|
|
|
2008
|
|
|
2009
|
|
|
2008
|
|
|
Office rental (Note 3(d))
|
|
|
150
|
|
|
|
|
|
|
|
344
|
|
|
|
|
|
Consulting fees (Note 3(e))
|
|
|
55
|
|
|
|
|
|
|
|
110
|
|
|
|
|
|
Salaries (Note 3(f))
|
|
|
107
|
|
|
|
|
|
|
|
214
|
|
|
|
|
|
Administrative fee (Note 3(a))
|
|
|
|
|
|
|
|
|
|
|
10
|
|
|
|
|
|
BoD remuneration (Note 3(f))
|
|
|
170
|
|
|
|
|
|
|
|
343
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
|
482
|
|
|
|
|
|
|
|
1,021
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
21.
|
Interest
and Finance Costs:
|
The amounts in the accompanying condensed consolidated
statements of operations are analyzed as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended June 30,
|
|
|
Six Months Ended June 30,
|
|
|
|
2009
|
|
|
2008
|
|
|
2009
|
|
|
2008
|
|
|
Interest on long-term debt
|
|
|
818
|
|
|
|
|
|
|
|
1,684
|
|
|
|
|
|
Interest on revolving credit facility
|
|
|
369
|
|
|
|
|
|
|
|
763
|
|
|
|
|
|
Amortization of debt issuance costs
|
|
|
150
|
|
|
|
|
|
|
|
307
|
|
|
|
|
|
Commitment fee on un-drawn revolving credit facility
|
|
|
(8
|
)
|
|
|
|
|
|
|
14
|
|
|
|
|
|
Other
|
|
|
25
|
|
|
|
|
|
|
|
51
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
|
1,354
|
|
|
|
|
|
|
|
2,819
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
22.
|
Interest
Income Money Market Funds:
|
Interest income of $1,057 and $2,612 for the three and six
months ended June 30, 2008 respectively, represents
interest on money market funds held in trust at an annualized
tax exempt interest yield of 2.72%. There is no such income for
the six months ended June 30, 2009 as the respective money
market funds were used to fund the business combination referred
to in Note 1. Interest income for the three and six months
ended June 30, 2009 of $116 and $256 represents interest
earned on term deposits at an annualized interest rate ranging
from 0.65% to 1.10%.
|
|
23.
|
Financial
Instruments:
|
The principal financial assets of the Company consist of cash
and cash equivalents and advances (trade) to related party. The
principal financial liabilities of the Company consist of
long-term bank debt, trade accounts payable, a convertible
promissory note and deferred revenue related party.
|
|
(a)
|
Significant
Risks and Uncertainties, including Business and Credit
Concentration
|
As of June 30, 2009, the Company operates a total fleet of
6 vessels, consisting of 2 Panamax vessels, 2 Handysize
vessels and 2 Supramax vessels. Of these 6 vessels, the
Company acquired 3 on August 28, 2008, one on
September 11, 2008 and the remaining two on
September 25, 2008.
F-60
SEANERGY
MARITIME HOLDINGS CORP.
NOTES TO
THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited) (Continued)
(All
amounts in footnotes in thousands of US Dollars, except for
share and per share data)
Vessel revenue is generated by charging customers for the
transportation of dry bulk cargo. Vessel revenue is generated
from time charters with SAMC, a company affiliated with members
of the Restis family, with initial terms of
11-13 months
expiring September 2009. The Companys vessel revenue for
the three and six months ended June 30, 2009 has been
generated 100% from SAMC.
The Company cannot predict whether SAMC will, upon the
expiration of its charters, re-charter the vessels on favorable
terms or at all. If SAMC decides not to re-charter the
Companys vessels, the Company may not be able to
re-charter them on similar terms. In the future, the Company may
employ vessels in the spot market, which is subject to greater
rate fluctuation than the time charter market. If the Company
receives lower charter rates under replacement charters or is
unable to re-charter all of the vessels, net revenue, operating
income and operating cash flows will decrease or become
negative. The Company generally does not have trade accounts
receivable since the time charters are collected in advance. The
vessels are chartered under time-charter agreements where, the
charterer pays for the transportation service within one week of
issue of the hire statement (invoice) which is issued
approximately 15 days prior to the service, thereby
supporting management of the trade accounts receivable.
Turbulence in the financial markets has led many lenders to
reduce, and in some cases, cease to provide credit, including
letters of credit, to borrowers. Purchasers of dry bulk cargo
typically pay for cargo with letters of credit. The tightening
of the credit markets has reduced the issuance of letters of
credit and as a result decreased the amount of cargo being
shipped as sellers determine not to sell cargo without a letter
of credit. Reductions in cargo result in less business for
charterers and declines in the demand for vessels.
These factors, combined with the general slow-down in consumer
spending caused by uncertainty about future market conditions,
impact the shipping business. As such, it is reasonably possible
that future charter rates may further deteriorate which would
have a significant impact on the Companys operations.
The Companys interest rates and long-term loan repayment
terms are described in Note 11.
Financial instruments, which potentially subject the Company to
significant concentrations of credit risk, consist principally
of cash and cash equivalents. The Company places its temporary
cash and cash equivalents with Marfin Egnatia Bank S.A. Given
their high credit ratings, management does not expect any
counterparty to fail to meet its obligations.
F-61
SEANERGY
MARITIME HOLDINGS CORP.
NOTES TO
THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited) (Continued)
(All
amounts in footnotes in thousands of US Dollars, except for
share and per share data)
Fair
Value of Financial Instruments
The following table presents the carrying amounts and estimated
fair values of the Companys financial instruments at
June 30, 2009 and December 31, 2008. The fair value of
a financial instrument is the amount that would be received to
sell an asset or paid to transfer a liability in an orderly
transaction between market participants at the measurement date.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
June 30, 2009
|
|
|
December 31, 2008
|
|
|
|
Carrying Value
|
|
|
Fair Value
|
|
|
Carrying Value
|
|
|
Fair Value
|
|
|
Financial assets:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash and cash equivalents
|
|
|
47,022
|
|
|
|
47,022
|
|
|
|
27,543
|
|
|
|
27,543
|
|
Advances (trade) to related party
|
|
|
|
|
|
|
|
|
|
|
577
|
|
|
|
577
|
|
Financial liabilities:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Long-term debt
|
|
|
197,345
|
|
|
|
197,345
|
|
|
|
212,345
|
|
|
|
212,345
|
|
Convertible promissory note due to shareholders
|
|
|
28,710
|
|
|
|
28,786
|
|
|
|
29,043
|
|
|
|
28,453
|
|
Trade accounts and other payables
|
|
|
465
|
|
|
|
465
|
|
|
|
674
|
|
|
|
674
|
|
Due to related party
|
|
|
218
|
|
|
|
218
|
|
|
|
|
|
|
|
|
|
Due to underwriters
|
|
|
133
|
|
|
|
133
|
|
|
|
419
|
|
|
|
419
|
|
Accrued expenses
|
|
|
1,864
|
|
|
|
1,864
|
|
|
|
541
|
|
|
|
541
|
|
Accrued interest
|
|
|
112
|
|
|
|
112
|
|
|
|
166
|
|
|
|
166
|
|
Accrued charges on convertible promissory note due to
shareholders
|
|
|
983
|
|
|
|
983
|
|
|
|
420
|
|
|
|
420
|
|
The carrying amounts shown in the table are included in the
condensed consolidated balance sheets under the indicated
captions.
The fair values of the financial instruments shown in the above
table as of June 30, 2009 and December 31, 2008
represent managements best estimate of the amounts that
would be received to sell those assets or that would be paid to
transfer those liabilities in an orderly transaction between
market participants at that date. Those fair value measurements
maximize the use of observable inputs. However, in situations
where there is little, if any, market activity for the asset or
liability at the measurement date, the fair value measurement
reflects the Companys own judgments about the assumptions
that market participants would use in pricing the asset or
liability. Those judgments are developed by the Company based on
the best information available in the circumstances.
The following methods and assumptions were used to estimate the
fair value of each class of financial instruments:
a. Cash and cash equivalents, advances (trade) to related
party, trade accounts and other payables, due to underwriters,
accrued expenses, and accrued interest: The carrying amounts
approximate fair value because of the short maturity of these
instruments.
b. Convertible promissory note: The fair value is
determined by discounting the face value and applicable coupons
which take into account the interest rate curve of the currency
of the convertible note, the credit spread of the Company, the
stock volatility, as well as any dividends paid by the Company.
c. Long-term debt: The carrying value approximates the fair
market value as the long-term debt bears interest at floating
interest rates.
F-62
SEANERGY
MARITIME HOLDINGS CORP.
NOTES TO
THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited) (Continued)
(All
amounts in footnotes in thousands of US Dollars, except for
share and per share data)
The Company adopted FASB Statement No. 157 on
January 1, 2008, for fair value measurements of financial
assets and financial liabilities and for fair value measurements
of non-financial items that are recognized or disclosed at fair
value in the financial statements on a recurring basis. This
statement establishes a fair value hierarchy that prioritizes
the inputs to valuation techniques used to measure fair value.
The hierarchy gives the highest priority to unadjusted quoted
prices in active markets for identical assets or liabilities
(Level 1 measurements) and the lowest priority to
measurement involving significant unobservable inputs
(Level 3 measurement) The three levels of the fair value
hierarchy are as follows:
Level 1: Quoted market prices in active
markets for identical assets or liabilities;
Level 2: Observable market based inputs
or unobservable inputs that are corroborated by market data;
Level 3: Unobservable inputs that are not
corroborated by market data.
As of June 30, 2009, no fair value measurements of assets
or liabilities were recognized in the condensed consolidated
financial statements.
Statement 159 provides entities with an option to measure many
financial instruments and certain other items at fair value.
Under Statement 159, unrealized gains and losses on items for
which the fair value option has been elected are reported in
earnings at each reporting period. Upon adoption of Statement
159 on January 1, 2008, the Company has not elected to
record its bank loans or fixed rate convertible promissory
note related party at fair value.
Accrued expenses are comprised of the following amounts:
|
|
|
|
|
|
|
|
|
|
|
Six Months Ended June 30,
|
|
|
|
2009
|
|
|
2008
|
|
|
Accrued dry-docking costs
|
|
|
1,451
|
|
|
|
|
|
Accrued audit and financial advisory costs
|
|
|
193
|
|
|
|
460
|
|
Accrued voyage expenses
|
|
|
171
|
|
|
|
13
|
|
Accrued insurance and related liabilities
|
|
|
49
|
|
|
|
18
|
|
Other accrued liabilities
|
|
|
|
|
|
|
50
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
|
1,864
|
|
|
|
541
|
|
|
|
|
|
|
|
|
|
|
We have evaluated subsequent events, if any, that have occurred
after the balance sheet date but before the issuance of these
financial statements and performed, where it was necessary, the
appropriate disclosures for those events. The date of the
evaluation of subsequent events is the same as the date the
financial statements are issued, September 17, 2009.
(a) Agreement to acquire Bulk Energy
Transport: On July 14, 2009 the Company
entered into an agreement with Constellation Bulk Energy
Holdings, Inc.(Seller) to acquire Sellers 50%
ownership interest in Bulk energy Transport (Holdings) Limited
for a nominal cash consideration. On August 13, 2009 the
F-63
SEANERGY
MARITIME HOLDINGS CORP.
NOTES TO
THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited) (Continued)
(All
amounts in footnotes in thousands of US Dollars, except for
share and per share data)
Company closed on its previously announced agreement to purchase
a 50% ownership interest in Bulk Energy Transport (Holdings)
Limited (BET) from Constellation Bulk Energy
Holdings, Inc. BETs other equity owner is Mineral
Transport Holdings, Inc. (Mineral Transport), which
is an affiliate of members of the Restis family, one of the
Companys major shareholders. The purchase price for the
shares was $1.00. We have preliminarily estimated that
BETs fair value of total and net assets at closing, is
$167,500 and $15,600, respectively. Under the BET loan
agreement, the BET subsidiaries are subject to operating and
financial covenants that may affect BETs business. The BET
subsidiaries must assure the lenders that the aggregate market
value of the BET vessels is not less than 125% of the
outstanding amount of the BET loan. If the market value of the
vessels is less than this amount, the BET subsidiaries must
prepay an amount that will result in the market value of the
vessels meeting this requirement or offer additional security to
the lenders, and a portion of the debt may be required to be
classified as current.
(b) New time charter contracts: On
July 17, 2009, the Company entered into time charter
contracts with MUR Shipping BV, a first class charterer, for its
two handy dry bulk carriers, the M/V African Oryx and the M/V
African Zebra, for a period of minimum twenty two (22) to
twenty five (25) months at gross floor charter rates of
$7,000 and $7,500 respectively per day and a 50% adjusted profit
share to be distributed equally between owners and charterers
calculated on average spot Time Charter Routes derived from the
Baltic Supramax Index. The charters commenced on July 17,
2009 and July 20, 2009 respectively.
(c) Extension of time charter
contracts: The Company has extended its time
charter contracts with the current charterer SAMC, in direct
continuation for its two Panamax dry bulk carriers, the M/V
Bremen Max and the M/V Hamburg Max, for a period of about eleven
(11) to thirteen (13) months. The M/V Bremen Max
charter commenced on July 27, 2009 and the M/V Hamburg Max
charter will commence on August 12, 2009. This employment
is anticipated to generate $12.7 million of gross revenues
for the scheduled period of the charters.
(d) Amendment and conversion of the convertible
promissory note issued in its business
combination: On August 19, 2009 the Company
amended the convertible promissory note in the principal amount
of $28.250.000 due on August 28, 2010, which was issued as
partial consideration for the vessels it acquired in its
business combination in August 2008, to reduce the conversion
price. In connection with, and as a condition to, the reduction
in the conversion price, holders of the note have converted the
principal amount of the note and all accrued but unpaid fees and
interest due thereunder into Seanergy common stock.
(e) Waiver granted: On September 9,
2009, the Company received a waiver from the Marfin Bank in
connection with the $165,000 term facility and $54,845 revolving
facility utilized, obtained in for the acquisition of the
vessels it acquired in its business combination on August 2008 .
The material terms of the covenant waiver and amendment
agreement with Marfin Bank are as follows: (1) the
Applicable Margin throughout each Waiver Period shall be
increased to: (i) Two point seventy five per cent (2,75%)
per annum in respect of Each Term Advance, and (ii) Three
point twenty five per cent (3.25%) per annum in respect of each
Revolving Advance, for each relevant interest period;
(2) The Borrowers shall prepay the following Repayment
installments in the amounts and on the dates described below:
(i) on 25 September 2009, the Borrowers shall pay the
fifth (5th) Repayment Installment in the amount of Five million
Two hundred and Fifty thousand Dollars ($5,250,000); and
(ii) on 4 January 2010, the Borrowers shall pay the
sixth (6th) and seventh (7th) Repayment Installments, in the
total amount of Ten million five hundred thousand Dollars
($10,500,000). The next eighth (8th) Repayment Installment will
be repaid in September 2010 when such Repayment Installment is
due and payable. (3) On 31 December 2009 and on each
date falling at semi-annual intervals thereafter throughout any
Waiver Period, if the Borrowers have a surplus of funds over the
Borrowers requirements for operation and maintenance of
the Ships during the relevant period, an amount equal to any
such Surplus Earnings shall be transferred from the relevant
Earnings Account to the Seanergy Holdings Account and remain
credited therein. The waiver will apply for a period up to
July 1, 2010.
F-64
Report of
Independent Registered Public Accounting Firm
The Board of Directors and Shareholders
Goldie Navigation Ltd., Pavey Services Ltd., Shoreline Universal
Ltd., Valdis Marine Corp., Kalistos Maritime S.A. and Kalithea
Maritime S.A.:
We have audited the accompanying combined balance sheets of
Goldie Navigation Ltd., Pavey Services Ltd., Shoreline Universal
Ltd., Valdis Marine Corp., Kalistos Maritime S.A. and Kalithea
Maritime S.A. (together the Group) as of
December 31, 2007 and 2006, and the related combined
statements of income, changes in equity and cash flows for each
of the years in the three-year period ended December 31,
2007. These combined financial statements are the responsibility
of the Groups management. Our responsibility is to express
an opinion on these combined 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. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in
the financial statements. An audit also includes 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 combined financial statements referred to
above present fairly, in all material respects, the financial
position of the Group as of December 31, 2007 and 2006, and
the results of its operations and its cash flows for each of the
years in the three-year period ended December 31, 2007, in
conformity with International Financial Reporting Standards, as
issued by the International Accounting Standards Board.
As discussed in Note 1 of the combined financial
statements, the combined financial statements present the
aggregated financial information of the six vessel-owning
companies and an allocation of long-term debt. The combined
financial statements may not necessarily be indicative of the
Groups financial position, results of operations, or cash
flows had the Group operated as a separate entity during the
period presented or for future periods.
/s/ KPMG
Certified Auditors AE
Athens, Greece
June 16, 2008, except as to Note 20(i), which is as of
July 25, 2008
F-65
Goldie
Navigation Ltd., Pavey Services Ltd., Shoreline Universal
Ltd.,
Valdis Marine Corp., Kalistos Maritime S.A. and Kalithea
Maritime S.A.
as of December 31, 2007 and 2006
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Note
|
|
|
2007
|
|
|
2006
|
|
|
|
|
|
|
(In thousands of
|
|
|
|
|
|
|
US dollars)
|
|
|
ASSETS
|
Vessels, net
|
|
|
7
|
|
|
|
244,801
|
|
|
|
114,487
|
|
Due from related parties
|
|
|
19
|
|
|
|
|
|
|
|
480
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total non-current assets
|
|
|
|
|
|
|
244,801
|
|
|
|
114,967
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Inventories
|
|
|
8
|
|
|
|
223
|
|
|
|
212
|
|
Trade accounts receivable and other assets
|
|
|
9
|
|
|
|
928
|
|
|
|
343
|
|
Due from related parties
|
|
|
19
|
|
|
|
5,833
|
|
|
|
3,841
|
|
Cash and cash equivalents
|
|
|
10
|
|
|
|
21
|
|
|
|
1,446
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total current assets
|
|
|
|
|
|
|
7,005
|
|
|
|
5,842
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total assets
|
|
|
|
|
|
|
251,806
|
|
|
|
120,809
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Equity
|
|
|
|
|
|
|
|
|
|
|
|
|
Capital contributions
|
|
|
11
|
|
|
|
40,865
|
|
|
|
36,960
|
|
Revaluation reserve
|
|
|
7
|
|
|
|
154,384
|
|
|
|
25,119
|
|
Retained earnings
|
|
|
|
|
|
|
4,408
|
|
|
|
6,980
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total equity
|
|
|
|
|
|
|
199,657
|
|
|
|
69,059
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
LIABILITIES
|
Long-term debt, net
|
|
|
12
|
|
|
|
38,580
|
|
|
|
41,354
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total non-current liabilities
|
|
|
|
|
|
|
38,580
|
|
|
|
41,354
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Current portion of long-term debt, net
|
|
|
12
|
|
|
|
9,750
|
|
|
|
8,420
|
|
Trade accounts payable
|
|
|
13
|
|
|
|
1,180
|
|
|
|
604
|
|
Accrued expenses
|
|
|
14
|
|
|
|
1,098
|
|
|
|
352
|
|
Deferred revenue
|
|
|
|
|
|
|
781
|
|
|
|
651
|
|
Due to related parties
|
|
|
19
|
|
|
|
720
|
|
|
|
353
|
|
Accrued interest expense
|
|
|
|
|
|
|
40
|
|
|
|
16
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total current liabilities
|
|
|
|
|
|
|
13,569
|
|
|
|
10,396
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total equity and liabilities
|
|
|
|
|
|
|
251,806
|
|
|
|
120,809
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
The notes on pages F-70 to F-90 are an integral part of these
combined financial statements.
F-66
Goldie
Navigation Ltd., Pavey Services Ltd., Shoreline Universal
Ltd.,
Valdis Marine Corp., Kalistos Maritime S.A. and Kalithea
Maritime S.A.
Combined
Statements of Income
For the three years ended December 31, 2007, 2006 and
2005
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Note
|
|
|
2007
|
|
|
2006
|
|
|
2005
|
|
|
|
|
|
|
(In thousands of US dollars)
|
|
|
Revenue from vessels
|
|
|
|
|
|
|
32,297
|
|
|
|
15,607
|
|
|
|
17,016
|
|
Revenue from vessels related party
|
|
|
19
|
|
|
|
3,420
|
|
|
|
10,740
|
|
|
|
10,140
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
35,717
|
|
|
|
26,347
|
|
|
|
27,156
|
|
Direct voyage expenses
|
|
|
3
|
|
|
|
(82
|
)
|
|
|
(64
|
)
|
|
|
(139
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
35,635
|
|
|
|
26,283
|
|
|
|
27,017
|
|
Expenses:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Crew costs
|
|
|
4
|
|
|
|
(2,803
|
)
|
|
|
(2,777
|
)
|
|
|
(1,976
|
)
|
Management fees related party
|
|
|
19
|
|
|
|
(782
|
)
|
|
|
(752
|
)
|
|
|
(644
|
)
|
Other operating expenses
|
|
|
5
|
|
|
|
(3,228
|
)
|
|
|
(2,842
|
)
|
|
|
(3,085
|
)
|
Depreciation
|
|
|
7
|
|
|
|
(12,625
|
)
|
|
|
(6,567
|
)
|
|
|
(6,970
|
)
|
Impairment reversal/(loss)
|
|
|
7
|
|
|
|
|
|
|
|
19,311
|
|
|
|
(19,311
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Results from operating activities
|
|
|
|
|
|
|
16,197
|
|
|
|
32,656
|
|
|
|
(4,969
|
)
|
Finance income
|
|
|
6
|
|
|
|
143
|
|
|
|
132
|
|
|
|
24
|
|
Finance expense
|
|
|
6
|
|
|
|
(2,980
|
)
|
|
|
(3,311
|
)
|
|
|
(2,392
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net finance cost
|
|
|
|
|
|
|
(2,837
|
)
|
|
|
(3,179
|
)
|
|
|
(2,368
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net profit/(loss) for the year
|
|
|
|
|
|
|
13,360
|
|
|
|
29,477
|
|
|
|
(7,337
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
The notes on pages F-70 to F-90 are an integral part of these
combined financial statements
F-67
Goldie
Navigation Ltd., Pavey Services Ltd., Shoreline Universal
Ltd.,
Valdis Marine Corp., Kalistos Maritime S.A. and Kalithea
Maritime S.A.
Combined
Statements of Changes in Equity
For the three years ended December 31, 2007, 2006 and
2005
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(Accumulated
|
|
|
|
|
|
|
|
|
|
|
|
|
Deficit)/
|
|
|
|
|
|
|
Capital
|
|
|
Revaluation
|
|
|
Retained
|
|
|
|
|
|
|
Contributions
|
|
|
Reserve
|
|
|
Earnings
|
|
|
Total
|
|
|
|
(In thousands of US dollars)
|
|
|
Balance at January 1, 2005
|
|
|
12,817
|
|
|
|
|
|
|
|
(3
|
)
|
|
|
12,814
|
|
Net (loss) for the year
|
|
|
|
|
|
|
|
|
|
|
(7,337
|
)
|
|
|
(7,337
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total recognized income and expense
|
|
|
|
|
|
|
|
|
|
|
(7,337
|
)
|
|
|
(7,337
|
)
|
Capital contributions
|
|
|
15,980
|
|
|
|
|
|
|
|
|
|
|
|
15,980
|
|
Dividends paid
|
|
|
|
|
|
|
|
|
|
|
(3,319
|
)
|
|
|
(3,319
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance at December 31, 2005
|
|
|
28,797
|
|
|
|
|
|
|
|
(10,659
|
)
|
|
|
18,138
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net profit for the year
|
|
|
|
|
|
|
|
|
|
|
29,477
|
|
|
|
29,477
|
|
Revaluation of vessels
|
|
|
|
|
|
|
25,119
|
|
|
|
|
|
|
|
25,119
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total recognized income and expense
|
|
|
|
|
|
|
25,119
|
|
|
|
29,477
|
|
|
|
54,596
|
|
Capital contributions
|
|
|
8,163
|
|
|
|
|
|
|
|
|
|
|
|
8,163
|
|
Dividends paid
|
|
|
|
|
|
|
|
|
|
|
(11,838
|
)
|
|
|
(11,838
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance at December 31, 2006
|
|
|
36,960
|
|
|
|
25,119
|
|
|
|
6,980
|
|
|
|
69,059
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net profit for the year
|
|
|
|
|
|
|
|
|
|
|
13,360
|
|
|
|
13,360
|
|
Revaluation of vessels
|
|
|
|
|
|
|
129,265
|
|
|
|
|
|
|
|
129,265
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total recognized income and expense
|
|
|
|
|
|
|
129,265
|
|
|
|
13,360
|
|
|
|
142,625
|
|
Capital contributions
|
|
|
3,905
|
|
|
|
|
|
|
|
|
|
|
|
3,905
|
|
Dividends paid
|
|
|
|
|
|
|
|
|
|
|
(15,932
|
)
|
|
|
(15,932
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance at December 31, 2007
|
|
|
40,865
|
|
|
|
154,384
|
|
|
|
4,408
|
|
|
|
199,657
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
The notes on pages F-70 to F-90 are an integral part of these
combined financial statements
F-68
Goldie
Navigation Ltd., Pavey Services Ltd., Shoreline Universal
Ltd.,
Valdis Marine Corp., Kalistos Maritime S.A. and Kalithea
Maritime S.A.
Combined
Statements of Cash Flows
For the three years ended December 31, 2007, 2006 and
2005
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2007
|
|
|
2006
|
|
|
2005
|
|
|
|
(In thousands of US dollars)
|
|
|
Cash flows from operating activities
|
|
|
|
|
|
|
|
|
|
|
|
|
Net profit/(loss)
|
|
|
13,360
|
|
|
|
29,477
|
|
|
|
(7,337
|
)
|
Adjustments for:
|
|
|
|
|
|
|
|
|
|
|
|
|
Depreciation
|
|
|
12,625
|
|
|
|
6,567
|
|
|
|
6,970
|
|
Impairment loss on trade accounts receivable and due from
related parties
|
|
|
|
|
|
|
870
|
|
|
|
|
|
Impairment (reversal) loss on vessels
|
|
|
|
|
|
|
(19,311
|
)
|
|
|
19,311
|
|
Interest expense
|
|
|
2,914
|
|
|
|
3,272
|
|
|
|
2,371
|
|
Interest income
|
|
|
(143
|
)
|
|
|
(132
|
)
|
|
|
(13
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
28,756
|
|
|
|
20,743
|
|
|
|
21,302
|
|
Due from related parties
|
|
|
(1,512
|
)
|
|
|
1,589
|
|
|
|
6,726
|
|
Inventories
|
|
|
(11
|
)
|
|
|
(56
|
)
|
|
|
(156
|
)
|
Trade accounts receivable and other assets
|
|
|
(585
|
)
|
|
|
(216
|
)
|
|
|
(768
|
)
|
Trade accounts payable
|
|
|
576
|
|
|
|
96
|
|
|
|
488
|
|
Accrued expenses
|
|
|
746
|
|
|
|
178
|
|
|
|
174
|
|
Deferred revenue
|
|
|
130
|
|
|
|
(260
|
)
|
|
|
911
|
|
Due to related parties
|
|
|
367
|
|
|
|
352
|
|
|
|
(144
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
28,467
|
|
|
|
22,426
|
|
|
|
28,533
|
|
Interest paid
|
|
|
(2,890
|
)
|
|
|
(3,265
|
)
|
|
|
(2,364
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net cash from operating activities
|
|
|
25,577
|
|
|
|
19,161
|
|
|
|
26,169
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash flows from investing activities
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest received
|
|
|
143
|
|
|
|
132
|
|
|
|
13
|
|
Additions for vessels
|
|
|
(12,685
|
)
|
|
|
(5,038
|
)
|
|
|
(86,706
|
)
|
Dry-docking costs
|
|
|
(989
|
)
|
|
|
(1,568
|
)
|
|
|
(18
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net cash used in investing activities
|
|
|
(13,531
|
)
|
|
|
(6,474
|
)
|
|
|
(86,711
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash flows from financing activities
|
|
|
|
|
|
|
|
|
|
|
|
|
Dividends paid
|
|
|
(15,932
|
)
|
|
|
(11,838
|
)
|
|
|
(3,319
|
)
|
Capital contributions
|
|
|
3,905
|
|
|
|
8,163
|
|
|
|
15,980
|
|
Proceeds from long-term debt
|
|
|
8,400
|
|
|
|
|
|
|
|
55,070
|
|
Repayment of long-term debt
|
|
|
(9,844
|
)
|
|
|
(7,573
|
)
|
|
|
(7,182
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net cash (used in) provided from financing activities
|
|
|
(13,471
|
)
|
|
|
(11,248
|
)
|
|
|
60,549
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net (decrease)/increase in cash and cash equivalents
|
|
|
(1,425
|
)
|
|
|
1,439
|
|
|
|
7
|
|
Cash and cash equivalents at January 1
|
|
|
1,446
|
|
|
|
7
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash and cash equivalents at December 31
|
|
|
21
|
|
|
|
1,446
|
|
|
|
7
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
The notes on pages F-70 to F-90 are an integral part of these
combined financial statements
F-69
Goldie
Navigation Ltd., Pavey Services Ltd., Shoreline Universal
Ltd.,
Valdis Marine Corp., Kalistos Maritime S.A. and Kalithea
Maritime S.A.
Notes to
Combined Financial Statements
December 31, 2007 and 2006
(In thousands of US Dollars, except for share and per share
data, unless otherwise stated)
|
|
1.
|
Business
and basis of presentation
|
On May 20, 2008, companies affiliated with members of the
Restis family collectively acquired a 9.62% interest in Seanergy
Maritime Corp. (Seanergy) for $25 million in
cash from existing shareholders and officers of Seanergy (the
Founders) via the acquisition of
2,750,000 shares (the Shares) of the common
stock (the Common Stock) of Seanergy and 8,008,334
warrants to purchase shares of Seanergys Common Stock (the
Warrants and collectively with the Shares, the
Securities). The Common Stock is subject to an
Escrow Agreement dated September 24, 2007 entered into by
the Founders pursuant to which the Shares remain in escrow with
an escrow agent until the date that is 12 months after the
consummation of a business combination such as that discussed in
Note 20(d) (the Business Combination). The
Warrants are subject to a
Lock-Up
Agreement dated September 24, 2007 (the
Lock-Up)
also entered into by the Founders pursuant to which the Warrants
would not be transferred until the consummation of the Business
Combination. On June 5, 2008 and June 10, 2008, a
further 413,000 shares and 200,000 shares of common
stock, respectively, were acquired by companies affiliated with
members of the Restis family on the open market, thereby
bringing their total interest in Seanergy to 11.76% (see
Note 20(i)). However the voting rights associated with the
Securities are governed by a voting agreement. Also on
May 20, 2008 Seanergy, a Marshall Islands Corporation and
its subsidiary Seanergy Merger Corp., a Marshall Islands
Corporation (Buyer) entered into a Master Agreement
pursuant to which the Buyer has agreed to purchase for an
aggregate purchase price of: (i) $367,030 in cash;
(ii) $28,250 in the form of a promissory note convertible
to 2,260,000 shares of Buyers common stock at $12.50
per share; and (iii) up to 4,308,075 shares of
Buyers common stock if Buyer achieves certain earnings
before interest, tax and depreciation thresholds, six dry bulk
vessels from companies associated with members of the Restis
family, which include four second hand vessels and two new
buildings, one of which was delivered on May 20, 2008 (see
Note 20(c)). In connection with the foregoing, six
Memoranda of Agreement were entered into with the vessel-owning
companies indicated below.
The combined financial statements include the assets,
liabilities and results of operations of the vessel-owning
companies which include the second-hand dry bulk carriers and
the two newbuildings (formerly Hull KA 215 and Hull KA 216)
(together the Group). The vessel-owning companies
which include the two newbuildings reflect no trading activities
for all periods presented.
The combined financial statements include the following
vessel-owning companies:
|
|
|
|
|
|
|
|
|
Country of
|
|
|
|
Vessel Name or Hull
|
Vessel-Owning Company
|
|
Incorporation
|
|
Date of Incorporation
|
|
Number
|
|
Goldie Navigation Ltd.
|
|
Marshall Islands
|
|
November 23, 2004
|
|
African Zebra
|
Pavey Services Ltd.
|
|
British Virgin Islands
|
|
October 29, 2004
|
|
Bremen Max
|
Shoreline Universal Ltd.
|
|
British Virgin Islands
|
|
November 25, 2004
|
|
Hamburg Max
|
Valdis Marine Corp.
|
|
Marshall Islands
|
|
November 3, 2004
|
|
African Oryx
|
Kalistos Maritime S.A.
|
|
Marshall Islands
|
|
February 16, 2004
|
|
KA 215
|
Kalithea Maritime S.A.
|
|
Marshall Islands
|
|
February 16, 2004
|
|
KA 216
|
The vessel-owning companies with the second hand dry bulk
vessels above are subsidiaries of Lincoln Finance Corp.
(Lincoln), which in turn is a wholly owned subsidiary of
Nouvelle Enterprises (Nouvelle). The vessel-owning companies
with the new buildings (Hull numbers KA 215 and KA 216) are
indirect wholly owned subsidiaries of First Financial
Corporation (First). First is the controlling shareholder of the
six vessel-owning companies. Lincoln, Nouvelle and First are
incorporated under the laws of the Republic of the
F-70
Goldie
Navigation Ltd., Pavey Services Ltd., Shoreline Universal
Ltd.,
Valdis Marine Corp., Kalistos Maritime S.A. and Kalithea
Maritime S.A.
Notes to Combined Financial
Statements (Continued)
December 31, 2007 and 2006
Marshall Islands with registered offices at Trust Company
Complex, Ajeltake Island, P.O. Box 1405, Majuro,
Marshall Islands and are owned by members of the Restis family.
The technical management of the Group is performed by
Enterprises Shipping & Trading Company (EST), a
corporation situated in Liberia, beneficially owned by certain
members of the Restis family. EST provides the Company and other
related vessel-owning companies with a wide range of shipping
services that include technical support and maintenance,
insurance advice, financial and accounting services for a fixed
fee (refer to Note 19).
As of December 31, 2007 and 2006, the Group does not employ
any executive officers or personnel other than crew aboard the
vessels. The Directors of the six vessel-owning companies do not
receive remuneration for the services they provide.
|
|
(b)
|
Basis
of presentation
|
The combined financial statements have been prepared in
accordance with International Financial Reporting Standards
(IFRS), as issued by the International Accounting Standards
Board (IASB).
These combined financial statements reflect all of the assets,
liabilities, revenues and expenses and cash flows of the Group
for all periods presented. These combined financial statements
exclude the assets, liabilities, revenues, expenses and cash
flows that do not belong to the Group. The combined financial
statements may not necessarily be indicative of the Groups
financial position, results of operations or cash flows had the
Group operated as a separate entity during the periods presented
or for future periods.
The companies of the Group are included in the consolidated
financial statements of Lincoln and First, however these
companies are independent legal entities with separate
accounting records. The companies of this Group have applied the
same accounting policies as when they were included in the
consolidated financial statements of Lincoln and First,
respectively. Therefore, in these combined financial statements,
all expenses, revenues, assets and liabilities refer
specifically to the Group had it operated on a standalone basis
and no allocation methodology for expenses or assets and
liabilities was required, except for the long-term debt (refer
to Note 12). Management believes the assumptions underlying
the combined financial statements are reasonable. For the
purposes of the transaction the balance sheet, statement of
income, statement of changes in equity and statement of cash
flows have been presented on a combined basis for a three-year
period.
|
|
(c)
|
Statement
of compliance
|
The combined financial statements were approved by the Directors
of the Group on June 12, 2008.
|
|
(d)
|
Basis
of measurement and functional presentation
currency
|
These combined financial statements are prepared on the
historical cost basis, except for the vessels which are measured
at fair value. The combined financial statements are presented
in US dollars ($), which is the functional currency of the
vessel-owning companies in the Group. All financial information
presented in US dollars has been rounded to the nearest thousand.
|
|
(e)
|
Use of
estimates and judgments
|
The preparation of these combined financial statements in
accordance with IFRS, requires management to make judgments,
estimates and assumptions that affect the application of
accounting policies and the reported amounts of assets,
liabilities, income and expenses. Actual results may differ from
these estimates.
F-71
Goldie
Navigation Ltd., Pavey Services Ltd., Shoreline Universal
Ltd.,
Valdis Marine Corp., Kalistos Maritime S.A. and Kalithea
Maritime S.A.
Notes to Combined Financial
Statements (Continued)
December 31, 2007 and 2006
Estimates and underlying assumptions are reviewed on an ongoing
basis. Revisions to accounting estimates are recognized in the
period in which the estimate is revised and in any future
periods affected. The estimates and assumptions that have the
most significant effect on the amounts recognized in the
combined financial statements, are estimations in relation to
the revaluation of vessels, useful lives of vessels, impairment
losses on vessels and on trade accounts receivable.
|
|
2.
|
Significant
accounting policies
|
A summary of the significant accounting policies used in the
presentation of the accompanying combined unaudited financial
statements is presented below:
|
|
(a)
|
Principles
of combination
|
The combined financial statements include the combined assets,
liabilities and results of operations for the six vessel-owning
companies (see Note 1).
Intercompany balances, transactions and unrealized gains and
losses on transactions between the companies included in these
combined financial statements have been eliminated in full.
All intercompany balances with entities outside the Group but
which were originally included in the consolidated financial
statements of Lincoln and First have not been eliminated and are
presented as balances and transactions with related parties.
Transactions in foreign currencies are translated to the
functional currency using the exchange rates at the date of the
transactions. Monetary assets and liabilities denominated in
foreign currencies at the reporting date are retranslated to the
functional currency at the foreign exchange rate at that date.
The foreign currency gain or loss on monetary items is the
difference between amortized cost in the functional currency at
the beginning of the period, adjusted for effective interest and
payments during the period and the amortized cost in foreign
currency translated at the exchange rate at the end of the
period. Non-monetary assets and liabilities denominated in
foreign currencies that are measured at fair value are
retranslated to the functional currency at the exchange rate at
the date the fair value was determined. Foreign currency
differences arising on translation are recognized in the
combined statement of income.
Vessels are originally recorded at cost less accumulated
depreciation and accumulated impairment losses.
Vessel cost includes the contract price of the vessel and
expenditure that is directly attributable to the acquisition of
the vessel (initial repairs, delivery expenses and other
expenditure to prepare the vessel for its initial voyage) and
borrowing costs incurred during the construction period.
When parts of a vessel have different useful lives, they are
accounted for as separate items (major components) of the
vessels (see Note 2(d)).
Subsequent expenditures for major improvements are also
recognized in the carrying amount if it is probable that the
future economic benefits embodied within the part will flow to
the Group and its cost can be measured reliably. The carrying
amount of the replaced part is derecognized. Routine maintenance
and repairs are recognized in the combined statement of income
as incurred.
F-72
Goldie
Navigation Ltd., Pavey Services Ltd., Shoreline Universal
Ltd.,
Valdis Marine Corp., Kalistos Maritime S.A. and Kalithea
Maritime S.A.
Notes to Combined Financial
Statements (Continued)
December 31, 2007 and 2006
Vessels are subsequently measured at fair value on an annual
basis. Increases in the individual vessels carrying amount
as a result of the revaluation is recorded in recognized income
and expense and accumulated in equity under the caption
revaluation surplus. The increase is recorded in the combined
statements of income to the extent that it reverses a
revaluation decrease of the related asset. Decreases in the
individual vessels carrying amount is recorded in the
combined statements of income as a separate line item. However,
the decrease is recorded in recognized income and expense to the
extent of any credit balance existing in the revaluation surplus
in respect of the related asset. The decrease recorded in
recognized income and expense reduces the amount accumulated in
equity under the revaluation surplus. The fair value of a vessel
is determined through market value appraisal, on the basis of a
sale for prompt, charter-free delivery, for cash, on normal
commercial terms, between willing sellers and willing buyers of
a vessel with similar characteristics.
Depreciation is recognized in the combined statement of income
on a straight line basis over the individual vessels
remaining estimated useful life, after considering the estimated
residual value. Each vessels residual value is equal to
the product of its light-weight tonnage and estimated scrap rate.
Management estimates the useful life of the new vessels to be
25 years from the date of initial delivery from the
shipyard. Second hand vessels are depreciated from the date of
their acquisition over their remaining estimated useful life.
Depreciation, useful lives and residual values are reviewed at
each reporting date.
A vessel is derecognized upon disposal or when no future
economic benefits are expected from its use. Gains or losses on
disposal are determined by comparing the proceeds from disposal
with the carrying amount of the vessel and are recognized in the
combined statement of income.
From time to time the Groups vessels are required to be
dry-docked for inspection and re-licensing at which time major
repairs and maintenance that cannot be performed while the
vessels are in operation are generally performed. The Group
defers the costs associated with dry-docking as they are
incurred by capitalizing them together with the cost of the
vessel. The Group then depreciates these costs on a
straight-line basis over the year until the next scheduled
dry-docking, generally 2.5 years. In the cases whereby the
dry-docking takes place earlier than in 2.5 years, the
carrying amount of the previous dry-docking is derecognized. In
the event of a vessel sale, the respective carrying values of
dry-docking costs are written-off at the time of sale to the
combined statement of income.
At the date of acquisition of a second-hand vessel, management
estimates the component of the cost that corresponds to the
economic benefit to be derived from capitalized dry-docking
cost, until the first scheduled dry-docking of the vessel under
the ownership of the Group, and this component is depreciated on
a straight-line basis over the remaining period to the estimated
dry-docking date.
|
|
(e)
|
Financial
instruments
|
Non-derivative financial instruments comprise trade and other
receivables, cash and cash equivalents, long term debt and trade
accounts payable. Non-derivative financial instruments are
recognized initially at fair value plus, for instruments not at
fair value through profit or loss, any directly attributable
transaction costs. Subsequent to initial recognition
non-derivative financial instruments are measured as explained
in notes (f) to (j) below.
The Group does not have any derivative financial instruments.
F-73
Goldie
Navigation Ltd., Pavey Services Ltd., Shoreline Universal
Ltd.,
Valdis Marine Corp., Kalistos Maritime S.A. and Kalithea
Maritime S.A.
Notes to Combined Financial
Statements (Continued)
December 31, 2007 and 2006
|
|
(f)
|
Trade
accounts receivable
|
Trade accounts receivable are stated at their amortized cost
using the effective interest method, less any impairment losses.
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
Groups vessels suffer insured damages. Recoveries from
insurance companies for the claims are provided if the amounts
are virtually certain to be received. Claims are submitted to
the insurance company, which may increase or decrease the
claims amount. Such adjustments are recorded in the year
they become virtually certain and were not material to the
Groups combined financial position or results of operation
in 2007, 2006 and 2005.
|
|
(h)
|
Cash
and cash equivalents
|
Cash and cash equivalents comprise cash balances, call deposits
and certificates of deposit (term deposits) with original
maturity of three months or less.
|
|
(i)
|
Trade
and other amounts payable
|
Trade and other amounts payable are stated at amortized cost.
Long-term debt is initially recognized at the fair value of the
consideration received and is recorded net of issue costs
directly attributable to the borrowing. After initial
recognition, issue costs are amortized using the effective
interest rate method and are recorded as finance expense in the
combined statement of income.
Inventories (lubricants) are measured at the lower of cost and
net realizable value. The cost of inventories is based on the
first-in,
first-out principle.
|
|
(l)
|
Impairment
of financial assets
|
A financial asset is assessed at each reporting date to
determine whether there is any objective evidence that it is
impaired.
A financial asset is considered to be impaired if objective
evidence indicates that one or more events have had a negative
effect on the estimated future cash flows of that asset. An
impairment loss in respect of a financial asset measured at
amortized cost is calculated as the difference between its
carrying amount, and the present value of the estimated future
cash flows discounted at the original effective interest rate.
Individually significant financial assets are tested for
impairment on an individual basis. The remaining financial
assets are assessed collectively in groups that share similar
credit risk characteristics.
All impairment losses are recognized in the combined statement
of income.
An impairment loss is reversed if the reversal can be related
objectively to an event occurring after the impairment loss was
recognized. For financial assets measured at amortized cost, the
reversal is recognized in the combined statement of income.
F-74
Goldie
Navigation Ltd., Pavey Services Ltd., Shoreline Universal
Ltd.,
Valdis Marine Corp., Kalistos Maritime S.A. and Kalithea
Maritime S.A.
Notes to Combined Financial
Statements (Continued)
December 31, 2007 and 2006
|
|
(m)
|
Impairment
of non-financial assets
|
The carrying amounts of the Groups non-financial assets,
primarily vessels, other than inventories are reviewed at each
reporting date to determine whether there is any indication of
impairment. If any such indication exists, then the assets
recoverable amount is estimated. Vessels are individually tested
for impairment (see Note 7).
The recoverable amount of vessels is the greater of its value in
use and its fair value less costs to sell. 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 asset.
Recoverability for vessels is measured by comparing the carrying
amount, including unamortized dry-docking and special survey
costs, to the greater of fair value (see note 2(c)) less
costs to sell or value in use. An impairment loss is recognized
if the carrying amount of the vessel exceeds its estimated
recoverable amount. Impairment losses are recognized in the
combined statement of income.
Impairment losses recognized in prior periods are assessed at
each reporting date for any indications that the loss has
decreased or no longer exists as a result of events or changes
to conditions occurring after the impairment loss was
recognized. An impairment loss is reversed only to the extent
that the assets carrying amount does not exceed the
carrying amount that had been recognized (see Note 7).
There are no legal requirements to hold a shareholders
meeting, nor is there a requirement in the vessel-owning
companies Articles of Incorporation or Bylaws to
distribute dividends. Dividends may be declared or paid out of
profits resulting from current or preceding years. Thus the
decision to distribute dividends is made by management of the
Group and they are therefore recognized as a liability in the
period in which they are declared by management.
A provision is recognized as a result of a past event when the
Group has a present legal or constructive obligation that can be
reliably estimated and it is probable that an outflow of
economic benefits will be required to settle the obligation.
Provisions are determined by discounting the expected future
cash flows that reflect current market assessments of the time
value of money and the risks specific to the liability.
The Group has no obligations to defined contribution or defined
benefit plans. Short-term employee benefits are measured on an
undiscounted basis and are expensed as the related service is
provided. A liability is recognized for the amount expected to
be paid under short-term cash bonus if the Group has a present
legal or constructive obligation to pay this amount as a result
of past service provided by the employee and the obligation can
be estimated reliably.
The Group generates its revenues from charterers for the charter
hire of its 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 charter agreement exists and collection of the related
revenue is reasonably assured, revenue is recognized and it is
earned, ratably over the duration of the year of time-charter.
F-75
Goldie
Navigation Ltd., Pavey Services Ltd., Shoreline Universal
Ltd.,
Valdis Marine Corp., Kalistos Maritime S.A. and Kalithea
Maritime S.A.
Notes to Combined Financial
Statements (Continued)
December 31, 2007 and 2006
Deferred revenue represents invoices issued, or cash received in
advance for services not yet rendered.
|
|
(r)
|
Vessel
voyage and other operating expenses
|
Vessel voyage expenses primarily consisting of port, canal and
bunker expenses that are unique to a particular charter are paid
for by the charterer under time-charter arrangements. Vessel
voyage and other operating expenses are expensed as incurred.
|
|
(s)
|
Finance
income and expenses
|
Finance income comprises of interest income on funds invested
and foreign currency gains. Interest income is recognized as it
accrues, using the effective interest method.
Finance expense comprises of interest expense on borrowings,
foreign currency losses and impairment losses on recognized
financial assets. All borrowing costs are recognized in the
combined statement of income using the effective interest method.
Under the laws of the countries of the vessel-owning
companies incorporation
and/or
vessels registration, the vessel-owning companies are not
subject to tax on international shipping income but are subject
only to certain minor registration and tonnage taxes that are
charged to operating expenses as incurred. The vessel-owning
companies however, are subject to United States federal income
taxation in respect of income that is derived from the
international operation of ships and the performance of services
directly related thereto, unless exempt from United States
federal income taxation. If the vessel-owning companies do not
qualify for the exemption from tax, they will be subject to a 4%
tax on its U.S. source income, imposed without the
allowance for any deductions. For these purposes,
U.S. source shipping income means 50% of the shipping
income that will be derived by the vessel-owning companies that
is attributable to transportation that begins or ends, but that
does not both begin and end, in the United States.
The vessel-owning companies did not incur any U.S. source
shipping income in 2007, 2006 and 2005. Therefore, the Group
does not have any current income tax or deferred taxes as of
December 31, 2007, 2006 and 2005.
A segment is a distinguishable component of the Group that is
engaged in providing related products or services (business
segment) or in providing products or services within a
particular economic environment (geographical segment), which is
subject to risks and returns that are different from the other
segments. The Group reports financial information and evaluates
its operations by charter revenues and not, for example, by
a) the length of ship employment for its customers or
b) the size of vessel. The Group does not have discrete
financial information to evaluate the operating results for each
type of charter. Although revenue can be identified for these
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 by revenue per day and
operating results of the fleet and thus the Group has determined
that it operates under one reportable segment. Furthermore, when
the Group charters a vessel to a charterer, the charter is free
to trade the vessel worldwide and, as a result the disclosure of
geographic information is impracticable. Also, as management of
the Group monitors its results per revenue and not by customer,
the geographical location of the customer is not relevant for
segment information.
F-76
Goldie
Navigation Ltd., Pavey Services Ltd., Shoreline Universal
Ltd.,
Valdis Marine Corp., Kalistos Maritime S.A. and Kalithea
Maritime S.A.
Notes to Combined Financial
Statements (Continued)
December 31, 2007 and 2006
|
|
(v)
|
New
standards and interpretations not yet adopted
|
A number of new standards, amendments to standards and
interpretations are not yet effective for the year ended
December 31, 2007, and have not been applied in preparing
these financial statements:
(i) IFRS 8 Operating Segments introduces the
management approach to segment reporting.
IFRS 8, which becomes mandatory for the financial
statements of 2009, will require the disclosure of segment
information based on the internal reports regularly reviewed by
the Groups Chief Operating Decision Maker in order to
assess each segments performance and to allocate resources
to them. The Group is evaluating the impact of this standard on
the combined financial statements.
(ii) Revised IAS 23 Borrowing Costs removes the
option to expense borrowing costs and requires that an entity
capitalize borrowing costs directly attributable to the
acquisition, construction or production of a qualifying asset as
part of the cost of that asset. Currently, the Group capitalizes
interest on the construction of the vessels and therefore the
revised IAS 23 which will become mandatory for the Groups
2009 financial statements is not expected to have a significant
effect on the Groups financial statements.
(iii) IFRIC 11 IFRS 2 Group and Treasury Share
Transactions requires a share-based payment arrangement in
which an entity receives goods or services as consideration for
its own equity instruments to be accounted for as an
equity-settled share-based payment transaction, regardless of
how the equity instruments are obtained. IFRIC 11 will become
mandatory for the Groups 2008 financial statements, with
retrospective application required. This standard is not
expected to have any significant impact on the combined
financial statements as it is not relevant to the Groups
operations.
(iv) IFRIC 12 Service Concession Arrangements
provides guidance on certain recognition and measurement
issues that arise in accounting for public-to-private service
concession arrangements. IFRIC 12, which becomes mandatory for
the Groups 2008 financial statements, is not expected to
have any effect on the combined financial statements as it is
not relevant to the Groups operations.
(v) IFRIC 13 Customer Loyalty Programmes addresses
the accounting by entities that operate, or otherwise
participate in, customer loyalty programs for their customers.
It relates to customer loyalty programs under which the customer
can redeem credits for awards such as free or discounted goods
or services. IFRIC 13, which becomes mandatory for the
Groups 2009 financial statements, is not expected to have
any impact on the combined financial statements.
(vi) IFRIC 14 IAS 19 The Limit on a Defined Benefit
Asset, Minimum Funding Requirements and their Interaction
clarifies when refunds or reductions in future contributions
in relation to defined benefit assets should be regarded as
available and provides guidance on the impact of minimum funding
requirements (MFR) on such assets. It also addresses when a MFR
might give rise to a liability. IFRIC 14 will become mandatory
for the Groups 2008 financial statements, with
retrospective application required. IFRIC 14 is not expected to
have any effect on the combined financial statements.
(vii) Revision to IAS 1, Presentation of Financial
Statements: The revised standard is effective for
annual periods beginning on or after January 1, 2009. The
revision to IAS 1 is aimed at improving users ability to
analyze and compare the information given in financial
statements. The changes made are to require information in
financial statements to be aggregated on the basis of shared
characteristics and to introduce a statement of comprehensive
income. This will enable readers to analyze changes in equity
resulting from transactions with owners in their capacity as
owners (such as dividends and share repurchases) separately from
non-owner changes (such as transactions with third
parties). In response to comments received through the
consultation process, the revised standard gives preparers of
financial
F-77
Goldie
Navigation Ltd., Pavey Services Ltd., Shoreline Universal
Ltd.,
Valdis Marine Corp., Kalistos Maritime S.A. and Kalithea
Maritime S.A.
Notes to Combined Financial
Statements (Continued)
December 31, 2007 and 2006
statements the option of presenting items of income and expense
and components of other comprehensive income either in a single
statement of comprehensive income with sub-totals, or in two
separate statements (a separate income statement followed by a
statement of comprehensive income). Management is currently
assessing the impact of this revision on the Groups
financial statements.
(viii) Revision to IFRS 3 Business Combinations and
an amended version of IAS 27 Consolidated and Separate
Financial Statements: This standard is required
to be applied prospectively to business combinations for which
the acquisition date is on or after the beginning of the first
annual reporting period beginning on or after July 1, 2009.
Earlier application is permitted. However, this standard will be
applied only at the beginning of an annual reporting period that
begins on or after June 30, 2007. If an entity applies this
standard before July 1, 2009, it will be required to
disclose that fact and apply IAS 27 (as amended in 2008) at
the same time. The main changes to the existing standards
include: (i) minority interests (now called non-controlling
interests) are measured either as their proportionate interest
in the net identifiable assets (the existing IFRS 3 requirement)
or at fair value; (ii) for step acquisitions, goodwill is
measured as the difference at acquisition date between the fair
value of any investment in the business held before the
acquisition, the consideration transferred and the net assets
acquired (therefore there is no longer the requirement to
measure assets and liabilities at fair value at each step to
calculate a portion of goodwill); (iii) acquisition-related
costs are generally recognized as expenses (rather than included
in goodwill); (iv) contingent consideration must be
recognized and measured at fair value at acquisition date with
any subsequent changes in fair value recognized usually in the
profit or loss (rather than by adjusting goodwill) and
(v) transactions with non-controlling interests which do
not result in loss of control are accounted for as equity
transactions. Management is currently assessing the impact that
these revisions will have on the Group.
(ix) Revision to IFRS 2 Share-based
Payment: The revision is effective for annual
periods on or after January 1, 2009 and provides
clarification for the definition of vesting conditions and the
accounting treatment of cancellations. It clarifies that vesting
conditions are service conditions and performance conditions
only. Other features of a share-based payment are not vesting
conditions. It also specifies that all cancellations, whether by
the entity or other parties, should receive the same accounting
treatment. The Group does not expect this standard to affect its
combined financial statements as currently there are no
share-based payment plans.
|
|
3.
|
Direct
voyage expenses
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2007
|
|
|
2006
|
|
|
2005
|
|
|
Classification fees and surveys
|
|
|
8
|
|
|
|
6
|
|
|
|
33
|
|
Bunkers expenses
|
|
|
40
|
|
|
|
25
|
|
|
|
40
|
|
Port expenses
|
|
|
9
|
|
|
|
15
|
|
|
|
24
|
|
Tugs
|
|
|
2
|
|
|
|
3
|
|
|
|
27
|
|
Commission and fees
|
|
|
13
|
|
|
|
8
|
|
|
|
14
|
|
Insurance and other voyage expenses
|
|
|
10
|
|
|
|
7
|
|
|
|
1
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
82
|
|
|
|
64
|
|
|
|
139
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
F-78
Goldie
Navigation Ltd., Pavey Services Ltd., Shoreline Universal
Ltd.,
Valdis Marine Corp., Kalistos Maritime S.A. and Kalithea
Maritime S.A.
Notes to Combined Financial
Statements (Continued)
December 31, 2007 and 2006
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2007
|
|
|
2006
|
|
|
2005
|
|
|
Basic and supplementary wages
|
|
|
1,162
|
|
|
|
1,183
|
|
|
|
920
|
|
Overtime
|
|
|
633
|
|
|
|
635
|
|
|
|
500
|
|
Vacation
|
|
|
342
|
|
|
|
338
|
|
|
|
200
|
|
Bonus
|
|
|
448
|
|
|
|
88
|
|
|
|
48
|
|
Other crew expenses
|
|
|
218
|
|
|
|
533
|
|
|
|
308
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2,803
|
|
|
|
2,777
|
|
|
|
1,976
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Crew costs represents the amounts due to the crew on board the
vessels under short-term contracts, i.e. no more than
9 months. The Group is not obliged to contribute to any
pension plans or post-employment benefits for the crew on board.
|
|
5.
|
Other
operating expenses
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2007
|
|
|
2006
|
|
|
2005
|
|
|
Chemicals and lubricants
|
|
|
1,432
|
|
|
|
1,192
|
|
|
|
1,151
|
|
Repairs and maintenance
|
|
|
1,176
|
|
|
|
1,055
|
|
|
|
740
|
|
Insurance
|
|
|
566
|
|
|
|
558
|
|
|
|
424
|
|
Administration expenses for vessels
|
|
|
54
|
|
|
|
37
|
|
|
|
54
|
|
Reimbursement to time charters
|
|
|
|
|
|
|
|
|
|
|
716
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
3,228
|
|
|
|
2,842
|
|
|
|
3,085
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Reimbursements to time charters represent a fee for cancellation
of contracts.
|
|
6.
|
Financial
income and expense
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2007
|
|
|
2006
|
|
|
2005
|
|
|
Financial income:
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest income
|
|
|
143
|
|
|
|
132
|
|
|
|
13
|
|
Foreign exchange gain
|
|
|
|
|
|
|
|
|
|
|
11
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
143
|
|
|
|
132
|
|
|
|
24
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Financial expense:
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest expense
|
|
|
2,914
|
|
|
|
3,272
|
|
|
|
2,371
|
|
Amortization of finance costs
|
|
|
59
|
|
|
|
22
|
|
|
|
21
|
|
Foreign exchange loss
|
|
|
7
|
|
|
|
17
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2,980
|
|
|
|
3,311
|
|
|
|
2,392
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net finance cost
|
|
|
2,837
|
|
|
|
3,179
|
|
|
|
2,368
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
F-79
Goldie
Navigation Ltd., Pavey Services Ltd., Shoreline Universal
Ltd.,
Valdis Marine Corp., Kalistos Maritime S.A. and Kalithea
Maritime S.A.
Notes to Combined Financial
Statements (Continued)
December 31, 2007 and 2006
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Advances to
|
|
|
|
|
|
|
|
|
|
|
|
|
Shipyards
|
|
|
|
|
|
|
|
|
|
|
|
|
for Vessels
|
|
|
|
|
|
|
|
|
|
|
|
|
Under
|
|
|
|
|
|
|
|
|
|
Vessels
|
|
|
Construction
|
|
|
Dry-Docking
|
|
|
Total
|
|
|
Cost
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance at January 1, 2006
|
|
|
76,970
|
|
|
|
|
|
|
|
18
|
|
|
|
76,988
|
|
Additions
|
|
|
116
|
|
|
|
4,922
|
|
|
|
1,568
|
|
|
|
6,606
|
|
Revaluation
|
|
|
25,119
|
|
|
|
|
|
|
|
|
|
|
|
25,119
|
|
Reversal of impairment loss
|
|
|
19,311
|
|
|
|
|
|
|
|
|
|
|
|
19,311
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance at December 31, 2006
|
|
|
121,516
|
|
|
|
4,922
|
|
|
|
1,586
|
|
|
|
128,024
|
|
Additions
|
|
|
24
|
|
|
|
12,661
|
|
|
|
989
|
|
|
|
13,674
|
|
Revaluation
|
|
|
129,265
|
|
|
|
|
|
|
|
|
|
|
|
129,265
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance at December 31, 2007
|
|
|
250,805
|
|
|
|
17,583
|
|
|
|
2,575
|
|
|
|
270,963
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Accumulated depreciation
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance at January 1, 2006
|
|
|
(6,970
|
)
|
|
|
|
|
|
|
|
|
|
|
(6,970
|
)
|
Depreciation
|
|
|
(6,083
|
)
|
|
|
|
|
|
|
(484
|
)
|
|
|
(6,567
|
)
|
Balance December 31, 2006
|
|
|
(13,053
|
)
|
|
|
|
|
|
|
(484
|
)
|
|
|
(13,537
|
)
|
Depreciation
|
|
|
(11,795
|
)
|
|
|
|
|
|
|
(830
|
)
|
|
|
(12,625
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance December 31, 2007
|
|
|
(24,848
|
)
|
|
|
|
|
|
|
(1,314
|
)
|
|
|
(26,162
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net book value January 1, 2006
|
|
|
70,000
|
|
|
|
|
|
|
|
18
|
|
|
|
70,018
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net book value December 31, 2006
|
|
|
108,463
|
|
|
|
4,922
|
|
|
|
1,102
|
|
|
|
114,487
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net book value December 31, 2007
|
|
|
225,957
|
|
|
|
17,583
|
|
|
|
1,261
|
|
|
|
244,801
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
During the year ended December 31, 2005, four vessel-owning
companies took delivery of their vessels (African Zebra, Bremen
Max, Hamburg Max and African Oryx). The total acquisition price
amounted to $96,282, of which $9,576 was paid as an advance in
2004.
The estimated remaining useful lives of the Groups vessels
is between 3 to 16 years as of December 31, 2007.
Vessels are measured at fair value at year end. At
December 31, 2005 the fair value of the individual vessels
indicated that the carrying value of the individual vessels was
impaired and as a result the Group recognized an impairment loss
of $19,311 which is recorded as a separate line item in the
combined statement of income since there was no revaluation
surplus recorded in the combined statement of changes in equity
(see note 2(c)). At December 31, 2006, due to the
changing market conditions, the fair value exceeded the carrying
value by $44,430 and accordingly an amount of $19,311 was
recorded as a separate line item in the combined statement of
income since it reversed a revaluation decrease recorded in the
previous year. The remaining surplus of $25,119 is recorded as
recognized income and expense under the caption revaluation
reserve in the combined statement of changes in equity. At
December 31, 2007 due to the prevailing positive market
conditions, the fair value of the individual vessels exceeded
the carrying amount and a revaluation surplus of $129,265 arose
and is recorded as recognized income and expense under the
caption revaluation reserve in the combined statement of changes
in equity.
F-80
Goldie
Navigation Ltd., Pavey Services Ltd., Shoreline Universal
Ltd.,
Valdis Marine Corp., Kalistos Maritime S.A. and Kalithea
Maritime S.A.
Notes to Combined Financial
Statements (Continued)
December 31, 2007 and 2006
Kalistos Maritime S.A. and Kalithea Maritime S.A. have entered
into shipbuilding contracts with a shipyard for the construction
of two newbuildings with the expected delivery dates in 2008
(refer to Note 20(c)) and 2009, respectively. As of
December 31, 2007 Kalistos Maritime S.A. and Kalithea
Maritime S.A. were committed to the construction of these two
vessels at a total contract cost of $47,640. Payments against
the contract cost through December 31, 2007 and 2006
totaled $12,000 and $4,800, respectively, and are included under
the caption advances to shipyards for vessels under
construction. Capitalized interest included under the caption
advances to shipyards for vessels under construction as of
December 31, 2007 and 2006 amounted to $249 and nil,
respectively.
|
|
|
|
|
|
|
|
|
|
|
2007
|
|
|
2006
|
|
|
Lubricants
|
|
|
223
|
|
|
|
209
|
|
Other
|
|
|
|
|
|
|
3
|
|
|
|
|
|
|
|
|
|
|
|
|
|
223
|
|
|
|
212
|
|
|
|
|
|
|
|
|
|
|
|
|
9.
|
Trade
accounts receivable and other assets
|
|
|
|
|
|
|
|
|
|
|
|
2007
|
|
|
2006
|
|
|
Charterers
|
|
|
1,237
|
|
|
|
717
|
|
Insurance claims
|
|
|
22
|
|
|
|
26
|
|
Prepayments for insurance premiums
|
|
|
238
|
|
|
|
209
|
|
Agents
|
|
|
48
|
|
|
|
33
|
|
Other
|
|
|
43
|
|
|
|
18
|
|
|
|
|
|
|
|
|
|
|
|
|
|
1,588
|
|
|
|
1,003
|
|
Impairment loss (Note 15(b))
|
|
|
(660
|
)
|
|
|
(660
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
928
|
|
|
|
343
|
|
|
|
|
|
|
|
|
|
|
|
|
10.
|
Cash and
cash equivalents
|
|
|
|
|
|
|
|
|
|
|
|
2007
|
|
|
2006
|
|
|
On demand
|
|
|
21
|
|
|
|
506
|
|
Term deposits
|
|
|
|
|
|
|
940
|
|
|
|
|
|
|
|
|
|
|
|
|
|
21
|
|
|
|
1,446
|
|
|
|
|
|
|
|
|
|
|
|
|
11.
|
Capital
contributions
|
The amounts shown in the combined balance sheet as capital
contributions represent payments made by the shareholders at
various dates to finance vessel acquisition in excess of the
amounts of the bank loans obtained. There is no contractual
obligation to repay the amounts.
F-81
Goldie
Navigation Ltd., Pavey Services Ltd., Shoreline Universal
Ltd.,
Valdis Marine Corp., Kalistos Maritime S.A. and Kalithea
Maritime S.A.
Notes to Combined Financial
Statements (Continued)
December 31, 2007 and 2006
The authorized share capitals of the companies that comprise the
Group are analyzed as follows:
|
|
|
|
|
|
|
|
|
|
|
Number of
|
|
|
Par Value per
|
|
Vessel-Owning Companies
|
|
Shares
|
|
|
Share
|
|
|
Goldie Navigation Ltd.
|
|
|
500
|
|
|
|
|
|
Pavey Services Ltd.
|
|
|
50,000
|
|
|
$
|
1
|
|
Shoreline Universal Ltd.
|
|
|
50,000
|
|
|
$
|
1
|
|
Valdis Marine Corp.
|
|
|
500
|
|
|
|
|
|
Kalistos Maritime S.A.
|
|
|
500
|
|
|
|
|
|
Kalithea Maritime S.A.
|
|
|
500
|
|
|
|
|
|
Long-term debt is analyzed as follows:
|
|
|
|
|
|
|
|
|
Borrower
|
|
2007
|
|
|
2006
|
|
|
Goldie Navigation Ltd.
|
|
|
5,858
|
|
|
|
7,279
|
|
Valdis Marine Corp.
|
|
|
8,576
|
|
|
|
10,684
|
|
Pavey Services Ltd.
|
|
|
12,134
|
|
|
|
15,124
|
|
Shoreline Universal Ltd.
|
|
|
13,390
|
|
|
|
16,687
|
|
Kalistos Maritime S.A.
|
|
|
5,026
|
|
|
|
|
|
Kalithea Maritime S.A.
|
|
|
3,346
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
|
48,330
|
|
|
|
49,774
|
|
Less: Current portion
|
|
|
9,750
|
|
|
|
8,420
|
|
|
|
|
|
|
|
|
|
|
Long-term portion
|
|
|
38,580
|
|
|
|
41,354
|
|
|
|
|
|
|
|
|
|
|
The long-term debt, denominated in US Dollars, of Goldie
Navigation Ltd., Valdis Marine Corp., Pavey Services Ltd. and
Shoreline Universal Ltd. represents the amounts allocated to
each vessel-owning company from the syndicated loan of $500,000
concluded on December 24, 2004 for the purchase of
32 vessels by each of 32 vessel-owning companies, with
Lincoln and Nouvelle as corporate guarantors (the syndicated
loan). The syndicated loan was allocated to each vessel-owning
company based upon each vessels acquisition cost. The
Group adjusts the amount outstanding each time one of the
vessels in the syndicated loan is sold without repayment of the
associated debt or a portion of the loan is paid and allocates
it proportionately to the remaining vessels.
The long-term debt initially allocated to each vessel-owning
company represents approximately 67.5% of the vessel acquisition
cost. The syndicated loan is payable in variable principal
installments plus interest at variable rates (LIBOR plus a
spread of 0.875%) with an original balloon installment of
$45,500 in March 2015. The balloon installment outstanding as of
December 31, 2007 amounted to $26,153. The terms and
conditions of the long-term debt for each vessel-owning company
are the same as the syndicated loan (see Note 20(h)).
The long-term debt is secured by a mortgage on the vessels, a
corporate guarantee of Lincoln and Nouvelle, and assignments on
earnings, insurance and requisition compensation of the
mortgaged vessel.
As of December 31, 2007 and 2006 the long-term debt of
Goldie Navigation Ltd., Valdis Marine Corp., Pavey Services Ltd.
and Shoreline Universal Ltd. represents the allocated amount of
the remaining balance of the syndicated loan after taking into
account vessel sales.
F-82
Goldie
Navigation Ltd., Pavey Services Ltd., Shoreline Universal
Ltd.,
Valdis Marine Corp., Kalistos Maritime S.A. and Kalithea
Maritime S.A.
Notes to Combined Financial
Statements (Continued)
December 31, 2007 and 2006
Details of the long-term debt, for each of the vessel-owning
companies is as follows:
Goldie Navigation Ltd.: The allocated initial
amount for Goldie Navigation Ltd. was $9,460 to partly finance
the acquisition of vessel African Zebra. At December 31,
2006, the outstanding balance was $7,306 ($7,279 net of
deferred direct cost) payable in three equal quarterly principal
installments of $422 and in thirty equal quarterly principal
installments of $174 plus interest at floating rates (LIBOR plus
a spread of 0.875%) with a balloon installment of $824 due in
2015. At December 31, 2007, the outstanding balance was
$5,881 ($5,858 net of principal repayment of $1,425 in 2007
and deferred direct cost) payable in twenty-nine equal quarterly
principal installments of $174 plus interest at variable rates
(LIBOR plus a spread of 0.875%) with a balloon installment of
$861 due in 2015.
Valdis Marine Corp.: The allocated initial
amount for Valdis Marine Corp. was $13,852 to partly finance the
acquisition of vessel African Oryx. At December 31, 2006,
the outstanding balance was $10,724 ($10,684 net of
deferred direct cost) payable in three equal quarterly principal
installments of $619 and in thirty equal quarterly principal
installments of $253 plus interest at floating rates (LIBOR plus
a spread of 0.875%) with a balloon installment of $1,262 due in
2015. At December 31, 2007, the outstanding balance was
$8,612 ($8,576 net of principal repayment of $2,114 in 2007
and deferred direct cost) payable in twenty-nine equal quarterly
principal installments of $254 plus interest at variable rates
(LIBOR plus a spread of 0.875%) with a balloon installment of
$1,261 due in 2015.
Pavey Services Ltd.: The allocated initial
amount for Pavey Services Ltd. was $19,595 to partly finance the
acquisition of vessel Bremen Max. At December 31, 2006, the
outstanding balance of $15,179 ($15,124 net of deferred
direct cost) was payable in three equal quarterly principal
installments of $880 and in thirty equal quarterly principal
installments of $359 plus interest at variable rates (LIBOR plus
a spread of 0.875%) with a balloon installment of $1,779 due in
2015. At December 31, 2007, the outstanding balance was
$12,182 ($12,134 net of principal repayments of $3,000 in
2007 and deferred direct cost) payable in twenty-nine equal
quarterly principal installments of $359 plus interest at
variable rates (LIBOR plus a spread of 0.875%) with a balloon
installment of $1,783 due in 2015.
Shoreline Universal Ltd.: The allocated
initial amount for Shoreline Universal Ltd. was $21,622 to
finance the acquisition of the vessel Hamburg Max. At
December 31, 2006, the outstanding balance of $16,747
($16,687 net of deferred direct cost) was payable in three
equal quarterly principal installments of $973 and in thirty
equal quarterly principal installments of $396 plus interest at
variable rates (LIBOR plus a spread of 0.875%) with a balloon
installment of $1,943 due in 2015. At December 31, 2007,
the outstanding balance was $13,443 ($13,390 net of
principal repayments of $3,305 in 2007 and direct cost) payable
in twenty-nine equal quarterly principal installments of $396
plus interest at variable rates (LIBOR plus a spread of 0.875%)
with a balloon installment of $1,968 due in 2015.
The original loan agreements for all of the vessels include
covenants deriving from the syndicated loan that require the
vessel-owning companies to maintain minimum hull values in
connection with the vessels outstanding loans, insurance
coverage of the vessels against all customary risks. The
corporate guarantors are required to have minimum levels of
available cash and cash equivalents, liquidity funds on a
consolidated basis of no less than $30,000, leverage ratio
(defined as Debt to Total assets) not higher than 0.7:0.1 and
net worth (total assets less the amount of the consolidated
debt) not less than $250,000. In addition, the covenants do not
permit the borrowers to sell the vessels and assets and change
the beneficial ownership or management of the vessels, without
the prior consent of the banks. The individual vessel-owning
companies and the corporate guarantors are in compliance with
the debt covenants as of December 31, 2007.
F-83
Goldie
Navigation Ltd., Pavey Services Ltd., Shoreline Universal
Ltd.,
Valdis Marine Corp., Kalistos Maritime S.A. and Kalithea
Maritime S.A.
Notes to Combined Financial
Statements (Continued)
December 31, 2007 and 2006
On June 23, 2006 Kalistos Maritime S.A., Kalithea Maritime
S.A. and a third affiliated vessel-owning company entered into a
loan facility of up to $20,160 and a guarantee facility of up to
$28,800 each to be used to partly finance and guarantee the
payment to the shipyards for the newbuilding.
Kalistos Maritime S.A.: Kalistos Maritime S.A.
loan facility is for up to $6,720, plus interest at variable
rates (LIBOR plus a spread of 0.65%), to finance a portion of
the construction cost of the Hull KA 215. Gross drawdowns
against this facility in 2007 and 2006 amounted to $5,040 and
nil, respectively ($5,026 in total, net of deferred direct
costs). The loan is repayable in full at the earlier of
December 18, 2008 and the date the newbuilding is delivered
by the shipyard. The loan was repaid in March 2008 (see
Note 20(c)).
Kalithea Maritime S.A.: Kalithea Maritime S.A.
loan facility is for up to $6,720 plus interest at variable
rates (LIBOR plus a spread of 0.65%), to finance a portion of
the construction cost of the Hull KA 216. Gross drawdowns
against this facility in 2007 and 2006 amounted to $3,360 and
nil, respectively ($3,346 in total, net of deferred direct
costs). The loan is repayable in full at the earlier of
May 18, 2009 and the date the newbuilding is delivered by
the shipyard.
The weighted average effective interest rate for all long-term
debt for the years ended December 31, 2007, 2006 and 2005
was approximately 6.1%, 6.12% and 4.16%, respectively. Interest
expense for the years ended December 31, 2007, 2006 and
2005 amounted to $2,914, $3,272 and $2,371, respectively, and is
included in finance expense in the accompanying combined
statements of income.
The principal repayments are as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
More
|
|
|
|
|
|
|
Year of
|
|
|
1 Year
|
|
|
1 to 2
|
|
|
2 to 5
|
|
|
Than
|
|
|
|
|
|
|
Maturity
|
|
|
or Less
|
|
|
Years
|
|
|
Years
|
|
|
5 Years
|
|
|
Total
|
|
|
31 December 2006
|
|
|
2015
|
|
|
|
8,420
|
|
|
|
4,724
|
|
|
|
14,171
|
|
|
|
22,459
|
|
|
|
49,774
|
|
31 December 2007
|
|
|
2015
|
|
|
|
9,750
|
|
|
|
4,724
|
|
|
|
14,171
|
|
|
|
19,685
|
|
|
|
48,330
|
|
|
|
13.
|
Trade
accounts payable
|
|
|
|
|
|
|
|
|
|
|
|
2007
|
|
|
2006
|
|
|
Suppliers
|
|
|
883
|
|
|
|
350
|
|
Insurance agents
|
|
|
167
|
|
|
|
125
|
|
Agents
|
|
|
16
|
|
|
|
|
|
Other
|
|
|
114
|
|
|
|
129
|
|
|
|
|
|
|
|
|
|
|
|
|
|
1,180
|
|
|
|
604
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2007
|
|
|
2006
|
|
|
Masters accounts
|
|
|
225
|
|
|
|
179
|
|
Expenses for vessels
|
|
|
784
|
|
|
|
120
|
|
Charterers accounts
|
|
|
51
|
|
|
|
35
|
|
Other
|
|
|
38
|
|
|
|
18
|
|
|
|
|
|
|
|
|
|
|
|
|
|
1,098
|
|
|
|
352
|
|
|
|
|
|
|
|
|
|
|
F-84
Goldie
Navigation Ltd., Pavey Services Ltd., Shoreline Universal
Ltd.,
Valdis Marine Corp., Kalistos Maritime S.A. and Kalithea
Maritime S.A.
Notes to Combined Financial
Statements (Continued)
December 31, 2007 and 2006
|
|
15.
|
Financial
instruments
|
Overview
The Group has exposure to the following risks from its use of
financial instruments:
1 Credit risk;
2 Liquidity risk;
3 Market risk defined as interest rate risk and currency
risk.
This note represents information about the Groups exposure
to cash of the above risks, the Groups objectives,
policies and processes for measuring and managing risk and the
Groups management of capital.
The Group does not enter into transactions involving derivative
financial instruments (or otherwise engage in other hedging
activities) to reduce exposure to fluctuations in interest and
foreign exchange rates and these are subject to the risk of
market rates changing subsequent to acquisition.
Credit risk is the risk of financial loss to the Group if a
customer or counterparty to a financial instrument fails to meet
its contractual obligations in relation to each class of
recognized financial assets. The maximum credit risk in relation
to such assets is represented by the carrying amount of those
assets in the combined balance sheets.
The main credit exposure is from trade accounts receivable,
amounts due from related parties and cash and cash equivalents.
The Group places its cash and cash equivalents, consisting
mostly of deposits, with financial institutions. The Group
performs annual evaluations of the relative credit-standing of
those financial institutions. Credit risk with respect to trade
accounts receivable is generally managed by chartering vessels
to established operators, rather than to more speculative or
undercapitalized entities. The vessels are chartered under
time-charter agreements where, per the industry practice, the
charterer pays for the transportation service within one week of
issue of the hire statement (invoice) which is issued
approximately 15 days prior to the service, thereby
supporting the management of trade receivables.
The Groups exposure to credit risk is influenced mainly by
the individual characteristics of each customer.
As of December 31, 2007 and 2006 two charterers and one
charterer, respectively, individually accounted for more than
10% of the Groups trade accounts receivable as follows:
|
|
|
|
|
|
|
|
|
Charterer
|
|
2007
|
|
2006
|
|
B
|
|
|
50
|
%
|
|
|
100
|
%
|
E
|
|
|
43
|
%
|
|
|
|
|
F-85
Goldie
Navigation Ltd., Pavey Services Ltd., Shoreline Universal
Ltd.,
Valdis Marine Corp., Kalistos Maritime S.A. and Kalithea
Maritime S.A.
Notes to Combined Financial
Statements (Continued)
December 31, 2007 and 2006
For the years ended December 31, 2007, 2006 and 2005,
three, three and two charterers, respectively, individually
accounted for more than 10% of the Groups revenue as
follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
Charterer
|
|
2007
|
|
2006
|
|
2005
|
|
A related party (Note 19)
|
|
|
|
|
|
|
38
|
%
|
|
|
37
|
%
|
B
|
|
|
33
|
%
|
|
|
37
|
%
|
|
|
43
|
%
|
C
|
|
|
25
|
%
|
|
|
|
|
|
|
|
|
D
|
|
|
|
|
|
|
17
|
%
|
|
|
|
|
E
|
|
|
28
|
%
|
|
|
|
|
|
|
|
|
The aging of trade and other accounts receivable is as follows:
|
|
|
|
|
|
|
|
|
|
|
2007
|
|
|
2006
|
|
|
Up to 30 days
|
|
|
928
|
|
|
|
243
|
|
Past due 31 120 days
|
|
|
|
|
|
|
100
|
|
Over 120 days
|
|
|
660
|
|
|
|
660
|
|
|
|
|
|
|
|
|
|
|
|
|
|
1,588
|
|
|
|
1,003
|
|
|
|
|
|
|
|
|
|
|
The impairment loss of $660 relates to a disagreement with a
specific charterer for a specific trip.
Liquidity risk is the risk that the Group will not be able to
meet its financial obligations as they fall due. The
Groups policy is to ensure, as far as possible, that it
will have sufficient liquidity to meet its liabilities when they
fall due. Furthermore, Lincoln, Nouvelle and First are the
guarantors of the loans and these entities pay the financial
obligations on behalf of the vessel-owning companies. In
addition, during the normal course of business, Lincoln,
Nouvelle and First support the Group for working capital needs.
The Group aims to mitigate liquidity risk by managing cash
generation from its operations, applying cash collection targets
throughout the Group. The vessels are chartered under
time-charter agreements where, per industry practice, the
charterer pays for the transportation service in advance,
supporting the management of cash generation.
Excess cash used in managing liquidity is only invested in
financial instruments exposed to insignificant risk of change in
market value, by being placed in interest-bearing deposits with
maturities fixed at no more than 3 months.
The contractual terms of the Groups interest bearing loans
including estimated interest payments are depicted in
Note 12.
Interest rate risk arises from the possibility that changes in
interest rates will affect the future cash outflows of the
Groups long-term debt as the long-term debt is at variable
rates.
F-86
Goldie
Navigation Ltd., Pavey Services Ltd., Shoreline Universal
Ltd.,
Valdis Marine Corp., Kalistos Maritime S.A. and Kalithea
Maritime S.A.
Notes to Combined Financial
Statements (Continued)
December 31, 2007 and 2006
The profile of interest-bearing financial assets and financial
liabilities as of December 31, 2007 and 2006, is as
follows. In addition, the associated cash flows are disclosed in
Notes 10 and 12.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Effective
|
|
|
|
|
|
|
|
|
|
Note
|
|
|
Interest Rate
|
|
|
Total
|
|
|
1 Year or Less
|
|
|
2006
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Term deposits
|
|
|
10
|
|
|
|
5.13
|
%
|
|
|
(940
|
)
|
|
|
(940
|
)
|
Bank loan
|
|
|
12
|
|
|
|
6.12
|
%
|
|
|
49,774
|
|
|
|
8,420
|
|
2007
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Bank loan
|
|
|
12
|
|
|
|
6.1
|
%
|
|
|
48,330
|
|
|
|
9,750
|
|
In managing the interest rate risk the Group aims to reduce the
impact of short-term fluctuations on the Groups earnings.
Over the longer term, however, permanent changes in interest
rates would have an impact on earnings.
At December 31, 2007 it is estimated that an increase of
one percentage point in interest rates would decrease the
Groups net profit by approximately $483 (2006: $488).
The Groups exposure to foreign currency risk is minimum.
Amounts in foreign currencies are included in trade accounts
payable and include amounts payable to suppliers in foreign
denominated currencies and are analyzed as follows:
|
|
|
|
|
|
|
US
|
|
|
|
Dollars
|
|
|
2007
|
|
|
|
|
Euro
|
|
|
149
|
|
GBP, JPY, ZAR
|
|
|
88
|
|
2006
|
|
|
|
|
Euro
|
|
|
104
|
|
GBP, JPY, ZAR
|
|
|
89
|
|
All amounts are shown at their fair value as they have a
maturity of no more than twelve months, except for long-term
debt. The carrying value of the Groups long-term debt
approximates fair value because the debt bears interest at
floating rates.
Managements policy is to maintain a strong capital base so
as to maintain creditor and market confidence and to sustain
future development of the business. Management monitors the
return on capital. There are no stock plans or options.
Each entity of the Group seeks to maintain a balance between
long-term debt and capital. There are no capital requirements.
In its funding strategy, the Groups objective is to
maintain a balance between continuity of funding and flexibility
through the use of debt. The Groups policy with vessel
acquisitions is that not more than 70% of the acquisition cost
of vessels will be funded through borrowings. For all the
acquisitions made, the bank financing was not more than 70% of
the total acquisition cost.
F-87
Goldie
Navigation Ltd., Pavey Services Ltd., Shoreline Universal
Ltd.,
Valdis Marine Corp., Kalistos Maritime S.A. and Kalithea
Maritime S.A.
Notes to Combined Financial
Statements (Continued)
December 31, 2007 and 2006
Various claims, suits and complaints, including those involving
government regulations and product liability, arise in the
ordinary course of the shipping business. In addition, losses
may arise from disputes with charterers, agents, insurance and
other claims with suppliers relating to the operation of the
Groups vessels. Currently, management is not aware of any
such contingent liabilities which should be disclosed or for
which a provision should be established in the accompanying
combined financial statements.
The Group accrues for the cost of environmental liabilities when
management becomes aware that a liability is probable and is
able to reasonably estimate the probable exposure. Currently,
management is not aware of any such claims or contingent
liabilities which should be disclosed, or for which a provision
should be established in the accompanying combined financial
statements.
As of December 31, 2007 and 2006 Kalistos Maritime S.A. and
Kalithea Maritime S.A. are committed to the purchase of Hulls KA
215 and KA 216 for a total cost of $47,640.
The related party balances are:
|
|
|
|
|
|
|
|
|
|
|
2007
|
|
|
2006
|
|
|
Due from related parties non current
|
|
|
|
|
|
|
|
|
Due from EST
|
|
|
|
|
|
|
480
|
|
|
|
|
|
|
|
|
|
|
Due from related parties current
|
|
|
|
|
|
|
|
|
Due from EST
|
|
|
480
|
|
|
|
|
|
Due from Lincoln
|
|
|
4,909
|
|
|
|
3,551
|
|
Charter revenue receivable from Swiss Marine Services S.A.
|
|
|
444
|
|
|
|
290
|
|
|
|
|
|
|
|
|
|
|
|
|
|
5,833
|
|
|
|
3,841
|
|
|
|
|
|
|
|
|
|
|
Due to related parties current
|
|
|
|
|
|
|
|
|
Due to EST
|
|
|
386
|
|
|
|
299
|
|
Due to First
|
|
|
334
|
|
|
|
54
|
|
|
|
|
|
|
|
|
|
|
|
|
|
720
|
|
|
|
353
|
|
|
|
|
|
|
|
|
|
|
The related party transactions included in the combined
statements of income are:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2007
|
|
2006
|
|
2005
|
|
Voyage revenue (Swiss Marine Services S.A.)
|
|
|
3,420
|
|
|
|
10,740
|
|
|
|
10,140
|
|
Management fees (EST)
|
|
|
(782
|
)
|
|
|
(752
|
)
|
|
|
(644
|
)
|
The related parties identified are:
The directors of the Group do not receive remuneration for the
non-executive services they offer. The identity and the
description of the other related parties of the Group are given
below.
F-88
Goldie
Navigation Ltd., Pavey Services Ltd., Shoreline Universal
Ltd.,
Valdis Marine Corp., Kalistos Maritime S.A. and Kalithea
Maritime S.A.
Notes to Combined Financial
Statements (Continued)
December 31, 2007 and 2006
Each vessel-operating company of the Group has a management
agreement with EST, to provide management services in exchange
for a fixed fee per day for each vessel in operation and a fixed
monthly fee per hull under construction. These agreements are
entered into with an initial three-year term until terminated by
either party upon written notice, in which case the agreements
terminate within two months after the date notice was given. In
the event that the agreement with EST is terminated, the fee
payable to EST shall continue to be payable for three months
from the termination date. In addition, EST provides crew for
the vessel and receives a reimbursement for crew support costs
for three months. Finally, if the agreement is terminated EST
will receive crew severance costs of up to $50 per vessel.
Management agreements with EST require the vessel-owning
companies with vessels in operation, to make an interest-free
advance of $120 each, to cover the working capital requirements
arising from the handling of the majority of the expenditure
generated from the vessels operations. This advance is
made ten days before the delivery of the vessel for which EST is
appointed as the manager.
Lincoln and First are the parent companies of the vessel and
hull-owning companies, respectively (see Note 1(a)). The
amounts due to and due from them represent expenses paid and
funds collected on the Groups behalf.
|
|
(d)
|
Swiss
Marine Services S.A. (SwissMarine)
|
Based on charter party agreements, certain of the Groups
vessels are chartered to SwissMarine, an affiliated company,
beneficially owned by certain members of the Restis family.
(a) Drawdowns on loan facility: On
January 28, 2008, Kalithea Maritime S.A. and Kalistos
Maritime S.A. each drew down $1,680 representing the third
installment of their loan facilities, in order to finance 70% of
their third and fourth delivery payment installments,
respectively for Hulls KA 216 and KA 215, respectively ($2,400
each).
(b) Loan facility: On March 11,
2008, Kalithea Maritime S.A., Kalistos Maritime S.A. and another
vessel-owning company not included in the Group signed a
commitment letter for a preferred ship variable rate mortgage
bank loan for up to $50,022 to finance a maximum of 70% of the
acquisition of three vessels under construction at the shipyards.
The loan will bear interest at LIBOR plus a spread and will be
repayable in equal consecutive quarterly installments of $230
commencing three months after the delivery date of the vessels
with any unpaid balance on the final maturity date (May
2018) becoming due at that time as a balloon payment.
The covenants require, among others, the vessel-owning companies
to maintain minimum hull values in connection with the
vessels outstanding loans, insurance coverage of the
vessels against all customary risks and to maintain a ratio of
the fair market value of the vessels over the debt at a minimum
of 125%. The Guarantor will require minimum levels of available
cash and cash equivalents, liquidity funds on a consolidated
basis not less than $10,000, leverage ratio (defined as total
consolidated liabilities over total consolidated assets adjusted
to reflect the market value of the vessels not to exceed 70%),
not to have further indebtedness or issuing guarantees. In
addition, the covenants do not permit the borrowers to sell the
vessels and assets and change the beneficial ownership or
management of the vessels, without the prior consent of the
banks. First will be the guarantor of the loan.
F-89
Goldie
Navigation Ltd., Pavey Services Ltd., Shoreline Universal
Ltd.,
Valdis Marine Corp., Kalistos Maritime S.A. and Kalithea
Maritime S.A.
Notes to Combined Financial
Statements (Continued)
December 31, 2007 and 2006
(c) Delivery of Hull KA 215: On
May 20, 2008, Hull KA 215 (vessel Davakis G.) was delivered
from the shipyard and the last installment of $11,820 was paid.
To finance 70% of the vessel acquisition cost amounting to
$23,820, a commitment letter for the preferred ship variable
rate mortgage was concluded (see (b) above). The total
drawdown against this mortgage was $16,674 which was used to
repay the existing loan facility of $6,720 and the remaining
drawdown was used to finance the vessel.
(d) Master Agreement: On May 20,
2008, Goldie Navigation Ltd., Pavey Services Ltd., Shoreline
Universal Ltd., Valdis Marine Corp., Kalistos Maritime S.A. and
Kalithea Maritime S.A. concluded the Master Agreement with
Seanergy Merger Corp., Marshall Islands Corporations, to sell
six dry bulk vessels which include four second-hand vessels and
two newbuildings for an aggregate purchase price of $367,030 in
cash, $28,250 in the form of a note convertible into
2,260,000 shares of Seanergy Marine Corp. common stock at a
price of $12.50 per share and up to 4,308,075 shares of
Seanergy Marine Corp. common stock if Seanergy Marine Corp.
achieves a certain level of earnings before interest, taxes
depreciation and amortization. Seanergy Maritime Corp. is
expected, within thirty days of the closing, to file a
registration statement. The Master Agreement specifies that EST
will manage the fleet and a brokerage agreement with Safbulk Pty
Ltd. (Safbulk) for the chartering of the fleet will also be
entered into. In addition, time charters for all vessels will be
entered into with South African Marine Corporation S.A. which
will include a 3.75% address commission in favor of South
African Marine Corporation S.A. Both these entities are
affiliated and beneficially owned by certain members of the
Restis family.
(e) Brokerage agreement: On May 20,
2008, a brokerage agreement between a subsidiary of Seanergy
Merger Corp. and Safbulk, was concluded for the provision of
chartering services for an initial period of two years from the
date of signing. Safbulk will receive a commission of 1.25% on
the collected vessel revenue.
(f) Management agreement: On May 20,
2008, a management agreement between a subsidiary of Seanergy
Merger Corp. and EST was concluded for the provision of
technical management services relating to the vessels for an
initial period of two years from the date of signing. EST will
be entitled to a fee of EURO 416 (four hundred and sixteen
Euros) per vessel per day until December 31, 2008
thereafter adjusted on an annual basis as defined.
(g) Charter agreement: On May 26,
2008, time charter agreements for 11 to
13-month
periods at a time charter daily rate of between $30 and $65,
were concluded for vessels African Oryx, African Zebra, Davakis
G., Bremen Max, Hamburg Max and Hull KA 216 (Delos Ranger) with
South African Marine Corporation S.A. which would become
effective upon the consummation of the business combination.
(h) Payment of long term debt: The
outstanding total balloon installment as of December 31,
2007 of $26,153 (see Note 12) has been reduced to
$23,702 as a result of the repayment of the syndicated loan
arising from the sale of three vessels in 2008 included in three
affiliated vessel-owning companies and therefore there will also
be a reallocation (reduction) of approximately $1,264 to the
long-term portion of the Groups debt in 2008.
(i) Acquisition of common stock: On
July 15, 2008, a company affiliated with members of the
Restis family purchased 2,896,171 shares of common stock
from three shareholders of Seanergy for an aggregate purchase
price of $28,610. On July 23 and 24, 2008, the same affiliated
company purchased a total of 3,785,590 shares of common
stock from two shareholders of Seanergy for an aggregate
purchase price of $37,753. On July 23, 2008, another
company affiliated with members of the Restis family purchased
70,000 shares of common stock of Seanergy in the open
market for an aggregate purchase price of $691, bringing their
total interest in Seanergy to 35.37%.
F-90
Goldie
Navigation Ltd., Pavey Services Ltd., Shoreline Universal
Ltd.,
Valdis Marine Corp., Kalistos Maritime S.A. and Kalithea
Maritime S.A.
Condensed
Combined Unaudited Interim Balance Sheets
as of June 30, 2008 and December 31, 2007
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
June 30,
|
|
|
December 31,
|
|
|
|
Note
|
|
|
2008
|
|
|
2007
|
|
|
|
(In thousands of US dollars)
|
|
|
ASSETS
|
Vessels, net
|
|
|
10
|
|
|
|
250,022
|
|
|
|
244,801
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total non-current assets
|
|
|
|
|
|
|
250,022
|
|
|
|
244,801
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Inventories
|
|
|
|
|
|
|
458
|
|
|
|
223
|
|
Trade accounts receivable and other assets
|
|
|
11
|
|
|
|
1,605
|
|
|
|
928
|
|
Due from related parties
|
|
|
19
|
|
|
|
13,022
|
|
|
|
5,833
|
|
Cash and cash equivalents
|
|
|
12
|
|
|
|
4,161
|
|
|
|
21
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total current assets
|
|
|
|
|
|
|
19,246
|
|
|
|
7,005
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total assets
|
|
|
|
|
|
|
269,268
|
|
|
|
251,806
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Equity
|
|
|
|
|
|
|
|
|
|
|
|
|
Capital contributions
|
|
|
13
|
|
|
|
48,769
|
|
|
|
40,865
|
|
Revaluation reserve
|
|
|
|
|
|
|
154,384
|
|
|
|
154,384
|
|
(Accumulated deficit) retained earnings
|
|
|
|
|
|
|
(2,613
|
)
|
|
|
4,408
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total equity
|
|
|
|
|
|
|
200,540
|
|
|
|
199,657
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
LIABILITIES
|
Long-term debt, net
|
|
|
14
|
|
|
|
48,520
|
|
|
|
38,580
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total non-current liabilities
|
|
|
|
|
|
|
48,520
|
|
|
|
38,580
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Current portion of long-term debt, net
|
|
|
14
|
|
|
|
12,364
|
|
|
|
9,750
|
|
Trade accounts payable
|
|
|
15
|
|
|
|
3,234
|
|
|
|
1,180
|
|
Accrued expenses
|
|
|
|
|
|
|
862
|
|
|
|
1,098
|
|
Deferred revenue
|
|
|
16
|
|
|
|
2,339
|
|
|
|
781
|
|
Due to related parties
|
|
|
19
|
|
|
|
1,395
|
|
|
|
720
|
|
Accrued interest expense
|
|
|
|
|
|
|
14
|
|
|
|
40
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total current liabilities
|
|
|
|
|
|
|
20,208
|
|
|
|
13,569
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total equity and liabilities
|
|
|
|
|
|
|
269,268
|
|
|
|
251,806
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
The notes on pages F-95 to F-105 are an integral part of these
condensed combined unaudited interim financial statements.
F-91
Goldie
Navigation Ltd., Pavey Services Ltd., Shoreline Universal
Ltd.,
Valdis Marine Corp., Kalistos Maritime S.A. and Kalithea
Maritime S.A.
Condensed
Combined Unaudited Interim Statements of Income
For the six months ended June 30, 2008 and 2007
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Note
|
|
|
2008
|
|
|
2007
|
|
|
|
(In thousands of US dollars)
|
|
|
Revenue from vessels
|
|
|
|
|
|
|
28,227
|
|
|
|
13,751
|
|
Revenue from vessels related party
|
|
|
19
|
|
|
|
|
|
|
|
3,430
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
28,227
|
|
|
|
17,181
|
|
Direct voyage expenses
|
|
|
6
|
|
|
|
(759
|
)
|
|
|
(60
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
27,468
|
|
|
|
17,121
|
|
Expenses:
|
|
|
|
|
|
|
|
|
|
|
|
|
Crew costs
|
|
|
7
|
|
|
|
(2,143
|
)
|
|
|
(1,343
|
)
|
Management fees related party
|
|
|
19
|
|
|
|
(411
|
)
|
|
|
(387
|
)
|
Other operating expenses
|
|
|
8
|
|
|
|
(1,831
|
)
|
|
|
(1,471
|
)
|
Depreciation
|
|
|
10
|
|
|
|
(16,314
|
)
|
|
|
(6,260
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Results from operating activities
|
|
|
|
|
|
|
6,769
|
|
|
|
7,660
|
|
Finance income
|
|
|
9
|
|
|
|
36
|
|
|
|
81
|
|
Finance expense
|
|
|
9
|
|
|
|
(1,014
|
)
|
|
|
(1,540
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net finance cost
|
|
|
|
|
|
|
(978
|
)
|
|
|
(1,459
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net profit for the period
|
|
|
|
|
|
|
5,791
|
|
|
|
6,201
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
The notes on pages F-95 to F-105 are an integral part of these
condensed combined unaudited interim financial statements.
F-92
Goldie
Navigation Ltd., Pavey Services Ltd., Shoreline Universal
Ltd.,
Valdis Marine Corp., Kalistos Maritime S.A. and Kalithea
Maritime S.A.
Condensed
Combined Unaudited Interim Statements of Changes in Equity
For the six months ended June 30, 2008 and 2007
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(Accumulated
|
|
|
|
|
|
|
Capital
|
|
|
Revaluation
|
|
|
Deficit)/Retained
|
|
|
|
|
|
|
Contributions
|
|
|
Reserve
|
|
|
Earnings
|
|
|
Total
|
|
|
|
(In thousands of US dollars)
|
|
|
Balance at December 31, 2006
|
|
|
36,960
|
|
|
|
25,119
|
|
|
|
6,980
|
|
|
|
69,059
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net profit for the period
|
|
|
|
|
|
|
|
|
|
|
6,201
|
|
|
|
6,201
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total recognized income and expense
|
|
|
|
|
|
|
|
|
|
|
6,201
|
|
|
|
6,201
|
|
Capital contributions
|
|
|
1,508
|
|
|
|
|
|
|
|
|
|
|
|
1,508
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance at June 30, 2007
|
|
|
38,468
|
|
|
|
25,119
|
|
|
|
13,181
|
|
|
|
76,768
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance at December 31, 2007
|
|
|
40,865
|
|
|
|
154,384
|
|
|
|
4,408
|
|
|
|
199,657
|
|
Net profit for the period
|
|
|
|
|
|
|
|
|
|
|
5,791
|
|
|
|
5,791
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total recognized income and expense
|
|
|
|
|
|
|
|
|
|
|
5,791
|
|
|
|
5,791
|
|
Capital contributions
|
|
|
7,904
|
|
|
|
|
|
|
|
|
|
|
|
7,904
|
|
Dividends paid
|
|
|
|
|
|
|
|
|
|
|
(12,812
|
)
|
|
|
(12,812
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance at June 30, 2008
|
|
|
48,769
|
|
|
|
154,384
|
|
|
|
(2,613
|
)
|
|
|
200,540
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
The notes on pages F-95 to F-105 are an integral part of these
condensed combined unaudited interim financial statements.
F-93
Goldie
Navigation Ltd., Pavey Services Ltd., Shoreline Universal
Ltd.,
Valdis Marine Corp., Kalistos Maritime S.A. and Kalithea
Maritime S.A.
Condensed
Combined Unaudited Interim Statements of Cash Flows
For the six months ended June 30, 2008 and 2007
|
|
|
|
|
|
|
|
|
|
|
2008
|
|
|
2007
|
|
|
|
(In thousands of
|
|
|
|
US dollars)
|
|
|
Cash flows from operating activities
|
|
|
|
|
|
|
|
|
Net profit
|
|
|
5,791
|
|
|
|
6,201
|
|
Adjustments for:
|
|
|
|
|
|
|
|
|
Depreciation
|
|
|
16,314
|
|
|
|
6,260
|
|
Interest expense
|
|
|
993
|
|
|
|
1,519
|
|
Interest income
|
|
|
(36
|
)
|
|
|
(81
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
23,062
|
|
|
|
13,899
|
|
Due from related parties
|
|
|
(7,189
|
)
|
|
|
(8,467
|
)
|
Inventories
|
|
|
(235
|
)
|
|
|
(32
|
)
|
Trade accounts receivable and other assets
|
|
|
(677
|
)
|
|
|
(280
|
)
|
Trade accounts payable
|
|
|
2,054
|
|
|
|
295
|
|
Accrued expenses
|
|
|
(236
|
)
|
|
|
(55
|
)
|
Deferred revenue
|
|
|
1,558
|
|
|
|
91
|
|
Due to related parties
|
|
|
675
|
|
|
|
178
|
|
|
|
|
|
|
|
|
|
|
|
|
|
19,012
|
|
|
|
5,629
|
|
Interest paid
|
|
|
(1,019
|
)
|
|
|
(1,535
|
)
|
|
|
|
|
|
|
|
|
|
Net cash from operating activities
|
|
|
17,993
|
|
|
|
4,094
|
|
|
|
|
|
|
|
|
|
|
Cash flows from investing activities
|
|
|
|
|
|
|
|
|
Interest received
|
|
|
36
|
|
|
|
81
|
|
Dry-docking costs
|
|
|
(521
|
)
|
|
|
(5,071
|
)
|
Additions for vessels
|
|
|
(21,014
|
)
|
|
|
(544
|
)
|
|
|
|
|
|
|
|
|
|
Net cash used in investing activities
|
|
|
(21,499
|
)
|
|
|
(5,534
|
)
|
|
|
|
|
|
|
|
|
|
Cash flows from financing activities
|
|
|
|
|
|
|
|
|
Dividends paid
|
|
|
(12,812
|
)
|
|
|
|
|
Capital contributions
|
|
|
7,904
|
|
|
|
1,508
|
|
Proceeds from long-term debt
|
|
|
21,635
|
|
|
|
3,360
|
|
Repayment of long-term debt
|
|
|
(9,081
|
)
|
|
|
(4,854
|
)
|
|
|
|
|
|
|
|
|
|
Net cash from financing activities
|
|
|
7,646
|
|
|
|
14
|
|
|
|
|
|
|
|
|
|
|
Net increase/(decrease) in cash and cash equivalents
|
|
|
4,140
|
|
|
|
(1,426
|
)
|
Cash and cash equivalents at January 1
|
|
|
21
|
|
|
|
1,446
|
|
|
|
|
|
|
|
|
|
|
Cash and cash equivalents at June 30
|
|
|
4,161
|
|
|
|
20
|
|
|
|
|
|
|
|
|
|
|
The notes on pages F-95 to F-105 are an integral part of these
condensed combined unaudited interim financial statements.
F-94
June 30, 2008 and December 31, 2007
(In Thousands of US dollars)
|
|
1
|
Business
and basis of presentation
|
The combined financial statements include the assets,
liabilities and results of operations of the following
vessel-owning companies which include the second-hand dry bulk
carriers and the two newbuildings (Davakis G. (formerly Hull KA
215) and Delos Ranger (formerly Hull KA 216) (together
the Group). The vessel-owning company of the vessel
Davakis G. reflects trading activities from May 20, 2008
and the vessel-owning company of the vessel Delos Ranger
reflects no trading activities for all periods presented:
|
|
|
|
|
|
|
|
|
|
|
Country of
|
|
Date of
|
|
|
|
|
Vessel-Owning Company
|
|
Incorporation
|
|
Incorporation
|
|
Vessel Name
|
|
Date of Delivery
|
|
Goldie Navigation Ltd.
|
|
Marshall Islands
|
|
November 23, 2004
|
|
African Zebra
|
|
January 3, 2005
|
Pavey Services Ltd.
|
|
British Virgin Islands
|
|
October 29, 2004
|
|
Bremen Max
|
|
January 26, 2005
|
Shoreline Universal Ltd.
|
|
British Virgin Islands
|
|
November 25, 2004
|
|
Hamburg Max
|
|
April 1, 2005
|
Valdis Marine Corp.
|
|
Marshall Islands
|
|
November 3, 2004
|
|
African Oryx
|
|
April 4, 2005
|
Kalistos Maritime S.A.
|
|
Marshall Islands
|
|
February 16, 2004
|
|
Davakis G.
|
|
May 20, 2008
|
Kalithea Maritime S.A.
|
|
Marshall Islands
|
|
February 16, 2004
|
|
Delos Ranger
|
|
August 22, 2008
|
The vessel-owning companies with the second hand dry bulk
vessels above are subsidiaries of Lincoln Finance Corp.
(Lincoln), which in turn is a wholly owned subsidiary of
Nouvelle Enterprises (Nouvelle). The vessel-owning companies
with the newbuildings (Davakis G. and Delos Ranger) are indirect
wholly owned subsidiaries of First Financial Corporation
(First). First is the controlling shareholder of the six
vessel-owning Companies. Lincoln, Nouvelle and First are
incorporated under the laws of the Republic of the Marshall
Islands with registered offices at Trust Company Complex,
Ajeltake Island, P.O. Box 1405, Majuro, Marshall
Islands and are owned by members of the Restis family.
The technical management of the Group is performed by
Enterprises Shipping & Trading Company (EST), a
corporation situated in Liberia, beneficially owned by certain
members of the Restis family. EST provides the Company and other
related vessel-owning companies with a wide range of shipping
services that include technical support and maintenance,
insurance advice, financial and accounting services for a fixed
fee (refer to Note 19).
As of June 30, 2008 and December 31, 2007, the Group
does not employ any executive officers or personnel other than
crew aboard the vessels. The Directors of the six vessel-owning
companies do not receive remuneration for the non-executive
services they provide.
On May 20, 2008, companies affiliated with members of the
Restis family collectively acquired a 9.62% interest in Seanergy
Maritime Corp. (Seanergy) for $25 million in
cash from existing shareholders and officers of Seanergy (the
Founders) via the acquisition of
2,750,000 shares (the Shares) of the common
stock (the Common Stock) of Seanergy and 8,008,334
warrants to purchase shares of Seanergys Common Stock (the
Warrants and collectively with the Shares, the
Securities). The Common Stock is subject to an
Escrow Agreement dated September 24, 2007 entered into by
the Founders pursuant to which the Shares remain in escrow with
an escrow agent until the date that is 12 months after the
consummation of a business combination. The Warrants are subject
to a Lock-Up
Agreement dated September 24, 2007 (the
Lock-Up)
also entered into by the Founders pursuant to which the Warrants
would not be transferred until the consummation of the Business
Combination. On June 5, 2008 and June 10, 2008, a
further 413,000 shares and 200,000 shares of common
stock, respectively, were acquired by companies affiliated with
members of the Restis family on the open market, thereby
bringing their total interest in Seanergy to 11.76%. On various
dates from July 15, 2008 through August 11, 2008, a
further 8,316,781 shares of common stock were acquired by
companies affiliated with members of the Restis family either
through the open market or directly from
F-95
Goldie
Navigation Ltd., Pavey Services Ltd., Shoreline Universal
Ltd.,
Valdis Marine Corp., Kalistos Maritime S.A. and Kalithea
Maritime S.A.
Notes to Condensed Combined Unaudited Interim Financial
Statements (Continued)
June 30, 2008 and December 31, 2007
shareholders, thereby bringing their total interest in Seanergy
to 40.84% (see Note 20(d)). Following the
shareholders approval on August 26, 2008 (see
Note 20(b)), the non-voting shareholders redeemed 6,370,773
Seanergy shares and thereby bringing the total interest of the
Restis family in Seanergy to 52.54% (see Note 20(d)). The
voting rights associated with the Securities are governed by a
voting agreement.
Also on May 20, 2008 Seanergy, a Marshall Islands
Corporation and its subsidiary Seanergy Merger Corp., a Marshall
Islands Corporation (Buyer) entered into a Master
Agreement pursuant to which the Buyer agreed to purchase for an
aggregate purchase price of: (i) $367,030 in cash;
(ii) $28,250 in the form of a promissory note convertible
to 2,260,000 shares of Buyers common stock at $12.50
per share; and (iii) up to 4,308,075 shares of
Buyers common stock if Buyer achieves certain earnings
before interest, tax and depreciation thresholds, six dry bulk
vessels from companies associated with members of the Restis
family, which include four second-hand vessels and two
newbuildings, which were delivered on May 20, 2008 and
August 22, 2008 (see Notes 10 and 20(a)). In
connection with the foregoing, Seanergy entered into six
Memoranda of Agreement with the vessel-owning companies.
|
|
2
|
Statement
of compliance
|
The condensed combined unaudited interim financial statements
have been prepared in accordance with International Financial
Reporting Standards (IFRS) IAS 34 Interim Financial
Reporting. They do not include all of the information
required for full annual financial statements, and should be
read in connection with the combined financial statements of the
Group as of and for the year ended December 31, 2007.
These condensed combined unaudited interim financial statements
were approved by the Directors of the Group on October 31,
2008.
|
|
3
|
Significant
accounting policies
|
The accounting policies applied by the Group in the accompanying
condensed combined unaudited interim financial statements are
the same as those applied by the Group in its combined financial
statements as of December 31, 2007.
|
|
4
|
Use of
estimates and judgments
|
The preparation of interim financial statements requires
management to make judgments, estimates and assumptions that
affect the application of accounting policies and the reported
amounts of assets, liabilities, income and expenses. Actual
results may differ from these estimates.
Estimates and underlying assumptions are reviewed on an ongoing
basis. Revisions to accounting estimates are recognized in the
period in which the estimate is revised and in any future
periods affected. The estimates and assumptions that have the
most significant effect on the amounts recognized in the
combined financial statements are estimations in relation to the
revaluation of vessels, useful lives of vessels, impairment
losses on vessels and on trade accounts receivable.
In preparing these condensed combined unaudited interim
financial statements, the significant judgments made by
management in applying the Groups accounting policies and
the sources of estimation uncertainty were the same as those
that applied to the combined financial statements as of and for
the year ended December 31, 2007, except for an increase in
the estimated residual value of the vessels used in calculating
depreciation, resulting in a lower depreciation charge to the
condensed combined unaudited income statement for the six months
ended June 30, 2008 of $1,053.
F-96
Goldie
Navigation Ltd., Pavey Services Ltd., Shoreline Universal
Ltd.,
Valdis Marine Corp., Kalistos Maritime S.A. and Kalithea
Maritime S.A.
Notes to Condensed Combined Unaudited Interim Financial
Statements (Continued)
June 30, 2008 and December 31, 2007
|
|
5
|
Financial
risk management and capital management
|
The Groups financial risk management and capital
management objectives and policies are consistent with those
disclosed in the combined financial statements as of and for the
year ended December 31, 2007.
|
|
|
|
|
|
|
|
|
|
|
2008
|
|
|
2007
|
|
|
Classification fees and surveys
|
|
|
1
|
|
|
|
4
|
|
Bunkers expenses
|
|
|
608
|
|
|
|
38
|
|
Port expenses
|
|
|
11
|
|
|
|
5
|
|
Tugs
|
|
|
|
|
|
|
2
|
|
Commission and fees
|
|
|
5
|
|
|
|
4
|
|
Insurance and other voyage expenses
|
|
|
|
|
|
|
7
|
|
Accrued voyage expenses
|
|
|
134
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
759
|
|
|
|
60
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2008
|
|
|
2007
|
|
|
Basic and supplementary wages
|
|
|
654
|
|
|
|
579
|
|
Overtime
|
|
|
447
|
|
|
|
319
|
|
Vacation
|
|
|
218
|
|
|
|
164
|
|
Bonus
|
|
|
517
|
|
|
|
151
|
|
Other crew expenses
|
|
|
307
|
|
|
|
130
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2,143
|
|
|
|
1,343
|
|
Crew costs represent the amounts due to the crew on board the
vessels under short-term contracts, i.e. no more than
9 months. The Group is not obliged to contribute to any
pension plans or post-employment benefits for the crew on board.
|
|
8
|
Other
operating expenses
|
|
|
|
|
|
|
|
|
|
|
|
2008
|
|
|
2007
|
|
|
Chemicals and lubricants
|
|
|
837
|
|
|
|
689
|
|
Repairs and maintenance
|
|
|
508
|
|
|
|
458
|
|
Insurance
|
|
|
334
|
|
|
|
272
|
|
Other operating expenses
|
|
|
152
|
|
|
|
52
|
|
|
|
|
|
|
|
|
|
|
|
|
|
1,831
|
|
|
|
1,471
|
|
|
|
|
|
|
|
|
|
|
F-97
Goldie
Navigation Ltd., Pavey Services Ltd., Shoreline Universal
Ltd.,
Valdis Marine Corp., Kalistos Maritime S.A. and Kalithea
Maritime S.A.
Notes to Condensed Combined Unaudited Interim Financial
Statements (Continued)
June 30, 2008 and December 31, 2007
|
|
9
|
Financial
income and expense
|
|
|
|
|
|
|
|
|
|
|
|
2008
|
|
|
2007
|
|
|
Financial income:
|
|
|
|
|
|
|
|
|
Interest income
|
|
|
36
|
|
|
|
81
|
|
|
|
|
|
|
|
|
|
|
Financial expense:
|
|
|
|
|
|
|
|
|
Interest expense
|
|
|
993
|
|
|
|
1,519
|
|
Amortization of finance costs
|
|
|
13
|
|
|
|
11
|
|
Foreign exchange loss, net
|
|
|
8
|
|
|
|
10
|
|
|
|
|
|
|
|
|
|
|
|
|
|
1,014
|
|
|
|
1,540
|
|
|
|
|
|
|
|
|
|
|
Net finance cost
|
|
|
978
|
|
|
|
1,459
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Advances to
|
|
|
|
|
|
|
|
|
|
|
|
|
Shipyards for
|
|
|
|
|
|
|
|
|
|
|
|
|
Vessels Under
|
|
|
|
|
|
|
|
|
|
Vessels
|
|
|
Construction
|
|
|
Dry-Docking
|
|
|
Total
|
|
|
Cost
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance at January 1, 2007
|
|
|
121,516
|
|
|
|
4,922
|
|
|
|
1,586
|
|
|
|
128,024
|
|
Additions
|
|
|
24
|
|
|
|
12,661
|
|
|
|
989
|
|
|
|
13,674
|
|
Revaluation
|
|
|
129,265
|
|
|
|
|
|
|
|
|
|
|
|
129,265
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance at December 31, 2007
|
|
|
250,805
|
|
|
|
17,583
|
|
|
|
2,575
|
|
|
|
270,963
|
|
Additions
|
|
|
675
|
|
|
|
20,339
|
|
|
|
521
|
|
|
|
21,535
|
|
Transfers
|
|
|
25,127
|
|
|
|
(25,127
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance at June 30, 2008
|
|
|
276,607
|
|
|
|
12,795
|
|
|
|
3,096
|
|
|
|
292,498
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Accumulated depreciation
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance at January 1, 2007
|
|
|
(13,053
|
)
|
|
|
|
|
|
|
(484
|
)
|
|
|
(13,537
|
)
|
Depreciation
|
|
|
(11,795
|
)
|
|
|
|
|
|
|
(830
|
)
|
|
|
(12,625
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance December 31, 2007
|
|
|
(24,848
|
)
|
|
|
|
|
|
|
(1,314
|
)
|
|
|
(26,162
|
)
|
Depreciation
|
|
|
(15,709
|
)
|
|
|
|
|
|
|
(605
|
)
|
|
|
(16,314
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance June 30, 2008
|
|
|
(40,557
|
)
|
|
|
|
|
|
|
(1,919
|
)
|
|
|
(42,476
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net book value January 1, 2007
|
|
|
108,463
|
|
|
|
4,922
|
|
|
|
1,102
|
|
|
|
114,487
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net book value December 31, 2007
|
|
|
225,957
|
|
|
|
17,583
|
|
|
|
1,261
|
|
|
|
244,801
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net book value June 30, 2008
|
|
|
236,050
|
|
|
|
12,795
|
|
|
|
1,177
|
|
|
|
250,022
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Kalistos Maritime S.A. and Kalithea Maritime S.A. had entered
into shipbuilding contracts with a shipyard for the construction
of two newbuildings with the expected delivery dates in 2008. On
May 20, 2008, one newbuilding, vessel Davakis G., was
delivered from the shipyard and the last installment of $11,820
was paid.
F-98
Goldie
Navigation Ltd., Pavey Services Ltd., Shoreline Universal
Ltd.,
Valdis Marine Corp., Kalistos Maritime S.A. and Kalithea
Maritime S.A.
Notes to Condensed Combined Unaudited Interim Financial
Statements (Continued)
June 30, 2008 and December 31, 2007
As of June 30, 2008 Kalithea Maritime S.A. was committed to
the construction of its vessel, Delos Ranger, at a total
contract cost of $23,820. Payments against the contract cost
through June 30, 2008 totaled $12,000 and are included
under the caption advances to shipyards for vessels under
construction. The vessel Delos Ranger was delivered from the
shipyard on August 22, 2008 (refer to Note 20(a)).
Capitalized interest included under the caption advances to
shipyards for vessels under construction as of June 30,
2008 and December 31, 2007 amounted to $795 and $249
respectively.
On various dates in August 2008 and September 2008, the vessels
were sold (refer to Note 20(b)).
|
|
11
|
Trade
accounts receivable and other assets
|
|
|
|
|
|
|
|
|
|
|
|
June 30,
|
|
|
December 31,
|
|
|
|
2008
|
|
|
2007
|
|
|
Charterers
|
|
|
1,324
|
|
|
|
1,237
|
|
Insurance claims
|
|
|
14
|
|
|
|
22
|
|
Prepayments for insurance premiums
|
|
|
675
|
|
|
|
238
|
|
Agents
|
|
|
252
|
|
|
|
48
|
|
Other
|
|
|
|
|
|
|
43
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2,265
|
|
|
|
1,588
|
|
Impairment loss
|
|
|
(660
|
)
|
|
|
(660
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
1,605
|
|
|
|
928
|
|
|
|
|
|
|
|
|
|
|
|
|
12
|
Cash and
cash equivalents
|
|
|
|
|
|
|
|
|
|
|
|
June 30,
|
|
|
December 31,
|
|
|
|
2008
|
|
|
2007
|
|
|
On demand
|
|
|
61
|
|
|
|
21
|
|
Term deposits
|
|
|
4,100
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
4,161
|
|
|
|
21
|
|
|
|
|
|
|
|
|
|
|
Capital contributions represents payments made by the
shareholders at various dates to finance vessel acquisitions in
excess of the amounts of the bank loans obtained. There is no
contractual obligation to repay the amounts.
F-99
Goldie
Navigation Ltd., Pavey Services Ltd., Shoreline Universal
Ltd.,
Valdis Marine Corp., Kalistos Maritime S.A. and Kalithea
Maritime S.A.
Notes to Condensed Combined Unaudited Interim Financial
Statements (Continued)
June 30, 2008 and December 31, 2007
Long-term debt is analyzed as follows:
|
|
|
|
|
|
|
|
|
|
|
June 30,
|
|
|
December 31,
|
|
Borrower
|
|
2008
|
|
|
2007
|
|
|
Goldie Navigation Ltd.
|
|
|
5,513
|
|
|
|
5,858
|
|
Valdis Marine Corp.
|
|
|
8,072
|
|
|
|
8,576
|
|
Pavey Services Ltd.
|
|
|
11,421
|
|
|
|
12,134
|
|
Shoreline Universal Ltd.
|
|
|
12,602
|
|
|
|
13,390
|
|
Kalistos Maritime S.A.
|
|
|
16,617
|
|
|
|
5,026
|
|
Kalithea Maritime S.A.
|
|
|
6,659
|
|
|
|
3,346
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
|
60,884
|
|
|
|
48,330
|
|
Less: Current portion
|
|
|
12,364
|
|
|
|
9,750
|
|
|
|
|
|
|
|
|
|
|
Long-term portion
|
|
|
48,520
|
|
|
|
38,580
|
|
|
|
|
|
|
|
|
|
|
The weighted average effective interest rate for all long-term
debt for the three months and six months ended 30, June 2008 and
2007 was approximately 4.61% and 6.23%, respectively. Interest
expense for the six months ended 30, June 2008 and 2007 amounted
to $993 and $1,519, respectively, and is included in finance
expense in the accompanying condensed combined unaudited interim
statements of income.
The principal repayments are as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year of
|
|
1 Year or
|
|
1 to 2
|
|
2 to 5
|
|
More Than
|
|
|
|
|
Maturity
|
|
Less
|
|
Years
|
|
Years
|
|
5 Years
|
|
Total
|
|
December 31, 2007
|
|
|
2015
|
|
|
|
9,750
|
|
|
|
4,724
|
|
|
|
14,171
|
|
|
|
19,685
|
|
|
|
48,330
|
|
June 30, 2008
|
|
|
2015
|
|
|
|
12,364
|
|
|
|
5,643
|
|
|
|
16,931
|
|
|
|
25,946
|
|
|
|
60,884
|
|
|
|
(a)
|
Goldie
Navigation Ltd., Valdis Marine Corp., Pavey Services Ltd. and
Shoreline Universal Ltd. loan facilities:
|
The long-term debt, denominated in US Dollars, of Goldie
Navigation Ltd., Valdis Marine Corp., Pavey Services Ltd. and
Shoreline Universal Ltd. represents the amounts allocated to
each vessel-owning company from the syndicated loan of $500,000
concluded on December 24, 2004 for the purchase of
32 vessels by each of 32 vessel-owning companies, with
Lincoln and Nouvelle as corporate guarantors (the syndicated
loan). The syndicated loan was allocated to each vessel-owning
company based upon each vessels acquisition cost. The
Group adjusts the amount outstanding each time one of the
vessels in the syndicated loan is sold without repayment of the
associated debt or a portion of the loan is paid and allocates
it proportionately to the remaining vessel-owning companies.
The long-term debt initially allocated to each vessel-owning
company represents approximately 67.5% of the vessel acquisition
cost. The syndicated loan is payable in variable principal
installments plus interest at variable rates (LIBOR plus a
spread of 0.875%) with an original balloon installment of
$45,500 in March 2015. The balloon installment outstanding as of
June 30, 2008 and December 31, 2007 amounted to
$23,702 and $26,153, respectively.
The long-term debt is secured by a mortgage on the vessels, a
corporate guarantee of Lincoln and Nouvelle, and assignments on
earnings, insurance and requisition compensation of the
mortgaged vessel.
F-100
Goldie
Navigation Ltd., Pavey Services Ltd., Shoreline Universal
Ltd.,
Valdis Marine Corp., Kalistos Maritime S.A. and Kalithea
Maritime S.A.
Notes to Condensed Combined Unaudited Interim Financial
Statements (Continued)
June 30, 2008 and December 31, 2007
The original loan agreements for all of the vessels include
covenants deriving from the syndicated loan that require the
vessel-owning companies to maintain minimum hull values in
connection with the vessels outstanding loans, insurance
coverage of the vessels against all customary risks. The
corporate guarantors are required to have minimum levels of
available cash and cash equivalents, liquidity funds on a
consolidated basis of no less than $30,000, leverage ratio
(defined as Debt to Total assets) not higher than 0.7:0.1 and
net worth (total assets less the amount of the consolidated
debt) not less than $250,000. In addition, the covenants do not
permit the borrowers to sell the vessels and assets and change
the beneficial ownership or management of the vessels, without
the prior consent of the banks. The individual vessel-owning
companies and the corporate guarantors are in compliance with
the debt covenants as of June 30, 2008 and
December 31, 2007.
Goldie Navigation Ltd.: The allocated initial
amount for Goldie Navigation Ltd. was $9,460 to partly finance
the acquisition of vessel African Zebra. At December 31,
2007, the outstanding balance was $5,881 ($5,858 net of
principal repayment of $1,425 in 2007 and deferred direct cost)
payable in twenty-nine equal quarterly principal installments of
$174 plus interest at variable rates (LIBOR plus a spread of
0.875%) with a balloon installment of $861 due in 2015. At
June 30, 2008, the outstanding balance was $5,535
($5,513 net of principal repayment of $346 in 2008 and
deferred direct cost) payable in twenty-seven equal quarterly
principal installments of $173 plus interest at variable rates
(LIBOR plus a spread of 0.875%) with a balloon installment of
$861 due in 2015. On September 25, 2008, the vessel African
Zebra was sold and the outstanding amount in the syndicated loan
was allocated proportionately to the remaining vessel-owning
companies which were part of the original syndicated loan and
whose vessels have not been sold (see Note (20c)).
Valdis Marine Corp.: The allocated initial
amount for Valdis Marine Corp. was $13,852 to partly finance the
acquisition of vessel African Oryx. At December 31, 2007,
the outstanding balance was $8,612 ($8,576 net of principal
repayment of $2,114 in 2007 and deferred direct cost) payable in
twenty-nine equal quarterly principal installments of $254 plus
interest at variable rates (LIBOR plus a spread of 0.875%) with
a balloon installment of $1,261 due in 2015. At June 30,
2008, the outstanding balance was $8,105 ($8,072 net of
principal repayment of $507 in 2008 and deferred direct cost)
payable in twenty-seven equal quarterly principal installments
of $253 plus interest at variable rates (LIBOR plus a spread of
0.875%) with a balloon installment of $1,261 due in 2015. On
August 28, 2008, the vessel African Oryx was sold and the
outstanding amount in the syndicated loan was allocated
proportionately to the remaining vessel-owning companies which
were part of the original syndicated loan and whose vessels have
not been sold (see Note (20c)).
Pavey Services Ltd.: The allocated initial
amount for Pavey Services Ltd. was $19,595 to partly finance the
acquisition of vessel Bremen Max. At December 31, 2007, the
outstanding balance was $12,182 ($12,134 net of principal
repayments of $3,000 in 2007 and deferred direct cost) payable
in twenty-nine equal quarterly principal installments of $359
plus interest at variable rates (LIBOR plus a spread of 0.875%)
with a balloon installment of $1,783 due in 2015. At
June 30, 2008, the outstanding balance was $11,465
($11,421 net of principal repayment of $717 in 2008 and
deferred direct cost) payable in twenty-seven equal quarterly
principal installments of $359 plus interest at variable rates
(LIBOR plus a spread of 0.875%) with a balloon installment of
$1,783 due in 2015. On September 11, 2008, the vessel
Bremen Max was sold and the outstanding amount in the syndicated
loan was allocated proportionately to the remaining
vessel-owning companies which were part of the original
syndicated loan and whose vessels have not been sold (see Note
(20c)).
Shoreline Universal Ltd.: The allocated
initial amount for Shoreline Universal Ltd. was $21,622 to
finance the acquisition of the vessel Hamburg Max. At
December 31, 2007, the outstanding balance was $13,443
($13,390 net of principal repayments of $3,305 in 2007 and
direct cost) payable in twenty-nine equal quarterly principal
installments of $396 plus interest at variable rates (LIBOR plus
a spread of 0.875%) with a
F-101
Goldie
Navigation Ltd., Pavey Services Ltd., Shoreline Universal
Ltd.,
Valdis Marine Corp., Kalistos Maritime S.A. and Kalithea
Maritime S.A.
Notes to Condensed Combined Unaudited Interim Financial
Statements (Continued)
June 30, 2008 and December 31, 2007
balloon installment of $1,968 due in 2015. At June 30,
2008, the outstanding balance was $12,651 ($12,602 net of
principal repayment of $791 in 2008 and deferred direct cost)
payable in twenty-seven equal quarterly principal installments
of $396 plus interest at variable rates (LIBOR plus a spread of
0.875%) with a balloon installment of $1,968 due in 2015. On
September 25, 2008, the vessel Hamburg Max was sold and the
outstanding amount in the syndicated loan was allocated
proportionately to the remaining vessel-owning companies which
were part of the original syndicated loan and whose vessels have
not been sold (see Note (20c)).
|
|
(b)
|
Kalistos
Maritime S.A. and Kalithea Maritime S.A.. loan
facilities:
|
(i) Original loan facility: On
June 23, 2006 Kalistos Maritime S.A., Kalithea Maritime
S.A. and a third affiliated vessel-owning company entered into a
loan facility of up to $20,160 and a guarantee facility of up to
$28,800 each to be used to partly finance and guarantee the
payment to the shipyards for the newbuilding.
(ii) 2nd loan facility: On
March 11, 2008, Kalithea Maritime S.A., Kalistos Maritime
S.A. and another vessel-owning company not included in the Group
signed a commitment letter for a preferred ship variable rate
mortgage bank loan for up to $50,022 to finance a maximum of 70%
of the acquisition of three vessels under construction at the
shipyards.
The loan bears interest at LIBOR plus a spread and is repayable
in equal consecutive quarterly installments of $230 commencing
three months after the delivery date of the vessels with any
unpaid balance on the final maturity date (May
2018) becoming due at that time as a balloon payment.
The covenants require, among others, the vessel-owning companies
to maintain minimum hull values in connection with the
vessels outstanding loans, insurance coverage of the
vessels against all customary risks and to maintain a ratio of
the fair market value of the vessels over the debt at a minimum
of 125%. The Guarantor will require minimum levels of available
cash and cash equivalents, liquidity funds on a consolidated
basis not less than $10,000, leverage ratio (defined as total
consolidated liabilities over total consolidated assets adjusted
to reflect the market value of the vessels not to exceed 70%),
not to have further indebtedness or issuing guarantees. In
addition, the covenants do not permit the borrowers to sell the
vessels and assets and change the beneficial ownership or
management of the vessels, without the prior consent of the
banks. First will be the guarantor of the loan. The individual
vessel-owning companies and the Guarantor are in compliance with
the debt covenants as of June 30, 2008 and
December 31, 2007.
Kalistos Maritime S.A.: Kalistos Maritime S.A.
loan facility (from the original loan facility) was for up to
$6,720, plus interest at variable rates (LIBOR plus a spread of
0.65%), to finance a portion of the construction cost of Davakis
G. Gross drawdowns against this facility at December 31,
2007 and June 30, 2008 amounted to $5,040 ($5,026 in total,
net of deferred direct costs) and $1,680, respectively. The loan
was repayable in full at the earlier of December 18, 2008
or the date the newbuilding was delivered by the shipyard. On
May 20, 2008, vessel Davakis G. was delivered from the
shipyard and the last building installment of $11,820 was paid.
To finance 70% of the vessel acquisition cost amounting to
$23,820, a commitment letter for a preferred ship variable rate
mortgage was concluded (2nd facility). The total drawdown
against this mortgage was $16,674 which was used to repay the
original loan facility of $6,720 and the remaining drawdown was
used to finance the vessel. At June 30, 2008, the
outstanding balance was $16,617 net of deferred direct
costs. On August 28, 2008, the vessel Davakis G. was sold
and the related loan was repaid (refer to Note 20(b)).
Kalithea Maritime S.A.: Kalithea Maritime S.A.
loan facility (from the original loan facility) was for up to
$6,720 plus interest at variable rates (LIBOR plus a spread of
0.65%), to finance a portion of the construction cost of Delos
Ranger. Gross drawdowns against the original facility at
December 31, 2007
F-102
Goldie
Navigation Ltd., Pavey Services Ltd., Shoreline Universal
Ltd.,
Valdis Marine Corp., Kalistos Maritime S.A. and Kalithea
Maritime S.A.
Notes to Condensed Combined Unaudited Interim Financial
Statements (Continued)
June 30, 2008 and December 31, 2007
amounted to $3,360 ($3,346 net of deferred direct costs).
Gross cumulative drawdowns against this facility at
June 30, 2008 amounted to $6,720 ($6,659 in total, net of
deferred direct costs). The loan is repayable in full at the
earlier of May 18, 2009 or the date the newbuilding is
delivered by the shipyard. The vessel Delos Ranger was delivered
on August 22, 2008 (refer to Note 20(a)). On
August 28, 2008, the vessel Delos Ranger was sold and the
related loan was repaid (refer to Notes 20(a) and 20(b)).
|
|
15
|
Trade
accounts payable
|
|
|
|
|
|
|
|
|
|
|
|
June 30,
|
|
|
December 31,
|
|
|
|
2008
|
|
|
2007
|
|
|
Suppliers
|
|
|
2,463
|
|
|
|
883
|
|
Insurance agents
|
|
|
543
|
|
|
|
167
|
|
Other
|
|
|
228
|
|
|
|
130
|
|
|
|
|
|
|
|
|
|
|
|
|
|
3,234
|
|
|
|
1,180
|
|
|
|
|
|
|
|
|
|
|
Deferred revenue represents voyages invoiced but not earned up
to June 30, 2008.
Various claims, suits and complaints, including those involving
government regulations and product liability, arise in the
ordinary course of the shipping business. In addition, losses
may arise from disputes with charterers, agents, insurance and
other claims with suppliers relating to the operation of the
Groups vessels. Currently, management is not aware of any
such contingent liabilities which should be disclosed or for
which a provision should be established in the accompanying
condensed combined unaudited interim financial statements.
The Group accrues for the cost of environmental liabilities when
management becomes aware that a liability is probable and is
able to reasonably estimate the probable exposure. Currently,
management is not aware of any such claims or contingent
liabilities which should be disclosed, or for which a provision
should be established in the accompanying condensed combined
unaudited interim financial statements.
As of June 30, 2008 Kalithea Maritime S.A. is committed to
the purchase of Delos Ranger for a total cost of $23,820
(excluding capitalized interest of $795). Payments outstanding
amount to $11,820 (see also Note 20(a)).
F-103
Goldie
Navigation Ltd., Pavey Services Ltd., Shoreline Universal
Ltd.,
Valdis Marine Corp., Kalistos Maritime S.A. and Kalithea
Maritime S.A.
Notes to Condensed Combined Unaudited Interim Financial
Statements (Continued)
June 30, 2008 and December 31, 2007
The related party balances are:
|
|
|
|
|
|
|
|
|
|
|
June 30,
|
|
|
December 31,
|
|
|
|
2008
|
|
|
2007
|
|
|
Due from related parties current
|
|
|
|
|
|
|
|
|
Due from EST
|
|
|
600
|
|
|
|
480
|
|
Due from Lincoln
|
|
|
11,978
|
|
|
|
4,909
|
|
Charter revenue receivable from Swiss Marine Services S.A.
|
|
|
444
|
|
|
|
444
|
|
|
|
|
|
|
|
|
|
|
|
|
|
13,022
|
|
|
|
5,833
|
|
|
|
|
|
|
|
|
|
|
Due to related parties current
|
|
|
|
|
|
|
|
|
Due to EST
|
|
|
1,020
|
|
|
|
386
|
|
Due to First
|
|
|
375
|
|
|
|
334
|
|
|
|
|
|
|
|
|
|
|
|
|
|
1,395
|
|
|
|
720
|
|
|
|
|
|
|
|
|
|
|
The related party transactions included in the condensed
combined unaudited statements of income for the six months ended
June 30, 2008 and 2007 are:
|
|
|
|
|
|
|
|
|
|
|
2008
|
|
2007
|
|
Voyage revenue (Swiss Marine Services S.A.)
|
|
|
|
|
|
|
3,430
|
|
Management fees (EST)
|
|
|
411
|
|
|
|
387
|
|
The related parties identified are:
The directors of the Group do not receive remuneration for the
non-executive services they offer. The identity and the
description of the other related parties of the Group are given
below.
Lincoln and First are the parent companies of the vessel and
hull-owning companies, respectively (see Note 1). The
amounts due to and due from them represent expenses paid and
funds collected on the Groups behalf.
Each vessel-owning company of the Group has a management
agreement with EST, to provide management services in exchange
for a fixed fee per day for each vessel in operation and a fixed
monthly fee per hull under construction. These agreements are
entered into with an initial three-year term until terminated by
either party upon written notice, in which case the agreements
terminate within two months after the date notice was given. In
the event that the agreement with EST is terminated, the fee
payable to EST shall continue to be payable for three months
from the termination date. In addition, EST provides crew for
the vessel and receives a reimbursement for crew support costs
for three months. Finally, if the agreement is terminated EST
will receive crew severance costs of up to $50 per vessel.
Management agreements with EST require the vessel-owning
companies with vessels in operation, to make an interest-free
advance of $120 each, to cover the working capital requirements
arising from the handling of the majority of the expenditure
F-104
Goldie
Navigation Ltd., Pavey Services Ltd., Shoreline Universal
Ltd.,
Valdis Marine Corp., Kalistos Maritime S.A. and Kalithea
Maritime S.A.
Notes to Condensed Combined Unaudited Interim Financial
Statements (Continued)
June 30, 2008 and December 31, 2007
generated from the vessels operations. This advance is
made ten days before the delivery of the vessel for which EST is
appointed as the manager.
|
|
(d)
|
Swiss
Marine Services S.A. (SwissMarine)
|
Based on charter party agreements, certain of the Groups
vessels are chartered to SwissMarine, an affiliated company,
beneficially owned by certain members of the Restis family.
(a) Delivery of Delos Ranger: On
August 22, 2008, vessel Delos Ranger was delivered from the
shipyard and the last installment of $11,820 (excluding
capitalized interest of $795) was paid. To finance 70% of the
vessel acquisition cost amounting to $23,820, a commitment
letter for the preferred ship variable rate mortgage was
concluded (see Note 14). The total drawdown against this
mortgage on August 22, 2008 of $16,674 was used to repay
the existing loan facility of $6,720 and the remaining drawdown
was used to finance the vessel. The vessel Delos Ranger was sold
on August 28, 2008 and the loan was repaid in full (see
Note 20(b)).
(b) Sale of vessels: On August 26,
2008, Seanergy approved the acquisition of the 6 dry bulk
vessels from the Group and on August 28, 2008,
September 11, 2008 and September 25, 2008, the Group
sold its vessels to subsidiaries of Seanergy (see
Note 1) for an aggregate sales price of $395,280 plus
a contingent consideration as mentioned in Note 1.
(c) Settlement of long term debt: The
long-term debt (see Note 14), denominated in
US Dollars, of Goldie Navigation Ltd., Valdis Marine Corp.,
Pavey Services Ltd. and Shoreline Universal Ltd. represents the
amounts allocated to each vessel-owning company from the
syndicated loan of $500,000 concluded on December 24, 2004
for the purchase of 32 vessels by each of
32 vessel-owning companies, with Lincoln and Nouvelle as
corporate guarantors (the syndicated loan). The syndicated loan
was allocated to each vessel-owning company based upon each
vessels acquisition cost. The Group adjusts the amount
outstanding each time one of the vessels in the syndicated loan
is sold without repayment of the associated debt or a portion of
the loan is paid and allocates it proportionately to the
remaining vessel-owning companies. Therefore, as the vessels
owned by these companies have been sold (see 20(b)), the
outstanding balances will be allocated to the vessel-owning
companies which were part of the original syndicated loan and
whose vessels have not been sold.
(d) Acquisition of common stock: On
various dates from July 15, 2008 through August 11,
2008 companies affiliated with members of the Restis family
purchased 8,246,781 shares of common stock from
shareholders of Seanergy or from the open market for an
aggregate purchase price of $82,013. On July 23, 2008,
another company affiliated with members of the Restis family
purchased 70,000 shares of common stock of Seanergy from
the open market for an aggregate purchase price of $691,
bringing their total interest in Seanergy to 40.84%. Following
the shareholders approval on August 26, 2008 (see
Note 20(b)), the non-voting shareholders redeemed 6,370,773
Seanergy shares thereby bringing the total interest of the
Restis family in Seanergy to 52.54%.
Subsequent to October 13, 2008, companies affiliated with
members of the Restis family purchased in open market
transactions 4,454,134 shares of common stock for an
aggregate purchase price of $23,618. Following these purchases
of common stock, the total interest of the Restis family and its
affiliates in Seanergy is 72%.
F-105
Report of
Independent Registered Public Accounting Firm
The Board of
Directors and Shareholders
BULK ENERGY TRANSPORT (HOLDINGS) LIMITED:
We have audited the accompanying consolidated balance sheets of
BULK ENERGY TRANSPORT (HOLDINGS) LIMITED (together the
Group) as of December 31, 2008 and 2007, and
the related consolidated statements of income, changes in equity
and cash flows for each of the years in the two-year period
ended December 31, 2008, and the period from
December 18, 2006 (inception) to December 31, 2006.
These consolidated financial statements are the responsibility
of the Groups management. Our responsibility is to express
an opinion on these consolidated 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. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in
the financial statements. An audit also, includes 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 consolidated financial statements referred
to above present fairly, in all material respects, the financial
position of the Group as of December 31, 2008 and 2007, and
the results of its operations and its cash flows for each of the
years in the two-year period ended December 31, 2008 and,
the period from December 18, 2006 (inception) to
December 31, 2006, in conformity with International
Financial Reporting Standards, as issued by the International
Accounting Standards Board.
/s/ KPMG
Certified Auditors AE
Athens, Greece
September 11, 2009
F-106
BULK
ENERGY TRANSPORT (HOLDINGS) LIMITED
December 31,
2008 and 2007
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Note
|
|
|
2008
|
|
|
2007
|
|
|
|
|
|
|
In thousands of
|
|
|
|
|
|
|
US Dollars
|
|
|
ASSETS
|
Vessels, net
|
|
|
7
|
|
|
|
276,753
|
|
|
|
430,053
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total non-current assets
|
|
|
|
|
|
|
276,753
|
|
|
|
430,053
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Inventories
|
|
|
8
|
|
|
|
1,217
|
|
|
|
682
|
|
Trade accounts receivables and other assets
|
|
|
9
|
|
|
|
2,025
|
|
|
|
11,075
|
|
Due from related parties
|
|
|
18
|
|
|
|
16,094
|
|
|
|
2,913
|
|
Cash and cash equivalents
|
|
|
10
|
|
|
|
35,110
|
|
|
|
26,665
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total current assets
|
|
|
|
|
|
|
54,446
|
|
|
|
41,335
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total assets
|
|
|
|
|
|
|
331,199
|
|
|
|
471,388
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Equity
|
|
|
|
|
|
|
|
|
|
|
|
|
Capital contributions
|
|
|
11
|
|
|
|
100,226
|
|
|
|
115,553
|
|
Revaluation reserve
|
|
|
|
|
|
|
68,972
|
|
|
|
208,562
|
|
Retained earnings/(accumulated deficit)
|
|
|
|
|
|
|
1,061
|
|
|
|
(4,754
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total equity
|
|
|
|
|
|
|
170,259
|
|
|
|
319,361
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
LIABILITIES
|
Long-term debt, net
|
|
|
12
|
|
|
|
134,152
|
|
|
|
116,208
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total non-current liabilities
|
|
|
|
|
|
|
134,152
|
|
|
|
116,208
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Fair value of interest rate swap
|
|
|
15
|
|
|
|
6,935
|
|
|
|
922
|
|
Current portion of long-term debt, net
|
|
|
12
|
|
|
|
16,573
|
|
|
|
20,875
|
|
Trade accounts payable
|
|
|
13
|
|
|
|
2,091
|
|
|
|
2,699
|
|
Accrued expenses
|
|
|
14
|
|
|
|
457
|
|
|
|
262
|
|
Deferred revenue
|
|
|
|
|
|
|
212
|
|
|
|
342
|
|
Due to related parties
|
|
|
18
|
|
|
|
59
|
|
|
|
10,500
|
|
Accrued interest expense
|
|
|
|
|
|
|
461
|
|
|
|
219
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total current liabilities
|
|
|
|
|
|
|
26,788
|
|
|
|
35,819
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total equity and liabilities
|
|
|
|
|
|
|
331,199
|
|
|
|
471,388
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
The notes on
page F-111
to F-129 are an integral part of these financial statements.
F-107
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Period from
|
|
|
|
|
|
|
|
|
|
|
|
|
December 18,
|
|
|
|
|
|
|
|
|
|
|
|
|
2006
|
|
|
|
|
|
|
|
|
|
|
|
|
(Inception) to
|
|
|
|
|
|
|
|
|
|
|
|
|
December 31,
|
|
|
|
Note
|
|
|
2008
|
|
|
2007
|
|
|
2006
|
|
|
|
|
|
|
In thousands of US Dollars
|
|
|
Revenue from vessels
|
|
|
|
|
|
|
60,859
|
|
|
|
5,362
|
|
|
|
|
|
Revenue from vessels related party
|
|
|
18
|
|
|
|
168
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
61,027
|
|
|
|
5,362
|
|
|
|
|
|
Direct voyage expenses
|
|
|
3
|
|
|
|
(1,981
|
)
|
|
|
(22
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
59,046
|
|
|
|
5,340
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Gain on sale of vessels
|
|
|
7
|
|
|
|
59,068
|
|
|
|
|
|
|
|
|
|
Expenses:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Crew costs
|
|
|
4
|
|
|
|
(5,213
|
)
|
|
|
(865
|
)
|
|
|
|
|
Management fees related party
|
|
|
18
|
|
|
|
(1,941
|
)
|
|
|
(441
|
)
|
|
|
|
|
Other operating expenses
|
|
|
5
|
|
|
|
(6,788
|
)
|
|
|
(1,950
|
)
|
|
|
|
|
Depreciation
|
|
|
7
|
|
|
|
(41,824
|
)
|
|
|
(4,350
|
)
|
|
|
|
|
Impairment loss
|
|
|
7
|
|
|
|
(2,649
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Results from operating activities
|
|
|
|
|
|
|
59,699
|
|
|
|
(2,266
|
)
|
|
|
|
|
Finance income
|
|
|
6
|
|
|
|
1,098
|
|
|
|
852
|
|
|
|
|
|
Finance expense
|
|
|
6
|
|
|
|
(16,094
|
)
|
|
|
(3,340
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net finance cost
|
|
|
|
|
|
|
(14,996
|
)
|
|
|
(2,488
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net profit/(loss) for the year
|
|
|
|
|
|
|
44,703
|
|
|
|
(4,754
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
The notes on
page F-111
to F-129 are an integral part of these financial statements.
F-108
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(Accumulated
|
|
|
|
|
|
|
|
|
|
|
|
|
Deficit)/
|
|
|
|
|
|
|
Capital
|
|
|
Revaluation
|
|
|
Retained
|
|
|
|
|
|
|
Contributions
|
|
|
Reserve
|
|
|
Earnings
|
|
|
Total
|
|
|
|
In thousands of US Dollars
|
|
|
Balance at December 18, 2006 (inception)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net (loss) for the period
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total recognized income and expense
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance at December 31, 2006
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net (loss) for the year
|
|
|
|
|
|
|
|
|
|
|
(4,754
|
)
|
|
|
(4,754
|
)
|
Revaluation of vessels
|
|
|
|
|
|
|
208,562
|
|
|
|
|
|
|
|
208,562
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total recognized income and expense
|
|
|
|
|
|
|
208,562
|
|
|
|
(4,754
|
)
|
|
|
203,808
|
|
Capital contributions
|
|
|
115,553
|
|
|
|
|
|
|
|
|
|
|
|
115,553
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance at December 31, 2007
|
|
|
115,553
|
|
|
|
208,562
|
|
|
|
(4,754
|
)
|
|
|
319,361
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net profit for the year
|
|
|
|
|
|
|
|
|
|
|
44,703
|
|
|
|
44,703
|
|
Revaluation of vessels
|
|
|
|
|
|
|
(139,590
|
)
|
|
|
|
|
|
|
(139,590
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total recognized income and expense
|
|
|
|
|
|
|
(139,590
|
)
|
|
|
44,703
|
|
|
|
(94,887
|
)
|
Capital withdrawals
|
|
|
(23,512
|
)
|
|
|
|
|
|
|
|
|
|
|
(23,512
|
)
|
Capital contributions
|
|
|
8,185
|
|
|
|
|
|
|
|
|
|
|
|
8,185
|
|
Dividends paid
|
|
|
|
|
|
|
|
|
|
|
(38,888
|
)
|
|
|
(38,888
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance at December 31, 2008
|
|
|
100,226
|
|
|
|
68,972
|
|
|
|
1,061
|
|
|
|
170,259
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
The notes on
page F-111
to F-129 are an integral part of these financial statements.
F-109
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Period from
|
|
|
|
|
|
|
|
|
|
December 18,
|
|
|
|
|
|
|
|
|
|
2006 (Inception)
|
|
|
|
|
|
|
|
|
|
to December 31,
|
|
|
|
2008
|
|
|
2007
|
|
|
2006
|
|
|
|
In thousands of US Dollars
|
|
|
Cash flows from operating activities
|
|
|
|
|
|
|
|
|
|
|
|
|
Net profit/(loss)
|
|
|
44,703
|
|
|
|
(4,754
|
)
|
|
|
|
|
Adjustments for:
|
|
|
|
|
|
|
|
|
|
|
|
|
Gain from sale of vessels
|
|
|
(59,068
|
)
|
|
|
|
|
|
|
|
|
Depreciation
|
|
|
41,824
|
|
|
|
4,350
|
|
|
|
|
|
Impairment loss on vessels
|
|
|
2,649
|
|
|
|
|
|
|
|
|
|
Fair value of interest rate swap
|
|
|
6,013
|
|
|
|
922
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
36,121
|
|
|
|
518
|
|
|
|
|
|
Due from related parties
|
|
|
1,819
|
|
|
|
(2,913
|
)
|
|
|
|
|
Inventories
|
|
|
(535
|
)
|
|
|
(682
|
)
|
|
|
|
|
Trade accounts and other receivables
|
|
|
9,050
|
|
|
|
(575
|
)
|
|
|
|
|
Trade accounts payables
|
|
|
(609
|
)
|
|
|
2,698
|
|
|
|
|
|
Accrued expenses
|
|
|
195
|
|
|
|
262
|
|
|
|
|
|
Deferred revenue
|
|
|
(130
|
)
|
|
|
342
|
|
|
|
|
|
Due to related parties
|
|
|
(10,441
|
)
|
|
|
|
|
|
|
|
|
Accrued interest expense
|
|
|
242
|
|
|
|
219
|
|
|
|
|
|
Dry-docking costs
|
|
|
(3,349
|
)
|
|
|
(2,553
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net cash from/(used in) operating activities
|
|
|
32,363
|
|
|
|
(2,684
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash flows from investing activities
|
|
|
|
|
|
|
|
|
|
|
|
|
Additions for vessels
|
|
|
(94,517
|
)
|
|
|
(223,288
|
)
|
|
|
|
|
Net proceeds from disposals of vessels
|
|
|
126,172
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net cash from/(used in) investing activities
|
|
|
31,655
|
|
|
|
(223,288
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash flows from financing activities
|
|
|
|
|
|
|
|
|
|
|
|
|
Dividends paid
|
|
|
(53,888
|
)
|
|
|
|
|
|
|
|
|
Capital withdrawals
|
|
|
(23,512
|
)
|
|
|
|
|
|
|
|
|
Capital contributions
|
|
|
8,185
|
|
|
|
115,553
|
|
|
|
|
|
Proceeds from long-term debt
|
|
|
73,500
|
|
|
|
148,500
|
|
|
|
|
|
Payments of long-term debt
|
|
|
(59,858
|
)
|
|
|
(11,416
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net cash (used in)/provided from financing activities
|
|
|
(55,573
|
)
|
|
|
252,637
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net increase in cash and cash equivalents
|
|
|
8,445
|
|
|
|
26,665
|
|
|
|
|
|
Cash and cash equivalents at January 1
|
|
|
26,665
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash and cash equivalents at December 31
|
|
|
35,110
|
|
|
|
26,665
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
The notes on
page F-111
to F-129 are an integral part of these financial statements.
F-110
1 Business
and basis of presentation
BULK ENERGY TRANSPORT (HOLDINGS) LIMITED (the
Company or BET) is registered and is
incorporated under the laws of the Republic of the Marshall
Islands. The Company was incorporated on December 18, 2006.
The Company started operations in 2007. The consolidated
financial statements of the Group comprise the Company and its
subsidiaries (the Group).
The Group has two shareholders, Constellation Bulk Energy
Holdings with 250 shares and Mineral TRSP-Holdings, an
entity that belongs to certain members of the Restis family with
250 shares.
The consolidated financial statements include the following
vessel-owning companies:
|
|
|
|
|
|
|
|
|
|
|
|
|
Date of
|
|
|
|
Country of
|
Vessel Owning Company
|
|
Vessel Name
|
|
Incorporation
|
|
Date of Delivery
|
|
Incorporation
|
|
Quex Shipping Inc.
|
|
BET Commander
|
|
January 3, 2007
|
|
December 17, 2007
|
|
British Virgin Islands
|
Rossington Marine Corp.
|
|
BET Intruder
|
|
January 3, 2007
|
|
March 20, 2008
|
|
British Virgin Islands
|
Rayford Navigation Corp.
|
|
BET Prince
|
|
January 3, 2007
|
|
January 7, 2008
|
|
British Virgin Islands
|
Creight Development Inc.
|
|
BET Performer*
|
|
January 3, 2007
|
|
September 28, 2007
|
|
British Virgin Islands
|
Pulford Ocean Inc.
|
|
BET Scouter (ex Saldhana)
|
|
January 3, 2007
|
|
July 23, 2007
|
|
British Virgin Islands
|
Lewisham Maritime Inc.
|
|
BET Fighter (ex Ferosa)
|
|
January 3, 2007
|
|
August 29, 2007
|
|
British Virgin Islands
|
|
|
|
* |
|
The BET Performer was sold on July 10, 2008. |
The Group provides worldwide ocean transportation services
through the ownership of a fleet of six bulk-carrier vessels.
The Group does not employ any executive officers or personnel
other than the crew aboard the vessels.
The technical management of the Group is performed by.
Enterprises Shipping and Trading S.A. (EST) which is
owned by certain members of the Restis family. Constellation
Energy Commodities Group Limited (Constellation)
provides commercial management. Both EST and Constellation are
considered related companies (Note 18). EST provides the
Group and other vessel-owning companies with a wide range of
services that include technical support and maintenance,
insurance advice, financial and accounting services all provided
for a fixed fee.
Constellation, a subsidiary of Constellation Bulk Energy
Holdings, provides the Group with a wide range of services that
include chartering services, voyage estimates and accounts,
appointing agents etc. for a fee that is the lower between
(a) a fixed fee or (b) one per cent (1%) of gross hire
or freight earned. In addition, the Group has appointed both EST
and Constellation, to serve as administrator of the Group for a
fixed fee. From September 23, 2008 and onwards,
Constellation no longer charges the Group any fee for this
service.
The consolidated financial statements have been prepared in
accordance with International Financial Reporting Standards
(IFRS), as issued by the International Accounting
Standards Board (IASB).
|
|
(c)
|
Statement
of compliance
|
The consolidated financial statements were approved by the
Directors of the Group on April 23, 2009.
F-111
BULK
ENERGY TRANSPORT (HOLDINGS) LIMITED
Notes to
Consolidated Financial
Statements (Continued)
December 31,
2008 and 2007
|
|
(d)
|
Basis
of measurement and functional presentation
currency
|
The consolidated financial statements are prepared on a
historical cost basis, except for the vessels and interest rate
swaps which are measured at fair value. The consolidated
financial statements are presented in US dollars ($), which is
the functional currency of the Group. All financial information
presented in US dollars has been rounded to the nearest thousand.
|
|
(e)
|
Use of
estimates and judgments
|
The preparation of these consolidated financial statements in
accordance with IFRS, requires management to make judgments,
estimates and assumptions that affect the application of
accounting policies and the reported amounts of assets,
liabilities, income and expenses. Actual results may differ from
these estimates.
Estimates and underlying assumptions are reviewed on an ongoing
basis. Revisions to accounting estimates are recognized in the
period in which the estimate is revised and in any future
periods affected. The estimates and assumptions that have the
most significant effect on the amounts recognized in the
consolidated financial statements, are estimations in relation
to the revaluation of vessels, useful lives of vessels,
impairment losses on vessels and trade accounts receivable.
2 Significant
accounting policies
A summary of the significant accounting policies used in the
presentation of the accompanying consolidated financial
statements is presented below:
|
|
(a)
|
Basis
of consolidation
|
Subsidiaries are entities controlled by the Group. Control
exists when the Group has the power to govern the financial and
operating policies of an entity so as to obtain benefits from
its activities. The financial statements of subsidiaries are
included in the consolidated financial statements from the date
that control commences until the date that control ceases.
Intercompany balances, transactions and unrealized gains and
losses arising between the companies included these consolidated
financial statements have been eliminated in full.
Transactions in foreign currencies are translated to the
functional currency using the exchange rates at the date of the
transactions. Monetary assets and liabilities denominated in
foreign currencies at the reporting date are translated to the
functional currency at the foreign exchange rate at that date.
The foreign currency gain or loss on monetary items is the
difference between amortized cost in the functional currency at
the beginning of the period, adjusted for effective interest and
payments during the period and the amortized cost in foreign
currency translated at the exchange rate at the end of the
period. Non-monetary assets and liabilities denominated in
foreign currencies that are measured at fair value are
translated to the functional currency at the exchange rate at
the date the fair value was determined. Foreign currency
differences arising on translation are recognized in the
consolidated statement of income.
Vessels are originally recorded at cost less accumulated
depreciation and accumulated impairment losses.
Vessel cost includes the contract price of the vessel and
expenditure that is directly attributable to the acquisition of
the vessel (initial repairs, delivery expenses and other
expenditure to prepare the vessel for its initial voyage) and
borrowing costs incurred during the construction period.
F-112
BULK
ENERGY TRANSPORT (HOLDINGS) LIMITED
Notes to
Consolidated Financial
Statements (Continued)
December 31,
2008 and 2007
When parts of a vessel have different useful lives, they are
accounted for as separate items (major components) of the
vessels (see Note 2(d)).
Subsequent expenditures for major improvements are also
recognized in the carrying amount if it is probable that the
future economic benefits embodied within the part will flow to
the Group and its cost can be measured reliably. The carrying
amount of the replaced part is derecognized. Routine maintenance
and repairs are recognized in the consolidated statement of
income as incurred.
Vessels are subsequently measured at fair value on an annual
basis. Increases in the individual vessels carrying amount
as a result of the revaluation are recorded in recognized income
and expense and accumulated in equity under the caption
revaluation reserve. The increase is recorded in the
consolidated statements of income to the extent that it reverses
a revaluation decrease of the related asset. Decreases in the
individual vessels carrying amount are recorded in the
consolidated statements of income as a separate line item.
However, the decrease is recorded in recognized income and
expense to the extent of any credit balance existing in the
revaluation reserve in respect of the related asset. The
decrease recorded in recognized income and expense reduces the
amount accumulated in equity under the revaluation reserve. The
fair value of a vessel is determined through market value
appraisal, on the basis of a sale for prompt, charter-free
delivery, for cash, on normal commercial terms, between willing
sellers and willing buyers of a vessel with similar
characteristics.
Depreciation is recognized in the consolidated statement of
income on a straight line basis over the individual
vessels remaining estimated useful life, after considering
the estimated residual value. Each vessels residual value
is equal to the product of its light-weight tonnage and
estimated scrap rate.
Management estimates the useful life of the new vessels to be
25 years from the date of initial delivery from the
shipyard. Second hand vessels are depreciated from the date of
their acquisition over their remaining estimated useful life.
Depreciation, useful lives and residual values are reviewed at
each reporting date.
A vessel is derecognized upon disposal or when no future
economic benefits are expected from its use. Gains or losses on
disposal are determined by comparing the proceeds from disposal
with the carrying amount of the vessel and are recognized in the
consolidated statement of income.
From time to time the Groups vessels are required to be
dry-docked for inspection and re-licensing at which time major
repairs and maintenance that cannot be performed while the
vessels are in operation are generally performed. The Group
defers the costs associated with dry-docking as they are
incurred by capitalizing them together with the cost of the
vessel. The Group then depreciates these costs on a
straight-line basis over the year until the next scheduled
dry-docking, generally 2.5 years. In the cases whereby the
dry-docking takes place earlier than in 2.5 years, the
carrying amount of the previous dry-docking is derecognized. In
the event of a vessel sale, the respective carrying values of
dry-docking costs are written-off at the time of sale to the
consolidated statement of income.
At the date of acquisition of a second-hand vessel, management
estimates the component of the cost that corresponds to the
economic benefit be derived from capitalized dry-docking cost,
until the first scheduled dry-docking of the vessel under the
ownership of the Group, and this component is depreciated on a
straight-line basis over the remaining period to the estimated
dry-docking date.
|
|
(e)
|
Financial
instruments
|
Non-derivative financial instruments comprise trade and other
receivables, cash and cash equivalents, long-term debt and trade
accounts payable. Non-derivative financial instruments are
recognized initially at fair
F-113
BULK
ENERGY TRANSPORT (HOLDINGS) LIMITED
Notes to
Consolidated Financial
Statements (Continued)
December 31,
2008 and 2007
value plus, for instruments not at fair value through profit or
loss, any directly attributable transaction costs. Subsequent to
initial recognition non-derivative financial instruments are
measured as explained in notes (f) to (j) below.
The Group has certain derivative financial instruments, which
are not held for trading, but are not designated in a qualifying
hedge relationship, and therefore, all changes in their fair
value are recognized immediately in the consolidated statement
of income as a component of net finance costs.
|
|
(f)
|
Trade
accounts receivable
|
Trade accounts receivable are stated at their amortized cost
using the effective interest method, less any impairment losses.
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
Groups vessels suffer insured damages. Recoveries from
insurance companies for the claims are provided if the amounts
are virtually certain to be received. Claims are submitted to
the insurance company, which may increase or decrease the
claims amount. Such adjustments are recorded in the year
they become virtually certain and were not material to the
Groups consolidated statement of income in 2008, 2007 and
2006.
|
|
(h)
|
Cash
and cash equivalents
|
Cash and cash equivalents comprise cash balances, call deposits
and certificates of deposit (term deposits) with original
maturity of three months or less.
|
|
(i)
|
Trade
and other amounts payable
|
Trade and other amounts payable are stated at amortized cost.
Long-term debt is initially recognized at the fair value of the
consideration received and is recorded net of issue costs
directly attributable to the borrowing. After initial
recognition, issue costs are amortized using the effective
interest rate method and are recorded as finance expense in the
consolidated statement of income.
Inventories (lubricants) are measured at the lower of cost and
net realizable value. The cost of inventories is based on the
first-in,
first-out principle.
|
|
(l)
|
Impairment
of financial costs
|
A financial asset is assessed at each reporting date to
determine whether there is any objective evidence that it is
impaired.
A financial asset is considered to be impaired if objective
evidence indicates that one or more events have had a negative
effect on the estimated future cash flows of that asset. An
impairment loss in respect of a financial asset measured at
amortized cost is calculated as the difference between its
carrying amount, and the present value of the estimated future
cash flows discounted at the original effective interest rate.
F-114
BULK
ENERGY TRANSPORT (HOLDINGS) LIMITED
Notes to
Consolidated Financial
Statements (Continued)
December 31,
2008 and 2007
Individually significant financial assets are tested for
impairment on an individual basis. The remaining financial
assets are assessed collectively in groups that share similar
credit risk characteristics.
All impairment losses are recognized in the consolidated
statement of income.
An impairment loss is reversed if the reversal can be related
objectively to an event occurring after the impairment loss was
recognized. For financial assets measured at amortized cost, the
reversal is recognized in the consolidated statement of income.
|
|
(m)
|
Impairment
of non-financial assets
|
The carrying amounts of the Groups non-financial assets,
primarily vessels, other than inventories are reviewed at each
reporting date to determine whether there is any indication of
impairment. If any such indication exists, then the assets
recoverable amount is estimated. Vessels are individually tested
for impairment (see Note 7).
The recoverable amount of vessels is the greater of its value in
use and its fair value less costs to sell. 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 asset.
Recoverability for vessels is measured by comparing the carrying
amount, including unamortized dry-docking and special survey
costs, to the greater of fair value (see note 2(c)) less
costs to sell or value in use. An impairment loss is recognized
if the carrying amount of the vessel exceeds its estimated
recoverable amount. Impairment losses are recognized in the
consolidated statement of income.
Impairment losses recognized in prior periods are assessed at
each reporting date for any indications that the loss has
decreased or no longer exists as a result of events or changes
to conditions occurring after the impairment loss was
recognized. An impairment loss is reversed only to the extent
that the assets carrying amount does not exceed the
carrying amount that had been recognized (see Note 7).
There are no legal requirements to hold a shareholders
meeting, nor is there a requirement in the Groups Articles
of Incorporation or Bylaws to distribute dividends. Dividends
may be declared or paid out of profits resulting from current or
preceding years. Thus the decision to distribute dividends is
made by management of the Group and they are therefore
recognized as a liability in the period in which they are
declared by management.
A provision is recognized as a result of a past event when the
Group has a present legal or constructive obligation that can be
reliably estimated and it is probable that an outflow of
economic benefits will be required to settle the obligation.
Provisions are determined by discounting the expected future
cash flows that reflect current market assessments of the time
value of money and the risks specific to the liability.
The Group has no obligations to defined contribution or defined
benefit plans. Short-term employee benefits are measured on an
undiscounted basis and are expensed as the related service is
provided. A liability is recognized for the amount expected to
be paid under short- term cash bonus arrangements if the Group
has a present legal or constructive obligation to pay this
amount as a result of past service provided by the employee and
the obligation can be estimated reliably.
F-115
BULK
ENERGY TRANSPORT (HOLDINGS) LIMITED
Notes to
Consolidated Financial
Statements (Continued)
December 31,
2008 and 2007
The Group generates its revenues from voyage and time
charterers. Revenue is recorded when a charter agreement exists
and collection of the related revenue is reasonably assured.
Revenue is recognized as it is earned, on a straight-line basis
over the duration of each time charter.
Deferred revenue represents invoices issued, or cash received in
advance for services not yet rendered.
|
|
(r)
|
Vessel
voyage and other operating expenses
|
Vessel voyage expenses primarily consisting of port, canal and
bunker expenses that are unique to a particular charter are paid
for by the charterer under time charter arrangements. Vessel
voyage and other operating expenses are expensed as incurred.
|
|
(s)
|
Finance
income and expenses
|
Finance income comprises of interest income on funds invested
and foreign currency gains. Interest income is recognized as it
accrues, using the effective interest method.
Finance expense comprises of interest expense on borrowings,
foreign currency losses and impairment losses on recognized
financial assets. All borrowing costs are recognized in the
consolidated statement of income using the effective interest
method.
Under the laws of the countries of the vessel-owning
companies incorporation
and/or
vessels registration, the vessel-owning companies are not
subject to income tax on international shipping income but are
subject only to certain minor registration and tonnage taxes
that are charged to operating expenses as incurred. The
vessel-owning companies however, are subject to United States
federal income taxation in respect of income that is derived
from the international operation of ships and the performance of
services directly related thereto, unless exempt from United
States federal income taxation. If the vessel-owning companies
do not qualify for the exemption from tax, they will be subject
to a 4% tax on its U.S. source income, imposed without the
allowance for any deductions. For these purposes,
U.S. source shipping income means 50% of the shipping
income that will be derived by the vessel-owning companies that
is attributable to transportation that begins or ends, but that
does not both begin and end, in the United States.
The vessel-owning companies did not incur any U.S. source
shipping income in 2008, 2007 and 2006. The Group met the
specific criteria under the U.S. tax law to qualify for the
exemption. Therefore, the Group does not have any current income
tax or deferred taxes as of December 31, 2008, 2007 and
2006.
A segment is a distinguishable component of the Group that is
engaged in providing related products or services (business
segment) or in providing products or services within a
particular economic environment (geographical segment), which is
subject to risks and returns that are different from the other
segments. The Group reports financial information and evaluates
its operations by charter revenues and not, for example, by
(a) the length of ship employment for its customers or
(b) the size of vessel. The Group does not have discrete
financial information to evaluate the operating results for each
type of charter. Although revenue can be identified for these
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 by revenue per day and
operating results of the fleet and thus the Group has determined
that it operates under one reportable segment. Furthermore, when
the Group charters a vessel to a charterer, the
F-116
BULK
ENERGY TRANSPORT (HOLDINGS) LIMITED
Notes to
Consolidated Financial
Statements (Continued)
December 31,
2008 and 2007
charterer is free to trade the vessel worldwide and, as a result
the disclosure of geographic information is impracticable. Also,
as management of the Group monitors its results by revenue per
day and not by customer, the geographical location of the
customer is not relevant for segment information.
|
|
(v)
|
New
standards and interpretations not yet adopted
|
A number of new standards, amendments to standards and
interpretations are not yet effective for the year ended
December 31, 2008, and have not been applied in preparing
these consolidated financial statements:
IFRS 8 Operating Segments, which is applicable from
January 1, 2009, introduces the management
approach to segment reporting. The Group does not expect
IFRS 8 to have any impact on the consolidated financial
statements.
Revised IAS 23 Borrowing Costs removes the option to
expense borrowing costs and requires that an entity capitalize
borrowing costs directly attributable to the acquisition,
construction or production of a qualifying asset as part of the
cost of that asset. The revised IAS 23, which will become
mandatory for the Groups 2009 financial statements, is not
expected to have a significant effect on the Groups
financial statements.
IFRIC 13 Customer Loyalty Programmes: IFRIC 13
becomes mandatory for the Groups 2009 financial
statements. This IFRIC is not expected to have any impact on the
consolidated financial statements.
Revised IAS 1, Presentation of Financial
Statements: The revised standard is effective for
annual periods beginning on or after January 1, 2009. The
revision to IAS 1 is aimed at improving users ability to
analyze and compare the information given in financial
statements. The changes made are to require information in
financial statements to be aggregated on the basis of shared
characteristics and to introduce a statement of comprehensive
income. This will enable readers to analyze changes in equity
resulting from transactions with owners in their capacity as
owners (such as dividends and share repurchases) separately from
non-owner changes (such as transactions with third
parties). In response to comments received through the
consultation process, the revised standard gives preparers of
financial statements the option of presenting items of income
and expense and components of other comprehensive income either
in a single statement of comprehensive income with sub-totals,
or in two separate statements (a separate income statement
followed by a statement of comprehensive income). Revised IAS 1
is not expected to have a significant impact on the presentation
of the Groups consolidated financial statements for 2009.
Revised IFRS 3 Business Combinations: This
standard is required to be applied prospectively to business
combinations for which the acquisition date is on or after the
beginning of the first annual reporting period beginning on or
after July 1, 2009. Earlier application is permitted.
Revised IFRS 3 is not expected to have any impact of this
revision on the Groups financial statements.
Amendment to IFRS 2 Share-based
Payment: The revision is effective for annual
periods on or after January 1, 2009. The Group does not
expect this standard to have any effect on the consolidated
financial statements.
IFRIC 15, Agreements for the Construction of Real
Estate: This interpretation is effective for
annual periods beginning on or after January 1, 2009 and
will not have any impact to the consolidated financial
statements.
IFRIC 16, Hedges of a Net Investment in a Foreign
Operation: This interpretation is effective for
annual periods beginning on or after October 1, 2008 and
will not have any impact to the financial statements.
F-117
BULK
ENERGY TRANSPORT (HOLDINGS) LIMITED
Notes to
Consolidated Financial
Statements (Continued)
December 31,
2008 and 2007
Reclassification of Financial Assets: Amendments to IAS 39
Financial Instruments: Recognition and measurement and IFRS 7
Financial Instruments: Disclosure: These
amendments are applicable from July 1, 2008 prospectively.
Furthermore, amendments have been made to IFRS 7 to ensure
disclosure is made of the above reclassifications, which are
also applicable from July 1, 2008 and will not have any
impact to the consolidated financial statements.
Eligible Hedged Items Amendment to IAS 39 Financial
instruments: Recognition and measurement: These
amendments are applicable retrospectively for annual periods
beginning on or after July 1, 2009 and will not have any
impact to the consolidated financial statements.
IFRIC 17 Distributions of Non-cash Assets to
Owners: This interpretation is applicable
prospectively for annual periods beginning on or after
July 1, 2009. Retrospective application is not permitted
and this IFRIC will not have any impact to the consolidated
financial statements.
IFRIC 18 Transfer of Assets from
Customers: This interpretation should be applied
prospectively to transfers of assets from customers received on
or after July 1, 2009 and will not have any impact to the
consolidated financial statements.
3 Direct
voyage expenses
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2008
|
|
|
2007
|
|
|
2006
|
|
|
Bunkers expenses
|
|
|
(1,554
|
)
|
|
|
|
|
|
|
|
|
Port expenses
|
|
|
(167
|
)
|
|
|
(8
|
)
|
|
|
|
|
Tugs
|
|
|
(60
|
)
|
|
|
|
|
|
|
|
|
Agents and fees
|
|
|
(200
|
)
|
|
|
(14
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
1,981
|
|
|
|
(22
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
4 Crew
costs
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2008
|
|
|
2007
|
|
|
2006
|
|
|
Basic and supplementary wages
|
|
|
(2,400
|
)
|
|
|
(427
|
)
|
|
|
|
|
Overtime
|
|
|
(954
|
)
|
|
|
(154
|
)
|
|
|
|
|
Vacation
|
|
|
(464
|
)
|
|
|
(86
|
)
|
|
|
|
|
Bonus
|
|
|
(545
|
)
|
|
|
(55
|
)
|
|
|
|
|
Travelling expenses
|
|
|
(404
|
)
|
|
|
(79
|
)
|
|
|
|
|
Victualling
|
|
|
(301
|
)
|
|
|
(48
|
)
|
|
|
|
|
Other
|
|
|
(145
|
)
|
|
|
(16
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(5,213
|
)
|
|
|
(865
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Crew costs represents the amounts due to the crew on board the
vessels under short-term contract, i.e. no more than nine
months. The number of crewmen as at December 31, 2008 was
115 (2007: 92). The Group is not obliged to contribute to any
pension plans or post-employment benefits for the crew on board.
F-118
BULK
ENERGY TRANSPORT (HOLDINGS) LIMITED
Notes to
Consolidated Financial
Statements (Continued)
December 31,
2008 and 2007
|
|
5
|
Other
operating expenses
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2008
|
|
|
2007
|
|
|
2006
|
|
|
Lubricants
|
|
|
(1,945
|
)
|
|
|
(550
|
)
|
|
|
|
|
Stores and chemicals
|
|
|
(645
|
)
|
|
|
(97
|
)
|
|
|
|
|
Repairs and maintenance
|
|
|
(2,447
|
)
|
|
|
(628
|
)
|
|
|
|
|
Insurance
|
|
|
(1,283
|
)
|
|
|
(437
|
)
|
|
|
|
|
Other
|
|
|
(468
|
)
|
|
|
(238
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(6,788
|
)
|
|
|
(1,950
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
6
|
Financial
income and expense
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2008
|
|
|
2007
|
|
|
2006
|
|
|
Financial Income:
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest income
|
|
|
1,054
|
|
|
|
828
|
|
|
|
|
|
Other
|
|
|
44
|
|
|
|
24
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
1,098
|
|
|
|
852
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2008
|
|
|
2007
|
|
|
2006
|
|
|
Financial expense:
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest income
|
|
|
(9,524
|
)
|
|
|
(2,406
|
)
|
|
|
|
|
Fair value of interest rate swaps
|
|
|
(6,013
|
)
|
|
|
(922
|
)
|
|
|
|
|
Other
|
|
|
(557
|
)
|
|
|
(12
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(16,094
|
)
|
|
|
(3,340
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net finance cost
|
|
|
(14,996
|
)
|
|
|
(2,488
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
F-119
BULK
ENERGY TRANSPORT (HOLDINGS) LIMITED
Notes to
Consolidated Financial
Statements (Continued)
December 31,
2008 and 2007
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Advances for
|
|
|
|
|
|
|
|
Cost:
|
|
Vessels
|
|
|
Vessels
|
|
|
Dry-Docking
|
|
|
Total
|
|
|
Balance at January 1, 2007
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Additions
|
|
|
212,788
|
|
|
|
10,500
|
|
|
|
2,553
|
|
|
|
225,841
|
|
Revaluation
|
|
|
208,562
|
|
|
|
|
|
|
|
|
|
|
|
208,562
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance at December 31, 2007
|
|
|
421,350
|
|
|
|
10,500
|
|
|
|
2,553
|
|
|
|
434,403
|
|
Additions
|
|
|
94,518
|
|
|
|
|
|
|
|
3,349
|
|
|
|
97,867
|
|
Revaluation
|
|
|
(142,239
|
)
|
|
|
|
|
|
|
|
|
|
|
(142,239
|
)
|
Transfers
|
|
|
10,500
|
|
|
|
(10,500
|
)
|
|
|
|
|
|
|
|
|
Disposals
|
|
|
(72,691
|
)
|
|
|
|
|
|
|
|
|
|
|
(72,691
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance at December 31, 2008
|
|
|
311,438
|
|
|
|
|
|
|
|
5,902
|
|
|
|
317,340
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Accumulated depreciation Balance at January 1, 2007
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Depreciation
|
|
|
(4,350
|
)
|
|
|
|
|
|
|
|
|
|
|
(4,350
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance at December 31, 2007
|
|
|
(4,350
|
)
|
|
|
|
|
|
|
|
|
|
|
(4,350
|
)
|
Disposals
|
|
|
5,587
|
|
|
|
|
|
|
|
|
|
|
|
5,587
|
|
Depreciation
|
|
|
(39,981
|
)
|
|
|
|
|
|
|
(1,843
|
)
|
|
|
(41,824
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance December 31, 2008
|
|
|
(38,744
|
)
|
|
|
|
|
|
|
(1,843
|
)
|
|
|
(40,587
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net book value January 1, 2007
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net book value December 31, 2007
|
|
|
417,000
|
|
|
|
10,500
|
|
|
|
2,553
|
|
|
|
430,053
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net book value December 31, 2008
|
|
|
272,694
|
|
|
|
|
|
|
|
4,059
|
|
|
|
276,753
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
During the year ended December 31, 2008 two vessel-owning
companies took delivery of their vessels (Bet Intruder and Bet
Prince). The total acquisition price of the vessels amounted to
$94,518, which including the down payment from December 31,
2007 of $10,500 amounted in total to $105,018. These
vessel-owning companies were purchased from First Investment a
subsidiary of First Financial Corporation which belongs to
members of the Restis family.
During the year ended December 31, 2007, four vessel-owning
companies took delivery of their vessels (BET Commander, BET
Scouter, BET Performer and BET Fighter). The total cost of the
vessels amounted to $212,788. These vessel-owning companies were
purchased from First Investment a subsidiary of First Financial
Corporation which belongs to members of the Restis family.
On May 22, 2008, the Group entered into an agreement to
sell to a third party, a vessel-owning company, BET Performer.
Total proceeds amounted to $129,500 less $3,328 that was paid as
commission for the sale, resulted in a gain of $59,068, which
was recognized in the consolidated statements of income. The
sale was completed on July 10, 2008.
Vessels are measured at fair value at year end. At
December 31, 2007, due to favorable market conditions, the
fair value exceeded the carrying value by $208,562 and,
accordingly, a revaluation reserve was recorded as a separate
item in the consolidated statement of changes in equity. At
December 31, 2008, the fair value of the individual vessels
indicated that the carrying value of the individual vessels was
impaired and, as a result, the Group recognized an impairment
loss of $142,239 out of which $2,649 is recorded as a separate
line item in
F-120
BULK
ENERGY TRANSPORT (HOLDINGS) LIMITED
Notes to
Consolidated Financial
Statements (Continued)
December 31,
2008 and 2007
the consolidated statement of income since there was no
revaluation reserve recorded in the consolidated statements of
changes in equity (see note 2 (c)).
The current economic and market conditions, including the
significant disruptions in the global credit markets, are having
broad effects on participants in a wide variety of industries.
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; conditions that the Company considers
indicators of a potential impairment. As a result of the credit
crisis and the lack of demand for dry-bulk freights, there were
no reliable estimates for the fair value of the ships.
To determine the fair value at December 31, 2008,
management calculated the fair value by using the discounted
projected net operating cash flow for each vessel-owning
company. The significant factors and assumptions used are as
follows:
|
|
|
|
|
Discount rate: 10%
|
|
|
|
Discount cash flows up to end of the vessels useful life.
|
|
|
|
Daily operating costs $5-$6
|
|
|
|
Earnings assumption: The agreed charter rate plus the average
ten to fifteen year charter rate when these are not determined.
|
At December 31, 2008, all vessel-owning companies are
subject to a first class mortgage to secure a long-term loan
(see Note 12).
|
|
|
|
|
|
|
|
|
|
|
2008
|
|
|
2007
|
|
|
Lubricants
|
|
|
658
|
|
|
|
682
|
|
Bunkers
|
|
|
559
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
1,217
|
|
|
|
682
|
|
|
|
|
|
|
|
|
|
|
|
|
9
|
Trade
accounts receivable and other assets
|
|
|
|
|
|
|
|
|
|
|
|
2008
|
|
|
2007
|
|
|
Charters
|
|
|
1,083
|
|
|
|
26
|
|
Guarantee for the purchase of ships
|
|
|
|
|
|
|
10,500
|
|
Prepayments
|
|
|
942
|
|
|
|
549
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2,025
|
|
|
|
11,075
|
|
|
|
|
|
|
|
|
|
|
Management has assessed that the risk of not collecting amounts
from charters is minimum and no impairment loss was created.
The amount shown as guarantee reflects the amount the Group will
receive in the event that the acquisition of the two vessels did
not occur. A similar amount is disclosed as due to related party
(Note 18). These amounts were released in 2008 as the
agreement was fulfilled.
F-121
BULK
ENERGY TRANSPORT (HOLDINGS) LIMITED
Notes to
Consolidated Financial
Statements (Continued)
December 31,
2008 and 2007
|
|
10
|
Cash and
cash equivalents
|
|
|
|
|
|
|
|
|
|
|
|
2008
|
|
|
2007
|
|
|
On demand
|
|
|
574
|
|
|
|
265
|
|
Term deposits
|
|
|
34,536
|
|
|
|
26,400
|
|
|
|
|
|
|
|
|
|
|
Cash and cash equivalents
|
|
|
35,110
|
|
|
|
26,665
|
|
|
|
|
|
|
|
|
|
|
|
|
(a)
|
Capital
contributions:
|
The amounts shown in the .consolidated balance sheet as capital
contributions represent payments made by the shareholders of
various dates to finance vessel acquisitions in excess of the
amounts of the bank loans obtained. There is no contractual
obligation to repay the amounts.
During the year ended December 31, 2007, the shareholders
contributed a total amount of $115,553.
During the year ended December 31, 2008, the shareholders
contributed a total amount of $8,185 primarily in relation to
the acquisition of Bet Intruder.
In addition, and as a result of the proceeds from the sale of
Bet Performer an amount of $23,518 was distributed in total to
the shareholders.
During the year ended December 31, 2008, the Group
distributed a total amount in dividends of $53,888. However,
management then decided in order to protect the capital of the
Company to ask from the shareholders to return an amount of
$15,000. This is shown as Due from related parties
(Note 18) and was deducted from the dividends.
Management expects this amount will be received within the
following 12 months.
The Companys authorized, issued and outstanding share
capital is divided into 500 registered shares of no par value.
Based on the written consent by the directors on August 5,
2008, the Company during the year paid dividends to the
shareholders of an amount of $38,888.
F-122
BULK
ENERGY TRANSPORT (HOLDINGS) LIMITED
Notes to
Consolidated Financial
Statements (Continued)
December 31,
2008 and 2007
Long-term debt is analyzed as follows:
|
|
|
|
|
|
|
|
|
|
|
2008
|
|
|
2007
|
|
|
Borrower
|
|
|
|
|
|
|
|
|
Creighton Development
|
|
|
|
|
|
|
44,127
|
|
Pulford Ocean
|
|
|
28,914
|
|
|
|
31,207
|
|
Lewisham Maritime
|
|
|
26,453
|
|
|
|
28,550
|
|
Rayford Navigation
|
|
|
43,069
|
|
|
|
|
|
Quex Shipping
|
|
|
30,760
|
|
|
|
33,199
|
|
Rossington Maritime
|
|
|
21,529
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
150,725
|
|
|
|
137,083
|
|
Less: Current portion
|
|
|
16,573
|
|
|
|
20,875
|
|
|
|
|
|
|
|
|
|
|
Long-term portion
|
|
|
134,152
|
|
|
|
116,208
|
|
|
|
|
|
|
|
|
|
|
The long-term debt, denominated in:US:Dollars, of BET Performer,
BET Scouter, BET Fighter, BET Prince, BET Commander and BET
Intruder represents the amounts allocated to each vessel-owning
company from the syndicated loan of .$222,000 for the purchase
of the vessel-owning companies. The loan was allocated to each
vessel-owning company based on the lower of the total amount of
the loan $222,000 and 70% of the vessel acquisition cost. As a
result of the sale of BET Performer on July 10, 2008, the
Group adjusted the amount outstanding proportionately to the
remaining vessels. The loan is repayable in sixteen equal
semi-annual installments from the last drawdown but no later
than June 20, 2015.
Details of the long-term debt, for each of the vessel-owning
companies are as follows:
Creighton Development: At December 31,
2007, the outstanding balances was $44,127 (net of $218 deferred
direct cost) payable in 15 equal semi-annual principal
installments of $2,374 plus interest at floating rates (LIBOR
plus a spread of 0.75%) with a balloon installment of $12,511
due in 2015. At December 31, 2008, the total outstanding
balance was $0 as the loan was paid in full after the sale of
the vessel.
Pulford Ocean: At December 31, 2007, the
outstanding balances was $31,207 (net of $146 deferred direct
cost) payable in 15 equal semi-annual principal installments of
$1,547 plus interest at floating rates (LIBOR plus a spread of
0.75%) with a balloon installment of $8,151 due in 2015. At
December 31, 2008, the total outstanding balance was
$28,914 (net of $127 deferred direct cost) payable in 13 equal
semi-annual principal installments of $1,590 plus interest of
floating rates (LIBOR plus a spread of 0.75%) with a balloon
installment of $8,376 due in 2015.
Lewisham Maritime: At December 31, 2007,
the outstanding balances was $28,550 (net of $135 deferred
direct cost) payable in 16 equal semi-annual principal
installments of $1,415 plus interest at floating rates (LIBOR
plus a spread of 0.75%) with a balloon installment of $7,457 due
in 2015. At December 31, 2008, the total outstanding
balance was $26,453 (net of $117 deferred direct cost) payable
in 13 equal semi-annual principal installments of $1,454 plus
interest of floating rates (LIBOR plus a spread of 0.75%) with a
balloon installment of $7,663 due in 2015.
Rayford Navigation: At December 31, 2008,
the total outstanding balance was $43,069 (net of $185 deferred
direct cost) payable in 13 equal semi-annual principal
installments of $2,368 plus interest of floating rates (LIBOR
plus a spread of 0.75%) with a balloon installment of $12,475
due in 2015.
F-123
BULK
ENERGY TRANSPORT (HOLDINGS) LIMITED
Notes to
Consolidated Financial
Statements (Continued)
December 31,
2008 and 2007
Quex Shipping: At December 31, 2007, the
outstanding balances was $33,199 (net of $155 deferred direct
cost) payable in 16 equal semi-annual principal installments of
$1,646 plus interest at floating rates (LIBOR plus a spread of
0.75%) with a balloon installment of $8,671 due in 2015. At
December 31, 2008, the total outstanding balance was
$30,760 (net of $135 deferred direct cost) payable in 13 .equal
semi-annual principal installments of $1,691 plus interest of
floating rates (LIBOR plus a spread of 0.75%) with a balloon
installment of $8,911 due in 2015.
Rossinghton Maritime At December 31, 2008, the total
outstanding balance was $21,529 ($97 net of deferred direct
cost) payable in 13 equal semi-annual principal installments of
$1,184 plus interest of floating rates (LIBOR plus a spread of
0.75%) with a balloon installment of $6,238 due in 2015.
The weighted average effective interest rate for all long-term
debt for the years ended December 31, 2007 and 2008 was
5.61% and 4.91%, respectively. Interest expense for the years
ended December 31, 2007 and 2008 amounted to $2,406 and
$9,524, respectively, and is included under finance expense in
the consolidated statements of income.
The principal repayments are as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Years of
|
|
|
1 Year
|
|
|
1 to 2
|
|
|
2 to 5
|
|
|
More Than
|
|
|
|
|
|
|
Maturity
|
|
|
or Less
|
|
|
Years
|
|
|
Years
|
|
|
5 Years
|
|
|
Total
|
|
|
December 31, 2007
|
|
|
2015
|
|
|
|
20,875
|
|
|
|
20,875
|
|
|
|
62,625
|
|
|
|
32,708
|
|
|
|
137,083
|
|
December 31, 2008
|
|
|
2015
|
|
|
|
16,573
|
|
|
|
33,145
|
|
|
|
49,718
|
|
|
|
51,289
|
|
|
|
150,725
|
|
The term facility includes covenants.
The major financial covenants include the following:
|
|
|
|
|
The vessels aggregate market value equal to 125% of the
outstanding facility.
|
|
|
|
The ratio of total liabilities to total assets shall not exceed
0.7:1.
|
The Group was in compliance with these loan covenants as at
December 31 2008.
|
|
13
|
Trade
accounts payable
|
|
|
|
|
|
|
|
|
|
|
|
2008
|
|
|
2007
|
|
|
Suppliers
|
|
|
1,453
|
|
|
|
573
|
|
Insurance agents
|
|
|
321
|
|
|
|
338
|
|
Repairers
|
|
|
109
|
|
|
|
1,221
|
|
Agents
|
|
|
208
|
|
|
|
567
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2,091
|
|
|
|
2,699
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2008
|
|
|
2007
|
|
|
Masters accounts
|
|
|
390
|
|
|
|
262
|
|
Other
|
|
|
67
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
457
|
|
|
|
262
|
|
|
|
|
|
|
|
|
|
|
F-124
BULK
ENERGY TRANSPORT (HOLDINGS) LIMITED
Notes to
Consolidated Financial
Statements (Continued)
December 31,
2008 and 2007
Overview
The Group has exposure to the following risks from its use of
financial instruments:
|
|
|
|
|
Credit risk;
|
|
|
|
Liquidity risk;
|
|
|
|
Market risk defined as interest rate risk and currency risk.
|
This note represents information about the Groups exposure
to cash of the above risks, the Groups objectives,
policies and processes for measuring and managing risk and the
Groups management of capital.
The Group has entered into transactions with derivative
financial instruments to reduce exposure in interest rate and
foreign exchange rates but does not meet the criteria for hedge
accounting.
Credit risk is the risk of financial loss to the Group if a
customer or counterparty to a financial instrument fails to meet
its contractual obligations in relation to each class of
recognized financial assets. The maximum credit risk in relation
to such assets is represented by the carrying amount of those
assets in the balance sheet.
The main credit exposure is from trade accounts receivable,
amounts due from related parties and cash and cash equivalents.
The Group places its cash and cash equivalents, consisting
mostly of deposits, with financial institutions. The Group
performs annual evaluations of the relative credit-standing of
those financial institutions. Credit risk with respect to trade
accounts receivable is generally managed by chartering vessels
to established operators, rather than to more speculative or
undercapitalized entities. The vessels are mainly chartered
under time-charter agreements where, per the industry practice,
the charterer pays for the transportation service within one
week of issue of the hire statement (invoice) which is issued
approximately 15 days once the service begins, thereby
supporting the management of trade receivables.
The Groups exposure to credit risk is influenced mainly by
the individual characteristics of each customer.
As of December 31, 2008 and 2007, the following characters
individually accounted for more than 10% of the Groups
revenue as follows:
|
|
|
|
|
|
|
|
|
Charter
|
|
2008
|
|
|
2007
|
|
|
A
|
|
|
12
|
%
|
|
|
51
|
%
|
B
|
|
|
|
|
|
|
26
|
%
|
C
|
|
|
11
|
%
|
|
|
18
|
%
|
D
|
|
|
14
|
%
|
|
|
|
|
E
|
|
|
15
|
%
|
|
|
|
|
As of December 31, 2008 and 2007 the following charterers
individually accounted for more than 10% of the Groups
trade receivables.
|
|
|
|
|
|
|
|
|
Charter
|
|
2008
|
|
|
2007
|
|
|
B
|
|
|
|
|
|
|
43
|
%
|
C
|
|
|
|
|
|
|
55
|
%
|
D
|
|
|
87
|
%
|
|
|
|
|
F-125
BULK
ENERGY TRANSPORT (HOLDINGS) LIMITED
Notes to
Consolidated Financial
Statements (Continued)
December 31,
2008 and 2007
The aging of trade and other accounts receivables is as follows:
|
|
|
|
|
|
|
|
|
|
|
2008
|
|
|
2007
|
|
|
Up to 30 days
|
|
|
643
|
|
|
|
|
|
Past due
31-120 days
|
|
|
356
|
|
|
|
14
|
|
Over 120 days
|
|
|
84
|
|
|
|
12
|
|
|
|
|
|
|
|
|
|
|
|
|
|
1,083
|
|
|
|
26
|
|
|
|
|
|
|
|
|
|
|
The Company generally does not have large trade accounts
receivable since the time charters are collected in advance. The
vessels are chartered under time-charter agreements where, the
charterer pays for the transportation service within one week of
issue of the hire statement (invoice) which is issued
approximately 15 days once the service begins, thereby
supporting management of the trade accounts receivable.
Turbulence in the financial markets has led many lenders to
reduce, and in some cases, cease .to provide credit, including
letters of credit, to borrowers. Purchasers of dry bulk cargo
typically pay for cargo with letters of credit. The tightening
of the credit markets has reduced the issuance of letters of
credit and as a result decreased the amount of cargo result in
less business for charterers and declines in the demand for
vessels. These factors, combined with the general slow-down in
consumer spending caused by uncertainty about future market
conditions, impact the shipping business. As such, it is
reasonably possible that future charter rates may further
deteriorate which would have a significant impact on the
Companys operations.
Liquidity risk is the risk that the Group will not be able to
meet its financial obligations as they fall due. The
Groups policy is to ensure, as far as possible, that it
will have sufficient liquidity to meet its liabilities when they
fall due. Furthermore, BULK ENERGY TRANSPORT (HOLDINGS) LIMITED
is the guarantor of the loan on all vessel-owning companies
(Note 7).
The Group aims to mitigate liquidity risk by managing cash
generation from its operations and applying cash collection
targets throughout the Group. The vessels are mainly chartered
under time-charter agreements where, per industry practice, the
charterer pays for the transportation service in advance,
supporting the management of cash generation.
Excess cash is only invested in financial instruments exposed to
insignificant risk of change in market value, by being placed in
interest-bearing deposits with maturities fixed at no more than
3 months.
Interest rate risk arises from the possibility that changes in
interest rates will affect the future cash outflows of the
Groups long-term debt as they are at variable rates. The
Group manages this exposure to changes in interest rates from
long-term debt by entering into interest rate swap contracts.
The Group has entered into three interest rate swap contracts,
denominated in US Dollars. The notional contract amount of
the swaps at December 31, 2008 amounts to $130,000 (2007:
$30,000) with maturity between 3-5 years. The average fixed
swap rate was 3.46% as of December 31, 2008 (2007: 4.84%).
The Group classifies the interest rate swap portfolio as a
financial instrument depicted at fair value since it does not
qualify for hedge accounting. The fair value of the swaps at
December 31, 2008 was $6,935 (2007: $922).
F-126
BULK
ENERGY TRANSPORT (HOLDINGS) LIMITED
Notes to
Consolidated Financial
Statements (Continued)
December 31,
2008 and 2007
In respect of interest-bearing financial assets and financial
liabilities as of December 31, 2008 and 2007, the following
table depicts their weighted average interest rates and the
periods in which they reprice.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Effective
|
|
|
|
|
|
1 Year
|
|
|
|
|
|
|
Note
|
|
|
Interest Rate
|
|
|
Total
|
|
|
or Less
|
|
|
2 to 5 Years
|
|
|
2007
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Term deposits
|
|
|
10
|
|
|
|
3.77
|
%
|
|
|
(26,400
|
)
|
|
|
(26,400
|
)
|
|
|
|
|
Long-term loan
|
|
|
12
|
|
|
|
5.61
|
%
|
|
|
137,083
|
|
|
|
30,000
|
|
|
|
107,083
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Effective
|
|
|
|
|
|
1 Year
|
|
|
|
|
|
|
Note
|
|
|
Interest Rate
|
|
|
Total
|
|
|
or Less
|
|
|
2 to 5 Years
|
|
|
2008
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Term deposits
|
|
|
10
|
|
|
|
2.22
|
%
|
|
|
(34,536
|
)
|
|
|
(34,536
|
)
|
|
|
|
|
Long-term loan
|
|
|
12
|
|
|
|
4.91
|
%
|
|
|
150,725
|
|
|
|
20,725
|
|
|
|
130,000
|
|
The Groups exposure to foreign currency risk is minimum.
Amounts in foreign currencies are included in trade accounts
payable and include amounts payable to suppliers in foreign
denominated currencies and are analyzed as follows:
|
|
|
|
|
|
|
US Dollar
|
|
|
2008
|
|
|
|
|
EUR
|
|
|
505
|
|
GBP and other
|
|
|
480
|
|
|
|
|
|
|
|
|
US Dollar
|
|
|
2007
|
|
|
|
|
EUR
|
|
|
196
|
|
GBP and other
|
|
|
151
|
|
In managing the interest rate risk, the Group aims to reduce the
impact of short-term fluctuations on the Groups earnings.
Over the longer term however, permanent changes in interest
rates would have an impact on earnings.
At December 31, 2008, it is estimated that a general
increase of one percentage point in interest rates would
decrease the Groups net profit by approximately $138
(2007: $807).
All amounts that are not recorded at fair value; the Group
believes that their carrying amount approximates their fair
value, as they have a maturity of no more than twelve months,
except for long-term debt. The carrying value of the
Groups long-term debt approximates fair value because the
debt bears interest at floating rates.
The Group has only ordinary shares. There are no stock plans or
options.
F-127
BULK
ENERGY TRANSPORT (HOLDINGS) LIMITED
Notes to
Consolidated Financial
Statements (Continued)
December 31,
2008 and 2007
The Group and each entity seeks to maintain a balance between
long-term debt and capital. There are no capital requirements.
In its funding strategy, the Groups objective is to
maintain a balance between continuity of funding and flexibility
through the use of debt. The Groups policy with vessel
acquisitions is that no more than 70% of the acquisition cost of
vessels will be funded through borrowings for all acquisitions
made. The bank financing was not more than 70% of the total
acquisition costs.
Various claims, suits and complaints, including those involving
government regulations and product liability, arise in the
ordinary course of the shipping business. In addition, losses
may arise from disputes with charterers, agents, insurance and
other claims with suppliers relating to the operation of the
Groups vessels. Currently, management is not aware of any
such contingent liabilities which should be disclosed or for
which a provision should be established in the accompanying
consolidated financial statements.
The Group accrues for the cost of environmental liabilities when
management becomes aware that a liability is probable and is
able to reasonably estimate the probable exposure. Currently,
management is not aware of any such claims or contingent
liabilities which should be disclosed, or for which a provision
should be established in the accompanying consolidated financial
statements.
The Groups policy is to maintain a strong capital base so
as to maintain creditor and market confidence and to sustain
future development of the business. Management monitors the
return on capital, which the Group defines as net operating
income divided by total shareholders equity.
The directors of the Group do not receive remuneration for the
non-executive services they offer. The identity and the
description of the other related parties of the Group are given
below.
|
|
(a)
|
Enterprises
Shipping and Trading SA:
|
Each vessel-operating company of the Group has a management
agreement with EST, to provide technical and administration
management services for a fixed fee per day for technical
services and a fixed monthly fee for management services for
each vessel in operation. These fees for 2008 amounted to $1,449
(2007: $325) and are included under the caption as management
fees in the accompanying consolidated statement of income.
Management agreements with EST require the vessel-owning
companies with vessels in operation to make an interest-free
advance of $750 each to cover the working capital requirements
arising from the handling of the majority of the expenditures.
|
|
(b)
|
Constellation
Energy Commodities Group Limited:
|
Each vessel-operating company has a commercial and
administration management agreement with Constellation Energy
Commodities Group Limited, under which commercial management
services are provided for a fee that is to the lesser of
(a) a fixed fee and (b) one per cent (1%) of gross
hire or freight earned and administration services, in exchange
for a fixed fee. Such fees for 2008 amounted to $492 (2007:
$116) are included under the caption as management fees in the
accompanying consolidated statements of income. As of
September 23, 2008, Constellation does not charge for
administration services.
Based on a charter party agreement, one of the vessel-operating
companies was time-chartered to Constellation Energy Global
Commodities Group London, an affiliated company. The net profit
amounted to $168 (2007: nil) and it is included in the
accompanying consolidated statements of income.
F-128
BULK
ENERGY TRANSPORT (HOLDINGS) LIMITED
Notes to
Consolidated Financial
Statements (Continued)
December 31,
2008 and 2007
The related balances are:
|
|
|
|
|
|
|
|
|
|
|
2008
|
|
|
2007
|
|
|
Due from related parties current
|
|
|
|
|
|
|
|
|
EST
|
|
|
832
|
|
|
|
2,334
|
|
Constellation
|
|
|
262
|
|
|
|
79
|
|
Due from shareholders
|
|
|
15,000
|
|
|
|
500
|
|
|
|
|
|
|
|
|
|
|
|
|
|
16,094
|
|
|
|
2,913
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2008
|
|
|
2007
|
|
|
Due from related parties current
|
|
|
|
|
|
|
|
|
First investment
|
|
|
|
|
|
|
10,500
|
|
Constellation
|
|
|
59
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
59
|
|
|
|
10,500
|
|
|
|
|
|
|
|
|
|
|
The related party transactions included in the consolidated
statements of income are:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2008
|
|
|
2007
|
|
|
2006
|
|
|
Revenue from vessels
|
|
|
|
|
|
|
|
|
|
|
|
|
Constellation
|
|
|
168
|
|
|
|
|
|
|
|
|
|
Management fees
|
|
|
|
|
|
|
|
|
|
|
|
|
EST
|
|
|
(1,449
|
)
|
|
|
(325
|
)
|
|
|
|
|
Constellation
|
|
|
(492
|
)
|
|
|
(116
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1,941
|
)
|
|
|
(441
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
F-129
PART II
INFORMATION
NOT REQUIRED IN PROSPECTUS
|
|
Item 6.
|
Indemnification
of Directors and Officers.
|
Under the Amended and Restated Articles of Incorporation, our
By-laws and under Section 60 of the Marshall Islands
Business Corporations Act (BCA), we may indemnify
anyone who was or is a party or is threatened to be made a party
to any threatened, pending or completed action, suit or
proceeding (other than an action by or in the right of the
corporation) whether civil, criminal, administrative or
investigative, 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.
A limitation on the foregoing is the statutory proviso (also
found in our By-laws) that, 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 that
his conduct was unlawful.
Further, under Section 60 of the BCA and our By-laws, the
termination of any action, suit or proceeding by judgment,
order, settlement, conviction, or upon a plea of no contest, or
its equivalent, does 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 proceeding, had reasonable cause to believe that his
conduct was unlawful.
In addition, under Section 60 of the BCA and under our
By-laws, a corporation may 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 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. Such indemnification may be
made against expenses (including attorneys fees) actually
and reasonably incurred such person 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. Again, this is
provided that no indemnification may 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.
Further, and as provided by both our By-laws and Section 60
of the BCA, when 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 the foregoing instances, or in
the defense of a related claim, issue or matter, he will be
indemnified against expenses (including attorneys fees)
actually and reasonably incurred by him in connection with such
matter.
Likewise, pursuant to our By-laws and Section 60 of the
BCA, expenses (our By-laws specifically includes attorneys
fees in expenses) incurred in defending a civil or criminal
action, suit or proceeding by an officer or director may be paid
in advance of the final disposition of the action, suit or
proceeding upon receipt of an undertaking by or on behalf of the
director or officer to repay such amount if it is ultimately
determined that he is not entitled to indemnification. The
By-laws further provide that with respect to other employees,
such expenses may be paid on the terms and conditions, if any,
as the Board may deem appropriate.
Both Section 60 of the BCA and our By-laws further provided
that the foregoing indemnification and advancement of expenses
are not 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/or as to
action in another capacity while holding office.
II-1
Under both Section 60 of the BCA and our By-laws, we also
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 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
regardless of whether the corporation would have the power to
indemnify him against such liability under the foregoing.
Under Section 60 of the BCA (and as provided in our
By-laws), the indemnification and advancement of expenses
provided by, or granted under the foregoing continue with regard
to a person who has ceased to be a director, officer, employee
or agent and inure to the benefit of his heirs, executors and
administrators unless otherwise provided when authorized or
ratified. Additionally, under Section 60 of the BCA and our
Bylaws, the indemnification and advancement of expenses provided
by, or granted under the foregoing continue with regard to a
person who has ceased to be a director, officer, employee or
agent and inure to the benefit of his heirs, executors and
administrators unless otherwise provided when authorized or
ratified.
In addition to the above, our By-laws provide that references to
us includes constituent corporations, and defines other
enterprises to include employee benefit plans,
fines to include excise taxes imposed on a person
with respect to an employee benefit plan, and further defines
the term serving at the request of the corporation.
Our Amended and Restated Articles of Incorporation set out a
much abbreviated version of the foregoing and make reference to
the provisions of the By-laws.
Such limitation of liability and indemnification does not affect
the availability of equitable remedies. In addition, we have
been advised that in the opinion of the SEC, indemnification for
liabilities arising under the Securities Act is against public
policy as expressed in the Securities Act and is therefore
unenforceable.
|
|
Item 7.
|
Recent
Sales of Unregistered Securities.
|
During the past three years, Seanergy Maritime has sold the
following shares of common stock without registration under the
Securities Act:
|
|
|
|
|
|
|
Number of
|
|
Shareholders
|
|
Shares(1)
|
|
|
Georgios Koutsolioutsos
|
|
|
2,100,000
|
|
Panagiotis Zafet
|
|
|
1,250,000
|
|
Simon Zafet
|
|
|
1,250,000
|
|
Alexios Komninos
|
|
|
275,000
|
|
Ioannis Tsigkounakis
|
|
|
125,000
|
|
|
|
|
(1) |
|
All such numbers give retroactive effect to the surrender for
cancellation of an aggregate 1,604,448 shares of common
stock by our shareholders on February 20, 2007, as adjusted
for a one and one-half-for-one stock split in the form of a
stock dividend on July 6, 2007, and a one and
one-third-for-one stock split in the form of a stock dividend on
August 6, 2007. |
Such shares were issued on November 27, 2006 in connection
with our organization pursuant to the exemption from
registration contained in Section 4(2) as they were sold to
sophisticated, wealthy non U.S. Person
individuals and such shares were issued to these individuals and
entities above at an aggregate offering price of $25,000, or
$0.008 per share, giving effect to the stock dividend. No
underwriting discounts or commissions were paid with respect to
such sales.
On February 20, 2007, such shareholders surrendered for
cancellation an aggregate of 802,224 of such shares on a
pro-rata basis.
In addition, on September 28, 2007, and prior to the
consummation of the initial public offering of the shares of
Seanergy Maritimes common stock, all of Seanergy
Maritimes executive officers purchased from Seanergy
Maritime an aggregate of 16,016,667 warrants at $0.90 per
warrant in a private placement in accordance with
Regulation S under the Securities Act of 1933.
II-2
On August 28, 2008, in connection with the closing of
Seanergys business combination, Seanergy issued a note in
the principal amount of $28,250,000, which note is convertible
into 2,260,000 shares of the Companys common stock at
a conversion price of $12.50 per share. The Note was issued
pursuant to an exemption from registration under
Section 4(2) of the Securities Act. On August 19,
2009, holders of the Note elected to convert the Note for shares
of Seanergys common stock. The Company issued an aggregate
of 5,585,868 shares to the four holders of the Note. The
shares were issued pursuant to an exemption from registration
under Section 4(2) of the Securities Act.
|
|
Item 8.
|
Exhibits
and Financial Statement Schedules.
|
(a) The following exhibits are filed as part of this
Registration Statement:
|
|
|
|
|
Exhibit
|
|
|
No.
|
|
Description
|
|
|
3
|
.1
|
|
Form of Amended and Restated Articles of Incorporation(2)
|
|
3
|
.2
|
|
Form of Amended and Restated By-laws(2)
|
|
3
|
.3
|
|
Amendment to Amended and Restated Articles(8)
|
|
4
|
.1
|
|
Specimen Common Stock Certificate(3)
|
|
4
|
.2
|
|
Specimen Public Warrant Certificate(3)
|
|
4
|
.3
|
|
Specimen Private Warrant Certificate(3)
|
|
4
|
.4
|
|
Form of Warrant Agreement between Continental Stock
Transfer & Trust Company and the Registrant(5)
|
|
5
|
.1
|
|
Opinion of Reeder & Simpson, P.C., Marshall
Islands counsel to the Registrant(6)
|
|
10
|
.1
|
|
Master Agreement dated as May 20, 2008(2)
|
|
10
|
.2
|
|
Amendment to Master Agreement dated July 25, 2008(2)
|
|
10
|
.3
|
|
Memorandum of Agreement relating to the African Oryx dated
May 20, 2008 between Seanergy Maritime Corp., as buyer, and
Valdis Marine Corp., as seller, as amended(2)
|
|
10
|
.4
|
|
Memorandum of Agreement relating to the African Zebra dated
May 20, 2008 between Seanergy Maritime Corp., as buyer, and
Goldie Navigation Ltd., as seller, as amended(2)
|
|
10
|
.5
|
|
Memorandum of Agreement relating to the Domestic Trade Ministry
Kouan Shipping Industry Co. Davakis G. (ex. Hull No. KA215)
dated May 20, 2008 between Seanergy Maritime Corp., as
buyer, and Kalistos Maritime S.A., as seller, as amended(2)
|
|
10
|
.6
|
|
Memorandum of Agreement relating to the Domestic Trade Ministry
Kouan Shipping Industry Co. Hull No. KA216 dated
May 20, 2008 between Seanergy Maritime Corp., as buyer, and
Kalithea Maritime S.A., as seller, as amended(2)
|
|
10
|
.7
|
|
Memorandum of Agreement relating to the Bremen Max dated
May 20, 2008 between Seanergy Maritime Corp., as buyer, and
Pavey Services Ltd., as seller, as amended(2)
|
|
10
|
.8
|
|
Memorandum of Agreement relating to the Hamburg Max dated
May 20, 2008 between Seanergy Maritime Corp., as buyer, and
Shoreline Universal Limited, as seller, as amended(2)
|
|
10
|
.9
|
|
Management Agreement dated as of May 20, 2008(2)
|
|
10
|
.10
|
|
Brokerage Agreement dated as of May 20, 2008(2)
|
|
10
|
.11
|
|
Voting Agreement dated as of May 20, 2008(2)
|
|
10
|
.12
|
|
Amendment to Voting Agreement dated July 25, 2008(2)
|
|
10
|
.13
|
|
Second Amendment to Voting Agreement dated August 21,
2008(4)
|
|
10
|
.14
|
|
Third Amendment to Voting Agreement dated August 27, 2008(1)
|
|
10
|
.15
|
|
Fourth Amendment to Voting Agreement dated November 20,
2008(1)
|
|
10
|
.16
|
|
Form of Convertible Unsecured Promissory Note(2)
|
|
10
|
.17
|
|
Form of Plan of Dissolution and Liquidation(2)
|
|
10
|
.18
|
|
Form of Stock Escrow Agreement(5)
|
|
10
|
.19
|
|
Form of Joinder Agreement(3)
|
|
10
|
.20
|
|
Stock Purchase Agreement between registrant and Constellation
Bulk Energy Holdings, Inc.(6)
|
|
10
|
.21
|
|
Amendment to Convertible Promissory Note dated August 28,
2009(6)
|
|
16
|
.1
|
|
Letter From KPMG Certified Auditors AE dated September 17,
2009, addressed to the SEC provided in connection with change in
independent registered public accountants(7)
|
II-3
|
|
|
|
|
Exhibit
|
|
|
No.
|
|
Description
|
|
|
23
|
.1
|
|
Consent of Weinberg & Company, P.A.(7)
|
|
23
|
.2
|
|
Consents of KPMG Certified Auditors AE(7)
|
|
23
|
.3
|
|
Consent of Reeder & Simpson, P.C., Marshall
Islands counsel to the Registrant (included in
Exhibit 5.1)(6)
|
|
24
|
|
|
Power of Attorney (included on the signature page).
|
|
|
|
(1) |
|
Incorporated by reference to the corresponding agreement in the
Exhibit filed with Seanergys
Form F-1
filed with the SEC on December 12, 2008. |
|
(2) |
|
Incorporated by reference to the corresponding agreement in the
Annex filed with Seanergy Maritimes proxy statement on
Form 6-K
filed with the SEC on July 31, 2008. |
|
(3) |
|
Incorporated by reference to the corresponding agreement in the
Exhibit filed with Seanergys
Form F-1
filed with the SEC on January 15, 2009. |
|
(4) |
|
Incorporated by reference to the corresponding agreement in the
Annex filed with Seanergy Maritimes supplemental proxy
statement on
Form 6-K
filed with the SEC on August 22, 2008. |
|
(5) |
|
Incorporated by reference to the corresponding agreement in the
Exhibit filed with Seanergy Maritimes
Form F-1
filed with the SEC on July 10, 2007. |
|
(6) |
|
To be filed in an amendment to this registration statement. |
|
(7) |
|
Filed herewith. |
|
(8) |
|
Incorporated by reference to the corresponding agreement in the
Exhibit filed with Seanergy Maritimes
Form F-1
Registration Statement file #333-161595 filed with the SEC on
August 28, 2009. |
(h) 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 Act 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 Act and will be
governed by the final adjudication of such issue.
(i) The undersigned registrant hereby undertakes that:
1. For purposes of determining any liability under the
Securities Act of 1933, the information omitted from the form of
prospectus filed as part of this registration statement in
reliance upon Rule 430A and contained in a form of
prospectus filed by the registrant pursuant to
Rule 424(b)(1)( or (4) or 497(h) under the Securities
Act shall be deemed to be part of t his registration statement
as of the time it was declared effective.
2. For the purpose of determining any liability under the
Securities Act of 1933, each post-effective amendment that
contains a form of prospectus 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.
II-4
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-1
and has duly caused this Registration Statement to be signed on
its behalf by the undersigned, thereunto duly authorized, in the
City of Athens, Country of Greece on September 15, 2009.
SEANERGY MARITIME HOLDINGS CORP.
|
|
|
|
By:
|
/s/ Georgios
Koutsolioutsos
|
Georgios Koutsolioutsos,
Chairman of the Board of Directors
POWER OF
ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, that each person whose signature
appears below constitutes and appoints each of Georgios
Koutsolioutsos and Dale Ploughman, each in their individual
capacity, as his true and lawful attorney-in-fact, with full
power of substitution and resubstitution for him and in his
name, place and stead, in any and all capacities to sign any and
all amendments including post-effective amendments to this
registration statement, and to file the same, with all exhibits
thereto, and other documents in connection therewith, with the
Securities and Exchange Commission, hereby ratifying and
confirming all that said attorney-in-fact or his substitute,
each acting alone, may lawfully do or cause to be done by virtue
thereof.
Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement has been signed by the following persons
in the capacities and on the date indicated.
|
|
|
|
|
|
|
Signatures
|
|
Title
|
|
Date
|
|
|
|
|
|
|
/s/ Georgios
Koutsolioutsos
Georgios
Koutsolioutsos
|
|
Chairman of the Board of Directors
|
|
September 15, 2009
|
|
|
|
|
|
/s/ Dale
Ploughman
Dale
Ploughman
|
|
Chief Executive Officer and Director (Principal executive
officer)
|
|
September 15, 2009
|
|
|
|
|
|
/s/ Christina
Anagnostara
Christina
Anagnostara
|
|
Chief Financial Officer and Director (Principal financial and
accounting officer)
|
|
September 15, 2009
|
|
|
|
|
|
/s/ Ioannis
Tsigkounakis
Ioannis
Tsigkounakis
|
|
Secretary and Director
|
|
September 15, 2009
|
|
|
|
|
|
/s/ Alexios
Komninos
Alexios
Komninos
|
|
Director
|
|
September 15, 2009
|
|
|
|
|
|
/s/ Kostas
Koutsoubelis
Kostas
Koutsoubelis
|
|
Director
|
|
September 15, 2009
|
|
|
|
|
|
/s/ Dimitris
Anagnostopoulos
Dimitris
Anagnostopoulos
|
|
Director
|
|
September 15, 2009
|
II-5
|
|
|
|
|
|
|
Signatures
|
|
Title
|
|
Date
|
|
|
|
|
|
|
/s/ Elias
M. Culucundis
Elias
M. Culucundis
|
|
Director
|
|
September 15, 2009
|
|
|
|
|
|
/s/ George
Taniskidis
George
Taniskidis
|
|
Director
|
|
September 15, 2009
|
|
|
|
|
|
/s/ Kyriakos
Dermatis
Kyriakos
Dermatis
|
|
Director
|
|
September 15, 2009
|
|
|
|
|
|
/s/ Alexander
Papageorgiou
Alexander
Papageorgiou
|
|
Director
|
|
September 15, 2009
|
|
|
|
|
|
/s/ Dimitrios
Panagiotopoulos
Dimitrios
Panagiotopoulos
|
|
Director
|
|
September 15, 2009
|
|
|
|
|
|
/s/ George
Tsimpis
George
Tsimpis
|
|
Director
|
|
September 15, 2009
|
II-6
SIGNATURE
OF AUTHORIZED REPRESENTATIVE IN THE UNITED STATES
Pursuant to the Securities Act of 1933, the undersigned, the
duly authorized representative in the United States of Seanergy
Maritime Holdings Corp. has signed this registration statement
or amendment thereto in Miami, Florida on September 15,
2009.
Authorized U.S. Representative
A. Jeffry Robinson
II-7