Business Context and Reporting Period
Company: Globus Maritime Ltd.
Filing Type: Form 20-F (Annual Report)
Reporting Period: Fiscal year ended December 31, 2015
Business Overview: Globus is an integrated dry bulk shipping company owning and operating a fleet of vessels transporting iron ore, coal, grain, and other commodities. As of December 31, 2015, the fleet consisted of six vessels (one Panamax, four Supramaxes, and one Kamsarmax) with an average age of 7.4 years. The company operates primarily on the spot market and short-term time charters.
Key Financial Metrics
| Metric (in thousands USD) | 2015 | 2014 |
|---|---|---|
| Voyage Revenue | $12,715 | $26,378 |
| Net Revenue (Revenue less Voyage Expenses) | $10,331 | $22,124 |
| Operating Loss | $(29,708) | $5,234 (Profit) |
| Total Comprehensive Loss | $(32,396) | $3,212 (Income) |
| Adjusted LBITDA (Unaudited) | $(2,376) | $9,938 |
| Basic Loss Per Share | $(3.20) | $0.29 |
| Net Cash Used in Operating Activities | $(60) | $9,521 |
| Total Debt Outstanding | $78,600 | $84,600 |
| Working Capital Deficit | $(64,900) | $(38,200) |
Operational Metrics:
- Daily Time Charter Equivalent (TCE) Rate: $4,333 (2015) vs. $7,969 (2014).
- Fleet Utilization: 96.4% (2015) vs. 99.5% (2014).
- Average Number of Vessels: 6.5 (2015) vs. 7.0 (2014).
Material Changes vs. Prior Period
- Revenue Decline: Voyage revenue decreased by 52% to $12.7 million, driven by a significant drop in average TCE rates due to depressed global dry bulk shipping markets.
- Impairment Losses: The company recognized a total impairment loss of $20.1 million in 2015. This included a $7.7 million loss on the sale of the m/v Tiara Globe and a $12.4 million impairment on the m/v Energy Globe due to recoverable amounts falling below carrying values.
- Operating Expenses: Vessel operating expenses increased slightly by 6% to $10.3 million, despite a reduction in fleet size, due to higher crew and maintenance costs.
- Depreciation: Increased by 8% to $6.1 million, partially due to a reduction in the estimated scrap rate from $335/ton to $240/ton in Q4 2015.
- Debt Restructuring: The company sold the m/v Tiara Globe in July 2015. In March 2016, it settled the Kelty Loan Agreement ($15.65 million) by transferring the shares of the vessel-owning subsidiary to Commerzbank for $6.86 million plus interest.
Guidance, Outlook, Risks, and Contingencies
Going Concern Uncertainty: Management has raised substantial doubt about the company's ability to continue as a going concern. As of December 31, 2015, the company had a working capital deficit of $64.9 million and was in breach of financial covenants on its major loan agreements (HSH, DVB, and Kelty/Commerzbank).
Debt Covenants and Waivers:
- The company was in breach of covenants regarding asset coverage ratios, net worth, and liquidity.
- In March and April 2016, the company reached settlement agreements and obtained waivers/relaxations from Commerzbank, DVB Bank, and HSH Nordbank. These agreements allowed for covenant suspensions and modified repayment schedules, subject to final documentation.
- Without these waivers, lenders could have accelerated the debt, potentially leading to foreclosure on the fleet.
Market Risks: The dry bulk market remains significantly depressed with the Baltic Dry Index (BDI) hitting all-time lows in late 2015 and early 2016. The company is exposed to volatile spot rates and has no long-term time charters as of the filing date.
Liquidity: Cash and cash equivalents were only $2.0 million as of year-end. The company relies on related-party credit facilities (Firment and Silaner) and potential equity raises to meet obligations.
Listing Status: The company transferred from the Nasdaq Global Market to the Nasdaq Capital Market in April 2016 to meet market value requirements but remains at risk of delisting if it fails to meet the minimum bid price requirement ($1.00) by May 9, 2016.
Key Facts for Investor Verification
- Covenant Compliance: Verify the finalization of the supplemental agreements with HSH Nordbank and DVB Bank to ensure debt acceleration is avoided.
- Going Concern Status: Assess the company's ability to generate sufficient cash flow or raise capital to cover the $64.9 million working capital deficit and upcoming debt service.
- Asset Valuation: Review the recoverable amount calculations for the remaining fleet, given the significant impairment charges already taken and the depressed market values.
- Related Party Dependence: Note the reliance on credit facilities from entities controlled by the Chairman (Firment and Silaner) for working capital.
- Delisting Risk: Monitor the stock price to ensure compliance with Nasdaq Capital Market minimum bid price requirements to avoid delisting, which could trigger cross-defaults.