Business Context and Reporting Period
This Form 6-K filing by Danaos Corporation covers the period ending August 27, 2010. The Company is a foreign private issuer engaged in the container shipping business. As of the reporting date, the fleet consisted of 49 containerships aggregating 216,529 TEU, with a contracted program for 16 additional ships (146,150 TEU) scheduled for delivery through 2012.
Key Financial Metrics and Capitalization
The filing provides capitalization data as of March 31, 2010, adjusted for significant transactions occurring between March 31 and August 27, 2010. The filing does not provide specific revenue, profit, or cash flow figures for the period.
| Capitalization Item | Actual (March 31, 2010) | As Adjusted (August 27, 2010) |
|---|---|---|
| Total Debt | $2,369,646,000 | $2,453,135,000 |
| Total Stockholders' Equity | $292,840,000 | $492,840,000 |
| Total Capitalization | $2,662,486,000 | $2,945,975,000 |
Recent Financing Activities:
- Debt Restructuring: Entered into a commitment letter on August 6, 2010, for approximately $426 million in new debt financing and restructuring of existing obligations. Terms include rescheduled maturities, reduced interest rate margins, and revised covenants.
- Equity Issuance: Sold 54,054,055 shares of common stock for $200.0 million in cash at $3.70 per share on August 12, 2010.
- Warrants: Agreed to issue warrants to lenders to purchase 15 million shares at $7.00 per share, expiring January 31, 2019.
- Vendor Financing: Agreements in principle reached for $190.0 million from Hyundai Samho and a $203.4 million facility with Citi and CEXIM.
Material Changes Versus Prior Period
Between March 31, 2010, and August 27, 2010, the Company's capital structure changed significantly due to the following adjustments:
- Debt: Net increase in total debt of approximately $83.5 million, reflecting scheduled repayments of $6.9 million, a prepayment of $169.9 million, and new debt drawdowns of $260.3 million.
- Equity: Stockholders' equity increased by $200.0 million due to the private placement of common stock. Outstanding shares increased from approximately 54.5 million to 108.6 million.
- Liquidity: The equity proceeds were a condition precedent to the debt restructuring and are designated for the completion of the newbuilding program.
Guidance, Outlook, and Corporate Governance
Management Commentary and Outlook: The Company intends to use the proceeds from the new debt and equity financing to complete its current newbuilding program. The debt restructuring aims to improve financial flexibility by reducing interest margins and revising covenants.
Corporate Governance: The Company elected to comply with the Marshall Islands Business Corporations Act rather than NYSE shareholder approval rules for the equity issuance. This decision was made to secure the $200 million investment, which was a condition for the lender agreement, under terms deemed more favorable than a broader public offering.
Board Changes: George Economou, CEO of DryShips, Inc., was appointed to the Board of Directors as an independent director following his investment through Sphinx Investments Corp. The Company agreed to nominate Mr. Economou or a designee for election at future annual meetings, subject to ownership thresholds.
Risks and Contingencies: The debt restructuring and new financing are subject to final documentation and other conditions. The equity transaction included registration rights and participation rights in future underwritten offerings.
Key Facts for Investor Verification
- Verify the final execution of the $426 million debt restructuring and the $393.4 million in additional vendor financing (Hyundai Samho and Citi/CEXIM).
- Confirm the impact of the 100% increase in outstanding shares on earnings per share and future dilution.
- Monitor the status of the 16 newbuilding contracts and their scheduled delivery dates through 2012.
- Review the specific revised financial covenants and interest rate margins resulting from the bank restructuring.
- Assess the long-term implications of the registration rights and participation rights granted to the new investors.