Global Ship Lease, Inc. — FY2020 Form 20-F
Reporting period: Year ended December 31, 2020. This is an annual report, not a standalone fourth-quarter filing. Financial statements are prepared under U.S. GAAP; amounts below are U.S. dollars.
Business context and financial performance
Global Ship Lease owns and charters containerships to liner companies. At year-end, it operated 43 vessels with capacity of 245,280 TEU and a TEU-weighted average age of 13.7 years. Fixed-rate time charters are its principal source of revenue.
| Metric | 2020 | 2019 | Change / context |
|---|---|---|---|
| Time-charter revenue | $282.8 million | $261.1 million | Up 8.3%, primarily reflecting more vessels and higher rates on certain renewed charters. |
| Operating income | $104.7 million | $111.6 million | Down 6.1% as operating costs and impairment increased. |
| Operating margin | 37.0% | 42.7% | Calculated as operating income divided by revenue. |
| Net income | $41.6 million | $39.8 million | Net margin was 14.7% versus 15.3%. |
| Net income available to common shareholders | $37.6 million | $36.8 million | Basic EPS was $1.23 versus $1.48; weighted-average common shares increased substantially. |
| Cash from operating activities | $104.4 million | $93.4 million | Up $11.0 million. |
| Cash from investing activities | $(39.6) million | $(99.9) million | Included vessel purchases, drydockings and sale proceeds. |
| Cash from financing activities | $(120.2) million | $64.1 million | Included debt repayments and redemptions. |
| Cash and restricted cash | $92.3 million | $147.6 million | Unrestricted cash was $80.8 million at year-end. |
| Total assets / shareholders’ equity | $1,274.2 million / $464.7 million | $1,351.8 million / $406.4 million | Equity increased as accumulated deficit narrowed. |
Vessel operating expenses rose to $102.8 million from $87.8 million; the average cost per ownership day increased 4.6% to $6,410. Total operating expenses were 63.0% of revenue, versus 57.3% in 2019. Utilization declined to 93.0% from 94.4%, with 1,120 off-hire days, including planned upgrades and drydockings. The company recorded $8.5 million of vessel impairment and a $0.2 million loss on vessel sales; two older feeder vessels were sold in 2020.
Debt and liquidity
Year-end gross debt was $781.9 million, compared with $912.8 million in 2019; the selected financial data reports debt, net of financing costs, of $769.5 million versus $896.9 million. Debt included $233.4 million of 9.875% secured 2022 Notes, $59.8 million of 8.00% unsecured 2024 Notes, and secured credit facilities. Floating-rate debt was approximately $450.2 million, generally priced at LIBOR plus a margin.
Current assets were $98.6 million and current liabilities $112.2 million. Credit agreements require at least $20 million of consolidated liquidity and include collateral-value and other financial covenants; the company reported compliance at year-end. Scheduled 2021 debt amortization was $76.7 million, with contractual interest payments estimated at $46.2 million. Management stated it expected business-generated funds to meet operating needs for the 12 months after filing, including working capital, drydockings, interest and debt repayments.
Subsequent financing and capital actions: In January 2021, the company drew a $236.2 million secured Hayfin facility, due in 2026 at LIBOR plus 7.00%, and used proceeds plus cash to redeem the remaining 2022 Notes for $239.2 million plus accrued interest. The refinancing reduced scheduled amortization and removed certain 2022 Notes incurrence covenants, but added 21 vessels as collateral. The company also completed a January 2021 common-share offering that generated approximately $67.8 million net proceeds.
Material changes, outlook and risks
- Operating changes: Revenue growth reflected a larger fleet and improved charter rates on selected vessels; expenses rose with ownership days, higher operating costs and pandemic-related crew and supply disruptions. COVID-19 also contributed to drydock delays.
- Charter exposure: CMA CGM accounted for 50.6% of 2020 charter revenue, down from 57.2% in 2019; 14 of 43 vessels were chartered to CMA CGM at year-end. No charterhire was outstanding at year-end, and the filing reports no payment delays in 2019 or 2020.
- Near-term expiries and growth: Six vessel charters had expired or could expire by the end of first-half 2021, with seven more potentially expiring in second-half 2021. In February 2021, the company contracted to buy seven approximately 20-year-old, 6,000-TEU vessels for $116 million, with at least three-year charters and phased delivery in the second and third quarters of 2021.
- Market outlook: Management cited uncertainty about COVID-19’s lasting effects but noted recovery in container volumes in the second half of 2020. MSI, an external industry source, estimated 2020 trade contraction of about 2.0% and forecast 6.8% growth in 2021; this is an industry estimate, not company guidance.
- Dividends: No common-share dividend was paid for 2020. The board announced a $0.12 quarterly common dividend beginning in first-quarter 2021, subject to board discretion, cash availability, law and debt restrictions. Series B preferred dividends are cumulative at 8.75% when declared.
- Impairment and asset values: No additional impairment was recorded at year-end after testing vessel groups. Management’s sensitivity analysis indicated a theoretical impairment charge of about $29.1 million with a 5% reduction in assumed post-charter rates, or $53.3 million with a 10% reduction. Vessel valuations and future charter-rate assumptions are uncertain.
- Other key risks and contingencies: Cyclical charter markets, counterparty defaults, substantial leverage and covenant limits, variable interest rates and LIBOR transition, aging vessels, off-hire and regulatory/environmental compliance costs could affect cash flow. The filing reports no material pending or threatened legal proceedings. Management assessed disclosure controls and internal control over financial reporting as effective; the auditor issued an unqualified opinion on the financial statements.
Investor facts to verify
- Reconcile reported cash and restricted cash with unrestricted funds, covenant liquidity and planned debt service after the 2021 refinancing.
- Review charter coverage, renewal rates and actual performance of the 13 vessels facing potential charter expiry during 2021, including CMA CGM counterparty exposure.
- Confirm delivery, financing and contracted charter terms for the seven-vessel purchase, including total expected acquisition and upgrade costs.
- Assess whether charter-rate assumptions, vessel values, utilization and drydock costs could trigger further impairment or reduce liquidity.
- Track the post-year-end share issuance, conversion of Series C preferred shares into common shares, resulting dilution, and the sustainability of the new common dividend.