Business Context and Reporting Period
This Form 6-K filing by Costamare Inc. (NYSE: CMRE) is dated September 20, 2011. The report details strategic fleet management activities, including the acquisition of secondhand vessels, extensions of existing time charters, disposal of older assets, and the finalization of financing for newbuilding programs. The Company operates as a leading owner and provider of containerships with a fleet of 61 vessels totaling approximately 337,000 TEU.
Key Financial Metrics and Transactions
- Vessel Acquisitions: Agreements reached to purchase two secondhand containerships for a total of $90 million ($60 million for MSC Viviana and $30 million for MSC Ulsan).
- Charter Rates: New acquisitions secured at daily rates of $29,000 (10-year term) and $16,500 (63-month term).
- Asset Disposals: Two older vessels (MSC Tuscany and MSC Fado) agreed to be sold for demolition for a total of approximately $8.8 million.
- Expected Gains: Management expects to realize capital gains of approximately $5 million from the vessel disposals.
- Contracted Revenue: Recent chartering agreements (acquisitions and extensions) represent approximately $207 million in contracted revenues.
- Financing Leverage: New financing arrangements for newbuild vessels provide for 80% leverage.
Material Changes and Fleet Strategy
The Company is executing a strategy to optimize its fleet age and revenue stability. Material changes include:
- Fleet Modernization: Replacing older assets (1978-built vessels) with newer secondhand vessels (2002 and 2003-built) and securing financing for 10 newbuild orders.
- Charter Extensions: Extended time charters for six existing vessels with MSC, securing rates ranging from $10,000 to $13,500+ per day for periods extending through 2018.
- Revenue Visibility: The TEU-weighted average duration of the new and extended contracts exceeds five years, significantly minimizing re-chartering risk.
Outlook, Management Commentary, and Risks
Management, led by CFO Gregory Zikos, expressed satisfaction with the ability to acquire vessels backed by attractive charters while disposing of the oldest fleet assets at favorable prices. The Company is leveraging the current low interest rate environment to hedge interest rate obligations, thereby increasing cash flow visibility. The financing for the newbuilding program is nearly complete, with three vessels finalized and a firm offer accepted for the remaining two.
Risks and Contingencies: The filing includes standard forward-looking statements warning that actual results may differ materially from projections due to inherent uncertainties in the shipping industry. Specific risks are referenced in the Company's Annual Report on Form 20-F.
Investor Verification Checklist
- Verify the final closing dates for the acquisition of MSC Viviana and MSC Ulsan.
- Confirm the execution of the definitive loan agreements for the remaining two newbuild vessels.
- Monitor the delivery schedule for the 10 newbuild containerships (expected Q1-Q3 2013).
- Track the actual capital gains realized from the demolition of MSC Tuscany and MSC Fado versus the estimated $5 million.
- Review the impact of the 80% leverage ratio on the Company's debt service obligations and liquidity.