Global Ship Lease Reports Lower Third Quarter Revenues on Lower Charters

Global Ship Lease Reports Lower Third Quarter Revenues on Lower Charters

Global Ship Lease Reports Lower Third Quarter Revenues on Lower Charters

Global Ship Lease, Inc., a containership charter owner, announced its unaudited results for the three months and nine months ended September 30, 2018.

Third Quarter and Year To Date Highlights

– Reported operating revenue of $35.9 million for the third quarter 2018. Revenue for the nine months ended September 30, 2018 was $107.0 million

– Reported net income available to common shareholders of $3.9 million for the third quarter 2018. For the nine months ended September 30, 2018, net income was $12.1 million

– Generated $23.6 million of Adjusted EBITDA(1) for the third quarter 2018. Adjusted EBITDA for the nine months ended September 30, 2018 was $70.6 million

– On September 10, 2018, announced that it had entered into a $65.0 million credit facility with funds associated with Hayfin Capital Management and Breakwater Capital to fund the acquisition of additional containerships. The non-amortizing facility may be drawn down during an 8-month period beginning September 10, 2018 and reaches maturity in July 2022.

– On September 20, 2018, announced a new time charter with Maersk Line for the 2004-built, 8,063 TEU containership GSLNingbo, previously named OOCLNingbo, following her redelivery by OOCL on September 17, 2018. The new charter commenced on September 21, 2018, for a period of between two and 12 months, with a subsequent option for an additional 12-month extension (at charterer’s option). During the first three months, the charter is at a rate of $11,500 per day; during months four to six, at $12,100 per day; during months seven to 12, at $12,400 per day; and during the subsequent 12-month option period, at $18,000 per day.

– On September 20, 2018, also announced an extension of its charter with CMA CGM for the 2002-built, 2,207 TEU containership Julie Delmas, which has been renamed GSL Julie. The extension commenced in direct continuation of the existing charter with effect from October 26, 2018, maintaining the current rate of $7,800 per day. The extended term runs through January 20, 2019 to March 20, 2019 (at charterer’s option).

-On October 29, 2018, announced the definitive agreement for a strategic combination with Poseidon Containers.

Ian Webber, Chief Executive Officer of Global Ship Lease, stated, “During the third quarter, we generated solid cash flows, while taking steps to further diversify GSL’s counterparty portfolio and extend our charter coverage. Specifically, we added Maersk, the world’s largest container liner company, as a counterparty, and extended one charter with CMA CGM, securing continuing full coverage of our fleet. Consistent with our focus on positioning the Company to capitalize on favorable fundamentals in the mid-sized and smaller containership segments, we also put in place a $65 million growth credit facility in the quarter.”

Revenue and Utilization

The fleet generated revenue from fixed rate, mainly long-term time charters of $35.9 million in the three months ended September 30, 2018, down $5.3 million on the comparative period in 2017, with the reduction in revenue as a consequence of the amendments to the charters of (i) Delmas Keta and GSL Julie whereby the day rate stepped down in September, 2017 from $18,465 per day to $7,800 per day, (ii) GSL Tianjin, where the rate stepped down in October 2017 from $34,500 per day to $13,000 per day and to $11,900 per day in January 2018 and again in mid-September 2018, (iii) OOCL Qingdao where the rate stepped down in March 2018 from $34,500 per day to $14,000 per day offset by (iv) revenue earned by GSL Valerie from July 1, 2018. There were 1,748 ownership days in the quarter, up 92 on the comparable period in 2017 from the addition of GSL Valerie on June 18, 2018. In the third quarter 2018, there were 10 days’ offhire, giving an overall utilization of 99.4%. In the comparable 2017 period, there was no offhire, giving an overall utilization of 100.0%.

For the nine months ended September 30, 2018, revenue was $107.0 million, down $14.1 million from revenue of $121.1 million in the comparative period of 2017, mainly due to the reasons noted above, as well as there being additional offhire in the comparative period from two more drydockings and a vessel grounding in March 2017.

The table below shows fleet utilization for the three and nine months ended September 30, 2018 and 2017, and for the years ended December 31, 2017, 2016, 2015 and 2014.

Vessel Operating Expenses

Vessel operating expenses, which include costs of crew, lubricating oil, spares and insurance, were $10.9 million for the three months ended September 30, 2018, compared to $10.6 million in the comparative period. The average cost per ownership day in the quarter was $6,232, compared to $6,401 for the comparative period, down $169 per day or 2.6%. The net reduction is primarily attributable to reduced crew costs and the release of reserves for insurance deductibles, offset by de minimis capital expenditure and miscellaneous costs that are expensed rather than capitalized.

For the nine months ended September 30, 2018, vessel operating expenses were $31.6 million or an average of $6,299 per day, compared to $31.9 million in the comparative period, or $6,487 per day. The $188, or 2.9%, reduction in vessel operating expenses per day is due mainly to reasons noted above.

Depreciation

Depreciation for the three months ended September 30, 2018 was $8.4 million, compared to $9.4 million in the third quarter 2017, with the reduction being due to the effect of lower book values for a number of vessels following impairment write downs taken in 2017.

Depreciation for the nine months ended September 30, 2018 was $24.7 million, compared to $28.6 million in the comparative period of 2017, with the reduction being due to the reason noted above.

Impairment

The Company’s accounting policies require that tangible fixed assets such as vessels are reviewed individually for impairment in case of trigger events or changes in circumstances to assess whether their carrying amounts are recoverable.

In September 2018, the Company agreed with CMA CGM to extend the charters on GSL Julie (formerly Julie Delmas) and entered a new charter with Maersk Line for GSL Ningbo (formerly OOCL Ningbo). These extensions triggered the performance of an impairment test on the two vessels. No impairment was identified.

In September 2017, the Company agreed with CMA CGM to extend the charters on Julie Delmas and Delmas Keta, by 12 months (plus or minus 45 days at the charterer’s option) at a fixed rate of $7,800 per vessel per day, commencing September 11, 2017 and September 20, 2017 respectively. These extensions triggered the performance of an impairment test on the two vessels. No impairment was identified.

General and Administrative Costs

General and administrative costs were $1.3 million in the three months ended September 30, 2018, the same as in the third quarter of 2017.

For the nine months ended September 30, 2018, general and administrative costs were $4.7 million, compared to $3.8 million for the comparative period in 2017. The increase was due to higher legal and professional fees, mainly in the three months ended March 31, 2018.

Other Operating Income

Other operating income in the three months ended September 30, 2018 was $1,000, compared to $2,000 in the third quarter of 2017.

For the nine months ended September 30, 2018, other operating income was $16,000, compared to $50,000 in the comparative period.

Adjusted EBITDA

As a result of the above, Adjusted EBITDA was $23.6 million for the three months ended September 30, 2018, down from $29.3 million for the three months ended September 30, 2017 due to lower total revenues from charter renewals, offset by lower vessel operating costs.

Adjusted EBITDA for the nine months ended September 30, 2018 was $70.6 million, compared to $85.4 million for the comparative period.

Interest Expense

Debt at September 30, 2018 totaled $412.9 million, comprising $360.0 million outstanding on our 9.875% notes due 2022, $44.8 million under our secured term loan, both of which were closed in October 2017 as part of a refinancing and $8.1 million outstanding under our growth facility, drawn against the GSL Valerie. The net proceeds of the refinancing, together with cash on hand, were used to refinance our previous 10.000% notes due 2019. In addition, all outstanding borrowings under both the previous revolving credit facility and the previous secured term loan were repaid and terminated.

Debt at September 30, 2017 totaled $401.1 million, comprised $346.3 million outstanding on our previous 10.000% notes due 2019, and $54.8 million outstanding under the revolving credit facility and the secured term loan.

Interest expense for the three months ended September 30, 2018, was $11.0 million, compared to $10.4 million for the three months ended September 30, 2017 on slightly higher borrowings following the draw-down of $8.1 million under the new growth facility, the inclusion of the commitment fee on the undrawn amount of the growth facility and amortization of deferred financing charges associated with that growth facility.

For the nine months ended September 30, 2018, interest expense was $32.5 million, compared to $32.4 million for the nine months ended September 30, 2017.

Interest income for the three months ended September 30, 2018 was $0.4 million, compared to $0.2 million in the comparative quarter in 2017 on higher cash balances and increased interest rates.

Interest income for the nine months ended September 30, 2018 was $1.0 million, compared to $0.3 million in the comparative period in 2017.

Taxation

Taxation for the three months ended September 30, 2018 was $13,000, compared to $15,000 in the third quarter of 2017.

Taxation for the nine months ended September 30, 2018 was $59,000, compared to $31,000 for the comparative period in 2017.

Earnings Allocated to Preferred Shares

The Series B Preferred Shares carry a coupon of 8.75%, the cost of which for the three months ended September 30, 2018 was $0.8 million, the same as in the comparative period.

The cost in the nine months ended September 30, 2018 was $2.3 million, the same as in the comparative period.

Net Income (Loss) Available to Common Shareholders

Net income available to common shareholders for the three months ended September 30, 2018 was $3.9 million. Net income for the three months ended September 30, 2017 was $8.9 million.

Normalized net income was the same as reported net income for both the three months ended September 30, 2018 and for the three months ended September 30, 2017.

Net income was $12.1 million for the nine months ended September 30, 2018. Net income was $22.5 million for the nine months ended September 30, 2017.

Normalized net income, which excludes, where relevant, the effect of any non-cash impairment charges, gains and losses on the purchase of notes and accelerated amortization of deferred financing charges and original issue discount consequent upon the retirement of notes, was the same as reported net income for the nine months ended September 30, 2018 and was $23.0 million for the nine months ended September 30, 2017.

Source : HSN

Manjula

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