Star Bulk Carriers Corp., a global shipping company focusing on the transportation of dry bulk cargoes, announced its unaudited financial and operating results for the second quarter and the first half of 2020.

Petros Pappas, Chief Executive Officer of Star Bulk, commented:

“Star Bulk announced today its second quarter 2020 financial results, reporting TCE Revenues of $97.1 million, Adjusted EBITDA of $35.1 million, Net loss of $44.1 million and Adjusted Net Loss of $18.1 million during a period of unprecedented volatility. Our average TCE for the quarter, decreased to $9,402/ day per vessel, while daily Opex and Net Cash G&A expenses per vessel were $4,027/day and $1,048/day respectively. As of today, we have physical coverage of 60% of Q3 2020 days at an average TCE rate of $12,145/ day.

We continue taking proactive steps to strengthen our balance sheet via refinancings that improve our Company’s liquidity. Despite the challenging market conditions, there has been significant interest from our lenders to engage with Star Bulk in new transactions. To date we have completed transactions that have increased our cash balance by $37.4 million and have received credit committee approval for another $75.0 million of expected net proceeds that will be finalized over the next two months.

We are optimistic about market fundamentals for the remainder of the year. There is a record low orderbook as a result of recent demand shocks and the uncertainty related to future decarbonization regulations. Dry bulk trade and ton-miles are expected to recover, propelled by the global infrastructure stimulus response to Covid19, which, we expect, will lead to a better balanced dry bulk market“

Recent Developments

Financing Activities

• In July 2020, we drew down $155.3 million in aggregate under the (i) ING $70.0 million Facility, (ii) Alpha Bank $35.0 million Facility and (iii) Piraeus Bank $50.4 million Facility, and used this amount to refinance the outstanding amounts under the loan and lease agreements of 14 vessels. The above facilities refinanced facilities with aggregate outstanding amounts of $124.9 million.
• In July 2020, we entered into a loan agreement with a wholly owned subsidiary of NTT Finance Corporation for an amount of $17.6 million (the “NTT $17.6 million Facility”). The drawn amount was used to refinance the outstanding lease agreement of the M/V Star Calypso. The facility will mature 5 years from the drawdown date. The NTT $17.6 million Facility is secured by a first priority mortgage on M/V Star Calypso. The above facility refinanced another facility with an outstanding amount of $10.7 million.
• In July 2020, we signed a commitment letter with CMBL to sell and leaseback the vessels M/V Laura, M/V Idee Fixe, M/V Roberta, M/V Kaley, M/V Diva, M/V Star Sirius and M/V Star Vega. We expect to receive $89.0 million in aggregate, pursuant to the seven sale and leaseback agreements, which will refinance the outstanding amounts under the loan and lease agreements of the aforementioned vessels. The sale and leaseback agreements are expected to be concluded by the end of August and the lease terms will be for 5 years with a purchase option at the expiration of the bareboat charters term.
• In July 2020, we signed a commitment letter with a Japanese financial institution to sell and leaseback the vessel M/V Star Lutas. We expect to receive $16.0 million pursuant to the sale and leaseback agreement, which will refinance the outstanding amount under the loan agreement of the vessel. The sale and leaseback agreement is expected to be concluded by the end of September 2020 and the lease term will be for 7 years with a purchase obligation at the expiration of the bareboat charter term.
• In July 2020, we signed a commitment letter with a Chinese financial institution to sell and leaseback three of our Newcastlemax vessels. We expect to receive up to $92.6 million in aggregate, pursuant to the three sale and leaseback agreements, which will refinance the outstanding amount under the loan agreement of the three vessels. The sale and leaseback agreements are expected to be concluded in September 2020 and the lease terms will be for 10 years with a purchase obligation at the expiration of the bareboat charters term.
• In July 2020, we signed a commitment letter with SPDB Financial Leasing Co. Ltd to sell and leaseback the vessels M/V Mackenzie, M/V Kennadi, M/V Honey Badger, M/V Wolverine and M/V Star Antares. We expect to receive up to $76.5 million in aggregate, pursuant to the five sale and leaseback agreements, which will refinance the outstanding amount under the loan agreement of the five vessels. The sale and leaseback agreements are expected to be concluded in September 2020 and the lease terms will be for 8 years with a purchase obligation at the expiration of the bareboat charters term.

Should we be able to draw down the full amounts under the above-mentioned debt refinancing transactions, we expect to increase our cash balance further by an aggregate of approximately $75.0 million.

• During the second quarter of 2020, we drew down a net amount of $5.4 million under the HSBC Working Capital Facility. As of the date of this press release, $29.6 million is outstanding under this facility.

Scrubber Financing Activities

• During the second quarter of 2020 and July 2020, we drew down $15.0 million of scrubber financing under the lease agreements with CMBL. As of today we have completed all scrubber related drawdowns and our scrubber financing balance stands at $118.6 million.

Interest rate derivative contracts
As of the date of this press release, we have agreed to fix the floating LIBOR related component of our interest cost on approximately 66% of our outstanding balance of vessel financings at an average 3-month USD LIBOR rate of 46bps and with an average remaining duration of 3.8 years.

Hedging VLSFO-HSFO spread
As of the date of this press release, we have hedged approximately 71,000 metric tons of our estimated fuel consumption for the second half of 2020 by selling the 2020 Singapore spread between Very Low-Sulfur Fuel Oil (VLSFO) – High-Sulfur Fuel Oil (HSFO) at an average price of $232 per ton. In addition we have hedged approximately 24,000 metric tons of our estimated fuel consumption by selling the 2021 Singapore spread between VLSFO –HSFO at an average price of $106 per ton.

Other Developments
On June 4, 2020, the Oslo BORS (“OSE”) granted our request for delisting our shares from the OSE. Our common shares were last listed on the OSE on July 31, 2020 and were delisted on August 3, 2020.

Impact of COVID-19 and our proactive measures
While it is still early to fully assess the impact of COVID-19 on our financial condition and operations and on the dry bulk industry in general, we have identified the following adverse effects of the COVID-19 pandemic on our business:

• Significant reduction in market charter rates, as a result of the decreased demand for dry bulk commodities and the uncertainty with regard to the timing of a return to more normalized global trade patterns.
• Potential adverse impact on asset values reflecting the weaker freight markets environment and lack of liquidity in the second hand market. Star Bulk is fully compliant with all its financial covenants as of end of the first half of 2020.
• Significant delays and increased cost associated with crew testing positive on COVID-19, crew rotation, supplying our vessels with spares or other supplies and overhauling or maintenance by attending engineers has been adversely affected by COVID-19 due to travel restrictions and quarantine rules.

The Company has taken proactive measures to ensure the health and wellness of crew and onshore employees while maintaining effective business continuity and the uninterrupted service to our customers.

Our business continuity plans onshore for our global offices in Athens, Limassol, Singapore, New York, Oslo and Manilla, have allowed for an efficient transition to a remote working environment. Additionally, we have also placed a temporary ban on all non-essential travel.

The actual impact of these effects and the efficacy of any measures we take in response to the challenges presented by the COVID-19 will depend on how the outbreak will develop, the duration and extent of the restrictive measures that are associated with COVID-19 and their impact on global economy and trade

Employment Overview

Daily Time Charter Equivalent Rate (“TCE”) and TCE Revenues are non-GAAP measures. Please see the table at the end of this release for a reconciliation to Voyage Revenues, which is the most directly comparable financial measure calculated and presented in accordance with U.S. GAAP, as well as for the definition of the respective measures.

For the second quarter of 2020 our TCE rate was:
Capesize / Newcastlemax Vessels: $11,363 per day.
Post Panamax / Kamsarmax / Panamax Vessels: $9,703 per day.
Ultramax / Supramax Vessels: $6,921 per day.

For first half of 2020 our TCE rate was:
Capesize / Newcastlemax Vessels: $13,902 per day.
Post Panamax / Kamsarmax / Panamax Vessels: $9,079 per day.
Ultramax / Supramax Vessels: $7,501 per day.

Amounts shown throughout the press release and variations in period–on–period comparisons are derived from the actual unaudited numbers in our books and records.

Second Quarter 2020 and 2019 Results

Voyage revenues for the second quarter of 2020 decreased to $146.1 million from $157.8 million in the second quarter of 2019. Adjusted time charter equivalent revenues (“Adjusted TCE Revenues”) (please see the table at the end of this release for the calculation of the Adjusted TCE Revenues) were $96.9 million for the second quarter of 2020, compared to $92.1 million for the second quarter of 2019. Adjusted TCE Revenues were positively impacted by an increase in realized gain on forward freight agreements and bunker swaps of $16.0 million in the second quarter of 2020 from $3.1 million in the second quarter of 2019. However, the negative impact of COVID-19 led to an overall weak dry bulk market environment, which is reflected in the lower TCE rate for the second quarter of 2020 of $9,402 compared to $10,549 for the second quarter of 2019.

For the second quarter of 2020, operating loss was $26.2 million, which includes depreciation of $35.3 million compared to operating loss of $18.4 million for the second quarter of 2019, which included depreciation of $30.0 million. Depreciation increased during the second quarter of 2020 due to the increase in the average number of vessels to 116.0 from 107.2 for the second quarter of 2019 as well as due to the increase in the cost base of our vessels due to the recent installation of scrubber equipment and ballast water management systems on 114 vessels.

For the second quarter of 2020, we had a net loss of $44.1 million, or $0.46 loss per share, basic and diluted, based on 95,797,142 weighted average basic and diluted shares. Net loss for the second quarter of 2019 was $40.2 million, or $0.44 loss per share, basic and diluted, based on 91,841,090 weighted average basic and diluted shares.

Net loss for the second quarter of 2020, included the following significant non-cash items, in addition to the depreciation expense mentioned above:

• Stock-based compensation expense of $2.1 million, or $0.02 per share, basic and diluted, recognized in connection with common shares granted to our directors and employees; and
• Unrealized loss on forward freight agreements and bunker swaps of $24.1 million, or $0.25 per share, basic and diluted.

Net loss for the second quarter of 2019, included the following significant non-cash items, in addition to the depreciation expense mentioned above:

• Stock-based compensation expense of $2.6 million, or $0.03 per share, basic and diluted, recognized in connection with common shares granted to our directors and employees;
• Unrealized loss on forward freight agreements and bunker swaps of $4.1 million or $0.04 per share, basic and diluted;
• Impairment loss of $3.4 million, or $0.04 per share, basic and diluted, recognized in connection with the agreements signed to sell the vessels Star Anna and Star Gamma;
• Loss on bad debt of $1.3 million or $0.01 per basic and diluted share associated with the write‐off of disputed charterer balances; and
• Net amortization of the fair value of below and above market acquired time charters of $0.5 million, or $0.01 per share, basic and diluted, associated with time charters attached to vessels acquired. The respective net amortization was recorded as an increase to voyage revenues.

Adjusted net loss for the second quarter of 2020, which excludes certain non-cash items, was $18.1 million, or $0.19 loss per share, basic and diluted, compared to an adjusted net loss for the second quarter of 2019 of $20.5 million, or $0.22 loss per share, basic and diluted.Adjusted EBITDA for the second quarter of 2020, which excludes certain non-cash items was $35.1 million, compared to adjusted EBITDA for the second quarter of 2019 of $31.2 million.
For the second quarters of 2020 and 2019, vessel operating expenses were $42.5 million and $39.1 million, respectively. This increase is attributable to the increase in the average number of vessels to 116.0 from 107.2. Our average daily operating expenses per vessel for the second quarter of 2020 and 2019, were $4,027 and $4,004, respectively.

During the second quarter of 2020, we incurred $7.5 million dry docking expenses mainly attributable to nine of our vessels that completed their periodic dry docking surveys within such period. During the second quarter of 2019, we incurred dry docking expenses of $19.0 million mainly attributable to ten of our vessels that completed their periodic dry docking surveys during such period (four of which had commenced in the first quarter of 2019), resulting in expenses of $7.0 million while the remaining $12.0 million were incurred in connection with in-progress and upcoming dry dockings.

General and administrative expenses for the second quarters of 2020 and 2019 were $9.0 million and $9.8 million, respectively. The decrease is mainly attributable to the decrease in stock based compensation expense to $2.1 million in the second quarter of 2020 from $2.6 million in the second quarter of 2019. Management fees for the second quarters of 2020 and 2019 were $4.6 million and $4.1 million, respectively. The increase is attributable to the new management agreements entered into in 2019 in connection with the fleet we acquired during the third quarter of 2019. Our average daily net cash general and administrative expenses per vessel (including management fees) for the second quarters of 2020 and 2019 were $1,048 and $1,009, respectively. Charter-in hire expense for the second quarters of 2020 and 2019 was $5.3 million and $21.8 million, respectively. This decrease is attributable to significantly fewer charter-in days of 360 during the second quarter of 2020 compared to 1,468 days during the second quarter of 2019.

For the second quarter of 2020, we incurred a net loss on forward freight agreements and bunker swaps of $8.1 million, consisting of $16.0 million of realized gain and $24.1 million of unrealized loss. For the second quarter of 2019 we incurred a net loss on forward freight agreements and bunker swaps of $1.0 million, consisting of realized gain of $3.1 million and unrealized loss of $4.1 million.

Interest and finance costs net of interest and other income/(loss) for the second quarters of 2020 and 2019 were $17.8 million and $21.0 million, respectively. Despite the increase in the weighted average balance of our outstanding indebtedness of $1,601.4 million during the second quarter of 2020, compared to $1,474.6 million for the same period in 2019, the interest and finance costs net of interest and other income/ (loss) decreased due to the decrease in the average interest rate on our outstanding indebtedness, mainly driven by the refinancing of certain of our debt agreements, the swap agreements that we entered during the second quarter of 2020 and the lower LIBOR rates during the second quarter of 2020.

First half 2020 and 2019 Results

Voyage revenues for the first half of 2020 decreased to $307.0 million from $324.3 million in the first half of 2019. Adjusted TCE Revenues were $196.7 million for the first half of 2020, compared to $195.7 million for the first half of 2019. Adjusted TCE Revenues were positively impacted by an increase in realized gain on forward freight agreements and bunker swaps of $19.6 million in the first half of 2020 compared to a realized gain of $8.4 million in the first half of 2019, partially counterbalancing the negative impact of COVID-19 in the dry bulk market. As a result, the TCE rate for the first half of 2020 was $10,128 compared to $10,880 for the first half of 2019.

For the first half of 2020, operating loss was $2.8 million, which includes depreciation of $70.0 million while for the first half of 2019, operating loss was $1.2 million, which includes depreciation of $59.8 million. Depreciation increased during the first half of 2020 due to the increase in the average number of vessels in our fleet to 116.0 from 107.2..

For the first half of 2020 we had a net loss of $41.4 million, or $0.43 loss per share, basic and diluted, based on 95,797,142 weighted average basic and diluted shares, while for the first half of 2019 we had a net loss of $45.5 million, or $0.49 loss per share, basic and diluted, based on 92,457,415 weighted average basic and diluted shares.

Net loss for the first half of 2020, included the following significant non-cash items, in addition to depreciation expense mentioned above:

• Stock-based compensation expense of $1.2 million, or $0.01 per share, basic and diluted, recognized in connection with common shares granted to our directors and employees, which includes a reversal of previously recognized cost of $1.2 million following the reassessment of the probability of achieving the performance conditions for some of our awards;
• Amortization of the fair value of below-market acquired time charters of $0.7 million, or $0.01 per share, basic and diluted, associated with time charters attached to vessels acquired. The respective amortization was recorded as an increase to voyage revenues; and
• Loss on debt extinguishment of $0.5 million or $0.01 per share, basic and diluted, recognized in connection with the refinancing of one of our debt facilities.
• Net loss for the first half of 2019, included the following significant non-cash items, in addition to depreciation expense mentioned above:

Unrealized loss on forward freight agreements and bunker swaps of $1.0 million or $0.01 per share, basic and diluted;
Stock-based compensation expense of $2.9 million, or $0.03 per share, basic and diluted, recognized in connection with common shares granted to our directors and employees;
Impairment loss of $3.4 million, or $0.04 per share, basic and diluted, recognized in connection with the agreement to sell the vessels Star Anna and Star Gamma;
Loss on bad debt of $1.3 million or $0.01 per basic and diluted share associated with the write‐off of disputed charterer balances; and
Net amortization of the fair value of below and above market acquired time charters of $1.2 million, or $0.01 per share, basic and diluted, associated with time charters attached to vessels acquired. The respective net amortization was recorded as an increase to voyage revenues.
Adjusted net loss for the first half of 2020, which excludes certain non-cash items, was $40.3 million, or $0.42 loss per share, basic and diluted compared to an adjusted net loss for the first half of 2019 of $26.9 million, or $0.29 loss per share, basic and diluted.

Adjusted EBITDA for the first half of 2020, which excludes certain non-cash items was $67.7 million compared to $77.2 million adjusted EBITDA for the first half of 2019.

For the first half of 2020 and 2019, vessel operating expenses were $85.2 million and $78.1 million, respectively. This increase was attributable to the increase in the average number of vessels to 116.0 from 107.2. Our average daily operating expenses per vessel for the first half of 2020 and 2019, were $4,037 and $4,025, respectively.

During the first half of 2020, we incurred $20.9 million dry docking expenses mainly attributable to 25 of our vessels that completed their periodic dry docking surveys within such period. During the first half of 2019, we incurred dry docking expenses of $28.7 million mainly attributable to 12 of our vessels that completed their periodic dry docking surveys during such period, resulting in expenses of $12.3 million while the remaining $16.4 million were incurred in connection with in-progress and upcoming dry dockings.

General and administrative expenses for the first half of 2020 were $15.0 million compared to $17.1 million during the first half of 2019. The decrease is primarily attributable to the decrease in stock-based compensation expense to $1.2 million in the first half of 2020 from $2.9 million in the first half of 2019 affected also by a reversal of previously recognized cost of $1.2 million following the reassessment of the probability of achieving the performance conditions for some of our awards. Management fees for the first half of 2020 and 2019 were $9.2 million and $8.2 million, respectively. The increase is attributable to the new management agreements entered into in connection with the fleet we acquired during the third quarter of 2019. Our average daily net cash general and administrative expenses per vessel (including management fees) for the first half of 2020 were increased to $1,052 from $990 during the first half of 2019. This increase in daily figures is attributable to the significant decrease in ownership and charter-in days in aggregate during the corresponding periods discussed also below (please see the table at the end of this release for the calculation of the Average daily Net Cash G&A expenses per vessel).

Charter-in hire expense for the first half of 2020 and 2019 was $14.1 million and $44.4 million, respectively. This decrease is attributable to the significant decrease in charter-in days from 3,208 in the first half of 2019 to 726 during the first half of 2020.

For the first half of 2020, we incurred a gain on forward freight agreements and bunker swaps of $19.5 million, consisting of a realized gain of $19.6 million and an unrealized loss of $0.1 million. For the first half of 2019, we incurred a gain on forward freight agreements and bunker swaps of $7.4 million, consisting of a realized gain of $8.4 million and an unrealized loss of $1.0 million.

Interest and finance costs net of interest and other income/ (loss) for the first half of 2020 and 2019 were $37.9 million and $42.7 million, respectively. Despite the increase in the weighted average balance of our outstanding indebtedness to $1,597.3 million during the first half of 2020 from $1,468.4 million during the first half of 2019, the interest and finance costs net of interest and other income/ (loss) decreased due to the decrease in the average interest rate on our outstanding indebtedness, mainly driven by the refinancing of certain of our debt agreements, the swap agreements that we entered during the second quarter of 2020 and the lower LIBOR rates during the first half of 2020.

Liquidity and Capital Resources

Cash Flows

Net cash provided by operating activities for the first half of 2020 and 2019 was $55.5 million and $7.6 million, respectively.

Despite the decrease in Adjusted EBITDA to $67.7 million during the first half of 2020 from $77.2 million during the corresponding period in 2019, our cash provided by operating activities increased in 2020 compared to 2019 due to (i) a net working capital inflow of $22.1 million compared to a net working capital outflow of $19.1 million during the first half of 2019 and (ii) lower net interest expense for the first half of 2020 compared to the corresponding period in 2019.

Net cash used in investing activities for the first half of 2020 and 2019 was $48.2 million and $132.1 million.

For the first half of 2020, net cash used in investing activities consisted of $51.3 million paid in connection with the acquisition and installation of scrubber equipment and ballast water management systems for certain of our vessels, offset partially by insurance proceeds of $3.1 million.

For the first half of 2019, net cash used in investing activities mainly consisted of (i) $93.2 million paid in connection with our newbuilding and newly acquired vessels and other capitalized expenses and (ii) $64.6 million paid for the acquisition and installation of scrubber equipment and ballast water management systems for certain of our vessels, offset partially by proceeds from the sale of three vessels concluded during the period of $20.0 million and insurance proceeds of $5.7 million.

During the first half of 2020 net cash used in financing activities was $25.9 million while during the first half of 2019 net cash provided by financing activities was $7.0 million.

For the first half of 2020, net cash used in financing activities mainly consisted of:

• $149.1 million of proceeds from loan and lease financings including $53.8 million drawn under the HSBC Working Capital Facility;

offset by:

• $93.4 million lease and debt repayments in connection with the regular amortization of outstanding vessel financings, $24.2 million repayment under the HSBC Working Capital Facility and $51.6 million early repayment due to the refinancing of certain of our finance agreements;
• $0.9 million of financing fees paid in connection with the new financing agreements; and
• $4.8 million of dividends paid in March 2020 for the fourth quarter of 2019.

For the first half of 2019, net cash provided by financing activities mainly consisted of:

• $392.4 million of proceeds from financing including financing from leases;

offset by:

• $366.1 million lease and debt obligations paid in aggregate in connection with: (i) the regular amortization of outstanding vessel financings and finance lease installments, and (ii) early repayment due to the refinancing of certain of our finance agreements and the sale of three of our vessels;
• $11.6 million used to repurchase our common shares in open market transactions;
• $6.2 million of financing fees paid in connection with the new financing agreements; and
• $1.5 million of prepayment fees paid in connection with early repaid debt.

Source: Star Bulk Carriers Corp.