Safe Bulkers Reports 4th Quarter & 12 Months 2020 Results

Source: www.gulfoilandgas.com 2/15/2021, Location: Europe

Safe Bulkers, Inc., an international provider of marine drybulk transportation services, announced its unaudited financial results for the three and twelve months period ended December 31, 2020.

Management Commentary
Dr. Loukas Barmparis, President of the Company, said: ''Having a consistent strategy for fleet renewal and environmental upgrading, hands on operations and strong balance sheet, we believe we are well positioned to take advantage of a strengthening charter market.''

Update on COVID-19, Company's actions and status
There has been a negative effect from the COVID-19 pandemic on the Company's results of operations and financial condition year to date, due to lower demand which resulted in relatively lower charter rates, and higher crew and related costs. Any future impact of COVID-19 on the Company’s results of operations and financial condition and any long-term impact of the pandemic on the dry bulk industry, will depend on future developments, which are highly uncertain and cannot be predicted, including any potential third wave of the pandemic and any new potential restrictions imposed as a result of the virus, new information which may emerge concerning the severity of the virus and/or actions taken to contain or treat its impact, including distribution and effectiveness of the vaccines, as well as political implications that could further impact world trade and global growth.

The COVID-19 pandemic had significant impact on the shipping industry and our seafarers as port lockdowns were imposed globally in 2020 and certain ports that have since reopened have subsequently closed again for crew changes. The Company has worked extensively to find solutions focusing on effectively managing crew changes despite the ongoing port closures and travel restrictions imposed by governments around the world. The Company has also taken measures to protect its seafarers' and shore employees' health and well-being, keep its vessels sailing with minimal disruption to their trading ability, service its charterers and mitigate and address the risks, effects and impact of COVID-19 on our operations and financial performance.

At-the-market equity offering program
In August 2020, the Company filed a prospectus supplement with the Securities and Exchange Commission (“SEC”), under which it may offer and sell shares of its common stock (“Shares”) from time to time for up to aggregate gross offering proceeds of $23.5 million through an “at-the-market” equity offering program (the “ATM Program”). As of February 12, 2021, the Company had not offered to sell and has not sold any Shares under the ATM Program.

Chartering our fleet
Our vessels are used to transport bulk cargoes, particularly coal, grain and iron ore, along worldwide shipping routes. We intend to employ our vessels on both period time charters and spot time charters, according to our assessment of market conditions. Our customers represent some of the world’s largest consumers of marine drybulk transportation services. The vessels we deploy on period time charters provide us with visible and relatively stable cash flow, while the vessels we deploy in the spot market allow us to maintain our flexibility in low charter market conditions and provide an opportunity for a potential upside in our revenue when charter market conditions improve.

In December 2020, the Company agreed the early termination of an existing charter of the Capesize-class vessel MV Lake Despina, which was contractually due to expire in January 2024. In exchange for the early redelivery of the vessel, the charterer paid the Company cash compensation of about $8.1 million, 50% of which was received in December 2020, and the balance in January 2021. The vessel was redelivered in February 2021 and was subsequently deployed under a new period time charter with a different charterer for a duration of 12 to 14 months at a gross daily charter rate linked to the 5 TC Baltic Exchange Capesize Index ("BCI-180 5TC'') times 119%.

During the fourth quarter of 2020, we operated 42.00 vessels on average earning a TCE11 of $12,319 compared to 41.00 vessels earning a TCE of $13,707 during the same period in 2019.

Scrubber benefit for scrubber fitted vessels is calculated on the basis of fuel consumption of heavy fuel oil and price differential between heavy fuel oil and compliant fuel cost for the specific voyage and is presented as part of the daily charter hire in Table 6 or, in cases where it can not be estimated, is not part of the stated daily charter hire.

Orderbook and financing
During the fourth quarter of 2020, the Company, as part of its plan to implement a gradual fleet renewal with modern, energy efficient vessels, entered into agreements for the acquisition of two Japanese dry-bulk newbuild vessels, one Kamsarmax class, 82,000 dwt and of one Post-Panamax class, 87,000 dwt, with scheduled deliveries within the first half of 2022 and the third quarter of 2022, respectively. The vessels are designed to meet the Phase 3 requirements of Energy Efficiency Design Index, (''EEDI Phase 3'') related to the mandatory reduction of green house gas emissions, as adopted by the International Maritime Organization, ("IMO") and also comply with the latest NOx emissions regulation, NOx-Tier III (IMO, MARPOL Annex VI, reg. 13).

Concurrently with the ordering of the newbuild vessels, the Company has concluded the financing arrangements: i) for the Kamsarmax newbuild, a sale and lease back through a ten-year bareboat charter agreement for 90% financing with a purchase obligation at a predetermined price on termination and purchase options after the third year in the Company's favor, and, ii) for the Post-Panamax newbuild, a new term loan facility of up to 60% post-delivery financing and an increase of the existing revolving credit facility from $20 million to $30 million, the maturity of which was extended from 2022, by up to 2 years.

Vessel sales and second hand acquisition
In the framework of fleet renewal the Company has entered into memoranda of agreements for the sale of two of its older vessels and for the acquisition of a 2011 second-hand Panamax.

During the last quarter of 2020, the Company made available for sale, a 2003-built, Panamax class, dry-bulk vessel, the Paraskevi. In January 2021, the Company signed an agreement for its sale at a price of $7.3 million before commissions with expected delivery date in March 2021. As of February 12, 2021, the respective outstanding loan balance of about $4.0 million, net of deferred finance charges, which was secured by the vessel, has been repaid. Upon consummation of the sale transaction, we expect that our debt will be decreased by $4.0 million and our liquidity will be increased by $3.2 million and expect to incur a non-cash loss on sale of asset in the approximate amount of $0.3 million.

During January 2021, the Company made available for sale a 2004-built, Panamax class, dry-bulk vessel, the Vassos, and signed an agreement for its sale at a price of $8.7 million before commissions. The respective outstanding loan balance of about $6.0 million, net of deferred finance charges, which is secured by the vessel, will be repaid prior to the expected conclusion of the sale in April 2021. Upon consummation of the sale transaction, we expect that our debt will be decreased by $6.0 million and our liquidity will be increased by $2.5 million and expect to incur a non-cash loss on sale of asset in the approximate amount of $1.0 million.

Upon consummation of both sale transactions, we expect that our debt will be decreased by $10.0 million in the aggregate and our net liquidity will be increased by $5.7 million in the aggregate.

In February 2021, the Company entered into an agreement for the acquisition of a Panamax class, 2011 Japanese-built, dry-bulk, 75,000 dwt at a price of $14.0 million before commissions, which will be funded from available cash. The vessel, which is sister-ship with two of the Company's existing vessels, is scheduled to be delivered within February 2021 and has been chartered for 11 to 14 months at a gross daily charter rate of $13,800.

Mezzanine equity redemption and financing
In February 2021, a Company's subsidiary issued a notice of redemption for all issued and outstanding shares of series A cumulative redeemable perpetual preferred stock, recorded as mezzanine equity (the "Mezzanine Equity") with a redemption price of approximately $18.1 million, including the accrued dividend. The Mezzanine Equity was issued in 2018 to a third party investor in relation to the financing of the then newbuild vessel Pedhoulas Cedrus. The redemption is expected to be completed within February. In addition, the Company entered into a sale and lease back of Pedhoulas Cedrus through a bareboat charter agreement with a purchase obligation at a predetermined price on termination and purchase options after the third year in the Company's favor. This agreement will be consummated concurrently with the share redemption. The net increase of our liquidity from this refinancing is expected to be $6.4 million.

Liquidity
As of December 31, 2020, we had liquidity of $171.2 million, which included cash and cash equivalents, time deposits, restricted cash and funds available under the sale and lease back agreements, new term loan agreement and the revolving credit facility. Our aggregate remaining capital expenditure requirements for the acquisition of the two newbuilds as of December 31, 2020, amounted to $52.0 million, of which $0.6 million is payable in 2021 and $51.4 million in 2022.

As of February 12, 2021, we had liquidity of $184.3 million, which included cash and cash equivalents, time deposits, restricted cash and funds available under the sale and lease back agreements, new term loan agreement and the revolving credit facility. Our aggregate remaining capital expenditure requirements for the acquisition of the two newbuilds and the second hand vessel, which will be debt-free, were $64.0 million, of which $12.6 million is payable in 2021 and $51.4 million payable in 2022.

Debt Profile
As of December 31, 2020, our consolidated debt before deferred financing costs was $616.2 million. The loan repayment schedule of the Company as of December 31, 2020.

Derivatives
During the fourth quarter of 2020, the Company entered into bunker fuel contracts for 36,000 tons for calendar 2021 and 24,000 tons for calendar 2022 to sell the spread differential between the price per ton of the 0.5% and 3.5% sulfur content fuel, with the objective of reducing the risk arising from a lower spread differential, which is related to the additional revenue from the operation of scrubbers in scrubber fitted vessels. In February 2021, the Company entered into bunker fuel contracts to sell the spread differential for another 12,000 tons for calendar 2022.

During 2020, the Company entered into forward freight agreements on the Panamax index for 80 days for Q1 2021 and 60 days for Q2 2021, with the objective of reducing the risk arising from the volatility in the charter rates.

During 2020, the Company entered into interest rate derivative contracts with the objective to reduce exposure from the fluctuation of interest rates. As of December 31, 2020, the aggregate notional amount of outstanding interest rate derivative contracts was $244.3 million or about 40% of the aggregate debt outstanding at that date.

Environmental Social Responsibility - Environmental investments
In the context of our Environmental Social Responsibility policies, the Company has completed the installation of 20 scrubbers and continues the retrofit of vessels with ballast water treatment systems. As of December 31, 2020, the Company has 30 vessels equipped with ballast water treatment systems. The aggregate cost paid as of the year end for our environmental investments was $67.2 million. In February 2021, the Company entered into an agreement for an additional scrubber installation in one of its Capesize class vessels during the fourth quarter of 2021.

Dividend Policy
The Company has not declared a dividend on the Company’s common stock for the fourth quarter of 2020. The Company had 102,197,670 shares of common stock issued and outstanding as of February 12, 2021.

The aggregate cash dividend of $0.50 per share declared by the Company on each of its 8.00% Series C Cumulative Redeemable Perpetual Preferred Shares (NYSE: SB.PR.C) and 8.00% Series D Cumulative Redeemable Perpetual Preferred Shares (NYSE: SB.PR.D) for the period from October 30, 2020 to January 29, 2021, which was paid on February 1, 2021 to the respective shareholders of record as of January 22, 2021, was $2.75 million.

A Company’s subsidiary declares a cash dividend on a quarterly basis on each of its Series A shares to the respective shareholders of such shares, presented under the caption “Mezzanine Equity” in the condensed consolidated balance sheets. The aggregate cash dividend declared for the Series A shares for the period from October 1, 2020 to December 31, 2020, which was paid on January 4, 2021, was $0.1 million. As previously mentioned, such Series A shares will be redeemed on February 25, 2021, together with dividend accrued up to such date, pursuant to a redemption notice issued in February 2021.

The declaration and payment of dividends, if any, will always be subject to the discretion of the Board of Directors of the Company. The timing and amount of any dividends declared will depend on, among other things: (i) the Company’s earnings, financial condition and cash requirements and available sources of liquidity; (ii) decisions in relation to the Company’s growth and leverage strategies; (iii) provisions of Marshall Islands and Liberian law governing the payment of dividends; (iv) restrictive covenants in the Company’s existing and future debt instruments; and (v) global economic and financial conditions.


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