Seaspan Achieves highest quarterly utilization rate since 2011 of 99.6%
Seaspan Corporation announced its financial results for the three and nine months ended September 30, 2019.
Increased portfolio financing program by $500.0 million to $1.5 billion
Agreed to acquire 9600 TEU vessel which Seaspan expects will enter into a three year time charter with Ocean Network Express (“ONE”)
Achieved vessel utilization of 99.6% for the third quarter, the highest quarterly utilization since 2011, and 98.8% for the first nine months
Operating earnings of $116.1 million for the third quarter and $570.6 million for the first nine months
Earnings per diluted share of $0.11 for the third quarter and $1.44 for the first nine months; changes in fair value of financial instruments contributed a loss of $0.10 per diluted share for the third quarter and a loss of $0.17 per diluted share for the first nine months
Cash flow from operations of $145.9 million for the third quarter and $645.2 million for the first nine months
Comments from Management
Bing Chen, President and Chief Executive Officer, commented, “Our focus on Operational Excellence in quality, reliability, and scalability, together with Customer Partnership, as the preferred solution provider of our customers, has resulted in our highest quarterly utilization rate since 2011, of 99.6% for our 112 vessels fleet. We continue to strengthen our customer centric approach, which this quarter generated an attractive vessel acquisition to facilitate the growth needs of one of our customers, in addition to a tailored charter solution for another. We see growing opportunities to broaden and deepen our customer partnerships as our sector stabilizes into a new normal marked by consolidation, and we expect our momentum to continue throughout the remainder of the year.”
Ryan Courson, Chief Financial Officer, said, “During the quarter we continued to execute across our business delivering, ahead of plan, a total of $645 million year-to-date cash flows from operations. We remain focused on the balance sheet as well, advancing our capital plan with the increase of our portfolio financing program to $1.5 billion of total commitments. The increased capacity provides room and flexibility to finance new acquisitions, including our recently acquired 9600 TEU vessel, which is expected to be delivered in April. The execution on our capital plan has significantly improved capital availability and flexibility, positioning us to execute on our next phase of growth.”
Significant Developments During the Quarter Ended September 30, 2019
Portfolio Financing Program Increased to $1.5 billion
On May 15, 2019, Seaspan entered into a credit agreement with a syndicate of lenders for a $1.0 billion secured credit facility as part of a portfolio financing program (the “Program”). The Program is secured by a portfolio of vessels (the “Collateral Pool”) and bears interest at LIBOR plus 2.25% per annum. Seaspan may add, substitute and remove vessels from the Collateral Pool during the term, subject to a borrowing base, portfolio concentration limits, absence of defaults and compliance with financial covenants and certain negative covenants.
On September 18, 2019, Seaspan increased the committed amount under the Program by $500.0 million to a total of $1.5 billion. The additional commitments are subject to the same terms, conditions and Collateral Pool security requirements as the initial tranche.
Series D Preferred Shares
In September 2019, Seaspan redeemed 1,923,585 shares of 7.95% Series D preferred shares for $47.8 million.
Purchase of 9600 TEU Vessel
On September 9, 2019, Seaspan closed an agreement to purchase a 2010-built 9600 TEU containership. The vessel is expected to be delivered by the end of April 2020, at which point Seaspan expects the vessel will enter into a 36 month fixed rate time charter with ONE. Subsequent to delivery of the vessel, Seaspan’s fleet will expand to 113 vessels.
As of November 7, 2019, Seaspan had 31 unencumbered vessels.
In October 2019, Seaspan refinanced secured term loan facilities, totalling $180.1 million, using proceeds from the Program. As of September 30, 2019, this balance was classified as current liabilities due to the issuance of voluntary irrevocable prepayment notices by Seaspan.
The Board of Directors declared a quarterly distribution in the amount of $0.125 per share for its Class A Common Shares, paid on October 30, 2019 to shareholders of record as at the close of business on October 21, 2019. Regular quarterly dividends on the Preferred Shares Series D, Series E, Series G, Series H and Series I were also declared.
Class A Common Shares Outstanding
As of November 7, 2019, there were 215.7 million Class A Common Shares outstanding.
Ownership Days, Operating Days and Vessel Utilization
Ownership days are the number of days a vessel is owned and available for charter. Operating days are the number of days a vessel is available to the charterer for use.
The primary driver of ownership days are the increases or decreases in the number of vessels owned, while the drivers of operating days are ownership days and the number of days the vessels are off-hire.
Ownership days were unchanged for the three months ended September 30, 2019, and increased by 1,791 days for the nine months ended September 30, 2019, compared with the same periods in 2018. The increase for the nine months ended September 30, 2019 was primarily due to the full period contribution of the additional 16 vessels acquired through the acquisition of Greater China Intermodal Investments LLC (“GCI”), which contributed 1,152 days, with the remainder due to the 2018 vessel deliveries.Vessel utilization represents the number of operating days as a percentage of ownership days.
Source: Seaspan Corporation