UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM
(Mark One)
OR
For the fiscal year ended
OR
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
OR
SHELL COMPANY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
Date of event requiring this shell company report:
Not applicable
For the transition period from ___________________________ to ___________________________
Commission file number
____________________________________________________________________________________________________________________________________________________________________________________________________________
Exact name of Registrant as specified in its charter)
Diana Shipping Inc.
____________________________________________________________________________________________________________________________________________________________________________________________________________
(Translation of Registrant’s name into English)
____________________________________________________________________________________________________________________________________________________________________________________________________________
,
,
,
____________________________________________________________________________________________________________________________________________________________________________________________________________
Pendelis 16, 175 64 Palaio Faliro, Athens, Greece
Tel: + 30-
-
, Fax: +
E-mail:
____________________________________________________________________________________________________________________________________________________________________________________________________________
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None
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None
____________________________________________________________________________________________________________________________________________________________________________________________________________
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4
TABLE OF CONTENTS
FORWARD-LOOKING STATEMENTS
5
PART I
Item 1.
Identity of Directors, Senior Management and Advisers
8
Item 2.
Offer Statistics and Expected Timetable
8
Item 3.
Key Information
8
Item 4.
Information on the Company
44
Item 4A.
Unresolved Staff Comments
68
Item 5.
Operating and Financial Review and Prospects
68
Item 6.
Directors, Senior Management and Employees
85
Item 7.
Major Shareholders and Related Party Transactions
92
Item 8.
Financial Information
97
Item 9.
The Offer and Listing
98
Item 10.
Additional Information
99
Item 11.
Quantitative and Qualitative Disclosures about Market Risk
108
Item 12.
Description of Securities Other than Equity Securities
109
PART II
Item 13.
Defaults, Dividend Arrearages and Delinquencies
110
Item 14.
Material Modifications to the Rights of Security Holders and Use of
Proceeds
110
Item 15.
Controls and Procedures
110
Item 16A.
Audit Committee Financial Expert
111
Item 16B.
Code of Ethics
111
Item 16C.
Principal Accountant Fees and Services
111
Item 16D.
Exemptions from the Listing Standards for Audit Committees
112
Item 16E.
Purchases of Equity Securities by the Issuer and Affiliated Purchasers
112
Item 16F.
Change in Registrant’s Certifying Accountant
113
Item 16G.
Corporate Governance
113
Item 16H.
Mine Safety Disclosure
114
PART III
Item 17.
Financial Statements
115
Item 18.
Financial Statements
115
Item 19.
Exhibits
115
5
FORWARD-LOOKING STATEMENTS
Matters discussed in this annual report and the documents incorporated by reference may constitute
forward-looking statements. The Private Securities Litigation Reform Act of 1995 provides safe harbor
protections for forward-looking statements in order to encourage companies to provide prospective
information about their business. Forward-looking statements include, but are not limited to, statements
concerning plans, objectives, goals, strategies, future events or performance, underlying assumptions and
other statements, which are other than statements of historical facts.
Diana Shipping Inc., or the Company, desires to take advantage of the safe harbor provisions of the Private
Securities Litigation Reform Act of 1995 and is including this cautionary statement in connection with this
safe harbor legislation. This document and any other written or oral statements made by the Company or
on its behalf may include forward-looking statements, which reflect its current views with respect to future
events and financial performance, and are not intended to give any assurance as to future results. When
used in this document, the words “believe”, “anticipate,” “intends,” “estimate,” “forecast,” “project,” “plan,”
“potential,” “will,” “may,” “should,” “expect,” “targets,” “likely,” “would,” “could,” “seeks,” “continue,”
“possible,” “might,” “pending,” and similar expressions, terms or phrases may identify forward-looking
statements.
Please note in this annual report, “we”, “us”, “our” and “the Company” all refer to Diana Shipping Inc. and
its subsidiaries, unless otherwise indicated.
The forward-looking statements in this document are based upon various assumptions, many of which are
based, in turn, upon further assumptions, including without limitation, management’s examination of
historical operating trends, data contained in its records and other data available from third
parties. Although the Company believes that these assumptions were reasonable when made, because
these assumptions are inherently subject to significant uncertainties and contingencies which are difficult
or impossible to predict and are beyond its control, the Company cannot assure you that it will achieve or
accomplish these expectations, beliefs or projections.
Such statements reflect the Company’s current views with respect to future events and are subject to
certain risks, uncertainties and assumptions. Should one or more of these risks or uncertainties materialize,
or should underlying assumptions prove incorrect, actual results may vary materially from those described
herein as anticipated, believed, estimated, expected or intended. The Company is making investors aware
that such forward-looking statements, because they relate to future events, are by their very nature subject
to many important factors that could cause actual results to differ materially from those contemplated.
In addition to these important factors and matters discussed elsewhere herein, including under the heading
"Item 3. Key Information—D. Risk Factors," and in the documents incorporated by reference herein,
important factors that, in its view, could cause actual results to differ materially from those discussed in the
forward-looking statements include, but are not limited to:
●
the strength of world economies;
●
fluctuations in currencies and interest rates, and the impact of the discontinuance of the London
Interbank Offered Rate for US Dollars, or LIBOR, after June 30, 2023 on any of our debt referencing
LIBOR in the interest rate;
●
general market conditions, including fluctuations in charter hire rates and vessel values;
●
changes in demand in the dry-bulk shipping industry;
6
●
changes in the supply of vessels, including when caused by new newbuilding vessel orders or
changes to or terminations of existing orders, and vessel scrapping levels;
●
changes in the Company's operating expenses, including bunker prices, crew costs, drydocking
and insurance costs;
●
the Company’s future operating or financial results;
●
availability of financing and refinancing and changes to the Company’s financial condition and
liquidity, including the Company’s ability to pay amounts that it owes and obtain additional financing
to fund capital expenditures, acquisitions and other general corporate activities and the Company’s
ability to obtain financing and comply with the restrictions and other covenants in the Company’s
financing arrangements;
●
changes in governmental rules and regulations or actions taken by regulatory authorities;
●
potential liability from pending or future litigation;
●
compliance with governmental, tax, environmental and safety regulation, any non-compliance with
the U.S. Foreign Corrupt Practices Act of 1977 (FCPA) or other applicable regulations relating to
bribery;
●
the failure of counter parties to fully perform their contracts with the Company;
●
the Company’s dependence on key personnel;
●
adequacy of insurance coverage;
●
the volatility of the price of the Company’s common shares;
●
the Company’s incorporation under the laws of the Marshall Islands and the different rights to relief
that may be available compared to other countries, including the United States;
●
general domestic and international political conditions or labor disruptions;
●
the impact of port or canal congestion or disruptions;
●
the length and severity of the continuing novel coronavirus (COVID-19) outbreak and its impact in
the dry-bulk shipping industry;
●
potential physical disruption of shipping routes due to accidents, climate-related reasons (acute and
chronic), political events, public health threats, international hostilities and instability, piracy or acts
by terrorists; and
●
other important factors described from time to time in the reports filed by the Company with the
Securities and Exchange Commission, or the SEC, including those factors discussed in “Item 3.
Key Information- D. Risk Factors” in this Annual Report on Form 20-F and the New York Stock
Exchange, or the NYSE.
This report may contain assumptions, expectations, projections, intentions and beliefs about future events.
These statements are intended as forward-looking statements. The Company may also from time to time
make forward- looking statements in other documents and reports that are filed with or submitted to the
Commission, in other information sent to the Company’s security holders, and in other written materials.
7
The Company also cautions that assumptions, expectations, projections, intentions and beliefs about future
events may and often do vary from actual results and the differences can be material. The Company
undertakes no obligation to publicly update or revise any forward-looking statement contained in this report,
whether as a result of new information, future events or otherwise, except as required by law.
8
PART I
Item 1. Identity of Directors, Senior Management and Advisers
Not Applicable.
Item 2. Offer Statistics and Expected Timetable
Not Applicable.
Item 3. Key Information
A. [Reserved]
B. Capitalization and Indebtedness
Not Applicable.
C. Reasons for the Offer and Use of Proceeds
Not Applicable.
D. Risk Factors
Summary of Risk Factors
The below bullets summarize the principal risk factors related to an investment in our Company.
Industry Specific Risk Factors
●
Charter hire rates for dry bulk vessels are volatile and have fluctuated significantly in the
past years, which may adversely affect our earnings, revenues and profitability and our
ability to comply with our loan covenants.
●
The current state of the global financial markets and economic conditions may adversely
impact our ability to obtain additional financing on acceptable terms and otherwise
negatively impact our business.
●
Our operating results may be affected by seasonal fluctuations.
●
An increase in the price of fuel, or bunkers, may adversely affect our profits.
●
We are subject to complex laws and regulations, including environmental regulations
that can adversely affect the cost, manner or feasibility of doing business.
●
Increased inspection procedures, tighter import and export controls and new security
regulations could increase costs and disrupt our business.
9
●
Operational risks and damage to our vessels could adversely impact our performance.
●
If our vessels call on ports located in countries or territories that are the subject of
sanctions or embargoes imposed by the U.S. government, the European Union, the
United Nations, or other governmental authorities, it could lead to monetary fines or
penalties and may adversely affect our reputation and the market for our securities.
●
We conduct business in China, where the legal system is not fully developed and has
inherent uncertainties that could limit the legal protections available to us.
●
Failure to comply with the U.S. Foreign Corrupt Practices Act could result in fines,
criminal penalties and an adverse effect on our business.
●
Changing laws and evolving reporting requirements could have an adverse effect on our
business.
Company Specific Risk Factors
●
The market values of our vessels could decline, which could limit the amount of funds
that we can borrow and could trigger breaches of certain financial covenants contained
in our loan facilities, which could adversely affect our operating results, and we may
incur a loss if we sell vessels following a decline in their market values.
●
We charter some of our vessels on short-term time charters in a volatile shipping
industry and a decline in charter hire rates could affect our results of operations and our
ability to pay dividends.
●
Rising crew costs could adversely affect our results of operations.
●
Our investment in Diana Wilhelmsen Management Limited may expose us to additional
risks.
●
A cyber-attack could materially disrupt our business.
●
Climate change and greenhouse gas restrictions may adversely impact our operations
and markets.
●
Increasing scrutiny and changing expectations from investors, lenders and other market
participants with respect to our ESG policies may impose additional costs on us or
expose us to additional risks.
●
Our earnings may be adversely affected if we are not able to take advantage of favorable
charter rates.
●
Investment in derivative instruments such as forward freight agreements could result in
losses.
●
We cannot assure you that we will be able to borrow amounts under loan facilities and
restrictive covenants in our loan facilities impose financial and other restrictions on us.
10
●
We are subject to certain risks with respect to our counterparties on contracts, and
failure of such counterparties to meet their obligations could cause us to suffer losses
or otherwise adversely affect our business.
●
In the highly competitive international shipping industry, we may not be able to compete
for charters with new entrants or established companies with greater resources, and as
a result, we may be unable to employ our vessels profitably.
●
We may be unable to attract and retain key management personnel and other employees
in the shipping industry, which may negatively impact the effectiveness of our
management and results of operations.
●
Technological innovation and quality and efficiency requirements from our customers
could reduce our charter hire income and the value of our vessels.
●
We may not have adequate insurance to compensate us if we lose our vessels or to
compensate third parties.
●
Our vessels may suffer damage and we may face unexpected drydocking costs, which
could adversely affect our cash flow and financial condition.
●
The aging of our fleet may result in increased operating costs in the future, which could
adversely affect our earnings.
●
We are exposed to U.S. dollar and foreign currency fluctuations and devaluations that
could harm our reported revenue and results of operations.
●
Volatility of London Interbank Offered Rate (“LIBOR”), the cessation of LIBOR and
replacement of our interest rate in our debt agreements could affect our profitability,
earnings and cash flow.
●
We depend upon a few significant customers for a large part of our revenues and the
loss of one or more of these customers could adversely affect our financial performance.
●
We are a holding company, and we depend on the ability of our subsidiaries to distribute
funds to us in order to satisfy our financial obligations.
●
Because we are organized under the laws of the Marshall Islands, it may be difficult to
serve us with legal process or enforce judgments against us, our directors or our
management.
●
If we expand our business further, we may need to improve our operating and financial
systems and will need to recruit suitable employees and crew for our vessels.
●
We may have to pay tax on U.S. source income, which would reduce our earnings.
●
United States tax authorities could treat us as a “passive foreign investment company,”
which could have adverse United States federal income tax consequences to United
States holders.
Risks Relating to Our Common Stock
11
●
We cannot assure you that our board of directors will continue to declare dividends on
shares of our common stock in the future.
●
The market prices and trading volume of our shares of common stock may experience
rapid and substantial price volatility, which could cause purchasers of our common
stock to incur substantial losses.
●
Since we are incorporated in the Marshall Islands, which does not have a well-developed
body of corporate law, you may have more difficulty protecting your interests than
shareholders of a U.S. corporation.
●
As a Marshall Islands corporation and with some of our subsidiaries being Marshall
Islands entities and also having subsidiaries in other offshore jurisdictions, our
operations may be subject to economic substance requirements, which could impact our
business.
●
Certain existing shareholders will be able to exert considerable control over matters on
which our shareholders are entitled to vote.
●
Future sales of our common stock could cause the market price of our common stock to
decline.
●
Our Series B Preferred Shares are senior obligations of ours and rank prior to our
common shares with respect to dividends, distributions and payments upon liquidation,
which could have an adverse effect on the value of our common shares.
Risks Relating to Our Series B Preferred Stock
●
We may not have sufficient cash from our operations to enable us to pay dividends on
our Series B Preferred Shares following the payment of expenses and the establishment
of any reserves.
●
Our Series B Preferred Shares are subordinate to our indebtedness, and your interests
could be diluted by the issuance of additional preferred shares, including additional
Series B Preferred Shares, and by other transactions.
●
We may redeem the Series B Preferred Shares, and you may not be able to reinvest the
redemption price you receive in a similar security.
Some of the following risks relate principally to the industry in which we operate and our business in
general. Other risks relate principally to the securities market and ownership of our securities, including our
common stock and our Series B Preferred Shares. The occurrence of any of the events described in this
section could significantly and negatively affect our business, financial condition, operating results, cash
available for the payment of dividends on our shares and interest on our loan facilities and Bond, or the
trading price of our securities.
Industry Specific Risk Factors
Charter hire rates for dry bulk vessels are volatile and have fluctuated significantly in the past
years, which may adversely affect our earnings, revenues and profitability and our ability to comply
with our loan covenants.
12
Substantially all of our revenues are derived from a single market, the dry bulk segment, and therefore our
financial results are subject to cyclicality of the dry bulk shipping industry and any attendant volatility in
charter hire rates and profitability. The degree of charter hire rate volatility among different types of dry bulk
vessels has varied widely, and time charter and spot market rates for dry bulk vessel have in the recent
past declined below the operating costs of vessels. When we charter our vessels pursuant to spot or short-
term time charters, we are exposed to changes in spot market and short-term charter rates for dry bulk
carriers and such changes may affect our earnings and the value of our dry bulk carriers at any given time.
We cannot assure you that we will be able to successfully charter our vessels in the future or renew existing
charters at rates sufficient to allow us to meet our obligations or pay any dividends in the future. Fluctuations
in charter rates result from changes in the supply of and demand for vessel capacity and changes in the
supply of and demand for the major commodities carried by water internationally. Because the factors
affecting the supply of and demand for vessels are outside of our control and are unpredictable, the nature,
timing, direction and degree of changes in industry conditions are also unpredictable. A significant decrease
in charter rates would adversely affect our profitability, cash flows and may cause vessel values to decline,
and, as a result, we may have to record an impairment charge in our consolidated financial statements
which could adversely affect our financial results.
Dry bulk market conditions remained volatile in 2022, reflecting the impact of a broad economic slowdown,
easing of port congestion, and the war in Ukraine. With the exception of a temporary sharp increase in
rates in the immediate aftermath of Russia’s invasion of Ukraine, rates generally trended downwards during
the course of the year. In January and February 2023, we saw spot rates fall to extremely low levels,
following normal seasonal patterns as well as Chinese New Year, which has reduced industrial activity in
the region. Market conditions have improved since the lows of February and are expected to gradually
improve over the course of 2023 as China’s re-opening takes hold, however we cannot guarantee a trend
towards recovery.
Factors that influence demand for dry bulk vessel capacity include:
●
supply of and demand for energy resources, commodities, and semi-finished and finished
consumer and industrial products;
●
changes in the exploration or production of energy resources, commodities, and semi-finished
and finished consumer and industrial products;
●
the location of regional and global exploration, production and manufacturing facilities;
●
the location of consuming regions for energy resources, commodities, and semi-finished and
finished consumer and industrial products;
●
the globalization of production and manufacturing;
●
global and regional economic and political conditions, armed conflicts, including the ongoing
conflict between Russia and Ukraine and fluctuations in industrial and agricultural production;
●
disruptions and developments in international trade;
●
changes in seaborne and other transportation patterns, including the distance cargo is
transported by sea;
●
international sanctions, embargoes, import and export restrictions, nationalizations, piracy, and
terrorist attacks;
13
●
legal and regulatory changes including regulations adopted by supranational authorities and/or
industry bodies, such as safety and environmental regulations and requirements;
●
weather and acts of God and natural disasters;
●
environmental and other regulatory developments;
●
currency exchange rates, specifically versus USD; and
●
the continuing impact of the COVID-19 pandemic on the global economy.
Demand for our dry bulk oceangoing vessels is dependent upon economic growth in the world’s economies,
seasonal and regional changes in demand and changes to the capacity of the global dry bulk fleet and the
sources and supply for dry bulk cargo transported by sea. Continued adverse economic, political or social
conditions or other developments could further negatively impact charter rates and therefore have a
material adverse effect on our business results, results of operations and ability to pay dividends.
Factors that influence the supply of dry bulk vessel capacity include:
●
the number of newbuilding orders and deliveries, including slippage in deliveries;
●
the number of shipyards and ability of shipyards to deliver vessels;
●
port or canal congestion;
●
potential disruption, including supply chain disruptions, of shipping routes due to accidents or
political events;
●
the scrapping of older vessels;
●
speed of vessel operation;
●
vessel casualties;
●
technological advances in vessel design and capacity;
●
the degree of scrapping or recycling of older vessels, depending, among other things, on
scrapping or recycling rates and international scrapping or recycling regulations;
●
the price of steel and vessel equipment;
●
product imbalances (affecting level of trading activity) and developments in international trade;
●
the number of vessels that are out of service, namely those that are laid-up, drydocked, awaiting
repairs or otherwise not available for hire;
●
availability of financing for new vessels and shipping activity;
●
changes in international regulations that may effectively cause reductions in the carrying
capacity of vessels or early obsolescence of tonnage; and
●
changes in environmental and other regulations that may limit the useful lives and trading
patterns of vessels.
14
In addition to the prevailing and anticipated freight rates, factors that affect the rate of newbuilding,
scrapping and laying-up include newbuilding prices, secondhand vessel values in relation to scrap prices,
costs of bunkers and other operating costs, costs associated with classification society surveys, normal
maintenance and insurance coverage costs, the efficiency and age profile of the existing dry bulk fleet in
the market and government and industry regulation of maritime transportation practices, particularly
environmental protection laws and regulations. These factors influencing the supply of and demand for
shipping capacity are outside of our control, and we may not be able to correctly assess the nature, timing
and degree of changes in industry conditions.
We anticipate that the future demand for our dry bulk carriers will be dependent upon economic growth in
the world’s economies, including China and India, seasonal and regional changes in demand, changes in
the capacity of the global dry bulk carrier fleet and the sources and supply of dry bulk cargo transported by
sea. While there has been a general decrease in new dry bulk carrier ordering since 2014, the capacity of
the global dry bulk carrier fleet could increase and economic growth may not resume in areas that have
experienced a recession or continue in other areas. Adverse economic, political, social or other
developments could have a material adverse effect on our business and operating results.
The current state of the global financial markets and economic conditions may adversely impact
our ability to obtain additional financing on acceptable terms and otherwise negatively impact our
business.
Global financial markets can be volatile and contraction in available credit may occur as economic
conditions change. In recent years, operating businesses in the global economy have faced weakening
demand for goods and services, deteriorating international liquidity conditions, and declining markets which
lead to a general decline in the willingness of banks and other financial institutions to extend credit,
particularly in the shipping industry. As the shipping industry is highly dependent on the availability of credit
to finance and expand operations, it may be negatively affected by such changes and volatility.
Also, as a result of concerns about the stability of financial markets generally, and the solvency of
counterparties specifically, the cost of obtaining money from the credit markets may increase if lenders
increase interest rates, enact tighter lending standards, refuse to refinance existing debt at all or on terms
similar to current debt, and reduce, or cease to provide funding to borrowers. Due to these factors,
additional financing may not be available to the extent required, on acceptable terms or at all. If additional
financing is not available when needed, or is available only on unfavorable terms, we may be unable to
expand or meet our obligations as they come due or we may be unable to enhance our existing business,
complete additional vessel acquisitions or otherwise take advantage of business opportunities as they
arise.
Credit markets in the United States and Europe have in the past experienced significant contraction,
deleveraging and reduced liquidity, and there is a risk that the U.S. federal government and state
governments and European authorities continue to implement a broad variety of governmental action
and/or new regulation of the financial markets. Global financial markets and economic conditions have
been, and continue to be, disrupted and volatile. We face risks attendant to changes in economic
environments, changes in interest rates, and instability in the banking and securities markets around the
world, among other factors which may have a material adverse effect on our results of operations and
financial condition and may cause the price of our common shares to decline. As of December 31, 2022,
we had total outstanding indebtedness of $530.1 million under our various credit facilities and bond and a
further $142.4 million of finance liabilities.
15
Global economic conditions may continue to negatively impact the drybulk shipping industry.
Major market disruptions and adverse changes in market conditions and regulatory climate in China, the
United States, the European Union and worldwide may adversely affect our business or impair our ability
to borrow amounts under credit facilities or any future financial arrangements.
Chinese dry bulk imports have accounted for the majority of global dry bulk transportation growth annually
over the last decade. Accordingly, our financial condition and results of operations, as well as our future
prospects, would likely be hindered by an economic downturn in any of these countries or geographic
regions. In recent years China and India have been among the world’s fastest growing economies in terms
of gross domestic product, and any economic slowdown in the Asia Pacific region particularly in China or
India may adversely affect demand for seaborne transportation of our products and our results of
operations. Moreover, any deterioration in the economy of the United States or the European Union, may
further adversely affect economic growth in Asia.
Economic growth is expected to slow, including due to supply-chain disruption, the recent surge in inflation
and related actions by central banks and geopolitical conditions, with a significant risk of recession in many
parts of the worlds in the near term. In particular, an adverse change in economic conditions affecting
China, Japan, India or Southeast Asia generally could have a negative effect on the drybulk market.
The dry bulk carrier charter market has improved but remains significantly below its high in 2008,
which may affect our revenues, earnings and profitability, and our ability to comply with our loan
covenants.
The abrupt and dramatic downturn in the dry bulk charter market until the beginning of 2021, from which
we derive substantially all of our revenues, severely affected the dry bulk shipping industry and our
business. The Baltic Dry Index, or the BDI, a daily average of charter rates for key dry bulk routes published
by the Baltic Exchange Limited, has long been viewed as the main benchmark to monitor the movements
of the dry bulk vessel charter market and the performance of the entire dry bulk shipping market. The BDI
declined 94% in 2008 from a peak of 11,793 in May 2008 to a low of 663 in December 2008 and has
remained volatile since then, reaching a record low of 290 in February 2016. In 2022, the BDI ranged from
a high of 3369 on May 23, 2022 to a low of 965 on August 31, 2022 to drop again to a low of 530 on
February 16, 2023. The BDI has since recovered from the February 2023 levels and closed at 1484 on
March 23, 2023. There can be no assurance that the dry bulk charter market will not decline further. The
decline and volatility in charter rates is due to various factors, including the lack of trade financing for
purchases of commodities carried by sea, which has resulted in a significant decline in cargo shipments,
and the excess supply of iron ore in China, which has resulted in falling iron ore prices and increased
stockpiles in Chinese ports. The decline and volatility in charter rates in the dry bulk market also affects the
value of our dry bulk vessels, which follows the trends of dry bulk charter rates, and earnings on our
charters, and similarly, affects our cash flows, liquidity and compliance with the covenants contained in our
loan agreements.
Any decline in the dry bulk carrier charter market may have additional adverse consequences for our
industry, including an absence of financing for vessels, no active secondhand market for the sale of
vessels, charterers seeking to renegotiate the rates for existing time charters, and widespread loan
covenant defaults in the dry bulk shipping industry. Accordingly, the value of our common shares could be
substantially reduced or eliminated.
Worldwide inflationary pressures could negatively impact our results of operations and cash flows.
It has been recently observed that worldwide economies have experienced inflationary pressures, with
price increases seen across many sectors globally. For example, the U.S. consumer price index, an
inflation gauge that measures costs across dozens of items, rose 6.5% in December 2022 compared to
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the prior year, driven in large part by increases in energy costs. It remains to be seen whether inflationary
pressures will continue, and to what degree, as central banks begin to respond to price increases. In the
event that inflation becomes a significant factor in the global economy generally and in the shipping industry
more specifically, inflationary pressures would result in increased operating, voyage and administrative
costs. Furthermore, the effects of inflation on the supply and demand of the products we transport could
alter demand for our services. Interventions in the economy by central banks in response to inflationary
pressures may slow down economic activity, including by altering consumer purchasing habits and
reducing demand for the commodities and products we carry, and cause a reduction in trade. As a result,
the volumes of goods we deliver and/or charter rates for our vessels may be affected. Any of these factors
could have an adverse effect on our business, financial condition, cash flows and operating results.
Regulations relating to ballast water discharge may adversely affect our revenues and profitability.
The IMO has imposed updated guidelines for ballast water management systems specifying the maximum
amount of viable organisms allowed to be discharged from a vessel’s ballast water. Depending on the date
of the International Oil Pollution Prevention ('IOPP') renewal survey, existing vessels constructed before
September 8, 2017 must comply with the updated D-2 Discharge Performance Standard ('D-2 standard')
on or after September 8, 2019. For most vessels, compliance with the D-2 standard involves installing on-
board systems to treat ballast water and eliminate unwanted organisms. Ships constructed on or after
September 8, 2017 are to comply with the D-2 standard upon delivery. We currently have one vessel that
does not comply with the updated guideline, which is scheduled to undergo such works in 2023.
Furthermore, United States regulations are currently changing. Although the 2013 Vessel General Permit
(“VGP”) program and U.S. National Invasive Species Act (“NISA”) are currently in effect to regulate ballast
discharge, exchange and installation, the Vessel Incidental Discharge Act (“VIDA”), which was signed into
law on December 4, 2018, requires that the EPA develop national standards of performance for
approximately 30 discharges, similar to those found in the VGP within two years. On October 26, 2020, the
EPA published a Notice of Proposed Rulemaking for Vessel Incidental Discharge National Standards of
Performance under VIDA. Within two years after the EPA publishes its final Vessel Incidental Discharge
National Standards of Performance, the U.S. Coast Guard must develop corresponding implementation,
compliance, and enforcement regulations regarding ballast water. The new regulations could require the
installation of new equipment, which may cause us to incur substantial costs.
Risks associated with operating ocean-going vessels could affect our business and reputation,
which could have a material adverse effect on our results of operations and financial condition.
The operation of ocean-going vessels carries inherent risks. These risks include the possibility of:
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marine disaster;
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acts of God;
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terrorism;
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environmental accidents;
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cargo and property losses or damage;
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business interruptions caused by mechanical failures, human error, war, political action in
various countries, labor strikes or adverse weather conditions; and
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piracy or robbery.
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In addition, international shipping is subject to various security and customs inspection and related
procedures in countries of origin and destination and trans-shipment points. Inspection procedures can
result in the seizure of the cargo and/or our vessels, delays in the loading, offloading or delivery and the
levying of customs duties, fines or other penalties against us. It is possible that changes to inspection
procedures could impose additional financial and legal obligations on us. Furthermore, changes to
inspection procedures could also impose additional costs and obligations on our customers and may, in
certain cases, render the shipment of certain types of cargo uneconomical or impractical. Any such
changes or developments may have a material adverse effect on our business, results of operations, cash
flows, financial condition and available cash.
Our operations outside the United States expose us to global risks, such as political instability,
terrorist or other attacks, war, international hostilities and global public health concerns, which
may affect the seaborne transportation industry and adversely affect our business.
We are an international shipping company and primarily conduct most of our operations outside the United
States, and our business, results of operations, cash flows, financial condition and ability to pay dividends,
if any, in the future may be adversely affected by changing economic, political and government conditions
in the countries and regions where our vessels are employed or registered. Moreover, we operate in a
sector of the economy that is likely to be adversely impacted by the effects of political conflicts.
Currently, the world economy faces a number of challenges, including trade tensions between the
United States and China, stabilizing growth in China, continuing threat of terrorist attacks around
the world, continuing instability and conflicts and other ongoing occurrences in the Middle East,
Ukraine, and in other geographic areas and countries, as well as the public health concerns
stemming from the ongoing COVID-19 outbreak.
In the past, political instability has also resulted in attacks on vessels, mining of waterways and other efforts
to disrupt international shipping, particularly in the Arabian Gulf region and most recently in the Black Sea
in connection with the recent conflicts between Russia and Ukraine. Acts of terrorism and piracy have also
affected vessels trading in regions such as the South China Sea and the Gulf of Aden off the coast of
Somalia. Any of these occurrences could have a material adverse impact on our future performance, results
of operation, cash flows and financial position.
Beginning in February of 2022, President Biden and several European leaders announced various
economic sanctions against Russia in connection with the aforementioned conflicts in the Ukraine region,
which may adversely impact our business.
The United States Department of the Treasury’s Office of Foreign Assets Control (“OFAC”) administers
and enforces multiple authorities under which sanctions have been imposed on Russia, including: the
Russian Harmful Foreign Activities sanctions program, established by the Russia-related national
emergency declared in Executive Order (E.O.) 14024 and subsequently expanded and addressed through
certain additional authorities, and the Ukraine-Russia-related sanctions program, established with the
Ukraine-related national emergency declared in E.O. 13660 and subsequently expanded and addressed
through certain additional authorities. The United States has also issued several Executive Orders that
prohibit certain transactions related to Russia, including the importation of certain energy products of
Russian Federation origin (including crude oil, petroleum, petroleum fuels, oils, liquefied natural gas and
coal), and all new investments in Russian by U.S. persons, among other prohibitions and export controls.
Furthermore, the United States has also prohibited a variety of specified services related to the maritime
transport of Russian Federation origin crude oil and petroleum products, including trading/commodities
brokering, financing, shipping, insurance (including reinsurance and protection and indemnity), flagging,
and customs brokering. These prohibitions took effect on December 5, 2022 with respect to the maritime
transport of crude oil and February 5, 2023 with respect to the maritime transport of other petroleum
products. An exception exists to permit such services when the price of the seaborne Russian oil does not
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exceed the relevant price cap; but implementation of this price exception relies on a recordkeeping and
attestation process that allows each party in the supply chain of seaborne Russian oil to demonstrate or
confirm that oil has been purchased at or below the price cap. Violations of the price cap policy or the risk
that information, documentation, or attestations provided by parties in the supply chain are later determined
to be false may pose additional risks adversely affecting our business. The ongoing conflict could result in
the imposition of further economic sanctions or new categories of export restrictions against persons in or
connected to Russia. While in general much uncertainty remains regarding the global impact of the conflict
in Ukraine, it is possible that such tensions could adversely affect the Company’s business, financial
condition, results of operation and cash flows. For instance, on February 24, 2023 OFAC issued a new
determination pursuant to Section 1(a)(i) of Executive Order 14024, which enables the imposition of
sanctions on individuals and entities who operate or have operated in the metals and mining sector of the
Russian economy. Increased restrictions on the metals and mining sector may pose additional risks
adversely affecting our business.
Our business could also be adversely impacted by trade tariffs, trade embargoes or other economic
sanctions that limit trading activities by the United States or other countries against countries in the Middle
East, Asia or elsewhere as a result of terrorist attacks, hostilities or diplomatic or political pressures.
In addition, public health threats, such as COVID-19, influenza and other highly communicable diseases
or viruses, outbreaks of which have from time to time occurred in various parts of the world in which we
operate, including China, Japan and South Korea, which may even become pandemics, such as the
COVID-19 virus, could lead to a significant decrease of demand for the transportation of dry bulk cargoes.
Such events may also adversely impact our operations, including timely rotation of our crews, the timing of
completion of any outstanding or future newbuilding projects or repair works in drydock as well as the
operations of our customers. Delayed rotation of crew may adversely affect the mental and physical health
of our crew and the safe operation of our vessels as a consequence.
Outbreaks of epidemic and pandemic diseases, including COVID-19, and governmental responses
thereto could adversely affect our business.
Since the beginning of 2020, the COVID-19 pandemic has negatively affected economic conditions, supply
chains, labor markets, demand for certain shipped goods both regionally and globally, and has also
negatively impacted and may continue to impact our operations and the operations of our customers and
suppliers. Over the course of the pandemic, measures taken to mitigate the spread of the COVID-19 virus
have included travel bans, quarantines, social distancing, limitations on public gatherings, impositions on
supply chain logistics, lockdowns and other emergency public health measures, resulting in a significant
reduction in overall global economic activity and extreme volatility in the global financial markets. Relatively
weak global economic conditions during periods of volatility have and may continue to have a number of
adverse consequences for the dry bulk shipping sectors. While many of the measures taken were relaxed
starting in 2021, we cannot predict whether and to what degree emergency public health and other
measures will be reinstituted in the event of any resurgence in the COVID-19 virus or any variants thereof.
This year, we have experienced increases in crew travel and medical costs due to COVID-19. If a
resurgence of COVID-19, including due to new variants, results in travel restrictions, supply chain
disruptions, and other impediments to the orderly conduct of seaborne trade, such as those caused by
China’s “zero-covid” policy, there may be an additional material adverse effect on our results of operations,
cash flows and financial condition. Further, prolongment of the COVID-19 pandemic could also impact
credit markets and financial institutions and result in increased interest rate spreads and other costs of,
and difficulty in obtaining, bank financing and our ability to finance the purchase price of vessel acquisitions,
which could limit our ability to grow our business in line with our strategy.
Our operating results may be affected by seasonal fluctuations.
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We operate our vessels in markets that have historically exhibited seasonal variations in demand and, as
a result, in charter hire rates. This seasonality may result in quarter-to-quarter volatility in our operating
results. The dry bulk carrier market is typically stronger in the fall and winter months in anticipation of
increased consumption of coal and other raw materials in the northern hemisphere during the winter
months. In addition, unpredictable weather patterns in these months tend to disrupt vessel scheduling and
supplies of certain commodities. As a result, our revenues may be weaker during the fiscal quarters ending
June 30 and September 30, and, conversely, our revenues may be stronger in fiscal quarters ending
December 31 and March 31. While this seasonality does not directly affect our operating results, it could
materially affect our operating results to the extent our vessels are employed in the spot market in the
future.
An increase in the price of fuel, or bunkers, may adversely affect our profits.
While we generally will not bear the cost of fuel or bunkers for vessels operating on time charters, fuel is a
significant factor in negotiating charter rates. As a result, an increase in the price of fuel beyond our
expectations may adversely affect our profitability at the time of charter negotiation. Fuel is also a
significant, if not the largest, expense in shipping when vessels are under voyage charter. The price and
supply of fuel is unpredictable and fluctuates based on events outside our control, including geopolitical
developments, supply and demand for oil and gas, actions by the Organization of Petroleum Exporting
Countries (the "OPEC"), and other oil and gas producers, war and unrest in oil producing countries and
regions, regional production patterns and environmental concerns. Any future increase in the cost of fuel
may reduce the profitability and competitiveness of our business.
We are subject to complex laws and regulations, including environmental regulations that can
adversely affect the cost, manner or feasibility of doing business.
Our business and the operations of our vessels are materially affected by environmental regulation in the
form of international conventions, national, state and local laws and regulations in force in the jurisdictions
in which our vessels operate, as well as in the country or countries of their registration, including those
governing the management and disposal of hazardous substances and wastes, the cleanup of oil spills
and other contamination, air emissions (including greenhouse gases), water discharges and ballast water
management. These regulations include, but are not limited to, European Union regulations, the U.S. Oil
Pollution Act of 1990, requirements of the U.S. Coast Guard, or USCG and the U.S. Environmental
Protection Agency, the U.S. Clean Air Act of 1970 (including its amendments of 1977 and 1990) , the U.S.
Clean Water Act, and the U.S. Maritime Transportation Security Act of 2002, and regulations of the IMO,
including the International Convention on Civil Liability for Oil Pollution Damage of 1969, the International
Convention for the Prevention of Pollution from Ships of 1973, as modified by the Protocol of 1978,
collectively referred to as MARPOL 73/78 or MARPOL, including designations of Emission Control Areas,
thereunder, SOLAS, the International Convention on Load Lines of 1966, the International Convention of
Civil Liability for Bunker Oil Pollution Damage, and the ISM Code. Because such conventions, laws, and
regulations are often revised, we cannot predict the ultimate cost of complying with such requirements or
the impact thereof on the re-sale price or useful life of any vessel that we own or will acquire. Additional
conventions, laws and regulations may be adopted that could limit our ability to do business or increase
the cost of our doing business and which may materially adversely affect our operations. Government
regulation of vessels, particularly in the areas of safety and environmental requirements, continue to
change, requiring us to incur significant capital expenditures on our vessels to keep them in compliance,
or even to scrap or sell certain vessels altogether. In addition, we may incur significant costs in meeting
new maintenance and inspection requirements, in developing contingency arrangements for potential
environmental violations and in obtaining insurance coverage.
In addition, we are required by various governmental and quasi-governmental agencies to obtain certain
permits, licenses, certificates, approvals and financial assurances with respect to our operations. Our
failure to maintain necessary permits, licenses, certificates, approvals or financial assurances could require
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us to incur substantial costs or temporarily suspend operation of one or more of the vessels in our fleet or
lead to the invalidation or reduction of our insurance coverage.
Environmental requirements can also affect the resale value or useful lives of our vessels, require a
reduction in cargo capacity, ship modifications or operational changes or restrictions, lead to decreased
availability of insurance coverage for environmental matters or result in the denial of access to certain
jurisdictional waters or ports, or detention in certain ports. Under local, national and foreign laws, as well
as international treaties and conventions, we could incur material liabilities, including for cleanup
obligations and natural resource damages, in the event that there is a release of petroleum or hazardous
substances from our vessels or otherwise in connection with our operations. We could also become subject
to personal injury or property damage claims relating to the release of hazardous substances associated
with our existing or historic operations. Violations of, or liabilities under, environmental requirements can
result in substantial penalties, fines and other sanctions, including in certain instances, seizure or detention
of our vessels.
Increased inspection procedures, tighter import and export controls and new security regulations
could increase costs and disrupt our business.
International shipping is subject to various security and customs inspection and related procedures in
countries of origin, destination and trans-shipment points. Under the U.S. Maritime Transportation Security
Act of 2002 (“MTSA”), the U.S. Coast Guard issued regulations requiring the implementation of certain
security requirements aboard vessels operating in waters subject to the jurisdiction of the United States
and at certain ports and facilities. These security procedures may result in cargo seizure, delays in the
loading, offloading, trans-shipment or delivery and the levying of customs duties, fines or other penalties
against us. It is possible that changes to inspection procedures could impose additional financial and legal
obligations on us. Changes to inspection procedures could also impose additional costs and obligations on
our customers and may, in certain cases, render the shipment of certain types of cargo uneconomical or
impractical. Any such changes or developments may have a material adverse effect on our business,
customer relations, financial condition and earnings.
Operational risks and damage to our vessels could adversely impact our performance.
The operation of an ocean-going vessel carries inherent risks. Our vessels and their cargoes are at risk of
being damaged or lost because of events such as marine disasters, bad weather and other acts of God,
business interruptions caused by mechanical failures, grounding, fire, explosions and collisions, human
error, war, terrorism, piracy, labor strikes, boycotts and other circumstances or events. Changing economic,
regulatory and political conditions in some countries, including political and military conflicts, have from
time to time resulted in attacks on vessels, mining of waterways, piracy, terrorism, labor strikes and
boycotts. Damage to the environment could also result from our operations, particularly through spillage of
fuel, lubricants or other chemicals and substances used in operations, or extensive uncontrolled fires.
These hazards may result in death or injury to persons, loss of revenues or property, the payment of
ransoms, environmental damage, higher insurance rates, damage to our customer relationships and
market disruptions, delay or rerouting, any of which may subject us to litigation. As a result, we could be
exposed to substantial liabilities not recoverable under our insurances. Further, the involvement of our
vessels in a serious accident could harm our reputation as a safe and reliable vessel operator and lead to
a loss of business. Epidemics and other public health incidents may also lead to crew member illness,
which can disrupt the operations of our vessels, or to public health measures, which may prevent our
vessels from calling on ports or discharging cargo in the affected areas or in other locations after having
visited the affected areas.
If our vessels suffer damage, they may need to be repaired at a drydocking facility. The costs of drydock
repairs are unpredictable and may be substantial. We may have to pay drydocking costs that our insurance
does not cover at all or in full. The loss of revenues while these vessels are being repaired and repositioned,
21
as well as the actual cost of these repairs, may adversely affect our business and financial condition. In
addition, space at drydocking facilities is sometimes limited and not all drydocking facilities are conveniently
located. We may be unable to find space at a suitable drydocking facility or our vessels may be forced to
travel to a drydocking facility that is not conveniently located relative to our vessels' positions. The loss of
earnings while these vessels are forced to wait for space or to travel to more distant drydocking facilities
may adversely affect our business and financial condition.
The operation of dry bulk vessels has certain unique operational risks. With a dry bulk vessel, the cargo
itself and its interaction with the ship can be a risk factor. By their nature, dry bulk cargoes are often heavy,
dense and easily shifted, and react badly to water exposure. In addition, dry bulk vessels are often
subjected to battering treatment during unloading operations with grabs, jackhammers (to pry encrusted
cargoes out of the hold), and small bulldozers. This treatment may cause damage to the dry bulk vessel.
Dry bulk vessels damaged due to treatment during unloading procedures may be more susceptible to a
breach at sea. Hull breaches in dry bulk vessels may lead to the flooding of their holds. If flooding occurs
in the forward holds, the bulk cargo may become so waterlogged that the vessel's bulkheads may buckle
under the resulting pressure leading to the loss of the dry bulk vessel. These risks may also impact the risk
of loss of life or harm to our crew.
If we are unable to adequately maintain or safeguard our vessels, we may be unable to prevent these
events. Any of these circumstances or events could negatively impact our business, financial condition or
results of operations. In addition, the loss of any of our vessels could harm our crew and our reputation as
a safe and reliable vessel owner and operator.
If our vessels call on ports located in countries or territories that are the subject of sanctions or
embargoes imposed by the U.S. government, the European Union, the United Nations, or other
governmental authorities, it could lead to monetary fines or penalties and may adversely affect our
reputation and the market for our securities.
We have not engaged in shipping activities in countries or territories or with government-controlled entities
in 2022 in violation of any applicable sanctions or embargoes imposed by the U.S. government, the EU,
the United Nations or other applicable governmental authorities. Our contracts with our charterers may
prohibit them from causing our vessels to call on ports located in sanctioned countries or territories or
carrying cargo for entities that are the subject of sanctions. Although our charterers may, in certain causes,
control the operation of our vessels, we have monitoring processes in place reasonably designed to ensure
our compliance with applicable economic sanctions and embargo laws. Nevertheless, it remains possible
that our charterers may cause our vessels to trade in violation of sanctions provisions without our consent.
If such activities result in a violation of applicable sanctions or embargo laws, we could be subject to
monetary fines, penalties, or other sanctions, and our reputation and the market for our common shares
could be adversely affected.
The applicable sanctions and embargo laws and regulations of these difference jurisdictions vary in their
application and do not all apply to the same covered persons or proscribe the same activities. In addition,
the sanctions and embargo laws and regulations of each jurisdiction may be amended to increase or reduce
the restrictions they impose over time, and the lists of persons and entities designated under these laws
and regulations are amended frequently. Moreover, most sanctions regimes provide that entities owned or
controlled by the persons or entities designated in such lists are also subject to sanctions. The U.S. and
EU have enacted new sanctions programs in recent years. Additional countries or territories, as well as
additional persons or entities within or affiliated with those countries or territories, have, and in the future
will, become the target of sanctions. These require us to be diligent in ensuring our compliance with
sanctions laws. Further, the U.S. has increased its focus on sanctions enforcement with respect to the
shipping sector. Current or future counterparties of ours may be affiliated with persons or entities that are
or may be in the future the subject of sanctions or embargoes imposed by the United States, EU, and/or
other international bodies. If we determine that such sanctions require us to terminate existing or future
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contracts to which we, or our subsidiaries, are party or if we are found to be in violation of such applicable
sanctions, our results of operations may be adversely affected, or we may suffer reputational harm.
As a result of Russia’s actions in Ukraine, the U.S., EU and United Kingdom, together with numerous other
countries and self-sanctioning, have imposed significant sanctions on persons and entities associated with
Russia and Belarus, as well as comprehensive sanctions on certain areas within the Donbas region of
Ukraine, and such sanctions apply to entities owned or controlled by such designated persons or entities.
These sanctions adversely affect our ability to operate in the region and also restrict parties whose cargo
we may carry.
Although we believe that we have been in compliance with all applicable sanctions and embargo laws and
regulations in 2022 and up to the date of this annual report, and intend to maintain such compliance, there
can be no assurance that we or our charterers will be in compliance in the future, particularly as the scope
of certain laws may be unclear and may be subject to changing interpretations. Any such violation could
result in fines, penalties or other sanctions that could severely impact our ability to access U.S. capital
markets and conduct our business and could result in our reputation and the markets for our securities to
be adversely affected and/or in some investors deciding, or being required, to divest their interest, or not
to invest, in us. In addition, certain institutional investors may have investment policies or restrictions that
prevent them from holding securities of companies that have contracts with countries or territories identified
by the U.S. government as state sponsors of terrorism. The determination by these investors not to invest
in, or to divest from, our shares may adversely affect the price at which our shares trade. Moreover, our
charterers may violate applicable sanctions and embargo laws and regulations as a result of actions that
do not involve us or our vessels, and those violations could in turn negatively affect our reputation. In
addition, our reputation and the market for our securities may be adversely affected if we engage in certain
other activities, such as entering into charters with individuals or entities that are not controlled by the
governments of countries or territories that are the subject of certain U.S. sanctions or embargo laws, or
engaging in operations associated with those countries or territories pursuant to contracts with third parties
that are unrelated to those countries or territories or entities controlled by their governments. Investor
perception of the value of our common stock may be adversely affected by the consequences of war, the
effects of terrorism, civil unrest and governmental actions in countries or territories that we operate in.
The smuggling of drugs or other contraband onto our vessels may lead to governmental claims
against us.
We expect that our vessels will call in ports in areas where smugglers attempt to hide drugs and other
contraband on vessels, with or without the knowledge of crew members. To the extent our vessels are
found with contraband, whether inside or attached to the hull of our vessel and whether with or without the
knowledge of any of our crew, we may face governmental or other regulatory claims which could have an
adverse effect on our business, results of operations, cash flows and financial condition.
Maritime claimants could arrest or attach one or more of our vessels, which could interrupt our
business or have a negative effect on our cash flows.
Crew members, suppliers of goods and services to a vessel, shippers of cargo, lenders, and other parties
may be entitled to a maritime lien against a vessel for unsatisfied debts, claims or damages. In many
jurisdictions, a maritime lien holder may enforce its lien by “arresting” or “attaching” a vessel through judicial
or foreclosure proceedings. The arrest or attachment of one or more of our vessels could interrupt the cash
flow of the charterer and/or require us to pay a significant amount of money to have the arrest or attachment
lifted, which would have an adverse effect on our cash flows.
In addition, in some jurisdictions, such as South Africa, under the “sister-ship” theory of liability, a claimant
may arrest both the vessel that is subject to the claimant’s maritime lien and any “associated” vessel, which
is any vessel owned or controlled by the same owner. Claimants could try to assert “sister-ship” liability
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against one vessel in our fleet for claims relating to another of our ships. Under some of our present
charters, if the vessel is arrested or detained as a result of a claim against us, we may be in default of our
charter and the charterer may suspend the payment of hire under the charter and charge us with any
additional expenses incurred during that period, which may negatively impact our revenues and cash flows.
We conduct business in China, where the legal system is not fully developed and has inherent
uncertainties that could limit the legal protections available to us.
Some of our vessels may be chartered to Chinese customers and from time to time on our charterers'
instructions, our vessels may call on Chinese ports. Such charters and voyages may be subject to
regulations in China that may require us to incur new or additional compliance or other administrative costs
and may require that we pay to the Chinese government new taxes or other fees. Applicable laws and
regulations in China may not be well publicized and may not be known to us or to our charterers in advance
of us or our charterers becoming subject to them, and the implementation of such laws and regulations
may be inconsistent. Changes in Chinese laws and regulations, including with regards to tax matters, or
changes in their implementation by local authorities could affect our vessels if chartered to Chinese
customers as well as our vessels calling to Chinese ports and could have a material adverse impact on our
business, financial condition and results of operations.
Governments could requisition our vessels during a period of war or emergency, resulting in a loss
of earnings.
A government could requisition one or more of our vessels for title or for hire. Requisition for title occurs
when a government takes control of a vessel and becomes her owner, while requisition for hire occurs
when a government takes control of a vessel and effectively becomes her charterer at dictated charter
rates. Generally, requisitions occur during periods of war or emergency, although governments may elect
to requisition vessels in other circumstances. Although we would be entitled to compensation in the event
of a requisition of one or more of our vessels, the amount and timing of payment would be uncertain.
Government requisition of one or more of our vessels may negatively impact our revenues and reduce the
amount of cash we may have available for distribution as dividends to our shareholders, if any such
dividends are declared.
Failure to comply with the U.S. Foreign Corrupt Practices Act could result in fines, criminal
penalties and an adverse effect on our business.
We may operate in a number of countries throughout the world, including countries suspected to have a
risk of corruption. We are committed to doing business in accordance with applicable anti-corruption laws
and have adopted measures designed to ensure compliance with the U.S. Foreign Corrupt Practices Act
of 1977, as amended (the “FCPA”). We are subject, however, to the risk that we, our affiliated entities or
our or their respective officers, directors, employees and agents may take actions determined to be in
violation of such anti-corruption laws, including the FCPA. Any such violation could result in substantial
fines, sanctions, civil and/or criminal penalties, curtailment of operations in certain jurisdictions, and might
adversely affect our business, earnings or financial condition. In addition, actual or alleged violations could
damage our reputation and ability to do business. Furthermore, detecting, investigating, and resolving
actual or alleged violations is expensive and can consume significant time and attention of our senior
management.
Changing laws and evolving reporting requirements could have an adverse effect on our business.
Changing laws, regulations and standards relating to reporting requirements, including the European Union
General Data Protection Regulation, or GDPR, may create additional compliance requirements for us.
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GDPR broadens the scope of personal privacy laws to protect the rights of European Union citizens and
requires organizations to report on data breaches within 72 hours and be bound by more stringent rules
for obtaining the consent of individuals on how their data can be used. GDPR has become enforceable on
May 25, 2018 and non-compliance may expose entities to significant fines or other regulatory claims which
could have an adverse effect on our business, financial condition, and operations.
Company Specific Risk Factors
The market values of our vessels could decline, which could limit the amount of funds that we can
borrow and could trigger breaches of certain financial covenants contained in our loan facilities,
which could adversely affect our operating results, and we may incur a loss if we sell vessels
following a decline in their market values.
While the market values of vessels and the freight charter market have a very close relationship as the
charter market moves from trough to peak, the time lag between the effect of charter rates on market values
of ships can vary.
The market values of our vessels have generally experienced high volatility, and you should expect the
market values of our vessels to fluctuate depending on a number of factors including:
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the prevailing level of charter hire rates;
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general economic and market conditions affecting the shipping industry;
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competition from other shipping companies and other modes of transportation;
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the types, sizes and ages of vessels;
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the supply of and demand for vessels;
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applicable governmental or other regulations;
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technological advances;
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the need to upgrade vessels as a result of charterer requirements, technological advances in vessel
design or equipment or otherwise; and
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the cost of newbuildings.
If the market values of our vessels decline, we may not be in compliance with certain covenants contained
in our loan facilities and we may not be able to refinance our debt or obtain additional financing or incur
debt on terms that are acceptable to us or at all. As of December 31, 2022, we were in compliance with all
of the covenants in our loan facilities. If we are not able to comply with the covenants in our loan facilities
or are unable to obtain waivers or amendments or otherwise remedy the relevant breach, our lenders could
accelerate our debt and foreclose on our vessels.
Furthermore, if we sell any of our owned vessels at a time when prices are depressed, our business, results
of operations, cash flow and financial condition could be adversely affected. Moreover, if we sell a vessel
at a time when vessel prices have fallen, the sale may be at less than the vessel's carrying amount in our
financial statements, resulting in a loss and a reduction in earnings. In addition, if vessel values decline,
we may have to record an impairment adjustment in our financial statements which could adversely affect
our financial results.
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We charter some of our vessels on short-term time charters in a volatile shipping industry and a
decline in charter hire rates could affect our results of operations and our ability to pay dividends.
Although significant exposure to short-term time charters is not unusual in the dry bulk shipping industry,
the short-term time charter market is highly competitive and spot market charter hire rates (which affect
time charter rates) may fluctuate significantly based upon available charters and the supply of, and demand
for, seaborne shipping capacity. While the short-term time charter market may enable us to benefit in
periods of increasing charter hire rates, we must consistently renew our charters and this dependence
makes us vulnerable to declining charter rates. As a result of the volatility in the dry bulk carrier charter
market, we may not be able to employ our vessels upon the termination of their existing charters at their
current charter hire rates or at all. The dry bulk carrier charter market is volatile, and in the recent past,
short-term time charter and spot market charter rates for some dry bulk carriers declined below the
operating costs of those vessels before rising. We cannot assure you that future charter hire rates will
enable us to operate our vessels profitably, or to pay dividends.
Rising crew costs could adversely affect our results of operations.
Due to an increase in the size of the global shipping fleet, the limited supply of and increased demand for
crew has created upward pressure on crew costs. Additionally, the return of a number of Ukrainian
seafarers to their homes as a result of the ongoing war in Ukraine has reduced the number of seafarers
globally, and thereby increased the pressure on crew wages. Continued higher crew costs or further
increases in crew costs could adversely affect our results of operations.
Our investment in Diana Wilhelmsen Management Limited may expose us to additional risks.
During 2015 we invested in a 50/50 joint venture with Wilhelmsen Ship Management which provides
management services to a limited number of vessels in our fleet and to affiliated companies, but our
eventual goal is to provide fleet management services to unaffiliated third party vessel operators. While
this joint venture may provide us in the future with a potential revenue source, it may also expose us to
risks such as low customer satisfaction, increased operating costs compared to those we would achieve
for our vessels, and inability to adequately staff our vessels with crew that meets our expectations or to
maintain our vessels according to our standards, which would adversely affect our financial condition.
A cyber-attack could materially disrupt our business.
We rely on information technology systems and networks in our operations and administration of our
business. Information systems are vulnerable to security breaches by computer hackers and cyber
terrorists. We rely on industry accepted security measures and technology to securely maintain confidential
and proprietary information maintained on our information systems. However, these measures and
technology may not adequately prevent security breaches. Our business operations could be targeted by
individuals or groups seeking to sabotage or disrupt our information technology systems and networks, or
to steal data. A successful cyber-attack could materially disrupt our operations, including the safety of our
operations, or lead to unauthorized release of information or alteration of information in our systems. Any
such attack or other breach of our information technology systems could have a material adverse effect on
our business and results of operations. In addition, the unavailability of the information systems or the
failure of these systems to perform as anticipated for any reason could disrupt our business and could
result in decreased performance and increased operating costs, causing our business and results of
operations to suffer. Any significant interruption or failure of our information systems or any significant
breach of security could adversely affect our business and results of operations. Our systems were the
subject of a malicious attack in September 2020 that resulted in disruptions to our computer networks for
a period of several days. We were able to successfully fully restore our systems without interruption to our
business or operations. Since then, we have taken extensive measures to enhance our security
infrastructure, reform network architecture, and implement rigorous security policies in line with ISO27001.
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Key initiatives include establishing security testing, business continuity, disaster recovery, and incident
response programs, as well as implementing multi-factor authentication and a vulnerability management
framework. Despite these improvements we cannot assure you that we will be able to successfully thwart
all future attacks with causing material and adverse effect on our business.
Moreover, cyber-attacks against the Ukrainian government and other countries in the region have been
reported in connection with the recent conflict between Russia and Ukraine. To the extent such attacks
have collateral effects on global critical infrastructure or financial institutions, such developments could
adversely affect our business, operating results and financial condition. At this time, it is difficult to assess
the likelihood of such threat and any potential impact at this time.
Even without actual breaches of information security, protection against increasingly sophisticated and
prevalent cyberattacks may result in significant future prevention, detection, response and management
costs, or other costs, including the deployment of additional cybersecurity technologies, engaging third-
party experts, deploying additional personnel and training employees. Further, as cyberthreats are
continually evolving, our controls and procedures may become inadequate, and we may be required to
devote additional resources to modify or enhance our systems in the future. Such expenses could have a
material adverse effect on our future performance, results of operations, cash flows and financial position.
Climate change and greenhouse gas restrictions may adversely impact our operations and
markets.
Due to concern over the risk of climate change, a number of countries and the IMO have adopted, or are
considering the adoption of, regulatory frameworks to reduce greenhouse gas emissions. These regulatory
measures may include, among others, adoption of cap and trade regimes, carbon taxes, increased
efficiency standards and incentives or mandates for renewable energy. More specifically, on October 27,
2016, the International Maritime Organization’s Marine Environment Protection Committee (“MEPC”)
announced its decision concerning the implementation of regulations mandating a reduction in sulfur
emissions from 3.5% currently to 0.5% as of the beginning of January 1, 2020. Additionally, in April 2018,
nations at the MEPC 72 adopted an initial strategy to reduce greenhouse gas emissions from ships. The
initial strategy identifies ―levels of ambition to reducing greenhouse gas emissions, including (1)
decreasing the carbon intensity from ships through implementation of further phases of the EEDI for new
ships; (2) reducing carbon dioxide emissions per transport work, as an average across international
shipping, by at least 40% by 2030, pursuing efforts towards 70% by 2050, compared to 2008 emission
levels; and (3) reducing the total annual greenhouse emissions by at least 50% by 2050 compared to 2008
while pursuing efforts towards phasing them out entirely.
Since January 1, 2020, ships have to either remove sulfur from emissions or buy fuel with low sulfur content,
which may lead to increased costs and supplementary investments for ship owners. The interpretation of
"fuel oil used on board" includes use in main engine, auxiliary engines and boilers. We have elected to
comply with this regulation by using 0.5% sulfur fuels on board, which are available around the world but
often at a higher cost and may result in higher costs than other companies that elected to install scrubbers
on their vessels.
In addition, although the emissions of greenhouse gases from international shipping currently are not
subject to the Kyoto Protocol to the United Nations Framework Convention on Climate Change, which
required adopting countries to implement national programs to reduce emissions of certain gases, or the
Paris Agreement (discussed further below), a new treaty may be adopted in the future that includes
restrictions on shipping emissions. Compliance with changes in laws, regulations and obligations relating
to climate change could increase our costs related to operating and maintaining our vessels and require
us to install new emission controls, acquire allowances or pay taxes related to our greenhouse gas
emissions or administer and manage a greenhouse gas emissions program. Revenue generation and
strategic growth opportunities may also be adversely affected.
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Increasing scrutiny and changing expectations from investors, lenders and other market
participants with respect to our ESG policies may impose additional costs on us or expose us to
additional risks.
Companies across all industries are facing increasing scrutiny relating to their ESG policies. Investor
advocacy groups, certain institutional investors, investment funds, lenders and other market participants
are increasingly focused on ESG practices and in recent years have placed increasing importance on the
implications and social cost of their investments. The increased focus and activism related to ESG and
similar matters may hinder access to capital, as investors and lenders may decide to reallocate capital or
to not commit capital as a result of their assessment of a company’s ESG practices. Companies which do
not adapt to or comply with investor, lender or other industry shareholder expectations and standards,
which are evolving, or which are perceived to have not responded appropriately to the growing concern for
ESG issues, regardless of whether there is a legal requirement to do so, may suffer from reputational
damage and the business, financial condition, and/or stock price of such a company could be materially
and adversely affected.
In February 2021, the Acting Chair of the SEC issued a statement directing the Division of Corporation
Finance to enhance its focus on climate-related disclosure in public company filings and in March 2021 the
SEC announced the creation of a Climate and ESG Task Force in the Division of Enforcement (the “Task
Force”). The Task Force’s goal is to develop initiatives to proactively identify ESG-related misconduct
consistent with increased investor reliance on climate and ESG-related disclosure and investment. To
implement the Task Force’s purpose, the SEC has taken several enforcement actions, with the first
enforcement action taking place in May 2022, and promulgated new rules. On March 21, 2022, the SEC
proposed that all public companies are to include extensive climate-related information in their SEC filings.
On May 25, 2022, SEC proposed a second set of rules aiming to curb the practice of "greenwashing" (i.e.,
making unfounded claims about one's ESG efforts) and would add proposed amendments to rules and
reporting forms that apply to registered investment companies and advisers, advisers exempt from
registration, and business development companies. As of the date of this annual report, these proposed
rules have not yet taken effect.
We may face increasing pressures from investors, lenders and other market participants, who are
increasingly focused on climate change, to prioritize sustainable energy practices, reduce our carbon
footprint and promote sustainability. As a result, we may be required to implement more stringent ESG
procedures or standards so that our existing and future investors and lenders remain invested in us and
make further investments in us. For example, in February 2021, we established a Sustainability Committee
and in March 2021, we signed an agreement with American Bureau of Shipping (“ABS”) to implement the
ABS Environmental MonitorTM digital sustainability solution across all our vessels managed by Diana
Shipping Services S.A. Additionally, in May 2021, we signed a sustainability - linked loan facility with ABN
AMRO Bank N.V., through six wholly-owned subsidiaries. Under this loan, the margin amount that we are
required to pay can be either increased or decreased depending on our ability to achieve certain
sustainability performance targets related to our fleet’s carbon emissions. If we do not meet the standards
in this loan, our business could be harmed.
Additionally, certain investors and lenders may exclude companies, such as us, from their investing
portfolios altogether due to environmental, social and governance factors. These limitations in both the
debt and equity capital markets may affect our ability to grow as our plans for growth may include accessing
the equity and debt capital markets. If those markets are unavailable, or if we are unable to access
alternative means of financing on acceptable terms, or at all, we may be unable to implement our business
strategy, which would have a material adverse effect on our financial condition and results of operations
and impair our ability to service our indebtedness. Further, it is likely that we will incur additional costs and
require additional resources to monitor, report and comply with wide ranging ESG requirements. The
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occurrence of any of the foregoing could have a material adverse effect on our business and financial
condition.
Moreover, from time to time, in alignment with our sustainability priorities, we may establish and publicly
announce goals and commitments in respect of certain ESG items. While we may create and publish
voluntary disclosures regarding ESG matters from time to time, many of the statements in those voluntary
disclosures are based on hypothetical expectations and assumptions that may or may not be representative
of current or actual risks or events or forecasts of expected risks or events, including the costs associated
therewith. Such expectations and assumptions are necessarily uncertain and may be prone to error or
subject to misinterpretation given the long timelines involved and the lack of an established single approach
to identifying, measuring and reporting on many ESG matters. If we fail to achieve or improperly report on
our progress toward achieving our environmental goals and commitments, the resulting negative publicity
could adversely affect our reputation and/or our access to capital.
The Public Company Accounting Oversight Board inspection of our independent accounting firm,
could lead to findings in our auditors’ reports and challenge the accuracy of our published audited
consolidated financial statements.
Auditors of U.S. public companies are required by law to undergo periodic Public Company Accounting
Oversight Board, or PCAOB, inspections that assess their compliance with U.S. law and professional
standards in connection with performance of audits of financial statements filed with the SEC. For several
years certain European Union countries, including Greece, did not permit the PCAOB to conduct
inspections of accounting firms established and operating in such European Union countries, even if they
were part of major international firms. Accordingly, unlike for most U.S. public companies, the PCAOB was
prevented from evaluating our auditor’s performance of audits and its quality control procedures, and,
unlike stockholders of most U.S. public companies, we and our stockholders were deprived of the possible
benefits of such inspections. Since 2015, Greece has agreed to allow the PCAOB to conduct inspections
of accounting firms operating in Greece. In the future, such PCAOB inspections could result in findings in
our auditors’ quality control procedures, question the validity of the auditor’s reports on our published
consolidated financial statements and the effectiveness of our internal control over financial reporting, and
cast doubt upon the accuracy of our published audited financial statements.
Our earnings may be adversely affected if we are not able to take advantage of favorable charter
rates.
We charter our dry bulk carriers to customers pursuant to short, medium or long-term time charters.
However, as part of our business strategy, the majority of our vessels are currently fixed on medium-term
time charters. We may extend the charter periods for additional vessels in our fleet, including additional dry
bulk carriers that we may purchase in the future, to take advantage of the relatively stable cash flow and
high utilization rates that are associated with long-term time charters. While we believe that long-term
charters provide us with relatively stable cash flows and higher utilization rates than shorter-term charters,
our vessels that are committed to long-term charters may not be available for employment on short-term
charters during periods of increasing short-term charter hire rates when these charters may be more
profitable than long-term charters.
Investment in derivative instruments such as forward freight agreements could result in losses.
Forward freight agreements, or FFAs and other derivative instruments may be used to hedge a vessel
owner's exposure to the charter market by providing for the sale of a contracted charter rate along a
specified route and period of time. Upon settlement, if the contracted charter rate is less than the average
of the rates, as reported by an identified index, for the specified route and period, the seller of the FFA is
required to pay the buyer an amount equal to the difference between the contracted rate and the settlement
rate, multiplied by the number of days in the specified period. Conversely, if the contracted rate is greater
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than the settlement rate, the buyer is required to pay the seller the settlement sum. If we take positions in
FFAs or other derivative instruments and do not correctly anticipate charter rate movements over the
specified route and time period, we could suffer losses in the settling or termination of the FFA. This could
adversely affect our results of operations and cash flows.
We may have difficulty effectively managing our growth, which may adversely affect our earnings.
Since the completion of our initial public offering in March 2005, we have increased our fleet to 51 vessels
in operation in 2017, and as of the date of this annual report we have 41 vessels in operation, owned and
chartered-in. We may grow our fleet further in the future and this may require us to increase the number of
our personnel. We may also have to increase our customer base to provide continued employment for the
new vessels.
Any future growth will primarily depend on our ability to:
●
locate and acquire suitable vessels;
●
identify and consummate acquisitions or joint ventures;
●
enhance our customer base;
●
manage our expansion; and
●
obtain required financing on acceptable terms.
Growing any business by acquisition presents numerous risks, such as undisclosed liabilities and
obligations, the possibility that indemnification agreements will be unenforceable or insufficient to cover
potential losses and difficulties associated with imposing common standards, controls, procedures and
policies, obtaining additional qualified personnel, managing relationships with customers and integrating
newly acquired assets and operations into existing infrastructure. We cannot give any assurance that we
will be successful in executing any future growth plans or that we will not incur significant expenses and
losses in connection with our future growth.
We cannot assure you that we will be able to borrow amounts under loan facilities and restrictive
covenants in our loan facilities impose financial and other restrictions on us.
Historically, we have entered into several loan agreements to finance vessel acquisitions, the construction
of newbuildings and working capital. As of December 31, 2022, we had $530.1 million outstanding under
our facilities and bond. Our ability to borrow amounts under our facilities is subject to the execution of
customary documentation relating to the facility, including security documents, satisfaction of certain
customary conditions precedent and compliance with terms and conditions included in the loan documents.
Prior to each drawdown, we are required, among other things, to provide the lender with acceptable
valuations of the vessels in our fleet confirming that the vessels in our fleet have a minimum value and that
the vessels in our fleet that secure our obligations under the facilities are sufficient to satisfy minimum
security requirements. To the extent that we are not able to satisfy these requirements, including as a result
of a decline in the value of our vessels, we may not be able to draw down the full amount under the facilities
without obtaining a waiver or consent from the lender. We will also not be permitted to borrow amounts
under the facilities if we experience a change of control.
The loan facilities also impose operating and financial restrictions on us. These restrictions may limit our
ability to, among other things:
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●
pay dividends if there is a default under the loan facilities or if the payment of the dividend would
result in a default or breach of a loan covenants;
●
incur additional indebtedness, including through the issuance of guarantees;
●
change the flag, class or management of our vessels;
●
create liens on our assets;
●
sell our vessels;
●
enter into a time charter or consecutive voyage charters that have a term that exceeds, or which
by virtue of any optional extensions may exceed a certain period;
●
merge or consolidate with, or transfer all or substantially all our assets to, another person; and
●
enter into a new line of business.
Therefore, we may need to seek permission from our lenders in order to engage in some corporate actions.
Our lenders’ interests may be different from ours and we cannot guarantee that we will be able to obtain
our lenders' permission when needed. This may limit our ability to finance our future operations, make
acquisitions or pursue business opportunities.
We cannot assure you that we will be able to refinance indebtedness incurred under our loan
facilities and bond.
We cannot assure you that we will be able to refinance our indebtedness with equity offerings or otherwise,
on terms that are acceptable to us or at all. If we are not able to refinance these amounts with the net
proceeds of equity offerings or otherwise, on terms acceptable to us or at all, we will have to dedicate a
greater portion of our cash flow from operations to pay the principal and interest of this indebtedness than
if we were able to refinance such amounts. If we are not able to satisfy these obligations, we may have to
undertake alternative financing plans. The actual or perceived credit quality of our charterers, any defaults
by them, and the market value of our fleet, among other things, may materially affect our ability to obtain
alternative financing. In addition, debt service payments under our loan facilities or alternative financing
may limit funds otherwise available for working capital, capital expenditures and other purposes. If we are
unable to meet our debt obligations, or if we otherwise default under our loan facilities or an alternative
financing arrangement, our lenders could declare the debt, together with accrued interest and fees, to be
immediately due and payable and foreclose on our fleet, which could result in the acceleration of other
indebtedness that we may have at such time and the commencement of similar foreclosure proceedings
by other lenders.
Purchasing and operating secondhand vessels may result in increased operating costs and
reduced operating days, which may adversely affect our earnings.
As part of our current business strategy to increase our owned fleet, we may acquire new and secondhand
vessels. While we rigorously inspect previously owned or secondhand vessels prior to purchase, this does
not provide us with the same knowledge about their condition and cost of any required (or anticipated)
repairs that we would have had if these vessels had been built for and operated exclusively by us.
Accordingly, we may not discover defects or other problems with secondhand vessels prior to purchasing
or chartering-in, or may incur costs to terminate a purchase agreement. Any such hidden defects or
problems may require us to put a vessel into drydock, which would reduce our fleet utilization and increase
our operating costs. If a hidden defect or problem is not detected, it may result in accidents or other
incidents for which we may become liable to third parties.
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In general, the costs to maintain a vessel in good operating condition increase with the age of the vessel.
Older vessels are typically less fuel-efficient than more recently constructed vessels due to improvements
in engine technology. Cargo insurance rates increase with the age of a vessel, making older vessels less
desirable to charterers.
Furthermore, governmental regulations, safety or other equipment standards related to the age of vessels
may require expenditures for alterations, or the addition of new equipment and may restrict the type of
activities in which the vessel may engage. As our vessels age, market conditions may not justify those
expenditures or enable us to operate our vessels profitably during the remainder of their useful lives.
We are subject to certain risks with respect to our counterparties on contracts, and failure of such
counterparties to meet their obligations could cause us to suffer losses or otherwise adversely
affect our business.
We enter into, among other things, charter parties with our customers. Such agreements subject us to
counterparty risks. The ability and willingness of each of our counterparties to perform its obligations under
a contract with us will depend on a number of factors that are beyond our control and may include, among
other things, general economic conditions, the condition of the maritime and offshore industries, the overall
financial condition of the counterparty, charter rates received for specific types of vessels, and various
expenses. Should a counterparty fail to honor its obligations under agreements with us, we could sustain
significant losses, which could have a material adverse effect on our business, financial condition, results
of operations and cash flows.
In addition, in depressed market conditions, our charterers may no longer need a vessel that is currently
under charter or may be able to obtain a comparable vessel at lower rates. As a result, charterers may
seek to renegotiate the terms of their existing charter agreements or avoid their obligations under those
contracts. If our charterers fail to meet their obligations to us or attempt to renegotiate our charter
agreements, it may be difficult to secure substitute employment for such vessels, and any new charter
arrangements we secure may be at lower rates. As a result, we could sustain significant losses, which
could have a material adverse effect on our business, financial condition, results of operations and cash
flows.
In the highly competitive international shipping industry, we may not be able to compete for
charters with new entrants or established companies with greater resources, and as a result, we
may be unable to employ our vessels profitably.
The operation of dry bulk vessels and transportation of dry bulk cargoes is extremely competitive and
fragmented. Competition for the transportation of dry bulk cargoes by sea is intense and depends on price,
location, size, age, condition and the acceptability of the vessel and its operators to the charterers.
Competition arises primarily from other vessel owners, some of whom have substantially greater resources
than we do. Due in part to the highly fragmented market, competitors with greater resources than us could
enter the dry bulk shipping industry and operate larger fleets through consolidations or acquisitions and
may be able to offer lower charter rates and higher quality vessels than we are able to offer. If we are
unable to successfully compete with other dry bulk shipping companies, our results of operations may be
adversely impacted.
We may be unable to attract and retain key management personnel and other employees in the
shipping industry, which may negatively impact the effectiveness of our management and results
of operations.
Our success depends to a significant extent upon the abilities and efforts of our management team. We
have entered into employment contracts with our Chief Executive Officer Mrs. Semiramis Paliou; our
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President, Mr. Anastasios Margaronis; our Chief Financial Officer, Chief Strategy Officer, Treasurer and
Secretary Mr. Ioannis Zafirakis and our Chief Operating Officer Mr. Eleftherios Papatrifon. On February 22,
2023, Mr. Eleftherios Papatrifon resigned from his position of the Chief Operating Officer and since that
date serves as a member of the board of directors. Our success will depend upon our ability to retain key
members of our management team and to hire new members as may be necessary. The loss of any of
these individuals could adversely affect our business prospects and financial condition. Difficulty in hiring
and retaining replacement personnel could have a similar effect. We do not currently, nor do we intend to,
maintain “key man” life insurance on any of our officers or other members of our management team.
Technological innovation and quality and efficiency requirements from our customers could
reduce our charter hire income and the value of our vessels.
Our customers have a high and increasing focus on quality and compliance standards with their suppliers
across the entire supply chain, including the shipping and transportation segment. Our continued
compliance with these standards and quality requirements is vital for our operations. The charter hire rates
and the value and operational life of a vessel are determined by a number of factors including the vessel’s
efficiency, operational flexibility and physical life. Efficiency includes speed, fuel economy and the ability to
load and discharge cargo quickly. Flexibility includes the ability to enter harbors, utilize related docking
facilities and pass through canals and straits. The length of a vessel’s physical life is related to its original
design and construction, its maintenance and the impact of the stress of operations. We face competition
from companies with more modern vessels having more fuel efficient designs than our vessels, or eco
vessels, and if new dry bulk vessels are built that are more efficient or more flexible or have longer physical
lives than the current eco vessels, competition from the current eco vessels and any more technologically
advanced vessels could adversely affect the amount of charter hire payments we receive for our vessels
and the resale value of our vessels could significantly decrease. Similarly, technologically advanced
vessels are needed to comply with environmental laws the investment in which along with the foregoing
could have a material adverse effect on our results of operations, charter hire payments and resale value
of vessels. This could have an adverse effect on our results of operations, cash flows, financial condition
and ability to pay dividends.
We may not have adequate insurance to compensate us if we lose our vessels or to compensate
third parties.
We procure insurance for our fleet against risks commonly insured against by vessel owners and operators.
Our current insurance includes hull and machinery insurance, war risks insurance and protection and
indemnity insurance (which includes environmental damage and pollution insurance). We can give no
assurance that we are adequately insured against all risks or that our insurers will pay a particular claim.
Even if our insurance coverage is adequate to cover our losses, we may not be able to timely obtain a
replacement vessel in the event of a loss. Furthermore, in the future, we may not be able to obtain adequate
insurance coverage at reasonable rates for our fleet. We may also be subject to calls, or premiums, in
amounts based not only on our own claim records but also the claim records of all other members of the
protection and indemnity associations through which we receive indemnity insurance coverage for tort
liability. Our insurance policies also contain deductibles, limitations and exclusions which, although we
believe are standard in the shipping industry, may nevertheless increase our costs.
Our vessels may suffer damage and we may face unexpected drydocking costs, which could
adversely affect our cash flow and financial condition.
If our vessels suffer damage, they may need to be repaired at a drydocking facility. The costs of drydock
repairs are unpredictable and can be substantial. The loss of earnings while a vessel is being repaired and
repositioned, as well as the actual cost of these repairs not covered by our insurance, would decrease our
earnings and available cash. We may not have insurance that is sufficient to cover all or any of the costs
or losses for damages to our vessels and may have to pay drydocking costs not covered by our insurance.
33
The aging of our fleet may result in increased operating costs in the future, which could adversely
affect our earnings.
In general, the cost of maintaining a vessel in good operating condition increases with the age of the vessel.
As of the date of this annual report, our fleet consists of 41 vessels in operation, owned and chartered-in,
having a combined carrying capacity of 4.7 million dead weight tons, or dwt, and a weighted average age
of 9.9 years. As our fleet ages, we will incur increased costs. Older vessels are typically less fuel efficient
and more costly to maintain than more recently constructed vessels due to improvements in engine
technology. Cargo insurance rates increase with the age of a vessel, making older vessels less desirable
to charterers. Governmental regulations and safety or other equipment standards related to the age of
vessels may also require expenditures for alterations or the addition of new equipment to our vessels and
may restrict the type of activities in which our vessels may engage. We cannot assure you that, as our
vessels age, market conditions will justify those expenditures or enable us to operate our vessels profitably
during the remainder of their useful lives.
We are exposed to U.S. dollar and foreign currency fluctuations and devaluations that could harm
our reported revenue and results of operations.
We generate all of our revenues in U.S. dollars but incur around half of our operating expenses and our
general and administrative expenses in currencies other than the U.S. dollar, primarily the Euro. Because
a significant portion of our expenses is incurred in currencies other than the U.S. dollar, our expenses may
from time to time increase relative to our revenues as a result of fluctuations in exchange rates, particularly
between the U.S. dollar and the Euro, which could affect the amount of net income that we report in future
periods. While we historically have not mitigated the risk associated with exchange rate fluctuations through
the use of financial derivatives, we may employ such instruments from time to time in the future in order to
minimize this risk. Our use of financial derivatives would involve certain risks, including the risk that losses
on a hedged position could exceed the nominal amount invested in the instrument and the risk that the
counterparty to the derivative transaction may be unable or unwilling to satisfy its contractual obligations,
which could have an adverse effect on our results.
Volatility of London Interbank Offered Rate (“LIBOR”), the cessation of LIBOR and replacement of
our interest rate in our debt agreements could affect our profitability, earnings and cash flow.
As certain of our current financing agreements have, and our future financing arrangements may have,
floating interest rates, typically based on LIBOR, movements in interest rates could negatively affect our
financial performance. The publication of U.S. Dollar LIBOR for the one-week and two-month U.S. Dollar
LIBOR tenors ceased on December 31, 2021, and the ICE Benchmark Administration (“IBA”), the
administrator of LIBOR, with the support of the United States Federal Reserve and the United Kingdom’s
Financial Conduct Authority, announced the publication of all other U.S. Dollar LIBOR tenors will cease on
June 30, 2023. The United States Federal Reserve concurrently issued a statement advising banks to
cease issuing U.S. Dollar LIBOR instruments after 2021. As such, any new loan agreements we enter into
will not use LIBOR as an interest rate, and we will need to transition our existing loan agreements from
U.S. Dollar LIBOR to an alternative reference rate prior to June 2023.
In order to manage our exposure to interest rate fluctuations under LIBOR, the Secured Overnight
Financing Rate, or “SOFR”, or any other alternative rate, we have and may from time to time use interest
rate derivatives to effectively fix some of our floating rate debt obligations. No assurance can however be
given that the use of these derivative instruments, if any, may effectively protect us from adverse interest
rate movements. The use of interest rate derivatives may affect our results through mark to market
valuation of these derivatives. Also, adverse movements in interest rate derivatives may require us to post
cash as collateral, which may impact our free cash position. Interest rate derivatives may also be impacted
by the transition from LIBOR to SOFR or other alternative rates.
34
Our financing agreements contain a provision requiring or permitting us to enter into negotiations with our
lenders to agree to an alternative interest rate or an alternative basis for determining the interest rate in
anticipation of the cessation of LIBOR. These clauses present significant uncertainties as to how alternative
reference rates or alternative bases for determination of rates would be agreed upon, as well as the
potential for disputes or litigation with our lenders regarding the appropriateness or comparability to LIBOR
of any substitute indices, such as SOFR, and any credit adjustment spread between the two benchmarks.
In the absence of an agreement between us and our lenders, most of our financing agreements provide
that LIBOR would be replaced with some variation of the lenders’ cost-of-funds rate. The discontinuation
of LIBOR presents a number of risks to our business, including volatility in applicable interest rates among
our financing agreements, potential increased borrowing costs for future financing agreements or
unavailability of or difficulty in attaining financing, which could in turn have an adverse effect on our
profitability, earnings and cash flow.
We depend upon a few significant customers for a large part of our revenues and the loss of one
or more of these customers could adversely affect our financial performance.
We have historically derived a significant part of our revenues from a small number of charterers. During
2022, 2021, and 2020, approximately 34%, 10% and 34%, respectively, of our revenues were derived from
two, one and two charterers, respectively. If one or more of our charterers chooses not to charter our
vessels or is unable to perform under one or more charters with us and we are not able to find a
replacement charter, we could suffer a loss of revenues that could adversely affect our financial condition
and results of operations.
We are a holding company, and we depend on the ability of our subsidiaries to distribute funds to
us in order to satisfy our financial obligations.
We are a holding company and our subsidiaries conduct all of our operations and own all of our operating
assets. We have no significant assets other than the equity interests in our subsidiaries. As a result, our
ability to satisfy our financial obligations depends on our subsidiaries and their ability to distribute funds to
us. If we are unable to obtain funds from our subsidiaries, we may not be able to satisfy our financial
obligations.
Because we are organized under the laws of the Marshall Islands, it may be difficult to serve us
with legal process or enforce judgments against us, our directors or our management.
We are organized under the laws of the Marshall Islands, and substantially all of our assets are located
outside of the United States. In addition, the majority of our directors and officers are non-residents of the
United States, and all or a substantial portion of the assets of these non-residents are located outside the
United States. As a result, it may be difficult or impossible for someone to bring an action against us or
against these individuals in the United States if they believe that their rights have been infringed under
securities laws or otherwise. Even if you are successful in bringing an action of this kind, the laws of the
Marshall Islands and of other jurisdictions may prevent or restrict them from enforcing a judgment against
our assets or the assets of our directors or officers.
The international nature of our operations may make the outcome of any bankruptcy proceedings
difficult to predict.
We are incorporated under the laws of the Republic of the Marshall Islands and we conduct operations in
countries around the world. Consequently, in the event of any bankruptcy, insolvency, liquidation,
dissolution, reorganization or similar proceeding involving us or any of our subsidiaries, bankruptcy laws
other than those of the United States could apply. If we become a debtor under U.S. bankruptcy law,
bankruptcy courts in the United States may seek to assert jurisdiction over all of our assets, wherever
35
located, including property situated in other countries. There can be no assurance, however, that we would
become a debtor in the United States, or that a U.S. bankruptcy court would be entitled to, or accept,
jurisdiction over such a bankruptcy case, or that courts in other countries that have jurisdiction over us and
our operations would recognize a U.S. bankruptcy court’s jurisdiction if any other bankruptcy court would
determine it had jurisdiction.
If we expand our business further, we may need to improve our operating and financial systems
and will need to recruit suitable employees and crew for our vessels.
Our current operating and financial systems may not be adequate if we further expand the size of our fleet
and our attempts to improve those systems may be ineffective. In addition, if we expand our fleet further,
we will need to recruit suitable additional seafarers and shoreside administrative and management
personnel. While we have not experienced any difficulty in recruiting to date, we cannot guarantee that we
will be able to continue to hire suitable employees if we expand our fleet. If we or our crewing agents
encounter business or financial difficulties, we may not be able to adequately staff our vessels. If we are
unable to grow our financial and operating systems or to recruit suitable employees should we determine
to expand our fleet, our financial performance may be adversely affected, among other things.
We may have to pay tax on U.S. source income, which would reduce our earnings.
Under the U.S. Internal Revenue Code of 1986, as amended, or the Code, 50% of the gross shipping
income of a vessel-owning or chartering corporation, such as ourselves and our subsidiaries, that is
attributable to transportation that begins or ends, but that does not both begin and end, in the United States
is characterized as U.S. source shipping income and such income is generally subject to a 4% U.S. federal
income tax without allowance for deductions, unless that corporation qualifies for exemption from tax under
Section 883 of the Code and the Treasury Regulations promulgated thereunder.
We expect that we and each of our subsidiaries qualify for this statutory tax exemption for the 2022 taxable
year and we will take this position for U.S. federal income tax return reporting purposes. However, there
are factual circumstances beyond our control that could cause us to lose the benefit of this tax exemption
in future years and thereby become subject to U.S. federal income tax on our U.S. source shipping income.
For example, in certain circumstances we may no longer qualify for exemption under Code Section 883 for
a particular taxable year if shareholders, other than “qualified shareholders”, with a five percent or greater
interest in our common shares owned, in the aggregate, 50% or more of our outstanding common shares
for more than half the days during the taxable year. Due to the factual nature of the issues involved, we
can give no assurances on our tax-exempt status or that of any of our subsidiaries.
If we or our subsidiaries are not entitled to this exemption under Section 883 of the Code for any taxable
year, we or our subsidiaries would be subject for those years to a 4% U.S. federal income tax on our gross
U.S.-source shipping income. The imposition of this taxation could have a negative effect on our business
and would result in decreased earnings available for distribution to our shareholders, although, for the 2022
taxable year, we estimate our maximum U.S. federal income tax liability to be immaterial if we were subject
to this U.S. federal income tax. See “Item 10. Additional Information—E. Taxation" for a more
comprehensive discussion of U.S. federal income tax considerations.
U.S. federal tax authorities could treat us as a “passive foreign investment company”, which could
have adverse U.S. federal income tax consequences to U.S. shareholders.
A foreign corporation will be treated as a “passive foreign investment company”, or PFIC, for U.S. federal
income tax purposes if either (1) at least 75% of its gross income for any taxable year consists of certain
types of “passive income” or (2) at least 50% of the average value of the corporation's assets produce or
are held for the production of those types of “passive income.” For purposes of these tests, “passive
income” includes dividends, interest, gains from the sale or exchange of investment property, and rents
36
and royalties other than rents and royalties which are received from unrelated parties in connection with
the active conduct of a trade or business. For purposes of these tests, income derived from the
performance of services does not constitute “passive income.” U.S. shareholders of a PFIC are subject to
a disadvantageous U.S. federal income tax regime with respect to the income derived by the PFIC, the
distributions they receive from the PFIC and the gain, if any, they derive from the sale or other disposition
of their shares in the PFIC.
Based on our current and proposed method of operation, we do not believe that we will be a PFIC with
respect to any taxable year. In this regard, we intend to treat the gross income we derive or are deemed to
derive from our time chartering activities as services income, rather than rental income. Accordingly, we
believe that our income from our time chartering activities does not constitute “passive income,” and the
assets that we own and operate in connection with the production of that income do not constitute assets
that produce or are held for the production of “passive income”.
There is substantial legal authority supporting this position consisting of case law and U.S. Internal
Revenue Service, or “IRS”, pronouncements concerning the characterization of income derived from time
charters and voyage charters as services income for other tax purposes. However, it should be noted that
there is also authority which characterizes time charter income as rental income rather than services
income for other tax purposes. Accordingly, no assurance can be given that the IRS or a court of law will
accept this position, and there is a risk that the IRS or a court of law could determine that we are a PFIC.
Moreover, no assurance can be given that we would not constitute a PFIC for any future taxable year if the
nature and extent of our operations changed.
If the IRS or a court of law were to find that we are or have been a PFIC for any taxable year, our U.S.
shareholders would face adverse U.S. federal income tax consequences. Under the PFIC rules, unless
those shareholders make an election available under the Code (which election could itself have adverse
consequences for such shareholders), such shareholders would be subject to U.S. federal income tax at
the then prevailing U.S. federal income tax rates on ordinary income plus interest upon excess distributions
and upon any gain from the disposition of our common stock, as if the excess distribution or gain had been
recognized ratably over the shareholder's holding period of our common stock. See “Item 10. Additional
Information—E. Taxation–United States Taxation of U.S. Holders–PFIC Status and Significant Tax
Consequences" for a more comprehensive discussion of the U.S. federal income tax consequences to U.S.
holders of our common stock if we are or were to be treated as a PFIC.
Risks Relating to Our Common Stock
We cannot assure you that our board of directors will continue to declare dividends on shares of
our common stock in the future.
In order to position us to take advantage of market opportunities in a then-deteriorating market, our board
of directors, beginning with the fourth quarter of 2008, suspended our common stock dividend. As a result
of improving market conditions in 2022, our board of directors elected to declare quarterly dividends and a
special non-cash dividend. Our board of directors have also declared a cash dividend paid on March 20,
2023 and a noncash dividend payable on May 16, 2023 and we intend to declare and pay quarterly cash
dividends with respect to the next three quarters of 2023 in an amount of not less than $0.15 per share.
The actual declaration of future cash dividends, and the establishment of record and payment dates, is
subject to final determination by our board of directors each quarter after its review of the company's
financial performance. We cannot assure you that our board of directors will declare and pay dividends
going forward. Our dividend policy is assessed by our board of directors from time to time, based on
prevailing market conditions, available cash, uses of capital, contingent liabilities, the terms of our loan
facilities, our growth strategy and other cash needs, the requirements of Marshall Islands law and other
factors deemed relevant to our board of directors. In addition, other external factors, such as our lenders
imposing restrictions on our ability to pay dividends under the terms of our loan facilities, may limit our
37
ability to pay dividends. Further, under the terms of our loan agreements, we may not be permitted to pay
dividends that would result in an event of default or if an event of default has occurred and is continuing.
Our growth strategy contemplates that we will finance the acquisition of additional vessels through a
combination of debt and equity financing on terms acceptable to us. If financing is not available to us on
acceptable terms, our board of directors may determine to finance or refinance acquisitions with cash from
operations, which could also reduce or even eliminate the amount of cash available for the payment of
dividends.
Marshall Islands law generally prohibits the payment of dividends other than from surplus (retained
earnings and the excess of consideration received for the sale of shares above the par value of the shares)
or while a company is insolvent or would be rendered insolvent by the payment of such a dividend. We
may not have sufficient surplus in the future to pay dividends.
In addition, our ability to pay dividends to holders of our common shares will be subject to the rights of
holders of our Series B Preferred Shares, which rank senior to our common shares with respect to
dividends, distributions and payments upon liquidation. No cash dividend may be paid on our common
stock unless full cumulative dividends have been or contemporaneously are being paid or provided for on
all outstanding Series B Preferred Shares for all prior and the then-ending dividend periods. Cumulative
dividends on our Series B Preferred Shares accrue at a rate of 8.875% per annum per $25.00 stated
liquidation preference per Series B Preferred Share, subject to increase upon the occurrence of certain
events, and are payable, as and if declared by our board of directors, on January 15, April 15, July 15 and
October 15 of each year, or, if any such dividend payment date otherwise would fall on a date that is not a
business day, the immediately succeeding business day. For additional information about our Series B
Preferred Shares, please see the section entitled "Description of Registrant's Securities to be Registered"
of our registration statement on Form 8-A filed with the SEC on February 13, 2014 and incorporated by
reference herein.
The market prices and trading volume of our shares of common stock may experience rapid and
substantial price volatility, which could cause purchasers of our common stock to incur substantial
losses.
Our shares of our common stock may experience similar rapid and substantial price volatility unrelated
to our financial performance, which could cause purchasers of our common stock to incur substantial
losses, which may be unpredictable and not bear any relationship to our business and financial
performance. Extreme fluctuations in the market price of our common stock may occur in response to
strong and atypical retail investor interest, including on social media and online forums, the direct
access by retail investors to broadly available trading platforms, the amount and status of short interest
in our common stock and our other securities, access to margin debt, trading in options and other
derivatives on our shares of common stock and any related hedging and other trading factors:
If there is extreme market volatility and trading patterns in our common stock, it may create several
risks for purchasers of our shares, including the following:
●
the market price of our common stock may experience rapid and substantial increases or
decreases unrelated to our operating performance or prospects, or macro or industry
fundamentals;
●
if our future market capitalization reflects trading dynamics unrelated to our financial
performance or prospects, purchasers of our common stock could incur substantial losses
as prices decline once the level of market volatility has abated;
38
●
if the future market price of our common stock declines, purchasers of shares of common
stock in this offering may be unable to resell such shares at or above the price at which they
acquired them. We cannot assure such purchasers that the market of our common stock
will not fluctuate or decline significantly in the future, in which case investors in this offering
could incur substantial losses.
Further, we may incur rapid and substantial increases or decreases in our common stock price in the
foreseeable future that may not coincide in timing with the disclosure of news or developments by or
affecting us. Accordingly, the market price of our common stock may fluctuate dramatically, and may
decline rapidly, regardless of any developments in our business. Overall, there are various factors,
many of which are beyond our control, that could negatively affect the market price of our common
stock or result in fluctuations in the price or trading volume of our common stock, including:
●
actual or anticipated variations in our annual or quarterly results of operations, including our
earnings estimates and whether we meet market expectations with regard to our earnings;
●
our ability to pay dividends or other distributions;
●
publication of research reports by analysts or others about us or the shipping industry in
which we operate which may be unfavorable, inaccurate, inconsistent or not disseminated
on a regular basis;
●
changes in market valuations of similar companies;
●
market reaction to any additional equity, debt or other securities that we may issue in the
future, and which may or may not dilute the holdings of our existing stockholders;
●
additions or departures of key personnel;
●
actions by institutional or significant stockholders;
●
short interest in our common stock or our other securities and the market response to such
short interest;
●
the dramatic increase in the number of individual holders of our common stock and their
participation in social media platforms targeted at speculative investing;
●
speculation in the press or investment community about our company or industries in which
we operate;
●
strategic actions by us or our competitors, such as acquisitions or other investments;
●
legislative, administrative, regulatory or other actions affecting our business, our industry;
●
investigations, proceedings, or litigation that involve or affect us;
●
the occurrence of any of the other risk factors included in this registration statement of which
this prospectus forms a part; and
●
general market and economic conditions.
39
Since we are incorporated in the Marshall Islands, which does not have a well-developed body of
corporate law, you may have more difficulty protecting your interests than shareholders of a U.S.
corporation.
Our corporate affairs are governed by our amended and restated articles of incorporation and bylaws and
by the Marshall Islands Business Corporations Act, or the BCA. The provisions of the BCA resemble
provisions of the corporation laws of a number of states in the United States. However, there have been
few judicial cases in the Marshall Islands interpreting the BCA. The rights and fiduciary responsibilities of
directors under the laws of the Marshall Islands are not as clearly established as the rights and fiduciary
responsibilities of directors under statutes or judicial precedent in existence in the United States. The rights
of shareholders of the Marshall Islands may differ from the rights of shareholders of companies
incorporated in the United States. While the BCA provides that it is to be interpreted according to the laws
of the State of Delaware and other states with substantially similar legislative provisions, there have been
few, if any, court cases interpreting the BCA in the Marshall Islands and we cannot predict whether Marshall
Islands courts would reach the same conclusions as U.S. courts. Thus, you may have more difficulty in
protecting your interests in the face of actions by the management, directors or controlling shareholders
than would shareholders of a corporation incorporated in a U.S. jurisdiction which has developed a
relatively more substantial body of case law.
As a Marshall Islands corporation and with some of our subsidiaries being Marshall Islands entities
and also having subsidiaries in other offshore jurisdictions, our operations may be subject to
economic substance requirements, which could impact our business.
We are a Marshall Islands corporation and some of our subsidiaries are Marshall Islands entities. The
Marshall Islands has enacted economic substance laws and regulations with which we may be obligated
to comply. We believe that we and our subsidiaries are compliant with the Marshall Islands economic
substance requirements. However, if there were a change in the requirements or interpretation thereof, or
if there were an unexpected change to our operations, any such change could result in noncompliance with
the economic substance legislation and related fines or other penalties, increased monitoring and audits,
and dissolution of the non-compliant entity, which could have an adverse effect on our business, financial
condition or operating results.
EU Finance ministers rate jurisdictions for tax rates and tax transparency, governance and real economic
activity. Countries that are viewed by such finance ministers as not adequately cooperating, including by
not implementing sufficient standards in respect of the foregoing, may be put on a “grey list” or a “blacklist”.
As of December 31, 2022, the Marshall Islands remained "white-listed" by the EU. However, on February
14, 2023, the Marshall Islands was placed by the EU on its list of non-cooperative jurisdictions for tax
purposes, on the grounds that Marshall Islands facilitates offshore structures and arrangements aimed at
attracting profits without real economic substance as they failed to fulfil their commitments to the Code of
Conduct Group with regard to economic substance requirements. At present, the impact of being included
on the list of non-cooperative jurisdictions for tax purposes is unclear. Although we understand that the
Marshall Islands is committed to full cooperation with the EU and expects to be moved back to the "white
list" in October 2023, subject to review by the EU Council, there is no assurance that such a reclassification
will occur.
If the Marshall Islands is not removed from the list and sanctions or other financial, tax or regulatory
measures were applied by European Member States to countries on the list or further economic substance
requirements were imposed by the Marshall Islands, our business could be harmed.
EU member states have agreed upon a set of measures, which they can choose to apply against grey- or
blacklisted countries, including monitoring and audits, withholding taxes, special documentation
requirements and anti-abuse provisions. The European Commission has stated it will continue to support
member states' efforts to develop a more coordinated approach to sanctions for the listed countries. EU
40
legislation prohibits EU funds from being channeled or transited through entities in countries on the
blacklist. Other jurisdictions in which we operate could be put on the blacklist in the future.
Certain existing shareholders will be able to exert considerable influence over matters on which
our shareholders are entitled to vote.
As of the date of this annual report, Mrs. Semiramis Paliou, our Chief Executive Officer and Director,
beneficially owns 16,883,779 shares, or approximately 15.9% of our outstanding common stock, which is
held indirectly through entities over which she exercises sole voting power. Mrs. Paliou controls 10,675
shares of Series C Preferred Stock, par value $0.01 per share, issued on January 31, 2019, and 400 shares
of Series D Preferred Stock, issued on June 22, 2021. The Series C Preferred Stock vote with our common
shares and each share of the Series C Preferred Stock entitles the holder thereof to 1,000 votes on all
matters submitted to a vote of the common stockholders of the Issuer. The Series D Preferred Stock vote
with the common shares of the Company, and each share of the Series D Preferred Stock entitles the
holder thereof to up to 100,000 votes, on all matters submitted to a vote of the stockholders of the Company,
subject to a maximum number of votes eligible to be cast by such holder derived from the Series D
Preferred Shares and any other voting security of the Company held by the holder to be equal to
the lesser of (i) 36% of the total number of votes entitled to vote on any matter put to shareholders of the
Company and (ii) the sum of the holder’s aggregate voting power derived from securities other than the
Series D Preferred Stock and 15% of the total number of votes entitled to be cast on matters put to
shareholders of the Company. Through her beneficial ownership of common shares and shares of Series
C Preferred Stock and Series D Preferred Stock, Mrs. Paliou controls 36% of the vote of any matter
submitted to the vote of the common shareholders. Please see "Item 7. Major Shareholders and Related
Party Transactions—A. Major Shareholders." While Mrs. Paliou and the entities controlled by Mrs. Paliou
have no agreement, arrangement or understanding relating to the voting of their shares of our common
stock, they are able to influence the outcome of matters on which our shareholders are entitled to vote,
including the election of directors and other significant corporate actions. This concentration of ownership
may have the effect of delaying, deferring or preventing a change in control, merger, consolidation,
takeover or other business combination. This concentration of ownership could also discourage a potential
acquirer from making a tender offer or otherwise attempting to obtain control of us, which could in turn have
an adverse effect on the market price of our shares. So long as our Chief Executive Officer continues to
own a significant amount of our equity, even though the amount held by her represents less than 50% of
our voting power, she will continue to be able to exercise considerable influence over our decisions. The
interests of these shareholders may be different from your interests.
Future sales of our common stock could cause the market price of our common stock to decline.
Our amended and restated articles of incorporation authorize us to issue up to 200,000,000 shares of
common stock, of which, as of December 31, 2022, 102,653,619 shares were outstanding. The number of
shares of common stock available for sale in the public market is limited by restrictions applicable under
securities laws and agreements that we and our executive officers, directors and principal shareholders
have entered into.
Sales of a substantial number of shares of our common stock in the public market, or the perception that
these sales could occur, may depress the market price for our common stock. These sales could also
impair our ability to raise additional capital through the sale of our equity securities in the future.
41
Anti-takeover provisions in our organizational documents could make it difficult for our
shareholders to replace or remove our current board of directors or have the effect of discouraging,
delaying or preventing a merger or acquisition, which could adversely affect the market price of
our common stock.
Several provisions of our amended and restated articles of incorporation and bylaws could make it difficult
for our shareholders to change the composition of our board of directors in any one year, preventing them
from changing the composition of management. In addition, the same provisions may discourage, delay or
prevent a merger or acquisition that shareholders may consider favorable.
These provisions include:
●
authorizing our board of directors to issue “blank check” preferred stock without shareholder
approval;
●
providing for a classified board of directors with staggered, three-year terms;
●
prohibiting cumulative voting in the election of directors;
●
authorizing the removal of directors only for cause and only upon the affirmative vote of the
holders of a majority of the outstanding shares of our common stock entitled to vote for the
directors;
●
prohibiting shareholder action by written consent;
●
limiting the persons who may call special meetings of shareholders; and
●
establishing advance notice requirements for nominations for election to our board of directors
or for proposing matters that can be acted on by shareholders at shareholder meetings.
In addition, we have adopted a Stockholders Rights Agreement, dated January 15, 2016, pursuant to which
our board of directors may cause the substantial dilution of any person that attempts to acquire us without
the approval of our board of directors.
These anti-takeover provisions, including provisions of our Stockholders Rights Agreement, could
substantially impede the ability of public shareholders to benefit from a change in control and, as a result,
may adversely affect the market price of our common stock and your ability to realize any potential change
of control premium.
Our Series B Preferred Shares are senior obligations of ours and rank prior to our common shares
with respect to dividends, distributions and payments upon liquidation, which could have an
adverse effect on the value of our common shares.
The rights of the holders of our Series B Preferred Shares rank senior to the obligations to holders of our
common shares. Upon our liquidation, the holders of Series B Preferred Shares will be entitled to receive
a liquidation preference of $25.00 per share, plus all accrued but unpaid dividends, prior and in preference
to any distribution to the holders of any other class of our equity securities, including our common shares.
The existence of the Series B Preferred Shares could have an adverse effect on the value of our common
shares.
Risks Relating to Our Series B Preferred Stock
42
We may not have sufficient cash from our operations to enable us to pay dividends on our Series
B Preferred Shares following the payment of expenses and the establishment of any reserves.
We pay quarterly dividends on our Series B Preferred Shares only from funds legally available for such
purpose when, as and if declared by our board of directors. We may not have sufficient cash available
each quarter to pay dividends. The amount of dividends we can pay on our Series B Preferred Shares
depends upon the amount of cash we generate from and use in our operations, which may fluctuate.
The amount of cash we have available for dividends on our Series B Preferred Shares will not depend
solely on our profitability. The actual amount of cash we have available to pay dividends on our Series B
Preferred Shares depends on many factors, including the following:
●
changes in our operating cash flow, capital expenditure requirements, working capital requirements
and other cash needs;
●
restrictions under our existing or future credit facilities or any future debt securities on our ability to
pay dividends if an event of default has occurred and is continuing or if the payment of the dividend
would result in an event of default, or under certain facilities if it would result in the breach of certain
financial covenants;
●
the amount of any cash reserves established by our board of directors; and
●
restrictions under Marshall Islands law, which generally prohibits the payment of dividends other
than from surplus (retained earnings and the excess of consideration received for the sale of shares
above the par value of the shares) or while a company is insolvent or would be rendered insolvent
by the payment of such a dividend.
The amount of cash we generate from our operations may differ materially from our net income or loss for
the period, which is affected by non-cash items, and our board of directors in its discretion may elect not
to declare any dividends. As a result of these and the other factors mentioned above, we may pay dividends
during periods when we record losses and may not pay dividends during periods when we record net
income.
The Series B Preferred Shares represent perpetual equity interests.
The Series B Preferred Shares represent perpetual equity interests in us and, unlike our indebtedness, will
not give rise to a claim for payment of a principal amount at a particular date. As a result, holders of the
Series B Preferred Shares may be required to bear the financial risks of an investment in the Series B
Preferred Shares for an indefinite period of time. In addition, the Series B Preferred Shares will rank junior
to all our indebtedness and other liabilities, and to any other senior securities we may issue in the future
with respect to assets available to satisfy claims against us.
Our Series B Preferred Shares are subordinate to our indebtedness, and your interests could be
diluted by the issuance of additional preferred shares, including additional Series B Preferred
Shares, and by other transactions.
Our Series B Preferred Shares are subordinated to all of our existing and future indebtedness. Therefore,
our ability to pay dividends on, redeem or pay the liquidation preference on our Series B Preferred Shares
in liquidation or otherwise may be subject to prior payments due to the holders of our indebtedness. Our
existing indebtedness restricts, and our future indebtedness may include restrictions on, our ability to pay
dividends on or redeem preferred shares. Our amended and restated articles of incorporation currently
authorize the issuance of up to 25,000,000 preferred shares, par value $0.01 per share. Of these preferred
shares, 1,000,000 shares have been designated Series A Participating Preferred Stock, 5,000,000 shares
43
have been designated Series B Preferred Shares, 10,675 are designated as Series C Preferred Shares
and 400 are designated as Series D Preferred Shares. The Series B Preferred Shares are senior in rank
to the Series A Participating Preferred Shares. The issuance of additional Series B Preferred Shares or
other preferred shares on a parity with or senior to the Series B Preferred Shares would dilute the interests
of holders of our Series B Preferred Shares, and any issuance of preferred shares senior to our Series B
Preferred Shares or of additional indebtedness could affect our ability to pay dividends on, redeem or pay
the liquidation preference on our Series B Preferred Shares. The Series B Preferred Shares do not contain
any provisions affording the holders of our Series B Preferred Shares protection in the event of a highly
leveraged or other transaction, including a merger or the sale, lease or conveyance of all or substantially
all our assets or business, which might adversely affect the holders of our Series B Preferred Shares, so
long as the rights of our Series B Preferred Shares are not directly materially and adversely affected.
We may redeem the Series B Preferred Shares, and you may not be able to reinvest the redemption
price you receive in a similar security.
Since February 14, 2019, we may, at our option, redeem Series B Preferred Shares, in whole or in part, at
any time or from time to time. We may have an incentive to redeem Series B Preferred Shares voluntarily
if market conditions allow us to issue other preferred shares or debt securities at a rate that is lower than
the dividend on the Series B Preferred Shares. If we redeem Series B Preferred Shares, then from and
after the redemption date, your dividends will cease to accrue on your Series B Preferred Shares, your
Series B Preferred Shares shall no longer be deemed outstanding and all your rights as a holder of those
shares will terminate, except the right to receive the redemption price plus accumulated and unpaid
dividends, if any, payable upon redemption. If we redeem the Series B Preferred Shares for any reason,
you may not be able to reinvest the redemption price you receive in a similar security.
Market interest rates may adversely affect the value of our Series B Preferred Shares.
One of the factors that may influence the price of our Series B Preferred Shares is the dividend yield on
the Series B Preferred Shares (as a percentage of the price of our Series B Preferred Shares) relative to
market interest rates. An increase in market interest rates, which are currently at low levels relative to
historical rates, may lead prospective purchasers of our Series B Preferred Shares to expect a higher
dividend yield, and higher interest rates would likely increase our borrowing costs and potentially decrease
funds available for distribution. Accordingly, higher market interest rates could cause the market price of
our Series B Preferred Shares to decrease.
As a holder of Series B Preferred Shares you have extremely limited voting rights.
Your voting rights as a holder of Series B Preferred Shares are extremely limited. Our common shares are
the only outstanding class or series of our shares carrying full voting rights. Holders of Series B Preferred
Shares have no voting rights other than the ability, subject to certain exceptions, to elect one director if
dividends for six quarterly dividend periods (whether or not consecutive) payable on our Series B Preferred
Shares are in arrears and certain other limited protective voting rights.
Our ability to pay dividends on and to redeem our Series B Preferred Shares is limited by the
requirements of Marshall Islands law.
Marshall Islands law provides that we may pay dividends on and redeem the Series B Preferred Shares
only to the extent that assets are legally available for such purposes. Legally available assets generally are
limited to our surplus, which essentially represents our retained earnings and the excess of consideration
received by us for the sale of shares above the par value of the shares. In addition, under Marshall Islands
law we may not pay dividends on or redeem Series B Preferred Shares if we are insolvent or would be
rendered insolvent by the payment of such a dividend or the making of such redemption.
44
The amount of your liquidation preference is fixed and you will have no right to receive any greater
payment regardless of the circumstances.
The payment due upon a liquidation is fixed at the redemption preference of $25.00 per share plus
accumulated and unpaid dividends to the date of liquidation. If, in the case of our liquidation, there are
remaining assets to be distributed after payment of this amount, you will have no right to receive or to
participate in these amounts. Furthermore, if the market price for your Series B Preferred Shares is greater
than the liquidation preference, you will have no right to receive the market price from us upon our
liquidation.
Item 4. Information on the Company
A. History and development of the Company
Diana Shipping Inc. is a holding company incorporated under the laws of Liberia in March 1999 as Diana
Shipping Investments Corp. In February 2005, the Company’s articles of incorporation were amended.
Under the amended and restated articles of incorporation, the Company was renamed Diana Shipping Inc.
and was re-domiciled from the Republic of Liberia to the Republic of the Marshall Islands. Our executive
offices are located at Pendelis 16, 175 64 Palaio Faliro, Athens, Greece. Our telephone number at this
address is +30-210-947-0100. Our agent and authorized representative in the United States is our wholly-
owned subsidiary, Bulk Carriers (USA) LLC, established in September 2006, in the State of Delaware,
which is located at 2711 Centerville Road, Suite 400, Wilmington, Delaware 19808. The SEC maintains an
Internet site that contains reports, proxy and information statements, and other information regarding
issuers that file electronically with the SEC. The address of the SEC's Internet site is http://www.sec.gov.
The address of the Company's Internet site is http://www.dianashippinginc.com.
Vessel acquisitions
In February 2022, we took delivery of Leonidas P.C. (ex Magnolia), a 2011 built Kamsarmax dry bulk vessel
of 82,165 dwt, which we agreed to acquire from an unaffiliated third party in July 2021, for a purchase price
of $22.0 million.
In March 2022, we also took delivery of Florida, a Japanese new-building Capesize dry bulk vessel of
approximately 181,500 dwt, which we agreed to acquire from an unaffiliated third party in December 2020,
for a purchase price of $60.2 million including commissions.
In August 2022, we entered into a master agreement with Sea Trade Holdings Inc. (or “Sea Trade”), an
unaffiliated third party, to acquire nine Ultramax vessels for an aggregate purchase price of $330 million,
of which $220 million would be paid in cash and $110 million through an aggregate of 18,487,393 newly
issued common shares of the Company, issuable on the delivery of each vessel. In addition to the master
agreement, in August 2022, we also entered into nine separate memoranda of agreement for the
acquisition of each vessel and issued nine warrants to Sea Trade, for the issuance of the shares,
exercisable on the delivery date of each vessel. During the fourth quarter of 2022, the Company took
delivery of eight vessels for an aggregate value of $263.7 million, of which $67.9 million was the value of
the newly issued common shares. On January 30, 2023, we took delivery of the ninth vessel for $24.2
million in cash, funded through our loan with Nordea, and issued 2,033,613 common shares to Sea Trade
of $7.8 million value.
In February 2023, we signed a Memorandum of Agreement to acquire from an unaffiliated third party the
vessel
, a 2016 built Ultramax dry bulk vessel, for a purchase price of $27.9 million, which
we intend to finance through debt financing. We expect to take delivery of the vessel by the beginning of
April 2023.
45
Vessel disposals
In June 2022, we sold to OceanPal Inc., or OceanPal, a related party company, the vessel
Baltimore
, for
a sale price of $22.0 million before commissions, of which $4.4 million was paid in cash and $17.6 million
through 25,000 Series D Convertible Preferred shares. The vessel was delivered to OceanPal on
September 20, 2022.
In January 2023, we sold to an unrelated third party the vessel
Aliki
The vessel was delivered to her new owners on February 8, 2023.
In February 2023, we sold to OceanPal, the vessel
Melia
$4.0 million was paid in cash and $10.0 million through 13,157 of OceanPal Series D Convertible Preferred
Shares. The vessel was delivered to her new owners on February 8, 2023.
Please read Note 4 – Advances for vessel acquisitions and Vessels, net to our consolidated financial
statements, included elsewhere in this Annual Report for a full description of the Company’s acquisitions
and sales of vessels as of December 31, 2022.
Sale and leaseback agreements
In March 2022, we sold Florida to an unrelated third party for $50.0 million in a sale and leaseback
transaction and we chartered the vessel back from the buyer for a period of ten years at $13,500 per day.
The Company has purchase options beginning at the end of the third year of the agreement. If not
repurchased earlier, the Company has the obligation to repurchase the vessel for $16.4 million, on the
expiration of the lease on the tenth year.
In August, 2022, we entered into two sale and leaseback agreements with two unaffiliated Japanese third
parties to sell
New Orleans
Santa Barbara,
for an aggregate amount of $66.4 million. The vessels
were delivered to their buyers on September 8, 2022 and September 12, 2022, respectively and the
Company chartered in both vessels under bareboat charter parties for a period of eight years, each, and
has purchase options beginning at the end of the third year of each vessel's bareboat charter period. If not
repurchased earlier, the Company has the obligation to repurchase the vessels for $13 million each, on
the expiration of each lease on the eighth year.
On December 6, 2022, we sold
DSI Andromeda
back the vessel under a bareboat agreement, for a period of ten years, under which the Company pays
hire, monthly in advance. The Company has purchase options beginning at the end of the third year of the
bareboat charter period and if not repurchased earlier, the Company has the obligation to repurchase the
vessel for $8.05 million, on the expiration of the lease on the tenth year.
Dividends
During 2022, we paid total dividends of $0.9 per share, or $79.8 million. More specifically, on March 21,
2022, we paid a cash dividend on our common stock amounting to $17.2 million, or $0.20 per share, to all
shareholders of record as of March 9, 2022.
On June 17, 2022, we paid a cash dividend on our common stock amounting to $21.6 million, or $0.25 per
share, to all shareholders of record as of June 6, 2022.
On August 19, 2022, we paid a cash dividend on our common stock amounting to $23.7 million, or $0.275
per share, to all shareholders of record as of August 8, 2022.
On December 15, 2022, we paid a cash dividend on our common stock amounting to $17.3 million, or
46
$0.175 per share, to all shareholders of record as of November 28, 2022.
In addition to the cash dividends, on December 15, 2022, we distributed 25,000 Series D Convertible
Preferred Shares of OceanPal, acquired as part of the non-cash consideration for the sale of
Baltimore
described above, as a non-cash dividend amounting to $18.2 million to our shareholders of record as of
November 28, 2022.
On March 20, 2023, we paid a cash dividend on our common stock amounting to $16 million, or $0.15 per
share, to all shareholders of record as of March 13, 2023. We have also declared the distribution to our
shareholders of record as of April 24, 2023 of the 13,157 Series D Convertible Preferred Shares of
OceanPal acquired as part of the non-cash consideration of the sale of
Melia
Please read Note 9 – Capital Stock and Changes in Capital Accounts to our consolidated financial
statements, included elsewhere in this Annual Report for a full description of the Company’s dividends
distribution as of December 31, 2022.
Loans
On September 30, 2022, the Company entered into a $200 million loan agreement to finance the acquisition
price of 9 Ultramax vessels. The Company drew down $197.2 million under the loan, in tranches for each
vessel on their delivery to the Company.
During 2022, we early prepaid an aggregate amount of $57.5 million of outstanding debt due to the sale of
Baltimore
to OceanPal, and
DSI Andromeda
,
Santa Barbara
New Orleans
, following their sale under
a sale and leaseback.
In February 2023, we early prepaid an additional amount of $8.1 million of outstanding debt due to the sale
of
Melia
to OceanPal and
Alik
i to an unaffiliated third party. In March 2023, we early prepaid $11.8 million,
being the outstanding balance of our loan with DNB Bank ASA.
Please read Note 6 – Long-term debt to our consolidated financial statements, included elsewhere in this
Annual Report for a full description of the Company’s loan facilities as of December 31, 2022.
B. Business overview
We specialize in the ownership and bareboat charter-in of dry bulk vessels, determined as one business
segment. Each of our vessels is owned through a separate wholly-owned subsidiary.
As of the date of this report, our fleet, owned and chartered-in, consisted of 41 dry bulk carriers, of which
nine were Ultramax, seven were Panamax, six were Kamsarmax, five were Post-Panamax, ten were
Capesize and four were Newcastlemax vessels, having a combined carrying capacity of approximately 4.7
million dwt and a weighted average age of 9.9 years. We have also agreed to acquire the vessel
Nord
Potomac
, a 2016 built Ultramax dry bulk vessel, expected to be delivered by the beginning of April 2023.
As of December 31, 2022, our operating fleet consisted of 42 dry bulk carriers, of which eight were
Ultramax, eight were Panamax, six were Kamsarmax, five were Post-Panamax, eleven were Capesize and
four were Newcastlemax vessels, having a combined carrying capacity of approximately 4.9 million dwt
and a weighted average age of 10.2 years. As of December 31, 2022, the Company had agreed to acquire
a 2016 built Ultramax dry bulk vessel of 60,309 dwt, delivered on January 30, 2023.
As of December 31, 2021, our operating fleet consisted of 33 dry bulk carriers, of which eight were
Panamax, five were Kamsarmax, five were Post-Panamax, eleven were Capesize and four were
Newcastlemax vessels, having a combined carrying capacity of approximately 4.3 million dwt and a
47
weighted average age of 10.4 years. As of December 31, 2021, the Company had agreed to acquire a
2011 built Kamsarmax dry bulk vessel of 82,165 dwt, delivered on February 16, 2022 and a Capesize dry
bulk vessel of 181,500 dwt, which was sold and leased back under a bare boat charter on March 29, 2022.
As of December 31, 2020, our operating fleet consisted of 40 dry bulk carriers, of which 13 were Panamax,
five were Kamsarmax, five were Post-Panamax, 13 were Capesize and four were Newcastlemax vessels,
having a combined carrying capacity of approximately 5.0 million dwt and a weighted average age of 10.2
years. As of December 31, 2020, the Company had agreed to sell the vessels Coronis, Sideris G.S. and
Oceanis, of which Coronis and Sideris GS were delivered to their buyers in January 2021 and Oceanis
was delivered in March 2021.
During 2022, 2021 and 2020, we had a fleet utilization of 98.9%, 99.1% and 97.9%, respectively, our
vessels achieved daily time charter equivalent rates of $22,735, $15,759 and $10,910, respectively, and
we generated revenues of $290.0 million, $214.2 million and $169.7 million, respectively.
We operate our vessels worldwide, in markets that have historically exhibited seasonal variations in
demand and, as a result, in charter hire rates. The dry bulk carrier market is typically stronger in the fall
and winter months in anticipation of increased consumption of coal and other raw materials in the northern
hemisphere during the winter months. In addition, unpredictable weather patterns in these months tend to
disrupt vessel scheduling and supplies of certain commodities. This seasonality has a limited direct impact
on our operating results as we charter our vessels to customers pursuant to medium-term and long-term
time charter agreements.
Management of Our Fleet
The commercial and technical management of our fleet, owned and bareboat chartered-in, as well as the
provision of administrative services relating to the fleet’s operations, are carried out by our wholly-owned
subsidiary, Diana Shipping Services S.A., which we refer to as DSS, and Diana Wilhelmsen Management
Limited, a 50/50 joint venture with Wilhelmsen Ship Management, which we refer to as DWM. In exchange
for providing us with commercial and technical services, personnel and office space, we pay DSS a
commission, which is a percentage of the managed vessels’ gross revenues, a fixed monthly fee per
managed vessel and an additional monthly fee for the administrative services provided to Diana Shipping
Inc. Such services may include budgeting, reporting, monitoring of bank accounts, compliance with banks,
payroll services and any other possible service that Diana Shipping Inc. would require to perform its
operations. Similarly, in exchange for providing us with commercial and technical services, we pay to DWM
a commission which is a percentage of the managed vessels’ gross revenues and a fixed management
monthly fee for each managed vessel. The amounts deriving from the agreements with DSS are considered
inter-company transactions and, therefore, are eliminated from our consolidated financial statements. The
management fees and commissions deriving from the agreements with DWM are included in our statement
of operations in “Management fees to related party”, “Voyage Expenses”, “Advances for vessel
acquisitions” and “Vessels, net”.
Steamship Shipbroking Enterprises Inc., or Steamship, a related party controlled by our Chairman of the
Board, Mr. Simeon Palios until January 15, 2023 and our CEO Mrs. Semiramis Paliou thereafter, provides
brokerage services to us, since June 1, 2010. Brokerage fees are included in “General and Administrative
expenses” in our statement of operations. The terms of this relationship are currently governed by a
Brokerage Services Agreement dated July 1, 2022.
The following table presents certain information concerning the dry bulk carriers in our fleet, as of the date
of this annual report.
Fleet Employment (As of March 17, 2023)
48
VESSEL
SISTER
SHIPS*
GROSS
RATE (USD
PER DAY)
COM**
CHARTERERS
DELIVERY DATE
TO
CHARTERERS***
REDELIVERY DATE TO
OWNERS****
NOTES
BUILT DWT
9 Ultramax Bulk Carriers
1
DSI Phoenix
A
5.00%
ASL Bulk Marine
Limited
4/Nov/22
4/Mar/2024 - 4/May/2024
2017 60,456
2
DSI Pollux
A
5.00%
Delta Corp Shipping
Pte. Ltd.
27/Oct/22
27/Dec/2023 - 27/Feb/2024
2015 60,446
3
DSI Pyxis
A
4.75%
Cargill Ocean
Transportation
Singapore Pte. Ltd.
16/Oct/22
16/Aug/2023 - 16/Oct/2023
2018 60,362
4
DSI Polaris
A
5.00%
ASL Bulk Marine
Limited
12/Nov/22
12/May/2024 - 12/Jul/2024
2018 60,404
5
DSI Pegasus
A
5.00%
Reachy Shipping
(SGP) Pte. Ltd.
7/Dec/22
15/Jul/2024 - 15/Sep/2024
2015 60,508
6
DSI Aquarius
B
5.00%
Engelhart CTP Freight
(Switzerland) SA
1/Feb/23
10/Jan/2024 - 25/Mar/2024
2016 60,309
7
DSI Aquila
B
5.00%
Western Bulk Carriers
AS
22/Nov/22
15/Sep/2023 - 15/Nov/2023
2015 60,309
8
DSI Altair
B
5.00%
Western Bulk Pte. Ltd.
28/Dec/22
25/Jun/2023 - 25/Aug/2023
2016 60,309
9
DSI Andromeda
B
5.00%
Western Bulk Carriers
AS
17/Nov/22
16/Oct/2023 - 16/Dec/2023
1, 2
2016 60,309
10
Nord Potomac (tbr.
DSI Drammen)
-
-
-
-
-
3
2016 63,379
8 Panamax Bulk Carriers
11
MELIA
5.00%
Asahi Shipping Co.,
Ltd.
10/Dec/22
04/Feb/2023
4
2005 76,225
12
ARTEMIS
4.75%
Cargill International
S.A., Geneva
21/Mar/22
20/Jun/2023 -20/Aug/2023
2006 76,942
13
LETO
4.75%
Aquavita International
S.A.
3/Oct/21
29/Jan/2023
5
2010 81,297
4.75%
Cargill International
S.A., Geneva
29/Jan/23
1/Mar/2024 - 30/Apr/2024
14
SELINA
C
5.00%
Speed Logistics
Marine Limited
18/Jun/22
15/Apr/2023 - 30/Apr/2023
6
2010 75,700
15
MAERA
C
4.75%
Cargill International
S.A., Geneva
16/Dec/22
28/Oct/2023 - 28/Dec/2023
2013 75,403
16
ISMENE
4.75%
Cargill International
S.A., Geneva
23/Nov/21
10/Jan/2023
2013 77,901
5.00%
ST Shipping and
Transport Pte. Ltd.
10/Jan/23
20/Aug/2023 - 10/Oct/2023
17
CRYSTALIA
D
5.00%
Reachy Shipping
(SGP) Pte. Ltd.
12/Nov/22
1/Sep/2023 - 15/Oct/2023
2014 77,525
18
ATALANDI
D
4.75%
Aquavita International
S.A.
5/Oct/21
15/Feb/2023
2014 77,529
4.75%
15/Feb/23
5/Mar/2024 - 5/May/2024
6 Kamsarmax Bulk Carriers
19
MAIA
E
5.00%
Hyundai Glovis Co.
Ltd.
24/May/22
20/Sep/2023 -20/Nov/2023
7
49
2009 82,193
20
MYRSINI
E
5.00%
Salanc Pte. Ltd.
22/Nov/22
20/Apr/2024 - 28/Jun/2024
2010 82,117
21
MEDUSA
E
4.75%
Cargill International
S.A., Geneva
9/Mar/22
15/May/2023 - 15/Jul/2023
2010 82,194
22
MYRTO
E
5.00%
Tata NYK Shipping
Pte. Ltd.
3/Aug/22
15/Jul/2023 - 15/Sep/2023
8
2013 82,131
23
ASTARTE
5.00%
Tongli Shipping Pte.
Ltd.
30/Jan/22
15/Apr/2023 - 15/Jun/2023
2013 81,513
24
LEONIDAS P. C.
4.75%
Cargill International
S.A., Geneva
18/Feb/22
28/Feb/2023
9
2011 82,165
4.75%
17/Mar/23
17 Feb 2024 - 17 Apr 2024
5 Post-Panamax Bulk Carriers
25
ALCMENE
5.00%
SwissMarine Pte. Ltd.,
Singapore
25/Nov/21
02/Jan/2023
2010 93,193
5.00%
2/Jan/23
10/Jan/2024 - 25/Mar/2024
26
AMPHITRITE
F
5.00%
Cobelfret S.A.
9/Nov/22
1/Dec/2023 - 15/Feb/2024
2012 98,697
27
POLYMNIA
F
5.00%
CLdN Cobelfret SA,
Luxembourg
4/Feb/22
14/Jan/2023
10
2012 98,704
5.00%
14/Jan/23
1/Apr/2024 - 31/May/2024
28
ELECTRA
G
5.00%
Refined Success
Limited
2/Jul/22
1/Apr/2023 - 15/May/2023
6
2013 87,150
29
PHAIDRA
G
5.00%
Comerge Shipping
Co., Limited
24/Nov/22
04/Mar/2023
11,12
2013 87,146
5.00%
Salanc Pte. Ltd.
4/Mar/23
17/Apr/2023
13
11 Capesize Bulk Carriers
30
ALIKI
5.00%
Koch Shipping Pte.
Ltd., Singapore
21/Feb/22
02/Feb/2023
4
2005 180,235
31
SEMIRIO
H
5.00%
C Transport Maritime
Ltd., Bermuda
15/Dec/21
15/Aug/2023 - 15/Nov/2023
2007 174,261
32
BOSTON
H
5.00%
Aquavita International
S.A.
15/Jul/22
1/Apr/2023 - 31/May/2023
2007 177,828
33
HOUSTON
H
5.00%
EGPN Bulk Carrier
Co., Limited
21/Nov/22
1/Jul/2024 - 31/Aug/2024
2009 177,729
34
NEW YORK
H
5.00%
C Transport Maritime
Ltd., Bermuda
2/Jul/22
10/Jun/2023 - 25/Aug/2023
2010 177,773
35
SEATTLE
I
5.00%
Solebay Shipping
Cape Company
Limited, Hong Kong
2/Mar/22
1/Oct/2023 - 15/Dec/2023
2011 179,362
36
P. S. PALIOS
I
5.00%
Classic Maritime Inc.
11/Jun/22
15/Apr/2024 - 30/Jun/2024
2013 179,134
37
G. P. ZAFIRAKIS
J
4.75%
Cargill International
S.A., Geneva
1/Dec/21
12/Jan/2023
14
2014 179,492
5.00%
Solebay Shipping
Cape Company
Limited, Hong Kong
12/Jan/23
15/Jun/2024 - 15/Aug/2024
38
SANTA BARBARA
J
4.75%
Cargill International
S.A., Geneva
19/Mar/22
10/May/2023 - 10/Jul/2023
15
2015 179,426
39
NEW ORLEANS
5.00%
Engelhart CTP Freight
(Switzerland) SA
25/Mar/22
20/Nov/2023 - 31/Jan/2024
15
2015 180,960
50
40
FLORIDA
5.00%
Bunge S.A., Geneva
29/Mar/22
29/Jan/2027 - 29/May/2027
2
2022 182,063
4 Newcastlemax Bulk Carriers
41
LOS ANGELES
K
5.00%
Koch Shipping Pte.
Ltd., Singapore
30/Jan/22
15/Jan/2023
2012 206,104
5.00%
Nippon Yusen
Kabushiki Kaisha,
Tokyo
15/Jan/23
20/May/2024 - 5/Aug/2024
42
PHILADELPHIA
K
5.00%
C Transport Maritime
Ltd., Bermuda
12/Apr/22
1/Feb/2024 - 15/Apr/2024
2012 206,040
43
SAN FRANCISCO
L
5.00%
Koch Shipping Pte.
Ltd., Singapore
18/Feb/22
18/Feb/2023
16
2017 208,006
5.00%
SwissMarine Pte. Ltd.,
Singapore
18/Feb/23
5/Jan/2025 - 5/Mar/2025
44
NEWPORT NEWS
L
5.00%
Koch Shipping Pte.
Ltd., Singapore
16/Dec/21
1/Jul/2023 - 30/Sep/2023
2017 208,021
* Each dry bulk carrier is a “sister ship”, or closely similar, to other dry bulk carriers that have the same letter.
** Total commission percentage paid to third parties.
*** In case of newly acquired vessel with time charter attached, this date refers to the expected/actual date of delivery of the vessel
to the Company.
**** Range of redelivery dates, with the actual date of redelivery being at the Charterers’ option, but subject to the terms, conditions,
and exceptions of the particular charterparty.
1The fixture includes the option for redelivery of vessel east of Suez against a gross ballast bonus of US$250,000.
2Bareboat chartered-in for a period of ten years.
3The Company expects to take delivery of the vessel by the beginning of April 2023.
4Vessel sold and delivered to her new Owners on February 8, 2023.
5Aquavita International S.A. has agreed to compensate the owners for the early redelivery of the vessel until the minimum agreed
redelivery date, February 1, 2023.
6Based on latest information.
7Vessel off hire for 3.93 days.
8Vessel on scheduled drydocking from October 12, 2022 to November 7, 2022.
9Vessel on scheduled drydocking from February 28, 2023 to March 17, 2023.
10The charter rate was US$10,000 per day for the first 30 days of the charter period.
11Redelivery date based on an estimated time charter trip duration of about 95 days.
12Charter includes a one time ballast bonus payment of US$300,000.
13Redelivery date based on an estimated time charter trip duration of about 45 days. In the event that the trip duration exceeds fifty
(50) days, the gross charter rate will be US$13,000 per day, minus a 5% commission paid to third parties, for each additional day.
14The Charterers will compensate the Owners for the excess of the charter party period at the rate of 123% of the average of the
Baltic Cape Index 5TC average for the days exceeding the period or the vessel’s present charter party rate whichever is higher.
15Bareboat chartered-in for a period of eight years.
16Koch Shipping Pte. Ltd. has agreed to compensate the owners for the early redelivery of the vessel by paying the difference
between the new rate and the previous rate, from the redelivery date from the Charterers, to March 1, 2023.
Our Customers
Our customers include regional and international companies, such as Cargill International S.A., Glencore
Grain B.V., Koch Shipping Pte Ltd and Swissmarine Services S.A. During 2022, two of our charterers
accounted for 34% of our revenues: Cargill (19%) and Koch (15%). During 2021, one of our charterers
51
accounted for 10% of our revenues: Cargill (10%). During 2020, two of our charterers accounted for 34%
of our revenues: Cargill (18%), Koch (16%).
We charter our dry bulk carriers, owned and bareboat chartered-in, to customers pursuant to time charters.
Under our time charters, the charterer typically pays us a fixed daily charter hire rate and bears all voyage
expenses, including the cost of bunkers (fuel oil) and canal and port charges. We remain responsible for
paying the chartered vessel's operating expenses, including the cost of crewing, insuring, repairing and
maintaining the vessel. In 2022, we paid commissions that ranged from 4.75% to 5.0% of the total daily
charter hire rate of each charter to unaffiliated ship brokers and to in-house brokers associated with the
charterer, depending on the number of brokers involved with arranging the charter.
We strategically monitor developments in the dry bulk shipping industry on a regular basis and, subject to
market demand, seek to adjust the charter hire periods for our vessels according to prevailing market
conditions. In order to take advantage of relatively stable cash flow and high utilization rates, we fix some
of our vessels on long-term time charters. Currently, the majority of our vessels are employed on short to
medium-term time charters, which provides us with flexibility in responding to market developments. We
continuously evaluate our balance of short- and long-term charters and extend or reduce the charter hire
periods of the vessels in our fleet according to the developments in the dry bulk shipping industry.
Charter Hire Rates
Charter hire rates fluctuate by varying degrees among dry bulk carrier size categories. The volume and
pattern of trade in a small number of commodities (major bulks) affect demand for larger vessels. Therefore,
charter rates and vessel values of larger vessels often show greater volatility. Conversely, trade in a greater
number of commodities (minor bulks) drives demand for smaller dry bulk carriers. Accordingly, charter
rates and vessel values for those vessels are usually subject to less volatility.
Charter hire rates paid for dry bulk carriers are primarily a function of the underlying balance between
vessel supply and demand, although at times other factors may play a role. Furthermore, the pattern seen
in charter rates is broadly mirrored across the different charter types and the different dry bulk carrier
categories. In the time charter market, rates vary depending on the length of the charter period and vessel-
specific factors such as age, speed and fuel consumption.
In the voyage charter market, rates are, among other things, influenced by cargo size, commodity, port
dues and canal transit fees, as well as commencement and termination regions. In general, a larger cargo
size is quoted at a lower rate per ton than a smaller cargo size. Routes with costly ports or canals generally
command higher rates than routes with low port dues and no canals to transit. Voyages with a load port
within a region that includes ports where vessels usually discharge cargo or a discharge port within a region
with ports where vessels load cargo also are generally quoted at lower rates, because such voyages
generally increase vessel utilization by reducing the unloaded portion (or ballast leg) that is included in the
calculation of the return charter to a loading area.
Within the dry bulk shipping industry, the charter hire rate references, most likely to be monitored, are the
freight rate indices issued by the Baltic Exchange. These references are based on actual charter hire rates
under charters entered into by market participants as well as daily assessments provided to the Baltic
Exchange by a panel of major shipbrokers. The Baltic Panamax Index is the index with the longest history.
The Baltic Capesize Index and Baltic Handymax Index are of more recent origin.
The Baltic Dry Index, or BDI, a daily average of charter rates in 20 shipping routes measured on a time
charter and voyage basis and covering Capesize, Panamax, Supramax, and Handysize dry bulk carriers
ranged from a low of 393 in May 2020 to a high of 2,097 in October. In 2021, the BDI ranged from a low of
1,303 in February to a high of 5,650 in October. In 2022, the BDI ranged from a high of 3369 on May 23,
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2022 to a low of 965 on August 31, 2022 to drop again to a low of 530 on February 16, 2023. The BDI has
since recovered from the February 2023 levels and closed at 1484 on March 23, 2023.
The Dry Bulk Shipping Industry
The global dry bulk carrier fleet could be divided into seven categories based on a vessel's carrying
capacity. These categories consist of:
●
Very Large Ore Carriers
. Very large ore carriers, or VLOCs, have a carrying capacity of more
than 200,000 dwt and are a comparatively new sector of the dry bulk carrier fleet. VLOCs are built
to exploit economies of scale on long-haul iron ore routes.
●
Capesize
. Capesize vessels have a carrying capacity of 110,000 -199,999 dwt. Only the largest
ports around the world possess the infrastructure to accommodate vessels of this size. Capesize
vessels are primarily used to transport iron ore or coal and, to a much lesser extent, grains, primarily
on long-haul routes.
●
Post-Panamax
. Post-Panamax vessels have a carrying capacity of 80,000-109,999 dwt. These
vessels tend to have a shallower draft and larger beam than a standard Panamax vessel with a
higher cargo capacity. These vessels have been designed specifically for loading high cubic
cargoes from draught restricted ports, although they cannot transit the Panama Canal.
●
Panamax
. Panamax vessels have a carrying capacity of 60,000-79,999 dwt. These vessels carry
coal, iron ore, grains, and, to a lesser extent, minor bulks, including steel products, cement and
fertilizers. Panamax vessels are able to pass through the Panama Canal, making them more
versatile than larger vessels with regard to accessing different trade routes. Most Panamax and
Post-Panamax vessels are “gearless,” and therefore must be served by shore-based cargo
handling equipment. However, there are a small number of geared vessels with onboard cranes, a
feature that enhances trading flexibility and enables operation in ports which have poor
infrastructure in terms of loading and unloading facilities.
●
Ultramax
Supramax with a maximum length of 200 meters and capacity that ranges from 60,000 dwt and
66,000 dwt. This class is considered an upgrade to Supramax class as it offers a better all-around
investment for Charterers and Shipowners due to its higher cargo carrying capacity and better
bunker efficiency. Ultramax class bulk carriers have 5 cargo holds. are fitted with 4 cranes and
usually are equipped with grabs allowing them to call more ports with no such facilities giving them
more versatility.
●
Handymax/Supramax
. Handymax vessels have a carrying capacity of 40,000-59,999 dwt. These
vessels operate in a large number of geographically dispersed global trade routes, carrying
primarily grains and minor bulks. Within the Handymax category there is also a sub-sector known
as Supramax. Supramax bulk carriers are ships between 50,000 to 59,999 dwt, normally offering
cargo loading and unloading flexibility with on-board cranes, or “gear,” while at the same time
possessing the cargo carrying capability approaching conventional Panamax bulk carriers.
●
Handysize
.
primarily involved in carrying minor bulk cargoes. Increasingly, ships of this type operate within
regional trading routes, and may serve as trans-shipment feeders for larger vessels. Handysize
vessels are well suited for small ports with length and draft restrictions. Their cargo gear enables
them to service ports lacking the infrastructure for cargo loading and unloading.
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Other size categories occur in regional trade, such as Kamsarmax, with a maximum length of 229 meters,
the maximum length that can load in the port of Kamsar in the Republic of Guinea. Other terms such as
Seawaymax, Setouchmax, Dunkirkmax, and Newcastlemax also appear in regional trade.
The supply of dry bulk carriers is dependent on the delivery of new vessels and the removal of vessels
from the global fleet, either through scrapping or loss. The level of scrapping activity is generally a function
of scrapping prices in relation to current and prospective charter market conditions, as well as operating,
repair and survey costs. The average age at which a vessel is scrapped was 29 years in 2022, 28 years
in 2021, and 27 years in 2020.
The demand for dry bulk carrier capacity is determined by the underlying demand for commodities
transported in dry bulk carriers, which in turn is influenced by trends in the global economy. Demand for
dry bulk carrier capacity is also affected by the operating efficiency of the global fleet, along with port
congestion, which has been a feature of the market since 2004, absorbing tonnage and therefore leading
to a tighter balance between supply and demand. In evaluating demand factors for dry bulk carrier capacity,
the Company believes that dry bulk carriers can be the most versatile element of the global shipping fleets
in terms of employment alternatives.
Vessel Prices
Dry bulk vessel values in 2022 generally were lower as compared to 2021. Consistent with these trends
were the market values of our dry bulk carriers. As charter rates and vessel values partially decreased
during 2022, there can be no assurance as to how long charter rates and vessel values will remain at their
current levels or whether they will decrease or improve to any significant degree in the near future.
Competition
Our business fluctuates in line with the main patterns of trade of the major dry bulk cargoes and varies
according to changes in the supply and demand for these items. We operate in markets that are highly
competitive and based primarily on supply and demand. We compete for charters on the basis of price,
vessel location, size, age and condition of the vessel, as well as on our reputation as an owner and
operator. We compete with other owners of dry bulk carriers in the Panamax, Post-Panamax and smaller
class sectors and with owners of Capesize and Newcastlemax dry bulk carriers. Ownership of dry bulk
carriers is highly fragmented.
We believe that we possess a number of strengths that provide us with a competitive advantage in the dry
bulk shipping industry:
●
We own a modern, high quality fleet of dry bulk carriers
. We believe that owning a modern, high
quality fleet reduces operating costs, improves safety and provides us with a competitive advantage
in securing favorable time charters. We maintain the quality of our vessels by carrying out regular
inspections, both while in port and at sea, and adopting a comprehensive maintenance program for
each vessel.
●
Our fleet includes groups of sister ships.
ships enhances the revenue generating potential of our fleet by providing us with operational and
scheduling flexibility. The uniform nature of sister ships also improves our operating efficiency by
allowing our fleet managers to apply the technical knowledge of one vessel to all vessels of the
same series and create economies of scale that enable us to realize cost savings when maintaining,
supplying and crewing our vessels.
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●
We have an experienced management team.
Our management team consists of experienced
executives who have, on average, more than 30 years of operating experience in the shipping
industry and has demonstrated ability in managing the commercial, technical and financial areas of
our business.
●
We benefit from the experience and reputation of Diana Shipping Services S.A. and the relationship
with Wilhelmsen Ship Management through the Diana Wilhelmsen Management Limited joint
venture.
●
We benefit from strong relationships with members of the shipping and financial industries.
have developed strong relationships with major international charterers, shipbuilders and financial
institutions that we believe are the result of the quality of our operations, the strength of our
management team and our reputation for dependability.
●
We have a strong balance sheet and a relatively low level of indebtedness.
strong balance sheet and relatively low level of indebtedness provide us with the flexibility to
increase the amount of funds that we may draw under our loan facilities in connection with any
future acquisitions or otherwise and enable us to use cash flow that would otherwise be dedicated
to debt service for other purposes.
Permits and Authorizations
We are required by various governmental and quasi-governmental agencies to obtain certain permits,
licenses and certificates with respect to our vessels. The kinds of permits, licenses and certificates required
depend upon several factors, including the commodity transported, the waters in which the vessel operates
the nationality of the vessel's crew and the age of a vessel. We have been able to obtain all permits,
licenses and certificates currently required to permit our vessels to operate. Additional laws and regulations,
environmental or otherwise, may be adopted which could limit our ability to do business or increase the
cost of us doing business.
Disclosure Pursuant to Section 219 of the Iran Threat Reduction and Syrian Human Rights
Act
Section 219 of the U.S. Iran Threat Reduction and Syria Human Rights Act of 2012, or the ITRA, added
new Section 13(r) to the U.S. Securities Exchange Act of 1934, as amended, or the Exchange Act, requiring
each SEC reporting issuer to disclose in its annual and, if applicable, quarterly reports whether it or any of
its affiliates have knowingly engaged in certain activities, transactions or dealings relating to Iran or with
the Government of Iran or certain designated natural persons or entities involved in terrorism or the
proliferation of weapons of mass destruction during the period covered by the report.
Pursuant to Section 13(r) of the Exchange Act, we note that none of our vessels made port calls to Iran in
2022 and to the date of this annual report.
Environmental and Other Regulations in the Shipping Industry
Government regulation and laws significantly affect the ownership and operation of our fleet. We are
subject to international conventions and treaties, national, state and local laws and regulations in force in
the countries in which our vessels may operate or are registered relating to safety and health and
environmental protection including the storage, handling, emission, transportation and discharge of
hazardous and non-hazardous materials, and the remediation of contamination and liability for damage to
natural resources. Compliance with such laws, regulations and other requirements entails significant
expense, including vessel modifications and implementation of certain operating procedures.
55
A variety of government and private entities subject our vessels to both scheduled and unscheduled
inspections. These entities include the local port authorities (applicable national authorities such as the
United States Coast Guard (“USCG”), harbor master or equivalent), classification societies, flag state
administrations (countries of registry) and charterers, particularly terminal operators. Certain of these
entities require us to obtain permits, licenses, certificates and other authorizations for the operation of our
vessels. Failure to maintain necessary permits or approvals could require us to incur substantial costs or
result in the temporary suspension of the operation of one or more of our vessels.
Increasing environmental concerns have created a demand for vessels that conform to stricter
environmental standards. We are required to maintain operating standards for all of our vessels that
emphasize operational safety, quality maintenance, continuous training of our officers and crews and
compliance with United States and international regulations. We believe that the operation of our vessels
is in substantial compliance with applicable environmental laws and regulations and that our vessels have
all material permits, licenses, certificates or other authorizations necessary for the conduct of our
operations. However, because such laws and regulations frequently change and may impose increasingly
stricter requirements, we cannot predict the ultimate cost of complying with these requirements, or the
impact of these requirements on the resale value or useful lives of our vessels. In addition, a future serious
marine incident that causes significant adverse environmental impact could result in additional legislation
or regulation that could negatively affect our profitability.
International Maritime Organization
The International Maritime Organization, the United Nations agency for maritime safety and the prevention
of pollution by vessels (the “IMO”), has adopted the International Convention for the Prevention of Pollution
from Ships, 1973, as modified by the Protocol of 1978 relating thereto, collectively referred to as MARPOL
73/78 and herein as “MARPOL,” the International Convention for the Safety of Life at Sea of 1974 (“SOLAS
Convention”), and the International Convention on Load Lines of 1966 (the “LL Convention”). MARPOL
establishes environmental standards relating to oil leakage or spilling, garbage management, sewage, air
emissions, handling and disposal of noxious liquids and the handling of harmful substances in packaged
forms. MARPOL is applicable to drybulk, tanker and LNG carriers, among other vessels, and is broken
into six Annexes, each of which regulates a different source of pollution. Annex I prevention of pollution by
Oil; Annexes II and III relate to harmful substances carried in bulk in liquid or in packaged form, respectively;
Annexes IV and V relate to sewage and garbage management, respectively; and Annex VI, lastly, relates
to air emissions. Annex VI was separately adopted by the IMO in September of 1997; new emissions
standards, titled IMO-2020, took effect on January 1, 2020.
Air Emissions
In September of 1997, the IMO adopted Annex VI to MARPOL to address air pollution from vessels.
Effective May 2005, Annex VI sets limits on sulfur oxide and nitrogen oxide emissions from all commercial
vessel exhausts and prohibits “deliberate emissions” of ozone depleting substances (such as halons and
chlorofluorocarbons), emissions of volatile compounds from cargo tanks, and the shipboard incineration of
specific substances. Annex VI also includes a global cap on the sulfur content of fuel oil and allows for
special areas to be established with more stringent controls on sulfur emissions, as explained
below. Emissions of “volatile organic compounds” from certain vessels, and the shipboard incineration
(from incinerators installed after January 1, 2000) of certain substances (such as polychlorinated biphenyls,
or “PCBs”) are also prohibited. We believe that all our vessels are currently compliant in all material
respects with these regulations.
The Marine Environment Protection Committee, or “MEPC”, adopted amendments to Annex VI regarding
emissions of sulfur oxide, nitrogen oxide, particulate matter and ozone depleting substances, which entered
into force on July 1, 2010. The amended Annex VI seeks to further reduce air pollution by, among other
things, implementing a progressive reduction of the amount of sulfur contained in any fuel oil used on board
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ships. On October 27, 2016, at its 70th session, the MEPC agreed to implement a global 0.5% m/m sulfur
oxide emissions limit (reduced from 3.50%) starting from January 1, 2020. This limitation can be met by
using low-sulfur compliant fuel oil, alternative fuels, or certain exhaust gas cleaning systems. Ships are
now required to obtain bunker delivery notes and International Air Pollution Prevention (“IAPP”) Certificates
from their flag states that specify sulfur content. Additionally, at MEPC 73, amendments to Annex VI to
prohibit the carriage of bunkers above 0.5% sulfur on ships were adopted and took effect March 1, 2020,
with the exception of vessels fitted with exhaust gas cleaning equipment (“scrubbers”) which can carry fuel
of higher sulfur content. These regulations subject ocean-going vessels to stringent emissions controls
and may cause us to incur substantial costs.
Sulfur content standards are even stricter within certain “Emission Control Areas,” or (“ECAs”). As of
January 1, 2015, ships operating within an ECA were not permitted to use fuel with sulfur content in excess
of 0.1% m/m. Amended Annex VI establishes procedures for designating new ECAs. Currently, the IMO
has designated four ECAs, including specified portions of the Baltic Sea area, North Sea area, North
American area and United States Caribbean area. Ocean-going vessels in these areas will be subject to
stringent emission controls and may cause us to incur additional costs. Other areas in China are subject
to local regulations that impose stricter emission controls. In December 2021, the member states of the
Convention of the Protection of the Mediterranean Sea Against Pollution agreed to support the designation
of a new ECA in the Mediterranean. On December 15, 2022, MEPC 79 adopted the designation of a new
ECA in the Mediterranean, with an effective date of May 1, 2025.If other ECAs are approved by the IMO,
or other new or more stringent requirements relating to emissions from marine diesel engines or port
operations by vessels are adopted by the U.S. Environmental Protection Agency (“EPA”) or the states
where we operate, compliance with these regulations could entail significant capital expenditures or
otherwise increase the costs of our operations.
Amended Annex VI also establishes new tiers of stringent nitrogen oxide emissions standards for marine
diesel engines, depending on their date of installation. At the MEPC meeting held from March to April 2014,
amendments to Annex VI were adopted which address the date on which Tier III Nitrogen Oxide (NOx)
standards in ECAs will go into effect. Under the amendments, Tier III NOx standards apply to ships that
operate in the North American and U.S. Caribbean Sea ECAs designed for the control of NOx produced
by vessels with a marine diesel engine installed and constructed on or after January 1, 2016. Tier III
requirements could apply to areas that will be designated for Tier III NOx in the future. At MEPC 70 and
MEPC 71, the MEPC approved the North Sea and Baltic Sea as ECAs for nitrogen oxide for ships built on
or after January 1, 2021. For the moment, this regulation relates to new building vessels and has no
retroactive application to existing fleet. The EPA promulgated equivalent (and in some senses stricter)
emissions standards in 2010. As a result of these designations or similar future designations, we may be
required to incur additional operating or other costs.
As determined at the MEPC 70, the new Regulation 22A of MARPOL Annex VI became effective as of
March 1, 2018 and requires ships above 5,000 gross tonnage to collect and report annual data on fuel oil
consumption to an IMO database, with the first year of data collection having commenced on January 1,
2019. The IMO intends to use such data as the first step in its roadmap (through 2023) for developing its
strategy to reduce greenhouse gas emissions from ships, as discussed further below.
As of January 1, 2013, MARPOL made mandatory certain measures relating to energy efficiency for ships.
All ships are now required to develop and implement a Ship Energy Efficiency Management
Plans (“SEEMPs”), and new ships must be designed in compliance with minimum energy efficiency levels
per capacity mile as defined by the Energy Efficiency Design Index (“EEDI”). Under these measures, by
2025, all new ships built will be 30% more energy efficient than those built in 2014. Additionally, MEPC 75
adopted amendments to MARPOL Annex VI which brings forward the effective date of the EEDI’s “phase
3” requirements from April 1, 2022 to January 1, 2025 for several ship types, including gas carriers, general
cargo ships, and LNG carriers.
57
Additionally, MEPC 75 introduced draft amendments to Annex VI which impose new regulations to reduce
greenhouse gas emissions from ships. These amendments introduce requirements to assess and
measure the energy efficiency of all ships and set the required attainment values, with the goal of reducing
the carbon intensity of international shipping. The requirements include (1) a technical requirement to
reduce carbon intensity based on a new Energy Efficiency Existing Ship Index (“EEXI”), and (2) operational
carbon intensity reduction requirements, based on a new operational carbon intensity indicator (“CII”). The
attained EEXI is required to be calculated for ships of 400 gross tonnage and above, in accordance with
different values set for ship types and categories. With respect to the CII, the draft amendments would
require ships of 5,000 gross tonnage to document and verify their actual annual operational CII achieved
against a determined required annual operational CII. Additionally, MEPC 75 proposed draft amendments
requiring that, on or before January 1, 2023, all ships above 400 gross tonnage must have an approved
SEEMP on board. For ships above 5,000 gross tonnage, the SEEMP would need to include certain
mandatory content. MEPC 75 also approved draft amendments to MARPOL Annex I to prohibit the use
and carriage for use as fuel of heavy fuel oil (“HFO”) by ships in Arctic waters on and after July 1, 2024.
The draft amendments introduced at MEPC 75 were adopted at the MEPC 76 session on June 2021 and
entered into force on November 1, 2022, with the requirements for EEXI and CII certification coming into
effect from January 1, 2023. MEPC 77 adopted a non-binding resolution which urges Member States and
ship operators to voluntarily use distillate or other cleaner alternative fuels or methods of propulsion that
are safe for ships and could contribute to the reduction of Black Carbon emissions from ships when
operating in or near the Arctic. MEPC 79 adopted amendments to MARPOL Annex VI, Appendix IX to
include the attained and required CII values, the CII rating and attained EEXI for existing ships in the
required information to be submitted to the IMO Ship Fuel Oil Consumption Database. The amendments
will enter into force on May 1, 2024.
We may incur costs to comply with these revised standards. Additional or new conventions, laws and
regulations may be adopted that could require the installation of expensive emission control systems and
could adversely affect our business, results of operations, cash flows and financial condition.
Safety Management System Requirements
The SOLAS Convention was amended to address the safe manning of vessels and emergency training
drills. The Convention of Limitation of Liability for Maritime Claims (the “LLMC”) sets limitations of liability
for a loss of life or personal injury claim or a property claim against ship owners. The ISM
Certification provides validation that both company and ships are operating using a process-based system
approach to manage risks and achieve continual improvement. The ISM code is meant to be a preventive
tool and asks companies to assess all risks and then take measured to safeguard against them.
Responsibilities and authorities are set out for the various entities includes in the ISM process. All of our
vessels as well as our shore-based operations are fully certified under the ISM Code.
Under Chapter IX of the SOLAS Convention, or the International Safety Management Code for the Safe
Operation of Ships and for Pollution Prevention (the “ISM Code”), our operations are also subject to
environmental standards and requirements. The ISM Code requires the party with operational control of a
vessel to develop an extensive safety management system that includes, among other things, the adoption
of a safety and environmental protection policy setting forth instructions and procedures for operating its
vessels safely and describing procedures for responding to emergencies. Through strong leadership and
a disciplined, clearly documented management system, the Company promotes the concept of HSSE
(Health, Safety, Security and Environmental) excellence at all levels in the organisation. This concept is
achieved by consistent measurement and feedback of the Company’s Management System in order to
generate continuous and sustainable improvement in Health, Safety, Security, and Quality and
Environmental (including Energy Efficiency) (HSSQE) management processes. The failure of a vessel
owner or bareboat charterer to comply with the ISM Code may subject such party to increased liability, may
decrease available insurance coverage for the affected vessels and may result in a denial of access to, or
detention in, certain ports.
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The ISM Code requires that vessel operators obtain a safety management certificate for each vessel they
operate. This certificate evidences compliance by a vessel’s management with the ISM Code requirements
for a safety management system. No vessel can obtain a safety management certificate unless its manager
has been awarded a document of compliance, issued by each flag state, under the ISM Code. We have
obtained applicable documents of compliance for our offices and safety management certificates for all of
our vessels for which the certificates are required by the IMO. The documents of compliance and safety
management certificate are renewed as required.
Regulation II-1/3-10 of the SOLAS Convention governs ship construction and stipulates that ships over
150 meters in length must have adequate strength, integrity and stability to minimize risk of loss or pollution.
Goal-based standards amendments in SOLAS regulation II-1/3-10 entered into force in 2012, with July 1,
2016 set for application to new oil tankers and bulk carriers. The SOLAS Convention regulation II-1/3-10
on goal-based ship construction standards for bulk carriers and oil tankers, which entered into force on
January 1, 2012, requires that all oil tankers and bulk carriers of 150 meters in length and above, for which
the building contract is placed on or after July 1, 2016, satisfy applicable structural requirements conforming
to the functional requirements of the International Goal-based Ship Construction Standards for Bulk
Carriers and Oil Tankers (“GBS Standards”).
Amendments to the SOLAS Convention Chapter VII apply to vessels transporting dangerous goods and
require those vessels be in compliance with the International Maritime Dangerous Goods Code (“IMDG
Code”). Effective January 1, 2018, the IMDG Code includes (1) updates to the provisions for radioactive
material, reflecting the latest provisions from the International Atomic Energy Agency, (2) new marking,
packing and classification requirements for dangerous goods, and (3) new mandatory training
requirements. Amendments which took effect on January 1, 2020 also reflect the latest material from the
UN Recommendations on the Transport of Dangerous Goods, including (1) new provisions regarding IMO
type 9 tank, (2) new abbreviations for segregation groups, and (3) special provisions for carriage of lithium
batteries and of vehicles powered by flammable liquid or gas. Additional amendments came into force on
June 1, 2022, include (1) addition of a definition of dosage rate, (2) additions to the list of high consequence
dangerous goods, (3) new provisions for medical/clinical waste, (4) addition of various ISO standards for
gas cylinders, (5) a new handling code, and (6) changes to stowage and segregation provisions.
The IMO has also adopted the International Convention on Standards of Training, Certification and
Watchkeeping for Seafarers (“STCW”). As of February 2017, all seafarers are required to meet the STCW
standards and be in possession of a valid STCW certificate. Flag states that have ratified SOLAS and
STCW generally employ the classification societies, which have incorporated SOLAS and STCW
requirements into their class rules, to undertake surveys to confirm compliance.
The IMO's Maritime Safety Committee and MEPC, respectively, each adopted relevant parts of the
International Code for Ships Operating in Polar Water (the “Polar Code”). The Polar Code, which entered
into force on January 1, 2017, covers design, construction, equipment, operational, training, search and
rescue as well as environmental protection matters relevant to ships operating in the waters surrounding
the two poles. It also includes mandatory measures regarding safety and pollution prevention as well as
recommendatory provisions. The Polar Code applies to new ships constructed after January 1, 2017, and
after January 1, 2018, ships constructed before January 1, 2017 are required to meet the relevant
requirements by the earlier of their first intermediate or renewal survey.
Furthermore, recent action by the IMO’s Maritime Safety Committee and United States agencies indicates
that cybersecurity regulations for the maritime industry are likely to be further developed in the near future
in an attempt to combat cybersecurity threats. By IMO resolution, administrations are encouraged to ensure
that cyber-risk management systems must be incorporated by ship-owners and managers by their first
annual Document of Compliance audit after January 1, 2021. In February 2021, the U.S. Coast Guard
published guidance on addressing cyber risks in a vessel’s safety management system. This might cause
59
companies to create additional procedures for monitoring cybersecurity, which could require additional
expenses and/or capital expenditures. The impact of future regulations is hard to predict at this time.
Pollution Control and Liability Requirements
The IMO has negotiated international conventions that impose liability for pollution in international waters
and the territorial waters of the signatories to such conventions. For example, the IMO adopted an
International Convention for the Control and Management of Ships’ Ballast Water and Sediments, (the
“BWM Convention”), in 2004. The BWM Convention entered into force on September 8, 2017. The BWM
Convention requires ships to manage their ballast water to remove, render harmless, or avoid the uptake
or discharge of new or invasive aquatic organisms and pathogens within ballast water and sediments. The
BWM Convention’s implementing regulations call for a phased introduction of mandatory ballast water
exchange requirements, to be replaced in time with mandatory concentration limits, and require all ships
to carry a ballast water record book and an international ballast water management certificate.
On December 4, 2013, the IMO Assembly passed a resolution revising the application dates of the BWM
Convention so that the dates are triggered by the entry into force date and not the dates originally in the
BWM Convention. This, in effect, makes all vessels delivered before the entry into force date “existing
vessels” and allows for the installation of ballast water management systems on such vessels at the first
International Oil Pollution Prevention (“IOPP”) renewal survey following entry into force of the convention.
The MEPC adopted updated guidelines for approval of ballast water management systems (G8) at MEPC
70. At MEPC 71, the schedule regarding the BWM Convention’s implementation dates was also discussed
and amendments were introduced to extend the date existing vessels are subject to certain ballast water
standards. Those changes were adopted at MEPC 72. Ships over 400 gross tons generally must comply
with a “D-1 standard,” requiring the exchange of ballast water only in open seas and away from coastal
waters. The “D-2 standard” specifies the maximum amount of viable organisms allowed to be discharged,
and compliance dates vary depending on the IOPP renewal dates. Depending on the date of the IOPP
renewal survey, existing vessels must comply with the D-2 standard on or after September 8, 2019. For
most ships, compliance with the D-2 standard will involve installing on-board systems to treat ballast water
and eliminate unwanted organisms. Ballast water management systems, which include systems that make
use of chemical, biocides, organisms or biological mechanisms, or which alter the chemical or physical
characteristics of the ballast water, must be approved in accordance with IMO Guidelines (Regulation D-
3). As of October 13, 2019, MEPC 72’s amendments to the BWM Convention took effect, making the Code
for Approval of Ballast Water Management Systems, which governs assessment of ballast water
management systems, mandatory rather than permissive, and formalized an implementation schedule for
the D-2 standard. Under these amendments, all ships must meet the D-2 standard by September 8, 2024.
Costs of compliance with these regulations may be substantial. Additionally, in November 2020, MEPC 75
adopted amendments to the BWM Convention which would require a commissioning test of the ballast
water management system for the initial survey or when performing an additional survey for retrofits. This
analysis will not apply to ships that already have an installed BWM system certified under the BWM
Convention. These amendments have entered into force on June 1, 2022. In December 2022, MEPC 79
agreed that it should be permitted to use ballast tanks for temporary storage of treated sewage and grey
water. MEPC 79 also established that ships are expected to return to D-2 compliance after experiencing
challenging uptake water and bypassing a BWM system should only be used as a last resort. Guidance
will be developed at MEPC 80 (in July 2023) to set out appropriate actions and uniform procedures to
ensure compliance with the BWM Convention.
Once mid-ocean exchange ballast water treatment requirements become mandatory under the BWM
Convention, the cost of compliance could increase for ocean carriers and may have a material effect on
our operations. Irrespective of the BWM convention, certain countries such as the U.S. have enforced and
implemented regional requirement related to the system certification, operation and reporting.
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The IMO also adopted the International Convention on Civil Liability for Bunker Oil Pollution Damage (the
“Bunker Convention”) to impose strict liability on ship owners (including the registered owner, bareboat
charterer, manager or operator) for pollution damage in jurisdictional waters of ratifying states caused by
discharges of bunker fuel. The Bunker Convention requires registered owners of ships over 1,000 gross
tons to maintain insurance for pollution damage in an amount equal to the limits of liability under the
applicable national or international limitation regime (but not exceeding the amount calculated in
accordance with the LLMC). With respect to non-ratifying states, liability for spills or releases of oil carried
as fuel in ship’s bunkers typically is determined by the national or other domestic laws in the jurisdiction
where the events or damages occur.
Ships are required to maintain a certificate attesting that they maintain adequate insurance to cover an
incident. In jurisdictions, such as the United States where the Bunker Convention has not been adopted,
various legislative schemes or common law govern, and liability is imposed either on the basis of fault or
on a strict-liability basis.
Anti-Fouling Requirements
In 2001, the IMO adopted the International Convention on the Control of Harmful Anti-fouling Systems on
Ships, or the “Anti-fouling Convention.” The Anti-fouling Convention, which entered into force on
September 17, 2008, prohibits the use of organotin compound coatings to prevent the attachment of
mollusks and other sea life to the hulls of vessels. Vessels of over 400 gross tons engaged in international
voyages will also be required to undergo an initial survey before the vessel is put into service or before an
International Anti-fouling System Certificate is issued for the first time; and subsequent surveys when the
anti-fouling systems are altered or replaced.
We have obtained Anti-fouling System Certificates for all of our vessels that are subject to the Anti-fouling
Convention.
Requirements for the Safe and Environmentally Sound Recycling of Ships
In 2009 the Hong Kong International Convention and MEPC 269(68) adopted the guidelines for the
preparation of the Inventory of Hazardous Materials. The Convention concerns all vessels over 500 GT
entitled to fly the flag of a Party or operating under its authority, with some exceptions like warships.
According to the Convention the shipowner should control Ship’s Hazardous Materials inherent in ship’s
structure, machinery, equipment and paints, coatings and prohibit the new installations of Hazardous
Materials, by maintaining an Inventory of Hazardous Materials (IHM). It is the Company’s responsibility to
maintain the IHM Part I up to date, during the life of the ship, according to MEPC Guidelines. The ships
are subject to survey (initial, renewal, additional and final) and certification and should keep a valid
International Certificate on Inventory of Hazardous Materials or an International Ready for Recycling
Certificate (in case of recycling), on board. For ships been resulted to contain hazardous materials (like
asbestos), actions for removal should be taken by the shipowner. The ships should only be recycled
according to the regulations. If the ship is detected to be in violation of this Convention, the Party carrying
out an inspection may take steps to warn, detain, dismiss, or exclude the ship from its ports, which might
have an impact in our commercial image and cause high fines to the company. Our fleet already complies
with this regulation, although not yet into force, but the preparation, maintenance and whenever needed
removal have resulted in substantial costs.
Compliance Enforcement
Noncompliance with the ISM Code or other IMO regulations may subject the ship owner or bareboat
charterer to increased liability, may lead to decreases in available insurance coverage for affected vessels
and may result in the denial of access to, or detention in, some ports. The USCG and European Union
authorities have indicated that vessels not in compliance with the ISM Code by applicable deadlines will
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be prohibited from trading in U.S. and European Union ports, respectively. As of the date of this report,
each of our vessels is ISM Code certified. The IMO continues to review and introduce new regulations. It
is impossible to predict what additional regulations, if any, may be passed by the IMO and what effect, if
any, such regulations might have on our operations.
U.S. Regulations
The U.S. Oil Pollution Act of 1990 and the Comprehensive Environmental Response, Compensation and
Liability Act
The U.S. Oil Pollution Act of 1990 (“OPA”) established an extensive regulatory and liability regime for the
protection and cleanup of the environment from oil spills. OPA affects all “owners and operators” whose
vessels trade or operate within the U.S., its territories and possessions or whose vessels operate in U.S.
waters, which includes the U.S.’s territorial sea and its 200 nautical mile exclusive economic zone around
the U.S. The U.S. has also enacted the Comprehensive Environmental Response, Compensation and
Liability Act (“CERCLA”), which applies to the discharge of hazardous substances other than oil, except in
limited circumstances, whether on land or at sea. OPA and CERCLA both define “owner and operator” in
the case of a vessel as any person owning, operating or chartering by demise, the vessel. Both OPA and
CERCLA impact our operations.
Under OPA, vessel owners and operators are “responsible parties” and are jointly, severally and strictly
liable (unless the spill results solely from the act or omission of a third party, an act of God or an act of war)
for all containment and clean-up costs and other damages arising from discharges or threatened
discharges of oil from their vessels, including bunkers (fuel). OPA defines these other damages broadly
to include:
(i) injury to, destruction or loss of, or loss of use of, natural resources and related assessment costs;
(ii) injury to, or economic losses resulting from, the destruction of real and personal property;
(iii) loss of subsistence use of natural resources that are injured, destroyed or lost;
(iv) net loss of taxes, royalties, rents, fees or net profit revenues resulting from injury, destruction or
loss of real or personal property, or natural resources;
(v) lost profits or impairment of earning capacity due to injury, destruction or loss of real or personal
property or natural resources; and
(vi) net cost of increased or additional public services necessitated by removal activities following a
discharge of oil, such as protection from fire, safety or health hazards, and loss of subsistence use
of natural resources.
OPA contains statutory caps on liability and damages; such caps do not apply to direct cleanup
costs. Effective November 12, 2019, the USCG adjusted the limits of OPA liability for non-tank vessels,
edible oil tank vessels, and any oil spill response vessels, to the greater of $1,200 per gross ton or $997,100
(subject to periodic adjustment for inflation). On December 23, 2022, the USCG issued a final rule to adjust
the limitation of liability under the OPA. Effective March 23, 2022, the new adjusted limits of OPA liability
for non-tank vessels, edible oil tank vessels, and any oil spill response vessels, to the greater of $1,300
per gross ton or $1,076,000 (subject to periodic adjustment for inflation).These limits of liability do not apply
if an incident was proximately caused by the violation of an applicable U.S. federal safety, construction or
operating regulation by a responsible party (or its agent, employee or a person acting pursuant to a
contractual relationship), or a responsible party's gross negligence or willful misconduct. The limitation on
liability similarly does not apply if the responsible party fails or refuses to (i) report the incident as required
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by law where the responsible party knows or has reason to know of the incident; (ii) reasonably cooperate
and assist as requested in connection with oil removal activities; or (iii) without sufficient cause, comply
with an order issued under the Federal Water Pollution Act (Section 311 (c), (e)) or the Intervention on the
High Seas Act.
CERCLA contains a similar liability regime whereby owners and operators of vessels are liable for cleanup,
removal and remedial costs, as well as damages for injury to, or destruction or loss of, natural resources,
including the reasonable costs associated with assessing the same, and health assessments or health
effects studies. There is no liability if the discharge of a hazardous substance results solely from the act or
omission of a third party, an act of God or an act of war. Liability under CERCLA is limited to the greater of
$300 per gross ton or $5.0 million for vessels carrying a hazardous substance as cargo and the greater of
$300 per gross ton or $500,000 for any other vessel. These limits do not apply (rendering the responsible
person liable for the total cost of response and damages) if the release or threat of release of a hazardous
substance resulted from willful misconduct or negligence, or the primary cause of the release was a
violation of applicable safety, construction or operating standards or regulations. The limitation on liability
also does not apply if the responsible person fails or refused to provide all reasonable cooperation and
assistance as requested in connection with response activities where the vessel is subject to OPA.
OPA and CERCLA each preserve the right to recover damages under existing law, including maritime tort
law. OPA and CERCLA both require owners and operators of vessels to establish and maintain with the
USCG evidence of financial responsibility sufficient to meet the maximum amount of liability to which the
particular responsible person may be subject. Vessel owners and operators may satisfy their financial
responsibility obligations by providing a proof of insurance, a surety bond, qualification as a self-insurer or
a guarantee. We comply and plan to comply going forward with the USCG’s financial responsibility
regulations by providing applicable certificates of financial responsibility.
The 2010
Deepwater Horizon
statutes, including higher liability caps under OPA, new regulations regarding offshore oil and gas drilling,
and a pilot inspection program for offshore facilities. However, several of these initiatives and
regulations have been or may be revised. For example, the U.S. Bureau of Safety and
Environmental Enforcement’s (“BSEE”) revised Production Safety Systems Rule (“PSSR”), effective
December 27, 2018, modified and relaxed certain environmental and safety protections under the 2016
PSSR. Additionally, the BSEE amended the Well Control Rule, effective July 15, 2019, which rolled back
certain reforms regarding the safety of drilling operations, and the former U.S. President Trump had
proposed leasing new sections of U.S. waters to oil and gas companies for offshore drilling. In January
2021, U.S. President Biden signed an executive order temporarily blocking new leases for oil and gas
drilling in federal waters. However, attorney generals from 13 states filed suit in March 2021 to lift the
executive order, and in June 2021, a federal judge in Louisiana granted a preliminary injunction against
the Biden administration, stating that the power to pause offshore oil and gas leases “lies solely with
Congress.” In August 2022, a federal judge in Louisiana sided with Texas Attorney General Ken Paxton,
along with the other 12 plaintiff states, by issuing a permanent injunction against the Biden Administration’s
moratorium on oil and gas leasing on federal public lands and offshore waters. With these rapid changes,
compliance with any new requirements of OPA and future legislation or regulations applicable to the
operation of our vessels could impact the cost of our operations and adversely affect our business.
OPA specifically permits individual states to impose their own liability regimes with regard to oil pollution
incidents occurring within their boundaries, provided they accept, at a minimum, the levels of liability
established under OPA and some states have enacted legislation providing for unlimited liability for oil
spills. Many U.S. states that border a navigable waterway have enacted environmental pollution laws that
impose strict liability on a person for removal costs and damages resulting from a discharge of oil or a
release of a hazardous substance. These laws may be more stringent than U.S. federal law. Moreover,
some states have enacted legislation providing for unlimited liability for discharge of pollutants within their
waters, although in some cases, states which have enacted this type of legislation have not yet issued
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implementing regulations defining vessel owners’ responsibilities under these laws. The Company intends
to comply with all applicable state regulations in the ports where the Company’s vessels call.
We currently maintain pollution liability coverage insurance in the amount of $1 billion per incident for each
of our vessels. If the damages from a catastrophic spill were to exceed our insurance coverage, it could
have an adverse effect on our business and results of operation.
Other United States Environmental Initiatives
The U.S. Clean Air Act of 1970 (including its amendments of 1977 and 1990) (“CAA”) requires the EPA to
promulgate standards applicable to emissions of volatile organic compounds and other air
contaminants. The CAA requires states to adopt State Implementation Plans, or SIPs, some of which
regulate emissions resulting from vessel loading and unloading operations which may affect our vessels.
The U.S. Clean Water Act (“CWA”) prohibits the discharge of oil, hazardous substances and ballast water
in U.S. navigable waters unless authorized by a duly-issued permit or exemption, and imposes strict liability
in the form of penalties for any unauthorized discharges. The CWA also imposes substantial liability for
the costs of removal, remediation and damages and complements the remedies available under OPA and
CERCLA. In 2015, the EPA expanded the definition of “waters of the United States” (“WOTUS”). In 2019
and 2020, the agencies repealed the prior WOTUS Rule and promulgated the Navigable Waters Protection
Rule (“NWPR”) which significantly reduced the scope and oversight of EPA and the Department of the
Army in traditionally non navigable waterways. On August 30, 2021, a federal district court in Arizona
vacated the NWPR and directed the agencies to replace the rule. On December 7, 2021, the EPA and the
Department of the Army proposed a rule that would reinstate the pre-2015 definition. On December 30,
2022, the EPA and the Department of Army announced the final WOTUS rule that largely reinstated the
pre-2015 definition.
The EPA and the USCG have also enacted rules relating to ballast water discharge, compliance with which
requires the installation of equipment on our vessels to treat ballast water before it is discharged or the
implementation of other port facility disposal arrangements or procedures at potentially substantial costs,
and/or otherwise restrict our vessels from entering U.S. Waters. The EPA will regulate these ballast water
discharges and other discharges incidental to the normal operation of certain vessels within United States
waters pursuant to the Vessel Incidental Discharge Act (“VIDA”), which was signed into law on December
4, 2018 and replaces the 2013 Vessel General Permit (“VGP”) program (which authorizes discharges
incidental to operations of commercial vessels and contains numeric ballast water discharge limits for most
vessels to reduce the risk of invasive species in U.S. waters, stringent requirements for exhaust gas
scrubbers, and requirements for the use of environmentally acceptable lubricants) and current Coast Guard
ballast water management regulations adopted under the U.S. National Invasive Species Act (“NISA”),
such as mid-ocean ballast exchange programs and installation of approved USCG technology for all
vessels equipped with ballast water tanks bound for U.S. ports or entering U.S. waters. VIDA establishes
a new framework for the regulation of vessel incidental discharges under Clean Water Act (CWA), requires
the EPA to develop performance standards for those discharges within two years of enactment, and
requires the U.S. Coast Guard to develop implementation, compliance, and enforcement regulations within
two years of EPA’s promulgation of standards. Under VIDA, all provisions of the 2013 VGP and USCG
regulations regarding ballast water treatment remain in force and effect until the EPA and U.S. Coast Guard
regulations are finalized. Non-military, non-recreational vessels greater than 79 feet in length must
continue to comply with the requirements of the VGP, including submission of a Notice of Intent (“NOI”) or
retention of a PARI form and submission of annual reports. We have submitted NOIs for our vessels where
required. Compliance with the EPA, U.S. Coast Guard and state regulations could require the installation
of ballast water treatment equipment on our vessels or the implementation of other port facility disposal
procedures at potentially substantial cost or may otherwise restrict our vessels from entering U.S. waters.
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European Union Regulations
In October 2009, the European Union amended a directive to impose criminal sanctions for illicit ship-
source discharges of polluting substances, including minor discharges, if committed with intent, recklessly
or with serious negligence and the discharges individually or in the aggregate result in deterioration of the
quality of water. Aiding and abetting the discharge of a polluting substance may also lead to criminal
penalties. The directive applies to all types of vessels, irrespective of their flag, but certain exceptions apply
to warships or where human safety or that of the ship is in danger. Criminal liability for pollution may result
in substantial penalties or fines and increased civil liability claims. Regulation (EU) 2015/757 of the
European Parliament and of the Council of 29 April 2015 (amending EU Directive 2009/16/EC) governs
the monitoring, reporting and verification of carbon dioxide emissions from maritime transport, and, subject
to some exclusions, requires companies with ships over 5,000 gross tonnage to monitor and report carbon
dioxide emissions annually, which may cause us to incur additional expenses.
The European Union has adopted several regulations and directives requiring, among other things, more
frequent inspections of high-risk ships, as determined by type, age, and flag as well as the number of times
the ship has been detained. The European Union also adopted and extended a ban on substandard ships
and enacted a minimum ban period and a definitive ban for repeated offenses. The regulation also provided
the European Union with greater authority and control over classification societies, by imposing more
requirements on classification societies and providing for fines or penalty payments for organizations that
failed to comply. Furthermore, the EU has implemented regulations requiring vessels to use reduced sulfur
content fuel for their main and auxiliary engines. The EU Directive 2005/33/EC (amending Directive
1999/32/EC) introduced requirements parallel to those in Annex VI relating to the sulfur content of marine
fuels. In addition, the EU imposed a 0.1% maximum sulfur requirement for fuel used by ships at berth in
the Baltic, the North Sea and the English Channel (the so called “SOx-Emission Control Area”). As of
January 2020, EU member states must also ensure that ships in all EU waters, except the SOx-Emission
Control Area, use fuels with a 0.5% maximum sulfur content.
On September 15, 2020, the European Parliament voted to include greenhouse gas emissions from the
maritime sector in the European Union’s carbon market, the EU Emissions Trading System (“EU ETS”).
On July 14, 2021, the European Parliament formally proposed its plan, which would involve gradually
including the maritime sector from 2023 and phasing the sector in over three-year period. This will require
shipowners to buy permits to cover these emissions. The Environment Council adopted a general
approach on the proposal in June 2022. On December 18, 2022, the Environmental Council and European
Parliament agreed to include maritime shipping emissions within the scope of the EU ETS on a gradual
introduction of obligations for shipping companies to surrender allowances: 40% for verified emissions from
2024, 70% for 2025 and 100% for 2026. Most large vessels will be included in the scope of the EU ETS
from the start. Big offshore vessels of 5,000 gross tonnage and above will be included in the 'MRV' on the
monitoring, reporting and verification of CO2 emissions from maritime transport regulation from 2025 and
in the EU ETS from 2027.
EU Ship Recycling Regulation
The Regulation is mostly aligned with the Hong Kong Convention on Ship Recycling, mentioned earlier
and aims quick ratification of the Convention. However, it sets some additional requirements and has been
into force since 2015 for new ships and 2020 for existing ships. It concerns vessels over 500 GT flying the
flag of a member state or vessels flying the flag of a 3
rd
Our fleet fully complies with this regulation. Our fleet’s Inventories of Hazardous Materials preparation,
certification and continuous maintenance have resulted in a significant cost to the Company.
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International Labour Organization
The International Labour Organization (the “ILO”) is a specialized agency of the UN that has adopted the
Maritime Labor Convention 2006 (“MLC 2006”). A Maritime Labor Certificate and a Declaration of Maritime
Labor Compliance is required to ensure compliance with the MLC 2006 for all ships that are 500 gross
tonnage or over and are either engaged in international voyages or flying the flag of a Member and
operating from a port, or between ports, in another country. All of our vessels are certified under the
Maritime Labor Convention 2006 (“MLC 2006”)
Greenhouse Gas Regulation
Currently, the emissions of greenhouse gases from international shipping are not subject to the Kyoto
Protocol to the United Nations Framework Convention on Climate Change, which entered into force in 2005
and pursuant to which adopting countries have been required to implement national programs to reduce
greenhouse gas emissions with targets extended through 2020. International negotiations are continuing
with respect to a successor to the Kyoto Protocol, and restrictions on shipping emissions may be included
in any new treaty. In December 2009, more than 27 nations, including the U.S. and China, signed the
Copenhagen Accord, which includes a non-binding commitment to reduce greenhouse gas emissions. The
2015 United Nations Climate Change Conference in Paris resulted in the Paris Agreement, which entered
into force on November 4, 2016 and does not directly limit greenhouse gas emissions from ships. The U.S.
initially entered into the agreement, but on June 1, 2017, the former U.S. President Trump announced
that the United States intends to withdraw from the Paris Agreement, and the withdrawal became effective
on November 4, 2020. On January 20, 2021, U.S. President Biden signed an executive order to rejoin the
Paris Agreement. It will take 30 days for the United States to rejoin.
At MEPC 70 and MEPC 71, a draft outline of the structure of the initial strategy for developing a
comprehensive IMO strategy on reduction of greenhouse gas emissions from ships was approved. In
accordance with this roadmap, in April 2018, nations at the MEPC 72 adopted an initial strategy to reduce
greenhouse gas emissions from ships. The initial strategy identifies “levels of ambition” to reducing
greenhouse gas emissions, including (1) decreasing the carbon intensity from ships through
implementation of further phases of the EEDI for new ships; (2) reducing carbon dioxide emissions per
transport work, as an average across international shipping, by at least 40% by 2030, pursuing efforts
towards 70% by 2050, compared to 2008 emission levels; and (3) reducing the total annual greenhouse
emissions by at least 50% by 2050 compared to 2008 while pursuing efforts towards phasing them out
entirely. The initial strategy notes that technological innovation, alternative fuels and/or energy sources for
international shipping will be integral to achieve the overall ambition. These regulations could cause us to
incur additional substantial expenses.
The EU made a unilateral commitment to reduce overall greenhouse gas emissions from its member states
from 20% of 1990 levels by 2020. The EU also committed to reduce its emissions by 20% under the Kyoto
Protocol’s second period from 2013 to 2020. Starting in January 2018, large ships over 5,000 gross
tonnage calling at EU ports are required to collect and publish data on carbon dioxide emissions and other
information. As previously discussed, regulations relating to the inclusion of greenhouse gas emissions
from the maritime sector in the European Union’s carbon market are also forthcoming.
Any passage of climate control legislation or other regulatory initiatives by the IMO, the EU, the U.S. or
other countries where we operate, or any treaty adopted at the international level to succeed the Kyoto
Protocol or Paris Agreement, that restricts emissions of greenhouse gases could require us to make
significant financial expenditures which we cannot predict with certainty at this time. Even in the absence
of climate control legislation, our business may be indirectly affected to the extent that climate change may
result in sea level changes or certain weather events.
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Vessel Security Regulations
Since the terrorist attacks of September 11, 2001 in the United States, there have been a variety of
initiatives intended to enhance vessel security such as the U.S. Maritime Transportation Security Act of
2002 (“MTSA”). To implement certain portions of the MTSA, the USCG issued regulations requiring the
implementation of certain security requirements aboard vessels operating in waters subject to the
jurisdiction of the United States and at certain ports and facilities, some of which are regulated by the EPA.
Similarly, Chapter XI-2 of the SOLAS Convention imposes detailed security obligations on vessels and port
authorities and mandates compliance with the International Ship and Port Facility Security Code (“the ISPS
Code”). The ISPS Code is designed to enhance the security of ports and ships against terrorism. To trade
internationally, a vessel must attain an International Ship Security Certificate (“ISSC”) from a recognized
security organization approved by the vessel’s flag state. Ships operating without a valid certificate may be
detained, expelled from, or refused entry at port until they obtain an ISSC. The various requirements, some
of which are found in the SOLAS Convention, include, for example, on-board installation of automatic
identification systems to provide a means for the automatic transmission of safety-related information from
among similarly equipped ships and shore stations, including information on a ship’s identity, position,
course, speed and navigational status; on-board installation of ship security alert systems, which do not
sound on the vessel but only alert the authorities on shore; the development of vessel security plans; ship
identification number to be permanently marked on a vessel’s hull; a continuous synopsis record kept
onboard showing a vessel's history including the name of the ship, the state whose flag the ship is entitled
to fly, the date on which the ship was registered with that state, the ship's identification number, the port at
which the ship is registered and the name of the registered owner(s) and their registered address;
and compliance with flag state security certification requirements.
The USCG regulations, intended to align with international maritime security standards, exempt non-U.S.
vessels from MTSA vessel security measures, provided such vessels have on board a valid ISSC that
attests to the vessel’s compliance with the SOLAS Convention security requirements and the ISPS Code.
Future security measures could have a significant financial impact on us. We intend to comply with the
various security measures addressed by MTSA, the SOLAS Convention and the ISPS Code. The cost of
vessel security measures has also been affected by the escalation in the frequency of acts of piracy against
ships, notably off the coast of Somalia, including the Gulf of Aden and Arabian Sea area. Substantial loss
of revenue and other costs may be incurred as a result of detention of a vessel or additional security
measures, and the risk of uninsured losses could significantly affect our business. Costs are incurred in
taking additional security measures in accordance with Best Management Practices to Deter Piracy,
notably those contained in the BMP5 industry standard.
Inspection by Flag administration and Classification Societies
The flag represents the nationality of the ship, showing that it’s under the control of the registered country
and must comply with international and maritime law of it. The flag is required to take measures to ensure
safety at sea and should verify that ships under its authority, conform relevant international standards, in
regard to construction, design, equipment and manning of ships, through on board physical inspections.
The hull and machinery of every commercial vessel must be classed by a classification society authorized
by its country of registry. The classification society certifies that a vessel is safe and seaworthy in
accordance with the applicable rules and regulations of the country of registry of the vessel and SOLAS.
Most insurance underwriters make it a condition for insurance coverage and lending that a vessel be
certified “in class” by a classification society which is a member of the International Association of
Classification Societies, the IACS. The IACS has adopted harmonized Common Structural Rules, or “the
Rules”, which apply to oil tankers and bulk carriers contracted for construction on or after July 1, 2015. The
Rules attempt to create a level of consistency between IACS Societies. All of our vessels are certified as
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being “in class” by all the applicable Classification Societies (e.g., American Bureau of Shipping, Lloyd's
Register of Shipping).
A vessel must undergo annual surveys, intermediate surveys, drydockings and special surveys. In lieu of
a special survey, a vessel’s machinery may be on a continuous survey cycle, under which the machinery
would be surveyed periodically over a five-year period. Every vessel should have a minimum of two
examinations of the outside of a vessel's bottom and related items during each five-year special survey
period. One such examination is to be carried out in conjunction with the Special Periodical Survey. In all
cases, the interval between any two such examinations is not to exceed 36 months. In all cases, the interval
between any two such examinations is not to exceed 36 months. If any vessel does not maintain its class
and/or fails any annual survey, intermediate survey, drydocking or special survey, the vessel will be unable
to carry cargo between ports and will be unemployable and uninsurable which could cause us to be in
violation of certain covenants in our loan agreements. Any such inability to carry cargo or be employed, or
any such violation of covenants, could have a material adverse impact on our financial condition and results
of operations.
Risk of Loss and Liability Insurance
General
The operation of any cargo vessel includes risks such as mechanical failure, physical damage, collision,
property loss, cargo loss or damage and business interruption due to political circumstances in foreign
countries, piracy incidents, hostilities and labor strikes. In addition, there is always an inherent possibility
of marine disaster, including oil spills and other environmental mishaps, and the liabilities arising from
owning and operating vessels in international trade. OPA, which imposes virtually unlimited liability
upon shipowners, operators and bareboat charterers of any vessel trading in the exclusive economic
zone of the United States for certain oil pollution accidents in the United States, has made liability insurance
more expensive for shipowners and operators trading in the United States market. We carry insurance
coverage as customary in the shipping industry. However, not all risks can be insured, specific claims may
be rejected, and we might not be always able to obtain adequate insurance coverage at reasonable rates.
While we maintain hull and machinery insurance, war risks insurance, protection and indemnity cover and
freight, demurrage and defense cover for our operating fleet in amounts that we believe to be prudent to
cover normal risks in our operations, we may not be able to achieve or maintain this level of coverage
throughout a vessel's useful life. Furthermore, while we believe that our present insurance coverage is
adequate, not all risks can be insured, and there can be no guarantee that any specific claim will be paid,
or that we will always be able to obtain adequate insurance coverage at reasonable rates.
Hull Machinery and War Risks Insurance
We maintain marine hull and machinery and war risks insurance, which cover, among other marine risks,
the risk of actual or constructive total loss, for all of our vessels. Our vessels are each covered up to at
least fair market value with deductibles ranging to a maximum of $100,000 per vessel per incident for
Panamax, Kamsarmax and Post-Panamax vessels and $150,000 per vessel per incident for Capesize and
Newcastlemax vessels.
Protection and Indemnity Insurance
Protection and indemnity insurance is provided by mutual protection and indemnity associations, or “PI
Associations,” and covers our third-party liabilities in connection with our shipping activities. This includes
third-party liability and other related expenses of injury or death of crew, passengers and other third parties,
loss or damage to cargo, claims arising from collisions with other vessels, damage to other third-party
property, pollution arising from oil or other substances, and salvage, towing and other related costs,
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including wreck removal. Protection and indemnity insurance is a form of mutual indemnity insurance,
extended by protection and indemnity mutual associations, or “clubs.”
Our current protection and indemnity insurance coverage for pollution is $1 billion per vessel per incident.
The 13 PI Associations that comprise the International Group insure approximately 90% of the world’s
commercial tonnage and have entered into a pooling agreement to reinsure each association’s
liabilities. The International Group’s website states that the Pool provides a mechanism for sharing all
claims in excess of US$10 million up to, currently, approximately US$8.2 billion. As a member of a PI
Association, which is a member of the International Group, we are subject to calls payable to the
associations based on our claim records as well as the claim records of all other members of the individual
associations and members of the shipping pool of PI Associations comprising the International
Group. Our vessels may be subject to supplemental calls which are based on estimates of premium
income and anticipated and paid claims. Such estimates are adjusted each year by the Board of Directors
of the PI Association until the closing of the relevant policy year, which generally occurs within three years
from the end of the policy year. Supplemental calls, if any, are expensed when they are announced and
according to the period they relate to.
C. Organizational structure
Diana Shipping Inc. is the sole owner of all of the issued and outstanding shares of the subsidiaries listed
in Exhibit 8.1 to this annual report.
D. Property, plants and equipment
Since October 8, 2010, DSS owns the land and the building where we have our principal corporate offices
in Athens, Greece. In addition, in December 2014, DSS acquired a plot of land jointly with two other related
entities from unrelated individuals and in November 2021 acquired an additional part of this land owned by
one of our related parties. This plot is in the same area as our principal offices. Other than this interest in
real property, our only material properties are the vessels in our fleet, owned and bareboat chartered-in.
Item 4A. Unresolved Staff Comments
None.
Item 5. Operating and Financial Review and Prospects
The following management's discussion and analysis should be read in conjunction with our historical
consolidated financial statements and their notes included elsewhere in this annual report. This discussion
contains forward-looking statements that reflect our current views with respect to future events and financial
performance. Our actual results may differ materially from those anticipated in these forward-looking
statements as a result of certain factors, such as those set forth in the section entitled “Risk Factors” and
elsewhere in this annual report.
A. Operating results
Factors Affecting Our Results of Operations
We believe that our results of operations are affected by the following factors:
(1) Average number of vessels is the number of vessels that constituted our fleet for the relevant
period, as measured by the sum of the number of days each vessel was a part of our fleet during
the period divided by the number of calendar days in the period.
69
(2) Ownership days are the aggregate number of days in a period during which each vessel in our
fleet has been owned by us. Ownership days are an indicator of the size of our fleet over a
period and affect both the amount of revenues and the amount of expenses that we record
during a period.
(3) Available days are the number of our ownership days less the aggregate number of days that
our vessels are off-hire due to scheduled repairs or repairs under guarantee, vessel upgrades
or special surveys and the aggregate amount of time that we spend positioning our vessels for
such events. The shipping industry uses available days to measure the number of days in a
period during which vessels should be capable of generating revenues.
(4) Operating days are the number of available days in a period less the aggregate number of days
that our vessels are off-hire due to any reason, including unforeseen circumstances. The
shipping industry uses operating days to measure the aggregate number of days in a period
during which vessels actually generate revenues.
(5) We calculate fleet utilization by dividing the number of our operating days during a period by
the number of our available days during the period. The shipping industry uses fleet utilization
to measure a company's efficiency in finding suitable employment for its vessels and minimizing
the amount of days that its vessels are off-hire for reasons other than scheduled repairs or
repairs under guarantee, vessel upgrades, special surveys or vessel positioning for such
events.
(6) Time charter equivalent rates, or TCE rates, are defined as our time charter revenues less
voyage expenses during a period divided by the number of our available days during the period,
which is consistent with industry standards. Voyage expenses include port charges, bunker
(fuel) expenses, canal charges and commissions. TCE rate is a non-GAAP measure, and
management believes it is useful to investors because it is a standard shipping industry
performance measure used primarily to compare daily earnings generated by vessels on time
charters with daily earnings generated by vessels on voyage charters, because charter hire
rates for vessels on voyage charters are generally not expressed in per day amounts while
charter hire rates for vessels on time charters are generally expressed in such amounts.
(7) Daily vessel operating expenses, which include crew wages and related costs, the cost of
insurance, expenses relating to repairs and maintenance, the costs of spares and consumable
stores, tonnage taxes and other miscellaneous expenses, are calculated by dividing vessel
operating expenses by ownership days for the relevant period.
The following table reflects such factors for the periods indicated:
70
As of and for the
Year Ended December 31,
2022
2021
2020
Fleet Data:
Average number of vessels (1)
35.4
36.6
40.8
Number of vessels at year-end
42.0
33.0
40.0
Weighted average age of vessels at year-end (in years)
10.2
10.4
10.2
Ownership days (2)
12,924
13,359
14,931
Available days (3)
12,449
13,239
14,318
Operating days (4)
12,306
13,116
14,020
Fleet utilization (5)
98.9%
99.1%
97.9%
Average Daily Results:
Time charter equivalent (TCE) rate (6)
$
22,735
$
15,759
$
10,910
Daily vessel operating expenses (7)
5,574
5,596
5,750
The following table reflects the calculation of our TCE rates for the periods presented:
Year Ended December 31,
2022
2021
2020
(in thousands of U.S. dollars, except for
TCE rates, which are expressed in U.S.
dollars, and available days)
Time charter revenues
$
289,972
$
214,203
$
169,733
Less: voyage expenses
(6,942)
(5,570)
(13,525)
Time charter equivalent revenues
$
283,030
$
208,633
$
156,208
Available days
12,449
13,239
14,318
Time charter equivalent (TCE) rate
$
22,735
$
15,759
$
10,910
Time Charter Revenues
Our revenues are driven primarily by the number of vessels in our fleet, the number of days during which
our vessels operate and the amount of daily charter hire rates that our vessels earn under charters, which,
in turn, are affected by a number of factors, including:
●
the duration of our charters;
●
our decisions relating to vessel acquisitions and disposals;
●
the amount of time that we spend positioning our vessels;
●
the amount of time that our vessels spend in drydock undergoing repairs;
●
maintenance and upgrade work;
●
the age, condition and specifications of our vessels;
●
levels of supply and demand in the dry bulk shipping industry.
71
Vessels operating on time charters for a certain period of time provide more predictable cash flows over
that period of time but can yield lower profit margins than vessels operating in the spot charter market
during periods characterized by favorable market conditions. Vessels operating in the spot charter market
generate revenues that are less predictable but may enable their owners to capture increased profit
margins during periods of improvements in charter rates although their owners would be exposed to the
risk of declining charter rates, which may have a materially adverse impact on financial performance. As
we employ vessels on period charters, future spot charter rates may be higher or lower than the rates at
which we have employed our vessels on period charters. Our time charter agreements subject us to
counterparty risk. In depressed market conditions, charterers may seek to renegotiate the terms of their
existing charter parties or avoid their obligations under those contracts. Should a counterparty fail to honor
their obligations under agreements with us, we could sustain significant losses which could have a material
adverse effect on our business, financial condition, results of operations and cash flows. Revenues derived
from time charter agreements in 2022 were increased compared to previous years, due to the significant
increase in charter rates, despite the decrease in the size of our fleet, evident in the decrease of the average
number of vessels. In 2023, we expect the average number of vessels to increase, as currently our fleet
consists of 41 vessels, however, due to the decrease of the time charter rates observed in the current
market, we expect our revenues in 2023 to decrease compared to 2022.
Voyage Expenses
We incur voyage expenses that mainly include commissions because all of our vessels are employed under
time charters that require the charterer to bear voyage expenses such as bunkers (fuel oil), port and canal
charges. Although the charterer bears the cost of bunkers, we also have bunker gain or loss deriving from
the price differences of bunkers. When a vessel is delivered to a charterer, bunkers are purchased by the
charterer and sold back to us on the redelivery of the vessel. Bunker gain, or loss, results when a vessel
is redelivered by her charterer and delivered to the next charterer at different bunker prices, or quantities.
We currently pay commissions ranging from 4.75% to 5.00% of the total daily charter hire rate of each
charter to unaffiliated ship brokers, in-house brokers associated with the charterers, depending on the
number of brokers involved with arranging the charter. In addition, we pay a commission to DWM and to
DSS for those vessels for which they provide commercial management services. The commissions paid to
DSS are eliminated from our consolidated financial statements as intercompany transactions. For 2023,
we expect our voyage expenses to decrease compared to 2022, due to the expected decrease in revenues.
The effect of bunker prices cannot be determined, as a gain or loss from bunkers results mainly from the
difference in the value of bunkers paid by the Company when the vessel is redelivered to the Company
from the charterer under the vessel’s previous time charter agreement and the value of bunkers sold by
the Company when the vessel is delivered to a new charterer.
Vessel Operating Expenses
Vessel operating expenses include crew wages and related costs, the cost of insurance, expenses relating
to repairs and maintenance, the cost of spares and consumable stores, tonnage taxes, environmental plan
costs and HSQ and vetting. Our vessel operating expenses generally represent fixed costs. Vessel
operating expenses have been reduced since 2021 due to the decrease in ownership days. For 2023, we
expect our operating expenses to increase compared to 2022, as a result of the average increase of the
size of the fleet compared to 2022.
Vessel Depreciation
The cost of our vessels is depreciated on a straight-line basis over the estimated useful life of each vessel.
Depreciation is based on the cost of the vessel less its estimated salvage value. We estimate the useful
life of our dry bulk vessels to be 25 years from the date of initial delivery from the shipyard, which we believe
is common in the dry bulk shipping industry. Furthermore, we estimate the salvage values of our vessels
72
based on historical average prices of the cost of the light-weight ton of vessels being scrapped. During
2021, we sold four vessels in January, March and July of 2021 and in November 2021 we contributed to
OceanPal the shares of three ship-owning companies, owning the vessels
Calipso
,
Protefs
Salt Lake
City
. Three of the vessels sold in 2021 were held for sale since 2020, when we agreed to sell them. In
2020, we had agreed to sell two more vessels, for which their sales were concluded in 2020. Following all
these transactions, vessel depreciation decreased from 2020 to 2021 and increased again in 2022, as we
took delivery of ten vessels and sold one. As of the date of this annual report, we have taken delivery of
one Ultramax vessel, we expect to take delivery of one additional Ultramax vessel and we sold two vessels.
For 2023, we expect depreciation expense to increase due to the increase in the number of vessels in our
fleet.
General and Administrative Expenses
We incur general and administrative expenses which include our onshore related expenses such as payroll
expenses of employees, executive officers, directors and consultants, compensation cost of restricted
stock awarded to senior management and non-executive directors, traveling, promotional and other
expenses of the public company, such as legal and professional expenses and other general expenses.
During the last three years, our general and administrative expenses are at the same level with the
exception of 2020 which increased due to an accelerated vesting of restricted stocks of board members
who resigned and the shares which were awarded to them fully vested on the date of their resignation. For
2023, we expect our general and administrative expenses to increase, due to anticipated increases in
payroll and other office expenses. General and administrative expenses are not affected by the size of the
fleet. However, they are affected by the exchange rate of Euro to US Dollars, as about half of our
administrative expenses are in Euro.
Interest and Finance Costs
We incur interest expense and financing costs in connection with vessel-specific debt, senior unsecured
bond and finance liabilities. As of December 31, 2022 our aggregate debt amounted to $530.1 million and
our finance liabilities amounted to $142.4 million. While our bond and finance liabilities have a fixed interest
rate, the loan agreements with our banks have a floating rate based on LIBOR or term SOFR plus a margin.
During 2022, we entered into a new loan agreement based on term SOFR, and we will need to transition
our existing loan agreements from LIBOR to an alternative reference rate prior to June 2023. As of the date
of this report, we do not have any agreements to mitigate our exposure in interest rates and we have not
made any agreements with our banks to replace LIBOR, but we are in discussions to do so. To date, we
have selected term SOFR to replace LIBOR but, we are not in a position to determine the effect of interest
rates on our results of operations and cash flows. Interest rates have started increasing since the beginning
of 2022, continue to increase in 2023 and taking into account the increase in the outstanding amount of
debt, we expect interest and finance costs in 2023 to increase. We expect to manage the exposure in
interest rates through our regular operating and financing activities.
Lack of Historical Operating Data for Vessels before Their Acquisition
Although vessels are generally acquired free of charter, we have acquired (and may in the future acquire)
some vessels with time charters. It is rare in the shipping industry for the last charterer of the vessel in the
hands of the seller to continue as the first charterer of the vessel in the hands of the buyer. In most cases,
when a vessel is under time charter and the buyer wishes to assume that charter, the vessel cannot be
acquired without the charterer’s consent and the buyer entering into a separate direct agreement (called a
“novation agreement”) with the charterer to assume the charter. The purchase of a vessel itself does not
transfer the charter because it is a separate service agreement between the vessel owner and the
charterer.
73
Where we identify any intangible assets or liabilities associated with the acquisition of a vessel, we record
all identified assets or liabilities at fair value. Fair value is determined by reference to market data. We
value any asset or liability arising from the market value of the time charters assumed when a vessel is
acquired. The amount to be recorded as an asset or liability at the date of vessel delivery is based on the
difference between the current fair market value of the charter and the net present value of future
contractual cash flows. When the present value of the time charter assumed is greater than the current
fair market value of such charter, the difference is recorded as prepaid charter revenue. When the opposite
situation occurs, any difference, capped to the vessel’s fair value on a charter-free basis, is recorded as
deferred revenue. Such assets and liabilities, respectively, are amortized as a reduction of, or an increase
in, revenue over the period of the time charter assumed.
When we purchase a vessel and assume or renegotiate a related time charter, among others, we must
take the following steps before the vessel will be ready to commence operations:
●
obtain the charterer’s consent to us as the new owner;
●
obtain the charterer’s consent to a new technical manager;
●
in some cases, obtain the charterer’s consent to a new flag for the vessel;
●
arrange for a new crew for the vessel, and where the vessel is on charter, in some cases, the
crew must be approved by the charterer;
●
replace all hired equipment on board, such as gas cylinders and communication equipment;
●
negotiate and enter into new insurance contracts for the vessel through our own insurance
brokers;
●
register the vessel under a flag state and perform the related inspections in order to obtain new
trading certificates from the flag state;
●
implement a new planned maintenance program for the vessel; and
●
ensure that the new technical manager obtains new certificates for compliance with the safety
and vessel security regulations of the flag state.
When we charter a vessel pursuant to a long-term time charter agreement with varying rates, we recognize
revenue on a straight-line basis, equal to the average revenue during the term of the charter.
The following discussion is intended to help you understand how acquisitions of vessels affect our business
and results of operations.
Our business is mainly comprised of the following elements:
●
employment and operation of our vessels; and
●
management of the financial, general and administrative elements involved in the conduct of
our business and ownership of our vessels.
The employment and operation of our vessels mainly require the following components:
●
vessel maintenance and repair;
74
●
crew selection and training;
●
vessel spares and stores supply;
●
contingency response planning;
●
onboard safety procedures auditing;
●
accounting;
●
vessel insurance arrangement;
●
vessel chartering;
●
vessel security training and security response plans (ISPS);
●
obtaining of ISM certification and audit for each vessel within the six months of taking over a
vessel;
●
vessel hiring management;
●
vessel surveying; and
●
vessel performance monitoring.
The management of financial, general and administrative elements involved in the conduct of our business
and ownership of our vessels mainly requires the following components:
●
management of our financial resources, including banking relationships, i.e., administration of
bank loans and bank accounts;
●
management of our accounting system and records and financial reporting;
●
administration of the legal and regulatory requirements affecting our business and assets; and
●
management of the relationships with our service providers and customers.
The principal factors that affect our profitability, cash flows and shareholders’ return on investment include:
●
rates and periods of charter hire;
●
levels of vessel operating expenses;
●
depreciation expenses;
●
financing costs;
●
the effects of COVID-19;
●
the war in the Ukraine;
●
inflation, and
75
●
fluctuations in foreign exchange rates.
Results of Operations
Year ended December 31, 2022 compared to the year ended December 31, 2021
Time charter revenues.
2022, compared to $214.2 million in 2021. The increase in time charter revenues was due to increased
average time charter rates that the Company achieved for its vessels, which increased our TCE rate to
$22,735 in 2022 from $15,759 in 2021, representing a 44% increase. This increase was partly offset by
decreased operating days during 2022, as compared to last year. Operating days in 2022 were 12,306
compared to 13,116 in 2021, resulting from the decrease in our fleet due to the sale of vessels and
increased drydock and off hire days in 2022 compared to last year.
Voyage expenses.
compared to $5.6 in 2021. This increase was mainly due to commissions, which is the main part of voyage
expenses, and which in 2022 increased to $14.4 million compared to $10.8 million in 2021 The increase
was partly offset by increased gain on bunkers amounting to $8.1 million in 2022 compared to $6.0 million
in 2021. The gain on bunkers was mainly due to the difference in the price of bunkers paid by the Company
to the charterers on the redelivery of the vessels from the charterers under the previous charter party
agreement and the price of bunkers paid by charterers to the Company on the delivery of the same vessels
to their charterers under new charter party agreements.
Vessel operating expenses.
Vessel operating expenses decreased by $2.8 million, or 4%, to $72.0 million
in 2022 compared to $74.8 million in 2021. The decrease in operating expenses is attributable to the
decrease in ownership days in 2022, as a result of the sale of vessels last year and OceanPal’s spinoff
and the sale of one additional vessel in 2022. The acquisition of eight vessels in the fourth quarter of 2022
was not enough to balance the size of the fleet. Operating expenses also decreased due to decreased
crew costs, spares and other consumables. The decrease was partly offset by increased insurance costs
due to increased premiums, taxes and environmental and health, safety and vetting expenses. Total daily
operating expenses were $5,574 in 2022 compared to $5,596 in 2021.
Depreciation and amortization of deferred charges. Depreciation and amortization of deferred charges
increased by $2.8 million, or 7%, to $43.3 million in 2022, compared to $40.5 million in 2021. This increase
was due to the acquisition of ten vessels during 2022, as noted above, and was partly offset due to the
sale of vessels in 2021, the vessels contributed to OceanPal in a spinoff which were removed from the fleet
in November 2021 and the sale of vessel
Baltimore
although her sale was completed in September 2022. A further increase incurred due to increased
amortization of deferred cost as a result of the drydock cost incurred for twelve vessels having drydock
surveys in 2022 and four in 2021.
General and administrative expenses
. General and admini
strati
ve expenses increased by $0.2 million, or
1%, to $29.4 million in 2022 compared to $29.2 million in 2021. The increase was mainly due to the
accelerated vesting of restricted shares of a board member who resigned in 2022. The increase was partially
offset due to decreased payroll cost and directors’ and officers’ insurance in 2022, as compared to 2021.
Management fees to related party.
to $0.5 million in 2022 compared to $1.4 million in 2021. The decrease was attributable to decreased average
number of vessels managed by DWM in 2022 compared to 2021, due to the contribution, in November 2021,
of three vessel-owning companies to OceanPal, which were all managed by DWM. The decrease was
partially offset due to the acquisition of three Ultramax vessels, in the fourth quarter of 2022, whose
management was assigned to DWM.
76
Gain on sale of vessels.
resulted from the sale of
Baltimore
in 2022 compared to $1.4 million in 2021 which resulted from the sale of
Naias
Insurance recoveries
. Insurance recoveries amounted to $1.8 million in 2022 and consisted of amounts
received from our insurers for claims covered under the insurance policies during 2022. There was no
comparative amount received last year.
Interest expense and finance costs.
$27.4 million in 2022 compared to $20.2 million in 2021. The increase was primarily attributable to increased
average outstanding balance of debt and finance liabilities in 2022, resulting from a new loan agreement
to finance the acquisition of nine Ultramax vessels and the sale and leaseback agreements we entered
into, in 2022. A further increase was also derived from increased average interest rates resulting from our
loan agreements, having a variable interest rate. In 2022, the weighted average interest rate of our secured
loan agreements was 3.8% compared to 2.45% in 2021.
Interest and other income
. Interest and other income increased by $2.5 million, or 1250%, to $2.7 million
in 2022 compared to $0.2 million in 2021. The increase is mainly attributable to increased deposit rates in
2022 compared to 2021. A further increase derives from dividend income amounting to $0.9 million, from
the Company’s investment in OceanPal’s Series C and Series D Preferred stock compared to $0.1 million
in 2021.
Loss on extinguishment of debt.
In 2022, loss on extinguishment of debt decreased by $0.6, or 60% to $0.4
million and consisted of financing costs written off as a result of the early prepayment of the outstanding
balances of loans attributed to the one vessel sold and three vessels refinanced in sale and leaseback
transactions in 2022. In 2021, loss on extinguishment of debt amounted to $1.0 million and consisted of
the prepayment in full of four loan agreements refinanced by another bank and the redemption of our $100
million bond in September 2021.
Gain on spin-off of OceanPal Inc.
between the fair value of the assets contributed to OceanPal, amounting to $48.1 million, and their carrying
value consisting of $30.3 million of vessel cost and $0.5 million of unamortized deferred costs and $2.0
million of assets contributed.
Gain on dividend distribution
. The gain on dividend distribution represents the gain recognized in 2022
upon the distribution of the 25,000 Convertible Series D Preferred Shares of OceanPal Inc. as a non cash
dividend to the Company's shareholders, being the difference between the carrying value and the fair value
of the Series D Preferred Shares on the date of the dividend declaration.
Gain/(loss) from equity method investments.
In 2022, gain on equity method investments, amounted to
$0.9 million, compared to a loss of $0.3 million in 2021 and relates to the result in each year of our 50%
interest in DWM, attributed to us.
Year ended December 31, 2021 compared to the year ended December 31, 2020
For a discussion of the year ended December 31, 2021 compared to the year ended December 31, 2020,
please refer to “Item 5. Operating and Financial Review and Prospects” in our Annual Report on Form 20-
F, for the year ended December 31, 2021 filed with the SEC on April 27, 2022.
B. Liquidity and Capital Resources
We finance our capital requirements with cash flow from operations, equity contributions from
shareholders, long-term bank debt, finance liabilities and senior unsecured bonds. Our main uses of funds
77
have been capital expenditures for the acquisition and construction of new vessels, expenditures incurred
in connection with ensuring that our vessels comply with international and regulatory standards,
repayments of bank loans, repurchase of our common stock and payment of dividends.
As of December 31, 2022 and 2021, working capital, which is current assets minus current liabilities,
including the current portion of long-term debt and finance liabilities, amounted to $9.0 million and $60.5
million, respectively. The decrease in working capital is mainly due to a balloon payment amounting to
$43.8 million under one of our loan agreements which is due in 2023. In 2022, we also entered into a new
loan agreement with Nordea to finance the acquisition of nine new Ultramax vessels and four sale and
leaseback agreements which increased the annual repayment installments. In addition, the Company’s
liabilities increased, due to the deliveries of eight vessels in the fourth quarter of 2022 and the increased
need for predelivery and other costs relating to their acquisition.
Cash and cash equivalents, including restricted cash, was $97.4 million on December 31, 2022 and $126.8
million as of December 31, 2021. Restricted cash mainly consists of the minimum liquidity requirements
under our loan facilities. As of December 31, 2022 and 2021, restricted cash amounted to $21.0 million
and $16.5 million, respectively. We consider highly liquid investments such as time deposits, certificates of
deposit and their equivalents with an original maturity of up to about three months to be cash equivalents.
Time deposits with maturity above three months are removed from cash and cash equivalents and are
separately presented as time deposits. In 2022, the time deposits above three months amounted to $46.5
million. Cash and cash equivalents are primarily held in U.S. dollars.
Net Cash Provided by Operating Activities
Net cash provided by operating activities increased by $69.2 million, or 77%. In 2022, net cash provided
by operating activities was $158.9 million compared to net cash provided by operating activities of
$89.7 million in 2021. This increase in cash from operating activities was attributable to increased revenues
as a result of better rates compared to 2021. This increase was partly offset by increased dry-docking costs
incurred for twelve vessels in 2022 compared to four vessels in 2021. Cash provided by operating activities
was also affected by OceanPal’s spin-off in 2021 which resulted in a gain of $15.3 million.
Net Cash Used in Investing Activities
Net cash used in investing activities was $273.1 million for 2022, which consists of $230.3 million paid for
vessel acquisitions and improvements due to new regulations; $4.4 million of proceeds from the sale of
one vessel in 2022; $46.5 million investment in time deposits with maturity above three months; and $0.7
million relating to the acquisition of equipment.
Net cash provided by investing activities was $13.4 million for 2021, which consists of $17.4 million paid
for vessel acquisitions and improvements due to new regulations; $33.7 million of proceeds from the sale
of four vessels in 2021; $0.4 million investment in DWM; $1.6 million relating to the acquisition of property
and equipment and $1 million contributed to OceanPal inc. in relation to the spin-off transaction.
Net Cash Provided by Financing Activities
Net cash provided by financing activities was $84.9 million for 2022, which consists of $275.1 million
proceeds from issuance of long term debt and finance liabilities; $102.8 million of indebtedness and finance
liabilities that we repaid; $5.8 million and $79.8 million of cash dividends paid on our preferred and common
stock, respectively; $3.8 million paid for repurchase of common stock; $5.3 million proceeds from issuance
of common stock; and $3.3 million of finance costs paid in relation to new loan agreements and finance
liabilities.
78
Net cash used in financing activities was $59.2 million for 2021, which consists of $101.3 million proceeds
from issuance of long term debt and bond; $93.2 million of indebtedness that we repaid; $5.8 million and
$8.8 million of dividends paid on our Series B Preferred Stock and common stock, respectively; $45.4
million paid for repurchase of common stock; and $7.6 million of finance costs paid in relation to new loan
agreements and bond.
For a detailed discussion of cash flows for the year ended December 31, 2021 compared to the year ended
December 31, 2020 please see “Item 5. Operating and Financial Review and Prospects - B. Liquidity and
Capital Resources” included in our 2021 Annual Report filed on Form 20-F with the SEC on April 27, 2022.
Capital Expenditures
We make capital expenditures in connection with vessel acquisitions and constructions, which we finance
with cash from operations, debt under loan facilities at terms acceptable to us, sale and leaseback
agreements and with funds from equity issuances.
As of the date of this annual report, we have taken delivery of one Ultramax dry bulk vessel, under our
agreement with Sea Trade and issued 2,033,613 common shares to Sea Trade. We funded part of the
purchase price of the vessel through our $200 million loan agreement with Nordea, drawn in 2022. By April
2023, we also expect to take delivery of m/v
Nord Potomac
, which we have agreed to acquire from an
unaffiliated entity for $27.9 million. As of the date of this annual report we have paid a 10% advance of the
purchase price from cash on hand, and we expect to finance the balance of the purchase price through
debt and equity. On March 20, 2023, we also paid a cash dividend on common stock of $0.15 per share,
or $16.0 million which we funded through cash on hand. Finally, as of the date of this annual report, we
prepaid $20.0 million of debt outstanding with cash on hand.
As of the date of this report, we do not have other capital expenditures for vessel acquisitions or
constructions, but we expect to incur capital expenditures when our vessels undergo surveys. This process
of recertification may require us to reposition these vessels from a discharging port to shipyard facilities,
which will reduce our operating days during the period. We also incur capital expenditures for vessel
improvements to meet new regulations. The loss of earnings associated with the decrease in operating
days together with the capital needs for repairs and upgrades result in increased cash flow needs. We
expect to cover such capital expenditures and cash flow needs with cash from operations and cash on
hand.
In the next twelve months, we will require capital to fund ongoing operations, vessel improvements to meet
requirements under new regulations, debt service, the payment of our preferred and common dividends
and the payment of our bareboat charters. In 2023, we expect to refinance our loan agreements maturing
in 2023 and early 2024 to decrease the installments required for debt service. Also, as of the date of this
annual report, we have contracted revenues covering around 75% of our ownership days in 2023, in time
charter agreements having an average time charter rate above our break-even rate as of December 31,
2022, and we have also fixed around 14% of our ownerships days in 2024. We believe that contracted and
anticipated revenues will result in internally generated cash flows and together with available cash, which
as of December 31, 2022 amounted to $76.4 million (excluding $21.0 million of compensating cash
balances) and having additional investment in time deposits of $46.5 million which will mature during 2023,
will be sufficient to fund such capital requirements. Should time charter rates remain at current levels as
our time charter agreements are due for renewal during the year, we believe that we will be able to have
sufficient funds to cover our capital expenditures in the long-term.
Long-term Debt and Finance Liabilities
As of December 31, 2022, we had $530.1 million of long term debt outstanding under our facilities and
Bond, under the agreements described below.
79
Secured Term Loans
On December 18, 2014, two of our wholly owned subsidiaries entered into a loan agreement with BNP for
a loan facility of $53.5 million to finance part of the acquisition cost of the
G. P. Zafirakis
P. S.
Palios
the loan and extend its maturity to May 19, 2024. The loan is repayable in equal semi-annual installments
of approximately $1.6 million and a balloon of $23.6 million payable together with the last installment. The
refinanced loan bears interest at LIBOR plus a margin of 2.5%, increased from a margin of 2% of the
original loan.
On March 17, 2015, eight of our wholly owned subsidiaries entered into a loan facility with Nordea for an
amount of $93.1 million, maturing on March 19, 2021. On May 7, 2020, we entered into a new loan
agreement to refinance the loan and extend its maturity to March 19, 2022. On July 29, 2021, we entered
into a supplemental agreement with Nordea, pursuant to which the borrowers exercised their options to
extend the loan maturity to March 2024 and to draw down an additional amount of $460,000. In July 2022,
we prepaid an amount of $4.8 million due to the sale of
Baltimore
loan is repayable in equal consecutive quarterly instalments of approximately $1.6 million and a balloon of
$23.3 million, payable together with the last instalment. The loan bears interest at LIBOR plus a margin of
2.25%, increased from a margin of 2.1% of the original loan.
On March 26, 2015, three of our wholly owned subsidiaries entered into a loan agreement with ABN AMRO
Bank N.V. , or ABN, for a secured term loan facility of up to $53.0 million, maturing on March 30, 2021, to
refinance part of the acquisition cost of the vessels
New York
,
Myrto
Maia
drawn on March 30, 2015. On June 27, 2019, two of our wholly owned subsidiaries entered into a $25.0
million term loan agreement with ABN, maturing on June 28, 2024, to refinance the acquisition cost of the
vessels
Selina,
Ismene
and
. On May 22, 2020, we signed a term loan facility with ABN with the
purpose to combine the two loans outstanding with ABN and extend the maturity of the first loan, maturing
on March 30, 2021 to the maturity of the second loan, maturing on June 30, 2024. The first loan is repayable
in equal consecutive quarterly instalments of about $1.0 million and a balloon of $13.4 million payable
together with the last instalment and bears interest at LIBOR plus a margin of 2.4% increased from a margin
of 2.0% of the original loan. The second loan is payable in consecutive quarterly instalments of $0.8 million
each and a balloon instalment of $9.0 million payable together with the last instalment June 28, 2024. The
loan bears interest at LIBOR plus a margin of 2.25%.
On May 20, 2021, we, through six wholly owned subsidiaries, signed a $91 million sustainability linked loan
facility with ABN dated May 14, 2021, which was used to refinance existing loan agreements with other
banks. On August 22, 2022, and following the sale and leaseback agreements of the vessels Santa Barbara
and New Orleans, which were mortgaged to secure the loan, we prepaid an amount of $30.8 million, which
was the part of the loan attributed to the two vessels. Following the prepayment, the loan is repayable in
consecutive quarterly installments of $2.0 million each and a balloon of $13.6 million payable together with
the last installment on May 20, 2026. The loan bears interest at LIBOR plus a margin of 2.15% per annum,
which may be adjusted annually by maximum 10 basis points upwards or downwards, subject to the
performance under certain sustainability KPIs.
On January 7, 2016, three of our wholly owned subsidiaries entered into a secured loan agreement with
the Export-Import Bank of China for a loan of up to $75.7 million in order to finance part of the construction
cost of three vessels. On January 4, 2017, we drew down $57.24 million to finance part of the construction
cost of
San Francisco
Newport News
, both delivered on January 4, 2017. The loan is payable in 60
equal quarterly instalments of about $1.0 million each, the last of which is payable by January 4, 2032, and
bears interest at LIBOR plus a margin of 2.3%.
80
On July 13, 2018, we entered into a loan agreement with BNP for a secured term loan facility of $75 million.
The loan has a term of five years and is repayable in 20 consecutive quarterly instalments of $1.56 million
and a balloon instalment of $43.75 million payable together with the last instalment on July 17, 2023. The
loan bears interest at LIBOR plus a margin of 2.3%.
On March 14, 2019, two of our wholly owned subsidiaries entered into a term loan agreement with DNB
Bank ASA for a loan of $19.0 million, to refinance the loan of
Crystalia
Atalandi
, which was repaid in
February 2019. The loan is repayable in 20 consecutive quarterly instalments of $0.5 million and a balloon
of $9.5 million payable together with the last instalment on March 14, 2024. The loan bears interest at
LIBOR plus a margin of 2.4%. On March 14, 2023, we prepaid in full this loan amounting to $11.8 million.
On September 30, 2022, we entered into a $200 million loan agreement to finance the acquisition price of
9 Ultramax vessels. We drew down $197.2 million under the loan, in tranches for each vessel on their
delivery to us. On December 12, 2022, we prepaid $21.9 million under the loan, attributed to DSI
Andromeda, following the vessel’s sale under a sale and leaseback agreement. Following this prepayment,
the loan is repayable in 20 equal quarterly instalments of an aggregate amount of $3.7 million, and a balloon
amounting to $100.9 million payable together with the last instalment on October 11, 2027. The loan bears
interest at term SOFR plus a margin of 2.25%.
Under the secured term loans outstanding as of December 31, 2022, 34 vessels of our fleet were
mortgaged with first preferred or priority ship mortgages. Additional securities required by the banks include
first priority assignment of all earnings, insurances, first assignment of time charter contracts with duration
that exceeds a certain period, pledge over the shares of the borrowers, manager’s undertaking and
subordination and requisition compensation and either a corporate guarantee by Diana Shipping Inc. (the
“Guarantor”) or a guarantee by the ship owning companies (where applicable), financial covenants, as well
as operating account assignments. The lenders may also require additional security in the future in the
event the borrowers breach certain covenants under the loan agreements. The secured term loans
generally include restrictions as to changes in management and ownership of the vessels, additional
indebtedness, as well as minimum requirements regarding hull cover ratio and minimum liquidity per vessel
owned by the borrowers, or the Guarantor, maintained in the bank accounts of the borrowers, or the
Guarantor. Furthermore, the secured term loans contain cross default provisions and additionally we are
not permitted to pay any dividends following the occurrence of an event of default.
As of December 31, 2021 and 2022, and the date of this report, we were in compliance with all of our loan
covenants.
Senior Unsecured Bond due 2026
On June 22, 2021, we issued a $125 million senior unsecured bond maturing in June 2026. The bond ranks
ahead of subordinated capital and ranks the same with all other senior unsecured obligations of the
Company other than obligations which are mandatorily preferred by law. The bond was offered to the
investors of the 9.5% Bond, part of whom exchanged their bonds, including entities affiliated with our
executive officers and directors who exchanged their securities and participated with an aggregate principal
amount of $21 million. The bond pays interest from June 22, 2021 at a US Dollar fixed-rate coupon of
8.375% payable semi-annually in arrears in June and December of each year. The bond is callable in
whole or in parts in June 2024 at a price equal to 103.35% of nominal value; between June 2025 to
December 2025 at a price equal to 101.675% of the nominal value and after December 2025 at a price
equal to 100% of nominal value. The bond includes financial and other covenants and is trading at Oslo
Børs effective February 1, 2022. As of December 31, 2022 and as of the date of this annual report, we did
not and have not designated any financial instruments as accounting hedging instruments.
Finance Liabilities
81
On March 15, 2022, we entered into a sale and leased back agreement for
Florida
, which we sold for $50
million, and leased back for a period of ten years, to finance the acquisition price of the vessel. Under the
bareboat charter, we have the option to repurchase the vessel after the end of the third year of the charter
period, or each year thereafter, until the termination of the lease, at specific prices, subject to irrevocable
and written notice to the owner. If not repurchased earlier, we have the obligation to repurchase the vessel
for $16.4 million, on the expiration of the lease on the tenth year.
On August 17, 2022, we entered into two sale and leaseback agreements with two unaffiliated Japanese
third parties for
New Orleans
Santa Barbara
, for an aggregate amount of $66.4 million and prepaid a
bank loan attributed to these vessels. The vessels were delivered to their buyers on September 8, 2022
and September 12, 2022, respectively and we chartered in both vessels under bareboat charter parties for
a period of eight years, each. We have purchase options beginning at the end of the third year of each
vessel's bareboat charter period, or each year thereafter, until the termination of the lease, at specific
prices, subject to irrevocable and written notice to the owner. If not repurchased earlier, we have the
obligation to repurchase the vessels for $13 million, each, on the expiration of each lease on the eighth
year.
On December 6, 2022, we sold
DSI Andromeda
bank loan attributed to the vessel. We leased back the vessel under a bareboat agreement for a period of
ten years. Under the bareboat charter, we have the option to repurchase the vessel after the end of the
third year of the charter period, or each year thereafter, until the termination of the lease, at specific prices,
subject to irrevocable and written notice to the owner. If not repurchased earlier, we have the obligation to
repurchase the vessel for $8.1 million, on the expiration of the lease on the tenth year.
C. Research and development, patents and licenses
We incur from time to time expenditures relating to inspections for acquiring new vessels that meet our
standards. Such expenditures are insignificant and they are expensed as they incur.
D. Trend information
Demand for dry bulk vessel services is influenced by global financial conditions. Global financial markets
and economic conditions have been, and continue to be, volatile. Our results of operations depend primarily
on charter hire rates that we are able to realize, and the demand for dry bulk vessel services. The Baltic
Dry Index, or the BDI, has long been viewed as the main benchmark to monitor the movements of the dry
bulk vessel charter market and the performance of the entire dry bulk shipping market. In 2022, the BDI
ranged from a high of 3369 on May 23, 2022 to a low of 965 on August 31, 2022 to drop again to a low of
530 on February 16, 2023. The BDI has since recovered from the February 2023 levels and closed at 1484
on March 23, 2023. Although there can be no assurance that the dry bulk charter market will not decline
further, as of the date of this annual report, we have fixed about 75% of our fleet ownership days at rates
above our break-even rate. Nevertheless, our revenues and results of operations in 2023 will be subject to
demand for our services, the level of inflation, market disruptions and interest rates. Demand for our dry
bulk oceangoing vessels is dependent upon economic growth in the world’s economies, seasonal and
regional changes in demand and changes to the capacity of the global dry bulk fleet and the sources and
supply for dry bulk cargo transported by sea. Continued adverse economic, political or social conditions or
other developments could further negatively impact charter rates and therefore have a material adverse
effect on our business and results of operations.
E. Critical Accounting Estimates
The discussion and analysis of our financial condition and results of operations are based upon our
consolidated financial statements, which have been prepared in accordance with U.S. GAAP. The
preparation of those financial statements requires us to make estimates and judgments that affect the
82
reported amounts of assets and liabilities, revenues and expenses and related disclosure of contingent
assets and liabilities at the date of our financial statements. Actual results may differ from these estimates
under different assumptions and conditions.
Impairment of Vessels
Long-lived assets are reviewed for impairment whenever events or changes in circumstances (such as
market conditions, obsolesce or damage to the asset, potential sales and other business plans) indicate
that the carrying amount of an asset may not be recoverable. When the estimate of undiscounted projected
net operating cash flows, excluding interest charges, expected to be generated by the use of an asset over
its remaining useful life and its eventual disposition is less than its carrying amount, the Company evaluates
the asset for impairment loss. Measurement of the impairment loss is based on the fair value of the asset,
determined mainly by third party valuations.
For vessels, we calculate undiscounted projected net operating cash flows by considering the historical
and estimated vessels’ performance and utilization with the significant assumption being future charter
rates for the unfixed days, using the most recent 10-year average of historical 1 year time charter rates
available for each type of vessel over the remaining estimated life of each vessel, net of commissions.
Historical ten-year blended average one-year time charter rates are in line with the Company’s overall
chartering strategy, they reflect the full operating history of vessels of the same type and particulars with
the Company’s operating fleet and they cover at least a full business cycle, where applicable. When the
10-year average of historical 1 year time charter rates is not available for a type of vessels, the Company
uses the average of historical 1 year time charter rates of the available period. The historical ten-year
average rate used in 2022 to calculate undiscounted projected net operating cash flow was $12,431 for
Panamax, Kamsarmax and Post-Panamax vessels, $16,876 for Ultramax vessels and $16,128 for our
Capesize and Newcastlmax vessels, compared to $11,363, nil and $15,543, respectively in 2021. Other
assumptions used in developing estimates of future undiscounted cash flow are the charter rates calculated
for the fixed days using the fixed charter rate of each vessel from existing time charters, the expected
outflows for scheduled vessels’ maintenance; vessel operating expenses; fleet utilization, and the vessels’
residual value if sold for scrap. Assumptions are in line with our historical performance and our expectations
for future fleet utilization under our current fleet deployment strategy. The difference between the carrying
amount of the vessel plus unamortized deferred costs and their fair value is recognized in the Company's
accounts as impairment loss. Although no impairment loss was identified or recorded in 2022, according
to our assessment, the carrying value plus unamortized deferred cost of vessels for which impairment
indicators existed as of December 31, 2022, was $574.8 million.
Historically, the market values of vessels have experienced volatility, which from time to time may be
substantial. As a result, the charter-free market value of certain of our vessels may have declined below
those vessels’ carrying value plus unamortized deferred cost, even though we would not impair those
vessels’ carrying value under our accounting impairment policy. Based on: (i) the carrying value plus
unamortized deferred cost of each of our vessels as of December 31, 2022 and 2021 and (ii) what we
believe the charter-free market value of each of our vessels was as of December 31, 2022 and 2021, the
aggregate carrying value of 17 and 2 of the vessels in our fleet as of December 31, 2022 and 2021,
respectively, exceeded their aggregate charter-free market value by approximately $83 million and $6
million, respectively, as noted in the table below. This aggregate difference represents the approximate
analysis of the amount by which we believe we would have to reduce our net income or increase our loss
if we sold all of such vessels at December 31, 2022 and 2021, on a charter-free basis, on industry standard
terms, in cash transactions, and to a willing buyer where we were not under any compulsion to sell, and
where the buyer was not under any compulsion to buy. For purposes of this calculation, we have assumed
that these 17 and 2 vessels would be sold at a price that reflects our estimate of their charter-free market
values as of December 31, 2022 and 2021, respectively.
83
Vessel
Dwt
Year Built
Carrying Value plus unamortized
deferred cost
(in millions of US dollars)
2022
2021
1
Alcmene
93,193
2010
10.1
10.6
2
Aliki
180,235
2005
13.0
14.3
3
Amphitrite
98,697
2012
14.7
15.6
4
Artemis
76,942
2006
11.9
13.3
5
Astarte
81,513
2013
19.1
18.7
6
Atalandi
77,529
2014
16.4
17.2
7
Baltimore
177,243
2005
-
17.5
8
Boston
177,828
2007
18.2
*
16.6
9
Calipso
73,691
2005
-
-
10
Coronis
74,381
2006
-
-
11
Crystalia
77,525
2014
16.1
16.9
12
Electra
87,150
2013
14.9
13.8
13
G.P. Zafirakis
179,492
2014
23.0
23.8
14
Houston
177,729
2009
19.4
20.8
15
Ismene
77,901
2013
10.6
11.2
16
Leto
81,297
2010
13.7
14.7
17
Los Angeles
206,104
2012
24.8
24.2
18
Maera
75,403
2013
12.3
10.9
19
Maia
82,193
2009
13.4
14.0
20
Medusa
82,194
2010
13.1
14.2
21
Melia
76,225
2005
10.8
11.4
22
Myrsini
82,117
2010
15.1
16.5
23
Myrto
82,131
2013
18.9
18.2
24
Naias
73,546
2006
-
-
25
New Orleans
180,960
2015
33.1
*
34.9
26
New York
177,773
2010
14.5
15.5
27
Newport News
208,021
2017
42.4
*
43.6
28
Oceanis
75,211
2001
-
-
29
P.S. Palios
179,134
2013
37.4
*
36.9
*
30
Phaidra
87,146
2013
13.0
13.6
31
Philadelphia
206,040
2012
25.5
24.4
32
Polymnia
98,704
2012
15.0
15.9
33
Protefs
73,630
2004
-
-
34
Salt Lake City
171,810
2005
-
-
35
San Francisco
208,006
2017
42.5
*
44.6
36
Santa Barbara
179,426
2015
36.4
*
38.2
*
37
Seattle
179,362
2011
22.6
24.0
38
Selina
75,700
2010
9.3
10.1
39
Semirio
174,261
2007
17.6
*
15.7
40
Sideris GS
174,186
2006
-
-
41
LEONIDAS P.C.
82,165
2011
21.7
*
-
42
Florida
182,063
2022
59.1
*
-
43
DSI Pyxis
60,362
2018
36.1
*
-
44
DSI Pollux
60,446
2015
31.4
*
-
45
DSI Phoenix
60,456
2017
34.3
*
-
46
DSI Polaris
60,404
2018
36.9
*
-
47
DSI Andromeda
60,309
2016
33.3
*
-
48
DSI Aquila
60,309
2015
31.5
*
-
49
DSI Pegasus
60,508
2015
30.3
*
-
50
DSI Altair
60,309
2016
32.5
*
-
Total
5,748,960
966
652
84
_______________________________
*
Indicates dry bulk vessels for which we believe, as of December 31, 2022 and 2021, the charter-free market value
was lower than the vessel’s carrying value plus unamortized deferred cost. We believe that the aggregate carrying
value plus unamortized deferred cost of these vessels exceeded their aggregate charter-free market value by
approximately $83 million and $6 million, respectively.
Our estimates of charter-free market value assume that our vessels were all in good and seaworthy
condition without need for repair and if inspected would be certified in class without notations of any kind.
Our estimates are based on information available from various industry sources, including:
●
reports by industry analysts and data providers that focus on our industry and related dynamics
affecting vessel values;
●
news and industry reports of similar vessel sales;
●
offers that we may have received from potential purchasers of our vessels; and
●
vessel sale prices and values of which we are aware through both formal and informal
communications with shipowners, shipbrokers, industry analysts and various other shipping
industry participants and observers.
As we obtain information from various industry and other sources, our estimates of charter-free market
value are inherently uncertain. In addition, vessel values are highly volatile; as such, our estimates may
not be indicative of the current or future charter-free market value of our vessels or prices that we could
achieve if we were to sell them. We also refer you to the risk factor in “Item 3. Key Information—D. Risk
Factors” entitled “
The market values of our vessels could decline, which could limit the amount of funds
that we can borrow and could trigger breaches of certain financial covenants contained in our loan facilities,
which could adversely affect our operating results, and we may incur a loss if we sell vessels following a
decline in their market values
” and the discussion under the heading "Item 4. Information on the
Company—B. Business Overview–Vessel Prices.”
Our impairment test exercise is sensitive to variances in the time charter rates. Our current analysis, which
also involved a sensitivity analysis by assigning possible alternative values to this significant input,
indicated that time charter rates would need to be reduced by 9% to result in impairment of individual long-
lived assets with indication of impairment. However, there can be no assurance as to how long charter
rates and vessel values will remain at their current levels. If charter rates decrease and remain depressed
for some time, it could adversely affect our revenue and profitability and future assessments of vessel
impairment.
A comparison of the average estimated daily time charter equivalent rate used in our impairment analysis
with the average “break-even rate” for each major class of vessels is presented below:
Average estimated daily time
charter equivalent rate used
Average break-even
rate
Ultramax
$16,876
$12,609
Panamax/Kamsarmax/Post-Panamax
$12,431
$9,459
Capesize/Newcastlemax
$16,128
$11,911
It should be noted that as of December 31, 2022, seventeen of our vessels, having indication of impairment,
would be affected by a reduction in time charter rates below the average break-even rate. Additionally, the
use of the 1-year, 3-year and 5-year average blended rates would not have any effect on the Company’s
impairment analysis and as such on the Company’s results of operations:
85
Vessel type
1-year
(period)
Impairment
charge
(in USD
million)
3-year
(period)
Impairment
charge
(in USD
million)
5-year
(period)
Impairment
charge
(in USD
million)
Ultramax
$23,025
-
$19,513
-
$16,876
-
Panamax/Kamsarmax/Post-
Panamax
$20,387
-
$17,616
-
$15,551
-
Capesize/Newcastlemax
$19,539
-
$19,295
-
$18,477
-
Item 6. Directors, Senior Management and Employees
A. Directors and Senior Management
Set forth below are the names, ages and positions of our directors and executive officers. Our Board of
Directors consists of eleven members and is elected annually on a staggered basis, and each director
elected holds office for a three-year term and until his or her successor is elected and has qualified, except
in the event of such director’s death, resignation, removal or the earlier termination of his or her term of
office. Officers are appointed from time to time by our board of directors and hold office until a successor
is appointed or their employment is terminated.
Name
Age
Position
Semiramis Paliou
48
Class III Director, Chief Executive Officer
Simeon Palios
81
Class I Director, and Chairman
Anastasios Margaronis
67
Class I Director and President
Ioannis Zafirakis
51
Class I Director, Chief Financial Officer, Chief
Strategy Officer, Treasurer and Secretary
Konstantinos Psaltis
84
Class II Director
Kyriacos Riris
73
Class II Director
Apostolos Kontoyannis
74
Class III Director
Konstantinos Fotiadis
72
Class III Director
Eleftherios Papatrifon
53
Class II Director
Simon Frank Peter Morecroft
64
Class II Director
Jane Sih Ho Chao
47
Class I Director
Maria Dede
50
Chief Accounting Officer
Margarita Veniou
44
Chief Corporate Development, Governance
Communications Officer
Maria Christina Tsemani
44
Chief People Officer
The term of our Class I directors expires in 2024, the term of our Class II directors expires in 2025, and the
term of our Class III directors expires in 2023.
Mr. Simon Morecroft was elected and appointed as a Class II Director on May 18, 2022.
Mr. Eleftherios Papatrifon served as Chief Operating Officer of the Company until February 2023, when he
was appointed as Class II Director and member of the Executive Committee on February 22, 2023 to serve
until the next scheduled election for Class II directors.
Ms. Jane Chao was appointed as a Class I Director on February 22, 2023 to serve until the next scheduled
election for Class I directors.
86
The business address of each officer and director is the address of our principal executive offices, which
are located at Pendelis 16, 175 64 Palaio Faliro, Athens, Greece.
Biographical information with respect to each of our directors and executive officers is set forth below.
Semiramis Paliou
Company’s Chief Executive Officer, Chairperson of the Executive Committee and member of the
Sustainability Committee since March 2021. Ms. Paliou has been the Chief Executive Officer of Diana
Shipping Services S.A. since March 2021. She also serves as a Director of OceanPal Inc. since April 2021
and as the Chairperson of the Board of Directors and of the Executive Committee of OceanPal Inc. since
November 2021. Ms. Paliou is the Chairperson of the Hellenic Marine Environment Protection Association
(HELMEPA), a position she has held since June 2020, while she joined its board of directors in March
2018. As of June 2021, she serves as Vice -Chairperson of INTERMEPA. She is also a member of the
board of directors of the UK PI Club since November 2020, member of the Union of Greek Shipowners
since February 2022 and member of the Global Maritime Forum since April 2022. She is Vice-Chairperson
of the Greek committee of Det Norske Veritas, a member of the Greek committee of Nippon Kaiji Kyokai
and a member of the Greek committee of Bureau Veritas.
Ms. Paliou has over 20 years of experience in shipping operations, technical management and crewing.
She began her career at Lloyd’s Register of Shipping where she worked as a trainee ship surveyor from
1996 to 1998. She was then employed by Diana Shipping Agencies S.A. From 2007 to 2010 she was
employed as a Director and President of Alpha Sigma Shipping Corp. From February 2010 to November
2015, she was the Head of the Operations, Technical and Crew department of Diana Shipping Services
S.A. From November 2015 to October 2016, she served as Vice-President of the same company. From
November 2016 to the end of July 2018, she served as Managing Director and Head of the Technical,
Operations, Crew and Supply department of Unitized Ocean Transport Limited. From November 2018 to
February 2020, she worked as Chief Operating Officer of Performance Shipping Inc. From October 2019
until February 2021, Ms. Paliou served as Deputy Chief Executive Officer of Diana Shipping Inc. She also
served as member of the Executive Committee and the Chief Operating Officer of the Company from
August 2018 until February 2021.
Ms. Paliou obtained her BSc in Mechanical Engineering from Imperial College, London and her MSc in
Naval Architecture from University College, London. She completed courses in “Finance for Senior
Executives”, in “Authentic Leader Development” and a certificate program on “Sustainable Business
Strategy” all at Harvard Business School. Ms. Paliou is also the daughter of Simeon Palios, the Company’s
Chairman.
Simeon P. Palios
February 2005 and a Director of the Company since March 1999. He served as the Company’s Chief
Executive Officer from February 2005 until February 2021. Mr. Palios also serves as the President of Diana
Shipping Services S.A. which was formed in 1986. Mr. Palios has experience in the shipping industry since
1969 and expertise in technical and operational issues. He has served as an ensign in the Greek Navy for
the inspection of passenger boats on behalf of Ministry of Merchant Marine and is qualified as a naval
architect and marine engineer. Mr. Palios was the founder of Diana Shipping Agencies S.A., where he
served as Managing Director until November 2004, having the overall responsibility for its activities. From
January 13, 2010 until February 28, 2022, Mr. Palios also served as the Chairman of the Board of Directors
of Performance Shipping Inc. and as Chief Executive Officer until October 2020.
Mr. Palios is a member of various leading classification societies worldwide and he is a member of the
board of directors of the United Kingdom Freight Demurrage and Defense Association Limited. Since
October 7, 2015, Mr. Palios has served as President of the Association “Friends of Biomedical Research
87
Foundation, Academy of Athens”. He holds a bachelor's degree in Marine Engineering from Durham
University.
Anastasios C. Margaronis
2005. He is also member of the Executive Committee of the Company. Mr. Margaronis is the Deputy
President of Diana Shipping Services S.A., where he also serves as a Director and Secretary. Mr.
Margaronis has experience in the shipping industry, including in ship finance and insurance, since 1980.
Prior to February 21, 2005, Mr. Margaronis was employed by Diana Shipping Agencies S.A. in 1979 and
performed on our behalf the services he now performs as President. He joined Diana Shipping Agencies
S.A. in 1979 and has been responsible for overseeing our vessels’ insurance matters, including hull and
machinery, protection and indemnity and war risks insurances. From January 2010 to February 2020, he
served as Director and President of Performance Shipping Inc.
In addition, Mr. Margaronis is a member of the Greek National Committee of the American Bureau of
Shipping. He has also been on the Members’ Committee of the Britannia Steam Ship Insurance Association
Limited since October 2022. From October 2005 to October 2019, he was a member of the board of
directors of the United Kingdom Mutual Steam Ship Assurance Association (Europe) Limited.
He holds a bachelor's degree in Economics from the University of Warwick and a master's of science
degree in Maritime Law from the Wales Institute of Science and Technology.
Ioannis Zafirakis
has served
as a Director and Secretary of Diana Shipping Inc. since February 2005, as
Chief Financial Officer since February 2020 (Interim Chief Financial Officer until February 2021), as
Treasurer since February 2020 and as Chief Strategy Officer since January 2021. Mr. Zafirakis is also a
member of the Executive Committee of the Company. During his career at Diana Shipping Inc., he held
various executive positions such as Chief Operating Officer, Executive Vice-President and Vice-President.
In addition, Mr. Zafirakis has served as a Director and Treasurer of Diana Shipping Services S.A. since
January 2013 and Chief Financial Officer since February 2021. He has served as a Director and Secretary
of OceanPal Inc. since April 2021 and as the President and Interim Chief Financial Officer of the company
since November 2021. Mr. Zafirakis is also member of the Executive Committee of OceanPal Inc.
Prior to joining Diana Shipping, from June 1997 to February 2005, Mr. Zafirakis was employed by Diana
Shipping Agencies S.A., where he held several positions in finance and accounting. From January 2010 to
February 2020, he worked as Director and Secretary of Performance Shipping Inc., where he also held
various executive positions such as Chief Operating Officer and Chief Strategy Officer.
Mr. Zafirakis is a member of the Business Advisory Committee of the Shipping Programs of ALBA Graduate
Business School at The American College of Greece. He has obtained a certificate in “Blockchain
Economics: An Introduction to Cryptocurrencies” from Panteion University of Social and Political Sciences
in Greece. He holds a bachelor's degree in Business Studies from City University Business School in
London and a master's degree in International Transport from the University of Wales in Cardiff.
Eleftherios (Lefteris) A. Papatrifon
of Diana Shipping Inc. since February 2023. Prior to this appointment, he served as Chief Operating Officer
of the Company from March 2021 to February 2023. Mr. Papatrifon also serves as a Director of OceanPal
Inc. and a member of its Executive Committee, positions he has held since November 2021. From
November 2021 to January 2023, he served as Chief Executive Officer of OceanPal Inc.
Prior to joining Diana Shipping Inc., he was Chief Executive Officer, Co-Founder and Director of Quintana
Shipping Ltd, a provider of dry bulk shipping services, from 2010 until the company’s successful sale of
assets and consequent liquidation in 2017. Previously, for a period of approximately six years, he served
as the Chief Financial Officer and Director of Excel Maritime Carriers Ltd. Prior to that, Mr. Papatrifon
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served for approximately 15 years in a number of corporate finance and asset management positions, both
in the USA and in Greece.
Mr. Papatrifon holds undergraduate (BBA) and graduate (MBA) degrees from Baruch College (CUNY). He
is also a member of the CFA Institute and a CFA charterholder.
Konstantinos Psaltis
its Nominating Committee since May 2015 and a member of its Compensation Committee since May 2017.
Mr. Psaltis serves also as President of Ormos Compania Naviera S.A., a company that specializes in
operating and managing multipurpose container vessels, where from 1981 to 2006, he held the position of
Managing Director. Prior to joining Ormos Compania Naviera S.A., Mr. Psaltis simultaneously served as a
technical manager in the textile manufacturing industry and as a shareholder of shipping companies
managed by M.J. Lemos. From 1961 to 1964, he served as ensign in the Royal Hellenic Navy.
He holds a degree in Mechanical Engineering from Technische Hochschule Reutlingen Wuppertal and
a bachelor's degree in Business Administration from Tubingen University in Germany.
Kyriacos Riris
Nominating Committee since May 2015. From May 2022, he is also the Chairman of the Audit Committee
of the Company.
Commencing in 1998, Mr. Riris served in a series of positions in PricewaterhouseCoopers (PwC), Greece,
including Senior Partner, Managing Partner of the Audit and the Advisory/Consulting Lines of Service. From
2009 to 2014, Mr. Riris served as Chairman of the Board of Directors of PricewaterhouseCoopers (PwC),
Greece. Prior to its merger with PwC, Mr. Riris was employed at Grant Thornton, Greece, where in 1984
he became a Partner. From 1976 to 1982, Mr. Riris was employed at Arthur Young, Greece. Since
November 2018, Mr. Riris has served as Chairman of Titan Cement International S.A., a Belgian
corporation.
Mr. Riris holds a degree from Birmingham Polytechnic (presently Birmingham City University) and
completed his professional qualifications with the Association of Certified Chartered Accountants (ACCA)
in the UK in 1975, becoming a Fellow of the Association of Certified Accountants in 1985.
Apostolos Kontoyannis
the Audit Committee of Diana Shipping Inc., positions he has held since March 2005. Since March 2021,
Mr. Kontoyannis also serves as the Chairperson of the Sustainability Committee of the Company.
Mr. Kontoyannis has over 40 years of experience in shipping finance and currently serves as financial
consultant to various shipping companies. He was employed by Chase Manhattan Bank N.A. in Frankfurt
(Corporate Bank), London (Head of Shipping Finance South Western European Region) and Piraeus
(Manager, Ship Finance Group) from 1975 to 1987.
Mr. Kontoyannis holds a bachelor's degree in Finance and Marketing and a master's degree in Business
Administration and Finance from Boston University.
Konstantinos Fotiadis
as an independent Director and as the Chairman of the Audit Committee of Performance Shipping Inc.
from the completion of Performance Shipping Inc.’s private offering until February 2011. From 1990 until
1994, Mr. Fotiadis served as the President and Managing Director of Reckitt Colman (Greece), part of
the British multinational Reckitt Colman plc, manufacturers of household, cosmetics and health care
products. From 1981 until its acquisition in 1989 by Reckitt Colman plc, Mr. Fotiadis was a General
Manager at Dr. Michalis S.A., a Greek company manufacturing and marketing cosmetics and health care
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products. From 1978 until 1981, Mr. Fotiadis held positions with Esso Chemicals Ltd. and Avrassoglou S.A.
Mr. Fotiadis has also been active as a business consultant and real estate developer.
Mr. Fotiadis holds a degree in Economics from Technische Universitaet Berlin and in Business
Administration from Freie Universitaet Berlin.
Simon Morecroft
Director of Enarxis Ltd, a shipping consultancy company. Mr. Morecroft spent his career in the shipbroking
industry as a Sale and Purchase broker. He joined Braemar Shipbrokers Ltd (now Braemar ACM
Shipbroking) in 1983 becoming a director in 1986 and remained on the board until his retirement in August
2021. During this time Braemar grew from a boutique broking operation into one of the world’s most
successful fully integrated shipbroking companies with a listing on the London Stock Exchange.
Mr. Morecroft graduated from Oxford University in 1980 with a Masters in PPE.
Jane Chao
director of Wah Kwong Shipping Holdings Limited, a position she has held since 2008. Ms. Chao is the
managing director of Wah Kwong China Investment which includes residential and commercial properties
as well as hospitality businesses in Shanghai and Wuxi. Ms. Chao has founded her own art consultancy
company Galerie Huit and lifestyle gallery Maison Huit in 2009 and recently, the non-profit Chao-Lee Art
Foundation in 2022.
Ms. Chao has also served as a Council Member for Changing Young Lives Foundation helping
underprivileged children in Hong Kong and China from 2014 to 2020.
Maria Dede
2005. Since Mach 2020, Ms. Dede also serves as Finance Manager of Diana Shipping Services S.A. In
2000, Ms. Dede joined the Athens branch of Arthur Andersen, which merged with Ernst and Young (Hellas)
in 2002, where she served as an external auditor of shipping companies until 2005. From 1996 to 2000
Ms. Dede was employed by Venus Enterprises S.A., a ship-management company, where she held a
number of positions primarily in accounting and supplies.
Ms. Dede holds a Bachelor’s degree in Maritime Studies from the University of Piraeus, a Master’s degree
in Business Administration from the ALBA Graduate Business School and a Master’s degree in Auditing
and Accounting from the Greek Institute of Chartered Accountants.
Margarita Veniou
Officer of Diana Shipping Inc. since July 2022. From September 2004 until June 2022, she served in the
Corporate Planning Governance Department of Diana Shipping Inc., holding various positions as
Associate, Officer and Manager. Ms. Veniou is also the Corporate Development, Governance
Communications Manager of Diana Shipping Services S.A., a position she has held since 2022, and from
2004 to 2022 she held various other positions at Diana Shipping Services S.A. In addition, since November
2021, Ms. Veniou has served as the Chief Corporate Development Governance Officer of OceanPal
Inc.. She is the General Manager of Steamship Shipbroking Enterprises Inc., a position she has held since
April 2014.
From January 2010 to February 2020, Ms. Veniou also held the position of Corporate Planning
Governance Officer of Performance Shipping Inc.
Ms. Veniou holds a bachelor's degree in Maritime Studies and a master's degree in Maritime Economics
Responsibility course at the London Business School and has obtained the Certification in Shipping
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Derivatives from the Athens University of Economics and Business. Ms. Veniou is also a member of WISTA
Hellas and ISO 14001 certified by Lloyd’s Register.
Maria-Christina Tsemani
Tsemani also serves as HR Manager of Diana Shipping Services S.A., a position she has held since
October 2020.
Ms. Tsemani has over 18 years of experience in HR positions with multinational companies and institutional
bodies. Before joining Diana Shipping, Ms. Tsemani was People Acquisition and Development Manager of
Vodafone Greece. During her career in Vodafone from 2008 to 2020, she held various other positions,
including Senior HR Business Partner and Organizational Effectiveness and Reward Manager. From 2004
to 2008, Ms. Tsemani worked as a Senior HR Consultant in PricewaterhouseCoopers (PwC). From 2001
to 2004, she served as Project Manager in the European Commission, based in Luxembourg.
Ms. Tsemani holds a bachelor’s degree in Mathematical Sciences and a master’s of science degree in
Applied Statistics from the University of Oxford, UK.
B. Compensation
Aggregate executive compensation (including amounts paid to Steamship) for 2022 was $6.6 million. Since
June 1, 2010, Steamship, a related party, as described in "Item 7. Major Shareholders and Related Party
Transactions—B. Related Party Transactions" has provided to us brokerage services. Under the Brokerage
Services Agreements in effect during 2022, fees for 2022 amounted to $3.3 million and we also paid
commissions for vessel sales and purchases amounting to $1.2 million. We consider fees under these
agreements to be part of our executive compensation due to the affiliation with Steamship.
Non-employee directors receive annual compensation in the amount of $52,000 plus reimbursement of
out-of-pocket expenses. In addition, each director serving as chairman of a committee receives additional
annual compensation of $26,000, plus reimbursement for out-of-pocket expenses with the exception of the
chairman of the audit and compensation committee who receive annual compensation of $40,000. Each
director serving as member of a committee receives additional annual compensation of $13,000, plus
reimbursement for out-of-pocket expenses with the exception of the member of the audit committee who
receives annual compensation of $26,000, plus reimbursement for out-of-pocket expenses. In 2022, fees
and expenses of our non-executive directors amounted to $0.5 million.
We do not have a retirement plan for our officers or directors.
Equity Incentive Plan
In November 2014, our board of directors approved, and the Company adopted the 2014 Equity Incentive
Plan for 5,000,000 common shares, amended on May 31, 2018 to increase the common shares to
13,000,000 and further amended on January 8, 2021, referred to as “the Plan”, to increase the number of
common shares available for the issuance of equity awards by 20 million shares. Currently, 13,444,759
shares remain reserved for issuance under the Plan.
Under the Plan, the Company’s employees, officers and directors are entitled to receive options to acquire
the Company’s common stock. The Plan is administered by the Compensation Committee of the
Company’s Board of Directors or such other committee of the Board as may be designated by the Board.
Under the terms of the Plan, the Company’s Board of Directors is able to grant (a) non-qualified stock
options, (b) stock appreciation rights, (c) restricted stock, (d) restricted stock units, (e) unrestricted stock,
(f) other equity-based or equity-related awards, (g) dividend equivalents and (h) cash awards. No options
or stock appreciation rights can be exercisable subsequent to the tenth anniversary of the date on which
such Award was granted. Under the Plan, the Administrator may waive or modify the application of
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forfeiture of awards of restricted stock and performance shares in connection with cessation of service with
the Company. No Awards may be granted under the Plan following the tenth anniversary of the date on
which the Plan was adopted by the Board (i.e., January 8, 2031).
During 2022 and as of the date of this annual report, our board of directors awarded an aggregate amount
of 1,470,000 shares and 1,750,000 shares, respectively of restricted common stock, of which 1,249,500
shares and 1,487,500 shares, respectively were awarded to senior management, and 220,500 shares and
262,500 shares, respectively, were awarded to non-employee directors. All restricted shares vest ratably
over three years, The restricted shares are subject to forfeiture until they become vested. Unless they
forfeit, grantees have the right to vote, to receive and retain all dividends paid and to exercise all other
rights, powers and privileges of a holder of shares.
In 2022, compensation costs relating to the aggregate amount of restricted stock awards amounted to $9.3
million.
C. Board Practices
We have established an Audit Committee, comprised of two board members, which is responsible for
reviewing our accounting controls, recommending to the board of directors the engagement of our
independent auditors, and pre-approving audit and audit-related services and fees. Each member has
been determined by our board of directors to be “independent” under the rules of the NYSE and the rules
and regulations of the SEC. As directed by its written charter, the Audit Committee is responsible for
appointing, and overseeing the work of the independent auditors, including reviewing and approving their
engagement letter and all fees paid to our auditors, reviewing the adequacy and effectiveness of the
Company's accounting and internal control procedures and reading and discussing with management and
the independent auditors the annual audited financial statements. The members of the Audit Committee
are Mr. Kyriacos Riris (chairman and financial expert) and Mr. Apostolos Kontoyannis (member and
financial expert).
We have established a Compensation Committee comprised of two members, which, as directed by its
written charter, is responsible for setting the compensation of executive officers of the Company, reviewing
the Company’s incentive and equity-based compensation plans, and reviewing and approving employment
and severance agreements. The members of the Compensation Committee are Mr. Apostolos Kontoyannis
(chairman) and Mr. Konstantinos Psaltis (member).
We have established a Nominating Committee comprised of two members, which, as directed by its written
charter, is responsible for identifying, evaluating and making recommendations to the board of directors
concerning individuals for selections as director nominees for the next annual meeting of stockholders or
to otherwise fill board of director vacancies. The members of the Nominating Committee are
Mr. Konstantinos Psaltis (chairman) and Mr. Kyriacos Riris (member).
We have established a Sustainability Committee as of February 18, 2021, comprised of Ms. Semiramis
Paliou (member) and Mr. Apostolos Kontoyannis (Chairman) which, as directed by its written charter, is
responsible for Identifying, evaluating and making recommendations to the Board with respect to significant
policies and performance on matters relating to sustainability, including environmental risks and
opportunities, social responsibility and impact and the health and safety of all of our stakeholders.
We have established an Executive Committee comprised of the four directors, Ms. Semiramis Paliou
(Chairperson), Mr. Anastasios Margaronis (member), Mr. Ioannis Zafirakis (member), and Mr. Eleftherios
Papatrifon (member). The Executive Committee has, to the extent permitted by law, the powers of the
Board of Directors in the management of the business and affairs of the Company.
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We also maintain directors’ and officers’ insurance, pursuant to which we provide insurance coverage
against certain liabilities to which our directors and officers may be subject, including liability incurred under
U.S. securities law. Our executive directors have employment agreements, which, if terminated without
cause, entitle them to continue receiving their basic salary through the date of the agreement’s expiration.
D. Employees
We crew our vessels primarily with Greek officers and Filipino officers and seamen and may also employ
seamen from Poland, Romania and Ukraine. DSS and DWM are responsible for identifying the appropriate
officers and seamen mainly through crewing agencies. The crewing agencies handle each seaman's
training, travel and payroll. The management companies ensure that all our seamen have the qualifications
and licenses required to comply with international regulations and shipping conventions. Additionally, our
seafaring employees perform most commissioning work and supervise work at shipyards and drydock
facilities. We typically man our vessels with more crew members than are required by the country of the
vessel's flag in order to allow for the performance of routine maintenance duties.
The following table presents the number of shoreside personnel employed by DSS and the number of
seafaring personnel employed by our vessel-owning subsidiaries as of December 31, 2022, 2021 and
2020.
Year Ended December 31,
2022
2021
2020
Shoreside
113
111
107
Seafaring
907
708
811
Total
1,020
819
918
E. Share Ownership
With respect to the total amount of common shares, Series B Preferred Shares, Series C Preferred Shares
and Series D Preferred Shares owned by our officers and directors, individually and as a group, see “Item
7. Major Shareholders and Related Party Transactions—A. Major Shareholders.”
F.
Disclosure of Registrant's Action to Recover Erroneously Awarded
Compensation
Not applicable.
Item 7. Major Shareholders and Related Party Transactions
A. Major Shareholders
The following table sets forth information regarding ownership of our common stock of which we are aware
as of the date of this annual report, for (i) beneficial owners of five percent or more of our common stock
and (ii) our officers and directors, individually and as a group. All of our shareholders, including the
shareholders listed in this table, are entitled to one vote for each share of common stock held.
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Title of Class
Identity of Person or Group
Number of
Shares Owned
Percent of
Class
*
Common Stock,
Semiramis Paliou (1)
16,883,779
15.9%
par value $0.01
Anastasios Margaronis (2)
8,530,996
8.0%
Sea Trade Holdings Inc. (3)
15,886,087
14.9%
All other officers and directors as a group (4)
8,069,027
7.6%
* Based on 106,437,232 common shares outstanding as of March 27, 2023.
(1) Mrs. Semiramis Paliou indirectly may be deemed to beneficially own 15.9% beneficially owned
through Tuscany Shipping Corp., or Tuscany, and through 4 Sweet Dreams S.A., as the result
of her ability to control the vote and disposition of such entities. As of December 31, 2020, 2021
and 2022, Mrs. Semiramis Paliou owned indirectly 17.8%, 18.9% and 16.0%, respectively, of
our outstanding common stock. Additionally, Mrs. Paliou owns, through Tuscany, 10,675 shares
of Series C Preferred Stock, par value $0.01 per share, and 400 shares of Series D Preferred
Stock, par value $0.01 per share. The Series C Preferred Stock vote with our common shares
and each share of the Series C Preferred Stock entitle the holder thereof to 1,000 votes on all
matters submitted to a vote of the common stockholders of the Company. The Series D
Preferred Stock vote with the common shares and each share of the Series D Preferred Stock
entitles the holder thereof to up to 100,000 votes on all matters submitted to a vote of the
common stockholders of the Company, subject to a maximum number of votes eligible to be
cast by such holder derived from the Series D Preferred Shares and any other voting security
of the Company held by the holder to be equal to the lesser of (i) 36% of the total number of
votes entitled to vote on any matter put to shareholders of the Company and (ii) the sum of the
holder’s aggregate voting power derived from securities other than the Series D Preferred Stock
and 15% of the total number of votes entitled to be cast on matters put to shareholders of the
Company. Through her beneficial ownership of common shares and shares of Series C
Preferred Stock and shares of Series D Preferred Stock, Paliou currently controls 36.0% of the
vote of any matter submitted to the vote of the common shareholders.
(2) Mr. Anastasios Margaronis, our President and a member of our board of directors may be
deemed to beneficially own Anamar Investments Inc. and Coronis Investments Inc. as the result
of his ability to control the vote and disposition of such entities, for an aggregate of 8,530,996
shares.
(3) This information is derived from a Schedule 13G/A filed with the SEC on February 13, 2023,
adjusting the percentage figure based on the common shares issued and outstanding as of the
date of this report.
(4) Ms. Semiramis Paliou and Mr. Anastasios Margaronis are our only directors or officers that
beneficially own 5% or more of our outstanding common stock. Mr. Ioannis Zafirakis may be
deemed to beneficially own 2,006,975 shares, or 1.9% of our outstanding common stock,
beneficially owned through Abra Marinvest Inc.; and Mr. Simeon Palios may be deemed to
beneficially own 3,378,964 shares, or 3.2% of our outstanding common stock, beneficially
owned through Taracan Investments S.A. and Limon Compania Financiera S.A. All other
officers and directors each own less than 1% of our outstanding common stock.
As of March 23, 2023, we had 111 shareholders of record, 94 of which were located in the United States
and held an aggregate of 94,001,022 of our common shares, representing 84.7% of our outstanding
common shares. However, one of the U.S. shareholders of record is CEDE CO., a nominee of The
Depository Trust Company, which held 93,290,614 of our common shares as of that date. Accordingly, we
believe that the shares held by CEDE CO. include common shares beneficially owned by both holders
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in the United States and non-U.S. beneficial owners. We are not aware of any arrangements the operation
of which may at a subsequent date result in our change of control.
Holders of the Series B Preferred Shares generally have no voting rights except (1) in respect of
amendments to the Articles of Incorporation which would adversely alter the preferences, powers or rights
of the Series B Preferred Shares or (2) in the event that we propose to issue any parity stock if the
cumulative dividends payable on outstanding Preferred Stock are in arrears or any senior stock. However,
if and whenever dividends payable on the Series B Preferred Shares are in arrears for six or more quarterly
periods, whether or not consecutive, holders of Series B Preferred Shares (voting together as a class with
all other classes or series of parity stock upon which like voting rights have been conferred and are
exercisable) will be entitled to elect one additional director to serve on our board of directors until such time
as all accumulated and unpaid dividends on the Series B Preferred Shares have been paid in full.
B. Related Party Transactions
OceanPal Inc., or OceanPal
Since November 2021, we own 500,000 of OceanPal’s Series B Preferred Shares, 10,000 of OceanPal’s
Series C Convertible Preferred Shares. Series B Preferred Shares entitle the holder to 2,000 votes on all
matters submitted to vote of the stockholders of the Company, provided however, that the total number of
votes shall not exceed 34% of the total number of votes, provided further, that the total number of votes
entitled to vote, including common stock or any other voting security, would not exceed 49% of the total
number of votes.
Series C Preferred Shares do not have voting rights unless related to amendments of the Articles of
Incorporation that adversely alter the preference, powers or rights of the Series C Preferred Shares or to
issue Parity Stock or create or issue Senior Stock. Series C Preferred Shares have become convertible
into common stock at the Company’s option since the first anniversary of the issue date, at a conversion
price equal to the lesser of $6.5 and the 10-trading day trailing VWAP of OceanPal’s common shares,
subject to adjustments. Additionally, Series C Preferred Shares have a cumulative preferred dividend
accruing at the rate of 8% per annum, payable in cash or, at OceanPal’s election, in kind and has a
liquidation preference equal to the stated value of $10,000.
On September 20, 2022, we acquired 25,000 Series D Preferred Shares, par value $0.01 per share, as
part of the consideration provided to us for the acquisition of
Baltimore
, which was sold to OceanPal,
pursuant to a Memorandum of Agreement dated June 13, 2022, for $22.0 million. The shares are
convertible into common stock at the Company’s option, provided however that the Company would not
beneficially own greater than 49% of the outstanding shares of common stock; they have no voting rights;
they have a cumulative dividend accruing at the rate of 7% per annum payable in cash or, at OceanPal’s
election, in PIK shares; and they have a liquidation preference equal $1,000 per share. On December 15,
2022, we distributed the Series D Preferred Shares as non-cash dividend to our shareholders of record on
November 28, 2022.
On February 8, 2023, we acquired 13,157 of OceanPal’s Series D Preferred Shares as part of the
consideration provided to us for the acquisition of
Melia
, which was sold to OceanPal, pursuant to a
Memorandum of Agreement dated February 1, 2023, for $14.0 million. On February 22, 2023, we declared
the distribution on May 16, 2023 of the 13,157 Series D Preferred Shares of OceanPal to our shareholders
of record as of April 24, 2023. The distribution of the 13,157 Series D Preferred Shares, or common shares
issuable upon conversion thereof is subject to there being an effective registration statement in place
covering the distribution of the Series D Preferred Shares or common shares of OceanPal Inc.
Dividend income from the OceanPal preferred shares during 2022 amounted to $0.9 million.
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OceanPal Inc. Non-Competition Agreement
We have entered into a non-competition agreement with OceanPal Inc. ("OceanPal"), dated November 2,
2021, pursuant to which we granted to OceanPal (i) a right of first refusal over any opportunity available to
us (or any of our subsidiaries) to acquire or charter-in any dry bulk vessel that is larger than 70,000
deadweight tons and that was built prior to 2006 and (ii) a right of first refusal over any employment
opportunity for a dry bulk vessel pursuant to a spot market charter presented or available to us with respect
to any vessel owned or chartered in, directly or indirectly, by us. The non-competition agreement also
prohibits us and OceanPal from soliciting each other's employees. The terms of the non-competition
agreement provide that it will terminate on the date that (i) our ownership of OceanPal’s equity securities
represents less than 10% of total outstanding voting power and (ii) we and OceanPal share no common
executive officers.
OceanPal Inc. Right of First Refusal
On November 2, 2021 we entered into a right of first refusal agreement with OceanPal Inc. pursuant to
which we granted OceanPal Inc. a right of first refusal over six drybulk carriers owned by us, as of the date
of the agreement, and identified in the agreement. Pursuant to this right of first refusal, OceanPal Inc. has
the right, but not the obligation, to purchase one or all of the six identified vessels from us when and if we
make a determination to sell one or more of the vessels at a price equal to the fair market value of each
vessel at the time of sale, as determined by the average of two independent shipbroker valuations from
brokers mutually agreeable to us and OceanPal Inc. If OceanPal Inc. does not exercise its right to purchase
a vessel, we have the right to sell the vessel to any third party for a period of three months from the date
notified OceanPal Inc. of our intent to sell the vessel. As of the date of the annual report, OceanPal has
acquired two of the six vessels.
Series D Preferred Stock
In June 2021, we issued 400 shares of its newly-designated Series D Preferred Stock, par value $0.01 per
share, to Tuscany Shipping Corp., an entity controlled by its Chief Executive Officer, Mrs. Semiramis
Paliou, for an aggregate purchase price of $360,000. The Series D Preferred Stock has no dividend or
liquidation rights. The Series D Preferred Stock will vote with the common shares of the Company, and
each share of the Series D Preferred Stock shall entitle the holder thereof to up to 100,000 votes, on all
matters submitted to a vote of the stockholders of the Company, subject to a maximum number of votes
eligible to be cast by such holder derived from the Series D Preferred Shares and any other voting security
of the Company held by the holder to be equal to the lesser of (i) 36% of the total number of votes entitled
to vote on any matter put to shareholders of the Company and (ii) the sum of the holder’s aggregate voting
power derived from securities other than the Series D Preferred Stock and 15% of the total number of votes
entitled to be cast on matters put to shareholders of the Company. The Series D Preferred Stock is
transferable only to the holder’s immediate family members and to affiliated persons. The issuance of
shares of Series D Preferred Stock to Tuscany Shipping Corp. was approved by an independent committee
of the Board of Directors of the Company, which received a fairness opinion from an independent third
party that the transaction was fair from a financial point of view to the Company.
Series C Preferred Stock
In January 2019, we issued 10,675 shares of newly-designated Series C Preferred Stock, par value $0.01
per share, to an affiliate of our Chairman, Mr. Simeon Palios, for an aggregate purchase price of
approximately $1.07 million. The Series C Preferred Stock vote with the common shares of the Company,
and each share entitles the holder thereof to 1,000 votes on all matters submitted to a vote of the
stockholders of the Company. The Series C Preferred Stock has no dividend or liquidation rights and
cannot be transferred without the consent of the Company except to the holder’s affiliates and immediate
family members. The issuance of shares of Series C Preferred Stock was approved by an independent
96
committee of the Board of Directors, which received a fairness opinion from an independent third party that
the transaction was fair from a financial point of view to the Issuer. In September 2020, the Series C
Preferred Shares were transferred from an affiliate of Mr. Simeon Palios to an affiliate of the Company’s
Chief Executive Officer, Mrs. Semiramis Paliou.
Steamship Shipbroking Enterprises Inc.
Steamship, an affiliated entity that was controlled by our Chairman of the Board, Mr. Simeon Palios until
January 15, 2023 and our CEO Ms. Semiramis Paliou thereafter, provides to us brokerage services for an
annual fee pursuant to a Brokerage Services Agreement. In 2022, brokerage fees amounted to $3.3 million
and we paid an additional amount of $1.2 million for commissions on the sale and purchases of vessels.
The terms of this relationship are currently governed by a Brokerage Services Agreement dated July 1,
2022 due to expire on June 30, 2023.
Altair Travel Agency S.A.
Altair Travel Agency S.A., or Altair, an affiliated entity that is controlled by our Chairman of the Board,
Mr. Simeon Palios, provides us with travel related services. Travel related expenses in 2022, amounted to
$2.6 million.
Diana Wilhelmsen Management Limited
Diana Wilhelmsen Management Limited, or DWM, is a 50/50 joint venture which provides management
services to certain vessels in our fleet for a fixed monthly fee and commercial services charged as a
percentage of the vessels’ gross revenues. Management fees in 2022 amounted to $0.5 million,
commissions on revenues amounted to $0.2 million and management fees capitalized amounted to $0.3
million.
C. Interests of Experts and Counsel
Not Applicable.
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Item 8. Financial information
A. Consolidated statements and other financial information
See “Item 18. Financial Statements.”
Legal Proceedings
We have not been involved in any legal proceedings which may have, or have had, a significant effect on
our business, financial position, results of operations or liquidity, nor are we aware of any proceedings that
are pending or threatened which may have a significant effect on our business, financial position, results
of operations or liquidity. From time to time, we may be subject to legal proceedings and claims in the
ordinary course of business, principally personal injury and property casualty claims. We expect that these
claims would be covered by insurance, subject to customary deductibles. Those claims, even if lacking
merit, could result in the expenditure of significant financial and managerial resources.
Dividend Policy
Our board of directors reviews and amends our dividend policy from time to time in light of our business
plans and other factors. In order to position us to take advantage of market opportunities in a then-
deteriorating market, our board of directors, beginning with the fourth quarter of 2008, suspended our
common stock dividend. As a result of improving market conditions in 2021, our board of directors elected
to declare quarterly dividends with respect to the third quarter of 2021 until the fourth quarter of 2022, two
special noncash dividends and its intention to declare dividends of $0.15 per share for each quarter in
2023, as described in Item 4A. History and development of the Company.
The declaration and payment of dividends will always be subject to the discretion of our board of directors.
The timing and amount of any dividends declared will depend on, among other things, our earnings,
financial condition and cash requirements and availability, our ability to obtain debt and equity financing on
acceptable terms as contemplated by our growth strategy and provisions of Marshall Islands law affecting
the payment of dividends. In addition, other external factors, such as our lenders imposing restrictions on
our ability to pay dividends under the terms of our loan facilities, may limit our ability to pay
dividends. Further, under the terms of our loan agreements, we may not be permitted to pay dividends
that would result in an event of default or if an event of default has occurred and is continuing.
Marshall Islands law generally prohibits the payment of dividends other than from surplus or when a
company is insolvent or if the payment of the dividend would render the company insolvent. Also, our loan
facilities and Bond prohibit the payment of dividends should an event of default arise.
We believe that, under current law, any dividends that we have paid and may pay in the future from earnings
and profits constitute “qualified dividend income” and as such are generally subject to a 20% United States
federal income tax rate with respect to non-corporate United States shareholders. Distributions in excess
of our earnings and profits will be treated first as a non-taxable return of capital to the extent of a United
States shareholder’s tax basis in its common stock on a dollar-for-dollar basis and thereafter as capital
gain. Please see the section of this annual report entitled “Taxation” under Item 10.E for additional
information relating to the tax treatment of our dividend payments.
Cumulative dividends on our Series B Preferred Shares are payable on each January 15, April 15, July 15
and October 15, when, as and if declared by our board of directors or any authorized committee thereof
out of legally available funds for such purpose. The dividend rate for our Series B Preferred Shares is
8.875% per annum per $25.00 of liquidation preference per share (equal to $2.21875 per annum per share)
and is not subject to adjustment. Since February 14, 2019, we may redeem, in whole or from time to time
in part, the Series B Preferred Shares at a redemption price of $25.00 per share plus an amount equal to
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all accumulated and unpaid dividends thereon to the date of redemption, whether or not declared.
Marshall Islands law provides that we may pay dividends on and redeem the Series B Preferred Shares
only to the extent that assets are legally available for such purposes. Legally available assets generally are
limited to our surplus, which essentially represents our retained earnings and the excess of consideration
received by us for the sale of shares above the par value of the shares. In addition, under Marshall Islands
law we may not pay dividends on or redeem Series B Preferred Shares if we are insolvent or would be
rendered insolvent by the payment of such a dividend or the making of such redemption.
B. Significant Changes
There have been no significant changes since the date of the annual consolidated financial statements
included in this annual report, other than those described in Note 15 “Subsequent events” of our annual
consolidated financial statements.
Item 9. The Offer and Listing
A. Offer and Listing Details
The trading market for shares of our common stock is the NYSE, on which our shares trade under the
symbol “DSX”.
Our Series B Preferred Stock has traded on the NYSE under the symbol “DSXPRB” since February 21,
2014.
B. Plan of distribution
Not Applicable.
C. Markets
Our common shares have traded on the NYSE since March 23, 2005 under the symbol “DSX,” our Series
B Preferred Stock has traded on the NYSE under the symbol "DSXPRB" since February 21, 2014. Since
February 1, 2022, our 8.375% Senior Unsecured Bond due 2026 commenced trading on the Oslo Stock
Exchange, under the symbol "DIASH02."
D. Selling Shareholders
Not Applicable.
E. Dilution
Not Applicable.
F.
Expenses of the Issue
Not Applicable.
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Item 10. Additional Information
A. Share capital
Not Applicable.
B. Memorandum and articles of association
Our current amended and restated articles of incorporation have been filed as exhibit 1 to our Form 6-K
filed with the SEC on May 29, 2008 with file number 001-32458, and our current amended and restated
bylaws have been filed as exhibit 3.2 to our Form F-3 filed with the SEC on May 6, 2009 with file number
333-159016. The information contained in these exhibits is incorporated by reference herein.
Information regarding the rights, preferences and restrictions attaching to each class of our shares is
described in the section entitled “Description of Capital Stock” in the accompanying prospectus to our
effective Registration Statement on Form F-3 filed with the SEC on June 6, 2018 with file number 333-
225964, including any subsequent amendments or reports filed for the purpose of updating such
description, provided that since the date of that Registration Statement, (i) the number of our outstanding
shares of common stock has increased to 106,437,232 as of March 27, 2023, and (ii) the Stockholder
Rights Plan described therein has been replaced by a Stockholders Rights Agreement dated as of January
15, 2016, as described below under “Stockholders Rights Agreement ,” (iii) in January 2019, we issued
10,675 shares of newly-designated Series C Preferred Stock, par value $0.01 per share and (iv) in June
2021, we issued 400 shares of its newly-designated Series D Preferred Stock, par value $0.01 per share.
For additional information about our Series B Preferred Shares, please see the section entitled "Description
of Registrant's Securities to be Registered" of our registration statement on Form 8-A filed with the SEC
on February 13, 2014 and incorporated by reference herein. For additional information about our Series C
Preferred Stock and Series D Preferred Stock, please see the Form 6-K filed with the SEC on February 6,
2019 and June 23, 2021, respectively, each incorporated by reference herein.
Stockholders Rights Agreement
On January 15, 2016, we entered into a Stockholders Rights Agreement with Computershare Trust
Company, N.A., as Rights Agent, to replace the Amended and Restated Stockholders Rights Agreement,
dated October 7, 2008.
Under the Stockholders Rights Agreement, we declared a dividend payable of one preferred stock
purchase right, or Right, for each share of common stock outstanding at the close of business on January
26, 2016. Each Right entitles the registered holder to purchase from us one one-thousandth of a share of
Series A participating preferred stock, par value $0.01 per share, at an exercise price of $40.00 per share.
The Rights will separate from the common stock and become exercisable only if a person or group acquires
beneficial ownership of 18.5% or more of our common stock (including through entry into certain derivative
positions) in a transaction not approved by our Board of Directors. In that situation, each holder of a Right
(other than the acquiring person, whose Rights will become void and will not be exercisable) will have the
right to purchase, upon payment of the exercise price, a number of shares of our common stock having a
then-current market value equal to twice the exercise price. In addition, if the Company is acquired in a
merger or other business combination after an acquiring person acquires 18.5% or more of our common
stock, each holder of the Right will thereafter have the right to purchase, upon payment of the exercise
price, a number of shares of common stock of the acquiring person having a then-current market value
equal to twice the exercise price. The acquiring person will not be entitled to exercise these Rights. Under
the Stockholders Rights Agreement's terms, it will expire on January 14, 2026. A copy of the Stockholders
Rights Agreement and a summary of its terms are contained in the Form 8-A12B filed with the SEC on
January 15, 2016, with file number 001-32458.
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C. Material contracts
Attached as exhibits to this annual report are the contracts we consider to be both material and not entered
into in the ordinary course of business, which (i) are to be performed in whole or in part on or after the filing
date of this annual report or (ii) were entered into not more than two years before the filing date of this
annual report. Other than these agreements, we have no material contracts, other than contracts entered
into in the ordinary course of business, to which the Company or any member of the group is a party. A
description of these is included in our description of our agreements generally: we refer you to Item 5.B for
a discussion of our loan facilities.
D. Exchange Controls
Under Marshall Islands, Panamanian, Cypriot and Greek law, there are currently no restrictions on the
export or import of capital, including foreign exchange controls or restrictions that affect the remittance of
dividends, interest or other payments to non-resident holders of our securities.
E. Taxation
In the opinion of Seward Kissel LLP, the following is a discussion of the material Marshall Islands and
U.S. federal income tax considerations of the ownership and disposition by a U.S. Holder and a Non-
U.S. Holder, each as defined below, of the common stock. This discussion does not purport to deal with
the tax consequences of owning common stock to all categories of investors, some of which, such as
dealers in securities or commodities, financial institutions, insurance companies, tax-exempt organizations,
U.S. expatriates, persons liable for the alternative minimum tax, persons who hold common stock as part
of a straddle, hedge, conversion transaction or integrated investment, U.S. Holders whose functional
currency is not the United States dollar, persons required to recognize income for U.S. federal income tax
purposes no later than when such income is reported on an “applicable financial statement,” investors
subject to the “base erosion and anti-avoidance” tax and investors that own, actually or under applicable
constructive ownership rules, 10% or more of the Company’s common stock, may be subject to special
rules. This discussion deals only with holders who hold the common stock as a capital asset. You are
encouraged to consult your own tax advisors concerning the overall tax consequences arising in your own
particular situation under U.S. federal, state, local or foreign law of the ownership of common stock.
Marshall Islands Tax Considerations
The Company is incorporated in the Marshall Islands. Under current Marshall Islands law, the company is
not subject to tax on income or capital gains, and no Marshall Islands withholding tax will be imposed upon
payments of dividends by us to our shareholders.
United States Federal Income Taxation
The following discussion is based upon the provisions of the U.S. Internal Revenue Code of 1986, as
amended (the “Code”), existing and proposed U.S. Treasury Department regulations, (the “Treasury
Regulations”), administrative rulings, pronouncements and judicial decisions, all as of the date of this
Annual Report. This discussion assumes that we do not have an office or other fixed place of business in
the United States. Unless the context otherwise requires, the reference to Company below shall be meant
to refer to both the Company and its vessel-owning and operating subsidiaries.
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Taxation of the Company’s Shipping Income
In General
The Company anticipates that it will derive substantially all of its gross income from the use and operation
of vessels in international commerce and that this income will principally consist of freights from the
transportation of cargoes, hire or lease from time or voyage charters and the performance of services
directly related thereto, which the Company refers to as “Shipping Income.”
Shipping Income that is attributable to transportation that begins or ends, but that does not both begin and
end, in the United States will be considered to be 50% derived from sources within the United States.
Shipping Income attributable to transportation that both begins and ends in the United States will be
considered to be 100% derived from sources within the United States. The Company is not permitted by
law to engage in transportation that gives rise to 100% U.S. source Shipping Income. Shipping Income
attributable to transportation exclusively between non-U.S. ports will be considered to be 100% derived
from sources outside the United States. Shipping Income derived from sources outside the United States
will not be subject to U.S. federal income tax.
Based upon the Company’s anticipated shipping operations, the Company’s vessels will operate in various
parts of the world, including to or from U.S. ports. Unless exempt from U.S. federal income taxation under
Section 883 of the Code, the Company will be subject to U.S. federal income taxation, in the manner
discussed below, to the extent its Shipping Income is considered derived from sources within the United
States.
In the year ended December 31, 2022, approximately 3.0% of the Company’s shipping income was
attributable to the transportation of cargoes either to or from a U.S. port. Accordingly, approximately 1.5%
of the Company’s shipping income would be treated as derived from U.S. sources for the year ended
December 31, 2022. In the absence of exemption from U.S. federal income tax under Section 883 of the
Code, the Company would have been subject to a 4% tax on its gross U.S. source Shipping Income, equal
to $0.2 for the year ended December 31, 2022.
Application of Exemption under Section 883 of the Code
Under the relevant provisions of Section 883 of the Code and the final Treasury Regulations promulgated
thereunder, a foreign corporation will be exempt from U.S. federal income taxation on its U.S. source
Shipping Income if:
(1) It is organized in a qualified foreign country which, as defined, is one that grants an equivalent
exemption from tax to corporations organized in the United States in respect of the Shipping
Income for which exemption is being claimed under Section 883 of the Code, or the “Country of
Organization Requirement”; and
(2) It can satisfy any one of the following two stock ownership requirements:
• more than 50% of its stock, in terms of value, is beneficially owned by qualified
shareholders which, as defined, includes individuals who are residents of a qualified
foreign country, or the “50% Ownership Test”; or
• its stock is “primarily and regularly” traded on an established securities market located
in the United States or a qualified foreign country, or the “Publicly Traded Test”.
The U.S. Treasury Department has recognized the Marshall Islands, Panama and Cyprus the countries of
incorporation of each of the Company and its subsidiaries that earns Shipping Income, as a qualified foreign
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country. Accordingly, the Company and each of the subsidiaries satisfy the Country of Organization
Requirement.
For the 2022 taxable year, the Company believes that it is unlikely that the 50% Ownership Test was
satisfied. Therefore, the eligibility of the Company and each subsidiary to qualify for exemption under
Section 883 of the Code is wholly dependent upon the Company’s ability to satisfy the Publicly Traded
Test.
Under the Treasury Regulations, stock of a foreign corporation is considered “primarily traded” on an
established securities market in a country if the number of shares of each class of stock that is traded
during the taxable year on all established securities markets in that country exceeds the number of shares
in each such class that is traded during that year on established securities markets in any other single
country. The Company’s common stock was “primarily traded” on the NYSE during the 2022 taxable year.
Under the Treasury Regulations, the Company’s common stock will be considered to be “regularly traded”
on the NYSE if: (1) more than 50% of its common stock, by voting power and total value, is listed on the
NYSE, referred to as the “Listing Threshold”, (2) its common stock is traded on the NYSE, other than in
minimal quantities, on at least 60 days during the taxable year (or one-sixth of the days during a short
taxable year), which is referred to as the “Trading Frequency Test”; and (3) the aggregate number of shares
of its common stock traded on the NYSE during the taxable year is at least 10% of the average number of
shares of its common stock outstanding during such taxable year (as appropriately adjusted in the case of
a short taxable year), which is referred to as the “Trading Volume Test”. The Trading Frequency Test and
Trading Volume Test are deemed to be satisfied under the Treasury Regulations if the Company’s common
stock is regularly quoted by dealers making a market in the common stock.
The Company believes that its common stock has satisfied the Listing Threshold, as well as the Trading
Frequency Test and Trading Volume Tests, during the 2022 taxable year.
Notwithstanding the foregoing, the Treasury Regulations provide, in pertinent part, that stock of a foreign
corporation will not be considered to be “regularly traded” on an established securities market for any
taxable year during which 50% or more of such stock is owned, actually or constructively under specified
stock attribution rules, on more than half the days during the taxable year by persons, or “5%
Shareholders”, who each own 5% or more of the value of such stock, or the “5% Override Rule.” For
purposes of determining the persons who are 5% Shareholders, a foreign corporation may rely on
Schedules 13D and 13G filings with the SEC.
Based on Schedules 13D and 13G filings, during the 2022 taxable year, less than 50% of the Company’s
common stock was owned by 5% Shareholders. Therefore, the Company believes that it is not subject to
the 5% Override Rule and thus has satisfied the Publicly Traded Test for the 2022 taxable year. However,
there can be no assurance that the Company will continue to satisfy the Publicly Traded Test in future
taxable years. For example, the Company could be subject to the 5% Override Rule if another 5%
Shareholder in combination with the Company’s existing 5% Shareholders were to own 50% or more of
the Company’s common stock. In such a case, the Company would be subject to the 5% Override Rule
unless it could establish that, among the shares of the common stock owned by the 5% Shareholders,
sufficient shares are owned by qualified shareholders, for purposes of Section 883 of the Code, to preclude
non-qualified shareholders from owning 50% or more of the Company’s common stock for more than half
the number of days during the taxable year. The requirements of establishing this exception to the 5%
Override Rule are onerous and there is no assurance the Company will be able to satisfy them.
Based on the foregoing, the Company believes that it satisfied the Publicly Traded Test and therefore
believes that it was exempt from U.S. federal income tax under Section 883 of the Code, during the 2022
taxable year, and intends to take this position on its 2022 U.S. federal income tax returns.
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Taxation in Absence of Exemption Under Section 883 of the Code
To the extent the benefits of Section 883 of the Code are unavailable with respect to any item of U.S.
source Shipping Income, the Company and each of its subsidiaries would be subject to a 4% tax imposed
on such income by Section 887 of the Code on a gross basis, without the benefit of deductions, which is
referred to as the “4% Gross Basis Tax Regime”. Since under the sourcing rules described above, no more
than 50% of the Company’s Shipping Income would be treated as being derived from U.S. sources, the
maximum effective rate of U.S. federal income tax on the Company’s Shipping Income would never exceed
2% under the 4% Gross Basis Tax Regime.
Based on its U.S. source Shipping Income for the 2022 taxable year and in the absence of exemption
under Section 883 of the Code, the Company would be subject to $0.2 of U.S. federal income tax under
the 4% Gross Basis Tax Regime.
The 4% Gross Basis Tax Regime would not apply to U.S. source Shipping Income to the extent considered
to be “effectively connected” with the conduct of a U.S. trade or business. In the absence of exemption
under Section 883 of the Code, such “effectively connected” U.S. source Shipping Income, net of applicable
deductions, would be subject to U.S. federal income tax currently imposed at a rate of 21%. In addition,
earnings “effectively connected” with the conduct of such U.S. trade or business, as determined after
allowance for certain adjustments, and certain interest paid or deemed paid attributable to the conduct of
the U.S. trade or business may be subject to U.S. federal branch profits tax imposed at a rate of 30%. The
Company’s U.S. source Shipping Income would be considered “effectively connected” with the conduct of
a U.S. trade or business only if: (1) the Company has, or is considered to have, a fixed place or business
in the United States involved in the earning of Shipping Income; and (2) substantially all of the Company’s
U.S. source Shipping Income is attributable to regularly scheduled transportation, such as the operation of
a vessel that followed a published schedule with repeated sailings at regular intervals between the same
points for voyages that begin or end in the United States, or, in the case of income from the chartering of
a vessel, is attributable to a fixed place of business in the United States. We do not intend to have, or
permit circumstances that would result in having a vessel operating to the United States on a regularly
scheduled basis. Based on the foregoing and on the expected mode of our shipping operations and other
activities, we believe that none of our U.S. source Shipping Income will be effectively connected with the
conduct of a U.S. trade or business.
Gain on Sale of Vessels
Regardless of whether we qualify for exemption under Section 883 of the Code, we will not be subject to
U.S. federal income taxation with respect to gain realized on a sale of a vessel, provided the sale is
considered to occur outside of the United States under U.S. federal income tax principles. In general, a
sale of a vessel will be considered to occur outside of the United States for this purpose if title to the vessel,
and risk of loss with respect to the vessel, pass to the buyer outside of the United States. It is expected
that any sale of a vessel by us will be considered to occur outside of the United States.
United States Taxation of U.S. Holders
The following is a discussion of the material U.S. federal income tax considerations relevant to an
investment decision by a U.S. Holder, as defined below, with respect to our common stock. This discussion
does not purport to deal with the tax consequences of owning our common stock to all categories of
investors, some of which may be subject to special rules. You are encouraged to consult your own tax
advisors concerning the overall tax consequences arising in your own particular situation under U.S.
federal, state, local or foreign law of the ownership of our common stock.
As used herein, the term “U.S. Holder” means a beneficial owner of our common stock that (i) is a U.S.
citizen or resident, a U.S. corporation or other U.S. entity taxable as a corporation, an estate, the income
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of which is subject to U.S. federal income taxation regardless of its source, or a trust if (a) a court within
the United States is able to exercise primary jurisdiction over the administration of the trust and one or
more U.S. persons have the authority to control all substantial decisions of the trust or (b) it has an election
in place to be treated as a United States person; and (ii) owns the common stock as a capital asset,
generally, for investment purposes.
If a partnership holds our common stock, the tax treatment of a partner will generally depend upon the
status of the partner and upon the activities of the partnership. If you are a partner in a partnership holding
our common stock, you are encouraged to consult your own tax advisor on this issue.
Distributions
Subject to the discussion of passive foreign investment companies below, any distributions made by the
Company with respect to its common stock to a U.S. Holder will generally constitute dividends, which may
be taxable as ordinary income or “qualified dividend income” as described in more detail below, to the
extent of the Company’s current or accumulated earnings and profits, as determined under U.S. federal
income tax principles. Distributions in excess of the Company’s earnings and profits will be treated first as
a non-taxable return of capital to the extent of the U.S. Holder’s tax basis in his common stock on a dollar-
for-dollar basis and thereafter as capital gain. Because the Company is not a U.S. corporation, U.S. Holders
that are corporations will generally not be entitled to claim a dividends-received deduction with respect to
any distributions they receive from the Company.
Dividends paid to a U.S. Holder which is an individual, trust, or estate, referred to herein as a “U.S. Non-
Corporate Holder,” will generally be treated as “qualified dividend income” that is taxable to Holders at
preferential U.S. federal income tax rates, provided that (1) the common stock is readily tradable on an
established securities market in the United States (such as the NYSE on which the common stock is listed);
(2) the Company is not a passive foreign investment company for the taxable year during which the
dividend is paid or the immediately preceding taxable year (which the Company does not believe it is, has
been or will be); (3) the U.S. Non-Corporate Holder has owned the common stock for more than 60 days
in the 121-day period beginning 60 days before the date on which the common stock becomes ex-dividend;
and (4) the U.S. Non-Corporate Holder is not under an obligation (whether pursuant to a short sale or
otherwise) to make payments with respect to positions in substantially similar or related property. There is
no assurance that any dividends paid on our common stock will be eligible for these preferential rates in
the hands of a U.S. Non-Corporate Holder. Any dividends paid by the Company which are not eligible for
these preferential rates will be taxed as ordinary income to a U.S. Non-Corporate Holder. Special rules
may apply to any “extraordinary dividend,” generally, a dividend paid by us in an amount which is equal to
or in excess of ten percent of a U.S. Holder’s adjusted tax basis, or fair market value in certain
circumstances, in a share of our common stock. If we pay an “extraordinary dividend” on our common stock
that is treated as “qualified dividend income,” then any loss derived by a U.S. Individual Holder from the
sale or exchange of such common stock will be treated as long-term capital loss to the extent of such
dividend.
Sale, Exchange or other Disposition of Common Stock
Subject to the discussion of the PFIC rules below, a U.S. Holder generally will recognize taxable gain or
loss upon a sale, exchange or other disposition of the Company’s common stock in an amount equal to
the difference between the amount realized by the U.S. Holder from such sale, exchange or other
disposition and the U.S. Holder’s tax basis in such stock. Such gain or loss will be treated as long-term
capital gain or loss if the U.S. Holder’s holding period in the common stock is greater than one year at the
time of the sale, exchange or other disposition. Long-term capital gain of a U.S. Non-Corporate Holder is
taxable at preferential U.S. Federal income tax rates. A U.S. Holder’s ability to deduct capital losses is
subject to certain limitations.
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PFIC Status and Significant Tax Consequences
Special U.S. federal income tax rules apply to a U.S. Holder that holds stock in a foreign corporation
classified as a passive foreign investment company, or a “PFIC”, for U.S. federal income tax purposes. In
general, the Company will be treated as a PFIC with respect to a U.S. Holder if, for any taxable year in
which such Holder held the Company’s common stock, either:
• at least 75% of the Company’s gross income for such taxable year consists of passive
income (e.g., dividends, interest, capital gains and rents derived other than in the
active conduct of a rental business), or
• at least 50% of the average value of the assets held by the corporation during such
taxable year produce, or are held for the production of, such passive income.
For purposes of determining whether the Company is a PFIC, the Company will be treated as earning and
owning its proportionate share of the income and assets, respectively, of any of its subsidiary corporations
in which it owns at least 25% of the value of the subsidiary’s stock. Income earned, or deemed earned, by
the Company in connection with the performance of services would not constitute passive income. By
contrast, rental income would generally constitute passive income unless the Company is treated under
specific rules as deriving its rental income in the active conduct of a trade or business.
Based on the Company’s current operations and future projections, the Company does not believe that it
is, nor does it expect to become, a PFIC with respect to any taxable year. Although there is no legal
authority directly on point, the Company’s belief is based principally on the position that, for purposes of
determining whether the Company is a PFIC, the gross income the Company derives or is deemed to
derive from the time chartering and voyage chartering activities of its wholly-owned subsidiaries should
constitute services income, rather than rental income. Correspondingly, the Company believes that such
income does not constitute passive income, and the assets that the Company or its wholly-owned
subsidiaries own and operate in connection with the production of such income, in particular, the vessels,
do not constitute assets that produce or are held for the production of passive income for purposes of
determining whether the Company is a PFIC. The Company believes there is substantial legal authority
supporting its position consisting of case law and Internal Revenue Service, or the “IRS”, pronouncements
concerning the characterization of income derived from time charters and voyage charters as services
income for other tax purposes. However, there is also authority which characterizes time charter income
as rental income rather than services income for other tax purposes. It should be noted that in the absence
of any legal authority specifically relating to the statutory provisions governing PFICs, the IRS or a court
could disagree with this position. In addition, although the Company intends to conduct its affairs in a
manner to avoid being classified as a PFIC with respect to any taxable year, there can be no assurance
that the nature of its operations will not change in the future.
As discussed more fully below, if the Company were to be treated as a PFIC for any taxable year, a U.S.
Holder would be subject to different U.S. federal income taxation rules depending on whether the U.S.
Holder makes an election to treat the Company as a “Qualified Electing Fund,” which election is referred
to as a “QEF Election.” As discussed below, as an alternative to making a QEF Election, a U.S. Holder
should be able to make a “mark-to-market” election with respect to the common stock, which election is
referred to as a “Mark-to-Market Election”. If the Company were to be treated as a PFIC, a U.S. Holder
would be required to file with respect to taxable years ending on or after December 31, 2013 IRS Form
8621 to report certain information regarding the Company.
Taxation of U.S. Holders Making a Timely QEF Election
If a U.S. Holder makes a timely QEF Election, which U.S. Holder is referred to as an “Electing Holder”, the
Electing Holder must report each year for U.S. federal income tax purposes his pro rata share of the
106
Company’s ordinary earnings and net capital gain, if any, for the Company’s taxable year that ends with or
within the taxable year of the Electing Holder, regardless of whether or not distributions were received by
the Electing Holder from the Company. The Electing Holder’s adjusted tax basis in the common stock will
be increased to reflect amounts included in the Electing Holder’s income. Distributions received by an
Electing Holder that had been previously taxed will result in a corresponding reduction in the adjusted tax
basis in the common stock and will not be taxed again once distributed. An Electing Holder would generally
recognize capital gain or loss on the sale, exchange or other disposition of the common stock.
Taxation of U.S. Holders Making a Mark-to-Market Election
Alternatively, if the Company were to be treated as a PFIC for any taxable year and, as anticipated, the
common stock is treated as “marketable stock,” a U.S. Holder would be allowed to make a Mark-to-Market
Election with respect to the Company’s common stock. If that election is made, the U.S. Holder generally
would include as ordinary income in each taxable year the excess, if any, of the fair market value of the
common stock at the end of the taxable year over such Holder’s adjusted tax basis in the common
stock. The U.S. Holder would also be permitted an ordinary loss in respect of the excess, if any, of the U.S.
Holder’s adjusted tax basis in the common stock over its fair market value at the end of the taxable year,
but only to the extent of the net amount previously included in income as a result of the Mark-to-Market
Election. A U.S. Holder’s tax basis in his common stock would be adjusted to reflect any such income or
loss amount. Gain realized on the sale, exchange or other disposition of the common stock would be
treated as ordinary income, and any loss realized on the sale, exchange or other disposition of the common
stock would be treated as ordinary loss to the extent that such loss does not exceed the net mark-to-market
gains previously included by the U.S. Holder.
Taxation of U.S. Holders Not Making a Timely QEF Election or Mark-to-Market Election
Finally, if the Company were to be treated as a PFIC for any taxable year, a U.S. Holder who does not
make either a QEF Election or a Mark-to-Market Election for that year, whom is referred to as a “Non-
Electing Holder”, would be subject to special U.S. federal income tax rules with respect to (1) any excess
distribution (i.e., the portion of any distributions received by the Non-Electing Holder on the common stock
in a taxable year in excess of 125% of the average annual distributions received by the Non-Electing Holder
in the three (3) preceding taxable years, or, if shorter, the Non-Electing Holder’s holding period for the
common stock), and (2) any gain realized on the sale, exchange or other disposition of the common
stock. Under these special rules:
• the excess distribution or gain would be allocated ratably over the Non-Electing Holder’s
aggregate holding period for the common stock;
• the amount allocated to the current taxable year and any taxable years before the
Company became a PFIC would be taxed as ordinary income; and
• the amount allocated to each of the other taxable years would be subject to tax at the
highest rate of tax in effect for the applicable class of taxpayer for that year, and an
interest charge for the deemed tax deferral benefit would be imposed with respect to
the resulting tax attributable to each such other taxable year.
These penalties would not apply to a pension or profit sharing trust or other tax-exempt organization that
did not borrow funds or otherwise utilize leverage in connection with its acquisition of the common stock. If
a Non-Electing Holder who is an individual dies while owning the common stock, such Holder’s successor
generally would not receive a step-up in tax basis with respect to such stock.
U.S. Federal Income Taxation of “Non-U.S. Holders”
A beneficial owner of our common stock that is not a U.S. Holder (other than a partnership) is referred to
herein as a “Non-U.S. Holder.”
107
Dividends on Common Stock
Non-U.S. Holders generally will not be subject to U.S. federal income or withholding tax on dividends
received from us with respect to our common stock, unless that income is effectively connected with the
Non-U.S. Holder’s conduct of a trade or business in the United States. If the Non-U.S. Holder is entitled to
the benefits of a U.S. income tax treaty with respect to those dividends, that income is taxable in the United
States only if attributable to a permanent establishment maintained by the Non-U.S. Holder in the United
States.
Sale, Exchange or Other Disposition of Common Stock
Non-U.S. Holders generally will not be subject to U.S. federal income or withholding tax on any gain
realized upon the sale, exchange or other disposition of our common stock, unless:
• the gain is effectively connected with the Non-U.S. Holder’s conduct of a trade or
business in the United States. If the Non-U.S. Holder is entitled to the benefits of a U.S.
income tax treaty with respect to that gain, the gain is taxable in the United States only
if attributable to a permanent establishment maintained by the Non-U.S. Holder in the
United States; or
• the Non-U.S. Holder is an individual who is present in the United States for 183 days or
more during the taxable year of disposition and other conditions are met.
If the Non-U.S. Holder is engaged in a U.S. trade or business for U.S. federal income tax purposes, the
income from our common stock, including dividends and the gain from the sale, exchange or other
disposition of the common stock, that is effectively connected with the conduct of that U.S. trade or
business will generally be subject to U.S. federal income tax in the same manner as discussed in the
previous section relating to the taxation of U.S. Holders. In addition, in the case of a corporate Non-U.S.
Holder, such Holder’s earnings and profits that are attributable to the effectively connected income, subject
to certain adjustments, may be subject to an additional U.S. federal branch profits tax at a rate of 30%, or
at a lower rate as may be specified by an applicable U.S. income tax treaty.
Backup Withholding and Information Reporting
In general, dividend payments, or other taxable distributions, made within the United States to a holder will
be subject to U.S. federal information reporting requirements. Such payments will also be subject to U.S.
federal “backup withholding” if paid to a non-corporate U.S. holder who:
• fails to provide an accurate taxpayer identification number;
• is notified by the IRS that he has failed to report all interest or dividends required to be
shown on his U.S. federal income tax returns; or
• in certain circumstances, fails to comply with applicable certification requirements.
Non-U.S. Holders may be required to establish their exemption from information reporting and backup
withholding by certifying their status on an applicable IRS Form W-8.
If a holder sells his common stock to or through a U.S. office of a broker, the payment of the proceeds is
subject to both backup withholding and information reporting unless the holder establishes an exemption. If
a holder sells his common stock through a non-U.S. office of a non-U.S. broker and the sales proceeds are
paid to the holder outside the United States, then information reporting and backup withholding generally
will not apply to that payment. However, information reporting requirements, but not backup withholding,
will apply to a payment of sales proceeds, including a payment made to a holder outside the United States,
108
if the holder sells his common stock through a non-U.S. office of a broker that is a U.S. person or has some
other contacts with the United States.
Backup withholding is not an additional tax. Rather, a taxpayer generally may obtain a refund of any
amounts withheld under backup withholding rules that exceed the taxpayer’s U.S. federal income tax
liability by filing a refund claim with the IRS.
U.S. Holders who are individuals (and to the extent specified in applicable Treasury Regulations, certain
U.S. entities) who hold “specified foreign financial assets” (as defined in Section 6038D of the Code) are
required to file IRS Form 8938 with information relating to the asset for each taxable year in which the
aggregate value of all such assets exceeds $75,000 at any time during the taxable year or $50,000 on the
last day of the taxable year (or such higher dollar amount as prescribed by applicable Treasury
Regulations). Specified foreign financial assets would include, among other assets, our common stock,
unless the common stock is held through an account maintained with a U.S. financial institution. Substantial
penalties apply to any failure to timely file IRS Form 8938, unless the failure is shown to be due to
reasonable cause and not due to willful neglect. Additionally, in the event a U.S. Holder who is an individual
(and to the extent specified in applicable Treasury regulations, a U.S. entity) that is required to file IRS
Form 8938 does not file such form, the statute of limitations on the assessment and collection of U.S.
federal income taxes of such holder for the related tax year may not close until three (3) years after the
date that the required information is filed.
F.
Dividends and paying agents
Not Applicable.
G. Statement by experts
Not Applicable.
H. Documents on display
We file reports and other information with the SEC. These materials, including this annual report and the
accompanying exhibits are available from the SEC’s website http://www.sec.gov.
I. Subsidiary information
Not Applicable.
J. Annual Report to Security Holders
We intend to submit any annual report provided to security holders in electronic format as an exhibit to a
current report on Form 6-K.
Item 11. Quantitative and Qualitative Disclosures about Market Risk
Interest Rates
We are exposed to market risks associated with changes in interest rates relating to our loan facilities,
according to which we pay interest at LIBOR plus a margin; and as such increases in interest rates could
affect our results of operations. An increase of 1% in the interest rates of our loan facilities bearing a
variable interest rate during 2022, could have increased our interest cost from $22.0 million to $25.0 million.
As LIBOR will be discontinued on June 30, 2023 and will be replaced by the Secured Overnight Financing
109
Rate, or “SOFR”, or any other alternative rate, we may face volatility in applicable interest rates among our
financing agreements and potential increased borrowing costs, which could in turn have an adverse effect
on our profitability, earnings and cash flow.
We will continue to have debt outstanding, which could impact our results of operations and financial
condition. We expect to manage any exposure in interest rates through our regular operating and financing
activities and, when deemed appropriate, through the use of derivative financial instruments.
As of December 31, 2022, 2021 and 2020 and as of the date of this annual report, we did not and have not
designated any financial instruments as accounting hedging instruments.
Currency and Exchange Rates
We generate all of our revenues in U.S. dollars but currently incur less than half of our operating expenses
(around 32% in 2022 and around 33% in 2021) and about half of our general and administrative expenses
(around 45% in 2022 and around 50% in 2021) in currencies other than the U.S. dollar, primarily the Euro.
For accounting purposes, including throughout this annual report, expenses incurred in Euros are
converted into U.S. dollars at the exchange rate prevailing on the date of each transaction. Because a
significant portion of our expenses are incurred in currencies other than the U.S. dollar, our expenses may
from time to time increase relative to our revenues as a result of fluctuations in exchange rates, particularly
between the U.S. dollar and the Euro, which could affect our results of operations in future periods.
Currently, we do not consider the risk from exchange rate fluctuations to be material for our results of
operations, as during 2022 and 2021, these non-US dollar expenses represented 12% and 26%,
respectively of our revenues and therefore, we are not engaged in extensive derivative instruments to
hedge a considerable part of those expenses.
While we historically have not mitigated the risk associated with exchange rate fluctuations through the use
of financial derivatives, we may determine to employ such instruments from time to time in the future in
order to minimize this risk. Our use of financial derivatives would involve certain risks, including the risk
that losses on a hedged position could exceed the nominal amount invested in the instrument and the risk
that the counterparty to the derivative transaction may be unable or unwilling to satisfy its contractual
obligations, which could have an adverse effect on our results.
Item 12. Description of Securities Other than Equity Securities
Not Applicable.
110
PART II
Item 13. Defaults, Dividend Arrearages and Delinquencies
None.
Item 14. Material Modifications to the Rights of Security Holders and Use
of Proceeds
None.
Item 15. Controls and Procedures
a) Disclosure Controls and Procedures
Management, including our Chief Executive Officer and Chief Financial Officer, has conducted an
evaluation of the effectiveness of our disclosure controls and procedures (as defined in Rules 13a-15(e)
and 15d-15(e) under the Exchange Act) as of the end of the period covered by this annual report. Based
upon that evaluation, our Chief Executive Officer and Chief Financial Officer have concluded that our
disclosure controls and procedures are effective to ensure that information required to be disclosed by the
Company in the reports that it files or submits to the SEC under the Exchange Act is recorded, processed,
summarized and reported within the time periods specified in SEC rules and forms.
b) Management’s Annual Report on Internal Control over Financial Reporting
Management is responsible for establishing and maintaining adequate internal control over financial
reporting, as such term is defined in Rule 13a-15(f) of the Exchange Act. The Company’s internal control
over financial reporting is a process designed under the supervision of the Company’s Chief Executive
Officer and Chief Financial Officer to provide reasonable assurance regarding the reliability of financial
reporting and the preparation of the Company’s financial statements for external reporting purposes in
accordance with U.S. GAAP. A company’s internal control over financial reporting includes those policies
and procedures that (i) pertain to the maintenance of records that, in reasonable detail, accurately and
fairly reflect the transactions and dispositions of the assets of the company; (ii) provide reasonable
assurance that transactions are recorded as necessary to permit the preparation of financial statements in
accordance with U.S. GAAP, and that receipts and expenditures of the company are being made only in
accordance with authorizations of management and directors of the company; and (iii) provide reasonable
assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the
company’s assets that could have a material effect on the financial statements.
Management has conducted an assessment of the effectiveness of the Company’s internal control over
financial reporting based on the framework established in Internal Control – Integrated Framework issued
by the Committee of Sponsoring Organizations of the Treadway Commission (2013 Framework). Based
on this assessment, management has determined that the Company’s internal control over financial
reporting as of December 31, 2022 is effective.
The registered public accounting firm that audited the financial statements included in this annual report
containing the disclosure required by this Item 15 has issued an attestation report on management's
assessment of our internal control over financial reporting.
111
c) Attestation Report of Independent Registered Public Accounting Firm
The attestation report on the Company’s internal control over financial reporting issued by the registered
public accounting firm that audited the Company’s consolidated financial statements, Ernst Young (Hellas)
Certified Auditors Accountants S.A., appears on page F-4 of the financial statements filed as part of this
annual report.
d) Changes in Internal Control over Financial Reporting
None.
Inherent Limitations on Effectiveness of Controls
Our management, including our Chief Executive Officer and our Chief Financial Officer, does not expect
that our disclosure controls or our internal control over financial reporting will prevent or detect all error and
all fraud. A control system, no matter how well designed and operated, can provide only reasonable, not
absolute, assurance that the control system’s objectives will be met. Further, because of the inherent
limitations in all control systems, no evaluation of controls can provide absolute assurance that
misstatements due to error or fraud will not occur or that all control issues and instances of fraud, if any,
within the Company have been detected. These inherent limitations include the realities that judgments in
decision-making can be faulty and that breakdowns can occur because of simple error or mistake. Controls
can also be circumvented by the individual acts of some persons, by collusion of two or more people, or
by management override of the controls. The design of any system of controls is based in part on certain
assumptions about the likelihood of future events, and there can be no assurance that any design will
succeed in achieving its stated goals under all potential future conditions. Projections of any evaluation of
controls effectiveness to future periods are subject to risks. Over time, controls may become inadequate
because of changes in conditions or deterioration in the degree of compliance with policies or procedures.
Item 16A. Audit Committee Financial Expert
Our Board of Directors has determined that both the members of our Audit Committee, Mr. Kyriacos Riris
and Mr. Apostolos Kontoyannis, qualify as “Audit Committee financial experts” and that they are both
considered to be “independent” according to SEC rules.
Item 16B. Code of Ethics
We have adopted a code of ethics that applies to officers, directors, employees and agents. Our code of
ethics is posted on our website,
, under “About Us—Code of Ethics” and
is filed as Exhibit 11.1 to this Annual Report. Copies of our code of ethics are available in print, free of
charge, upon request to Diana Shipping Inc., Pendelis 16, 175 64 Palaio Faliro, Athens, Greece. We intend
to satisfy any disclosure requirements regarding any amendment to, or waiver from, a provision of this
code of ethics by posting such information on our website.
Item 16C. Principal Accountant Fees and Services
a) Audit Fees
Our principal accountants, Ernst and Young (Hellas), Certified Auditors Accountants S.A., have billed us
for audit services. Audit fees in 2022 and 2021 amounted to € 383,250 and € 372,750, or approximately
$426,000 and $437,000, respectively, and relate to audit services provided in connection with timely AS
4105 reviews, the audit of our consolidated financial statements and the audit of internal control over
financial reporting.
112
b) Audit-Related Fees
Audit related fees amounted to € 71,288, as compared to € 112,000 in 2021 and relate to audit services
provided in connection with the Company’s filings with the SEC and OceanPal’s Spin-off.
c) Tax Fees
During 2022 and 2021, we received services for which fees amounted to $10,500 and $11,000,
respectively, for the calculation of Earnings and Profits of the Company.
d) All Other Fees
None.
e) Audit Committee’s Pre-Approval Policies and Procedures
Our Audit Committee is responsible for the appointment, replacement, compensation, evaluation and
oversight of the work of our independent auditors. As part of this responsibility, the Audit Committee pre-
approves the audit and non-audit services performed by the independent auditors in order to assure that
they do not impair the auditor’s independence from the Company. The Audit Committee has adopted a
policy which sets forth the procedures and the conditions pursuant to which services proposed to be
performed by the independent auditors may be pre-approved.
f) Audit Work Performed by Other than Principal Accountant if Greater than 50%
Not applicable.
Item 16D. Exemptions from the Listing Standards for Audit Committees
Our Audit Committee consists of two independent members of our Board of Directors. Otherwise, our Audit
Committee conforms to each other requirement applicable to audit committees as required by the
applicable listing standards of the NYSE.
Item 16E. Purchases of Equity Securities by the Issuer and Affiliated
Purchasers
On May 23, 2014, we announced that our Board of Directors authorized a share repurchase plan for up to
$100 million of the Company’s common shares. The plan does not have an expiration date. As of December
31, 2022 and the date of this report, there is an outstanding value of about $66.3 million of common shares
that can be repurchased under the plan. The shares purchased under this plan are presented in the table
below:
113
Period
Total number of
shares
purchased
Average price
paid per share
Total number of
shares
purchased as
part of publicly
announced plans
or Programs
Maximum number (or
approximate Dollar
value) of shares that may
yet be purchased under
the plan
$70,083,734
June 2022
191,055
$4.66
$69,192,630
July 2022
628,945
$4.53
$66,342,500
Item 16F. Change in Registrant’s Certifying Accountant
Not applicable.
Item 16G. Corporate Governance
Overview
Pursuant to an exception for foreign private issuers, we, as a Marshall Islands company, are not required
to comply with the corporate governance practices followed by U.S. companies under the NYSE listing
standards. We believe that our established practices in the area of corporate governance are in line with
the spirit of the NYSE standards and provide adequate protection to our shareholders. In fact, we have
voluntarily adopted NYSE required practices, such as (a) having a majority of independent directors, (b)
establishing audit, compensation, sustainability and nominating committees and (c) adopting a Code of
Ethics. The significant differences between our corporate governance practices and the NYSE standards
are set forth below.
Executive Sessions
The NYSE requires that non-management directors meet regularly in executive sessions without
management. The NYSE also requires that all independent directors meet in an executive session at least
once a year. As permitted under Marshall Islands law and our bylaws, our non-management directors do
not regularly hold executive sessions without management and we do not expect them to do so in the
future.
Audit Committee
The NYSE requires, among other things, that a company have an audit committee with a minimum of three
members. Our Audit Committee consists of two independent members of our Board of Directors. Our Audit
Committee conforms to every other requirement applicable to audit committees set forth in the listing
standards of the NYSE.
Shareholder Approval of Equity Compensation Plans
The NYSE requires listed companies to obtain prior shareholder approval to adopt or materially revise any
equity compensation plan. As permitted under Marshall Islands law and our amended and restated bylaws,
we do not need prior shareholder approval to adopt or revise equity compensation plans, including our
equity incentive plan.
114
Corporate Governance Guidelines
The NYSE requires companies to adopt and disclose corporate governance guidelines. The guidelines
must address, among other things: director qualification standards, director responsibilities, director access
to management and independent advisers, director compensation, director orientation and continuing
education, management succession and an annual performance evaluation. We are not required to adopt
such guidelines under Marshall Islands law and we have not adopted such guidelines.
Share Issuances
In lieu of obtaining shareholder approval prior to the issuance of designated securities, we will comply with
provisions of the Marshall Islands Business Corporations Act, which allows the Board of Directors to
approve share issuances. Additionally, the NYSE restricts the issuance of super voting stock such as our
Series C Preferred Shares. However, pursuant to 313.00 of Section 3 of the NYSE Listed Company
Manual, the NYSE will accept any action or issuance relating to the voting rights structure of a non-U.S.
company that is in compliance with the NYSE’s requirements for domestic companies or that is not
prohibited by the company's home country law. We are not subject to such restrictions under our home
country, Marshall Islands, law.
Item 16H. Mine Safety Disclosure
Not applicable.
Item 16I. Disclosure Regarding Foreign Jurisdictions that Prevent Inspections
Not applicable.
115
PART III
Item 17. Financial Statements
See Item 18.
Item 18. Financial Statements
The financial statements required by this Item 18 are filed as a part of this annual report beginning on page
F-1.
Item 19. Exhibits
Exhibit
Number Description
1.1
1.2
1.3
1.4
2.1
2.2
2.3
2.4
2.5
2.6
2.7
2.8
**
2.9
4.1
4.2
4.3
4.4
4.5
4.6
4.7
4.8
4.9
4.10
116
4.11
4.12
4.13
4.14
4.15
4.16
4.17
4.18
4.19
4.20
4.21
4.22
4.23
4.24
4.25
4.26
4.27
4.28
4.29
4.30
4.31
4.32
4.33
4.34
4.35
4.36
4.37
4.38
4.39
4.40
117
4.41
4.42
4.43
4.44
4.45:
**
4.46:
**
4.47:
**
4.48:
**
8.1
11.1
12.1
**
12.2
**
13.1
Certification of Principal Executive Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant
**
13.2
Certification of Principal Financial Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant
**
15.1
**
101 The following materials from the Company's Annual Report on Form 20-F for the fiscal year ended
December 31, 2022, formatted in eXtensible Business Reporting Language (XBRL): (i) Consolidated
Balance Sheets as of December 31, 2022 and 2021; (ii) Consolidated Statements of Operations for
the years ended December 31, 2022, 2021 and 2020; (iii) Consolidated Statements of
Comprehensive Income/(Loss) for the years ended December 31, 2022, 2021 and 2020; (iv)
Consolidated Statements of Stockholders' Equity for the years ended December 31, 2022, 2021 and
2020; (v) Consolidated Statements of Cash Flows for the years ended December 31, 2022, 2021 and
2020; and (v) the Notes to Consolidated Financial Statements
104 Cover Page Interactive Data File (formatted as Inline XBRL and contained in Exhibit 101)
** Filed herewith.
(1) Filed as Exhibit 1 to the Company's Form 6-K filed on May 29, 2008.
(2) Filed as Exhibit 3.1 to the Company's Form 6-K filed on February 13, 2014.
(3) Filed as Exhibit 3.3 to the Company's Form 8-A filed on February 13, 2014.
(4) Filed as Exhibit 3.1 to the Company's Form 8-A12B/A filed on January 15, 2016.
(5) Filed as Exhibit 4.1 to the Company's Form 6-K filed on May 28, 2015.
(6) Filed as Exhibit 4.2 to the Company's Form 6-K filed on May 28, 2015.
(7) Filed as Exhibit 4.1 to the Company's Form 8-A12B/A filed on January 15, 2016.
(8) Filed as an Exhibit to the Company's Registration Statement (File No. 123052) on March 1, 2005.
(9) Filed as an Exhibit to the Company's Amended Registration Statement (File No. 123052) on March
15, 2005.
(10) Reserved.
(11) Filed as an Exhibit to the Company's Annual Report filed on Form 20-F on March 27, 2014.
(12) Filed as an Exhibit to the Company's Annual Report filed on Form 20-F on March 25, 2015.
(13) Filed as an Exhibit to the Company's Annual Report filed on Form 20-F on March 28, 2016.
(14) Filed as an Exhibit to the Company's Annual Report filed on Form 20-F on April 20, 2012.
(15) Filed as an Exhibit to the Company’s Annual Report filed on Form 20-F on February 17, 2017.
(16) Filed as Exhibit 4.1 to the Company's Form 8-A12B filed on February 13, 2014.
(17) Filed as an Exhibit to the Company’s Annual Report filed on Form 20-F on March 31, 2011.
(18) Filed as an Exhibit to the Company’s Form 6-K filed on February 6, 2019.
(19) Filed as an Exhibit to the Company’s Annual Report filed on Form 20-F on March 16, 2018.
(20) Filed as an Exhibit to the Company’s Annual Report filed on Form 20-F on March 12, 2019.
(21) Filed as an Exhibit to the Company’s Form 6-K filed on April 23, 2021.
(22) Filed as an Exhibit to the Company’s Form 6-K filed on June 23, 2021.
118
(23) Filed as an Exhibit to the Company’s Form 6-K filed on July 31, 2021.
(24) Filed as an Exhibit to the Company’s Annual Report filed on Form 20-F on March 12, 2021.
(25) Filed as an Exhibit to the Company’s Form F-3 filed on June 4, 2021.
119
SIGNATURES
The registrant hereby certifies that it meets all of the requirements for filing on Form 20-F and has duly
caused and authorized the undersigned to sign this annual report on its behalf.
DIANA SHIPPING INC.
/s/ Ioannis Zafirakis
Ioannis Zafirakis
Chief Financial Officer
Dated: March 27, 2023
F-1
DIANA SHIPPING INC.
INDEX TO CONSOLIDATED FINANCIAL STATEMENTS
Page
Report of Independent Registered Public Accounting Firm (PCAOB ID:
) ..................
F-2
Report of Independent Registered Public Accounting Firm ................................ ................
F-4
Consolidated Balance Sheets as of December 31, 2022 and 2021 ................................ ...
F-6
Consolidated Statements of Operations for the years ended December 31, 2022, 2021
and 2020 ................................ ................................ ................................ ...........................
F-7
Consolidated Statements of Comprehensive Income/(Loss) for the years ended
December 31, 2022, 2021 and 2020 ................................ ................................ ..................
F-8
Consolidated Statements of Stockholders' Equity for the years ended December 31,
2022, 2021 and 2020 ................................ ................................ ................................ .........
F-9
Consolidated Statements of Cash Flows for the years ended December 31, 2022, 2021
and 2020 ................................ ................................ ................................ ...........................
F-
11
Notes to Consolidated Financial Statements................................ ................................ ......
F-13
F-2
Report of Independent Registered Public Accounting Firm
To the Stockholders and the Board of Directors of Diana Shipping Inc.
Opinion on the Financial Statements
We have audited the accompanying consolidated balance sheets of Diana Shipping Inc. (the Company)
as of December 31, 2022 and 2021, the related consolidated statements of operations, comprehensive
income/(loss), stockholders' equity and cash flows for each of the three years in the period ended
December 31, 2022, and the related notes (collectively referred to as the “consolidated financial
statements”). In our opinion, the consolidated financial statements present fairly, in all material respects,
the financial position of the Company at December 31, 2022 and 2021, and the results of its operations
and its cash flows for each of the three years in the period ended December 31, 2022, in conformity with
U.S. generally accepted accounting principles.
We also have audited, in accordance with the standards of the Public Company Accounting Oversight
Board (United States) (PCAOB), the Company's internal control over financial reporting as of December
31, 2022, based on criteria established in Internal Control-Integrated Framework issued by the Committee
of Sponsoring Organizations of the Treadway Commission (2013 framework) and our report dated March
27, 2023 expressed an unqualified opinion thereon.
Basis for Opinion
These financial statements are the responsibility of the Company's management. Our responsibility is to
express an opinion on the Company’s financial statements based on our audits. We are a public accounting
firm registered with the PCAOB and are required to be independent with respect to the Company in
accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities
and Exchange Commission and the PCAOB.
We conducted our audits in accordance with the standards of the PCAOB. Those standards require that
we plan and perform the audit to obtain reasonable assurance about whether the financial statements are
free of material misstatement, whether due to error or fraud. Our audits included performing procedures to
assess the risks of material misstatement of the financial statements, whether due to error or fraud, and
performing procedures that respond to those risks. Such procedures included examining, on a test basis,
evidence regarding the amounts and disclosures in the financial statements. Our audits also included
evaluating the accounting principles used and significant estimates made by management, as well as
evaluating the overall presentation of the financial statements. We believe that our audits provide a
reasonable basis for our opinion.
Critical Audit Matter
The critical audit matter communicated below is a matter arising from the current period audit of the
financial statements that was communicated or required to be communicated to the audit committee and
that: (1) relates to accounts or disclosures that are material to the financial statements and (2) involved our
especially challenging, subjective or complex judgments. The communication of the critical audit matter
does not alter in any way our opinion on the consolidated financial statements, taken as a whole, and we
are not, by communicating the critical audit matter below, providing a separate opinion on the critical audit
matter or on the accounts or disclosure to which it relates.
F-3
Recoverability assessment of vessels held and used
Description
of the matter
At December 31, 2022, the carrying value of the Company’s vessels plus
unamortized deferred costs was $965,918 thousands. As discussed in Note 2
(l) to the consolidated financial statements, the Company evaluates its vessels
for impairment whenever events or changes in circumstances indicate that the
carrying value of a vessel plus unamortized deferred costs may not be
recoverable in accordance with the guidance in ASC 360 – Property, Plant and
Equipment (“ASC 360”). If indicators of impairment exist, management
analyzes the future undiscounted net operating cash flows expected to be
generated throughout the remaining useful life of each vessel and compares it
to the carrying value of the vessel plus unamortized deferred costs. Where a
vessel’s carrying value plus unamortized deferred costs exceeds the
undiscounted net operating cash flows, management will recognize an
impairment loss equal to the excess of the carrying value plus unamortized
deferred costs over the fair value of the vessel.
Auditing management’s recoverability assessment was complex given the
judgement and estimation uncertainty involved in determining the future charter
rates for non-contracted revenue days used in forecasting undiscounted net
operating cash flows. These rates are subjective as they involve the
development and use of assumptions about the dry-bulk shipping market
through the end of the useful lives of the vessels. This assumption is forward
looking and subject to the inherent unpredictability of future global economic
and market conditions.
How we
addressed
the matter in
our audit
We obtained an understanding of the Company’s impairment process,
evaluated the design, and tested the operating effectiveness of the controls
over the Company’s recoverability assessment of vessels held and used,
including the determination of future charter rates for non-contracted revenue
days.
We evaluated management’s recoverability assessment by comparing the
methodology and model used for each vessel against the accounting guidance
in ASC 360. To test management’s undiscounted net operating cash flow
forecasts, our procedures included, among others, comparing the future vessel
charter rates for non-contracted revenue days with external data such as
available market data from various analysts and recent economic and industry
changes, and internal data such as historical charter rates for the vessels. In
addition, we performed sensitivity analyses to assess the impact of changes to
future charter rates for non-contracted revenue days in the determination of the
future undiscounted net operating cash flows. We tested the completeness and
accuracy of the data used within the forecasts. We assessed the adequacy of
the Company’s disclosures in Note 2 (l) to the consolidated financial
statements.
/s/
We have served as the Company’s auditor since 2004.
March 27, 2023
F-4
Report of Independent Registered Public Accounting Firm
To the Stockholders and the Board of Directors of Diana Shipping Inc.
Opinion on Internal Control Over Financial Reporting
We have audited Diana Shipping Inc.’s internal control over financial reporting as of December 31, 2022,
based on criteria established in Internal Control—Integrated Framework issued by the Committee of
Sponsoring Organizations of the Treadway Commission (2013 framework) (the COSO criteria). In our
opinion, Diana Shipping Inc. (the Company) maintained, in all material respects, effective internal control
over financial reporting as of December 31, 2022, based on the COSO criteria.
We also have audited, in accordance with the standards of the Public Company Accounting Oversight
Board (United States) (PCAOB), the consolidated balance sheets of the Company as of December 31,
2022 and 2021, the related consolidated statements of operations, comprehensive income/(loss),
stockholders’ equity and cash flows for each of the three years in the period ended December 31, 2022,
and the related notes and our report dated March 27, 2023 expressed an unqualified opinion thereon.
Basis for Opinion
The Company’s management is responsible for maintaining effective internal control over financial
reporting and for its assessment of the effectiveness of internal control over financial reporting included in
the accompanying Management’s Annual Report on Internal Control over Financial Reporting. Our
responsibility is to express an opinion on the Company’s internal control over financial reporting based on
our audit. We are a public accounting firm registered with the PCAOB and are required to be independent
with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules
and regulations of the Securities and Exchange Commission and the PCAOB.
We conducted our audit in accordance with the standards of the PCAOB. Those standards require that we
plan and perform the audit to obtain reasonable assurance about whether effective internal control over
financial reporting was maintained in all material respects.
Our audit included obtaining an understanding of internal control over financial reporting, assessing the
risk that a material weakness exists, testing and evaluating the design and operating effectiveness of
internal control based on the assessed risk, and performing such other procedures as we considered
necessary in the circumstances. We believe that our audit provides a reasonable basis for our opinion.
F-5
Definition and Limitations of Internal Control Over Financial Reporting
A company’s internal control over financial reporting is a process designed to provide reasonable
assurance regarding the reliability of financial reporting and the preparation of financial statements for
external purposes in accordance with generally accepted accounting principles. A company’s internal
control over financial reporting includes those policies and procedures that (1) pertain to the maintenance
of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the
assets of the company; (2) provide reasonable assurance that transactions are recorded as necessary to
permit preparation of financial statements in accordance with generally accepted accounting principles,
and that receipts and expenditures of the company are being made only in accordance with authorizations
of management and directors of the company; and (3) provide reasonable assurance regarding prevention
or timely detection of unauthorized acquisition, use, or disposition of the company’s assets that could have
a material effect on the financial statements.
Because of its inherent limitations, internal control over financial reporting may not prevent or detect
misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk
that controls may become inadequate because of changes in conditions, or that the degree of compliance
with the policies or procedures may deteriorate.
/s/ Ernst Young (Hellas) Certified Auditors Accountants S.A.
Athens, Greece
March 27, 2023
F-6
DIANA SHIPPING INC.
CONSOLIDATED BALANCE SHEETS
December 31, 2022 and 2021
(Expressed in thousands of U.S. Dollars – except for share and per share data)
2022
2021
ASSETS
Current Assets
Cash and cash equivalents (Note 2(e))
$
$
Time deposits (Note 2(e))
Accounts receivable, trade (Note 2(f))
Due from related parties, net of provision for credit losses (Note 3(c) and 8(b))
Inventories (Note 2(g))
Prepaid expenses and other assets
Total Current Assets
Fixed Assets:
Advances for vessel acquisitions (Note 4)
Vessels, net (Note 4)
Property and equipment, net (Note 5)
Total fixed assets
Other Noncurrent Assets
Restricted cash, non-current (Note 6)
Equity method investments (Note 3(c))
Investments in related party (Note 3(f))
Other non-current assets
Deferred costs (Note 2(n))
Total Non-current Assets
Total Assets
$
$
LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities
Current portion of long-term debt, net of deferred financing costs (Note 6)
$
$
Current portion of finance liabilities, net of deferred financing costs (Note 7)
Accounts payable
Due to related parties (Note 3(a) and (c))
Accrued liabilities
Deferred revenue (Note 2(q))
Total Current Liabilities
Non-current Liabilities
Long-term debt, net of current portion and deferred financing costs (Note 6)
Finance liabilities, net of current portion and deferred financing costs (Note 7)
Other non-current liabilities
Total Noncurrent Liabilities
Commitments and contingencies (Note 8)
-
-
Stockholders' Equity
Preferred stock (Note 9)
Common stock, $
and
respectively (Note 9)
Additional paid in capital
Accumulated other comprehensive income
Accumulated deficit
(574,993 )
(590,286 )
Total Stockholders' Equity
$
$
The accompanying notes are an integral part of these consolidated financial statements.
F-7
DIANA SHIPPING INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
For the years ended December 31, 2022, 2021 and 2020
(Expressed in thousands of U.S. Dollars – except for share and per share
data)
2022
2021
2020
REVENUES:
Time charter revenues (Note 2(q))
$
$
$
OPERATING EXPENSES
Voyage expenses (Notes 2(q) and 10)
Vessel operating expenses (Note 2(r))
Depreciation and amortization of deferred charges
(Note 2(m) and (n))
General and administrative expenses
Management fees to related party (Note 3(c))
Vessel impairment charges (Note 2(l))
-
-
(Gain)/loss on sale of vessels (Note 4)
(2,850 )
(1,360 )
Insurance recoveries (Note 8(a))
(1,789 )
-
-
Other operating (income)/loss
(265 )
(230 )
Operating income/(loss), total
$
$
$
(112,675 )
OTHER INCOME / (EXPENSES):
Interest expense and finance costs (Note 11)
(27,419 )
(20,239 )
(21,514 )
Interest and other income
(Loss)/gain on extinguishment of debt
(435 )
(980 )
Gain on spin-off of OceanPal Inc. (Note 3(f))
-
-
Gain on dividend distribution (Note 3(f))
-
-
Gain/(loss) from equity method investments (Note 3(c))
(333 )
(1,110 )
Total other expenses, net
$
(23,634 )
$
(6,124 )
$
(21,522 )
Net income/(loss)
$
$
$
(134,197 )
Dividends on series B preferred shares (Notes 9(b) and
12)
(5,769 )
(5,769 )
(5,769 )
Net income/(loss) attributable to common
stockholders
$
$
$
(139,966 )
Earnings/(loss) per common share, basic
$
$
$
(1.62 )
Earnings/(loss) per common share, diluted
12)
$
$
$
(1.62 )
Weighted average number of common shares
outstanding, basic
Weighted average number of common shares
outstanding, diluted
The accompanying notes are an integral part of these consolidated financial statements.
F-8
DIANA SHIPPING INC.
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME/(LOSS)
For the years ended December 31, 2022, 2021 and 2020
(Expressed in thousands of U.S. Dollars)
2022
2021
2020
Net income/(loss)
$
$
$
(134,197 )
Other comprehensive income/(loss) - Defined benefit
plan
(40 )
Comprehensive income/(loss)
$
$
$
(134,237 )
The accompanying notes are an integral part of these consolidated financial statements.
F-9
DIANA SHIPPING INC.
CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY
For the years ended December 31, 2022, 2021 and 2020
(Expressed in thousands of U.S. Dollars – except for share data)
Preferred Stock
Series B
Preferred Stock
Series C
Preferred Stock
Series D
Common Stock
Additional
Paid-in
Capital
Other
Comprehe
nsive
Income /
(Loss)
Accumulat
ed Deficit
Total
Equity
# of Shares
Par
Valu
e
# of
Shares
Par
Valu
e
# of
Shares
Par
Valu
e
# of Shares
Par
Value
BALANCE,
December 31, 2019
$
$
-
-
$
-
$
$
$
$
(452,616 )
$
Net loss
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
(134,197 )
(134,197 )
Issuance of
restricted stock and
compensation cost
(Note 9(h))
-
-
-
-
-
-
-
-
Stock repurchased
and retired (Note
9(e))
-
-
-
-
-
-
(4,118,337 )
(41 )
(11,958 )
-
-
(11,999 )
Dividends on series
B preferred stock
(Note 9(b))
-
-
-
-
-
-
-
-
-
-
(5,769 )
(5,769 )
Other
comprehensive
loss
-
-
-
-
-
-
-
-
-
(40 )
-
(40 )
BALANCE,
December 31, 2020
$
$
-
-
$
-
$
$
$
$
(592,582 )
$
Net income
-
-
-
-
-
-
-
-
-
-
Issuance of Series
D Preferred Stock
(Note 9(d))
-
-
-
-
-
-
-
-
-
Issuance of
restricted stock and
compensation cost
(Note 9(h))
-
-
-
-
-
-
-
-
Stock repurchased
and retired (Note
9(e))
-
-
-
-
-
-
(12,862,744 )
(129 )
(45,240 )
-
-
(45,369 )
Dividends on series
B preferred stock
(Note 9(b))
-
-
-
-
-
-
-
-
-
-
(5,769 )
(5,769 )
Dividends on
common stock
(Note 9(f))
-
-
-
-
-
-
-
-
-
-
(8,820 )
(8,820 )
OceanPal Inc.
spinoff (Note 9(g))
-
-
-
-
-
-
-
-
-
-
(40,509 )
(40,509 )
Other
comprehensive
income
-
-
-
-
-
-
-
-
-
-
F-10
BALANCE,
December 31, 2021
$
$
-
$
-
$
$
$
$
(590,286 )
$
Net income
-
-
-
-
-
-
-
-
-
-
Issuance of
restricted stock and
compensation cost
(Note 9(h))
-
-
-
-
-
-
-
-
Stock repurchased
and retired (Note
9(e))
-
-
-
-
-
-
(820,000 )
(8 )
(3,791 )
-
-
(3,799 )
Issuance of
common stock
(Note 9(e))
-
-
-
-
-
-
-
-
Issuance of
common stock for
vessel acquisitions
(Notes 4 and 9(e))
-
-
-
-
-
-
-
-
Dividends on series
B preferred stock
(Note 9(b))
-
-
-
-
-
-
-
-
-
-
(5,769 )
(5,769 )
Dividends on
common stock
(Note 9(f))
-
-
-
-
-
-
-
-
-
-
(79,812 )
(79,812 )
Dividends in kind
(Note 9(g))
-
-
-
-
-
-
-
-
-
-
(18,189 )
(18,189 )
Other
comprehensive
income
-
-
-
-
-
-
-
-
-
-
BALANCE,
December 31, 2022
$
$
-
$
-
$
$
$
$
(574,993 )
$
The accompanying notes are an integral part of these consolidated financial statements.
F-
11
DIANA SHIPPING INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
For the years ended December 31, 2022, 2021 and 2020
(Expressed in thousands of U.S. Dollars)
2022
2021
2020
Net income/(loss)
$
$
$
(134,197 )
Adjustments to reconcile net income/(loss) to cash provided by
operating activities
Depreciation and amortization of deferred charges
Asset Impairment loss (Note 2(l))
-
-
Amortization of debt issuance costs (Note 11)
Compensation cost on restricted stock (Note 9(h))
Provision for credit loss and write offs (Note 2(z) and 3(c))
-
Dividend income (Note 3(f))
(100 )
(69 )
-
Pension and other postretirement benefits
(40 )
(Gain)/loss on sale of vessels (Notes 4)
(2,850 )
(1,360 )
Gain on dividend distribution (Note 3(f))
(589 )
-
-
(Gain)/loss on extinguishment of debt (Note 6)
(374 )
Gain on OceanPal spinoff (Note 3(f))
-
(15,252 )
-
(Gain)/loss from equity method investments (Note 3(c))
(894 )
(Increase) / Decrease
Accounts receivable, trade
(3,427 )
Due from related parties
(56 )
(1,173 )
Inventories
(1,581 )
Prepaid expenses and other assets
(1,265 )
Other non-current assets
(16 )
(1,177 )
(252 )
Increase / (Decrease)
Accounts payable, trade and other
(2,836 )
Due to related parties
(72 )
(31 )
Accrued liabilities
(2,610 )
(780 )
Deferred revenue
Other non-current liabilities
(218 )
(57 )
Drydock cost
(16,368 )
(4,531 )
(10,122 )
Net Cash Provided by Operating Activities
$
$
$
Payments to acquire vessels and vessel improvements (Note 4)
(230,302 )
(17,393 )
(6,001 )
Proceeds from sale of vessels, net of expenses (Note 4)
Proceeds from sale of related party investment
-
-
Time deposits
(46,500 )
-
-
Payments to joint venture (Note 3(c))
-
(375 )
(500 )
Investment in spun-off subsidiary (Note 3(f))
-
(1,000 )
-
Payments to acquire furniture and fixtures (Note 5)
(667 )
(1,600 )
(138 )
Net Cash Provided by/(Used in) Investing Activities
$
(273,097 )
$
$
Proceeds from issuance of long-term debt and finance liabilities (Notes
6 and 7)
-
Proceeds from issuance of common stock, net of expenses (Note 9(e))
-
-
Proceeds from issuance of preferred stock, net of expenses (Note 9(d))
-
-
Payments of dividends, preferred stock (Note 9(b))
(5,769 )
(5,769 )
(5,769 )
Payments of dividends, common stock (Note 9(f))
(79,812 )
(8,820 )
-
Payments for repurchase of common stock (Note 9(e))
(3,799 )
(45,369 )
(11,999 )
Payments of financing costs (Notes 6 and 7)
(3,302 )
(7,594 )
(567 )
Repayments of long-term debt and finance liabilities (Notes 6 and 7)
(102,839 )
(93,170 )
(54,762 )
Net Cash Provided by / (Used in) Financing Activities
$
$
(59,189 )
$
(73,097 )
Cash, Cash Equivalents and Restricted Cash, Period
Increase/(Decrease)
(29,360 )
(45,379 )
Cash, Cash Equivalents and Restricted Cash, Beginning Balance
Cash, Cash Equivalents and Restricted Cash, Ending Balance
$
$
$
RECONCILIATION OF CASH, CASH EQUIVALENTS AND
RESTRICTED CASH
Cash and cash equivalents
$
$
Restricted cash, non-current
F-12
Cash, Cash Equivalents and Restricted Cash, Total
$
$
$
SUPPLEMENTAL CASH FLOW INFORMATION
Non-cash acquisition of assets (Note 4)
$
$
-
-
Non-cash debt assumed (Note 6)
-
-
Stock issued in noncash financing activities (Note 4)
Transfer to investments (Note 4)
Non-cash finance liability (Note 7)
-
-
Interest paid
$
$
The accompanying notes are an integral part of these consolidated financial statements.
DIANA SHIPPING INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 2022
(Expressed in thousands of U.S. Dollars – except share, per share data, unless otherwise stated)
F-13
1. Basis of Presentation and General Information
The accompanying consolidated financial statements include the accounts of Diana Shipping Inc., or DSI,
and its wholly owned subsidiaries (collectively, the “Company”). DSI was formed on
, as
Diana Shipping Investment Corp., under the laws of the Republic of Liberia. In February 2005, the
Company’s articles of incorporation were amended. Under the amended articles of incorporation, the
Company was renamed Diana Shipping Inc. and was re-domiciled from the Republic of Liberia to the
Republic of the Marshall Islands.
The Company is engaged in the ocean transportation of dry bulk cargoes worldwide through the ownership
and bareboat charter in of dry bulk carrier vessels. The Company operates its own fleet through Diana
Shipping Services S.A. (or “DSS”), a wholly owned subsidiary and through Diana Wilhelmsen Management
Limited, or DWM, a
% owned joint venture (Note 3). The fees paid to DSS are eliminated in consolidation.
The outbreak of war between Russia and the Ukraine has disrupted supply chains and caused instability
in the energy markets and the global economy, which have experienced significant volatility. The United
States and the European Union, among other countries, have announced sanctions against Russia,
including sanctions targeting the Russian oil sector, among those a prohibition on the import of oil and coal
from Russia to the United States.
As of December 31, 2022, and during the year ended December 31, 2022, the Company’s operations, or
counterparties, have not been significantly affected by the war in Ukraine and their implications, however,
as volatility continues it is difficult to predict the long-term impact on the industry and on the Company’s
business and it is possible that in the future third parties with whom the Company has or will have contracts
may be impacted by such events and sanctions. The Company is constantly monitoring the developing
situation, as well as its charterers’ and other counterparties’ response to the market and continuously
evaluates the effect on its operations. As events continue to evolve and additional information becomes
available, the Company’s estimates may change in future periods.
2. Significant Accounting Policies
a) Principles of Consolidation
: The accompanying consolidated financial statements have been
prepared in accordance with U.S. generally accepted accounting principles and include the accounts of
Diana Shipping Inc. and its wholly owned subsidiaries. All intercompany balances and transactions have
been eliminated upon consolidation. Under Accounting Standards Codification (“ASC”) 810
“Consolidation”, the Company consolidates entities in which it has a controlling financial interest, by first
considering if an entity meets the definition of a variable interest entity ("VIE") for which the Company is
deemed to be the primary beneficiary under the VIE model, or if the Company controls an entity through a
majority of voting interest based on the voting interest model. The Company evaluates financial
instruments, service contracts, and other arrangements to determine if any variable interests relating to an
entity exist. For entities in which the Company has a variable interest, the Company determines if the entity
is a VIE by considering whether the entity’s equity investment at risk is sufficient to finance its activities
without additional subordinated financial support and whether the entity’s at-risk equity holders have the
characteristics of a controlling financial interest. In performing the analysis of whether the Company is the
primary beneficiary of a VIE, the Company considers whether it individually has the power to direct the
activities of the VIE that most significantly affect the entity’s performance and also has the obligation to
absorb losses or the right to receive benefits of the VIE that could potentially be significant to the VIE. The
Company had identified it had variable interests in DWM, as it was considered that all of its activities either
involved or were conducted on behalf of the Company and its related parties but was not the primary
beneficiary. The Company has reconsidered this initial determination and determined that since DWM
DIANA SHIPPING INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 2022
(Expressed in thousands of U.S. Dollars – except share, per share data, unless otherwise stated)
F-14
meets the definition of a business and the Company does not have any obligations to absorb losses of the
joint venture, DWM is not a VIE. If the Company holds a variable interest in an entity that previously was
not a VIE, it reconsiders whether the entity has become a VIE.
b) Use of Estimates:
The preparation of consolidated financial statements in conformity with U.S.
generally accepted accounting principles requires management to make estimates and assumptions that
affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at
the date of the consolidated financial statements and the reported amounts of revenues and expenses
during the reporting period. Actual results could differ from those estimates.
c) Other Comprehensive Income / (Loss):
The Company separately presents certain transactions,
which are recorded directly as components of stockholders’ equity. Other Comprehensive Income / (Loss)
is presented in a separate statement.
d) Foreign Currency Translation:
The functional currency of the Company is the U.S. dollar because
the Company’s vessels operate in international shipping markets, and therefore primarily transact business
in U.S. dollars. The Company’s accounting records are maintained in U.S. dollars. Transactions involving
other currencies during the year are converted into U.S. dollars using the exchange rates in effect at the
time of the transactions. At the balance sheet dates, monetary assets and liabilities which are denominated
in other currencies are translated into U.S. dollars at the year-end exchange rates. Resulting gains or
losses are included in other operating (income)/loss in the accompanying consolidated statements of
operations.
e) Cash, Cash Equivalents and Time Deposits:
The Company considers highly liquid investments
such as time deposits, certificates of deposit and their equivalents with an original maturity of up to about
three months to be cash equivalents. Time deposits with maturity above three months are removed from
cash and cash equivalents and are separately presented as time deposits. Restricted cash consists mainly
of cash deposits required to be maintained at all times under the Company’s loan facilities (Note 6).
f) Accounts Receivable, Trade:
The amount shown as accounts receivable, trade, at each balance
sheet date, includes receivables from charterers for hire from lease agreements, net of provisions for
doubtful accounts, if any. At each balance sheet date, all potentially uncollectible accounts are assessed
individually for purposes of determining the appropriate provision for doubtful accounts. As of December
31, 2022 and 2021 there was
income on trade receivables as all balances are settled within a year.
g) Inventories:
Inventories consist of lubricants and victualling which are stated, on a consistent
basis, at the lower of cost or net realizable value. Net realizable value is the estimated selling prices in the
ordinary course of business, less reasonably predictable costs of completion, disposal, and transportation.
When evidence exists that the net realizable value of inventory is lower than its cost, the difference is
recognized as a loss in earnings in the period in which it occurs. Cost is determined by the first in, first out
method. Amounts removed from inventory are also determined by the first in first out method. Inventories
may also consist of bunkers, when on the balance sheet date, a vessel is without employment. Bunkers, if
any, are also stated at the lower of cost or net realizable value and cost is determined by the first in, first
out method.
h) Vessel Cost
: Vessels are stated at cost which consists of the contract price and any material
expenses incurred upon acquisition or during construction. Expenditures for conversions and major
improvements are also capitalized when they appreciably extend the life, increase the earning capacity or
improve the efficiency or safety of the vessels; otherwise, these amounts are charged to expense as
DIANA SHIPPING INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 2022
(Expressed in thousands of U.S. Dollars – except share, per share data, unless otherwise stated)
F-15
incurred. Interest cost incurred during the assets' construction periods that theoretically could have been
avoided if expenditure for the assets had not been made is also capitalized. The capitalization rate, applied
on accumulated expenditures for the vessel, is based on interest rates applicable to outstanding borrowings
of the period.
i) Vessels held for sale:
criteria are met. Long-lived assets or disposal groups classified as held for sale are measured at the lower
of their carrying amount or fair value less cost to sell. These assets are not depreciated once they meet
the criteria to be held for sale. The fair value less cost to sell of an asset held for sale is assessed at each
reporting period it remains classified as held for sale. When the plan to sell an asset changes, the asset is
reclassified as held and used, measured at the lower of its carrying amount before it was recorded as held
for sale, adjusted for depreciation, and the asset’s fair value at the date of the decision not to sell.
j) Sale and leaseback:
sale of an asset and leaseback of the same asset by the seller is involved, the Company, as seller-lessee,
should firstly determine whether the transfer of an asset shall be accounted for as a sale under ASC 606.
For a sale to have occurred, the control of the asset would need to be transferred to the buyer and the
buyer would need to obtain substantially all the benefits from the use of the asset. As per the
aforementioned guidance, sale and leaseback transactions, which include an obligation for the Company,
as seller-lessee, to repurchase the asset, or other situations where the leaseback would be classified as a
finance lease, are determined to be failed sales under ASC 842-40. Consequently, the Company does not
derecognize the asset from its balance sheet and accounts for any amounts received under the sale and
leaseback agreement as a financing arrangement.
k) Property and equipment:
The Company also owns part of a plot acquired for office use (Note 5). Land is stated at cost and it is not
subject to depreciation. The building has an estimated useful life of
Furniture, office equipment and vehicles have a useful life of
, except for a car owned by the
Company, which has a useful life of
. Computer software and hardware have a useful life of
. Depreciation is calculated on a straight-line basis.
l) Impairment of Long-Lived Assets:
Long-lived assets are reviewed for impairment whenever
events or changes in circumstances (such as market conditions, obsolesce or damage to the asset,
potential sales and other business plans) indicate that the carrying amount of an asset may not be
recoverable. When the estimate of undiscounted projected net operating cash flows, excluding interest
charges, expected to be generated by the use of an asset over its remaining useful life and its eventual
disposition is less than its carrying amount, the Company evaluates the asset for impairment loss.
Measurement of the impairment loss is based on the fair value of the asset, determined mainly by third
party valuations.
For vessels, the Company calculates undiscounted projected net operating cash flows by considering the
historical and estimated vessels’ performance and utilization with the significant assumption being future
charter rates for the unfixed days, using the most recent
-year average of historical 1 year time charter
rates available for each type of vessel over the remaining estimated life of each vessel, net of commissions.
Historical ten-year blended average one-year time charter rates are in line with the Company’s overall
chartering strategy, they reflect the full operating history of vessels of the same type and particulars with
the Company’s operating fleet and they cover at least a full business cycle, where applicable. When the
10-year average of historical 1 year time charter rates is not available for a type of vessels, the Company
uses the average of historical 1 year time charter rates of the available period. Other assumptions used in
developing estimates of future undiscounted cash flow are charter rates calculated for the fixed days using
DIANA SHIPPING INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 2022
(Expressed in thousands of U.S. Dollars – except share, per share data, unless otherwise stated)
F-16
the fixed charter rate of each vessel from existing time charters, the expected outflows for scheduled
vessels’ maintenance; vessel operating expenses; fleet utilization, and the vessels’ residual value if sold
for scrap. Assumptions are in line with the Company’s historical performance and its expectations for future
fleet utilization under its current fleet deployment strategy. This calculation is then compared with the
vessels’ net book value plus unamortized deferred costs. The difference between the carrying amount of
the vessel plus unamortized deferred costs and their fair value is recognized in the Company's accounts
as impairment loss.
The Company’s impairment assessment resulted in the
recognition of impairment
carrying value in 2020 amounting to $
.
2022.
For property and equipment, the Company determines undiscounted projected net operating cash flows
by considering an estimated monthly rent the Company would have to pay in order to lease a similar
property, during the useful life of the building.
and 2020 and the Company has not identified any other facts or circumstances that would require the write
down of the value of its land or building in the near future.
m) Vessel Depreciation:
Depreciation is computed using the straight-line method over the estimated
useful life of the vessels, after considering the estimated salvage (scrap) value. Each vessel’s salvage
value is equal to the product of its lightweight tonnage and estimated scrap rate. Management estimates
the useful life of the Company’s vessels to be
Second-hand vessels are depreciated from the date of their acquisition through their remaining estimated
useful life. When regulations place limitations over the ability of a vessel to trade on a worldwide basis, its
remaining useful life is adjusted at the date such regulations are adopted.
n) Deferred Costs
: The Company follows the deferral method of accounting for dry-docking and
special survey costs whereby actual costs incurred are deferred and amortized on a straight-line basis over
the period through the date the next survey is scheduled to become due. Unamortized deferred costs of
vessels that are sold or impaired are written off and included in the calculation of the resulting gain or loss
in the year of the vessel’s sale (Note 4) or impairment.
o) Financing Costs
: Fees paid for obtaining finance liabilities, fees paid to lenders for obtaining new
loans, new bonds, or refinancing existing ones accounted as loan modification, are deferred and recorded
as a contra to debt. Other fees paid for obtaining loan facilities not used at the balance sheet date are
deferred. Fees relating to drawn loan facilities are amortized to interest and finance costs over the life of
the related debt using the effective interest method and fees incurred for loan facilities not used at the
balance sheet date are amortized using the straight-line method according to their availability terms.
Unamortized fees relating to loans or bonds repaid or repurchased or refinanced as debt extinguishment
are written off in the period the repayment, prepayment, repurchase or extinguishment is made and
included in the determination of gain/loss on debt extinguishment. Loan commitment fees are expensed in
the period incurred, unless they relate to loans obtained to finance vessels under construction, in which
case, they are capitalized to the vessels’ cost.
p) Concentration of Credit Risk
: Financial instruments, which potentially subject the Company to
significant concentrations of credit risk, consist principally of cash and trade accounts receivable. The
Company places its temporary cash investments, consisting mostly of deposits, with various qualified
financial institutions and performs periodic evaluations of the relative credit standing of those financial
institutions that are considered in the Company’s investment strategy. The Company limits its credit risk
with accounts receivable by performing ongoing credit evaluations of its customers’ financial condition and
DIANA SHIPPING INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 2022
(Expressed in thousands of U.S. Dollars – except share, per share data, unless otherwise stated)
F-17
generally does not require collateral for its accounts receivable and does not have any agreements to
mitigate credit risk.
q) Accounting for Revenues and Expenses:
Revenues are generated from time charter
agreements which contain a lease as they meet the criteria of a lease under ASC 842. Agreements with
the same charterer are accounted for as separate agreements according to their specific terms and
conditions. All agreements contain a minimum non-cancellable period and an extension period at the option
of the charterer. Each lease term is assessed at the inception of that lease. Under a time charter agreement,
the charterer pays a daily hire for the use of the vessel and reimburses the owner for hold cleanings, extra
insurance premiums for navigating in restricted areas and damages caused by the charterers. Revenues
from time charter agreements providing for varying annual rates are accounted for as operating leases and
thus recognized on a straight-line basis over the non-cancellable rental periods of such agreements, as
service is performed. The charterer pays to third parties port, canal and bunkers consumed during the term
of the time charter agreement, unless they are for the account of the owner, in which case, they are included
in voyage expenses. Voyage expenses also include commissions on time charter revenue (paid to the
charterers, the brokers and the managers) and gain or loss from bunkers resulting mainly from the
difference in the value of bunkers paid by the Company when the vessel is redelivered to the Company
from the charterer under the vessel’s previous time charter agreement and the value of bunkers sold by
the Company when the vessel is delivered to a new charterer (Note 10). Under a time charter agreement,
the owner pays for the operation and the maintenance of the vessel, including crew, insurance, spares and
repairs, which are recognized in operating expenses. The Company, as lessor, has elected not to allocate
the consideration in the agreement to the separate lease and non-lease components (operation and
maintenance of the vessel) as their timing and pattern of transfer to the charterer, as the lessee, are the
same and the lease component, if accounted for separately, would be classified as an operating lease.
Additionally, the lease component is considered the predominant component, as the Company has
assessed that more value is ascribed to the vessel rather than to the services provided under the time
charter contracts. In time charter agreements apart from the agreed hire rate, the Company may be entitled
to an additional income, such as ballast bonus. Ballast bonus is paid by charterers for repositioning the
vessel. The Company analyzes terms of each contract to assess whether income from ballast bonus is
accounted together with the lease component over the duration of the charter or as service component
under ASC 606. Deferred revenue includes cash received prior to the balance sheet date for which all
criteria to recognize as revenue have not been met.
r) Repairs and Maintenance:
expenses are expensed in the year incurred. Such costs are included in vessel operating expenses in the
accompanying consolidated statements of operations.
s) Earnings / (loss) per Common Share:
by dividing net income / (loss) available to common stockholders by the weighted average number of
common shares outstanding during the year. Shares issuable at little or no cash consideration upon
satisfaction of certain conditions, are considered outstanding and included in the computation of basic
earnings/(loss) per share as of the date that all necessary conditions have been satisfied. Diluted earnings
per common share, reflects the potential dilution that could occur if securities or other contracts to issue
common stock were exercised.
t) Segmental Reporting:
The Company engages in the operation of dry-bulk vessels which has been
identified as one reportable segment. The operation of the vessels is the main source of revenue
generation, the services provided by the vessels are similar and they all operate under the same economic
environment. Additionally, the vessels do not operate in specific geographic areas, as they trade worldwide;
they do not trade in specific trade routes, as their trading (route and cargo) is dictated by the charterers;
DIANA SHIPPING INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 2022
(Expressed in thousands of U.S. Dollars – except share, per share data, unless otherwise stated)
F-18
and the Company does not evaluate the operating results for each type of dry bulk vessels (i.e. Panamax,
Capesize etc.) for the purpose of making decisions about allocating resources and assessing performance.
u) Fair Value Measurements
: The Company classifies and discloses its assets and liabilities carried
at fair value in one of the following categories: Level 1: Quoted market prices in active markets for identical
assets or liabilities; Level 2: Observable market-based inputs or unobservable inputs that are corroborated
by market data; Level 3: Unobservable inputs that are not corroborated by market data.
v) Share Based Payments:
their grant date fair value and are not subsequently re-measured. That cost is recognized over the period
during which an employee is required to provide service in exchange for the award—the requisite service
period (usually the vesting period). No compensation cost is recognized for equity instruments for which
employees do not render the requisite service unless the board of directors determines otherwise.
Forfeitures of awards are accounted for when and if they occur. If an equity award is modified after the
grant date, incremental compensation cost will be recognized in an amount equal to the excess of the fair
value of the modified award over the fair value of the original award immediately before the modification.
w) Equity method investments:
exercises significant influence but does not exercise control are accounted for by the equity method of
accounting. Under this method, the Company records such an investment at cost and adjusts the carrying
amount for its share of the earnings or losses of the entity subsequent to the date of investment and reports
the recognized earnings or losses in income. Dividends received, if any, reduce the carrying amount of the
investment. When the carrying value of an equity method investment is reduced to zero because of losses,
the Company does not provide for additional losses unless it is committed to provide further financial
support to the investee. As of December 31, 2021, the Company’s investment in DWM is classified as a
liability because the Company absorbed such losses (Note 3(c)). The Company also evaluates whether a
loss in value of an investment that is other than a temporary decline should be recognized. Evidence of a
loss in value might include absence of an ability to recover the carrying amount of the investment or inability
of the investee to sustain an earnings capacity that would justify the carrying amount of the investment.
x) Going concern:
Management evaluates, at each reporting period, whether there are conditions or
events that raise substantial doubt about the Company's ability to continue as a going concern within one
year from the date the financial statements are issued.
y) Shares repurchased and retired:
The Company’s shares repurchased for retirement, are
immediately cancelled and the Company’s share capital is accordingly reduced. Any excess of the cost of
the shares over their par value is allocated in additional paid-in capital, in accordance with ASC 505-30-
30, Treasury Stock.
z) Financial Instruments, credit losses
: At each reporting date, the Company evaluates its financial
assets individually for credit losses and presents such assets in the net amount expected to be collected
on such financial asset. When financial assets present similar risk characteristics, these are evaluated on
a collective basis. When developing an estimate of expected credit losses, the Company considers
available information relevant to assessing the collectability of cash flows such as internal information, past
events, current conditions and reasonable and supportable forecasts. As of December 31, 2021, the
Company assessed the financial condition of DWM, changed its estimate on the recoverability of its
receivable due from DWM relating to the fine paid by the Company on behalf of DWM (Notes 3(c) and 8(b))
and determined that part of the amount may not be recoverable. As a result, the Company recorded as of
December 31, 2021, an allowance for credit losses amounting to $
, based on probability of default as
there was no previous loss record. The allowance for credit losses was included in “Other operating
DIANA SHIPPING INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 2022
(Expressed in thousands of U.S. Dollars – except share, per share data, unless otherwise stated)
F-19
(income)/loss” in the 2021 accompanying consolidated statements of operations. The allowance was
reversed in 2022 as the full amount was recovered and its reversal is included in “Other operating
(income)/loss” in the 2022 accompanying consolidated statements of operations.
identified and recorded in 2020 and 2022.
aa) Financial Instruments, Recognition and Measurement:
According to ASC 321-10-35-2, the
Company has elected to measure equity securities without a readily determinable fair value, that do not
qualify for the practical expedient in ASC 820
Fair Value Measurement
to estimate fair value using the NAV
per share (or its equivalent), at its cost minus impairment, if any. If the Company identifies observable price
changes in orderly transactions for the identical or a similar investment of the same issuer, it shall measure
equity securities at fair value as of the date that the observable transaction occurred. The Company shall
continue to apply this measurement until the investment does not qualify to be measured in accordance
with this paragraph. At each reporting period, the Company reassesses whether an equity investment
without a readily determinable fair value qualifies to be measured in accordance with this paragraph. The
Company may subsequently elect to measure equity securities at fair value and the election to measure
securities at fair value shall be irrevocable. Any resulting gains or losses on the securities for which that
election is made shall be recorded in earnings at the time of the election. At each reporting period, the
Company also evaluates indicators such as the investee’s performance and its ability to continue as going
concern and market conditions, to determine whether an investment is impaired in which case, the
Company will estimate the fair value of the investment to determine the amount of the impairment loss.
ab) Non-monetary transactions and spinoffs:
Non-monetary transactions are recorded based on the
fair values of the assets (or services) involved unless the fair value of neither the asset received, nor the
asset relinquished is determinable within reasonable limits. Also, under ASC 845-10-30-10 Nonmonetary
Transactions, Overall, Initial Measurement, Nonreciprocal Transfers with Owners and ASC 505-60 Spinoffs
and Reverse Spinoffs, if the pro-rata spinoff of a consolidated subsidiary or equity method investee does
not meet the definition of a business under ASC 805, the nonreciprocal transfer of nonmonetary assets is
accounted for at fair value, if the fair value of the nonmonetary asset distributed is objectively measurable
and would be clearly realizable to the distributing entity in an outright sale at or near the time of the
distribution, and the spinor recognizes a gain or loss for the difference between the fair value and book
value of the spinee. A transaction is considered pro rata if each owner receives an ownership interest in
the transferee in proportion to its existing ownership interest in the transferor (even if the transferor retains
an ownership interest in the transferee). In accordance with ASC 805 Business Combinations: Clarifying
the Definition of a Business, if substantially all of the fair value of the gross assets distributed in a spinoff
are concentrated in a single identifiable asset or group of similar identifiable assets, then the spinoff of a
consolidated subsidiary does not meet the definition of a business (Note 3(f)). Other nonreciprocal transfers
of nonmonetary assets to owners are accounted for at fair value if the fair value of the nonmonetary asset
distributed is objectively measurable and would be clearly realizable to the distributing entity in an outright
sale at or near the time of the distribution.
ac) Contracts in entity’s equity:
considered equity instruments, unless an event that is not in the entity’s control would require net cash
settlement. Additionally, the entity should have sufficient authorized and unissued shares, the contract
contains an explicit share limit, there is no requirement to net cash settle the contract in the event the entity
fails to make timely filings with the Securities and Exchange Commission (SEC) and there are no cash
settled top-off or make-whole provisions. The Company follows the provision of ASC 480 “Distinguishing
Liabilities from Equity” and ASC 815 “Derivatives and Hedging” to determine whether the warrants issued
should be classified as permanent equity, temporary equity or liability. The Company has determined that
warrants are free standing instruments and are out of scope of ASC 480 and meet all criteria for equity
classification.
DIANA SHIPPING INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 2022
(Expressed in thousands of U.S. Dollars – except share, per share data, unless otherwise stated)
F-20
New Accounting Pronouncements - Not Yet Adopted
In March 2020, the FASB issued ASU 2020-04, Reference Rate Reform (Topic 848): Facilitation of the
Effects of Reference Rate Reform on Financial Reporting, which provides optional expedients and
exceptions for applying GAAP to contracts, hedging relationships, and other transactions affected by
reference rate reform. ASU 2020-04 applies to contracts that reference LIBOR or another reference rate
expected to be terminated because of reference rate reform. The amendments in this Update are effective
for all entities as of March 12, 2020 through December 31, 2022. An entity may elect to apply the
amendments for contract modifications by Topic or Industry Subtopic as of any date from the beginning of
an interim period that includes or is subsequent to March 12, 2020, or prospectively from a date within an
interim period that includes or is subsequent to March 12, 2020, up to the date that the financial statements
are available to be issued. Once elected for a Topic or an Industry Subtopic, the amendments in this Update
must be applied prospectively for all eligible contract modifications for that Topic or Industry Subtopic. An
entity may elect to apply the amendments in this Update to eligible hedging relationships existing as of the
beginning of the interim period that includes March 12, 2020 and to new eligible hedging relationships
entered into after the beginning of the interim period that includes March 12, 2020. An entity may elect
certain optional expedients for hedging relationships that exist as of December 31, 2022 and maintain
those optional expedients through the end of the hedging relationship. In December 2022, the FASB issued
ASU No. 2022-06, Deferral of the Sunset Date of Reference Rate Reform (Topic 848). Topic 848 provides
optional expedients and exceptions for applying GAAP to transactions affected by reference rate (e.g.,
LIBOR) reform if certain criteria are met, for a limited period of time to ease the potential burden in
accounting for (or recognizing the effects of) reference rate reform on financial reporting. The ASU deferred
the sunset date of Topic 848 from December 31, 2022 to December 31, 2024. The Company is exposed
to LIBOR and LIBOR changes under its loan agreements with several banks. As of December 31, 2022,
the Company used LIBOR and will continue to use LIBOR until it is discontinued or replaced by another
rate to be agreed with the related banks. During 2022, the Company entered into a new loan agreement
and elected to use term SOFR as a replacement for LIBOR and it is probable that it will use the same rate
when the agreements under LIBOR are modified. The Company does not expect that the change of LIBOR
to term SOFR will have a significant impact in its results of operations and cash flows.
3. Transactions with related parties
a) Altair Travel Agency S.A. (“Altair”):
Altair, which is controlled by the Company’s Chairman of the Board. Travel expenses for 2022, 2021 and
2020 amounted to $
, $
, respectively, and are mainly included in “Vessels, net book
value”, “Vessel operating expenses” and “General and administrative expenses” in the accompanying
consolidated financial statements. As of December 31, 2022 and 2021, an amount of $
,
respectively, was payable to Altair and is included in “Due to related parties” in the accompanying
consolidated balance sheets.
b) Steamship Shipbroking Enterprises Inc. or Steamship:
the Company’s Chairman of the Board which provides brokerage services to DSI for a fixed monthly fee
plus commission on the sale of vessels, pursuant to a Brokerage Services Agreement. For 2022, 2021 and
2020 brokerage fees amounted to $
, $
, respectively, and are included in “General
and administrative expenses” in the accompanying consolidated statements of operations. For 2022, 2021,
and 2020, commissions on the sale and purchase of vessels amounted to $
, $
,
respectively and are included in the calculation of impairment charge when the vessels were recorded at
fair value less cost to sell, or the gain/loss on the sale of vessels. As of December 31, 2022 and 2021,
there was
DIANA SHIPPING INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 2022
(Expressed in thousands of U.S. Dollars – except share, per share data, unless otherwise stated)
F-21
c) Diana Wilhelmsen Management Limited, or DWM:
Management Inc., a wholly owned subsidiary of DSI, and Wilhelmsen Ship Management Holding AS, an
unaffiliated third party, each holding
% of DWM. The DWM office is located in Athens, Greece. During
2021 and 2020, each
% shareholder of DWM contributed an amount of $
, respectively, as
additional investment to DWM. As of December 31, 2022, the investment in DWM amounted to $
is separately presented in “Equity method investments” in the accompanying 2022 consolidated balance
sheet and as of December 31, 2021, the investment in DWM was a liability amounting to $
included in “Due to related parties” in the accompanying 2021 consolidated balance sheet. In 2022, the
investment in DWM resulted in gain of $
, and in 2021 and in 2020, resulted in a loss of $
$
, respectively, included in “Gain/(loss) from equity method investments” in the accompanying
consolidated statements of operations.
From October 8, 2019 until May 24, 2021, DSS outsourced the management of certain vessels to DWM
for which DSS was paying a fixed monthly fee per vessel and a percentage of those vessels’ gross
revenues. On May 24, 2021, the management of the same vessels was transferred to DWM directly,
whereas the vessel owning companies of these vessels entered into new management agreements with
DWM under which they pay a fixed monthly fee and a percentage of their gross revenues. Management
fees paid to DWM in 2022, 2021 and 2020 amounted to $
, $
, respectively, and are
separately presented as “Management fees to related party” in the accompanying consolidated statements
of operations. Additionally, in 2022, the Company paid to DWM management fees amounting to $
,
included in “Advances for vessel acquisitions” and “Vessels, net”, relating to the management of
Ultramax vessels the Company assigned to DWM with new management agreements and incurred during
the predelivery period of the vessels. Commissions for 2022, 2021 and 2020 amounted to $
, $
$
, respectively, and are included in “Voyage expenses” (Note 10). As of December 31, 2022 and 2021,
there was an amount of $
accompanying consolidated balance sheets (Note 8(b)). As of December 31, 2021, the amount due from
related parties includes a provision of $
the due amount was collected.
d) Series D Preferred Stock
: On June 22, 2021, the Company issued
Stock, to an affiliate of its Chief Executive Officer, Mrs. Semiramis Paliou for an aggregate purchase price
of $
e) Sale and purchase of Bond by executives
: On June 22, 2021, entities affiliated with executive
officers and directors of the Company sold their bonds of the Company’s 9.5% Senior Unsecured Bond
and participated in the 8.375% Senior Unsecured Bond with an aggregate principal amount of $
(Note 6).
f) OceanPal Inc., or OceanPal:
Conveyance agreement with its wholly owned subsidiary OceanPal, to contribute to it
shipowning subsidiaries and working capital of $
Preferred Shares;
% of the common
shares of OceanPal to be issued and outstanding on the spinoff with cancellation of the existing outstanding
common shares. On November 29, 2021, the Company completed a pro rata distribution of the common
stock of OceanPal to the Company’s stockholders of record as of the close of business on November 3,
2021. Each of the Company’s stockholders received one share of OceanPal Inc. common stock for each
ten shares of the Company’s common stock held as of the close of business on November 3, 2021. As of
December 31, 2021, the Company evaluated OceanPal’s spinoff and concluded that it was a pro rata
distribution to the owners of the Company of shares of a consolidated subsidiary that does not meet the
definition of a business under ASC 805 Business Combinations, as the fair value of the gross assets
DIANA SHIPPING INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 2022
(Expressed in thousands of U.S. Dollars – except share, per share data, unless otherwise stated)
F-22
contributed to OceanPal was concentrated in a group of similar identifiable assets, the vessels. The
Company also assessed that the fair value of the nonmonetary assets transferred to OceanPal was
objectively measurable and clearly realizable to the transferor in an outright sale at or near the time of the
distribution. The spinoff was measured at fair value and a gain of $
, being the difference between
the fair value and book value of the OceanPal, was recognized and separately presented as “Gain on
spinoff of OceanPal Inc.” in the accompanying consolidated statements of operations.
The fair value of the assets contributed, amounting to $
Series B Preferred Shares and
OceanPal to Diana in connection with the transaction, amounting to $
, was recorded as dividend in
the Company’s consolidated statement of stockholders’ equity for the year ended December 31, 2021. The
fair value of the vessels was measured on the date of the spinoff, on November 29, 2021, and was
determined through Level 2 inputs of the fair value hierarchy by taking into consideration third party
valuations which were based on the last done deals of sale of vessels, on a charter free basis, with similar
characteristics, such as type, size and age at the specific dates. The fair value of the remaining assets
contributed approximated their carrying value.
Since the spinoff, the Company is the holder of Series B Preferred Shares and Series C Convertible
Preferred Shares of OceanPal, or together the “OceanPal Shares”. Series B Preferred Shares entitle the
holder to
however, that the total number of votes shall not exceed
% of the total number of votes, provided further,
that the total number of votes entitled to vote, including common stock or any other voting security, would
not exceed
% of the total number of votes.
Series C Preferred Shares do not have voting rights unless related to amendments of the Articles of
Incorporation that adversely alter the preference, powers or rights of the Series C Preferred Shares or to
issue Parity Stock or create or issue Senior Stock. Series C Preferred Shares have become convertible
into common stock at the Company’s option since the first anniversary of the issue date, at a conversion
price equal to the lesser of $
subject to adjustments. Additionally, Series C Preferred Shares have a cumulative preferred dividend
accruing at the rate of
% per annum, payable in cash or, at OceanPal’s election, in kind and has a
liquidation preference equal to the stated value of $
. As there was no observable market for the
OceanPal Shares, at the spinoff the Series B Preferred Shares were recorded at their par value, or $
,
which the Company assessed was the fair value, and Series C Preferred Shares were recorded at $
,
being the fair value of the shares determined through Level 2 inputs of the fair value hierarchy by taking
into consideration a third party valuation based on the income approach, taking into account the present
value of the future cash flows the Company expects to receive from holding the equity instrument.
During 2022 and for the period from the spinoff to December 31, 2021, the Company assessed the
existence of an observable market for the OceanPal Shares, the existence of observable price changes
for identical or similar investments of the same issuer and the existence of any indications for impairment.
As per the Company’s assessment no such have been identified as of December 31, 2022 and 2021 and
for the periods then ended and the investments continued to qualify to be measured at cost. As of
December 31, 2022 and 2021, the aggregate value of investments without readily determinable fair values
amounted to $
, respectively, including accrued dividends of $
, respectively,
and are separately presented as “Investments in related party” in the accompanying consolidated balance
sheets. Additionally, as of December 31, 2021, an amount of $
spinoff, included in “Due to related parties”, which was settled in 2022.
DIANA SHIPPING INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 2022
(Expressed in thousands of U.S. Dollars – except share, per share data, unless otherwise stated)
F-23
On September 20, 2022, OceanPal issued
as part of the consideration provided to the Company for the acquisition of Baltimore, which was sold to
OceanPal, pursuant to a Memorandum of Agreement dated June 13, 2022, for $
commissions, of which $
shares (Note 4). The Company has initially measured its investments on Series D preferred shares at their
fair value on their issuance date on September 20, 2022 and has elected to subsequently measure such
investments in accordance with the paragraph ASC 321-10-35-2 (Note 2(aa)). The fair value of Series D
Preferred Shares, of $
, was determined through Level 2 inputs of the fair value hierarchy by taking
into consideration a third-party valuation which was based on the income approach, taking into account the
present value of the future cash flows the Company expects to receive from holding the equity instrument.
The shares are convertible into common stock at the Company’s option, provided however that the
Company would not beneficially own greater than
% of the outstanding shares of common stock; they
have no voting rights; they have a cumulative dividend accruing at the rate of
% per annum payable in
cash or, at OceanPal’s election, in PIK shares (Series D Preferred shares issued to the holder in lieu of
cash dividends); and they have a liquidation preference equal $
acquisition of the investment in Series D preferred shares and up to the date of its distribution to the
Company's shareholders (see discussion below), the Company did not identify any indications for
impairment or any observable prices for identical or similar investments of the same issuer.
On December 15, 2022, the Company distributed those shares as non-cash dividend (dividend in kind) to
its shareholders of record on November 28, 2022. The shareholders had the option to receive Series D
Preferred Shares or common shares of OceanPal at the conversion rate determined before distribution
according to the terms of the designation statement. The Company’s shareholders received
common shares of OceanPal, and
transaction as a nonreciprocal transfer with its owners in accordance with ASC 845 and measured their
fair value on the date of declaration at $
. The fair value of the Series D Preferred Shares was
determined through Level 2 inputs of the fair value hierarchy, by using the income approach, taking into
account the present value of the future cash flows, the holder of shares would expect to receive from
holding the equity instrument. This resulted in gain of $
, being the difference between the fair value and
the carrying value of the investment and is separately presented as “Gain on dividend distribution” in the
accompanying consolidated statements of operations.
During 2022 and 2021, dividend income deriving from the Company’s investments in OceanPal amounted
to $
, respectively.
4. Advances for vessel acquisitions and Vessels, net
Advances for Vessel Acquisitions
As of December 31, 2022 and 2021, advances for vessel acquisitions amounted to $
,
respectively, and related to advances paid and predelivery costs incurred for the acquisition of the vessels
described below. As of December 31, 2022, an amount of $
acquisitions was held at an escrow account of the designated escrow agent and were the funds borrowed
for the acquisition of one vessel which was delivered to the Company in January 2023 (Note 15).
Vessel Acquisitions
On July 15, 2021 the Company signed, through a separate wholly owned subsidiary, a Memorandum of
Agreement to acquire from an unaffiliated third party, the 2011 built Kamsarmax dry bulk vessel
Leonidas
P.C.
, for a purchase price of $
. The Company paid an advance of $
, being
% of the purchase
DIANA SHIPPING INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 2022
(Expressed in thousands of U.S. Dollars – except share, per share data, unless otherwise stated)
F-24
price, included in Advances for vessel acquisitions, in the accompanying 2021 consolidated balance sheet.
The balance of the purchase price was paid on the vessel’s delivery on February 16, 2022, and the advance
and predelivery costs were transferred to Vessels. The Company incurred $
expenses.
On December 3, 2021, the Company signed, through a separate wholly owned subsidiary, a Memorandum
of Agreement to acquire from an unaffiliated third party, the Capesize dry bulk vessel
Florida,
construction, for a purchase price of $
. The Company paid an amount of $
, being
%
advance of the purchase price included in Advances for vessel acquisitions, in the accompanying 2021
consolidated balance sheet. The balance of the purchase price was paid on the vessel’s delivery on March
29, 2022 and the advance and predelivery costs were transferred to Vessels. The Company incurred
$
On August 10, 2022, the Company entered into a master agreement with Sea Trade Holdings Inc. (or “Sea
Trade”), an unaffiliated third party, to acquire nine Ultramax vessels for an aggregate purchase price of
$
, of which $
newly issued common shares of the Company, issuable on the delivery of each vessel. In addition to the
master agreement, in August 2022, the Company entered into
the acquisition of each vessel and issued nine warrants to Sea Trade, for the issuance of the shares,
exercisable on the delivery date of each vessel. During the fourth quarter of 2022, the Company took
delivery of
, of which $
issued common shares (Notes 9 and 14) and $
shares was determined based on the closing price of the Company’s common stock on the date of delivery
of each vessel, which was also the date of issuance, determined through Level 1 inputs of the fair value
hierarchy. Also, as of December 31, 2022, an amount of $
acquisitions being part of the purchase price for the acquisition of the ninth vessel, and additional
predelivery expenses, amounting to $
Vessel Disposals
On March 16, 2021, the Company through a separate wholly owned subsidiary entered into a Memorandum
of Agreement to sell to an unaffiliated third party the vessel
Naias
, for a sale price of $
commissions. At the date of the agreement to sell the vessel, the vessel was measured at the lower of its
carrying amount or fair value (sale price) less costs to sell, which was the vessel’s carrying value at $
,
and was classified in current assets as vessel held for sale, according to the provisions of ASC 360, as all
criteria required for this classification were met. The vessel was delivered to the buyer on July 30, 2021
and the sale of the vessel resulted in gain amounting to $
, included in “(Gain)/loss on sale of vessels”
in the consolidated statement of operations.
On June 13, 2022, the Company through a separate wholly owned subsidiary entered into a Memorandum
of Agreement to sell to OceanPal, the vessel
Baltimore
, for a sale price of $
(Note 3 (f)). On the date of the agreement, the vessel was classified as held for sale according to the
provisions of ASC 360, as all criteria required for this classification were met, at carrying value of $
and unamortized deferred costs of $
, measured at the lower of carrying value and fair value (sale price)
less costs to sell. The vessel was delivered to OceanPal on September 20, 2022 and the sale resulted in
gain amounting to $
, included in “(Gain)/loss on sale of vessels” in the consolidated statement of
operations.
The amounts reflected in Vessels, net in the accompanying consolidated balance sheets are analyzed as
follows:
DIANA SHIPPING INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 2022
(Expressed in thousands of U.S. Dollars – except share, per share data, unless otherwise stated)
F-25
Vessel Cost
Accumulated
Depreciation
Net Book
Value
Balance, December 31, 2020
$
$
(156,253 )
$
- Additions for improvements
-
- Additions for improvements reclassified from other non-
current assets
-
- Vessel disposals
(16,120 )
(9,010 )
- Vessels contributed to OceanPal
(47,429 )
(30,302 )
- Depreciation for the year
-
(34,963 )
(34,963 )
Balance, December 31, 2021
$
$
(166,979 )
$
- Additions for vessel acquisitions and improvements
-
- Additions for improvements reclassified from other non-
current assets
-
- Vessel disposals
(29,175 )
(16,722 )
- Depreciation for the year
-
(36,986 )
(36,986 )
Balance, December 31, 2022
$
$
(191,512 )
$
Additions for vessel improvements mainly relate to the implementation of ballast water treatment and other
works necessary for the vessels to comply with new regulations and be able to navigate to additional ports.
As of December 31, 2022 and 2021, an amount of $
, respectively, was reclassified to
Vessels, net from other non-current assets and related to ballast water treatment equipment paid in a
previous period but delivered on the vessels during the years ended December 31, 2022 and 2021.
5. Property and Equipment, net
In November 2021, DSS acquired
1/3
owned also 1/3, for the purchase price of €
taxes amounted to $
.
The Company owns the land and building of its principal corporate offices in Athens, Greece. Additionally,
DSS owns, together with a related party company, another plot of land in the nearby area, acquired for
office use. Other assets consist of office furniture and equipment, computer software and hardware and
vehicles. The amount reflected in “Property and equipment, net” is analyzed as follows:
Property and
Equipment
Accumulated
Depreciation
Net Book
Value
Balance, December 31, 2020
$
$
(5,494 )
$
- Additions in property and equipment
-
- Depreciation for the year
-
(462 )
(462 )
- Disposal of assets
(529 )
-
Balance, December 31, 2021
$
$
(5,427 )
$
- Additions in property and equipment
-
- Depreciation for the year
-
(546 )
(546 )
Balance, December 31, 2022
$
$
(5,973 )
$
DIANA SHIPPING INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 2022
(Expressed in thousands of U.S. Dollars – except share, per share data, unless otherwise stated)
F-26
6. Long-term debt
The amount of long-term debt shown in the accompanying consolidated balance sheets is analyzed as
follows:
2022
2021
Senior unsecured bond
Secured long-term debt
Total long-term debt
$
$
Less: Deferred financing costs
(7,609 )
(8,168 )
Long-term debt, net of deferred financing costs
$
$
Less: Current long-term debt, net of deferred financing costs,
current
(91,495 )
(41,148 )
Long-term debt, excluding current maturities
$
$
Senior Unsecured Bond
:
On
, the Company issued a $
2023 of which entities affiliated with executive officers and directors of the Company purchased $
aggregate principal amount of the bond. The bond was fully repurchased and retired on September 27,
2021 upon the exercise of the Company’s call option pursuant to the Bond terms discussed below. The
bond bore interest at a US Dollar fixed-rate coupon of
% which was
.
and was trading on the Oslo Stock Exchange under the ticker symbol “DIASH01”. On July 7, 2020, the
Company repurchased $
$
% of nominal value, or $
, with a
newly issued bond, discussed below. The Company applied the debt modification guidance for the part of
the transaction refinanced by existing investors amounting to $
remaining $
. An amount of $
refinancing and unamortized deferred fees were deferred over the term of the new bond and an amount of
$
call option and redeemed the balance of the bond at the price of
%. In 2021 and 2020, the repurchase
of the bond resulted in loss of $
, respectively, which is included in “(Loss)/gain on
extinguishment of debt” in the consolidated statements of operations.
On
, the Company issued a $
refinanced the previous bond. The bond ranks ahead of subordinated capital and ranks the same with all
other senior unsecured obligations of the Company other than obligations which are mandatorily preferred
by law. Entities affiliated with executive officers and directors of the Company purchased an aggregate of
$
rate coupon of
% and is payable semi-annually in arrears in June and December of each year. The
bond is callable in whole or in parts in June 2024 at a price equal to
% of nominal value; between
June 2025 to December 2025 at a price equal to
% of the nominal value and after December 2025
at a price equal to
% of nominal value. The bond includes financial and other covenants and is trading
at Oslo Stock Exchange under the ticker symbol “DIASH02”.
DIANA SHIPPING INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 2022
(Expressed in thousands of U.S. Dollars – except share, per share data, unless otherwise stated)
F-27
Secured Term Loans:
Under the secured term loans outstanding as of December 31, 2022,
are mortgaged with first preferred or priority ship mortgages, having an aggregate carrying value of
$
. Additional securities required by the banks include first priority assignment of all earnings,
insurances, first assignment of time charter contracts that exceed a certain period, pledge over the shares
of the borrowers, manager’s undertaking and subordination and requisition compensation and either a
corporate guarantee by DSI (the “Guarantor”) or a guarantee by the ship owning companies (where
applicable), financial covenants, as well as operating account assignments. The lenders may also require
additional security in the future in the event the borrowers breach certain covenants under the loan
agreements. The secured term loans generally include restrictions as to changes in management and
ownership of the vessels, additional indebtedness, as well as minimum requirements regarding hull cover
ratio and minimum liquidity per vessel owned by the borrowers, or the Guarantor, maintained in the bank
accounts of the borrowers, or the Guarantor.
As of December 31, 2022 and 2021, minimum cash deposits required to be maintained at all times under
the Company’s loan facilities, amounted to $
, respectively and are included in
“Restricted cash, non-current” in the accompanying consolidated balance sheets. Furthermore, the
secured term loans contain cross default provisions and additionally the Company is not permitted to pay
any dividends following the occurrence of an event of default. For 2022 and 2021, the weighted average
interest rate of the secured term loans was
% and
%, respectively.
As of December 31, 2022 and 2021, the Company had the following agreements with banks, either as a
borrower or as a guarantor, to guarantee the loans of its subsidiaries:
Export-Import Bank of China and DnB NOR Bank ASA:
, the Company drew
down a first tranche of $
, under a secured loan agreement, which was repayable in
instalments of approximately $
on
. On
, the Company drew down, under the same agreement, a second
tranche of $
, which was repayable in
balloon of $
. The loan which bore interest
at LIBOR plus a margin of
% per annum was prepaid in full on May 17, 2021, and unamortized costs
were written off to “(Loss)/gain on extinguishment of debt” in the 2021 consolidated statement of operations.
Commonwealth Bank of Australia, London Branch:
$
instalments of $
. The loan which bore
interest at
%, was prepaid in full on May 18, 2021 and unamortized costs were
written off to “(Loss)/gain on extinguishment of debt” in the 2021 consolidated statement of operations.
BNP Paribas (“BNP”):
agreement, to finance part of the acquisition cost of the
G. P. Zafirakis
P. S. Palios
maturing on
. The agreement was refinanced on June 29, 2020, to extend the maturity to
. The loan is repayable in equal semi-annual instalments of approximately $
$
margin of
%.
On July 16, 2018, the Company drew down $
is repayable in consecutive quarterly instalments of $
together with the last instalment on
. The loan bears interest at LIBOR plus a margin of
%.
DIANA SHIPPING INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 2022
(Expressed in thousands of U.S. Dollars – except share, per share data, unless otherwise stated)
F-28
Nordea Bank AB, London Branch (“Nordea”):
under a secured loan agreement, maturing on
. The loan bore interest at LIBOR plus a
margin of
%. On May 7, 2020, the loan was refinanced to extend the maturity to March 19, 2022 and on
July 29, 2021, the Company entered into a supplemental agreement with Nordea, to extend the loan
maturity to March 2024 and to draw down an additional amount of $
. The balance of the refinanced
loan, including the additional $
instalments of $
, all other terms of the loan remaining the same. In July 2022, the Company prepaid an
amount of $
, due to the sale of
Baltimore
to OceanPal (Note 4). Unamortized finance costs relating
to the part of the loan prepaid, were written off to “(Loss)/gain on extinguishment of debt” in the 2022
consolidated statement of operations. Following this prepayment, the loan is repayable in equal
instalments of $
.
On September 30, 2022, the Company entered into a $
price of
each vessel on their delivery to the Company. On December 12, 2022, the Company prepaid $
under the loan, attributed to DSI Andromeda, following the vessel’s sale under a sale and leaseback
agreement. (Note 7). Unamortized finance costs relating to the part of the loan prepaid, were written off to
“(Loss)/gain on extinguishment of debt” in the 2022 consolidated statement of operations. Following this
prepayment, the loan is repayable in
,
and a balloon amounting to $
. The
loan bears interest at term SOFR plus a margin of
%. Loan fees amounted to $
contra to debt and commitment fees amounted to $
, included in Interest expense and finance costs in
the accompanying 2022 consolidated statement of operations.
ABN AMRO Bank N.V., or ABN:
the amount of $
instalment on
. The tranche bears interest at LIBOR plus a margin of
%. Tranche B is
repayable in equal consecutive
together with the last instalment on
, and bears interest at LIBOR plus a margin of
%.
On May 20, 2021, the Company, drew down $
ABN AMRO Bank N.V, dated May 14, 2021, which was used to refinance existing loans. The loan was
repayable in consecutive
with the last instalment, on
. On August 22, 2022, and following the sale and leaseback
agreements of the vessels
Santa Barbara
New Orleans
, which were mortgaged to secure the loan, the
Company prepaid an amount of $
, which was the part of the loan attributed to the two vessels.
Unamortized finance costs relating to the part of the loan prepaid, were written off to “(Loss)/gain on
extinguishment of debt” in the 2022 consolidated statement of operations. Following this prepayment, the
loan is repayable in consecutive
with the last instalment, on
. The loan bears interest at LIBOR plus a margin of
% per
annum, which may be adjusted annually by maximum
the performance under certain sustainability KPIs.
Danish Ship Finance A/S:
which was repayable in
payable together with the last instalment on
. The loan which bore interest at LIBOR plus a
DIANA SHIPPING INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 2022
(Expressed in thousands of U.S. Dollars – except share, per share data, unless otherwise stated)
F-29
margin of
% was prepaid in full on May 20, 2021, and unamortized costs were written off to “(Loss)/gain
on extinguishment of debt” in the 2021 consolidated statement of operations.
ING Bank N.V.:
On November 19, 2015, the Company drew down advance A amounting to $
a secured loan agreement, which was repayable in
each and a balloon instalment of about $
. Advance B amounting to $
consecutive
together with the last instalment on
. The loan which bore interest at LIBOR plus a margin
of
% was prepaid in full on May 20, 2021, and unamortized costs were written off to “(Loss)/gain on
extinguishment of debt” in the 2021 consolidated statement of operations.
Export-Import Bank of China:
loan agreement, which is repayable in equal
, each, until its maturity on
%.
DNB Bank ASA.:
which is repayable in consecutive
with the last instalment on
. The loan bears interest at LIBOR plus a margin of
%.
As of December 31, 2022 and 2021, the Company was in compliance with all of its loan covenants.
The maturities of the Company’s bond and debt facilities described above as of December 31, 2022, and
throughout their term, are shown in the table below and do not include the related debt issuance costs:
Period
Principal Repayment
Year 1
$
Year 2
Year 3
Year 4
Year 5
Year 6 and thereafter
Total
$
7. Finance Liabilities
The amount of finance liabilities shown in the 2022 accompanying consolidated balance sheet is analyzed
as follows:
2022
Finance liabilities
Less: Deferred financing costs
(1,439 )
Finance liabilities, net of deferred financing costs
$
Less: Current finance liabilities, net of deferred financing costs, current
(8,802 )
Finance liabilities, excluding current maturities
$
DIANA SHIPPING INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 2022
(Expressed in thousands of U.S. Dollars – except share, per share data, unless otherwise stated)
F-30
On March 29, 2022, the Company sold
Florida
back the vessel under a bareboat agreement, for a period of
, under which the Company pays
hire, monthly in advance. Under the bareboat charter, the Company has the option to repurchase the vessel
after the end of the third year of the charter period, or each year thereafter, until the termination of the
lease, at specific prices, subject to irrevocable and written notice to the owner. If not repurchased earlier,
the Company has the obligation to repurchase the vessel for $
, on the expiration of the lease on the
tenth year. Issuance costs amounted to $
.
On August 17, 2022, the Company entered into
Japanese third parties for
New Orleans
Santa Barbara,
for an aggregate amount of $
. The
vessels were delivered to their buyers on September 8, 2022 and September 12, 2022, respectively and
the Company chartered in both vessels under bareboat charter parties for a period of
, each,
and has purchase options beginning at the end of the third year of each vessel's bareboat charter period,
or each year thereafter, until the termination of the lease, at specific prices, subject to irrevocable and
written notice to the owner. If not repurchased earlier, the Company has the obligation to repurchase the
vessels for $
, each, on the expiration of each lease on the eighth year. Issuance costs amounted to
$
.
On December 6, 2022, the Company sold
DSI Andromeda
and leased back the vessel under a bareboat agreement, for a period of
, under which the
Company pays hire, monthly in advance. Under the bareboat charter, the Company has the option to
repurchase the vessel after the end of the third year of the charter period, or each year thereafter, until the
termination of the lease, at specific prices, subject to irrevocable and written notice to the owner. If not
repurchased earlier, the Company has the obligation to repurchase the vessel for $
, on the expiration
of the lease on the tenth year. Issuance costs amounted to $
.
Under the bareboat charter parties, the Company is responsible for the operation and maintenance of the
vessels and the owner of the vessels shall not retain any control, possession, or command of the vessel
during the charter period.
The Company determined that, under ACS 842-40 Sale and Leaseback Transactions, the transactions are
failed sales and consequently the assets were not derecognized from the financial statements and the
proceeds from the sale of the vessels were accounted for as financial liabilities. As of December 31, 2022,
the weighted average remaining lease term of the above lease agreements was
interest rate was
%.
As of December 31, 2022, and throughout the term of the leases, the Company has annual finance liabilities
as shown in the table below:
Period
Principal Repayment
Year 1
$
Year 2
Year 3
Year 4
Year 5
Year 6 and thereafter
Total
$
DIANA SHIPPING INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 2022
(Expressed in thousands of U.S. Dollars – except share, per share data, unless otherwise stated)
F-31
8. Commitments and Contingencies
a) Various claims, suits, and complaints, including those involving government regulations and product
liability, arise in the ordinary course of the shipping business. In addition, losses may arise from disputes
with charterers, agents, insurance and other claims with suppliers relating to the operations of the
Company’s vessels. The Company accrues for the cost of environmental and other liabilities when
management becomes aware that a liability is probable and is able to reasonably estimate the probable
exposure. The Company’s vessels are covered for pollution in the amount of $
incident, by the PI Association in which the Company’s vessels are entered. In 2022, the Company
recorded a gain of $
its insurance policies, which is separately presented as insurance recoveries in the accompanying 2022
consolidated statement of operations.
b) In February 2021, DWM, as managers of the vessel
Protefs
, entered into a plea agreement with the
United States pursuant to which DWM, plead guilty for alleged violations of law concerning
maintenance of books and records and the handling of oil wastes of the vessel
Protefs.
On September
23, 2021, in the sentencing hearing of the
Protefs
among others, imposed to DWM a fine of $
of this fine was recorded as due from DWM (Note 3(c) and as of December 31, 2021, the receivable
was decreased by a provision for credit losses (Note 2(z). In 2022 the provision was reversed as the
full amount was recovered.
c) Pursuant to the sale and lease back agreements signed between the Company and its counterparties,
the Company has purchase obligations to repurchase the vessels
Florida, Santa Barbara, New Orleans
and
upon expiration of their lease contracts, as described in Note 7.
d) As of December 31, 2022, the Company’s vessels, owned and chartered-in, were fixed under time
charter agreements, considered operating leases. The minimum contractual gross charter revenue
expected to be generated from fixed and non-cancelable time charter contracts existing as of December
31, 2022 and until their expiration was as follows:
Period
Amount
Year 1
$
Year 2
Year 3
Year 4
Year 5
$
9. Capital Stock and Changes in Capital Accounts
a) Preferred stock
:
consists of
are designated as Series A Participating Preferred Shares,
Preferred Shares,
Series D Preferred Shares. As of December 31, 2022 and 2021, the Company had
Participating Preferred Shares issued and outstanding.
b) Series B Preferred Stock:
Series B Preferred Shares issued and outstanding with par value $
DIANA SHIPPING INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 2022
(Expressed in thousands of U.S. Dollars – except share, per share data, unless otherwise stated)
F-32
with liquidation preference at $
to dividends, distributions and payments upon liquidation and are subordinated to all of the existing and
future indebtedness.
Dividends on the Series B Preferred Shares are cumulative from the date of original issue and are payable
on the 15th day of January, April, July and October of each year at the dividend rate of
% per annum,
or $
amounted to $
, $
, respectively. Since February 14, 2019, the Company may
redeem, in whole or in part, the Series B Preferred Shares at a redemption price of $
an amount equal to all accumulated and unpaid dividends thereon to the date of redemption, whether or
not declared.
c) Series C Preferred Stock
: As of December 31, 2022, and, 2021, the Company had
of Series C Preferred Stock, issued and outstanding, with par value $
of its Chief Executive Officer, Mrs. Semiramis Paliou.
rights and cannot be transferred without the consent of the Company except to the holder’s affiliates and
immediate family members.
d) Series D Preferred Stock
: As of December 31, 2022, and, 2021, the Company had
Series D Preferred Stock, issued and outstanding, with par value $
its Chief Executive Officer, Mrs. Semiramis Paliou. The Series D Preferred Stock is not redeemable and
has
Company, and each share of the Series D Preferred Stock entitles the holder thereof to up to
votes, on all matters submitted to a vote of the shareholders of the Company, subject to a maximum number
of votes eligible to be cast by such holder derived from the Series D Preferred Shares and any other voting
security of the Company held by the holder to be equal to the lesser of (i) 36% of the total number of votes
entitled to vote on any matter put to shareholders of the Company and (ii) the sum of the holder’s aggregate
voting power derived from securities other than the Series D Preferred Stock and 15% of the total number
of votes entitled to be cast on matters put to shareholders of the Company. The Series D Preferred Stock
is transferable only to the holder’s immediate family members and to affiliated persons or entities.
e) Issuance and Repurchase of Common Shares:
In February 2020, the Company repurchased, in
a tender offer
repurchased
at an average price of $
$
, including expenses. In February 2021, the Company repurchased in a tender offer
shares at the price of $
August 2021, the Company repurchased, in another tender offer,
a price of $
, including expenses.
In 2022, the Company issued under its ATM program
price of $
. During 2022, the Company repurchased
under its share repurchase program
share, for an aggregate cost of $
, including expenses. In addition, during the fourth quarter, the
Company issued
DIANA SHIPPING INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 2022
(Expressed in thousands of U.S. Dollars – except share, per share data, unless otherwise stated)
F-33
eight out of nine warrants mentioned in (i) below, for the acquisition of eight vessels, at an average price
of $
.
f) Dividend on Common Stock:
On March 21, 2022, the Company paid a dividend on its common
stock of $
paid a dividend on its common stock of $
On August 19, 2022, the Company paid a dividend on its common stock of $
shareholders of record as of August 8, 2022. On December 15, 2022, the Company paid a dividend on its
common stock of $
the Company paid total cash dividends on common stock amounting to $
.
g) Dividend in Kind:
On December 15, 2022, the Company distributed the Company’s investment in
the Series D Preferred Shares of OceanPal in the form of a stock dividend amounting to $
, or $
per share, to its shareholders of record as of November 28, 2022 (Notes 3(f) and 4). On November 29,
2021, the Company distributed to its shareholders of record on November 3, 2021, the common stock of
OceanPal, acquired in a spin-off, amounting to $
h) Incentive Plan:
On February 25, 2022, the Company’s Board of Directors approved the award of
pursuant to the Company’s Equity Incentive Plan, as annual bonus. The fair value of the restricted shares
based on the closing price on the date of the Board of Directors’ approval was $
. The cost of these
awards will be recognized in income ratably over the restricted shares vesting period which will be
As of December 31, 2022,
incentive plan.
Restricted stock in 2022, 2021 and 2020 is analyzed as follows:
Number of Shares
Weighted Average
Grant Date Price
Outstanding at December 31, 2019
$
Granted
Vested
(3,610,221 )
Outstanding at December 31, 2020
$
Granted
Vested
(1,168,363 )
Outstanding at December 31, 2021
$
Granted
Vested
(3,118,060 )
Outstanding at December 31, 2022
$
The fair value of the restricted shares has been determined with reference to the closing price of the
Company’s stock on the date such awards were approved by the Company’s board of directors. The
aggregate compensation cost is being recognized ratably in the consolidated statement of operations over
the respective vesting periods. In 2022, 2021, and 2020, compensation cost amounted to $
, $
,
and $
, respectively, and is included in “General and administrative expenses” presented in the
accompanying consolidated statements of operations.
As of December 31, 2022 and 2021, the total unrecognized cost relating to restricted share awards was
$
, respectively. As of December 31, 2022, the weighted-average period over which the
DIANA SHIPPING INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 2022
(Expressed in thousands of U.S. Dollars – except share, per share data, unless otherwise stated)
F-34
total compensation cost related to non-vested awards not yet recognized is expected to be recognized is
i) Warrants:
On August 11, 2022, the Company issued
permitted the holder to purchase from the Company
, at $
the delivery of each vessel from Sea Trade to the Company. The warrants would expire and no longer be
exercisable upon the earlier of the termination date of each memorandum of agreement and the date before
the delivery date of a vessel if a registration statement had not been declared effective. The holder of the
warrants would not be considered a shareholder prior to the issuance of the shares. As of December 31,
2022, there was only
Company (Note 15). The Company did
t receive any proceeds from the exercise of the warrants by Sea
Trade and the exercise price of the shares issued was included in the price of the vessels acquired.
10. Voyage expenses
The amounts in the accompanying consolidated statements of operations are analyzed as follows:
2022
2021
2020
Commissions
$
$
$
(Gain)/loss from bunkers
(8,100 )
(5,955 )
Port expenses and other
Total
$
$
$
11. Interest and Finance Costs
The amounts in the accompanying consolidated statements of operations are analyzed as follows:
2022
2021
2020
Interest expense, debt
$
$
$
Finance liabilities interest expense
-
-
Amortization of debt and finance liabilities issuance costs
Loan and other expenses
Interest expense and finance costs
$
$
$
12. Earnings/(loss) per Share
All common shares issued (including the restricted shares issued under the Company’s incentive plans)
are the Company’s common stock and have equal rights to vote and participate in dividends. The
calculation of basic earnings/(loss) per share does not treat the non-vested shares (not considered
participating securities) as outstanding until the time/service-based vesting restriction has lapsed.
Incremental shares are the number of shares assumed issued under the treasury stock method weighted
for the periods the non-vested shares were outstanding. In 2022 and 2021, there were
calculation. In 2020, incremental shares were
t included in the calculation of the diluted earnings per
share, as the Company incurred losses and the effect of such shares would be anti-dilutive.
DIANA SHIPPING INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 2022
(Expressed in thousands of U.S. Dollars – except share, per share data, unless otherwise stated)
F-35
Profit or loss attributable to common equity holders is adjusted by the amount of dividends on Series B
Preferred Stock as follows:
2022
2021
2020
Net income/(loss)
$
$
$
(134,197 )
Dividends on series B preferred shares
(5,769 )
(5,769 )
(5,769 )
Net income/(loss) attributable to common stockholders
$
$
$
(139,966 )
Weighted average number of common shares, basic
Incremental shares
-
Weighted average number of common shares, diluted
Earnings/(loss) per share, basic
$
$
$
(1.62 )
Earnings/(loss) per share, diluted
$
$
$
(1.62 )
13. Income Taxes
Under the laws of the countries of the companies’ incorporation and / or vessels’ registration, the
companies are not subject to tax on international shipping income; however, they are subject to registration
and tonnage taxes, which are included in vessel operating expenses in the accompanying consolidated
statements of operations.
The vessel-owning companies with vessels that have called on the United States are obliged to file tax
returns with the Internal Revenue Service. However, pursuant to the Internal Revenue Code of the United
States, U.S. source income from the international operations of ships is generally exempt from U.S. tax.
The applicable tax is
% of
% of U.S.-related gross transportation income unless an exemption applies.
The Company and each of its subsidiaries expects it qualifies for this statutory tax exemption for the 2022,
2021 and 2020 taxable years, and the Company takes this position for United States federal income tax
return reporting purposes.
14. Financial Instruments and Fair Value Disclosures
Interest rate risk and concentration of credit risk
Financial instruments, which potentially subject the Company to significant concentrations of credit risk,
consist principally of cash and trade accounts receivable. The ability and willingness of each of the
Company’s counterparties to perform their obligations under a contract depend upon a number of factors
that are beyond the Company’s control and may include, among other things, general economic conditions,
the state of the capital markets, the condition of the shipping industry and charter hire rates. The
Company’s credit risk with financial institutions is limited as it has temporary cash investments, consisting
mostly of deposits, placed with various qualified financial institutions and performs periodic evaluations of
the relative credit standing of those financial institutions. The Company limits its credit risk with accounts
receivable by performing ongoing credit evaluations of its customers’ financial condition and by receiving
payments of hire in advance. The Company, generally, does not require collateral for its accounts
receivable and does not have any agreements to mitigate credit risk.
DIANA SHIPPING INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 2022
(Expressed in thousands of U.S. Dollars – except share, per share data, unless otherwise stated)
F-36
In 2022, 2021 and 2020, charterers that individually accounted for
% or more of the Company’s time
charter revenues were as follows:
Charterer
2022
2021
2020
Cargill International SA
Koch Shipping PTE LTD. Singapore
*
*Less than 10%
The Company is exposed to interest rate fluctuations associated with its variable rate borrowings. Currently,
the company does not have any derivative instruments to manage such fluctuations.
Fair value of assets and liabilities
The carrying values of financial assets reflected in the accompanying consolidated balance sheet,
approximate their respective fair values due to the short-term nature of these financial instruments. The
fair value of long-term bank loans with variable interest rates approximates the recorded values, generally
due to their variable interest rates.
Fair value measurements disclosed
As of December 31, 2022, the Bond having a fixed interest rate and a carrying value of $
had a fair value of $
FASB guidance for Fair Value Measurements.
On September 20, 2022, the Company acquired
$
, determined through Level 2 inputs of the fair value hierarchy by taking into consideration a third-
party valuation which was based on the income approach, taking into account the present value of the
future cash flows the Company expects to receive from holding the equity instrument.
On December 15, 2022, the Company distributed the Series D Preferred Shares as non-cash dividend and
measured their fair value on the date of declaration at $
. Their fair value was determined through
Level 2 inputs of the fair value hierarchy, by using the income approach, taking into account the present
value of the future cash flows, the holder of shares would expect to receive from holding the equity
instrument which resulted in gain of $
Other Fair value measurements
DIANA SHIPPING INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 2022
(Expressed in thousands of U.S. Dollars – except share, per share data, unless otherwise stated)
F-37
Description (in thousands of US Dollars)
December 31,
2021
Quoted Prices in
Active Markets
(Level 1)
Significant Other
Observable
Inputs (Level 2)
Non-recurring fair value measurements
Investments in related parties (1)
December 31,
2022
Quoted Prices in
Active Markets
(Level 1)
Significant Other
Observable
Inputs (Level 2)
Non-recurring fair value measurements
Long-lived assets held for use (2)
Total non-recurring fair value measurements
-
(1)
On November 29, 2021, Series B preferred shares and Series C preferred shares were recorded
at $
, respectively, being the fair value of the shares on the date of issuance to the
Company by OceanPal (Note 3(f)).
(2) During the fourth quarter of 2022, the Company took delivery of
agreement with Sea Trade, acquired for the purchase price of $
, of which $
paid in cash and $
the common shares issued to Sea Trade was determined based on the closing price of the
Company’s shares on the date of delivery of each vessel, which was also the date of issuance of
such shares.
15. Subsequent Events
a) Series B Preferred Stock Dividends:
On January 17, 2023, the Company paid a quarterly
dividend on its series B preferred stock, amounting to $
, to its
stockholders of record as of January 13, 2023.
b) Sale of vessels and loan prepayments:
owned subsidiary, entered into an agreement with an unrelated third party to sell the vessel Aliki
for the sale price of $
. The vessel was delivered to her new owners on February 8, 2023.
Additionally, on February 1, 2023, the Company, through a wholly-owned subsidiary, entered into
an agreement with OceanPal, a related party company, to sell the vessel Melia for the sale price of
$
, of which $
Shares. The vessel was delivered to her new owners on February 8, 2023. The sale of the vessels
resulted in gain. On February 2, 2023, the Company prepaid $
agreements with Nordea, being the part of the loan secured by
Melia
Aliki
, and the repayment
schedule was adjusted accordingly.
c) Delivery of Ultramax vessel:
Ultramax dry bulk vessel, under the Company’s agreement with Sea Trade and issued
common shares to Sea Trade, at $
,
based on the closing price of the Company’s stock on the date of delivery, determined through
Level 1 account hierarchy.
DIANA SHIPPING INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 2022
(Expressed in thousands of U.S. Dollars – except share, per share data, unless otherwise stated)
F-38
d) Acquisition of Ultramax vessel:
Agreement to acquire from an unaffiliated third party the m/v Nord Potomac, a 2016 built Ultramax
dry bulk vessel, for a purchase price of $
, of which the Company paid a
% advance of the
purchase price. The Company anticipates taking delivery of the vessel by the beginning of April
2023.
e)
Restricted share awards:
award of
. shares of restricted common stock to executive management and non-
executive directors, pursuant to the Company’s amended plan, as annual bonus. The fair value of
the restricted shares based on the closing price on the date of the Board of Directors’ approval was
$
. The cost of these awards will be recognized ratably over the restricted shares vesting period
which will be
f) Loan prepayment:
balance of its loan with DNB Bank (Note 6).
g) Dividend on Common Stock and Dividend in Kind:
quarterly dividend on its common stock of $
, to shareholders of record
as of March 13, 2023 based on the Company’s results of operations during the fourth quarter ended
December 31, 2022. The Company will also distribute on May 16, 2023, to its shareholders of record
on April 24, 2023, the
non-cash consideration of the sale of
Melia
TABLE OF CONTENTS
Part IItem 1. Identity Of Directors, Senior Management and AdvisersItem 2. Offer Statistics and Expected TimetableItem 3. Key InformationItem 4. Information on The CompanyItem 4A. Unresolved Staff CommentsItem 5. Operating and Financial Review and ProspectsItem 6. Directors, Senior Management and EmployeesItem 7. Major Shareholders and Related Party TransactionsItem 8. Financial InformationItem 9. The Offer and ListingItem 10. Additional InformationItem 11. Quantitative and Qualitative Disclosures About Market RiskItem 12. Description Of Securities Other Than Equity SecuritiesPart IIItem 13. Defaults, Dividend Arrearages and DelinquenciesItem 14. Material Modifications To The Rights Of Security Holders and UseItem 15. Controls and ProceduresItem 16A. Audit Committee Financial ExpertItem 16B. Code Of EthicsItem 16C. Principal Accountant Fees and ServicesItem 16D. Exemptions From The Listing Standards For Audit CommitteesItem 16E. Purchases Of Equity Securities By The Issuer and AffiliatedItem 16F. Change in Registrant S Certifying AccountantItem 16G. Corporate GovernanceItem 16H. Mine Safety DisclosureItem 16I. Disclosure Regarding Foreign Jurisdictions That Prevent InspectionsPart IIIItem 17. Financial StatementsItem 18. Financial StatementsItem 19. Exhibits