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:
+
-
-
, Fax: +
E-mail:
____________________________________________________________________________________________________________________________________________________________________________________________________________
Securities registered or to be
registered pursuant
to Section 12(b) of the Act.
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Trading
Symbol(s)
Name of each exchange on which
registered
Securities registered or to be registered pursuant
to Section 12(g) of the Act.
None
____________________________________________________________________________________________________________________________________________________________________________________________________________
Securities for which there is a reporting obligation pursuant to Section
15(d) of the Act.
None
____________________________________________________________________________________________________________________________________________________________________________________________________________
Indicate the number of outstanding shares of each of the issuer’s classes of capital or common stock
as of the close of the period covered by
the annual report.
As of December 31, 2023, there were
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as defined in Rule 405 of the Securities Act.
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is not required to file reports pursuant to Section 13
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4
TABLE OF CONTENTS
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8
8
8
43
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68
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110
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112
112
112
113
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113
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115
117
117
117
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,
interest rates, and inflationary pressures;
●
general market conditions, including fluctuations in charter hire rates
and vessel values;
●
changes in demand in the dry-bulk shipping industry;
●
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;
6
●
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;
●
any continuing
impacts of
coronavirus (COVID-19)
or other
global or
regional pandemics
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.
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
7
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.
9
●
Increased inspection
procedures, tighter
import
and export
controls and
new
security
regulations could increase costs and disrupt our business.
●
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.
●
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.
●
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.
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.
●
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.
11
●
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.
Risks Relating to Our Outstanding Warrants
●
The issuance of our common stock upon the exercise of our Warrants may depress our
stock price.
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.
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
12
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.
In 2023, the period market for dry bulk vessels experienced
fluctuations influenced by various factors. Dry
bulk market conditions
remained volatile
reflecting the
impact of
war in
Ukraine, geopolitical
tensions, trade
policies,
and
environmental
regulations.
However,
there
were
regional
variations
in
market
conditions,
with China's demand
recovering and
some other
areas experiencing
stronger demand
due to
infrastructure
projects or agricultural exports.
Panama Canal and Suez
Canal disruptions during the
year surely affected
market
and
the
longer these
issues
go
on,
the
more
of
a
market support
it
will
be.
The markets
rallied
strongly at
the end
of last
year,
with the
Baltic Capesize
index rallying
to heights
which since
2010 was
only exceeded
in October
2021. The
Panamax, Ultramax,
Supramax and
Handysize indices
rallied to
levels
which since 2010 was exceeded only during most of 2021 and early 2022. Fundamentals maintain bullish
and can support a positive outlook for 2024 which as always are
subject to revisions.
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
conflicts between Russia and Ukraine and Israel and Hamas, 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 for
reasons including
but not
limited to
reductions in
canal capacities
and
geopolitical conflicts and military responses;
●
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
●
economic slowdowns caused by public health pandemics.
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
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
14
●
changes
in
environmental
and
other
regulations
that
may
limit
the
useful
lives
and
trading
patterns of vessels.
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.
In
addition,
the
conflict
between
Israel
and
Hamas,
which
began
in
October
2023,
has
resulted
in
an
increased
number
of
vessel
attacks
in
the
Red
Sea.
Various
shipping
companies
and/or
commercial
managers have indicated that their vessels
would avoid crossing the Red Sea
and consequently the Suez
Canal,
and
for
the
time
being
divert
vessels
around
southern
Africa’s
Cape
of
Good
Hope,
which
occasionally adds substantial
time and cost
to East-West voyages.
While we are
unable to ascertain
the
immediate impact of this conflict, any
further attacks or piracy attempts, or continued
diversion of vessels
from the Suez Canal, may affect our business, financial condition, and results of operations.
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.
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, 2023,
we had
total outstanding
indebtedness of
$517.0 million
under
our various credit facilities and bond and a further $133.3 million
of finance liabilities.
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
15
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.
The growth
of China’s
economy has
slowed during
2023. A
continued
economic
slowdown
in
China
or
the
Asia
Pacific
region
or
in
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, inflationary pressures 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
2023, the BDI ranged from
a low of 530 to
a high of 3,346 and
closed at 1,714 on April 2,
2024. 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.
The
previous
year
worldwide
economies
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 was 6.5% in December 2022, driven in large
part by increases in
energy costs.
In December
2023, the
U.S. consumer
price index
dropped to
3.4% and
it remains
to
be
seen
whether
inflationary
pressures
will
increase
again
and
to
what
degree.
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.
16
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:
●
marine disaster;
●
acts of God;
●
terrorism;
●
environmental accidents;
●
cargo and property losses or damage;
●
business
interruptions
caused
by
mechanical
failures,
human
error,
war,
political
action
in
various countries, labor strikes or adverse weather conditions; and
●
piracy or robbery.
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, economic
sanctions restrictions.
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,
and in the Red
Sea in connection
with
the conflict between Israel
and Hamas. 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.
17
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
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.
While Ukraine
continued to
deploy a
number of
counter-attacks in
2023 and
as of
December 2023
held
important areas in ground operations, after over two years of fighting Russia still maintains a foothold in a
number
of
key
cities
and
areas.
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.
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, including as a result of the current conflict between
Israel and Hamas.
Outbreaks
of
epidemic
and
pandemic
diseases
and
governmental
responses
thereto
could
adversely affect our business.
Our operations are subject to risks related to pandemics, epidemics or other infectious disease outbreaks
and
government
responses
thereto.
COVID-19,
which
was
initially
declared
a
pandemic
by
the
World
Health Organization on March 11, 2020 and was declared no longer a global
health emergency on May 5,
2023,
negatively
affected
economic
conditions,
supply
chains,
labor
markets,
and
demand
for
certain
shipped
goods
both
regionally
and
globally
as
a
result
of
government
efforts
to
combat
the
pandemic,
including
the
enactment
or
imposition
of
travel
bans,
quarantines
and
other
emergency
public
health
measures.
The
extent
to
which
our
business,
the
global
economy
and
dry
bulk
transportation
industry
may
be
negatively
affected
by
future
pandemics,
epidemics
or
other
outbreaks
of
infectious
diseases
is
highly
uncertain and will
depend on numerous evolving
factors that we
cannot predict, including, but
not limited
to (i) the duration and
severity of the infectious
disease outbreak; (ii)
the imposition of restrictive
measures
18
to combat the outbreak and slow disease transmission; (iii) the introduction of financial support measures
to reduce the impact
of the outbreak on the
economy; (iv) volatility in the
demand for and price
of oil and
gas; (v) shortages or reductions in the supply of essential goods, services or labor; and (vi) fluctuations in
general economic or financial conditions tied to the outbreak, such as a sharp increase
in interest rates or
reduction in
the
availability of
credit. We
cannot predict
the
effect that
an
outbreak of
a new
COVID-19
variant
or
strain,
or
any
future
infectious
disease
outbreak,
pandemic
or
epidemic
may
have
on
our
business, results of operations and financial condition, which could be
material and adverse.
Our operating results may be affected by seasonal fluctuations.
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.
In addition, if the recent sharp
increase in crude oil prices and widening of the
spread between the prices
of high
sulfur fuel
and low
sulfur fuel
resulting from
conflict between
Russia and
Ukraine and
Israel and
Hamas continues,
this might
lead to
a decrease
in the
economic viability
of
older vessels
that lack
fuel
efficiency and a reduction of useful lives of these vessels.
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,
19
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
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
20
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,
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 2023
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 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 cases, control
the
operation
of
our
vessels,
we
have
monitoring
processes
in
place
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,
21
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
different
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
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, 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 2023 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
22
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
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
23
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.
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:
●
the prevailing level of charter hire rates;
●
general economic and market conditions affecting the shipping industry;
●
competition from other shipping companies and other modes
of transportation;
●
the types, sizes and ages of vessels;
●
the supply of and demand for vessels;
●
applicable governmental or other regulations;
●
technological advances;
●
the need
to upgrade
vessels as
a result
of charterer
requirements, technological
advances in
vessel
design or equipment or otherwise; and
●
the cost of newbuildings.
24
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, 2023, 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.
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
25
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.
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, our risk of cyber-attacks and other sources of security breaches
and incidents may be elevated
as
a result
of the
ongoing conflicts
between Russia
and
Ukraine. and
the
Israel-Hamas conflict.
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.
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.
Further,
in
July
2023,
the
SEC
adopted
amendments
to
its
rules
on
cybersecurity
risk
management,
strategy, governance, and
incident disclosure.
The amendments,
require us
to report
material cybersecurity
incidents involving our
information systems and
periodic reporting regarding our
policies and procedures
to identify and manage cybersecurity risks, amongst other disclosures.
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.
In
July
2023,
nations
at
the
International Maritime Organization’s
Marine Environment Protection
Committee (“MEPC”) 80
updated the
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
20% by
2030, compared
to
2008 emission
levels; and
(3) reducing
the total
annual greenhouse
emissions by
at least
70% by
2040
compared to 2008 while pursuing efforts towards phasing them out entirely.
26
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.
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. 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.
On
March
6,
2024,
the
SEC
adopted
final
rules
to
require registrants
to disclose
certain climate-related
information in
SEC filings
of all
public companies.
The
final rules
require companies
to disclose,
among other
things: material
climate-related risks;
activities to
mitigate or
adapt to such
risks; information about
the registrant's board
of directors' oversight
of climate-
related risks
and management’s
role in
managing material
climate-related risks;
and information
on any
climate-related
targets
or
goals
that
are
material
to
the
registrant's
business,
results
of
operations,
or
financial condition.
Further, to facilitate
investors' assessment
of certain
climate-related risks,
the final
rules
require
disclosure
of
Scope
1
and/or
Scope
2
greenhouse
gas
(GHG)
emissions
on
a
phased-in
basis
when those
emissions are
material; the
filing of
an attestation
report covering
the required
disclosure of
such
registrants’
Scope
1
and/or
Scope
2
emissions,
also
on
a
phased-in
basis;
and
disclosure of
the
financial statement
effects of
severe weather
events and other
natural conditions including,
for example,
27
costs
and
losses.
The
final
rules
include
a
phased-in
compliance
period
for
all
registrants,
with
the
compliance date dependent on the registrant’s filer
status and the content of the
disclosure. However, on
March 15, 2024, the
U.S. Court of Appeals
for the Fifth Circuit
granted an administrative
stay on the
SEC's
recent climate disclosure rule.
We may
face increasing pressures
from investors, future
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
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
28
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
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 of
which 39
vessels in
operation,
owned
and
chartered-in,
and
two
under
construction
and
we
have
agreed
to
sell
one
of
our
vessels. 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.
29
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,
2023, we had $517.0 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:
●
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.
30
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.
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.
31
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
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
32
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.
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 of
which 39 in
operation, owned and
chartered-in, having a combined carrying capacity of 4.4 million dead weight tons, or dwt, and a weighted
average age of
10.4 years and
two Kamsarmax vessels
under construction.
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
33
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.
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
2023, 2022, and
2021, approximately
13%, 34%
and 10%, respectively, of
our revenues
were derived
from
one,
two
and
one
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.
Certain of our vessels
are owned through joint
ventures that we have entered
into, and our views
about
the
operations
of
those
vessels
may
differ
from
our
joint
venture
partners
and
adversely
affect our interest in the joint ventures.
We have entered into
two joint venture arrangements pursuant to
which we own minority interests in
four
CSOV newbuilding
contracts through
Windward Offshore
GmbH
Co. KG
and one
dry bulk
vessel through
Bergen Ultra,
and we
may enter
into additional
joint venture
arrangement in
the future. As
a minority
interest
holder
in
these
joint
ventures,
we
share
voting
and
operational
control
of
these
joint
ventures
and
the
operations of these vessel that we own through these joint ventures. Our joint venture
partners may have
interests that are
different from ours
which may result in
conflicting views as to
the operation the vessels
owned by
the joint
ventures or
the
conduct of
the business
of the
joint venture.
We
may
not be
able to
resolve such conflicts in our favor and such conflicts
or differing view could have a material adverse effect
on our interest in the joint venture or our business in general.
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.
34
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
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 2023
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 2023
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.
35
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
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.
Changes in tax
laws and unanticipated
tax liabilities could
materially and adversely
affect the taxes
we pay, results of operations and financial results.
We are subject to income and other taxes in the United States and foreign jurisdictions, and our results of
operations and financial
results may be
affected by tax and
other initiatives around
the world. For
instance,
there is a high level of uncertainty in
today’s tax environment stemming from global initiatives put forth by
the
Organisation
for
Economic
Co-operation
and
Development’s
(“OECD”)
two-pillar
base
erosion
and
profit
shifting
project.
In
October
2021,
members
of
the
OECD
put
forth
two
proposals:
(i)
Pillar
One
reallocates profit to the market
jurisdictions where sales arise
versus physical presence; and
(ii) Pillar Two
compels multinational corporations with €750 million
or more in annual
revenue to pay a
global minimum
tax of 15% on income
received in each country in
which they operate. The reforms
aim to level the playing
36
field between countries by discouraging
them from reducing their
corporate income taxes to
attract foreign
business investment. Over 140 countries agreed to enact
the two-pillar solution to address the challenges
arising from the
digitalization of the
economy and, in
2024, these guidelines
were declared effective
and
must now be enacted by those OECD member
countries. It is possible that these guidelines,
including the
global
minimum
corporate
tax
rate
measure
of
15%,
could
increase
the
burden
and
costs
of
our
tax
compliance, the
amount of
taxes
we
incur in
those
jurisdictions and
our
global effective
tax
rate,
which
could have a material adverse impact on our results of operations and
financial results.
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 2021, our
board of directors elected to declare quarterly dividends from
the fourth
quarter of
2021 until
the first
quarter of
2024 and
two special
non-cash dividends.
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 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 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.
37
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;
●
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;
38
●
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.
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.
39
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”.
Effective as
of October 17,
2023 the Marshall
Islands has
been designated as
a cooperating
jurisdiction
for tax
purposes. If
the Marshall
Islands is
added to
the list
of non-cooperative
jurisdictions in
the future
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.
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 23,750,097 shares, or approximately 19.8% 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 200,000
votes, on
all matters
submitted
to a
vote of
the stockholders
of the
Company,
provided however, that
to the extent the
total number of votes one
or more holders of Series
D Preferred
Stock is entitled
to vote (including
any voting power
of such holders
derived from Series
D Preferred
Stock,
shares of
Common Stock
or any
other voting
security of
the Company
issued and
outstanding as
of the
date hereof or
that may be
issued in the
future) on any
matter submitted to
a vote of
stockholders of the
Company
would
exceed
36%
of
the
total
number
of
votes
eligible
to
be
cast
on
such
matter,
the
total
number of
votes that
holders of
Series D
Preferred Stock
may exercise
derived from
the Series
D Preferred
Stock together with
Common Shares and
any other voting
securities of the
Company beneficially owned
by such holder,
shall be reduced to 36% of
the total number of votes entitled to
vote on any matter put to
stockholders 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 1,000,000,000
shares of
common stock, of which, as
of December 31, 2023, 113,065,725 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.
40
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.
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.
41
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.
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
42
dividends on
or
redeem preferred
shares. Our
amended and
restated
articles of
incorporation currently
authorize the issuance
of up to
50,000,000 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
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
43
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.
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.
Risks Relating to Our Outstanding Warrants
The issuance
of our
common stock
upon the
exercise of
the Warrants may
depress our
stock price.
We could issue up
to 33,919,605 shares of common
stock in connection
with the exercise
of the Warrants.
The issuances
of the
shares of
common stock
upon exercise
of the
Warrants and the
resale of
such shares
after their issuance,
or the perception that
such sales could
occur, could
result in downward
pressure on
our
stock
price
and
could
impact
our
ability to
raise
capital
through the
sale
of
additional shares
in
the
future. See
“Item 4. Information
on the
Company— A.
History and
development of
the Company—
Warrant
Distribution" for a more detailed discussion of our Warrants.
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.
Recent Developments
Vessel acquisitions
In January 2023, we
took delivery of
DSI Aquarius, a
2016 built Ultramax
dry bulk vessel of
60,309 dwt, for
a purchase price of $24.0 million in
cash and 2,033,613 newly issued common shares. The vessel
is one
of nine modern Ultramax dry bulk vessels that we entered into an agreement
to purchase in August 2022.
In
February 2024,
we signed
shipbuilding contracts
for two
81,200 dwt
methanol dual
fuel new-building
Kamsarmax
dry
bulk
vessels,
for
a
purchase
price
of
$46
million
each,
to
be
built
at
Tsuneishi
Group
(Zhoushan)
Shipbuilding Inc.,
China.
The
vessels
are
expected to
be
delivered to
the
Company by
the
second half of 2027 and the first half of 2028, respectively.
44
Vessel disposals
In January 2023,
we agreed to
sell to an
unrelated third party
the vessel
Aliki
was delivered to her new owners on February 8, 2023.
In
February 2023,
we agreed
to
sell to
OceanPal, a
related party,
the
vessel
Melia
which $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.
In
October
2023,
we
agreed to
sell
to
an
unrelated third
party the
vessel
Boston
vessel was delivered to her new owners on December 6, 2023.
In January 2024, we agreed to sell to an unrelated third party the vessel
Artemis
$13.0 million.
The vessel was delivered to her new owners on March 5, 2024.
In February 2024, we agreed to sell to an unrelated third party,
the vessel
Houston,
for $23.3 million. The
vessel is expected to be delivered to the buyer latest by September 16,
2024.
Please
read
Note
6
– Advances
for
vessel
acquisitions
and
Vessels,
net of
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, 2023.
Other transactions
In February 2023,
we signed a
Memorandum of Agreement
to acquire from
an unaffiliated third-party
an
Ultramax dry bulk vessel for a purchase price
of $27.9 million. On April 28, 2023, the vessel’s ship
owning
company
was
deconsolidated
from
the
Company’s
financial
statements
due
to
the
Company’s
loss
of
control. Upon the deconsolidation, we retained 25% of the the total partnership
interests.
In
November
2023,
we
entered
into
a
joint
venture
agreement,
with
two
unrelated
companies
to
form
Windward
Offshore
GmbH
Co.
KG,
or
Windward,
for
the
purpose
of
establishing
and
operating
an
offshore wind
vessel company.
We
agreed to
contribute Euro
25.0 million,
being 45.45%
of Windward’s
capital,
to
construct
two
CSOVs.
In
January
2024,
we
committed
to
increase
our
contribution
to
the
partnership to Euro 50.0
million, being 45.87% of
Windward’s capital in
order for the partnership to
place
orders for two additional CSOVs.
Dividends
On March 20, 2023,
we paid a cash
dividend on our common
stock of $0.15 per
share,
or $16 million, to
all shareholders
of record
as of March
13, 2023 and
on June 9,
2023, we
distributed our
Series D Preferred
Shares of OceanPal to our shareholders of record as of April
24, 2023.
On July
10, 2023,
we distributed a
dividend of
$0.15 per
share to
our shareholders of
record as
of June
12,
2023,
and
paid
$12.4
million
in
cash
to
shareholders
who
elected
to
receive
cash
and
distributed
965,044 newly issued common shares to shareholders who elected
to receive shares.
On September
8, 2023, we
distributed a dividend
of $0.15
per share to
our shareholders of
record as
of
August 14,
2023, and
paid $13.0
million in
cash to
shareholders who
elected to
receive cash
and distributed
831,672 newly issued common shares to shareholders who elected
to receive shares.
On
December 4,
2023, we
distributed a
dividend of
$0.15 per
share to
all
shareholders of
record as
of
November 27, 2023,
in the form
of common
stock and distributed
4,831,777 newly
issued common
shares.
45
On March
12, 2024,
we paid
a cash
dividend of
$0.075 per
share, or
$9.0 million,
to all
shareholders of
record as of March 5, 2024.
Please read Note
11
– Capital Stock and Changes in Capital Accounts and Note 17 – Subsequent
events
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, 2023.
Loans
In February 2023, we
early prepaid $8.1 million of
outstanding debt due to the
sale of
Melia
to OceanPal
and
Alik
i to an unaffiliated third party.
On March
14, 2023,
we early prepaid
$11.8
million, being the
outstanding balance of
our loan
with DNB
Bank ASA.
In April
2023, both
loans held
with BNP
were refinanced
through a
new $100
million loan
facility with
Danish
Ship Finance and the outstanding balance of both loans, amounting
to $75.2 million was prepaid in full.
On June
26, 2023,
we prepaid
in full
both loans
held with
ABN Bank
amounting to
$68.7 million,
which
were refinanced under
a new loan
agreement with DNB
Bank ASA of
$100.0 million,
drawn on June
27,
2023. As part of
the loan agreement,
we entered into an
interest rate swap
with DNB for a
notional amount
of $30.0 million, being 30% of the loan amount
under which we pay a fixed rate and receive
floating under
term SOFR.
On June 27, 2023, we
drew down $22.5 million
and prepaid in full
the outstanding balance of
our loan with
Nordea Bank of $20.9 million.
On June 29,
2023, we repurchased
$5.9 million
nominal value of
the $125.0 million
senior unsecured bond
issued in June 2021 with maturity in June 2026.
A full description of the Company’s loan facilities as
of December 31, 2023 is included in
Item 5 Operating
and
Financial
Review
and
Prospects
and
Note
8
of
our
consolidated
financial
statements
and
Notes
thereto, included elsewhere in this Annual Report.
Warrant Distribution
On December 14, 2023,
we issued warrants to
purchase common shares (the “Warrants”)
to the holders
of record of Common Stock
as of the close of
business on December 6, 2023 (the
“Record Date”) on the
terms and conditions described in the Warrant Agreement (as defined below and attached as exhibit 2.10
to this
annual report). Each
holder received one
Warrant for
every five shares
of issued and
outstanding
shares of common stock held as of the
Record Date (rounded down to the nearest whole number for
any
fractional
Warrant).
Each
Warrant
entitles
the
holder
to
purchase,
at
the
holder’s
sole
and
exclusive
election, at the exercise price,
one share of common stock
plus, to the extent, described
below, the Bonus
Share Fraction. A
Bonus Share
Fraction entitles
a holder to
receive an additional
0.5 of a
share of common
stock for each Warrant exercised (the “Bonus Share Fraction”) without
payment of any additional exercise
price. Since the dividend
ex-Date on March 4, 2024,
the Bonus Share Fraction
was adjusted to 0.51292
of
a share of common stock for each Warrant exercised.
The right
to receive
the Bonus
Share Fraction
will expire
at 5:00
p.m. New
York City time (the
“Bonus Share
Expiration Date”) upon
the earlier of (i)
the date specified
by the Registrant
upon not less than
20 business
days’
notice
and
(ii)
the
first
business
day
following
the
last
day
of
the
first
30
consecutive trading
day
period
in
which
the
daily
VWAP
of
the
shares
of
common
stock
has
been
at
least
equal
to
the
then
46
applicable
trigger
price
for
at
least
20
trading
days
(whether
or
not
consecutive)
(the
“Bonus
Price
Condition”). Any Warrant
exercised with an
exercise date after
the Bonus Share
Expiration Date will
not be
entitled to any Bonus Share
Fraction. The Company will
make a public announcement
of the Bonus Share
Expiration Date
(i) at least
20 business
days prior
to such date,
in the
case of the
Company setting
a Bonus
Share Expiration Date
and (ii) prior
to market
open on the
Bonus Share Expiration
Date in the
case of
a
Bonus Price Condition.
Unless earlier redeemed, the Warrants will expire
and cease to be exercisable at
5:00 p.m. New York City
time on December 14, 2026 (the “Expiration Date”).
In connection with the Warrant distribution, we filed a prospectus
supplement, dated December 14, 2023,
pursuant
to
our
existing
shelf
registration
statement
on
Form
F-3
declared
effective
on
July
9,
2021,
registering up
to 33,919,605
shares of
common stock to
be issued
upon exercise
of the
Warrants under
the Securities Act of 1933, as amended.
The
Warrants
commenced
trading
on
the
New
York
Stock
Exchange
under
the
ticker
“DSX
WS”
on
December 14, 2023.
As of
the date
of this
annual report,
out of
the 22,613,070
Warrants distributed
in this
transaction, 3,051,471
Warrants have been exercised and 4,597,192 common shares have been issued.
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 consisted
of 41
vessels of
which 39
in operation,
owned and
chartered-
in, having
a combined carrying
capacity of
4.4 million dead weight
tons, or
dwt, and
a weighted average
age of 10.4 years and two Kamsarmax vessels under construction.
As of December
31, 2023,
we had a
fleet of 40
dry bulk
carriers, owned and
chartered-in, consisting
of nine
Ultramax, seven
Panamax, six
Kamsarmax, five
Post-Panamax, nine
Capesize and
four Newcastlemax
vessels, having
a combined
carrying capacity
of approximately
4.5 million
dwt and a
weighted average
age
of 10.5 years.
As
of
December
31,
2022,
we
had
a
fleet
of
42
dry
bulk
carriers,
consisting
of
eight
Ultramax,
eight
Panamax, six Kamsarmax, five Post-Panamax, eleven Capesize and four
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.
During
2023,
2022
and
2021,
we
had
a
fleet
utilization
of
99.7%,
98.9%
and
99.1%,
respectively,
our
vessels achieved daily
time charter equivalent
rates of
$16,713, $22,735 and
$15,759, respectively,
and
we generated revenues of $262.1 million, $290.0 million and $214.2
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.
47
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
CEO
Mrs.
Semiramis Paliou,
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 February
23,
2024.
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 April 3, 2024)
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
15/Apr/2024 - 4/May/2024
1
2017 60,456
2
DSI Pollux
A
4.75%
Cargill Ocean
Transportation
(Singapore) Pte. Ltd.
28/Dec/23
20/Aug/2025 - 20/Oct/2025
2015 60,446
3
DSI Pyxis
A
5.00%
ASL Bulk Marine Limited
24/Sep/23
10/Oct/2024 - 10/Dec/2024
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
18/Jan/2024
2016 60,309
5.00%
Stone Shipping Ltd
18/Jan/24
1/Dec/2024 - 1/Feb/2025
7
DSI Aquila
B
5.00%
Western Bulk Carriers
AS
11/Nov/23
10/Nov/2024 - 10/Jan/2025
2015 60,309
8
DSI Altair
B
5.00%
Western Bulk Carriers
AS
23/Jun/23
10/Aug/2024 - 10/Oct/2024
2016 60,309
48
9
DSI Andromeda
B
5.00%
Bunge SA, Geneva
27/Nov/23
20/Feb/2025 - 20/Apr/2025
2, 3
2016 60,309
6 Panamax Bulk Carriers
10
ARTEMIS
5.00%
Jera Global Markets Pte.
Ltd.
14/Oct/23
23/Feb/2024
4
2006 76,942
11
LETO
4.75%
Cargill International
S.A., Geneva
29/Jan/23
5/Apr/2024 - 30/Apr/2024
1
2010 81,297
12
SELINA
C
4.75%
Cargill International
S.A., Geneva
20/May/23
15/Sep/2024 - 15/Nov/2024
2010 75,700
13
MAERA
C
4.75%
Cargill International
S.A., Geneva
16/Dec/22
29/Jan/2024
5
2013 75,403
5.00%
ST Shipping and
Transport Pte. Ltd.
29/Jan/24
20/Nov/2024 - 20/Jan/2025
14
ISMENE
5.00%
Paralos Shipping Pte.,
Ltd.
13/Sep/23
15/Apr/2025 - 30/Jun/2025
2013 77,901
15
CRYSTALIA
D
5.00%
Reachy Shipping (SGP)
Pte. Ltd.
6/Sep/23
05/Apr/2024 - 15/Apr/2024
1
2014 77,525
5.00%
Louis Dreyfus Company
Freight Asia Pte. Ltd.
-
-
6
16
ATALANDI
D
4.75%
Aquavita International
S.A.
15/Feb/23
10/Apr/2024 - 5/May/2024
1
2014 77,529
6 Kamsarmax Bulk Carriers
17
MAIA
E
5.00%
ST Shipping and
Transport Pte. Ltd.
23/Sep/23
15/Jun/2024 - 20/Aug/2024
2009 82,193
18
MYRSINI
E
5.00%
Salanc Pte. Ltd.
22/Nov/22
20/Apr/2024 - 28/Jun/2024
2010 82,117
19
MEDUSA
E
5.00%
ASL Bulk Shipping
Limited
14/May/23
10/Feb/2025 - 15/Apr/2025
2010 82,194
20
MYRTO
E
5.00%
Cobelfret S.A.,
Luxemburg
15/Jul/23
1/Nov/2024 - 15/Jan/2025
2013 82,131
21
ASTARTE
5.00%
Reachy Shipping (SGP)
Pte. Ltd.
29/Apr/23
1/Aug/2024 - 1/Oct/2024
2013 81,513
22
LEONIDAS P. C.
4.75%
Cargill International
S.A., Geneva
17/Mar/23
22/Feb/2024
7
2011 82,165
5.00%
Ming Wah International
Shipping Company
Limited
22/Feb/24
20/Aug/2025 - 20/Oct/2025
5 Post-Panamax Bulk Carriers
23
ALCMENE
5.00%
SwissMarine Pte. Ltd.,
Singapore
2/Jan/23
23/Mar/2024
2010 93,193
5.00%
Triangle Merchant
Maritime Co., Limited
24/Mar/24
13/May/2024-18/May/2024
8
24
AMPHITRITE
F
5.00%
Cobelfret S.A.,
Luxembourg
9/Nov/22
13/Jan/2024
2012 98,697
13/Jan/24
15/Nov/2024 - 15/Jan/2025
9
25
POLYMNIA
F
5.00%
Cobelfret S.A.,
Luxemburg
14/Jan/23
15/Apr/2024 - 31/May/2024
10
2012 98,704
26
ELECTRA
G
5.00%
Cobelfret S.A.,
Luxemburg
13/Apr/23
1/Jun/2024 - 1/Aug/2024
2013 87,150
49
27
PHAIDRA
G
4.75%
Aquavita International
S.A.
9/May/23
1/Sep/2024 - 15/Nov/2024
2013 87,146
9 Capesize Bulk Carriers
28
SEMIRIO
H
5.00%
Solebay Shipping Cape
Company Limited, Hong
Kong
18/Aug/23
20/Nov/2024 - 30/Jan/2025
2007 174,261
29
HOUSTON
H
5.00%
EGPN Bulk Carrier Co.,
Limited
21/Nov/22
1/Jul/2024 - 31/Aug/2024
11
2009 177,729
30
NEW YORK
H
5.00%
SwissMarine Pte. Ltd.,
Singapore
11/Jun/23
1/Oct/2024 - 7/Dec/2024
2010 177,773
31
SEATTLE
I
5.00%
Solebay Shipping Cape
Company Limited, Hong
Kong
1/Oct/23
15/Jul/2025 - 30/Sep/2025
2011 179,362
32
P.
S. PALIOS
I
5.00%
Classic Maritime Inc.
11/Jun/22
15/Apr/2024 - 30/Jun/2024
2013 179,134
33
G. P. ZAFIRAKIS
J
5.00%
Solebay Shipping Cape
Company Limited, Hong
Kong
12/Jan/23
15/Jun/2024 - 15/Aug/2024
2014 179,492
34
SANTA BARBARA
J
5.00%
Smart Gain Shipping
Co., Limited
7/May/23
10/Oct/2024 - 10/Dec/2024
12
2015 179,426
35
NEW ORLEANS
5.00%
Kawasaki Kisen Kaisha,
Ltd.
7/Dec/23
15/Aug/2025 - 31/Oct/2025
12, 13
2015 180,960
36
FLORIDA
5.00%
Bunge S.A., Geneva
29/Mar/22
29/Jan/2027 - 29/May/2027
3
2022 182,063
4 Newcastlemax Bulk Carriers
37
LOS ANGELES
K
5.00%
Nippon Yusen Kabushiki
Kaisha, Tokyo
15/Jan/23
20/May/2024 - 5/Aug/2024
2012 206,104
38
PHILADELPHIA
K
5.00%
C Transport Maritime
Ltd., Bermuda
12/Apr/22
04/Feb/2024
2012 206,040
5.00%
Nippon Yusen Kabushiki
Kaisha, Tokyo
4/Feb/24
20/Apr/2025 - 20/Jul/2025
39
SAN FRANCISCO
L
5.00%
SwissMarine Pte. Ltd.,
Singapore
18/Feb/23
5/Jan/2025 - 5/Mar/2025
2017 208,006
40
NEWPORT NEWS
L
5.00%
Nippon Yusen Kabushiki
Kaisha, Tokyo
20/Sep/23
10/Mar/2025 - 10/Jun/2025
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.
1Based on latest information.
2The fixture includes the option for redelivery of vessel east of Suez against a gross ballast bonus of US$250,000.
3Bareboat chartered-in for a period of ten years.
4Vessel has been sold and delivered to her new Owners on March 5, 2024.
50
5Charterers will compensate the Owners at a rate of 105% of the Baltic Panamax Index 5 TC average as published by the Baltic
Exchange on a daily basis or the vessel’s present charter party rate, whichever is higher, for the excess period commencing from
December 29, 2023 until the actual redelivery date.
6Vessel will be delivered to the new Charterers during the second quarter of 2024.
7Vessel off hire for 6.83 days.
8Redelivery date based on an estimated time charter trip duration of about 50-55 days.
9The charter rate will be US$12,250 per day for the first 30 days of the charter period.
10The charter rate was US$10,000 per day for the first 30 days of the charter period.
11Vessel
has been sold and it is expected to be delivered to her new Owners by latest September 16, 2024.
12Bareboat chartered-in for a period of eight years.
13Vessel off hire for 3.65 days.
Our Customers
Our customers include
regional and international
companies,
mainly with concentrations
below 10% of
our
gross revenues. During 2023,
only one of our
charterers accounted for 13%
of our revenues.
During 2022,
two
of
our
charterers
accounted
for
34%
of
our
revenues,
in
aggregate,
and
during
2021,
one
of
our
charterers accounted for 10% of our revenues.
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
2023, 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.
51
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, is 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.
In 2023, the BDI ranged from a low of 530 to a high of 3,346 and
closed at 1,714 on April 2, 2024.
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.
52
●
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.
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
and 28
years
in 2021.
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
2023 generally were
lower as
compared to 2022.
Consistent with these
trends
were the
market values
of
our
dry bulk
carriers. As
charter rates
and vessel
values
partially decreased
during 2023, 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
53
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.
●
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
54
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
2023 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.
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 relates to
oil leakage or
spilling;
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.
55
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
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. In July
2023, MEPC 80 announced
three
new ECA
proposals, including
the Canadian
Arctic waters
and the
North-East Atlantic
Ocean. 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
56
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.
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. In July
2023, MEPC
80 announced three new
ECA proposals, including
the Canadian Arctic
waters and the North-East
Atlantic
Ocean. The amendments will enter into
force on May 1, 2024.
In July 2023, MEPC 80
approved the plan
for reviewing
CII regulations
and guidelines,
which must
be completed
at the
latest by
January 1,
2026.
There
will
be
no
immediate
changes
to
the
CII
framework,
including
correction
factors
and
voyage
adjustments, before the review is completed.
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.
57
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.
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
58
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
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.
In June
2022, SOLAS
also set
out new
amendments that
took effect
on January
1, 2024,
which include
new
requirements for:
(1)
the
design for
safe
mooring operations,
(2)
the
Global
Maritime
Distress and
Safety System (“GMDSS”),
(3) watertight integrity, (4) watertight doors
on cargo ships,
(5) fault-isolation of
fire detection
systems, (6)
life-saving appliances, and
(7) safety
of ships
using LNG
as fuel.
These new
requirements may impact the cost of our operations.
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
59
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. In
July 2023,
MEPC 80 approved a plan for a comprehensive
review of the BWM Convention. over the next
three years
and
the
corresponding
development
of
a
package
of
amendments
to
the
Convention.
MEPC
80
also
adopted further
amendments relating
to Appendix
II of
the BWM
Convention concerning
the form
of the
Ballast Water Record Book, which are expected to
enter into force in February 2025.
A protocol for ballast
water
compliance
monitoring
devices
and
unified
interpretation
of
the
form
of
the
BWM
Convention
certificate were also adopted.
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.
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
60
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.
Vessels of 24
meters in
length or
more but
less than
400 gross
tonnage engaged in international voyages will have to carry a Declaration on Anti-fouling Systems signed
by the owner or authorized agent.
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
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
61
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)
(ii)
(iii)
(iv)
loss of real or personal property, or natural resources;
(v)
property or natural resources; and
(vi)
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
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.
62
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. After being blocked by the
courts, in
September 2023,
the Biden
administration announced
a scaled
back offshore
oil drilling
plan,
including just
three oil
lease sales in
the Gulf
of Mexico.
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
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
63
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”),
thereby
expanding federal authority
under the CWA.
Following litigation on
the revised WOTUS rule,
in December
2018, the EPA and Department of the Army proposed a revised,
limited definition of 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. .
In January
2023,
the revised WOTUS rule was codified in place
of the vacated NWPR. On May 25, 2023,
the United States
Supreme Court ruled in the case Sackett v. EPA
that only wetlands and permanent bodies of water with a
"continuous surface
connection" to
"traditional interstate
navigable waters"
are covered
by the
CWA, further
narrowing the application of the WOTUS rule. On August 2023, the EPA
and the Department of the Army
issued the final
WOTUS rule, effective
September 8, 2023,
that largely reinstated
the pre-2015 definition
and applied the
Sackett
ruling.
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.
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
64
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”)
as
part of its “Fit-for-55”
legislation to reduce
net greenhouse gas
emissions by at
least 55% by 2030.
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
equivalent
to
a
portion
of
their
carbon
emissions: 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. General
cargo vessels
and off-
shore vessels
between 400-5,000
gross tonnage
will be
included in
the
MRV
regulation from
2025 and
their inclusion in
EU ETS will
be reviewed
in 2026. Furthermore,
starting from January
1, 2026, the
ETS
regulations
will
expand
to
include
emissions
of
two
additional
greenhouse
gases:
nitrous
oxide
and
methane.
Compliance
with the
Maritime
EU
ETS
will
result
in
additional compliance
and
administration
costs
to
properly
incorporate
the
provisions
of
the
Directive
into
our
business
routines.
Additional
EU
regulations
which
are
part
of
the
EU’s
"Fit-for-55,"
could
also
affect
our
financial
position
in
terms
of
compliance and administration costs when they take effect.
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.
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
65
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,
which the U.S. officially rejoined on February 19, 2021.
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.
At MEPC
77, the
Member States
agreed to
initiate the
revision of
the Initial
IMO Strategy
on Reduction
of GHG
emissions from
ships, recognizing
the need
to strengthen
the ambition
during the
revision process.
In July
2023, MEPC
80 adopted
a revised
strategy, which includes
an enhanced
common ambition to
reach net-zero
greenhouse gas emissions
from international shipping
around or close to 2050, a
commitment to ensure an uptake of
alternative zero and near-zero greenhouse
gas fuels
by 2030,
as well
as i).
reducing the
total annual
greenhouse gas
emissions from
international
shipping by at
least 20%, striving for
30%, by 2030,
compared to 2008;
and ii). reducing
the total annual
greenhouse gas
emissions from
international shipping
by at
least 70%,
striving for
80%, by
2040, compared
to 2008.
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.
Under
the
European
Climate
Law,
the
EU
committed
to
reduce
its
net
greenhouse
gas
emissions by
at least
55% by
2030 through
its “Fit-for-55”
legislation package.
As part
of this
initiative,
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
66
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.
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
67
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
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,
68
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,
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. On July 6, 2023, the
Company purchased the remaining 1/3 from Alpha Sigma
Shipping Corp, a related party company, for the purchase price
of $1.2 million and became its sole
owner.
In 2024, we purchased two additional
plots of land from unrelated third parties
for an aggregate amount of
approximately $1.9 million.
All plots
of land
are 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
69
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.
(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,
2023
2022
2021
Fleet Data:
Average number of vessels (1)
41.1
35.4
36.6
Number of vessels at year-end
40.0
42.0
33.0
Weighted average age of vessels at year-end (in
years)
10.5
10.2
10.4
Ownership days (2)
14,986
12,924
13,359
Available days (3)
14,867
12,449
13,239
Operating days (4)
14,824
12,306
13,116
Fleet utilization (5)
99.7%
98.9%
99.1%
Average Daily Results:
Time charter equivalent (TCE) rate (6)
$
16,713
$
22,735
$
15,759
Daily vessel operating expenses (7)
5,704
5,574
5,596
The following table reflects the calculation of our TCE rates for
the periods presented:
Year Ended December 31,
2023
2022
2021
(in thousands of U.S. dollars, except for TCE rates, which
are expressed in U.S. dollars, and available days)
Time charter revenues
$
262,098
$
289,972
$
214,203
Less: voyage expenses
(13,621)
(6,942)
(5,570)
Time charter equivalent revenues
$
248,477
$
283,030
$
208,633
Available days
14,867
12,449
13,239
Time charter equivalent (TCE) rate
$
16,713
$
22,735
$
15,759
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.
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
71
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
2023
decreased
compared
to
previous
years,
due
to
the
significant
decrease in
charter rates,
despite the
increase in
the size
of our
fleet, evident
in the
increase of
the average
number of vessels.
In 2024, the average
number of vessels will
decrease, as currently our
fleet consists of
41 vessels of which 39 vessels in operation, owned and chartered-in, and two under construction,
and we
have agreed to sell one of our vessels. As a result, although we have observed
that the time charter rates
have increased
since the
beginning of
2024, we
expect our
revenues in
2024 to
decrease compared
to
2023.
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
2024,
we expect
our voyage
expenses to
decrease compared
to 2023,
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 increased
since 2021
due to
the increase
in ownership
days. For
2024, we
expect
our operating expenses to decrease compared to 2023, as a result of the average decrease of the size of
the fleet compared to 2023.
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. Effective
July 1, 2023, the Company
changed its estimated
scrap rate of its
vessels from $250 per
lightweight ton to
$400 per lightweight
ton, calculated
based on the
average demolition
prices in
different markets, during
the
last 15 years. During 2022, we
took delivery of ten vessels and
sold one and in 2023,
we took delivery of
one vessel and
sold three. Following
these transactions vessel
depreciation has increased
since 2021.
For
2024, we expect depreciation
expense to decrease due to
the increase of the
scrap rate in 2023
and the
decrease in the number of vessels in our fleet
as in 2024 we have sold one vessel and
we have agreed to
sell another one.
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 increasing,
especially in
2023,
mainly due to payroll costs
and donations.
For 2024, 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, 2023 our aggregate debt amounted
to $517.0 million and
our finance
liabilities amounted
to $133.3
million. During
2023, we
replaced LIBOR,
being the
reference
rate to calculate interest expense in our loan facilities having a floating rate, with term SOFR through loan
refinancings and one loan modification. Interest rates, which have been increasing since the
beginning of
2022, continued
to increase
in 2023
and in
combination with
the increased
average debt
outstanding in
2023, interest costs
increased significantly. For 2024,
we expect
interest and finance
costs to remain
at the
same levels with 2023, as we do not expect interest rates to increase,
while debt outstanding is expected
to decrease.
We manage
our exposure
in interest
rates, by
maintaining a
mix of
financing under
agreements with
floating
and fixed
interest rates. More
specifically,
during 2022, we
refinanced part of
our loans
having a floating
interest rate,
with sale
and leaseback
transactions
with fixed
rates. Also,
in 2023,
we entered
into an
interest
rate swap
for 30%
of our
$100 million
loan facility
with DNB,
dated June
26, 2023,
under which
we pay
fixed
interest and
receive floating.
Through these
agreements and
our
bond, also
bearing fixed
interest
rate, we
manage part
of our
exposure in
interest rates
caused by
the remaining
agreements which
bear
floating interest rates.
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, 2023 compared to the year ended December 31, 2022
Time charter
revenues.
2023, compared to $290.0 million
in 2022. The
decrease in time charter
revenues was due to
decreased
average
time
charter
rates,
which
decreased
our
TCE
rate
to
$16,713
in
2023
from
$22,735
in
2022,
representing a 26%
decrease. This decrease
was partly offset
by increased operating
days during 2023,
as
compared
to
last
year.
Operating
days
in
2023
were
14,824
compared
to
12,306
in
2022,
mainly
resulting from the acquisition of eight Ultramax
vessels in the fourth quarter of
2022 and one more in first
quarter of 2023.
Voyage
expenses.
compared to $6.9 in 2022.
This increase was mainly due to
the decreased gain on bunkers amounting to
$0.5 million
in 2023
compared to
$8.1 million
in 2022.
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. This
decrease was partially counterbalanced due to decreased commissions, which is the main part of voyage
expenses, and which in 2023 decreased to $13.3 million compared
to $14.4 million in 2022.
Vessel operating expenses.
Vessel operating expenses
increased by
$13.5 million,
or 19%,
to $85.5
million
in
2023
compared
to
$72.0
million
in
2022.
The
increase
in
operating
expenses
is
attributable
to
the
increase in
ownership days in
2023, as
a result
of the
acquisition of
eight Ultramax
vessels in
the fourth
quarter of 2022
and one more
in first quarter
of 2023.
Operating expenses
also increased due
to increased
crew
costs, insurances,
spares
and
other consumables.
Total
daily operating
expenses
were $5,704
in
2023 compared to $5,574 in 2022.
Depreciation
and
amortization
of
deferred
charges. Depreciation
and
amortization
of
deferred
charges
increased
by $6.5 million,
or 15%,
to $49.8
million
in 2023,
compared
to $43.3
million
in 2022.
This increase
was due
to the
acquisition of
nine vessels,
as noted
above. This
increase was
partially offset
due to
the
fact that,
effective July 1,
2023, the
Company changed
its estimated
scrap rate
of its
vessels from
$250
per lightweight ton to $400 and the sale of vessel
Boston
in the fourth quarter of 2023. A further decrease
incurred due to decreased amortization of deferred cost as a result of the drydock cost incurred for seven
vessels having drydock surveys in 2023 and twelve in 2022.
General and
administrative expenses
. General and admini
strati
ve expenses
increased by
$3.6 million,
or
12%,
to
$33.0
million
in
2023
compared
to
$29.4
million
in
2022.
The
increase
was
mainly
due
to
the
increased payroll
costs and
travelling expenses.
A further
increase by
$0.6 million
was attributed
to donations.
Management fees to related party.
to $1.3 million in 2023 compared
to $0.5 million in 2022. The increase
was attributable to increased average
number of vessels managed
by DWM in 2023 compared to 2022, due to the acquisition of three Ultramax
vessels
in
the
fourth
quarter
of
2022
and
one
more
in
first
quarter
of
2023,
whose management
was
assigned to DWM.
Gain
on
sale
of
vessels.
resulted
from
the
sale
of
vessels
Aliki,
Melia
and
Boston
in
2023
compared
to
$2.9 million
in
2022
which
resulted from the sale of
Baltimore
76
Insurance recoveries
. Insurance recoveries amounted to null balance in 2023,
compared to $1.8
million in
2022
which
consisted
of amounts
received from
our insurers
for claims
covered under
the insurance
policies
during 2022.
Interest expense
and finance
costs.
$49.3
million
in 2023
compared
to $27.4
million
in 2022.
The increase
was primarily
attributable to
increased
average outstanding
balance of
debt and
finance liabilities
in 2023,
resulting from
the refinances
performed.
A
further
increase
was
also
derived
from
increased
average
interest
rates
resulting
from
our
loan
agreements, having
a variable
interest rate.
In 2023,
the weighted
average interest
rate of
our secured
loan
agreements was 7.3% compared to 3.8% in 2022.
Interest and other income
. Interest and other income increased by $5.5 million, or 204%, to $8.2 million
in
2023 compared
to $2.7
million in
2022. The
increase is
mainly attributable
to increased
deposit rates
in
2023 compared to 2022.
Loss on extinguishment
of debt.
In 2023, loss on
extinguishment of debt increased
by $0.3, or 75%
to $0.7
million and consisted of the prepayment in full of six loan agreements refinanced by other banks. In 2022,
loss on extinguishment
of debt amounted
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 one vessel sold and three
vessels refinanced in sale and leaseback transactions in 2022.
Loss on
derivatives
. Loss on
derivates
to $0.4 million
in 2023
and represents the
fair value of
an interest
rate swap
dated July
6, 2023
in which
the Company
entered into
with DNB.
The notional
amount
of the agreement is $30 million and the Company pays a fixed rate of 4.268% and receives floating under
term SOFR.
Gain on
related party
Investments.
Gain on
related party
Investments amounted
to $1.5
million in
2023,
compared to $0.6 million
in 2022. On October 17,
2023, the Company realized
a gain of $1.7 million
which
derived from the
conversion of 9,793
of the
10,000 Series C
Preferred shares of
OceanPal to 3,649,474
common shares of OceanPal, having a fair
value of $9.2 million, based on the closing
price of OceanPal’s
common
shares
on
the
date
of
conversion.
This
gain
was
the
difference
between
the
book
value
of
OceanPal’s Series
C Preferred
shares and
the fair
value of
the converted
common shares
and was
partially
offset by an unrealized
loss of $1.0
million, resulting from
the measurement
of OceanPal’s common
shares
at fair value on
December 31, 2023,
based on the
closing price of the
shares on that
date. Additionally, the
Company distributed to
its shareholders as
a noncash dividend,
its 13,157 Series
D Preferred Shares
of
OceanPal,
which
resulted
in
gain
of
$0.8
million.
The
gain
of
$0.6
million
in
2022
represents
the
gain
recognized upon the
distribution of 25,000
Convertible Series D
Preferred Shares of
OceanPal Inc.
as a
noncash 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 on deconsolidation of
subsidiary.
Gain on deconsolidation of
subsidiary amounted to
$0.8 million in
2023 and represents the gain from the Company’s 25% interest in Bergen Ultra measured at fair
value on
the date of its deconsolidation from the Company’s financial statements.
Unrealized gain on equity
securities.
Unrealized gain on equity
securities amounted to $2.8
million in 2023
and resulted from the measurement of equity securities,
having a book value of $17.9 million, at fair value
of $20.7 million on December 31, 2023, determined through Level
1 of the fair value hierarchy.
Unrealized gain on
warrants.
Unrealized
gain on warrants
amounted $1.6 million
in 2023, which
resulted
from the fair value adjustment
as of December 31, 2023
of the value of the
22,613,070 warrants issued on
December 14, 2023.
77
Gain/(loss) from equity method
investments.
In 2023, loss
from equity method
investments,
amounted to
$0.3 million,
compared to
a gain
of $0.9
million in
2022
The loss
in 2023
is attributed
to a
loss of
$0.7
million from
our 45.45%
interest in
Windward, which
was partly
offset by
a gain
of $0.2
million from
our
50% interest in DWM,
and a gain of
$0.2 million from
our 25% interest
in Bergen. The
gain in the prior
year
derived from our 50% interest in DWM.
Year ended December 31, 2022 compared to the year ended December 31, 2021
For a discussion of the year ended December 31, 2022 compared to the year ended December 31, 2021,
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, 2022 filed with the SEC on March 27,
2023.
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
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,
2023
and
2022,
working
capital,
which
is
current
assets
minus
current
liabilities,
including the current
portion of long-term
debt and finance
liabilities, amounted to
$97.1 million and
$9.0
million, respectively. The increase in working capital
is mainly due to increased
cash and cash equivalents
and our investment in equity securities amounting to $20.7 million,
which did not exist in the prior year.
In
addition, the
Company’s current
portion of
long-term debt
decreased compared
to last
year as
in 2022,
current
portion of
long-term debt
included a
balloon of
$43.8 million
under
one
of
our
loan
agreements
which was refinanced in 2023.
Cash and
cash equivalents,
including restricted
cash, was
$121.6 million
as of
December 31,
2023 and
$97.4
million
as
of
December
31,
2022.
Restricted
cash
mainly
consists
of
the
minimum
liquidity
requirements under
our loan
facilities. As
of December
31, 2023
and 2022,
restricted cash
amounted to
$20.0 million and $21.0 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. As
of December 31, 2023,
the time deposits above
three
months amounted to
$40.0 million,
compared to $46.5
million as
of December 31,
2022. Cash and
cash
equivalents are primarily held in U.S. dollars.
Net Cash Provided by Operating Activities
Net cash provided by operating
activities decreased by $88.5 million,
or 56%.
In 2023, net cash
provided
by
operating
activities
was
$70.4 million
compared
to
net
cash
provided
by
operating
activities
of
$158.9 million in
2022. This
decrease in
cash from
operating activities
was mainly
attributable to
decreased
revenues
as
a
result
of
decreased
average
time
charter
rates
compared
to
2022.
Cash
provided
by
operating
activities
was
also
affected
by
our
investment
in
equity
securities
acquired
in
2023
for
$17.9
million. This decrease was
partly offset by decreased
dry-docking costs incurred
for seven vessels in
2023
compared to twelve vessels in 2022.
Net Cash Used in Investing Activities
Net cash
provided by investing
activities was $24.9
million for
2023, which consists
of $29.7 million
paid
for vessel acquisitions and improvements due to new regulations; $36.6 million of proceeds from the
sale
of three
vessels in
2023; $10.5
million paid to
acquire investments in
Windward and
Cohen; $1.0 million
78
cash divested from deconsolidation
of Bergen Ultra;
decreased investment by $6.5
million in time deposits
with
maturity
above
three months;$25.2
million
proceeds
from
convertible
loan
with
limited
partnership;
$0.2 million paid to acquire other assets; and $2.0 million relating
to the acquisition of equipment.
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 Financing Activities
Net cash used in
financing activities was $71.1 million for
2023, which consists of $57.7
million proceeds
from issuance of long term debt and finance liabilities; $79.8 million of indebtedness and finance liabilities
that we repaid; $5.8 million and $41.4 million of
cash dividends paid on our preferred and common stock,
respectively; and $1.8 million of finance costs paid in relation
to new loan agreements.
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.
For a detailed
discussion of
cash flows
for the
year ended
December 31,
2022
compared to
the year
ended
December 31, 2021
please see “Item 5. Operating and Financial Review and Prospects - B. Liquidity and
Capital Resources”
included in
our
2022 Annual
Report filed
on Form
20-F with
the SEC
on
March 27,
2023.
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
entered into
two agreements
for the
construction of
two 81,200
dwt methanol
dual fuel
new-building Kamsarmax dry
bulk vessels, for
$46 million each.
The vessels
are
expected to be delivered
to the Company by
the second half
of 2027 and
the first half of
2028 respectively.
On February 15, 2024,
we paid an aggregate
amount of $16.1
million, representing 17.5%
of the purchase
price of
both vessels.
Additionally,
we have
committed to
contribute Euro
50 million
to Windward
for the
construction of four CSOVs, with deliveries scheduled to
occur between the third quarter of 2025
and the
fourth quarter
of 2026.
As of
the date
of this
report, we
have paid
an aggregate
of Euro
24.3 million,
or
$26.1 million.
We also
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 may also incur capital expenditures for vessel
improvements to meet new regulations. In the next twelve
months, we will require capital to fund ongoing
operations, debt
service, the
payment of
our preferred
dividends and
the payment
of our
bareboat charters.
As of the date of this annual report,
we have contracted revenues covering around 71% of our ownership
days in 2024, in time charter agreements
having an average time charter
rate in excess of our break-even
rate as of
December 31, 2023,
and we have
also fixed around
12% of our
ownerships days in
2025. We
believe that contracted and
anticipated revenues will
result in internally generated
cash flows and together
with available cash and
cash equivalents,
which as of December
31, 2023 amounted to
$101.6 million and
having additional investments
in time
deposits of $40.0
million which mature
in 2024, will
be sufficient to
79
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. We
may also
incur additional
debt to
finance part
of the
construction cost of our methanol vessels on order.
Long-term Debt and Finance Liabilities
As of
December 31,
2023, we
had $517.0
million of
long term
debt outstanding
under our
facilities and
Bond, under the agreements described below.
Secured Term Loans
On January 4,
2017, we
drew down
$57.24 million,
under a
secured loan
agreement with
the Export-Import
Bank
of
China,
dated
January
7,
2016,
to
finance
part
of
the
construction
cost
of
San
Francisco
Newport News
, both
delivered on January
4, 2017. The
loan is payable
in equal quarterly
instalments of
about $1.0 million each,
the last of
which is payable by
January 4, 2032. On
July 19, 2023, we
amended
the terms of
the loan
to replace
LIBOR with
term SOFR
and the
margin was
increased from
2.3% to
2.45%.
On September 30, 2022, we 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
but prepaid
$21.9 million
in December
2022 due
to a
vessel sale
and
leaseback transaction.
The loan
is repayable
in equal
quarterly instalments
of an
aggregate amount
of $3.7
million, and a balloon of $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%.
On
April
12,
2023,
we
entered
into
a
$100
million
term
loan
facility
with
Danish
Ship
Finance
A/S
to
refinance an
aggregate of
$75.2 million
outstanding balance
under existing
loans with
BNP Paribas
and
working
capital.
The
loan is
repayable
in
twenty equal
consecutive
quarterly instalments
of
$3.3 million
each and
a balloon
of $34
million payable together
with the
last instalment
on April
19, 2028,
and bears
interest at term SOFR plus a margin of 2.2%.
On
June
20, 2023,
the
Company
entered into
a $22.5
million loan
agreement with
Nordea to
refinance
$20.9
million
outstanding
balance
of
an
existing
loan.
The
new
loan
is
repayable
in
equal
quarterly
instalments of
about $1.1
million and
bears interest
at term
SOFR plus
a margin
of 2.25%.
The loan
matures
on June 27, 2028.
On June
26, 2023,
we entered
into a
$100 million
loan agreement
with DNB
Bank ASA,
or DNB,
to refinance
an aggregate
of $68.7
million outstanding
balance under
existing loans
with ABN
AMRO Bank
N.V,
and
for
working
capital
purposes.
The
loan
is
repayable
in
equal
quarterly
instalments
of
$3.8
million
until
December
27,
2029,
and
bears
term
SOFR
plus
a
margin
of
2.2%,
subject
to
sustainability
margin
adjustment. Additionally,
the loan
is subject to
a margin
reset, according to
which the
borrowers and the
lenders will enter
into discussions to
agree on a
new margin. Unless
the parties agree
on a new
margin,
the loan will be mandatorily
repayable on June 27, 2027.
As part of the loan
agreement, on July 6, 2023,
we
entered
into
an
interest
rate
swap
with
DNB
for
a
notional
amount
of
$30
million
and
quarterly
amortization of
$1.2 million.
Under the
interest rate
swap, we
pay a
fixed rate
of 4.268%
and receive
floating
under term
SOFR. The swap
has a
termination date
on December 27,
2029, and
a mandatory break
on
June 27, 2027, which is the margin reset date of
the loan, according to which the swap will be terminated
if the loan is prepaid. As of December 31, 2023, the
interest rate swap was a liability having a fair value
of
$0.4 million.
Under
the
secured
term
loans
outstanding
as
of
December
31,
2023,
33
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
80
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, 2022 and
2023, and the date of this
annual report, we were in compliance with
all of
our loan covenants.
Senior Unsecured Bond due 2026
On June 22, 2021,
the Company 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.
Entities
affiliated
with
executive officers and
directors of the
Company purchased an
aggregate of $21
million principal amount
of
the
bond. The
bond bears
interest at
a US
Dollar fixed-rate
coupon of
8.375%
and
is payable
semi-
annually in
arrears in
June and
December of
each year.
The bond
is callable
in whole
or in
part 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 nominal
value and
after December
2025 at
a price
equal to
100% of
nominal value.
On
June
29,
2023,
we
repurchased
$5.9
million
nominal
value
of
the
bond
and
recognized
a
loss
of
$0.2
million. The bond includes financial and other covenants and is trading at
Oslo Stock Exchange under the
ticker symbol “DIASH02”.
Finance Liabilities
On March 29, 2022, we entered into a $50 million sale and leaseback agreement with an unaffiliated third
party,
for a
period of ten
years, under which
we pay
hire, monthly in
advance and 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
an aggregate amount
of $66.4 million,
for a period
of eight years,
each,
under which we
pay hire, monthly in advance,
and we have the option to purchase the vessels 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
$13.0
million, each,
on the
expiration of
each
lease on
the
eighth year.
On
December
6,
2022,
we
entered
into
a
sale
and
leaseback
agreement
for
$29.9
million
with
an
unaffiliated third party, for
a period of
ten years,
under which
we pay
hire, monthly
in advance,
and 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.
81
Commitments and Contingencies
On March 30,
2023, we entered
into a corporate
guarantee with Nordea
under which we
guaranteed the
performance by
Bergen Ultra,
an
equity method
investee
owning one
dry
bulk
carrier,
of
its
obligations
under a loan
agreement with
the bank maturing
on March 30,
2028. The Company
considers the likelihood
of
having
to
make
any
payments under
the
guarantee to
be
remote,
as the
loan
is
also
secured by
an
account pledge by Bergen,
first preferred mortgage on
the vessel, a first priority
general assignment of the
earnings, insurances
and requisition
compensation of
the vessel,
a charter
party assignment,
a partnership
interests
security
deed,
and
a
manager’s
undertaking.
As
of
December
31,
2023,
the
loan
had
an
outstanding balance of $14.8 million.
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 2023,
the BDI
ranged from a low
of 530 to a
high of 3,346 and
closed at 1,714 on
April 2, 2024. 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 62%
of our
fleet ownership
days in
2024 at
rates above
our break-even
rate. Nevertheless,
our
revenues
and
results
of
operations
in
2024 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
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.
82
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
2023 to
calculate undiscounted
projected net
operating cash
flow was
$12,775 for
Panamax,
Kamsarmax
and
Post-Panamax
vessels,
$16,608
for
Ultramax
vessels
and
$16,115
for
our
Capesize
and
Newcastlmax
vessels,
compared
to
$12,431,
16,876
and
$16,128,
respectively
in
2022.
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 2023,
according
to
our
assessment,
the
carrying
value
plus
unamortized
deferred
cost
of
vessels
for
which
impairment indicators existed as of December 31, 2023, was $378.2
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,
2023 and
2022 and
(ii)
what we
believe the charter-free market value of each of
our vessels was as of December 31,
2023 and 2022, the
aggregate
carrying
value
of
12
and
17
of
the
vessels
in
our
fleet
as
of
December
31,
2023
and
2022,
respectively,
exceeded their
aggregate charter-free
market value
by
approximately $49
million and
$83
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,
2023 and
2022, 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 12 and 17 vessels
would be sold at a price
that reflects our estimate of
their charter-free market
values as of December 31, 2023 and 2022, respectively.
83
Vessel
Dwt
Year Built
Carrying Value plus unamortized
deferred cost
(in millions of US dollars)
2023
2022
1
Alcmene
93,193
2010
2
Aliki
180,235
2005
3
Amphitrite
98,697
2012
4
Artemis
76,942
2006
5
Astarte
81,513
2013
6
Atalandi
77,529
2014
7
Boston
177,828
2007
*
8
Crystalia
77,525
2014
9
Electra
87,150
2013
10
G.P.
Zafirakis
179,492
2014
11
Houston
177,729
2009
12
Ismene
77,901
2013
13
Leto
81,297
2010
14
Los Angeles
206,104
2012
15
Maera
75,403
2013
16
Maia
82,193
2009
17
Medusa
82,194
2010
18
Melia
76,225
2005
19
Myrsini
82,117
2010
20
Myrto
82,131
2013
21
New Orleans
180,960
2015
*
22
New York
177,773
2010
23
Newport News
208,021
2017
*
24
P.S.
Palios
179,134
2013
*
*
25
Phaidra
87,146
2013
26
Philadelphia
206,040
2012
27
Polymnia
98,704
2012
28
San Francisco
208,006
2017
*
29
Santa Barbara
179,426
2015
*
*
30
Seattle
179,362
2011
31
Selina
75,700
2010
32
Semirio
174,261
2007
*
33
LEONIDAS P.C.
82,165
2011
*
*
34
Florida
182,063
2022
*
35
DSI Pyxis
60,362
2018
*
*
36
DSI Pollux
60,446
2015
*
*
37
DSI Phoenix
60,456
2017
*
*
38
DSI Polaris
60,404
2018
*
*
39
DSI Andromeda
60,309
2016
*
*
40
DSI Aquila
60,309
2015
*
*
41
DSI Pegasus
60,508
2015
*
*
42
DSI Altair
60,309
2016
*
*
43
DSI Aquarius
60,309
2016
*
Total
4,915,571
_______________________________
*
Indicates dry bulk
vessels for which
we believe, as
of December 31,
2023 and 2022,
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 $49 million and $83 million, respectively.
84
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
11
% 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
$16,608
$12,195
Panamax/Kamsarmax/Post-Panamax
$12,775
Capesize/Newcastlemax
$16,115
$11,721
85
It should be
noted that as
of December 31,
2023, twelve 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:
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
$15,131
-
$20,740
-
$17,191
-
Panamax/Kamsarmax/Post-
Panamax
$13,536
-
$18,618
-
$15,652
-
Capesize/Newcastlemax
$15,623
-
$19,900
-
$17,974
-
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
49
Class III Director and Chief Executive Officer
Simeon Palios
82
Class I Director and Chairman
Anastasios Margaronis
68
Class I Director and President
Ioannis Zafirakis
52
Class I Director, Chief Financial Officer, Chief
Strategy Officer, Treasurer and Secretary
Konstantinos Psaltis
85
Class II Director
Kyriacos Riris
74
Class II Director
Apostolos Kontoyannis
75
Class III Director
Konstantinos Fotiadis
73
Class III Director
Eleftherios Papatrifon
54
Class II Director
Simon Frank Peter Morecroft
65
Class II Director
Jane Sih Ho Chao
48
Class I Director
Maria Dede
51
Chief Accounting Officer
Margarita Veniou
45
Chief Corporate Development, Governance
Communications Officer
Maria Christina Tsemani
45
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 2026.
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.
86
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.
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 July 2023, she serves as
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, Bureau
Veritas, American Bureau of Shipping and Hellenic War Risks
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.
(ex.
Diana
Containerships 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. (ex. Diana Containerships Inc.) and as Chief
Executive Officer until October
2020.
87
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
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. (ex. Diana Containerships 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 and
Chief Financial Officer (Interim Chief
Financial Officer until February 2021) and
Treasurer since February
2020
and
he
is
also
the
Chief
Strategy
Officer
of
the
Company.
Mr.
Zafirakis
is
also
member
of
the
Executive Committee
of the
Company.
Mr.
Zafirakis has
held various
executive positions
such as
Chief
Operating
Officer,
Executive
Vice-President
and
Vice-President.
In
addition,
Mr.
Zafirakis
is
the
Chief
Financial Officer of
Diana Shipping Services S.A., where
he also serves as
Director and Treasurer.
Also,
he
has
served
as
a
Director
of
OceanPal
Inc.
since
April
2021.
He
has
also
served
as
the
President,
Secretary and
Interim Chief Financial
Officer of
OceanPal Inc.
from November 2021
to April
2023. He
is
also member of the Executive Committee of OceanPal Inc.
From June 1997 to
February 2005, Mr.
Zafirakis was employed by
Diana Shipping Agencies S.A., where
he held
a number
of positions in
finance and
accounting. From January
2010 to
February 2020,
he also
served as Director and Secretary of Performance Shipping Inc. (ex. Diana Containerships Inc.), where he
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. In 2024,
Mr.
Zafirakis attended and completed
the
Advanced
Management
Programme
at
INSEAD
Business
School
in
Singapore.
Mr.
Zafirakis
has
also
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.
88
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
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, while he
is currently the
Vice Chairman of
the Board and
the Chairman of
the Audit and
the
Risk Committee of the Group.
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. (ex.
89
Diana Containerships
Inc.) from
the completion
of Performance
Shipping Inc.
(ex. Diana
Containerships
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 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,
she also serves as
the Finance Manager and Chief
Accounting Officer 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.
and she has also served
as the company’s Board Secretary
since April 2023. She is
the General Manager
of Steamship Shipbroking Enterprises Inc., a position she has held
since April 2014.
90
From
January
2010
to
February
2020,
Ms.
Veniou
also
held
the
position
of
Corporate
Planning
Governance Officer of Performance Shipping Inc. (ex. Diana Containerships
Inc.).
Ms. Veniou
holds a bachelor's
degree in Maritime
Studies and a
master's degree in Maritime
Economics
Corporate
Responsibility
course
at
the
London
Business
School
and
has
obtained
the
Certification
in
Shipping 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
20 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 2023
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
2023,
fees
for
2023
amounted
to
$3.9
million
and
we
also
paid
commissions
for
vessel
sales
and
purchases
amounting to
$0.9
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 2023, 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
shares of common
stock, amended on
May 31, 2018
to increase the
shares of common
stock to
13,000,000 and
further amended
on January
8, 2021,
referred to
as “the
Plan”, to
increase the
number
of
shares
of
common
stock
available
for
the
issuance
of
equity
awards
by
20
million
shares.
Currently, 11,144,759
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
91
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
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 2023 and as of the
date of this annual report, our
board of directors awarded
an aggregate amount
of 1,750,000
shares and
2,300,000 shares,
respectively of
restricted common
stock, of
which 1,487,500
shares and 1,955,000
shares, respectively were
awarded to senior
management, and 262,500
shares and
345,000 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 2023, compensation
costs relating
to the aggregate
amount of
restricted stock
awards amounted
to $9.9
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.
92
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.
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.
Clawback Policy
In December 2023,
our Board
of Directors
adopted a policy
regarding the
recovery of erroneously
awarded
compensation (“Clawback Policy”) in accordance with the applicable rules of
NYSE and Section 10D and
Rule 10D-1 of the Securities Exchange Act of 1934, as amended. In the event we are required to prepare
an accounting restatement due to
material noncompliance with any
financial reporting requirements under
U.S. securities
laws or
otherwise erroneous
data or
if we
determine there
has been
a significant
misconduct
that causes material financial, operational
or reputational harm, we shall
be entitled to recover a portion
or
all of
any incentive-based
compensation, if
any,
provided to
certain executives
who, during
a three-year
period
preceding
the
date
on
which
an
accounting
restatement
is
required,
received
incentive
compensation
based
on
the
erroneous
financial
data
that
exceeds
the
amount
of
incentive-based
compensation the executive would have received based on
the restatement.
Our
Clawback
Policy
shall
be
administered
by
our
Compensation Committee
who
has
the
authority,
in
accordance with
the applicable
laws, rules
and regulations,
to interpret
and make
determinations
necessary
for the administration of the
Clawback Policy,
and may forego recovery in
certain instances, including if it
determines that recovery would be impracticable.
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,
2023,
2022
and
2021.
Year Ended December 31,
2023
2022
2021
Shoreside
11
2
113
111
Seafaring
906
907
708
Total
1,018
1,020
819
93
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.
Title of Class
Identity of Person or Group
Number of
Shares Owned
Percent of
Class
*
Common Stock,
Semiramis Paliou (1)
23,750,097
19.8%
par value $0.01
Anastasios Margaronis (2)
12,114,535
10.1%
Sea Trade Holdings Inc. (3)
19,165,545
16.0%
All other officers and directors as a group (4)
12,316,914
10.3%
* Based on 119,962,917 common shares outstanding as of April 1, 2024.
(1)
Mrs. Semiramis Paliou indirectly may be deemed to beneficially own 19.8% 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.
The shares include 5,427,977
shares
of
common
stock
issuable
to
Semiramis Paliou
upon
exercise
of
3,527,501
warrants
distributed on December 14, 2023. As of December 31, 2021, 2022 and 2023, Mrs. Semiramis
Paliou
owned
indirectly
17.8%,
18.9%
and
20.3%,
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.
Each share
of Series
D Preferred
Stock
shall entitle
the holder
thereof to
two hundred
thousand (200,000)
votes on
all matters
submitted
to a
vote of
the stockholders
of the
Company, provided however, that, notwithstanding
any other
provision of the
Series D Preferred Stock
statement of designation, to
the extent that
the total
number of votes one
or more holders of
Series D Preferred Stock is
entitled to vote (including
any voting
power of
such holders
derived from
Series D
Preferred Stock,
shares of
Common
Stock or any other
voting security of
the Company issued
and outstanding
as of the date
hereof
or that
may be
issued in
the future)
on any
matter submitted
to a
vote of
stockholders of
the
Company would exceed 36.0% of the total
number of votes eligible to be cast
on such matter,
the total
number of votes
that holders
of Series D
Preferred Stock may
exercise derived from
the Series D Preferred Stock together with Common Shares and any
other voting securities of
94
the Company beneficially
owned by such
holder, shall
be reduced to
36% of the
total number
of votes that may be cast on such matter submitted to a vote of
stockholders.
(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 12,114,535
shares.
These
shares
include
2,758,710
shares
of
common
stock
issuable
to
Anastasios
Margaronis upon exercise of 1,792,814 warrants distributed on December
14, 2023.
(3)
This information
is derived
from a
Schedule 13G/A
filed with
the SEC
on February
12, 2024,
adjusting the percentage figure based
on the common shares issued
and outstanding as of the
date of
this report.
The shares
include 4,422,817
shares of
common stock
issuable to
Sea Trade
Holdings Inc. upon the exercise of 2,948,545 warrants distributed on December
14, 2023.
(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
3,089,992
shares,
or
2.6%
of
our
outstanding
common
stock,
beneficially
owned
through
Abra
Marinvest
Inc.;
and
Mr.
Simeon
Palios
may
be
deemed
to
beneficially
own
5,017,536
shares,
or
4.2%
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 April 1, 2024,
we had 83 shareholders of record, 65
of which were located in the
United States and
held an
aggregate of
105,578,632 of
our common
shares, representing
88.01% 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 104,663,529
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
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. As
of October 17,
2023
we own
207 shares
of OceanPal’s
Series C
Convertible Preferred
Shares issued
to us
in the
OceanPal
spin-off.
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
95
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.
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 June
9, 2023, we
distributed the
Series D Preferred Shares as a non-cash dividend to our shareholders
of record on April 24, 2023.
Dividend income from the OceanPal preferred shares during 2023 amounted
to $0.8 million.
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 and three vessels were sold to third
parties.
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.
Each share of
Series D Preferred
Stock shall entitle
the holder thereof
to two hundred
thousand (200,000) votes on all
matters submitted to a vote of
the stockholders of the Company, provided
96
however, that, notwithstanding
any other provision of
Series D Preferred Stock
statement of designation,
to the extent that
the total number of votes
one or more holders
of Series D Preferred Stock
is entitled to
vote (including
any voting
power of
such holders
derived from
Series D
Preferred Stock,
shares of
Common
Stock or
any other
voting security
of the
Company issued
and outstanding
as of
the date
hereof or
that
may
be
issued
in
the
future)
on
any matter
submitted to
a
vote
of
stockholders of
the
Company
would
exceed 36.0% of
the total number
of votes eligible
to be cast
on such matter, the total
number of votes
that
holders of Series D Preferred Stock
may exercise derived from the Series
D Preferred Stock together with
Common Shares and any other voting securities of the Company beneficially owned by such holder, shall
be reduced
to 36%
of the
total number
of votes
that may
be cast
on such
matter submitted
to a
vote of
stockholders. 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.
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. 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
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.
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
2023, brokerage
fees amounted
to $3.9
million
and we paid
an additional amount
of $0.9 million
for commissions on the
sale and purchases
of vessels.
The terms of this relationship are currently governed by a Brokerage Services Agreement dated February
23, 2024 due to expire on December 31, 2024.
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 and CEO Ms. Semiramis Paliou provides us with travel related services. Travel related
expenses in 2023, amounted to $2.5 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
2023
amounted
to
$1.3
million,
commissions on revenues amounted to $0.4 million.
Bergen Ultra
Bergen Ultra,
or Bergen,
is a
limited partnership
which owns
a dry
bulk carrier.
One of
our subsidiaries,
97
Diana
General
Partner
Inc.,
owns
3%
of
the
partnership
and
acts
as
the
General
Partner
and
another
subsidiary, Komi Shipping
Company Inc.,
owns 22%
of the
partnership.
The remaining
partnership interests
are owned by unaffiliated parties. On March 30, 2023, we entered into a
corporate guarantee with Nordea
to
secure
Bergen’s
obligations
under
a
$15.4
million
loan
facility.
We
have
also
entered
into
an
administrative
service
agreement
under
which
DSS
provides
administrative
services
to
Bergen
for
an
annual fee of $15 and a
commission agreement under which the Company is paid
a commission of 0.8%
per
annum,
on
the
outstanding
balance
of
the
loan,
as
compensation
for
the
guarantee
it
provided
to
Nordea. During 2023, income from administrative fees amounted to $10,192 and we received $61,267 as
payment for the guarantee commission.
Real Estate Acquisition
In July 2023 we purchased the remaining 1/3 interest in a
parcel of land that the Company did not already
own from Alpha Sigma Shipping Corp, a related party company, for the purchase price of $1.2 million and
became the sole owner of the parcel.
Please see Item 4.(D), Property, plants and equipment.
C.
Interests of Experts and Counsel
Not Applicable.
98
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
and for each quarter
thereafter, until
the
first
quarter
of
2024
and
two
special
noncash
dividends,
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
99
in part, the Series B Preferred Shares at
a redemption price of $25.00 per share plus an
amount equal to
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 17
“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.
Our Warrants to Purchase Common Stock, expiring on or about December 14, 2026, have
traded on the
NYSE under the symbol “DSX WS” since December 14, 2023.
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 and our
Warrants have
traded on
the NYSE
under the
symbol “DSX
WS” since
December 14,
2023. 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.
100
Item 10.
Additional Information
A.
Share capital
Not Applicable.
B.
Memorandum and articles of association
Our current amended and restated articles of incorporation are filed as exhibit 1.1 hereto, and our current
amended and restated
bylaws are filed
as exhibit 1.2
hereto. 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
Exhibit 2.8
to
this
annual
report
titled
“Description
of
Securities
Registered
Pursuant
to
Section 12 of the Securities Exchange Act of 1934.”
Stockholders Rights Agreement
On
February 2,
2024, we
entered
into
an
Amended and
Restated Stockholders
Rights
Agreement with
Computershare
Trust
Company,
N.A.,
as
Rights
Agent,
to
amend
and
restate
the
Stockholders
Rights
Agreement, dated January 15, 2016.
Under the Amended
and Restated
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 $25.00 per share. The
Rights will separate from the common stock and
become exercisable only
if a person or
group acquires beneficial
ownership of 15% 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
15% 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 Amended and Restated Stockholders Rights Agreement's terms, it will expire on
February 1, 2034. A copy of the
Amended and Restated 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, as amended on February 2, 2024.
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.
101
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.
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
102
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,
2023,
approximately
2.4%
of
the
Company’s
shipping
income
was
attributable to the transportation of cargoes either to or from a U.S. port. Accordingly, approximately 1.2%
of
the
Company’s
shipping
income
would
be
treated
as
derived
from
U.S. sources
for
the
year
ended
December 31, 2023. 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 $0.1 for the year ended December 31, 2023.
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
country.
Accordingly,
the
Company
and
each
of
the
subsidiaries
satisfy
the
Country
of
Organization
Requirement.
For
the
2023
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
2023 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
103
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 2023 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 2023 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 2023 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 2023
taxable year and intends to take this position on its 2023 U.S. federal
income tax returns.
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
2023
taxable
year
and
in
the
absence
of
exemption
under Section 883
of the Code,
the Company would
be subject to
$0.1 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
104
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
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
105
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 PFIC
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.
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
106
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
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,
107
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.”
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.
108
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,
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
109
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.
Changes in Global Tax Laws
Long-standing
international
tax
initiatives
that
determine
each
country’s
jurisdiction
to
tax
cross-border
international trade and profits are evolving
as a result of, among
other things, initiatives such as the
Anti-
Tax
Avoidance
Directives,
as
well
as
the
Base
Erosion
and
Profit
Shifting
reporting
requirements,
mandated
and/or
recommended
by
the
EU,
G8,
G20
and
Organization
for
Economic
Cooperation
and
Development, including the imposition of a minimum global
effective tax rate for multinational businesses
regardless of the jurisdiction of operation
and where profits are generated (Pillar
Two). As these and other
tax laws and
related regulations change (including
changes in the
interpretation, approach and guidance
of tax
authorities), our
financial results
could be
materially impacted.
Given the
unpredictability of
these
possible changes and their potential
interdependency, it
is difficult to
assess whether the overall effect
of
such potential tax changes would be cumulatively positive or negative for our earnings and cash flow,
but
such changes could adversely affect our financial results.
On December 12, 2022, the European Union member states agreed to implement the OECD’s
Pillar Two
global corporate
minimum tax
rate of
15% on
companies with
revenues of
at least
€750 million effective
from 2024. Various countries have either
adopted implementing legislation
or are in the
process of drafting
such
legislation. Any
new
tax
law
in
a
jurisdiction
where
we
conduct
business
or
pay tax
could
have
a
negative effect on our company.
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 were paying
interest at LIBOR plus a margin
until June 30, 2023 and since
then we
110
pay term
SOFR plus
a margin.
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 2023,
could have
increased our interest cost from $29.6 million to $33.6 million.
We
will
continue
to
have
debt
outstanding,
which
could
impact
our
results
of
operations
and
financial
condition. We manage our exposure in interest rates, by maintaining
a mix of financing under agreements
with floating and
fixed interest rates.
More specifically, during 2022, we refinanced
part of our loans
having
a floating interest
rate, with sale
and leaseback
transactions with fixed
rates. Also, in
2023, we entered
into
an interest rate swap for 30% of our
$100 million loan facility with DNB,
dated June 26, 2023, under
which
we
pay fixed
interest and
receive floating.
Through these
agreements and
our
bond, also
bearing fixed
interest rate, we manage
part of our exposure
in interest rates
caused by the remaining
agreements which
bear floating interest rates.
As of December
31, 2023, 2022
and 2021, 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 29% in 2023 and
around 32% in 2022) and
about half of our general
and administrative expenses
(around 44% in 2023 and around
45% in 2022) 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
2023
and
2022,
these
non-US
dollar
expenses
represented
15%
and
12%,
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.
111
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, 2023 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.
112
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,
for audit
services. Audit fees
in 2023 and
2022 amounted to
€ 383,250 and
€ 383,250, or
approximately
$416,000 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.
113
b) Audit-Related Fees
Audit related fees during 2023
amounted to € 22,050, as compared
to € 71,288 in 2022 and
relate to audit
services provided in connection with the Company’s filings with the SEC.
c) Tax Fees
During
2023
and
2022,
we
received
services
for
which
fees
amounted
to
$11,025
and
$10,500,
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. During 2023,
we did
not repurchase
any shares
of common
stock and
as of
December 31,
2023 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.
Item 16F.
Change in Registrant’s Certifying Accountant
Not applicable.
114
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.
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.
115
Item 16H. Mine Safety Disclosure
Not applicable.
Item 16I.
Disclosure Regarding
Foreign Jurisdictions
that Prevent
Inspections
Not applicable.
Item 16J. Insider Trading Policies
Pursuant to applicable
SEC transition guidance,
the disclosure required
by Item 16J
will be applicable
to
us beginning in the fiscal year ending December 31, 2024.
Item 16K. Cybersecurity
Risk management and strategy
We have
security measures in
place to mitigate
the risk of
cybersecurity threats affecting
our technology
environment
and
our
business.
In
2023,
the
Company
successfully
achieved
ISO
27001
certification,
demonstrating that our
Information Security
Management System
(ISMS) meets the
rigorous requirements
of
this
internationally recognized
standard.
The
Company's
security
team
regularly
conducts
significant
internal
changes,
and
the
underlying
controls
of
our
cyber
risk
management
program
are
now
formally
aligned with ISO 27001.
Cybersecurity training is carried out on a company-wide
basis to all employees and seafarers while online
performance cybersecurity
is delivered
to our crew
monthly. To
help build
cultural awareness
of these
risks
within the Company, additional phishing campaigns have been
implemented within the organization
which
have
motivated
the
staff
to
react,
helping
to
enhance
awareness
of
these
risks
and
mitigate
their
occurrence.
The
security
team
have
further
enhanced
our
processes
and
increased
our
defenses
by
implementing
a
cybersecurity
testing
program,
carried
out
on
a
yearly
basis
by
external
consultants.
Penetration testing was also carried out
in parallel during 2023. A
centralized monitoring system, powered
by
Microsoft's
cloud-based
Security
Information
and
Event
Management
(SIEM)
solution,
is
in
place
throughout
the
year.
This
system
aggregates
security
data
from
various
sources,
uses
built-in
artificial
intelligence to
detect and
investigate threats,
and enables
our security
team to
respond to
incidents rapidly.
We
have
also
created
a
comprehensive
Business
Continuity
and
Disaster
Recovery
plan
to
ensure
business resilience and minimize potential disruptions.
For the
year 2024,
the security
team has
planned a
comprehensive
collaboration with
a third-party
company
to enhance our cybersecurity awareness and training initiatives. This partnership includes the
design and
implementation
of
a
multi-faceted
approach
to
staff
training,
encompassing
synchronous
and
asynchronous
security
awareness
sessions,
custom-tailored
phishing
campaigns
and
the
creation
of
informative cybersecurity awareness
newsletters to keep
our staff
up to date
on the latest
best practices
and emerging risks. Furthermore, the
collaboration will focus on the
customization and digitalization of our
vessels' cybersecurity awareness program, ensuring that our seafarers
maintain a robust security posture
while at sea.] We will continue to acquire relevant tools to support the identification
of third-party risks and
further
strengthen our
defense. In
parallel to
these
security
measures, our
Company has
established a
Data Management Platform over Microsoft Azure
Technologies, to act as a centralized and secure source
of
truth
for
our
operations.
The
Data
Management
Platform
was
integrated
with
our
core
systems
and
implementation of key reports
was initiated. The goal
for 2024 is to build
Financial and Operational
reports
116
that will
enable better,
faster and
more accurate
monitoring of
Company activities
and improve
decision
making
and
productivity.
To
further
support
this
transition,
relevant
personnel
will
be
digitally
upskilled,
while
being
provided
with
the
necessary
tools
to
help
them
make
better
decisions,
ensuring
greater
productivity
and
enhancing vessel
efficiency.
We
are
committed to
enhance
and
enrich
our
operational
excellence through our external
3rd parties’ inspections and
audits (PSC-Vetting
inspections Audits). We
openly
share
our
results
and
“lessons
learnt”
within
the
industry
and
organizations,
we
compare
and
benchmark our performance and we continuously improve our safety
footprint.
Governance
Our board of directors considers cybersecurity risk as part of its risk oversight function and has delegated
the
day-to-day
oversight of
cybersecurity
and
other
technology
risks
to
the
Cyber
Security Officer.
The
Cyber Security Officer
is responsible for
assessing and managing cybersecurity
threats and for
reporting
cybersecurity
updates,
including
updates
on
monitoring
strategies
and
efforts
to
prevent
cybersecurity
threats, to the board of directors on a quarterly basis or more often
as needed.
The
audit
committee receives
regular reports
from
management
on
our cybersecurity
risks.
In
addition,
management updates the audit committee, as
necessary, regarding
any material cybersecurity incidents,
as
well
as
any
incidents
with
lesser
impact
potential.
The
audit
committee
reviews
the
Company's
cybersecurity
risks
and
assess’
the
steps
that
management
has
taken
to
protect
against
threats
to
the
Company's information systems and security.
Our
board
of
directors
oversees
the
Company’s
cybersecurity
risk
exposures
and
the
steps
taken
by
management to
monitor and
mitigate cybersecurity
risks. The
board of
directors ensures
allocation and
prioritization of resources and
overall strategic direction for
cybersecurity and ensures alignment with
the
Company’s overall strategy.
Cybersecurity Threats
During the year ended December 31, 2023 and until the date of this annual report, we did not identify any
cybersecurity threats that
have materially affected
or are reasonably likely
to materially affect our
business
strategy, results of operations,
or financial condition.
For more
information about
the cybersecurity
risks we
face, please see Item 3.
Key Information — D. Risk Factors
— “A cyber-attack could materially
disrupt our
business.”
117
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
2.10
4.1
4.2
4.3
4.4
4.5
4.6
4.7
118
4.8
4.9
4.10
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
119
4.36
4.37
4.38
4.39
4.40
4.41
4.42
4.43
4.44
4.45:
(26)
4.46:
(26)
4.47:
(26)
4.48:
(26)
4.49:
**
4.50:
**
4.51:
**
4.52:
**
4.53:
**
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
**
97.1
**.
101
The following materials
from the Company's
Annual Report on
Form 20-F for
the fiscal year
ended
December 31, 2023,
formatted in eXtensible
Business Reporting Language
(XBRL): (i) Consolidated
Balance Sheets as of December 31, 2023 and 2022;
(ii) Consolidated Statements of Income for the
years ended December 31,
2023, 2022 and
2021; (iii) Consolidated
Statements of Comprehensive
Income for
the years
ended December
31, 2023,
2022 and
2021; (iv)
Consolidated Statements
of
Stockholders'
Equity
for
the
years
ended
December
31,
2023,
2022
and
2021;
(v)
Consolidated
Statements
of
Cash
Flows
for
the
years
ended
December
31,
2023,
2022
and
2021;
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 99.2 to the Company's Form 6-K filed on November 15, 2023
.
(2)
Filed as Exhibit 99.3 to the Company's Form 6-K filed on November 15, 2023.
(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 February
2, 2024.
(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.
120
(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 September 8, 2023
.
(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.
(26)
Filed as an Exhibit to the Company’s Annual Report filed on Form 20-F on
March 27, 2023.
(27)
Filed as an Exhibit to the Company’s Form 6-K filed on December 14, 2023.
121
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: April 4, 2024
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, 2023 and 2022
................................
...
F-6
Consolidated Statements of Income for the years ended December
31, 2023, 2022 and
2021 ................................................................
................................
................................
..
F-7
Consolidated Statements of Comprehensive Income for the years
ended December 31,
2023, 2022 and 2021
................................
................................
................................
.........
F-8
Consolidated Statements of Stockholders' Equity for the years
ended December 31,
2023, 2022 and 2021
................................
................................
................................
.........
F-9
Consolidated Statements of Cash Flows for the years ended December
31, 2023, 2022
and 2021 ................................
................................
................................
...........................
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,
2023
and
2022,
the
related
consolidated
statements
of
income,
comprehensive
income, stockholders' equity and cash
flows for each of the three years
in the period ended December
31,
2023,
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,
2023 and 2022,
and the results
of its operations
and its cash
flows for
each of
the three
years in
the period
ended December
31, 2023, 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, 2023, 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 April
4,
2024 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,
2023,
the
carrying
value
of
the
Company’s
vessels
plus
unamortized deferred costs was $
915,470 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/ Ernst Young (Hellas) Certified Auditors Accountants S.A.
We have served as the Company’s auditor since 2004.
Athens, Greece
April 4, 2024
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, 2023,
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, 2023, 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,
2023
and
2022,
the
related
consolidated
statements
of
income,
comprehensive
income,
stockholders’
equity and cash flows for each of the three years in
the period ended December 31, 2023, and the related
notes and our report dated April 4, 2024 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
April 4, 2024
F-6
DIANA SHIPPING INC.
CONSOLIDATED BALANCE SHEETS
December 31, 2023 and 2022
(Expressed in thousands of U.S. Dollars – except
for share and per share data)
2023
2022
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 (Note 4)
Inventories (Note 2(g))
Prepaid expenses and other assets
Investments in equity securities (Note 5(b))
Fair value of derivatives
Total Current Assets
Fixed Assets:
Advances for vessel acquisitions (Note 6)
Vessels, net (Note 6)
Property and equipment, net (Note 7)
Total fixed assets
Other Noncurrent Assets
Restricted cash, non-current (Note 8)
Due from related parties, non-current (Note 4)
Equity method investments (Note 4)
Investments in related party (Note 5(a))
Other non-current assets
Deferred costs
Total Non-current Assets
Total Assets
$
$
LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities
Current portion of long-term debt, net of deferred
financing costs (Note 8)
$
$
Current portion of finance liabilities, net of deferred
financing costs (Note 9)
Accounts payable
Due to related parties (Note 3)
Accrued liabilities
Deferred revenue
Total Current Liabilities
Non-current Liabilities
Long-term debt, net of current portion and deferred
financing costs (Note 8)
Finance liabilities, net of current portion and deferred
financing costs (Note 9)
Fair value of derivatives
Warrant liability (Note 11(g))
Other non-current liabilities
Total Noncurrent Liabilities
Commitments and contingencies (Note 10)
-
-
Stockholders' Equity
Preferred stock (Note 11)
Common stock, $
respectively (Note 11)
Additional paid in capital
Accumulated other comprehensive income
Accumulated deficit
(
613,869
)
(
574,993
)
Total Stockholders' Equity
$
$
The accompanying notes are an integral part of
these consolidated financial statements.
F-7
DIANA SHIPPING INC.
CONSOLIDATED STATEMENTS
OF INCOME
For the years ended December 31, 2023, 2022 and 2021
(Expressed in thousands of U.S. Dollars – except for share and per share data)
2023
2022
2021
REVENUES:
Time charter revenues
$
$
$
OPERATING EXPENSES
Voyage expenses (Note 12)
Vessel operating expenses
Depreciation and amortization of deferred charges
General and administrative expenses
Management fees to a related party (Note 4(a))
Gain on sale of vessels (Note 6)
(
5,323
)
(
2,850
)
(
1,360
)
Insurance recoveries
(
1,789
)
Other operating (income)/loss
(
1,464
)
(
265
)
Operating income, total
$
$
$
OTHER INCOME / (EXPENSES):
Interest expense and finance costs (Note 13)
(
49,331
)
(
27,419
)
(
20,239
)
Interest and other income
Loss on derivative instruments (Note 8)
(
439
)
Loss on extinguishment of debt (Note 8)
(
748
)
(
435
)
(
980
)
Gain on spin-off of OceanPal Inc.
Gain on deconsolidation of subsidiary (Note 4(b))
Gain on related party investments (Note 5(a))
Unrealized gain on equity securities (Note 5(b))
Unrealized gain on warrants (Note 11 (g))
Gain/(loss) from equity method investments (Note 4)
(
262
)
(
333
)
Total other expenses, net
$
(
35,868
)
$
(
23,634
)
$
(
6,124
)
Net income
$
$
$
Dividends on series B preferred shares (Notes 11(b) and
14)
(
5,769
)
(
5,769
)
(
5,769
)
Net income attributable to common stockholders
$
$
$
Earnings per common share, basic
$
$
$
Earnings per common share, diluted
$
$
$
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
For the years ended December 31, 2023, 2022 and 2021
(Expressed in thousands of U.S. Dollars)
2023
2022
2021
Net income
$
$
$
Other comprehensive income - Defined benefit plan
Comprehensive income
$
$
$
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, 2023, 2022
and 2021
(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
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, 2020
$
$
-
-
$
-
$
$
$
$
(
592,582
)
$
Net income
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
Issuance of Series
D Preferred Stock
(Note 11(d))
-
-
-
-
-
-
-
-
-
Issuance of
restricted stock and
compensation cost
(Note 11(h))
-
-
-
-
-
-
-
-
Stock repurchased
and retired (Note
11(e))
-
-
-
-
-
-
(
12,862,744
)
(
129
)
(
45,240
)
-
-
(
45,369
)
Dividends on series
B preferred stock
(Note 11(b))
-
-
-
-
-
-
-
-
-
-
(
5,769
)
(
5,769
)
Dividends on
common stock
(Note 11(f))
-
-
-
-
-
-
-
-
-
-
(
8,820
)
(
8,820
)
OceanPal Inc.
spinoff (Note 11(g))
-
-
-
-
-
-
-
-
-
-
(
40,509
)
(
40,509
)
Other
comprehensive
income
-
-
-
-
-
-
-
-
-
-
BALANCE,
December 31, 2021
$
$
-
$
-
$
$
$
$
(
590,286
)
$
Net income
-
-
-
-
-
-
-
-
-
-
Issuance of
restricted stock and
compensation cost
(Note 11(h))
-
-
-
-
-
-
-
-
Stock repurchased
and retired (Note
11(e))
-
-
-
-
-
-
(
820,000
)
(
8
)
(
3,791
)
-
-
(
3,799
)
Issuance of
common stock
(Note 11(e))
-
-
-
-
-
-
-
-
Issuance of
common stock for
vessel acquisitions
(Notes 6 and 11(e))
-
-
-
-
-
-
-
-
Dividends on series
B preferred stock
(Note 11(b))
-
-
-
-
-
-
-
-
-
-
(
5,769
)
(
5,769
)
Dividends on
common stock
(Note 11(f))
-
-
-
-
-
-
-
-
-
-
(
79,812
)
(
79,812
)
Dividends in kind
(Note 11(g))
-
-
-
-
-
-
-
-
-
-
(
18,189
)
(
18,189
)
F-10
Other
comprehensive
income
-
-
-
-
-
-
-
-
-
-
BALANCE,
December 31, 2022
$
$
-
$
-
$
$
$
$
(
574,993
)
$
Net income
-
-
-
-
-
-
-
-
-
-
Issuance of
restricted stock and
compensation cost
(Note 11(h))
-
-
-
-
-
-
-
-
Issuance of
common stock
(Note 11(e))
-
-
-
-
-
-
-
-
Issuance of
common stock for
vessel acquisitions
(Notes 6 and 11(e))
-
-
-
-
-
-
-
-
Dividends on series
B preferred stock
(Note 11(b))
-
-
-
-
-
-
-
-
-
-
(
5,769
)
(
5,769
)
Dividends on
common stock
(Note 11(f))
-
-
-
-
-
-
-
-
-
-
(
64,276
)
(
64,276
)
Warrants (Note
11(g))
-
-
-
-
-
-
-
-
-
-
(
7,914
)
(
7,914
)
Dividends in kind
(Note 11(g))
-
-
-
-
-
-
-
-
-
-
(
10,761
)
(
10,761
)
Other
comprehensive
income
-
-
-
-
-
-
-
-
-
-
BALANCE,
December 31, 2023
$
$
-
$
-
$
$
$
$
(
613,869
)
$
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, 2023, 2022 and 2021
(Expressed in thousands of U.S. Dollars)
2023
2022
2021
Net income
$
$
$
Adjustments
to
reconcile
net
income
to
cash
provided
by
operating activities
Depreciation and amortization of deferred charges
Amortization of debt issuance costs (Note 13)
Compensation cost on restricted stock (Note 11(h))
Provision for credit loss
Dividend income (Note 5(a))
(
3
)
(
100
)
(
69
)
Pension and other postretirement benefits
Loss on derivative instruments (Note 8)
Gain on sale of vessels (Notes 6)
(
5,323
)
(
2,850
)
(
1,360
)
Gain on related parties investments (Note 5(a))
(
1,502
)
(
589
)
Loss on extinguishment of debt (Note 8)
Gain on OceanPal spinoff
(
15,252
)
Gain on deconsolidation of subsidiary (Note 4 (b))
(
844
)
Gain / (Loss) from equity method investments (Note 4)
(
894
)
Unrealized gain on equity securities (Note 5(b))
(
2,813
)
Unrealized gain on warrants (Note 11(g))
(
1,583
)
(Increase) / Decrease
Accounts receivable, trade
(
3,427
)
Due from related parties
(
252
)
(
56
)
Inventories
(
511
)
(
1,581
)
Prepaid expenses and other assets
(
1,950
)
(
1,265
)
Other non-current assets
(
16
)
(
1,177
)
Investments in equity securities
(
17,916
)
Increase / (Decrease)
Accounts payable, trade and other
(
1,761
)
Due to related parties
(
57
)
(
72
)
Accrued liabilities
(
2,610
)
Deferred revenue
(
4,195
)
Other non-current liabilities
(
218
)
(
57
)
Drydock cost
(
5,646
)
(
16,368
)
(
4,531
)
Net Cash Provided by Operating Activities
$
$
$
Payments to
acquire vessels and
vessel improvements
(Notes
6 and 4(b))
(
29,732
)
(
230,302
)
(
17,393
)
Proceeds from sale of vessels, net of expenses (Note 6)
Payments to acquire investments (Note 4)
(
10,595
)
Time deposits
(
46,500
)
Payments to joint ventures
(
375
)
Payments to acquire other assets (Note 4(b))
(
216
)
Cash divested from deconsolidation (Note 4(b))
(
771
)
(
1,000
)
Proceeds
from
convertible
loan
with
limited
partnership
(Note
4(b))
Payments to acquire property, furniture and fixtures (Note 7)
(
2,006
)
(
667
)
(
1,600
)
Net Cash Provided By/(Used in) Investing Activities
$
$
(
273,097
)
$
Proceeds from issuance of long-term debt and finance liabilities
(Notes 8 and 9)
Proceeds from issuance of common stock (Note 11(e))
Payments for issuance of common stock (Note 11(e))
(
79
)
Proceeds from issuance of preferred stock, net of expenses
Payments of dividends, preferred stock (Note 11(b))
(
5,769
)
(
5,769
)
(
5,769
)
Payments of dividends, common stock (Note 11(f))
(
41,427
)
(
79,812
)
(
8,820
)
Payments for repurchase of common stock
(
3,799
)
(
45,369
)
Payments of financing costs (Notes 8 and 9)
(
1,724
)
(
3,302
)
(
7,594
)
Repayments
of
long-term
debt
and
finance
liabilities
(Notes 8
and 9)
(
79,842
)
(
102,839
)
(
93,170
)
F-12
Net Cash Provided by/(Used In) Financing Activities
$
(
71,145
)
$
$
(
59,189
)
Cash,
Cash
Equivalents
and
Restricted
Cash,
Period
Increase/(Decrease)
(
29,360
)
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
Cash, Cash Equivalents and Restricted Cash, Total
$
$
$
SUPPLEMENTAL CASH FLOW INFORMATION
Non-cash acquisition of assets (Note 6)
$
$
Non-cash debt assumed
-
Non-cash Finance Liability
-
Stock issued in noncash financing activities (Note 6)
Non-cash investments acquired (Notes 6 and 5(a))
Noncash dividend (Note 11(f) and 11(g))
Transfer to Investments
Interest paid
$
$
The accompanying notes are an integral part of these consolidated financial statements.
DIANA SHIPPING INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 2023
(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
4(a)).
The
fees
paid
to
DSS
are
eliminated
in
consolidation.
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. 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
DIANA SHIPPING INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 2023
(Expressed in thousands of U.S. Dollars – except share, per share
data, unless otherwise stated)
F-14
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 8). As of
December 31, 2023 and
2022, accrued interest income
amounted to $
, respectively and is
included in prepaid expenses and other assets in the accompanying
consolidated balance sheets.
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, 2023
and 2022
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
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.
DIANA SHIPPING INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 2023
(Expressed in thousands of U.S. Dollars – except share, per share
data, unless otherwise stated)
F-15
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 7).
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
-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
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 did not result in the
recognition of impairment
therefore
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. No
impairment loss
was identified or
recorded for
2023,
2022
and 2021 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.
DIANA SHIPPING INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 2023
(Expressed in thousands of U.S. Dollars – except share, per share
data, unless otherwise stated)
F-16
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.
resulted
in
decreased
depreciation expense,
increased
operating
income
and
increased
net
income
by
$
.
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 6) 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
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
DIANA SHIPPING INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 2023
(Expressed in thousands of U.S. Dollars – except share, per share
data, unless otherwise stated)
F-17
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 12). 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;
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
DIANA SHIPPING INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 2023
(Expressed in thousands of U.S. Dollars – except share, per share
data, unless otherwise stated)
F-18
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
(or
fair
value
if
a
consequence of deconsolidation)
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 and
are recorded as receivable
on
dividend
declaration.
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.
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. For equity
method
investments
that
the
Company
has
elected
to
account
for
using
the
fair
value
option,
all
subsequent
changes in fair value are included in gain/loss on related party investments.
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 4(a))
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
(income)/loss in the 2021 accompanying
consolidated statements of income.
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.
recorded in 2023 and 2022.
aa)
Financial
Instruments,
Investments-Equity
Securities,
Recognition
and
Measurement
:
The
Company
initially
recognizes
equity
securities
at
the
transaction
price.
Equity
Investments
with
readily
determinable fair values are subsequently measured at fair value through net
income. Unrealized holding
gains
and
losses
for
these
securities
are
recorded
in
earnings.
According
to
ASC
321-10-35-2,
the
DIANA SHIPPING INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 2023
(Expressed in thousands of U.S. Dollars – except share, per share
data, unless otherwise stated)
F-19
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.
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 the
classification of
certain
freestanding financial instruments as permanent equity, temporary equity or liability.
The Company, when
assessing the accounting of the warrants and
the pre-funded warrants, takes into consideration ASC 480
to determine whether the warrants and the pre-funded warrants should be classified
as permanent equity
instead of temporary equity
or liability. The Company further analyses
the key features of
the warrants and
the pre-funded warrants and examines whether these fall
under the definition of a derivative
according to
ASC 815 applicable guidance or whether certain of these features affect the classification. In cases when
derivative accounting is deemed inappropriate, no bifurcation of
these features is performed.
DIANA SHIPPING INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 2023
(Expressed in thousands of U.S. Dollars – except share, per share
data, unless otherwise stated)
F-20
ad)
Guarantees:
Guarantees
issued
by
the
Company,
excluding
those
that
guarantee
its
own
performance, are recognized at fair
value at the time the
guarantees are issued, or upon deconsolidation
of
a
subsidiary.
A
liability
for
the
fair
value
of
the
obligation
undertaken
in
issuing
the
guarantee
is
recognized. If it becomes probable that
the Company will have to perform
under a guarantee (Note 10(c)),
the Company
will recognize an
additional liability if
the amount
of the
loss can
be reasonably
estimated.
The
recognition
of
fair
value is
not
required for
certain
guarantees such
as
the
parent's guarantee
of
a
subsidiary's debt
to a
third party.
For those
guarantees excluded
from the
above guidance
requiring the
fair value recognition provision of the liability, financial statement disclosures of such items are made.
3.
Transactions with related parties
a)
Altair Travel Agency S.A. (“Altair”):
Altair,
which is
controlled by
the Company’s
Chairman of
the Board
Mr.
Palios and
the Company’s
CEO
Mrs. Semiramis
Paliou. Travel
expenses for
2023, 2022
and 2021
amounted to
$
, $
,
respectively,
and
are
mainly
included
in
vessel
operating
expenses
and
general
and
administrative
expenses in the accompanying consolidated
financial statements. As of December
31, 2023 and 2022, 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
CEO Mrs.
Semiramis Paliou
and provides
brokerage services
to DSI
for a
fixed monthly
fee plus commission on
the sale of vessels, pursuant
to a Brokerage Services
Agreement. For 2023, 2022
and 2021
brokerage fees
amounted to
$
, $
, respectively, and
are included
in general
and
administrative expenses
in
the
accompanying consolidated
statements of
income.
For
2023, 2022,
and 2021, commissions to Steamship amounted to $
, $
, respectively and are included
in gain on the sale of vessels,
vessel cost and equity method investments.
As of December 31, 2023 and
2022, an amount of $
, respectively, was due to Steamship.
4.
Equity Method Investments
a)
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. As of December 31, 2023 and 2022, the investment in
DWM
amounted to
$
consolidated balance
sheets. In
2023 and
2022, the
investment in
DWM resulted
in a
gain of
$
, and
$
, respectively, and in
2021, resulted
in a
loss of
$
, included
in loss
from equity
method investments
in the accompanying consolidated statements of income.
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
to
DWM
in
2023,
2022
and
2021
amounted
to
$
,
$
,
respectively,
and
are
separately presented as management fees to related party in the accompanying consolidated statements
of income. Additionally, in
2023 and 2022,
the Company paid
to DWM management
fees amounting
to $
and
$
,
respectively,
included
in
advances
for
vessel
acquisitions
and
vessels,
net,
relating
to
the
management of
four Ultramax vessels
the Company
assigned to DWM
with new
management agreements
and incurred
during the
predelivery period
of the
vessels. Commissions
for 2023,
2022 and
2021 amounted
to $
, $
, respectively,
and are
included in
voyage expenses
(Note 12).
As of
December
DIANA SHIPPING INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 2023
(Expressed in thousands of U.S. Dollars – except share, per share
data, unless otherwise stated)
F-21
31, 2023
and 2022, there
was an amount
of $
parties in the accompanying consolidated balance sheets.
b)
Bergen Ultra
LP, or Bergen:
of acquiring,
owning, chartering
and/or operating
a vessel.
Bergen was
a wholly
owned subsidiary
of Diana,
which
on
February
14,
2023,
signed
a
Memorandum
of
Agreement
to
acquire
for
$
,
from
an
unrelated third-party an Ultramax
dry bulk vessel, delivered
on April 10, 2023.
On March 30, 2023,
Bergen
entered into a loan agreement with Nordea for a $
vessel.
On
the
same
date,
the
Company
entered
into
a
corporate
guarantee
with
Nordea
to
secure
Bergen’s
obligations
under
the
loan.
On
April
28,
2023,
the
Company
entered
into
(i)
an
investment
agreement with an unrelated
third party to acquire
% of the limited
partnership interests, for
$
; (ii)
an amended limited partnership agreement under which the
Company acts as the General Partner of
the
partnership through its wholly owned subsidiary Diana General Partner Inc.; (iii)
an administrative service
agreement under
which DSS
provides administrative
services to
Bergen for
an annual
fee of
$
; (iv)
a
commission
agreement
under
which
the
Company
is
paid
a
commission
of
%
per
annum,
on
the
outstanding
balance
of
the
loan,
as
compensation
for
the
guarantee
it
provided
to
Nordea
and
(v)
a
convertible loan agreement
for $
to repay all expenditures made by the Company for the acquisition of the vessel. Pursuant to the terms of
the
convertible
loan,
on
April
28,
2023,
the
Company
received
from
Bergen
$
amount
of
$
%
of
the
total
partnership interests.
Upon the provisions of
the amended partnership
agreement, the general
partner irrevocably delegated
the
authority
to
Bergen’s
board
of
directors
to
have
the
power
to
oversee
and
direct
the
operations,
management and policies of Bergen. The Company evaluated
its variable interests in Bergen under ASC
810 and
concluded that
Bergen is
a VIE
and that
the Company
does not
individually have
the power
to
direct the
activities of the
VIE that most
significantly affect the
partnership’s performance. From
April 28,
2023
the
Company no
longer retains
the
power
to
control the
board
of directors.
As
of
the
same
date,
Bergen has been considered as an affiliate entity and not as a controlled subsidiary of the Company.
The
Company
accounted
for
the
deconsolidation
of
Bergen
in
accordance
with
ASC
610
and
the
retained
noncontrolling interest
of
% was
accounted for
under the
equity method
due to
the Company’s
significant
influence over Bergen.
On the
date of
deconsolidation,
the Company
measured the
fair value
of the
retained noncontrolling
interest
at
$
value of its
% interest in accordance with ASC 610,
took into consideration the fair value of the
distinct
assets and liabilities
of Bergen on the date
of the deconsolidation.
This resulted in gain
on deconsolidation
amounting to
$
, separately
presented in
the accompanying
2023 consolidated
statement of
income,
being the
difference between the
fair value of
the retained noncontrolling
interest plus the
carrying value
the liabilities assumed by Bergen and the carrying value of
the assets derecognized.
For 2023,
the investment
in Bergen
resulted in
gain of
$
investments in the 2023 accompanying consolidated statement of income.
As of December 31, 2023, the
investment
in
Bergen
amounted
to
$
accompanying
2023
consolidated
balance
sheet.
Also,
for
2023,
income
from
management
fees
from
Bergen amounted to $
, included in time charter revenues and income from the commission paid on the
loan
guarantee
amounted
to
$
,
included
in
interest
and
other
income
in
the
2023
accompanying
consolidated
statement
of
income.
As
of
December
31,
2023,
there
was
an
amount
of
$
Bergen included in due from related parties, current and non-current.
DIANA SHIPPING INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 2023
(Expressed in thousands of U.S. Dollars – except share, per share
data, unless otherwise stated)
F-22
c)
Windward Offshore
GmbH,
or Windward:
owned subsidiary Diana
Energize Inc., or Diana
Energize, entered into a
joint venture agreement, with
unrelated companies
to form Windward
Offshore GmbH
Co. KG or
Windward, based
in Germany, for the
purpose of
establishing and
operating an
offshore wind
vessel company
with the
aim of
becoming a
leading
provider
of
service
vessels
to
the
growing
offshore
wind
industry
and
acquire
certain
vessels.
Diana
Energize agreed to
contribute
% of the limited
partnership’s capital and as
of
December
31,
2023,
the
investment
amounted
to
$
construction of
of $
statement of income.
d)
Cohen Global Maritime
Inc., or Cohen:
owned subsidiary Cebu Shipping Company Inc., or Cebu, acquired
% of Cohen, a company
organized
in
the
Republic
of
the
Philippines
for
the
purpose
of
engaging
in
the
manning
agency
business.
As
of
December 31, 2023, the Company’s investment in Cohen amounted to $
, consisting of advances paid
to acquire the license required to engage in the manning agency
business.
5.
Investments in related parties and other
a)
OceanPal Inc., or
OceanPal:
of
, respectively, of Series C Convertible
Preferred
Shares of OceanPal.
Series
B
preferred
shares
entitle
the
holder
to
stockholders of the
Company,
provided 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 B Preferred
Shares have no dividend or distribution rights.
equal
to
the
stated
value
of
$
commencing upon the first anniversary of the issue date, at a conversion price equal to the lesser of
$
and the
10-trading day
trailing VWAP
of OceanPal’s
common shares,
subject to
adjustments. Dividends
on
each
share
of
Series
C
Preferred
Shares
are
cumulative
and
accrue
at
the
rate
of
%
per
annum.
Dividends are payable in cash or, at OceanPal’s election, in kind.
On October 17,
2023, the Company
converted
to
value hierarchy, based on
the closing
price of
OceanPal’s common shares
on the
date of
conversion.
Upon
conversion the
Company realized
a gain
of $
,
being the
difference between
the
book value
of the
on
related
party
investments,
separately
presented
in
the
accompanying
consolidated
statements
of
income. Following
the conversion,
the Company is
the beneficial
owner of
% of the
outstanding common
stock of
OceanPal and
since the
shares are
listed at
NASDAQ, the
Company elected
to account
for its
common stock ownership in OceanPal at fair value.
As
of
December
31,
2023,
the
Company’s
investment
in
the
common
stock
of
OceanPal
amounted
to
$
, being the
fair value of
OceanPal’s common shares
on that date,
determined through
Level 1 inputs
DIANA SHIPPING INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 2023
(Expressed in thousands of U.S. Dollars – except share, per share
data, unless otherwise stated)
F-23
of the
fair value
hierarchy, and the
Company recorded
an unrealized
loss on
investment of
$
, included
in gain on
related party investments, separately presented
in the accompanying consolidated
statements
of income.
As the
Company applied
the fair
value option
to its
investment in
the common
shares of
OceanPal that
would otherwise be accounted for under the
equity method of accounting, it also applied
fair value to all of
its financial
interests in
OceanPal, being
the
Series B
preferred shares
and Series
C preferred
shares which
until then, the Company applied
the guidance for equity securities
without readily determinable fair
values.
As of December 31,
2023 and 2022, the
Company’s investment in Series
B preferred shares and
Series C
preferred
shares,
amounted
to
$
,
respectively,
including
$
,
respectively,
dividends
receivable on
the
Series
C
preferred shares,
and
are
separately presented
in
investments in
related parties in
the accompanying consolidated
balance sheets. As
of December 31,
2023, the Company
recorded a gain of $
, presented in gain on
related party Investments, being the difference
between the
book
value
of
the
investments
and
the
fair
value
determined
through
Level
3
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.
On
September
20,
2022,
the
Company
acquired
Preferred Shares, par value $
sale of
Baltimore to OceanPal, pursuant
to a Memorandum
of Agreement dated
June 13, 2022
(Note 6).
Similarly,
on February
8, 2023,
the Company
acquired
Convertible Preferred
Shares,
as part
of the
consideration provided
to the
Company for
sale of
Melia to
OceanPal, pursuant to a Memorandum of Agreement dated February
1, 2023 (Note 6).
Series D preferred shares
were convertible into
common stock at
the holder’s option,
at a conversion
price
equal to
the 10-trading
day trailing
VWAP of OceanPal’s
common shares,
provided however
that the
holder
would not beneficially
own greater than
% of OceanPal’s
outstanding shares of common
stock. Series
D preferred
shares have
no voting
rights; dividends
were cumulative,
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 had a liquidation preference equal
$
On the date of issuance,
the Company measured its investments
on Series D preferred shares
at their fair
value and elected to subsequently
measure such investments in accordance
with paragraph ASC 321-10-
35-2 (Note 2(aa)). The
fair value of
Series D Preferred
Shares was determined
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
dividend 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
accounted
for
the
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 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 related party investments in the accompanying
consolidated statements of income.
On June 9, 2023, the Company distributed the
to
its
shareholders
of
record
on
April
24,
2023.
The
Company
accounted
for
the
transaction
as
a
DIANA SHIPPING INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 2023
(Expressed in thousands of U.S. Dollars – except share, per share
data, unless otherwise stated)
F-24
nonreciprocal
transfer
with
its
owners
in
accordance
with
ASC
845
and
measured
the
fair
value
of
the
preferred shares
on the
date of
declaration at
$
. The
fair value
of the
Series D
Preferred Shares
was determined
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
related
party
investment
in
the
2023
accompanying
consolidated
statement of income.
For 2023,
2022 and
2021, dividend
income from
the Series
C and
Series D
OceanPal preferred
shares
amounted to $
, $
, respectively, included in interest and
other income in the
accompanying
consolidated statements of income.
b)
Investment in
equity securities:
listed in the NYSE which as of December
31, 2023 had a fair value of $
. The equity securities were
initially recorded
at cost
amounting to
$
values were
readily determinable,
determined through
Level 1
of the
fair value
hierarchy.
The securities
are considered
marketable securities
that are
available to
be converted
into cash
to fund
current operations
and classified in current
assets in the accompanying
2023 consolidated balance
sheet. Unrealized gain
on
the investment amounted to $
the accompanying consolidated statements of income.
6.
Advances for vessel acquisitions and Vessels, net
Vessel Acquisitions
On July
15, 2021
the Company
agreed to
acquire from
an unaffiliated
third party, the
2011 built Kamsarmax
dry
bulk
vessel
Leonidas
P.C.
,
for
a
purchase
price
of
$
,
delivered
on
February
16,
2022.
The
Company incurred $
On December 3,
2021, the Company
agreed to acquire from
an unaffiliated third
party,
the Capesize dry
bulk vessel
Florida,
, delivered on March 29, 2022. 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
the fourth
quarter
of 2022,
the Company
took delivery
of
common shares having a
fair value of $
additional predelivery expenses.
On January
30, 2023,
the Company
took delivery
of the
ninth vessel
for $
newly issued common shares, having
a fair value of
$
. Part of the
purchase price of the vessel
and
additional
predelivery
expenses
were
already
paid
in
2022
and
presented as
of
December 31,
2022
in
advances for vessel
acquisitions in the
accompanying consolidated
balance sheet.
The Company incurred
$
The value
of the
shares issued
in 2022
and in
2023, was
determined through
Level 1
inputs of
the fair
value
hierarchy based on the closing price of the
Company’s common stock on the date of issuance which
was
the date of delivery of each vessel.
DIANA SHIPPING INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 2023
(Expressed in thousands of U.S. Dollars – except share, per share
data, unless otherwise stated)
F-25
On February 14, 2023, the Company signed a Memorandum of Agreement to acquire from an unaffiliated
third-party an
Ultramax dry
bulk vessel
for a
purchase price
of $
. On
April 28,
2023, the
vessel’s
ship owning company
was deconsolidated
from the Company’s
financial statements due
to the Company’s
loss of control
described in
note 4(b) and
the net book
value of
the vessel amounting
to $
in both vessel acquisitions and vessel disposals.
Vessel Disposals
On June
13, 2022,
the Company
sold to
OceanPal, the
vessel
Baltimore
, for
a sale
price of
$
which $
5(a)). 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
$
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 on sale of vessels in the accompanying consolidated statements of
income.
On
January
23,
2023,
the
Company
sold
to
an
unrelated
third
party
the
vessel
Aliki
$
Melia
$
, of
which $
(Note 5(a)).
On the
date of the
agreements, the vessels,
having an
aggregate carrying value
of $
and unamortized deferred
costs of $
was
the
lower
of
their
carrying
value
and
fair
value
(sale
price)
less
costs
to
sell.
Both
vessels
were
delivered to their new owners on
February 8, 2023. The sale of the
vessels resulted in gain amounting to
$
, included in gain on sale of vessels in the accompanying consolidated
statements of income.
On October
5, 2023,
the Company
sold to
an unrelated
third party
the vessel
Boston for
a sale
price of
$
. The vessel was delivered to the buyer on
December 6, 2023 and the sale of the vessel resulted
in gain
of $
, included
in gain
on sale
of vessels
in the
accompanying
consolidated statements
of income.
The amounts reflected in Vessels, net in
the accompanying consolidated balance sheets are analyzed as
follows:
Vessel Cost
Accumulated
Depreciation
Net Book
Value
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 acquisitions and improvements
-
- Vessel disposals
(
60,655
)
(
38,967
)
- Vessel disposal due to deconsolidation
of subsidiary (Note
4(b))
(
27,908
)
-
(
27,908
)
- Depreciation for the year
-
(
44,231
)
(
44,231
)
Balance, December 31, 2023
$
$
(
214,055
)
$
DIANA SHIPPING INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 2023
(Expressed in thousands of U.S. Dollars – except share, per share
data, unless otherwise stated)
F-26
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, an
amount of
$
assets
and
related
to
ballast
water
treatment
equipment
paid
in
a
previous
period
but
delivered on
the
vessels during the year ended December 31, 2022.
7.
Property and Equipment, net
The Company owns the land and building of its principal corporate offices in Athens, Greece and a plot of
a
land
of
which on
July 6,
2023,
DSS purchased
1/3
from
Alpha Sigma
Shipping
Corp,
a related
party
company,
for
the
purchase
price
of
$
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, 2021
$
$
(
5,427
)
$
- Additions in property and equipment
-
- Depreciation for the year
-
(
546
)
(
546
)
Balance, December 31, 2022
$
$
(
5,973
)
$
- Additions in property and equipment
-
- Depreciation for the year
-
(
687
)
(
687
)
Balance, December 31, 2023
$
$
(
6,660
)
$
8.
Long-term debt
The
amount of
long-term debt
shown in
the
accompanying consolidated
balance sheets
is
analyzed as
follows:
2023
2022
Senior unsecured bond
Secured long-term debt
Total long-term
debt
$
$
Less: Deferred financing costs
(
6,314
)
(
7,609
)
Long-term debt, net of deferred financing costs
$
$
Less: Current long-term debt, net of deferred financing
costs,
current
(
49,512
)
(
91,495
)
Long-term debt, excluding current maturities
$
$
Senior Unsecured Bond
:
On
, the
Company issued a
$
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
$
the bond.
The bond
bears interest
at a
US Dollar
fixed-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 part
in June 2024 at
a
price
equal
to
%
of
nominal
value;
between
June
2025
to
December
2025
at
a
price
equal
to
% of nominal value and after December 2025 at a price
equal to
% of nominal value. On June
DIANA SHIPPING INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 2023
(Expressed in thousands of U.S. Dollars – except share, per share
data, unless otherwise stated)
F-27
29,
2023,
the
Company repurchased
$
.
In
this
respect, the
Company
recognized
an
amount
of
$
between the
reacquisition price of
$
$
. The
bond includes
financial and
other covenants
and is
trading
at Oslo Stock Exchange under the ticker symbol “DIASH02”.
Secured Term Loans:
Under the
secured term
loans outstanding
as of
December 31,
2023,
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, 2023 and 2022, 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. In
2023 and 2022
, the weighted
average interest rate
of
the secured term loans was
% and
%, respectively.
As of December
31, 2023 and
2022, the Company
had the following
agreements with banks,
either as a
borrower or as a guarantor, to guarantee the loans of its subsidiaries:
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 was repayable in equal semi-annual instalments of approximately $
$
of
%.
On July 16, 2018, the Company drew down $
was
repayable
in
consecutive
quarterly
instalments
of
$
payable together with the last instalment on
. The loan bore interest at LIBOR plus a margin
of
%.
In
April 2023,
both loans
were refinanced
through a
new loan
facility with
Danish Ship
Finance and
the
outstanding balance of both loans, amounting to
$
loss on debt extinguishment amounting to $
.
Nordea Bank AB,
London Branch (“Nordea”):
under a secured
loan agreement,
maturing on
. The loan agreement
was amended on
May
7, 2020,
and supplemented
on July
29, 2021,
with an
additional borrowing
of $
. In
July 2022
and in
DIANA SHIPPING INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 2023
(Expressed in thousands of U.S. Dollars – except share, per share
data, unless otherwise stated)
F-28
February 2023, the Company prepaid an amount of $
, respectively, following the sale of
vessels. On June 20, 2023,
the Company entered into a
new loan agreement with Nordea
to refinance the
outstanding
balance of
the
existing
loan
amounting to
$
.
On
June
27,
2023,
the
Company
drew
down
$
extinguishment
amounting to
$
.
The
new
loan
is
repayable
in
$
%. The loan matures on
.
On September
30, 2022,
the Company
entered into
a $
price of
9 Ultramax
vessels. The
Company drew
down $
on their
delivery to
the Company
but prepaid
$
transaction. The loan is repayable in equal
, and a
balloon of $
. The loan
bears interest
at term
SOFR plus
a margin
of
%. Loan
fees amounted
to $
commitment fees amounted to $
, included in interest expense and finance costs in the accompanying
2022 consolidated statement of income.
ABN AMRO Bank N.V., or ABN:
the
amount
of
$
consecutive
the last instalment on
. The tranche bore
interest at LIBOR plus
a margin of
%. Tranche
B was repayable in equal consecutive
payable together with
the last
instalment on
, and
bore 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. In August 2022,
the Company prepaid
$
repayable
in
instalment, on
. The loan
bore interest at
LIBOR plus a margin
of
% per annum,
which
could
be
adjusted
annually
by
maximum
performance under certain sustainability KPIs.
On June 26,
2023, the Company prepaid
in full both
loans amounting to $
, which were refinanced
under
a
new
loan
agreement
with
DNB
Bank
ASA
and
the
Company
recorded
a
loss
on
debt
extinguishment amounting to $
.
Export-Import Bank of China:
loan
agreement,
which
is
repayable
in
equal
,
each,
until
its
maturity
on
%.
DNB Bank
ASA or
DNB:
agreement,
which
is
repayable
in
consecutive
payable together
with the
last instalment
on
. The
loan bore
interest at
LIBOR plus
a margin
of
%. On March 14, 2023,
the outstanding balance of
the loan amounting to $
and the Company recorded a loss on debt extinguishment amounting
to $
.
On June 26,
2023, the Company
entered into a
$
2023,
to
refinance
the
outstanding
balance
of
the
ABN
loans
mentioned
above
and
for
working
capital
purposes. The loan is repayable
in
, and
bears term SOFR plus
a margin of
%, subject to sustainability
margin adjustment. Additionally, the loan
DIANA SHIPPING INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 2023
(Expressed in thousands of U.S. Dollars – except share, per share
data, unless otherwise stated)
F-29
is subject to
a margin reset,
according to which
the borrowers and
the lenders will
enter into discussions
to agree
on a
new margin.
Unless the
parties agree
on a
new margin,
the loan
will be
mandatorily repayable
on June 27,
2027. As part
of the loan
agreement, on July
6, 2023, the
Company entered into
an interest
rate
swap
with
DNB
for
a
notional
amount
of
$
,
being
%
of
the
loan
amount
and
quarterly
amortization
of
$
.
Under
the
interest
rate
swap,
the
Company
pays
a
fixed
rate
of
%
and
receives floating under
term SOFR, has
a trade date
on June 27,
2023, and termination
date on December
27, 2029, and also has a mandatory break on June 27, 2027, the margin reset date of
the loan, according
to which the swap will be terminated
if the loan is prepaid. As of
December 31, 2023, the fair value of the
interest
rate
swap
amounted
to
$
liabilities,
amounting
to
$
sheet. Loss
from the
interest rate
swap amounted
to $
instruments in the 2023 consolidated statement of income.
Danish Ship
Finance A/S
or Danish:
Danish, for
$
and
BNP,
mentioned
above
and
working
capital.
On
April
18
and
19,
2023,
the
Company
drew
down
$
balloon of $
SOFR plus a margin of
%.
As of December 31, 2023 and 2022, the Company was in compliance
with all of its loan covenants.
As of December 31, 2023, the maturities of
the Company’s bond and debt facilities 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
$
9.
Finance Liabilities
The amount
of finance
liabilities shown
in the
accompanying consolidated
balance sheet
is analyzed
as
follows:
December 31, 2023
December 31, 2022
Finance liabilities
Less: Deferred financing costs
(
1,208
)
(
1,439
)
Finance liabilities, net of deferred financing costs
$
$
Less: Current finance liabilities, net of deferred financing
costs,
current
(
9,221
)
(
8,802
)
Finance liabilities, excluding current maturities
$
$
DIANA SHIPPING INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 2023
(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.
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.
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.
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, 2023,
the weighted average remaining
lease term of
the above lease
agreements was
interest
rate
was
%
and
the
sublease
income
during
2023
was
$
,
included
in
time
charter
revenues.
As of
December 31,
2023, 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, 2023
(Expressed in thousands of U.S. Dollars – except share, per share
data, unless otherwise stated)
F-31
10.
Commitments and Contingencies
a)
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)
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 9.
c)
Company guarantees
the performance
by Bergen
of all
of its
obligations
under the
loan until
the maturity
of the loan
on March 30, 2028
(Note 4 (b)). The
Company considers the likelihood of
having to make
any payments under the guarantee to be remote, as the loan is also secured by an account pledge by
Bergen,
first
preferred
mortgage
on
the
vessel,
a
first
priority
general
assignment
of
the
earnings,
insurances
and
requisition
compensation
of
the
vessel,
a
charter
party
assignment,
a
partnership
interests
security
deed,
and
a
manager’s
undertaking.
Accordingly,
as
of
December
31,
2023,
the
Company
did
not
record
a
provision for
losses
under
the
guarantee
of
Bergen’s
loan
amounting to
$
d)
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, 2023 and until their expiration was as follows:
Period
Amount
Year 1
$
Year 2
Year 3
Year 4
$
11.
Capital Stock and Changes in Capital Accounts
a)
Preferred stock
:
consists of
per share,
of which
shares are designated as
Series B Preferred Shares,
Shares and
the Company had
DIANA SHIPPING INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 2023
(Expressed in thousands of U.S. Dollars – except share, per share
data, unless otherwise stated)
F-32
b)
Series
B
Preferred
Stock:
Series B Preferred
Shares issued and
outstanding with
par value $
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, 2023, and 2022,
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, 2023, and 2022, 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
notwithstanding any
other provision
of the Series
D Preferred
Stock
statement of
designation, to
the extent
that the total number
of votes one or
more holders of Series
D Preferred Stock
is entitled to vote
(including
any voting power of such holders derived from Series D Preferred
Stock, shares of Common Stock or any
other voting security of the
Company issued and outstanding as of
the date hereof or that
may be issued
in the
future) on any
matter submitted to
a vote
of stockholders of
the Company would
exceed
% of
the total number
of votes eligible
to be cast on
such matter, the total
number of votes
that holders of
Series
D Preferred Stock may exercise derived
from the Series D Preferred Stock
together with Common Shares
and any
other voting
securities of
the
Company beneficially
owned by
such holder,
shall be
reduced to
% of the total number of votes that may be cast on such matter submitted
to a vote of stockholders.
e)
Issuance and Repurchase of Common Shares:
In February 2021, the Company repurchased
in
a tender
offer
August 2021,
the Company
repurchased,
in another
tender offer,
,
including
expenses.
In
2022,
the
Company
issued
under
its
ATM
program
stock,
at
an
average
price
of
$
.
During
2022,
the
Company
repurchased
under
its
share
repurchase
program
average price of $
, including expenses. In addition, in
the
fourth
quarter
of
2022,
the
Company
issued
DIANA SHIPPING INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 2023
(Expressed in thousands of U.S. Dollars – except share, per share
data, unless otherwise stated)
F-33
exercise by Sea Trade of the
eight out of nine warrants mentioned in (i) below,
for the acquisition of eight
vessels,
at
an
average
price
of
$
.
On
January
30,
2023,
the
Company
issued
shares, at
$
, to
Sea Trade
upon exercise
by Sea
Trade
of a
warrant it
held for
the acquisition
of a
vessel
(Note
6).
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.
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 $
.
On March
20, 2023, the
Company paid
a dividend of
$
, to
its shareholders of
record as of March 13, 2023. On July 10, 2023, the Company distributed a dividend of $
all shareholders of record as
of June 12, 2023, and
paid $
to receive cash
and distributed
receive
shares.
On
September
8,
2023,
the
Company
distributed
a
dividend
of
$
shareholders of record as
of August 14, 2023, and
paid $
receive
cash
and
distributed
receive
shares.
On
December
4,
2023,
the
Company
distributed
a
dividend
of
$
shareholders of record
as of November
27, 2023 in
the form of
common stock and
distributed
newly issued common shares.
g)
Dividend in Kind:
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 $
. 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 $
of record as of November
28, 2022. On June
9, 2023, 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
$
On
December 14,
2023, the
Company distributed
December 6, 2023. Holders
received
one warrant for every
five shares of issued
and outstanding shares
of common stock held as of
the record date (rounded down to
the nearest whole number for any fractional
warrant. Each
Warrant
entitle the
Holder to
purchase, at
the Holder’s
sole and
exclusive election, at
the
exercise price of $
fraction entitles
a Holder
to receive
an additional
half
without payment of any additional exercise price. If all warrants were exercised as of December
31, 2023,
the Company would
have issued
received
$
determined through level
1 account hierarchy, being the opening
price of the warrants
on the NYSE
on the
date of distribution as they are listed
under the ticker DSX_W. The value of the warrants was
measured at
$
, or $
31, 2023, the
warrant liability was remeasured
at fair value and
recorded at $
, resulting in
a gain of
$
As of December 31, 2023,
DIANA SHIPPING INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 2023
(Expressed in thousands of U.S. Dollars – except share, per share
data, unless otherwise stated)
F-34
h)
Incentive
Plan:
As
of
December
31,
2023,
according to the Company’s incentive plan.
Restricted stock in 2023, 2022 and 2021 is analyzed as follows:
Number of Shares
Weighted Average
Grant Date Price
Outstanding as of December 31, 2020
$
Granted
Vested
(
1,168,363
)
Outstanding as of December 31, 2021
$
Granted
Vested
(
3,118,060
)
Outstanding as of December 31, 2022
$
Granted
Vested
(
2,822,753
)
Outstanding as of December 31, 2023
$
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
recognized
ratably
in
the
consolidated
statement
of
income
over
the
respective vesting periods. In 2023, 2022 and 2021,
compensation cost amounted to $
, $
$
,
respectively,
and
is
included
in
general
and
administrative
expenses
in
the
accompanying
consolidated statements of income.
As of
December 31,
2023 and
2022, the
total unrecognized cost
relating to
restricted share
awards was
$
, respectively. As of
December 31,
2023, the weighted-average
period over
which the
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
upon delivery of the ninth Ultramax vessel (Note 6). 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.
12.
Voyage expenses
The amounts in the accompanying consolidated statements of income
are analyzed as follows:
DIANA SHIPPING INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 2023
(Expressed in thousands of U.S. Dollars – except share, per share
data, unless otherwise stated)
F-35
2023
2022
2021
Commissions
$
$
$
Gain from bunkers
(
474
)
(
8,100
)
(
5,955
)
Port expenses and other
Total
$
$
$
13.
Interest and Finance Costs
The amounts in the accompanying consolidated statements of income
are analyzed as follows:
2023
2022
2021
Interest expense, debt
$
$
$
Finance liabilities interest expense
Amortization of debt and finance liabilities issuance
costs
Loan and other expenses
Interest expense and finance costs
$
$
$
14.
Earnings 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 per share does not treat the non-vested shares (not considered participating
securities) as outstanding until the time/service-based
vesting restriction has lapsed.
The dilutive effect on
unexercised
warrants (Note
11(g))
that
are
in-the-money,
is
computed using
the
treasury stock
method
which assumes that the proceeds upon exercise of these warrants are
used to purchase common shares
at the average market price for the period. 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 2023,
2022
and
2021,
there
were
,
,
and
included in the denominator of the diluted earnings per share calculation.
DIANA SHIPPING INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 2023
(Expressed in thousands of U.S. Dollars – except share, per share
data, unless otherwise stated)
F-36
Net income attributable
to common stockholders
is adjusted by the
dividends on Series B
Preferred Stock.
Net income attributable to common
stockholders is further adjusted by
the unrealized gain on
warrants as
of December 31, 2023 to calculate the diluted earnings per share.
2023
2022
2021
Net income
$
$
$
Dividends on series B preferred shares
(
5,769
)
(
5,769
)
(
5,769
)
Net income attributable to common stockholders
$
$
$
Weighted average number of common shares, basic
Earnings per share, basic
$
$
$
Net income
$
$
$
Dividends on series B preferred shares
(
5,769
)
(
5,769
)
(
5,769
)
Unrealized gain on warrants
(
1,583
)
Adjusted net income attributable to common
stockholders
$
$
$
Weighted average number of common shares, basic
Incremental shares
Weighted average number of common shares, diluted
Earnings per share, diluted
$
$
$
15.
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 2023,
2022 and
2021 taxable years,
and the
Company takes this
position for
United States federal
income tax
return reporting purposes.
16.
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
DIANA SHIPPING INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 2023
(Expressed in thousands of U.S. Dollars – except share, per share
data, unless otherwise stated)
F-37
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.
In 2023,
2022 and
2021, charterers
that individually
accounted for
% or
more of
the Company’s
time
charter revenues were as follows:
Charterer
2023
2022
2021
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. On July
6, 2023, the
company entered
into an interest
rate swap
with DNB
(Notes 8 and
13) to manage
part of
such
exposure.
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, 2023, 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 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 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 $
.
On February
8, 2023, the
Company acquired
part of
the consideration provided
to the
Company for sale
of Melia to
OceanPal, at
$
, 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
June
9,
2023, the
Company distributed
the
Series
D
Preferred
Shares as
a
non-cash
dividend and
measured their
fair value
on the
date of
declaration at
$
. The
fair value
was determined
by using
DIANA SHIPPING INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 2023
(Expressed in thousands of U.S. Dollars – except share, per share
data, unless otherwise stated)
F-38
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
Description (in thousands of US Dollars)
December 31,
2022
Quoted Prices
in Active
Markets
(Level 1)
Non-recurring fair value measurements
Long-lived assets held for use
$
$
Total
non-recurring fair value measurements
December 31,
2023
Quoted Prices
in Active
Markets
(Level 1)
Significant
Other
Observable
Inputs (Level 2)
Significant
Other
Observable
Inputs (Level 3)
Assets
Recurring fair value measurements
Investments in equity securities
$
$
$
Investments in related party
Interest rate swap, asset
Total
recurring fair value measurements
$
$
$
$
Non-recurring fair value measurements
Equity method investments
$
$
$
$
Long-lived assets held for use
-
Total
non-recurring fair value measurements
$
$
$
-
Liabilities
Recurring fair value measurements
Interest rate swap, liability
Warrant liability
Total
recurring fair value measurements
-
17.
Subsequent Events
a)
Exercise of
warrants:
Since January
4, 2024 and
until April
1, 2024, holders
of warrants
exercised
from the exercise of warrants amounted to $
.
b)
:
On
January
15,
2024,
the
Company
paid
a
quarterly
dividend
on
its
series
B
preferred
stock,
amounting
to
$
,
to
its
stockholders of record as of January 12, 2024.
c)
Acquisition
of
property:
On
January
18,
2024,
the
Company
acquired
from
unaffiliated
third
parties a plot of
land for the purchase price of
Euro
On March 6, 2024, the Company acquired
from unaffiliated third parties another plot
of land for the
purchase price of Euro
.
DIANA SHIPPING INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 2023
(Expressed in thousands of U.S. Dollars – except share, per share
data, unless otherwise stated)
F-39
d)
entered into an agreement with an unrelated third party to sell
the vessel Artemis for the sale price
of $
. The vessel was delivered to the new owners on March 5, 2024.
e)
Commissioning Service
Operation Vessels (CSOVs):
On January
24, 2024,
Diana Energize
Inc.
increased
its
equity
commitment
to
Euro
%
of
the
limited
partnership’s capital (Note 4 (c)).
f)
Methanol
Dual
Fuel
New-Building Kamsarmax
Dry
Bulk
Vessels:
On
February
8,
2024,
the
Company signed an agreement to
order through Marubeni Corporation
or its guaranteed nominee,
an
unaffiliated
third
party,
vessels, for
a purchase
price of
$
Inc., China. The vessels are expected
to be delivered to the
Company by the second half of 2027
and the first
half of 2028
respectively. On February 15,
2024, the Company
paid the first
instalment,
amounted $
% of the contract price.
g)
entered into an agreement
with an unrelated third
party to sell the
vessel Houston for the
sale price
of $
,
with delivery to the new owners latest by September 16, 2024.
h)
common stock of
$
quarter
ended
December
31,
2023.
The
cash
dividend
was
paid
on
March
12,
2024,
to
all
shareholders of record as of March 5, 2024.
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 InspectionsItem 16J. Insider Trading PoliciesItem 16K. CybersecurityPart IIIItem 17. Financial StatementsItem 18. Financial StatementsItem 19. Exhibits