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UNITED STATES

 

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

 

FORM 6-K 

REPORT OF FOREIGN PRIVATE ISSUER PURSUANT TO RULE 13A-16 OR 15D-16 OF THE SECURITIES EXCHANGE ACT OF 1934

 For the month of August 2023

Commission File Number:  001-34153

 

 

 

Global Ship Lease, Inc.

(Translation of registrant's name into English)

 

 

c/o Global Ship Lease Services Limited

25 Wilton Road,

London SW1V 1LW,

United Kingdom

 (Address of principal executive office)

  

Indicate by check mark whether the registrant files or will file annual reports under cover of Form 20-F or Form 40-F.

 

Form 20-F [X]       Form 40-F [  ]

 

Indicate by check mark if the registrant is submitting the Form 6-K in paper as permitted by Regulation S-T Rule 101(b)(1): [  ].

 

Note: Regulation S-T Rule 101(b)(1) only permits the submission in paper of a Form 6-K if submitted solely to provide an attached annual report to security holders.

 

Indicate by check mark if the registrant is submitting the Form 6-K in paper as permitted by Regulation S-T Rule 101(b)(7): [  ].

 

Note: Regulation S-T Rule 101(b)(7) only permits the submission in paper of a Form 6-K if submitted to furnish a report or other document that the registrant foreign private issuer must furnish and make public under the laws of the jurisdiction in which the registrant is incorporated, domiciled or legally organized (the registrant's "home country"), or under the rules of the home country exchange on which the registrant's securities are traded, as long as the report or other document is not a press release, is not required to be and has not been distributed to the registrant's security holders, and, if discussing a material event, has already been the subject of a Form 6-K submission or other Commission filing on EDGAR.

 

  

 

 

INFORMATION CONTAINED IN THIS REPORT ON FORM 6-K

 

Attached as Exhibit 99.1 to this Report on Form 6-K (this “Report”) is Management’s Discussion and Analysis of Financial Results of Operations and the unaudited interim consolidated financial statements, and the accompanying notes thereto, for the six months ended June 30, 2023, of the Global Ship Lease, Inc. (the “Company”).

 

The information contained in Exhibit 99.1 to this Report is hereby incorporated by reference into the Company's registration statements on Form F-3 (File Nos. 333-231509, 333-258800 and 333-267468) and on Form S-8 (File Nos. 333-258992 and 333-264113).

 

 

 

 

 

  

 

 

SIGNATURES

  

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.

 

 

 

GLOBAL SHIP LEASE, INC.

(registrant)

     
Dated: August 3, 2023 By: /s/ Ian J. Webber
    Ian J. Webber
    Chief Executive Officer

 

 

 

  

 

 

Exhibit 99.1

Management’s Discussion and Analysis of Financial Condition and Results of Operations

 

The following is management’s discussion and analysis of financial condition and results of operations of Global Ship Lease, Inc. for the six month periods ended June 30, 2023 and 2022. The following discussion and analysis should be read in conjunction with our interim unaudited condensed consolidated financial statements and the related notes thereto, included in this report, the discussion and analysis included in our Annual Report on Form 20-F for the year ended December 31, 2022, filed with the U.S. Securities and Exchange Commission, or the SEC, on March 23, 2023 (the “Annual Report”), and other financial information appearing elsewhere in this report. We prepare our financial statements in accordance with generally accepted accounting principles in the United States, or U.S. GAAP. The following discussion and analysis contain forward-looking statements that reflect our future plans, estimates, beliefs and expected performance. Our actual results may differ materially from those anticipated in these forward-looking statements as a result of many factors, such as those set forth in the section entitled “Risk Factors” included in our Annual Report.

 

Unless the context otherwise requires, references to the “Company”, “we”, “us”, “our” or “Global Ship Lease” refer to Global Ship Lease, Inc., “Technomar” refers to Technomar Shipping Inc., our principal ship technical manager and “Conchart” refers to Conchart Commercial Inc. our commercial ship manager, “Managers” refers to Technomar and Conchart, together. Unless otherwise indicated, all references to “$” and “dollars” are to U.S. dollars. We use the term “TEU”, meaning twenty-foot equivalent unit, the international standard measure of container size, in describing volumes in world container trade and other measures, including the capacity of our containerships, which we also refer to as ships. Unless otherwise indicated, we calculate the average age of our ships on a weighted average basis, based on TEU capacity.

 

Cautionary Statement Regarding Forward-Looking Statements

 

This discussion and analysis contains forward-looking statements. Forward-looking statements provide our current expectations or forecasts of future events. Forward-looking statements include statements about our expectations, beliefs, plans, objectives, intentions, assumptions and other statements that are not historical facts. Words or phrases such as "anticipate", "believe", "continue", "estimate", "expect", "intend", "may", "ongoing", "plan", "potential", "predict", “should”, "project", "will" or similar words or phrases, or the negatives of those words or phrases, may identify forward-looking statements, but the absence of these words does not necessarily mean that a statement is not forward-looking. These forward-looking statements are based on assumptions that may be incorrect, and we cannot assure you that these projections included in these forward-looking statements will come to pass. Actual results could differ materially from those expressed or implied by the forward-looking statements as a result of various factors.

 

The risks and uncertainties include, but are not limited to:

future operating or financial results;
expectations regarding the strength of future growth of the container shipping industry, including the rates of annual demand and supply growth;
geo-political events such as the conflict in Ukraine;
the length and severity of the ongoing outbreak of the novel coronavirus (COVID-19) around the world and governmental responses thereto;
the financial condition of our charterers and their ability and willingness to pay charterhire to us in accordance with the charters and our expectations regarding the same;
the overall health and condition of the U.S. and global financial markets;
our financial condition and liquidity, including our ability to obtain additional financing to fund capital expenditures, vessel acquisitions and for other general corporate purposes and our ability to meet our financial covenants and repay our borrowings;
our expectations relating to dividend payments and expectations of our ability to make such payments including the availability of cash and the impact of constraints under our loan agreements and financing arrangements;
future acquisitions, business strategy and expected capital spending;
operating expenses, availability of key employees, crew, number of off-hire days, drydocking and survey requirements, costs of regulatory compliance, insurance costs and general and administrative costs;
general market conditions and shipping industry trends, including charter rates and factors affecting supply and demand;
assumptions regarding interest rates and inflation;
changes in the rate of growth of global and various regional economies;

 1 

 

risks incidental to vessel operation, including piracy, discharge of pollutants and vessel accidents and damage including total or constructive total loss;
estimated future capital expenditures needed to preserve our capital base;
our expectations about the availability of vessels to purchase, the time that it may take to construct new vessels, or the useful lives of our vessels;
our continued ability to enter into or renew charters including the re-chartering of vessels on the expiry of existing charters, or to secure profitable employment for our vessels in the spot market;
our ability to realize expected benefits from our acquisition of secondhand vessels;
our ability to capitalize on our management’s and directors’ relationships and reputations in the containership industry to its advantage;
changes in governmental and classification societies’ rules and regulations or actions taken by regulatory authorities;
expectations about the availability of insurance on commercially reasonable terms;
changes in laws and regulations (including environmental rules and regulations); and
potential liability from future litigation;
other important factors described from time to time in the reports we file with the SEC.

 

Forward-looking statements are subject to known and unknown risks and uncertainties and are based on potentially inaccurate assumptions that could cause actual results to differ materially from those expected or implied by the forward-looking statements. Our actual results could differ materially from those anticipated in forward-looking statements for many reasons specifically as described in our filings with the SEC. Accordingly, you should not unduly rely on these forward-looking statements, which speak only as of the date of this communication. We undertake no obligation to publicly revise any forward-looking statement to reflect circumstances or events after the date of this report or to reflect the occurrence of unanticipated events. You should, however, review the factors and risks that we describe in the reports we will file from time to time with the SEC after the date of this communication.

 

Overview

 

We are a containership owner, incorporated in the Marshall Islands. We commenced operations in December 2007 with a business of owning and chartering out containerships under fixed rate charters to container liner companies.

 

As of June 30, 2023, we owned 68 vessels, with a total carrying capacity of 375,406 TEU with an average age, weighted by TEU capacity, of 16.7 years.

 

Our financial results are largely driven by the following factors:

 

·the continued performance of our counterparties to our charter agreements;

 

·the number of vessels in our fleet and their charter rates;

 

·the terms under which we recharter our vessels once the existing time charters have expired;

·the number of days that our vessels are utilized and not subject to drydocking, special surveys, capitalized enhancements or otherwise are off-hire;

 

·our ability to control our costs, including ship operating costs, ship management fees, insurance costs, drydock costs, general, administrative, capitalized expenses ,other expenses and interest and financing costs. Ship operating costs may vary from month to month depending on a number of factors, including the timing of purchases of spares and stores and of crew changes;

·impairment of our vessels and other non-current assets; and

 

·access to, and the pricing and other terms of, our financing arrangements.

 

 

The average remaining term of our charters as at June 30, 2023, to the mid-point of redelivery, including options under our control and other than if a redelivery notice has been received, was 2.3 years on a TEU-weighted basis. The charter rate that we will achieve on the renewal of an expiring charter will be affected by market conditions at that time. As discussed further below, operational matters such as off-hire days for planned maintenance or for unexpected accidents and incidents also affect the actual amount of revenues we receive.

 

 2 

 

The container shipping industry is cyclical and subject to significant volatility. The industry suffered a cyclical downturn, as a result of the Global Financial Crisis in 2008 – 2009, through 2016 and many container shipping companies reported substantial losses. Financial performance subsequently improved; however, the industry remained under pressure due to oversupply of container ship capacity. Early 2020 saw a substantial downturn, triggered by the global COVID-19 pandemic, followed by a robust recovery for the industry - with a spike in earnings, and subsequently in asset values, commencing in late 2020 and continuing through the first half of 2022. However, the market currently faces macro uncertainty and negative sentiment - due to the conflict in Ukraine, and elevated inflation globally, among other things - which are placing downward pressure on consumer demand and containerized cargo volumes, causing charter market earnings and asset values to normalize. All charter payments have been received on a timely basis in 2022 and year-to-date 2023 and, as of June 30, 2023, receipt of charter hire was up to-date. If our existing charterers were to be unable to make charter payments to us, our results of operations and financial condition would be materially adversely affected. If our existing charters with our charterers were terminated and we were required to recharter at lower rates or if we were unable to find new charters due to market conditions, our results of operations and financial condition would be materially adversely affected.

 

Vessel Management

 

Under each of our time charters, we are responsible for the operation and technical management of each vessel, which includes crewing, provision of lubricating oils, maintaining the vessel, periodic drydocking and performing work required by regulations. The day-to-day crewing and technical management of our vessels are provided by our ship managers pursuant to the terms of ship management agreements.

 

As of the date of this report, all of our ship technical management agreements are with Technomar, a company of which our Executive Chairman is the Founder, Managing Director, and majority beneficial owner, for a daily management fee. The manager provides all day-to-day ship technical management, including crewing, purchasing stores, lubricating oils and spare parts, paying wages, pensions and insurance for the crew, and organizing other vessel operating necessities, including the arrangement and management of drydocking. Six vessels (“Third-Party Managed Vessels”), which were purchased by us in July 2021 were previously managed by another third-party ship manager with those management agreements terminating between May and July 2023.

 

We pay Technomar a daily management fee of Euro 750 from January 1, 2023, compared to Euro 715 for 2022, per vessel, payable in U.S. dollars, which, in addition to the technical ship management services noted above, includes administrative support services provided to the Global Ship Lease group, including accounting and financial reporting, treasury management services and legal services.

 

We paid $200,000 per annum per vessel for technical management services for the Third-Party Managed Vessels and $4,000 per month per vessel for crew services for these vessels.

 

In addition, each of our vessel-owning subsidiaries for the Third-Party Managed Vessels entered into a Supervision Agreement with Technomar, pursuant to which Technomar supervised the third-party manager. Technomar also undertook the provision of Technical, Drydock, Insurance, Freight and Claims Handling Services as well as accounting, administrative & support services. Pursuant to the Supervision Agreements, we paid a supervision fee of $157.50 per day (effective from January 1, 2023) per vessel ($150.00 prior to January 1, 2023). The Supervision Agreements terminated when the underlying management agreement terminated between May and July 2023.

 

Conchart Commercial Inc. provides commercial management services to us pursuant to commercial management agreements. Our Executive Chairman is the sole beneficial owner of Conchart. Under the commercial management agreements, Conchart, is responsible for (i) marketing of our vessels, (ii) seeking and negotiating employment of our vessels, (iii) advise us on market developments, developments of new rules and regulations, (iv) assisting in calculation of hires, freights, demurrage and/or dispatch monies and collection any sums related to the operation of vessels, (v) communicating with agents, and (vi) negotiating sale and purchase transactions.

 

We, as per commercial management agreements have agreed to pay to the commercial manager who shall be named broker in each memorandum of agreement (or equivalent agreement) providing for the sale of all vessels and purchase of some vessels, a commission of 1.00% based on the sale and purchase price for any sale and purchase of a vessel, which shall be payable upon request of the commercial manager.

 

Technomar and Conchart are related parties of ours.

 

See “Item 4. Information on the Company - B. Business Overview - Management of Our Fleet” in our Annual Report for a more detailed description of our ship management agreements.

 

 3 

 

 

Operating Fleet

 

The table below provides certain information about our fleet of 68 containerships as of June 30, 2023.

 

 

Vessel Name

 

Capacity in TEUs Lightweight (tons) Year Built Charterer Earliest Charter Expiry Date Latest Charter Expiry Date(2) Daily Charter Rate $
               
CMA CGM Thalassa 11,040 38,577 2008 CMA CGM 4Q25 2Q26 47,200
    ZIM Norfolk (ex UASC Al Khor) (1)   9,115 31,764 2015 ZIM 2Q27 4Q27 65,000
Anthea Y (1) 9,115 31,890 2015 COSCO(3) 3Q25 4Q25(3) 38,000 (3)
ZIM Xiamen (ex Maira XL)(1) 9,115 31,820 2015 ZIM 3Q27 4Q27 65,000
MSC Tianjin 8,603 34,325 2005 MSC 2Q24 3Q24 19,000
MSC Qingdao (4) 8,603 34,609 2004 MSC 2Q24 2Q25 23,000
GSL Ningbo 8,603 34,340 2004 MSC 3Q27 4Q27 (5) 22,500 (5)
tbr GSL Alexandra 8,544 37,777 2004 Confidential 3Q25 3Q26 Confidential (6)
tbr GSL Sofia 8,544 37,777 2003 Confidential 3Q25 3Q26 Confidential (6)
tbr GSL Effie 8,544 37,777 2003 Confidential 3Q25 3Q26 Confidential (6)
GSL Lydia 8,544 37,777 2003 Confidential 2Q25 4Q26 Confidential (6)
GSL Eleni 7,847 29,261 2004 Maersk 3Q24 1Q25 (7) 16,500 (7)
GSL Kalliopi 7,847 29,105 2004 Maersk 3Q24 4Q24 (7) 18,900 (7)
GSL Grania 7,847 29,190 2004 Maersk 3Q24 1Q25 (7) 17,750 (7)
Mary (1) 6,927 23,424 2013 CMA CGM (8) 4Q28 1Q31 (8) 25,910 (8)
Kristina (1) 6,927 23,421 2013 CMA CGM (8) 3Q29 3Q31 (8) 25,910 (8)
Katherine (1) 6,927 23,403 2013 CMA CGM (8) 1Q29 2Q31 (8) 25,910 (8)
Alexandra (1) 6,927 23,348 2013 CMA CGM (8) 2Q29 3Q31 (8) 25,910 (8)
Alexis (1) 6,882 23,919 2015 CMA CGM (8) 2Q29 3Q31 (8) 25,910 (8)
Olivia I (1) 6,882 23,864 2015 CMA CGM (8) 2Q29 2Q31 (8) 25,910 (8)
GSL Christen 6,840 27,954 2002 Maersk 3Q23 1Q24 35,000
GSL Nicoletta 6,840 28,070 2002 Maersk 3Q24 1Q25 35,750
CMA CGM Berlioz 6,621 26,776 2001 CMA CGM 4Q25 2Q26 37,750
Agios Dimitrios(4) 6,572 24,931 2011 MSC 4Q23 3Q24 20,000
GSL Vinia 6,080 23,737 2004 Maersk 3Q24 1Q25 13,250
GSL Christel Elisabeth 6,080 23,745 2004 Maersk 2Q24 1Q25 13,250
GSL Dorothea 5,992 24,243 2001 Maersk 3Q24 3Q26 18,600 (9)
GSL Arcadia 6,008 24,858 2000 Maersk 2Q24 1Q26 18,600 (9)
GSL Violetta 6,008 24,873 2000 Maersk 4Q24 4Q25 18,600 (9)
GSL Maria 6,008 24,414 2001 Maersk 4Q24 1Q27 18,600 (9)
GSL MYNY 6,008 24,873 2000 Maersk 3Q24 1Q26 18,600 (9)
GSL Melita 6,008 24,848 2001 Maersk 3Q24 3Q26 18,600 (9)
GSL Tegea 5,992 24,308 2001 Maersk 3Q24 3Q26 18,600 (9)
Tasman 5,936 25,010 2000 Maersk 4Q23 2Q24 20,000
ZIM Europe 5,936 25,010 2000 ZIM 1Q24 2Q24 24,250
Ian H 5,936 25,128 2000 ZIM 2Q24 4Q24 32,500
GSL Tripoli 5,470 22,259 2009 Maersk 4Q24 4Q27 36,500 (10)
GSL Kithira 5,470 22,108 2009 Maersk 4Q24 1Q28 36,500 (10)
GSL Tinos 5,470 22,067 2010 Maersk 4Q24 4Q27 36,500 (10)
GSL Syros 5,470 22,098 2010 Maersk 4Q24 4Q27 36,500 (10)
Dolphin II 5,095 20,596 2007 OOCL 1Q25 3Q25 53,500
Orca I 5,095 20,633 2006 Maersk 2Q24 4Q25 21,000 (11)
CMA CGM Alcazar 5,089 20,087 2007 CMA CGM 3Q26 1Q27 35,500
GSL Chateau d’If 5,089 19,994 2007 CMA CGM 4Q26 1Q27 35,500
GSL Susan 4,363 17,309 2008 CMA CGM 3Q27 1Q28 Confidential (12)
CMA CGM Jamaica 4,298 17,272 2006 CMA CGM 1Q28 2Q28 Confidential (12)
CMA CGM Sambhar 4,045 17,429 2006 CMA CGM 1Q28 2Q28 Confidential (12)
CMA CGM America 4,045 17,428 2006 CMA CGM 1Q28 2Q28 Confidential (12)
GSL Rossi 3,421 16,420 2012 ZIM 1Q26 3Q26 38,875 (13)
GSL Alice 3,421 16,543 2014 CMA CGM 2Q25 2Q25 20,500 (14)
GSL Eleftheria 3,404 16,642 2013 Maersk 3Q25 4Q25 37,975
GSL Melina 3,404 16,703 2013 Hapag-Lloyd 2Q24 3Q24 21,000
GSL Valerie 2,824 11,971 2005 ZIM 1Q25 3Q25 35,600 (15)
Matson Molokai 2,824 11,949 2007 Matson 2Q25 3Q25 36,500
GSL Lalo 2,824 11,950 2006 MSC 1Q24 2Q24 17,500
GSL Mercer 2,824 11,970 2007 ONE 4Q24 2Q25 35,750
Athena 2,762 13,538 2003 Hapag-Lloyd 2Q24 2Q24 21,500
 4 

 

GSL Elizabeth 2,741 11,507 2006 ONE 3Q23 3Q23 18,750
tbr GSL Chloe 2,546 12,212 2012 ONE 4Q24 1Q25 33,000
GSL Maren 2,546 12,243 2014 Swire 1Q24 2Q24 18,200(16)
Maira 2,506 11,453 2000 Hapag-Lloyd 3Q23 4Q23 17,750
Nikolas 2,506 11,370 2000 CMA CGM 1Q24 1Q24 16,750
Newyorker 2,506 11,463 2001 CMA CGM 1Q24 3Q24 20,700
Manet 2,272 11,727 2001 OOCL 4Q24 2Q25 32,000
Keta 2,207 11,731 2003 CMA CGM 1Q25 1Q25 25,000
Julie 2,207 11,731 2002 Footnote (17) 2Q25 3Q25 Footnote (17)
Kumasi 2,207 11,791 2002 Wan Hai 1Q25 2Q25 38,000
Akiteta 2,207 11,731 2002 OOCL 4Q24 1Q25 32,000

 

(1)  Modern design, high reefer capacity, fuel-efficient vessel. 
(2)  In many instances charterers have the option to extend a charter beyond the nominal latest expiry date by the amount of time that the vessel was off hire during the course of that charter. This additional charter time (“Offhire Extension”) is computed at the end of the initially contracted charter period. The Latest Charter Expiry Dates shown in this table have been adjusted to reflect offhire accrued up to the date of issuance of this release plus estimated offhire scheduled to occur during the remaining lifetimes of the respective charters. However, as actual offhire can only be calculated at the end of each charter, in some cases actual Offhire Extensions – if invoked by charterers – may exceed the Latest Charter Expiry Dates indicated.     
(3)  Anthea Y was forward fixed to a leading liner operator for a period of 24 months +/- 30 days, with the new charter to commence upon expiry of the existing charter in 3Q or 4Q23.
(4)  MSC Qingdao & Agios Dimitrios are fitted with Exhaust Gas Cleaning Systems (“scrubbers”).                                                 
(5)  GSL Ningbo chartered to MSC at $22,500 per day to July 2023. Thereafter, the charter has been extended by 48 to 52 months, at $22,500 per day.
(6)  Tbr GSL Alexandra, tbr GSL Sofia, tbr GSL Effie and GSL Lydia delivered in 2Q23. Contract cover for each vessel is for a minimum firm period 24 months from the date each vessel is delivered, with charterers holding one year extension options at confidential rates. 
(7)  GSL Eleni (delivered 2Q 2019) is chartered for five years; GSL Kalliopi (delivered 4Q 2019) and GSL Grania (delivered 3Q 2019) are chartered for three years plus two successive periods of one year each, at the option of the charterer. The first of these extension options was exercised for both vessels in 2Q 2022 and commenced for GSL Grania and for GSL Kalliopi in 3Q and in 4Q 2022, respectively. The second of these extension options was exercised for both vessels in 2Q 2023 and will commence for both vessels in 3Q23. During the option periods the charter rates for GSL Kalliopi and GSL Grania are $18,900 per day and $17,750 per day respectively. 
(8)  Mary, Kristina, Katherine, Alexandra, Alexis, Olivia I were forward fixed to Hapag-Lloyd for five years, followed by two periods of 12 months each at the option of the charterer. The new charters are scheduled to commence as each of the existing charters expire, on a staggered basis, between approximately late 2023 and late 2024, following the expiration of existing charters. 
(9)  GSL Maria, GSL Violetta, GSL Arcadia, GSL MYNY, GSL Melita, GSL Tegea and GSL Dorothea. Contract cover for each ship is for a firm period of at least three years from the date each vessel was delivered, with charterers holding a one-year extension option on each charter (at a rate of $12,900 per day), followed by a second option (at a rate of $12,700 per day) with the period determined by – and terminating prior to – each vessel’s 25th year drydocking & special survey.    
(10) GSL Tripoli, GSL Kithira, GSL Tinos, and GSL Syros. Ultra-high reefer ships of 5,470 TEU each. Contract cover on each ship is for a firm period of three years, from their delivery dates in 2021, at a rate of $36,500 per day, with a period of an additional three years (at $17,250 per day) at charterers’ option.
(11) Orca I. Chartered at $21,000 per day through to the median expiry of the charter in 2Q2024; thereafter the charterer has the option to charter the vessel for a further 12-14 months at the same rate.  
(12) GSL Susan, CMA CGM Jamaica, CMA CGM Sambhar and CMA CGM America. In July 2022, these four vessels were each forward fixed for five years +/- 45 days at confidential charter rates. The new charter for GSL Susan commenced in 4Q 2022, while the charters for the remaining three vessels commenced in late 1Q 2023. 
(13) GSL Rossi. Chartered at an average rate of $38,875 per day-$42,750 for the first 18 months, $38,000 for the next 18 months and $35,000 for the remaining period.
(14) GSL Alice. Chartered at $20,500 per day for a period of 24 months +/- 30 days at the option of charterer. The new charter   commenced in May 2023. 
(15) GSL Valerie. Chartered at an average rate of $35,600 per day-$40,000 for the first 12 months, $36,000 for the next 12 months and $32,000 for the remaining period.
(16) GSL Maren. Charter extended to Westwood (Swire) for a period of 11 to 14 months, commenced at the end of 1Q 2023 at a rate of $17,200 per day for the first 2 months and for the remaining period at a rate of $18,200.
(17) Julie was forward fixed to a leading liner company for a period of 24 months +/- 30 days at the option of the charterer at confidential charter rate. The new charter commenced in 3Q 2023, after the vessel’s scheduled drydock.

 

 5 

 

Recent and Other Developments

 

In May 2023, we contracted to purchase four 8,544 TEU vessels for an aggregate purchase price of $123.3 million. The vessels are chartered to a leading liner operator for a minimum firm period of 24 months, followed by a 12-month extension at the charterer’s option. The vessels were delivered in May and June 2023. In May 2023, we entered into a new credit facility for $76.0 million to partially finance the purchase price. The remaining purchase price was financed by cash on hand.

 

As of the date of this report all of our loan agreements (except for the sale and lease back agreement with Neptune) have been amended and restated to take into effect the transition from LIBOR to the Secured Overnight Financing Rate (“SOFR”) and the relevant provisions on a replacement rate. In addition, our interest rate caps have automatically transited to 1-month Compounded SOFR on July 1, 2023 at a level of 0.64%.

 

Share Buyback

 

During the six month period ended June 30, 2023, we repurchased 967,242 Class A common shares at an average price of $17.56 per share for a total of $17.0 million under the authorized program of $40.0 million for opportunistic share repurchases. Approximately $3.0 million of that program remains available. Subsequent to June 30, 2023, the Board of Directors authorized a further $40.0 million for such repurchases for a total of approximately $43.0 million of authorization capacity remaining.

 

Critical Accounting Policies

 

The interim unaudited condensed consolidated financial statements have been prepared in accordance with U.S. GAAP. The preparation of these financial statements requires us to make estimates in the application of our accounting policies based on the best assumptions, judgments and opinions of management. Critical accounting policies are those that reflect significant judgments or uncertainties, and potentially result in materially different results under different assumptions and conditions. All significant accounting policies are as described in our Annual Report.

 

For a further description of our significant accounting policies, please see note 2 to the interim unaudited condensed consolidated financial statements included elsewhere in this report.

 

(a)Use of estimates

 

The preparation of interim unaudited condensed consolidated financial statements in conformity with U.S. GAAP 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 interim unaudited condensed consolidated financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates under different assumptions and/or conditions.

 

(b)Vessels in operation

 

Vessels are generally recorded at their historical cost, which consists of the acquisition price and any material expenses incurred upon acquisition, adjusted for the fair value of intangible assets or liabilities associated with above or below market charters attached to the vessels at acquisition. Vessels acquired in a corporate transaction accounted for as an asset acquisition are stated at the acquisition price, which consists of consideration paid, plus transaction costs considering pro rata allocation based on vessels fair value at the acquisition date. Vessels acquired in a corporate transaction accounted for as a business combination are recorded at fair value.

 

Subsequent expenditures for major improvements and upgrades are capitalized, provided they appreciably extend the life, increase the earnings capacity or improve the efficiency or safety of the vessels.

 

Borrowing costs incurred during the construction of vessels or as part of the prefinancing of the acquisition of vessels are capitalized. There was no capitalized interest for the six months ended June 30, 2023 and June 30, 2022.

 

Vessels are stated less accumulated depreciation and impairment, if applicable. Vessels are depreciated to their estimated residual value using the straight-line method over their estimated useful lives which are reviewed on an ongoing basis to ensure they reflect current technology, service potential and vessel structure. The useful lives are estimated to be 30 years from original delivery by the shipyard.

 

Management estimates the residual values of our container vessels based on a scrap value cost of steel times the weight of the vessel noted in lightweight tons (LWT). Residual values are periodically reviewed and revised to recognize changes in conditions, new regulations or other reasons. Revision of residual values affect the depreciable amount of the vessels and affects depreciation expense in the period of the revision and future periods. Management estimated the residual values of our vessels based on scrap rate of $400 per LWT.

 

 6 

 

For any vessel group which is impaired, the impairment charge is recorded against the cost of the vessel and the accumulated depreciation as at the date of impairment is removed from the accounts.

 

The cost and related accumulated depreciation of assets retired or sold are removed from the accounts at the time of sale or retirement and any gain or loss is included in the interim unaudited condensed Consolidated Statements of Income.

 

 

(c)Impairment of Long-lived assets

 

Tangible fixed assets, such as vessels, that are held and used or to be disposed of by us are reviewed for impairment when events or changes in circumstances indicate that their carrying amounts may not be recoverable. In these circumstances, we perform step one of the impairment test by comparing the undiscounted projected net operating cash flows for each vessel group to its carrying value. A vessel group comprises the vessel, the unamortized portion of deferred drydocking related to the vessel and the related carrying value of the intangible asset or liability (if any) with respect to the time charter attached to the vessel at its purchase. If the undiscounted projected net operating cash flows of the vessel group are less than its carrying amount, management proceeds to step two of the impairment assessment by comparing the vessel group’s carrying amount to its fair value, including any applicable charter, and an impairment loss is recorded equal to the difference between the vessel group’s carrying value and fair value. Fair value is determined with the assistance from valuations obtained from third party independent ship brokers.

 

We use a number of assumptions in projecting our undiscounted net operating cash flows analysis including, among others, (i) revenue assumptions for charter rates on expiry of existing charters, which are based on forecast charter rates, where relevant, in the four years from the date of the impairment test and a reversion to the historical mean of time charter rates for each vessel thereafter (ii) off-hire days, which are based on actual off-hire statistics for our fleet (iii) operating costs, based on current levels escalated over time based on long term trends (iv) dry docking frequency, duration and cost (v) estimated useful life, which is assessed as a total of 30 years from original delivery by the shipyard and (vi) scrap values.

 

Revenue assumptions are based on contracted charter rates up to the end of the existing contract of each vessel, and thereafter, estimated time charter rates for the remaining life of the vessel. The estimated time charter rate used for non-contracted revenue days of each vessel is considered a significant assumption. Recognizing that the container shipping industry is cyclical and subject to significant volatility based on factors beyond our control, management believes that using forecast charter rates in the four years from the date of the impairment assessment and a reversion to the historical mean of time charter rates thereafter, represents a reasonable benchmark for the estimated time charter rates for the non-contracted revenue days, and takes into account the volatility and cyclicality of the market.

 

During the six months ended June 30, 2023 and 2022, we evaluated the impact of current economic situation on the recoverability of all our vessel groups and have determined that there were no events or changes in circumstances which indicated that their carrying amounts may not be recoverable. Accordingly, there were no triggering events and no impairment test was performed for the six months ended June 30, 2023 and 2022.

 

(d)Intangible assets and liabilities-charter agreements

 

Our intangible assets and liabilities consist of unfavorable lease terms on charter agreements acquired in assets acquisitions. When intangible assets or liabilities associated with the acquisition of a vessel are identified, they are recorded at fair value. Fair value is determined by reference to market data and the discounted amount of expected future cash flows. Where charter rates are higher than market charter rates, an intangible asset is recorded, based on the difference between the acquired charter rate and the market charter rate for an equivalent vessel and equivalent duration of charter party at the date the vessel is delivered. Where charter rates are less than market charter rates, an intangible liability is recorded, based on the difference between the acquired charter rate and the market charter rate for an equivalent vessel. The determination of the fair value of acquired assets and liabilities requires us to make significant assumptions and estimates of many variables including market charter rates (including duration), the level of utilization of its vessels and its weighted average cost-of capital. The estimated market charter rate (including duration) is considered a significant assumption. The use of different assumptions could result in a material change in the fair value of these items, which could have a material impact on our financial position and results of operations. The amortizable value of favorable and unfavorable leases is amortized over the remaining life of the relevant lease term and the amortization expense or income respectively is included under the caption “Amortization of intangible liabilities -charter agreements” in the interim unaudited condensed Consolidated Statements of Income. For any vessel group which is impaired, the impairment charge is recorded against the cost of the vessel and the accumulated depreciation as at the date of impairment is removed from the accounts.

 

 7 

 

 

(e)Revenue recognition and related expenses

 

We charter out our vessels on time charters which involve placing a vessel at a charterer’s disposal for a specified period of time during which the charterer uses the vessel in return for the payment of a specified daily hire rate. Such charters are accounted for as operating leases and therefore revenue is recognized on a straight-line basis as the average revenues over the rental periods of such charter agreements, as service is performed. Cash received in excess of earned revenue is recorded as deferred revenue. If a time charter contains one or more consecutive option periods, then subject to the options being exercisable solely by us, the time charter revenue will be recognized on a straight-line basis over the total remaining life of the time charter, including any options which are more likely than not to be exercised. If a time charter is modified, including the agreement of a direct continuation at a different rate, the time charter revenue will be recognized on a straight-line basis over the total remaining life of the time charter from the date of modification. During the periods ended June 30, 2023, and 2022, an amount of $1,785 and $2,911, respectively, has been recorded in time charter-revenues for such modifications and revenues recognized on a straight-line basis. Any difference between the charter rate invoiced and the time charter revenue recognized is classified as, or released from, deferred revenue. As of June 30, 2023, current and non-current portion from implementing the straight-line basis, amounting to $7,535 ($6,487 as for December 31, 2022) and $21,824 ($21,144 as for December 31, 2022), respectively, are presented in the interim condensed unaudited Consolidated Balance Sheets in the line item “Prepaid expenses and other current assets” and “Other non-current assets”, respectively.

 

Revenues are recorded net of address commissions, which represent a discount provided directly to the charterer based on a fixed percentage of the agreed upon charter rate. Charter revenue received in advance which relates to the period after a balance sheet date is recorded as deferred revenue within current liabilities until the respective charter services are rendered.

 

Under time charter arrangements we, as owner, are responsible for all the operating expenses of the vessels, such as crew costs, insurance, repairs and maintenance, and such costs are expensed as incurred and are included in vessel operating expenses.

 

Commission paid to brokers to facilitate the agreement of a new charter are included in time charter and voyage expenses as are certain expenses related to a voyage, such as the costs of bunker fuel consumed when a vessel is off-hire or idle.

 

Leases: In cases of lease agreements where we act as the lessee, we recognize an operating lease asset and a corresponding lease liability on the interim unaudited condensed Consolidated Balance Sheets. Following initial recognition and with regards to subsequent measurement we remeasure lease liability and right of use asset at each reporting date.

 

Leases where we act as the lessor are classified as either operating or sales-type / direct financing leases.

 

In cases of lease agreements where we act as the lessor under an operating lease, we keep the underlying asset on the interim unaudited condensed Consolidated Balance Sheets and continue to depreciate the assets over their useful life. In cases of lease agreements where we act as the lessor under a sales-type / direct financing lease, we derecognize the underlying asset and record a net investment in the lease. We act as a lessor under operating leases in connection with all of our charter out – bareboat-out arrangements.

 

In cases of sale and leaseback transactions, if the transfer of the asset to the lessor does not qualify as a sale, then the transaction constitutes a failed sale and leaseback and is accounted for as a financial liability. For a sale to have occurred, the control of the asset would need to be transferred to the lessor, and the lessor would need to obtain substantially all the benefits from the use of the asset. We have entered into six agreements which qualify as failed sale and leaseback transactions as we are required to repurchase the vessels at the end of the lease term and we have accounted for the six agreements as financing transactions.

 

We elected the practical expedient which allows us to treat the lease and non-lease components as a single lease component for the leases where the timing and pattern of transfer for the non-lease component and the associated lease component to the lessees are the same and the lease component, if accounted for separately, would be classified as an operating lease. The combined component is therefore accounted for as an operating lease under ASC 842, as the lease components are the predominant characteristics.

 8 

 

(f)Fair Value Measurement and Financial Instruments

 

Financial instruments carried on the interim unaudited condensed Consolidated Balance Sheets include cash and cash equivalents, restricted cash, time deposits, trade receivables and payables, other receivables and other liabilities and long-term debt. The particular recognition methods applicable to each class of financial instrument are disclosed in the applicable significant policy description of each item or included below as applicable.

 

Fair value measurement: Fair value is defined as the price that would be received to sell an asset or paid to transfer a liability (i.e. the “exit price”) in an orderly transaction between market participants at the measurement date. The hierarchy is broken down into three levels based on the observability of inputs as follows:

 

Level 1 - Valuations based on quoted prices in active markets for identical assets or liabilities that we have the ability to access. Valuation adjustments and block discounts are not applied to Level 1 instruments. Since valuations are based on quoted prices that are readily and regularly available in an active market, valuation of these products does not entail a significant degree of judgment.

 

Level 2 - Valuations based on one or more quoted prices in markets that are not active or for which all significant inputs are observable, either directly or indirectly.

 

Level 3 - Valuations based on inputs that are unobservable and significant to the overall fair value measurement.

 

During the six months ended June 30, 2023, we evaluated the impact of current economic situation on the recoverability of all our vessel groups and have determined that there were no events or changes in circumstances which indicated that their carrying amounts may not be recoverable. Accordingly, there was no triggering event and no impairment test was performed for six months ending June 30, 2023.

 

Through the latter part of 2022, we noted that charter rates in the spot market had come under pressure and accordingly determined that events occurred, and circumstances had changed, which indicated that potential impairment of the Company’s long-lived assets could exist. These indicators included continued volatility in the spot market and the related impact of the current container sector on management’s expectation for future revenues. As a result, step one of the impairment assessments of each of the vessel groups was performed as at December 31, 2022 and step two of the impairment analysis was required for one vessel of the group, as its undiscounted projected net operating cash flows did not exceed its carrying value. As a result, we recorded an impairment loss of $3.0 million for one vessel asset group with a total aggregate carrying amount of $9.0 million which was written down to its fair value of $6.0 million.

 

In December 2021, we purchased interest rate caps with an aggregate notional amount of $484.1 million, which amortizes over time as our outstanding debt balances decline. In February 2022, we further hedged our exposure by putting in place two USD one-month LIBOR interest rate caps of 0.75% through fourth quarter 2026, on $507.9 million of our floating rate debt. The second interest rate cap was not designated as a cash flow hedge and therefore the positive fair value adjustment of $1,417 as at June 30, 2023 was recorded through interim unaudited condensed Consolidated Statements of Income ($2,084 positive fair value adjustment as at June 30, 2022). ASC 815-20-25-13a stipulates that an entity may designate either all or certain future interest payments on variable-rate debt as the hedged exposure in a cash flow hedge relationship. We are designating certain future interest payments on our outstanding variable-rate debt as the hedged item in this relationship. Under ASC 815-20-25-106e, “for cash flow hedges of the interest payments on only a portion of the principal amount of the interest-bearing asset or liability, the notional amount of the interest rate cap designated as the hedging instrument matches the principal amount of the portion of the asset or liability on which the hedged interest payments are based”. In this case, we have designated only a portion of our outstanding debt (initially, $253.9 million) as the hedged item, and any interest payments beyond the notional amount of the interest rate cap in any given period are not designated as being hedged.

 

We assess the effectiveness of the hedges on an ongoing basis. The amounts included in accumulated other comprehensive income (OCI) will be reclassified to interest expense should the hedge no longer be considered effective.

 

The objective of the hedges is to reduce the variability of cash flows associated with the interest rates relating to our variable rate borrowings. When derivatives are used, we are exposed to credit loss in the event of non-performance by the counterparties; however, non-performance is not anticipated. ASC 815, Derivatives and Hedging, requires companies to recognize all derivative instruments as either assets or liabilities at fair value in the balance sheet. The fair values of the interest rate derivatives are based on quoted market prices for similar instruments from commercial banks (based on significant observable inputs - Level 2 inputs). As of June 30, 2023, and December 31, 2022, the Company recorded a derivative asset of $56.9 million and $63.5 million, respectively.

 

 9 

 

Financial Risk Management: Our activities expose us to a variety of financial risks including fluctuations in, time charter rates, credit and interest rates risk. Risk management is carried out under policies approved by executive management. Guidelines are established for overall risk management, as well as specific areas of operations.

 

Credit risk: We closely monitor our credit exposure to customers, financial institutions and counter-parties for credit risk. We have entered into commercial management agreement with Conchart, pursuant to which Conchart has agreed to provide commercial management services to us, including the negotiation, on behalf of us, vessel employment contracts. Conchart has policies in place to ensure that it trades with customers and counterparties with an appropriate credit history.

 

Financial instruments that potentially subject us to concentrations of credit risk are accounts receivable cash and cash equivalents and time deposits. We do not believe our exposure to credit risk is likely to have a material adverse effect on our financial position, results of operations or cash flows.

 

Liquidity Risk: Prudent liquidity risk management implies maintaining sufficient cash and marketable securities, the availability of funding through an adequate amount of committed credit facilities and the ability to close out market positions. We monitor cash balances appropriately to meet working capital needs.

 

Foreign Exchange Risk: Foreign currency transactions are translated into the measurement currency rates prevailing at the dates of transactions. Foreign exchange gains and losses resulting from the settlement of such transactions and from the translation of monetary assets and liabilities denominated in foreign currencies are recognized in the interim unaudited condensed Consolidated Statements of Income.

 

 

(g)Derivative instruments

 

The Company is exposed to interest rate risk relating to its variable rate borrowings. In December 2021, the Company purchased an amortized interest rate cap with an aggregate notional amount of $484.1 million (“December 2021 hedging"), which amount reduces over time as the Company’s outstanding debt balances amortize. The objective of the hedges is to reduce the variability of cash flows associated with the interest relating to its variable rate borrowings.

 

At the inception of the transaction, the Company documents the relationship between hedging instruments and hedged items, as well as its risk management objective and the strategy for undertaking various hedging transactions. The Company also documents its assessment, both at the hedge inception and on an ongoing basis, of whether the derivative financial instruments that are used in hedging transactions are highly effective in offsetting changes in fair values or cash flows of hedged items.

 

This transaction is designated as a cash flow hedge, and under ASU 2017-12, cash flow hedge accounting allows all changes in fair value to be recorded through Other Comprehensive Income once hedge effectiveness has been established. Under ASC 815-30-35-38, amounts in accumulated other comprehensive income shall be reclassified into earnings in the same period or periods during which the hedged forecasted transaction affects earnings (i.e., each quarter) and shall be presented in the same income statement line item as the earnings effect of the hedged item in accordance with paragraph 815-20-45-1A.

 

The premium paid related to this derivative was classified in the interim unaudited condensed Consolidated Statements of Cash Flows as operating activities in the line item “Derivative asset”. The premium shall be amortized into earnings “on a systematic and rational basis over the period in which the hedged transaction affects earnings” (ASC 815-30-35-41A); that is, the Company will expense the premium over the life of the interest rate cap in accordance with the “caplet method,” as described in Derivatives Implementation Group (DIG) Issue G20. DIG Issue G20 dictates that the cost of the interest rate cap is recognized on earnings over time, based on the value of each periodic caplet. The cost per period will change as the caplet for that period changes in value. Given that the interest rate cap is forward-starting, expensing of the premium will not begin until the effective start date of the interest rate cap, in order to match potential cap revenue with the cap expenses in the period in which they are incurred.

 

In February 2022, the Company purchased two additional amortized interest rate caps with an aggregate notional amount of $507.9 million. The first interest rate cap of $253.9 million which has been designated as a cash flow hedge, has the same accounting treatment as described above for the December 2021 hedging. The second interest rate cap was not designated as a cash flow hedge and therefore the negative fair value adjustment of $1.4 million as at June 30, 2023 ($6.6 million positive fair value adjustment as at June 30, 2022) was recorded through our interim unaudited condensed Consolidated Statements of Income. ASC 815-20-25-13a stipulates that an entity may designate either all or certain future interest payments on variable-rate debt as the hedged exposure in a cash flow hedge relationship. In this case, we have designated only a portion of its outstanding debt (initially, $253.9 million) as the hedged item, and any interest payments beyond the notional amount of the interest rate cap in any given period are not designated as being hedged .

 

 10 

 

The amounts included in accumulated other comprehensive income (OCI) will be reclassified to interest expense should the hedge no longer be considered effective. As of June 30, 2023, and December 31, 2022, following a quantitative assessment, part of the hedge was no longer considered effective and an amount of $176 and $1,091 was reclassified from other comprehensive income (OCI) to the interim unaudited condensed Consolidated Statements of Income. No amount of ineffectiveness was included in net income for the six months period ended June 30, 2022. The Company will continue to assess the effectiveness of the hedge on an ongoing basis.

 

 

(h)Recent accounting pronouncements

 

We do not believe that any recently issued, but not yet effective, accounting pronouncements would have a material impact on our interim unaudited condensed consolidated financial statements.

 

Results of Operations

 

Financial Results for the Six Months Ended June 30, 2023 Compared to the Six Months Ended June 30, 2022

 

The following table presents interim unaudited condensed consolidated revenues and expenses for the six month periods ended June 30, 2023 and 2022. This information was derived from the interim unaudited condensed consolidated financial statements of operations of Global Ship Lease for the respective periods.

 

(Expressed in millions of U.S. dollars except share data)

 

 

     

Six months ended

June 30,

      2023     2022
OPERATING REVENUES            
Time charter revenues (include related party revenues of $nil and $66.9 million for each of the periods ended June 30, 2023 and 2022, respectively)  

 

316.3  

284.7

Amortization of intangible liabilities-charter agreements (include related party amortization of intangible liabilities-charter agreements

of $nil and $5.4 million for each of the periods ended June 30, 2023 and 2022, respectively)

    5.1     23.4
Total Operating Revenues     321.4     308.1
             
OPERATING EXPENSES            
Vessel operating expenses (include related party vessel operating expenses of $8.9 million and $8.6 million for each of the periods ended June 30, 2023 and 2022, respectively)     86.2     80.9

Time charter and voyage expenses (include related party time charter and voyage expenses of $3.7 million

and $3.0 million for each of the periods ended June 30, 2023 and 2022, respectively)

    12.1     9.5
Depreciation and amortization     43.4     40.1
General and administrative expenses     9.5     10.3
Operating Income     170.2     167.3
             
NON-OPERATING INCOME/(EXPENSES)            
Interest income     4.4     0.5

Interest and other finance expenses (include acceleration of deferred financing costs of $0.1 million and prepayment fees, acceleration of deferred

financing costs and premium of $19.1 million for each of the periods ended June 30, 2023 and 2022, respectively)

    (22.0)     (48.7)
Other income, net     1.2     0.3
Fair value adjustment on derivative asset     (1.4)     6.6
Total non-operating expenses     (17.8)     (41.3)
Income before income taxes     152.4     126.0
Income taxes     -     -
Net Income     152.4     126.0
Earnings allocated to Series B Preferred Shares     (4.8)     (4.8)
Net Income available to Common Shareholders   $ 147.6   $ 121.2

 

 11 

 

 

Revenue and Utilization

 

Revenue from fixed-rate, mainly long-term, time-charters was $321.4 million in the six months ended June 30, 2023, up $13.3 million (or 4.3%) on revenue of $308.1 million for the prior year period. The increase in revenue is principally due to (i) a 0.1% increase in ownership days, due to the four vessels acquired after June 30, 2022, offset by one vessel sold, resulting in 11,773 ownership days in the six months ended June 30, 2023, compared to 11,765 days in the same period of 2022, and (ii) increased revenue on charter renewals at higher rates on a number of vessels, offset by (i) a $18.4 million credit from amortization of intangible liabilities arising on below-market charters attached to acquired vessels and (ii) by a net increase in offhire and idle days; there were 630 such days in the first half of 2023, of which 436 were for scheduled drydockings, compared to 575 days in the prior year period of which 309 were for scheduled drydockings. Utilization for the six months ended June 30, 2023 was 94.6% compared to utilization of 95.1% in the same period of the prior year.

 

The table below shows fleet utilization for the six month periods ended June 30, 2023 and 2022.

  Six months ended
  June 30,   June 30,
  2023   2022
Days      
Ownership days 11,773   11,765
Planned offhire - scheduled dry-dock (436)   (309)
Unplanned offhire (174)   (236)
Idle time (20)   (30)
Operating days 11,143   11,190
       
Utilization 94.6%   95.1%

 

As of June 30, 2023, two drydockings were in progress. In 2023, we anticipate four further drydockings, including for three of the four recently purchased ships.

 

 

Vessel Operating Expenses 

 

Vessel operating expenses, which are primarily the costs of crew, lubricating oil, repairs, maintenance, insurance and technical management fees, were up 6.6% to $86.2 million for the six months ended June 30, 2023, compared to $80.9 million in the comparative period. The increase of $5.3 million was mainly due to (i) high inflation impact on all categories, (ii) increase in repairs, spares and maintenance expenses for planned main engine maintenance and overhaul of diesel generators as well as main engine annual spares delivery, (iii) increased crew expenses as salaries were driven higher due to limited crew supply as a consequence of current container market conditions, worldwide inflation and higher crew travel expenses due to increased number of crew changes and higher airfare prices, (iv) increased cost of lubricant consumption due to higher average prices and (v) increase in management fees effected since January 1, 2023. The average cost per ownership day for the six months period ended June 30, 2023 was $7,319, compared to $6,875 for the prior year period, up $444 per day, or 6.5%.

 

 

Time Charter and Voyage Expenses 

 

Time charter and voyage expenses comprise mainly commission paid to ship brokers, the cost of bunker fuel for owner’s account when a ship is off-hire or idle and miscellaneous owner’s costs associated with a ship’s voyage. For the six months ended June 30, 2023, time charter and voyage expenses were $12.1 million, or an average of $1,031 per day, compared to $9.5 million in the comparative period, or $804 per day, an increase of $227 per ownership day, or 28.2%. The increase was mainly due to increased commissions on charter renewals at higher rates, higher costs for bunker fuel for owner’s account due to increase in off hire days and additional voyage administration costs and additional operational requests from charterers.

 

Depreciation and Amortization

 

Depreciation for the six months ended June 30, 2023 was $43.4 million, compared to $40.1 million in the comparative period. The increase was mainly due to net addition of three vessels in 2023, and 14 drydockings completed after June 30, 2022.

 12 

 

 

General and Administrative Expenses

 

For the six months ended June 30, 2023, general and administrative expenses were $9.5 million, compared to $10.3 million in the comparative period. The decrease was mainly due to lower stock-based compensation expense in the first quarter of 2023 and a one-off expense that occurred in first quarter of 2022 due to social security charges related to vesting of shares under the Omnibus Incentive Plan. The average general and administrative expense per ownership day for the six months period ended June 30, 2023 was $807, compared to $875 in the comparative period, a decrease of $68 or 7.8%.

 

 

Interest Expense and Interest Income

 

Debt as at June 30, 2023 totaled $925.3 million, comprising $491.3 million of secured bank debt collateralized by vessels, $310.6 million of our 5.69% Senior Secured Notes due 2027 (the “2027 USPP Notes”) collateralized by vessels and $123.4 million under sale and leaseback financing transactions. As of June 30, 2023, five of our vessels were unencumbered.

 

Debt as at June 30, 2022 totaled $1,125.7 million, comprising $526.7 million of secured bank debt collateralized by vessels, $350.0 million of 2027 USPP Notes collateralized by vessels, $160.0 million under sale and leaseback financing transactions and $89.0 million of unsecured indebtedness on our 8.00% Senior Unsecured Notes (the “2024 Notes”) which were fully redeemed in July 2022. As of June 30, 2022, five of our vessels were unencumbered.

 

Interest and other finance expenses for the six months ended June 30, 2023 was $22.0 million, down from $48.7 million for the comparative period. The decrease is mainly due to (i) a prepayment fee and the associated non-cash write off of deferred financing charges of $14.1 million on the full repayment of the Hayfin Credit Facility, (ii) the non-cash write off of deferred financing charges of $0.3 million on the full repayment of our Hellenic Credit Facility and (iii) $0.6 million premium paid on the redemption in April of $28.5 million of 2024 Notes and (iv) a prepayment fee and the associated non-cash write off of deferred financing charges of $4.1 million on the full repayment of our Blue Ocean Junior Credit Facility, all of which took place in the six months ended June 30 2022.

 

Interest income for the six months period ended June 30, 2023 was $4.4 million, compared to $0.5 million for the comparative period.

 

 

Other Income, Net

 

Other income, net was $1.2 million for the six month period ended June 30, 2023, compared to $0.3 million for the comparative period.

 

 

Fair value adjustment on derivatives

 

In December 2021, we entered into a USD 1 month LIBOR interest rate cap of 0.75% through fourth quarter 2026 on $484.1 million of floating rate debt, which reduces over time and represented approximately half of the outstanding floating rate debt. In February 2022, we entered into two additional USD 1-month LIBOR interest rate caps of 0.75% through fourth quarter 2026 on the remaining balance of $507.9 million of floating rate debt. The second interest rate cap was not designated as a cash flow hedge and therefore the negative fair value adjustment of $1.4 million for the six months ended June 30, 2023 was recorded through our interim unaudited condensed consolidated statements of income as compared to the positive fair value adjustment of $6.6 million for the six months ended June 30, 2022. These interest rate caps have automatically transited to 1-month Compounded SOFR on July 1, 2023 at a level of 0.64%.

 

Earnings Allocated to Preferred Shares

 

The Series B Preferred Shares, carry a coupon of 8.75%, the cost of which for the six months ended June 30, 2023 was $4.8 million the same as in the comparative period.

 

 

Net Income Available to Common Shareholders

 

Net income available to common shareholders for the six months ended June 30, 2023 was $147.6 million, after $1.4 million negative fair value adjustment on derivatives. Net income available to common shareholders for the six months ended June 30, 2022 was $121.2 million, after $6.6 million positive fair value adjustment on derivatives, a prepayment fee and the associated non-cash write off of deferred financing charges of $14.1 million on the full repayment of our Hayfin Credit Facility, the non-cash write off of deferred financing charges of $0.3 million on the full repayment of our Hellenic Credit Facility, $0.6 million premium paid on the redemption in April 2022 of $28.5 million of 2024 Notes and a prepayment fee and the associated non-cash write off of deferred financing charges of $4.1 million on the full repayment of our Blue Ocean Junior Credit Facility.

 

Earnings per share for the six months ended June 30, 2023, was $4.15, an increase of 25.4% from the earnings per share for the comparative period, which was $3.31. 

 

 13 

 

Liquidity and Capital Resources

 

Our net cash flow from operating activities derives from revenue received under our charter contracts, which varies directly with the number of vessels under charter, days on-hire and charter rates, less operating expenses including crew costs, lubricating oil costs, costs of repairs and maintenance, insurance premiums, general and administrative expenses, interest and other financing costs. In addition, each of our vessels is subject to a drydock approximately every five years. Eight drydockings were completed during the six months ended June 30, 2023 and two more drydockings were in progress as of June 30, 2023.

 

The main factor affecting our operating cash flow in a period is the timing of the receipt of charterhire, which is due to be paid two weeks or one month in advance and, other than from any asset sales and purchases, are the payments for costs of drydockings and vessel upgrades, the timing of the payment of interest, which is mainly quarterly and amortization of our debt.

 

Our credit facilities require that we maintain certain levels of minimum liquidities and on group basis we maintain $20.0 million minimum liquidity at each quarter. In addition, we intend to declare and make quarterly dividend payments amounting to approximately $2.4 million per quarter on our Series B Preferred Shares on a perpetual basis and in accordance with the Certificate of Designation governing the terms of our Series B Preferred Shares, based on the amount outstanding as of June 30, 2023. Finally, we may, in the discretion of our Board of Directors, declare and pay dividends on our common shares, subject to, among other things, any applicable restrictions contained in our current and future agreements governing our indebtedness, including our credit facilities, and available cash flow.

 

On May 10, 2023 we announced a dividend of $0.375 per Class A common share from the earnings of the first quarter 2023, paid on June 2, 2023 to common shareholders of record as of May 24, 2023, amounting to $13.3 million. On August 3, 2023, we announced a dividend of $0.375 per Class A common share from the earnings of the second quarter 2023 to be paid on September 4, 2023 to common shareholders of record as of August 23, 2023.

 

Other than costs for drydockings and compliance with environmental and decarbonization regulations, there are no other current material commitments for capital expenditures or other known and reasonably likely material cash requirements other than in respect of our growth strategy.

 

All our revenues are denominated in U.S. dollars and a portion of our expenses are denominated in currencies other than U.S. dollars. As of June 30, 2023, we had $259.0 million in cash and cash equivalents, including $161.9 million restricted cash and time deposits of $12.6 million and from free available cash $23.0 million are associated with credit facilities minimum liquidity covenants. Our cash and cash equivalents are mainly held in U.S. dollars, with relatively small amounts of UK pounds sterling and Euros. We regularly review the amount of cash and cash equivalents held in different jurisdictions to determine the amounts necessary to fund our operations and their growth initiatives and amounts needed to service our indebtedness and related obligations. If these amounts are moved out of their original jurisdictions, we may be subject to taxation.

 

Due to our charter coverage and nature of our operating and financial costs, our cashflows are predictable and visible, at least in the near to medium term. We have policies in place to control treasury activities within the group.

 

For example, all new credit facilities must be approved by our Board of Directors, and cash deposits can only be made with institutions meeting certain credit metrics and up to predetermined limits by institution.

 

Our floating rate debt is represented by drawings under a number of secured credit facilities. In December 2021, we hedged our exposure to a potential rising interest rate environment by putting in place a USD one-month LIBOR interest rate cap of 0.75% through fourth quarter 2026, on $484.1 million of our floating rate debt, which reduces over time and represents approximately half of the then outstanding floating rate debt. In February 2022, we entered into a further USD one-month LIBOR interest rate caps of 0.75% through fourth quarter 2026 on $507.9 million of remaining floating rate debt, which also reduces over time and represented approximately half of the outstanding floating rate. These interest rate caps have automatically transited to 1-month Compounded SOFR on July 1, 2023 at a level of 0.64%.

 

 14 

 

The following table presents cash flow information derived from the interim unaudited condensed consolidated statements of cash flows of Global Ship Lease for the six month periods ended June 30, 2023 and 2022.

 

    Six months ended June 30,
    2023    

 

2022

Cash flows from operating activities:          
Net income $ 152.4   $ 125.9
Adjustments to reconcile net income to net cash provided by operating activities:          
Depreciation and amortization $ 43.4   $ 40.1
Amounts reclassified from other comprehensive income   (0.2)    
Amortization of derivative asset’s premium   1.9     0.1
Amortization of deferred financing costs   2.8     6.1
Amortization of original issue premium on repurchase of notes       0.3
Amortization of intangible liabilities-charter agreements   (5.0)     (23.4)
Fair value adjustment on derivative asset   1.4     (6.6)
Prepayment fees on debt repayment       15.2
Stock-based compensation expense   5.2     5.7
Changes in operating assets and liabilities:          
Increase in accounts receivable and other assets $ (2.5)   $ (6.2)
Increase in inventories   (1.2)     (0.5)
Increase in derivative asset       (15.4)
Decrease in accounts payable and other liabilities   (10.7)     (1.0)
Decrease in related parties' balances, net   0.8     2.2
Increase in deferred revenue   12.2     0.6
Unrealized foreign exchange loss    –     – 
Net cash provided by operating activities $ 200.5   $ 143.1
Cash flows from investing activities:          
Acquisition of vessels $ (123.3)   $
Cash paid for vessel expenditures   (4.5)     (3.2)
Advances for vessel acquisitions and other additions   (5.9)     (2.3)
Cash paid for drydockings   (18.3)     (15.3)
Net proceeds from sale of vessel   5.9    
Time deposits (acquired)/withdrawal   (4.0)     0.1
Net cash used in investing activities $ (150.1)   $ (20.7)
Cash flows from financing activities:          
Repurchase of 2024 Notes, including premium $ —    $ (29.1)
Proceeds from drawdown of credit facilities   76.0     60.0
Proceeds from 2027 USPP Notes       350.0
Repayment of credit facilities/sale and leaseback   (100.3)     (79.9)
Repayment of refinanced debt, including prepayment fees       (276.6)
Deferred financing costs paid   (1.1)     (9.3)
Cancellation of Class A common shares   (17.0)     (4.9)
Class A common shares-dividend paid   (26.7)     (23.1)
Series B preferred shares-dividends paid   (4.8)     (4.8)
Net cash used in financing activities $ (73.9)   $ (17.7)
Net (decrease)/increase in cash and cash equivalents and restricted cash   (23.5)     104.7
Cash and cash equivalents and restricted cash at beginning of the period   269.9     195.6
Cash and cash equivalents and restricted cash at end of the period $ 246.4   $ 300.3
Supplementary Cash Flow Information:          
Cash paid for interest   33.3     25.3
Cash received from interest rate caps   15.9     0.3
Non-cash investing activities:          
Unpaid capitalized expenses   12.0     8.2
Unpaid drydocking expenses   16.2     7.4
Non-cash financing activities:          
Unpaid deferred financing costs       0.3
Unrealized (loss)/gain on derivative assets   (5.2)     22.9

 

 15 

 

Net Cash provided by operating activities for the six months ended June 30, 2023 compared to the six months ended June 30, 2022

 

Net cash provided by operating activities was $200.5 million for the six months ended June 30, 2023 reflecting mainly net income of $152.4 million, adjusted for depreciation and amortization of $43.4 million, amortization of derivative asset’s premium of $1.9 million, amounts reclassified from other comprehensive income (OCI) of $0.2 million, amortization of deferred financing costs of $2.8 million, amortization of intangible liabilities of $5.0 million, fair value adjustment on derivative of $1.4 million, stock-based compensation expense of $5.2 million, plus increase in working capital, including deferred revenue, of $1.0 million.

 

Net cash provided by operating activities was $143.1 million for the six months ended June 30, 2022 reflecting mainly net income of $125.9 million, adjusted for depreciation and amortization of $40.1 million, amortization of derivative asset’s premium of $0.1 million, amortization of deferred financing costs and original issue premium on repurchase of notes of $6.4 million, amortization of intangible liabilities of $23.4 million, fair value adjustment on derivative of $6.6 million, stock-based compensation expense of $5.7 million, prepayment fees of $15.2 million plus decrease in working capital, including deferred revenue, of $20.3 million.

 

Cash used in investing activities for the six months ended June 30, 2023 as compared to the six months ended June 30, 2022

 

Cash used in investing activities was $150.1 million for the six months ended June 30, 2023, as compared to $20.7 million for the same period in 2022. Cash used in investing activities for the six months ended June 30, 2023 was the result of (i) $123.3 million for the acquisition of four vessels, (ii) $10.4 million for improvements on all vessels, (iii) $18.3 million for regulatory drydockings, (iv) $5.9 million net proceeds from sale of one vessel and (v) $4.0 million time deposits placed. The principal reason for the decrease is additional investment in new vessels, additional spending on vessel improvements and additional time deposits placed.

 

Cash used in investing activities was $20.7 million for the six months ended June 30, 2022. Cash used in investing activities for the six months ended June 30, 2022 was the result of (i) $5.5 million for improvements on all vessels, (ii) $15.3 million for regulatory drydockings and (iii) $0.1 million time deposit withdrawal.

 

Cash used in financing activities for the six months ended June 30, 2023 as compared to the six months ended June 30, 2022

 

Cash used in financing activities was $73.9 million for the six months period ended June 30, 2023. Cash used in financing activities for the six months ended June 30, 2023 was the result of (i) $100.3 million amortization of debt, (ii) $1.1 million costs incurred in connection with a new credit facility, (iii) $4.8 million and $26.7 million in dividends related to the Series B Preferred Shares and Class A common shares, respectively, (iv) $17.0 million for the repurchase of Class A common shares and (v) $76.0 million from drawdown under a new credit facility.

 

Cash used in financing activities was $17.7 million for the six months ended June 30, 2022. Cash used in financing activities for the six months ended June 30, 2022 was the result of (i) $356.5 million amortization of debt including prepayment fees; (ii) $9.3 million costs incurred in connection with new credit facilities; (iii) $29.1 million of repurchases of our 2024 Notes, including premium; (iv) $4.8 million and $23.1 million in dividends related to the Series B Preferred Shares and Class A common shares, respectively; (v) $4.9 million for the repurchase of Class A common shares; and (vi) $410.0 million from drawdowns under new credit facilities and 2027 USPP Notes (a) for the refinancing of our Hayfin Credit Facility using a portion of the net proceeds of our 2027 USPP Notes for the full prepayment of the remaining outstanding balance of $197.6 plus a prepayment fee of $11.3 million; and (b) for the full prepayment on June, 24, 2022, of our Hellenic Bank Credit Facility using a portion of the net proceeds from the 2027 USPP Notes.

 

In July 2022 we fully redeemed the remaining outstanding 2024 Notes of $89.0 million aggregate principal amount at a price of 102.00% of the principal amount plus accrued and unpaid interest.

 

 16 

 

 

Indebtedness

 

Our indebtedness as of June 30, 2023 comprised:

 

Lender 30/6/2023   Collateral vessels   Interest Rate   Final maturity date
Chailease Credit Facility 3.0   Maira, Nikolas, Newyorker   LIBOR plus 4.2%    March 31, 2025
Syndicated Senior Secured Credit Facility (CACIB, ABN, First-Citizens & Trust Company, Siemens, CTBC, Bank Sinopac, Palatine) 165.2   Dolphin II, Athena, Kristina, Katherine, Agios Dimitrios, Alexandra, Alexis, Olivia I, Orca, Mary   SOFR plus 3.0% plus Credit Adjustment Spread (“CAS”) of 0.21%   December 24, 2026
E.SUN, MICB, Cathay, Taishin Credit Facility 37.5   Dolphin II, Athena, Orca   LIBOR plus 2.75%   July 13, 2026
CACIB, CTBC, Sinopac Facility 41.5   ZIM Xiamen (ex Maira XL)   LIBOR plus 2.75%   April 14, 2026
Deutsche Credit Facility 42.4   ZIM Norfolk (ex UASC Al Khor)   LIBOR plus 3.25%   April 30, 2026
HCOB Credit Facility 32.8   GSL Arcadia, GSL Maria, GSL Dorothea, GSL Tegea, GSL Melita, GSL MYNY   LIBOR plus 3.5%   April-July, 2025
2027 USPP Notes 310.6   20 vessels   Interpolated interest rate of 2.84% plus margin of 2.85%   July 15, 2027
Sinopac Credit Facility 9.1   GSL Valerie   LIBOR plus 3.25%   September 2, 2026
Finance Lease with CMBFL 37.8   Anthea Y   LIBOR plus 3.25%   May 27, 2028
Finance Lease with Neptune 8.4   GSL Violetta   LIBOR plus 4.64%   February 13, 2026
Finance Lease with CMBFL 77.1   GSL Tripoli, GSL Syros, GSL Tinos, GSL Kithira   LIBOR plus 3.25%   September, 2027
HCOB, CACIB, ESUN, CTBC, Taishin Credit Facility 83.9   Borealis vessels   LIBOR plus 3.25%   July, 2026
Macquarie Credit Facility 76.0   tbr GSL Sofia, tbr GSL Effie, tbr GSL Alexandra, GSL Lydia   SOFR plus 3.5%   May, 2026
  925.3            

 

 

Credit Facilities and other Financing Arrangements

 

As of the date of this report all of our loan agreements (except for the sale and lease back agreement with Neptune) have been amended and restated to take into effect the transition from LIBOR to the Secured Overnight Financing Rate (“SOFR”) and the relevant provisions on a replacement rate. In addition, our interest rate caps have automatically transited to 1-month Compounded SOFR on July 1, 2023 at a level of 0.64%.

 

Macquarie Credit Facility

 

On May 18, 2023, we via our subsidiaries Global Ship Lease 72 LLC, Global Ship Lease 73 LLC, Global Ship Lease 74 LLC and Global Ship Lease 75 LLC entered into a new credit facility agreement with Macquarie Bank Limited (“Macquarie”) for an amount of $76.0 million to finance part of the acquisition cost of the four 8,544 TEU vessels for an aggregate purchase price of $123.3 million. The vessels were delivered during the second quarter of 2023.

 

All four tranches were drawdown in the second quarter of 2023 and the credit facility has a maturity in May 2026.

 

The facility is repayable in two equal consecutive quarterly instalments of $5.0 million, six equal consecutive quarterly instalments of $6.0 million and one quarterly instalment of $3.0 million and two equal consecutive quarterly instalments of $1.0 million with a final balloon of $25.0 million payable three years after the first utilisation date.

 

This facility’s interest rate is SOFR plus a margin of 3.50% per annum payable quarterly in arrears.

 

As of June 30, 2023, the outstanding balance of this facility was $76.0 million.

 

 17 

 

 

5.69% Senior Secured Notes due 2027

 

On June 16, 2022, Knausen Holding LLC (the "Issuer"), an indirect wholly-owned subsidiary of us, closed on the private placement of $350.0 million of privately rated/investment grade 5.69% Senior Secured Notes due 2027 (the “2027 Secured Notes”) to a limited number of accredited investors. The fixed interest rate was determined on June 1, 2022, based on the interpolated interest rate of 2.84% plus a margin 2.85%.

 

We used the net proceeds from the private placement for the repayment of the remaining outstanding balances on our New Hayfin Credit Facility and the Hellenic Bank Credit Facility (releasing five unencumbered vessels), and our 2024 Notes. The remaining amount of net proceeds were allocated for general corporate purposes.

 

An amount equal to 15% per annum of the original principal balance of each Note shall be paid in equal quarterly installments on the 15th day of each of January, April, July, and October starting October 15, 2022, and the remaining unpaid principal balance shall be due and payable on the maturity date of July 15, 2027. Interest accrues on the unpaid balance of the Notes, payable quarterly on the 15th day of January, April, July, and October in each year, such interest commencing and accruing on and from June 14, 2022.

 

The 2027 Secured Notes are senior obligations of the Issuer, secured by first priority mortgages on 20 identified vessels owned by subsidiaries of the Issuer (the “Subsidiary Guarantors”) and certain other associated assets and contract rights, as well as share pledges over the Subsidiary Guarantors. In addition, the 2027 Secured Notes are fully and unconditionally guaranteed by us.

 

As of June 30, 2023, the outstanding balance of this facility was $310.6 million.

 

 

$60.0 Million E.SUN, MICB, Cathay, Taishin Credit Facility

 

On December 30, 2021, we, via our subsidiaries Zeus One Marine LLC, Hephaestus Marine LLC and Pericles Marine LLC, entered into a new syndicated senior secured debt facility with E.SUN Commercial Bank Ltd (“E.SUN”), Cathay United Bank (“Cathay”), Mega International Commercial Bank Co. Ltd (“MICB”) and Taishin International Bank (“Taishin”). We, using a portion of the net proceeds from this credit facility fully prepaid the outstanding amount of the Blue Ocean Junior Credit facility, amounting to $26.2 million plus a prepayment fee of $4.0 million. All three tranches were drawn down in January 2022.

 

The facility is repayable in eight equal consecutive quarterly instalments of $4.5 million and ten equal consecutive quarterly instalments of $2.4 million.

 

This facility bears interest at LIBOR plus a margin of 2.75% per annum payable quarterly in arrears.

  

As of June 30, 2023, the outstanding balance of this facility was $37.5 million.

 

 

 

$12.0 Million Sinopac Capital International Credit Facility

 

On August 27, 2021, we, via our subsidiary Global Ship Lease 42 LLC entered into a secured credit facility for an amount of $12.0 million with Sinopac Capital International (HK) Limited (“Sinopac Credit Facility”), partially used to fully refinance the Hayfin Credit Facility. The full amount was drawn down in September 2021 and the credit facility has a maturity in September 2026.

 

The facility is repayable in 20 equal consecutive quarterly instalments of $0.4 million with a final balloon of $3.6 million payable together with the final instalment.

 

This facility bears interest at LIBOR plus a margin of 3.25% per annum payable quarterly in arrears.

 

As of June 30, 2023, the outstanding balance of this facility was $9.1 million.

 

 

$140.0 Million HCOB, CACIB, ESUN, CTBC, Taishin Credit Facility

 

On July 6, 2021, we entered into a facility with Credit Agricole Corporate and Investment Bank (“CACIB”), Hamburg Commercial Bank AG (“HCOB”), E.Sun Commercial Bank, Ltd (“ESUN”), CTBC Bank Co. Ltd. (“CTBC”) and Taishin International Bank (“Taishin”) for a total of $140.0 million to finance the acquisition of the Twelve Vessels. The full amount was drawdown in July 2021 and the credit facility has a maturity in July 2026.

The facility is repayable in six equal consecutive quarterly instalments of $8.0 million, eight equal consecutive quarterly instalments of $5.4 million and six equal consecutive quarterly instalments of $2.2 million with a final balloon of $35.6 million payable together with the final instalment. On March 23, 2023, due to the sale of GSL Amstel, we additionally repaid $2.8 million out of which $1.0 million deducted from the balloon instalment, and the vessel was released as collateral under the Company’s $140.0 million HCOB, CACIB, ESUN, CTBC, Taishin Credit Facility.

 18 

 

This facility bears interest at LIBOR plus a margin of 3.25% per annum payable quarterly in arrears.

As of June 30, 2023, the outstanding balance of this facility was $83.9 million.

 

$51.7 Million Deutsche Bank AG Credit Facility

 

On May 6, 2021, we, via our subsidiary Laertis Marine LLC, entered into a secured facility for an amount of $51.7 million with Deutsche Bank AG in order to refinance one of the three previous tranches of the $180.5 million Deutsche, CIT, HCOB, Entrust, Blue Ocean Credit Facility, that had a maturity date on June 30, 2022, of an amount $48.5 million.

 

The facility is repayable in 20 equal consecutive quarterly instalments of $1.2 million with a final balloon of $28.4 million payable together with the final instalment.

 

This facility bears interest at LIBOR plus a margin of 3.25% per annum payable quarterly in arrears.

 

As of June 30, 2023, the outstanding balance of this facility was $42.4 million.

 

 

$64.2 Million Hamburg Commercial Bank AG Credit Facility

 

On April 15, 2021, we entered into a Senior Secured term loan facility with Hamburg Commercial Bank AG (the “HCOB Credit Facility”) for an amount of up to $64.2 million in order to finance the acquisition of six out of the Seven Vessels.

 

Tranche A, E and F amounting to $32.1 million were drawn down in April 2021 and have a maturity date in April 2025, Tranche B and D amounting to $21.4 million were drawn down in May 2021 and have a maturity date in May 2025, and Tranche C amounting to $10.7 million was drawn down in July 2021 and has a maturity date in July 2025.

 

Each Tranche of the facility is repayable in 16 equal consecutive quarterly instalments of $0.7 million.

 

This facility bears interest at LIBOR plus a margin of 3.50% per annum payable quarterly in arrears.

 

As of June 30, 2023, the outstanding balance of this facility was $32.8 million.

 

 

$51.7 Million CACIB, Bank Sinopac, CTBC Credit Facility

 

On April 13, 2021, we, via our subsidiary Penelope Marine LLC entered into a secured facility for an amount of $51.7 million in order to refinance one of the three previous tranches of the $180.5 million Deutsche, CIT, HCOB, Entrust, Blue Ocean Credit Facility, that had a maturity date on June 30, 2022, of an amount $48.6 million. The secured credit facility has a maturity in April 2026.

 

The lenders are Credit Agricole Corporate and Investment Bank (“CACIB”), Bank Sinopac Co. Ltd. (“Bank Sinopac”) and CTBC Bank Co. Ltd. (“CTBC”).

 

The facility is repayable in 20 equal consecutive quarterly instalments of $1.3 million with a final balloon of $26.2 million payable together with the final instalment.

 

This facility bears interest at LIBOR plus a margin of 2.75% per annum payable quarterly in arrears.

 

As of June 30, 2023, the outstanding balance of this facility was $41.5 million.

 

 

$9.0 Million Chailease Credit Facility

 

On February 26, 2020, we, via our subsidiaries, Athena Marine LLC, Aphrodite Marine LLC and Aris Marine LLC, entered into a secured term facility agreement with Chailease International Financial Services Pte., Ltd. for an amount of $9.0 million. The Chailease Bank Facility was used for the refinance of DVB Credit Facility.

 

The facility is repayable in 36 consecutive monthly instalments $0.2 million and 24 monthly instalments of $0.1 million with a final balloon of $1.3 million payable together with the final instalment.

 

This facility bears interest at LIBOR plus a margin of 4.20% per annum.

 

As of June 30, 2023, the outstanding balance of this facility was $3.0 million.

 

 19 

 

 

$268.0 Million Syndicated Senior Secured Credit Facility (CACIB, ABN, First-Citizens & Trust Company, Siemens, CTBC, Bank Sinopac, Palatine)

 

On September 19, 2019, we entered into a Syndicated Senior Secured Credit Facility in order to refinance existing credit facilities that had a maturity date in December 2020, of an amount $224.3 million.

 

The Senior Syndicated Secured Credit Facility was agreed to be borrowed in two tranches. The Lenders are Credit Agricole Corporate and Investment Bank (“CACIB”), ABN Amro Bank N.V. (“ABN”), First-Citizens & Trust Company, Siemens Financial Services, Inc (“Siemens”), CTBC Bank Co. Ltd. (“CTBC”), Bank Sinopac Ltd. (“Bank Sinopac”) and Banque Palatine (“Palatine”).

 

Tranche A amounting to $230.0 million was drawn down in full on September 24, 2019 and is scheduled to be repaid in 20 consecutive quarterly instalments of $5.2 million starting from December 12, 2019 and a balloon payment of $126.0 million payable on September 24, 2024.

 

Tranche B amounts to $38.0 million was drawn down in full on February 10, 2020 and is scheduled to be repaid in 20 consecutive quarterly instalments of $1.0 million and a balloon payment of $18.0 million payable in the termination date on the fifth anniversary from the utilization date of Tranche A, which falls in September 24, 2024. In January 2022, we agreed a new senior secured debt facility to refinance its outstanding Syndicated Senior Secured Credit Facility, which extended the maturity date from September 2024 to December 2026, amended certain covenants in our favor at an unchanged rate of LIBOR + 3.00%. On July 1, 2022, the interest rate is SOFR plus a margin of 3.00% plus Credit Adjustment Spread (“CAS”) and is payable at each quarter end date.

 

As of June 30, 2023, the outstanding balance of this facility was $165.2 million.

 

 

$120.0 Million Sale and Leaseback agreements – CMBFL Four Vessels

 

On August 26, 2021, we, via our subsidiaries Global Ship Lease 68 LLC, Global Ship Lease 69 LLC, Global Ship Lease 70 LLC and Global Ship Lease 71 LLC, entered into four $30.0 million sale and leaseback agreements with CMB Financial Leasing Co. Ltd. (“CMBFL”) to finance the acquisition of the Four Vessels. As at September 30, 2021, we had drawdown a total of $90.0 million. The drawdown for the fourth vessel, amounting to $30.0 million, took place on October 13, 2021 together with the delivery of this vessel. We have a purchase obligation to acquire the Four Vessels at the end of their lease terms and under ASC 842-40, the transaction has been accounted for as a failed sale. In accordance with ASC 842-40, we did not derecognize the respective vessels from its balance sheet and accounted for the amounts received under the sale and leaseback agreement as financial liabilities.

 

Each sale and leaseback agreement is repayable in 12 equal consecutive quarterly instalments of $1.6 million and 12 equal consecutive quarterly instalments of $0.3 million with a repurchase obligation of $7.0 million on the final repayment date.

 

The sale and leaseback agreements for the three vessels mature in September 2027 and for the fourth vessel in October 2027 and bear interest at LIBOR plus a margin of 3.25% per annum payable quarterly in arrears.

 

As of June 30, 2023, the outstanding balance of these sale and lease back agreements was $77.1 million.

 

 

$54.0 Million Sale and Leaseback agreement – CMBFL

 

On May 20, 2021, we, via our subsidiary Telemachus Marine LLC entered into a $54.0 million, sale and leaseback agreement with CMB Financial Leasing Co. Ltd. (“CMBFL”) to refinance one of the three previous tranches of the $180.5 million Deutsche, CIT, HCOB, Entrust, Blue Ocean Credit Facility, that had a maturity date on June 30, 2022, of an amount $46.6 million. We have a purchase obligation to acquire the vessel at the end of the lease term and under ASC 842-40, the transaction has been accounted for as a failed sale. In accordance with ASC 842-40, we did not derecognize the respective vessel from its balance sheet and accounted for the amount received under the sale and leaseback agreement as a financial liability.

 

The sale and leaseback agreement will be repayable in eight equal consecutive quarterly instalments of $2.0 million each and 20 equal consecutive quarterly instalments of $0.9 million with a repurchase obligation of $19.98 million on the final repayment date.

 

The sale and leaseback agreement matures in May 2028 and bears interest at LIBOR plus a margin of 3.25% per annum payable quarterly in arrears.

  

 20 

 

 

In May 2021, on the actual delivery date of the vessel, we drew $54.0 million, which represented vessel purchase price $75.0 million less advanced hire of $21.0 million, which advanced hire neither bore any interest nor was refundable and was set off against payment of the purchase price payable to us by the unrelated third party under this agreement.

 

As of June 30, 2023, the outstanding balance of this sale and leaseback agreement was $37.8 million.

 

 

$14.7 Million Sale and Leaseback agreement – Neptune Maritime Leasing

 

On May 12, 2021, we, via our subsidiary GSL Violetta LLC entered into a $14.7 million sale and leaseback agreement with Neptune Maritime Leasing (“Neptune”) to finance the acquisition of GSL Violetta delivered in April 2021.We have a purchase obligation to acquire the vessel at the end of the lease term and under ASC 842-40, the transaction has been accounted for as a failed sale. In accordance with ASC 842-40, we did not derecognize the respective vessel from our balance sheet and accounted for the amount received under the sale and leaseback agreement as a financial liability. In May 2021, we drew $14.7 million under this agreement.

 

The sale and leaseback agreement will be repayable in 15 equal consecutive quarterly instalments of $0.8 million each and four equal consecutive quarterly instalments of $0.5 million with a repurchase obligation of $1.0 million on the last repayment date.

 

The sale and leaseback agreement matures in February 2026 and bears interest at LIBOR plus a margin of 4.64% per annum payable quarterly in arrears.

 

As of June 30, 2023, the outstanding balance of this sale and leaseback agreement was $8.4 million.

 

Covenants and Security

 

The agreements governing our indebtedness contain certain financial covenants, which require us to maintain, among other things:

 

·minimum liquidity at the borrower (vessel-owned or finance lessor) level and minimum liquidity of at least $20.0 million at the group level; and

·minimum market value of collateral vessels for each credit facility or vessels under each financing obligation, as applicable, such that the aggregate market value of such vessels related to each such agreement is between 120% and 143%, depending on the particular credit facility or financing obligation, of the aggregate principal amount outstanding under such debt agreement, or, if we do not meet such threshold, to provide additional security to eliminate the shortfall.

 

 

 

 

The agreements governing our indebtedness also contain undertakings limiting or restricting us from, among other things:

 

·incurring additional indebtedness or issuing certain preferred stock;

 

·making any substantial change to the general nature of our business;

 

·paying dividends;

 

·redeeming or repurchasing capital stock;

 

·selling the collateral vessel, if applicable;

 

 

·entering into certain transactions other than arm’s length transactions;

 

·acquiring a company, shares or securities or a business or undertaking;

 

·effecting a change of control of us, entering into any amalgamation, demerger, merger, consolidation or corporate reconstruction, or selling all or substantially all of our properties or assets;

 

·experiencing any change in the position of Executive Chairman; and

 

·changing the flag, class or technical or commercial management of the vessel mortgaged under such facility or terminating or materially amending the management agreement relating to such vessel.

 

Our secured credit facilities and 2027 USPP Notes are generally secured by, among other things:

 

·a first priority mortgage over the relevant collateralized vessels;

 

·first priority assignment of earnings and insurances from the mortgaged vessels;

 

·pledge of the earnings account of the mortgaged vessel;

 

·pledge of the equity interest of each of the vessel-owning subsidiaries; and

 

·corporate guarantees.

 

As at June 30, 2023 we were in compliance with all of the financial covenants in the agreements governing our indebtedness.

 21 

 

  

Debt repaid in 2023

 

On March 23, 2023, due to the sale of GSL Amstel, we additionally repaid $2.8 million out of which $1.0 million deducted from the balloon instalment, and the vessel was released as collateral under our $140.0 Million HCOB, CACIB, ESUN, CTBC, Taishin Credit Facility. 

 

Leverage

 

Debt as at June 30, 2023 totaled $925.3 million, comprising $491.3 million of secured bank debt collateralized by vessels, $310.6 million of 2027 USPP Notes collateralized by vessels and $123.4 million under sale and leaseback financing transactions. As of June 30, 2023, five of our vessels were unencumbered.

 

We believe that funds generated by the business and retained will be sufficient to meet our operating needs for the next twelve months, including working capital requirements, drydocking costs, interest and debt repayment obligations.

 

As market conditions warrant, we may from time to time, depending upon market conditions and the provisions on our facilities/notes, seek to opportunistically prepay our outstanding indebtedness.

 

Quantitative and Qualitative Disclosures about Market Risks

 

Interest Rate Risk

 

We are exposed to the impact of interest rate changes primarily through our floating-rate borrowings. Significant increases in interest rates could adversely affect our results of operations and our ability to service our own debt.

 

Interest rate risk mainly will apply to any future debt facility on floating rate since as of June 30, 2023 all of our outstanding loan balances on floating interest rates are hedged.

 

 

Sensitivity Analysis

 

Our analysis of the potential effects of variations in market interest rates is based on a sensitivity analysis, which models the effects of potential market interest rate changes on our financial condition and results of operations. The following sensitivity analysis may have limited use as a benchmark and should not be viewed as a forecast as it does not include a variety of other potential factors that could affect our business as a result of changes in interest rates.

 

Currently we are fully hedged on our floating rate debt of $614.7 million.

 

 

Foreign Currency Exchange Risk

 

The shipping industry’s functional currency is the U.S. dollar. All of our revenues and the majority of our operating costs are in U.S. dollars. In the future, we do not expect to be exposed to any significant extent to the impact of changes in foreign currency exchange rates. Consequently, we do not presently intend to enter into derivative instruments to hedge the foreign currency translation of assets or liabilities or foreign currency transactions or to use financial instruments for trading or other speculative purposes.

 

Inflation

 

Historically, with the exception of rising costs associated with the employment of international crews for our ships and the impact of global oil prices on the cost of lubricating oil, we had not experienced a significant impact on ship operating expenses, drydocking expenses and general and administrative expenses. Currently, due to the conflict in Ukraine and the new macroeconomic environment, among other factors, there is inflationary pressure which may, in turn, increase certain of our other operating expenses, such as the cost of spares and supplies, transportation costs and other expenses, in addition to drydocking expenses and general and administrative expenses.

 

Off-Balance Sheet Arrangements

 

We do not have any off-balance sheet arrangements that have or are reasonably likely to have a current or future effect on our financial condition, changes in financial condition, revenues or expenses, results of operations, liquidity, capital expenditures or capital resources that is material to investors.

 

  

 

 

 22 

 

 

 

 

 

 

GLOBAL SHIP LEASE, INC.

 

INTERIM UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

 

PERIOD ENDED JUNE 30, 2023

 

 

 

 

 

 

 

 

 

 

 

 

  

 

 

GLOBAL SHIP LEASE, INC.

 

     

Index

  Page
INTERIM UNAUDITED CONDENSED CONSOLIDATED BALANCE SHEETS AS AT JUNE 30, 2023 AND DECEMBER 31, 2022   F-1
INTERIM UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF INCOME FOR THE SIX MONTHS ENDED JUNE 30, 2023 AND 2022   F-2
INTERIM UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME FOR THE SIX MONTHS ENDED JUNE 30, 2023 AND 2022   F-3
INTERIM UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS FOR THE SIX MONTHS ENDED JUNE 30, 2023 AND 2022   F-4
INTERIM UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS’ EQUITY FOR THE SIX MONTHS ENDED JUNE 30, 2023 AND 2022   F-5
NOTES TO THE INTERIM UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS   F-6

 

 

 

 

 

 

 

 

 

 

 

  

Global Ship Lease, Inc.

 

Interim Unaudited Condensed Consolidated Balance Sheets

 

(Expressed in thousands of U.S. dollars except share data)

 

 

                 
      As of
  Note    

June 30, 2023

   

December 31, 2022

ASSETS              
CURRENT ASSETS              
Cash and cash equivalents     $ 84,493   $ 120,130
Time deposits       12,600     8,550
Restricted cash       45,142     28,363
Accounts receivable, net       3,109     3,684
Inventories       13,399     12,237
Prepaid expenses and other current assets       36,252     33,765
Derivative asset 5     28,177     29,645
Due from related parties 7     48     673
Total current assets     $ 223,220   $ 237,047
NON - CURRENT ASSETS              
Vessels in operation 3   $ 1,716,778   $ 1,623,307
Advances for vessels acquisitions and other additions 3     6,699     4,881
Deferred charges, net       69,106     54,663
Other non-current assets 2g     31,572     31,022
Derivative asset, net of current portion 5     28,727     33,858
Restricted cash, net of current portion       116,767     121,437
Total non - current assets       1,969,649     1,869,168
TOTAL ASSETS     $ 2,192,869   $ 2,106,215
LIABILITIES AND SHAREHOLDERS' EQUITY              
CURRENT LIABILITIES              
Accounts payable     $ 25,809   $ 22,755
Accrued liabilities       29,624     36,038
Current portion of long - term debt 6     204,140     189,832
Current portion of deferred revenue       29,661     12,569
Due to related parties 7     692     572
Total current liabilities     $ 289,926   $ 261,766
LONG - TERM LIABILITIES              
Long - term debt, net of current portion and deferred financing costs 6   $ 707,673   $ 744,557
Intangible liabilities - charter agreements 4     8,697     14,218
Deferred revenue, net of current portion       114,331     119,183
Total non - current liabilities       830,701     877,958
Total liabilities     $ 1,120,627   $ 1,139,724
Commitments and Contingencies 8        
SHAREHOLDERS' EQUITY              

Class A common shares - authorized 214,000,000 shares with a $0.01 par value 35,165,914 shares issued and outstanding (2022 - 35,990,288 shares)

9   $ 351   $ 359

Series B Preferred Shares - authorized 104,000 shares with a $0.01 par value 43,592 shares issued and outstanding (2022 - 43,592 shares)

9        
Additional paid in capital       676,571     688,262
Retained Earnings       367,311     246,390
Accumulated other comprehensive income       28,009     31,480
Total shareholders' equity       1,072,242     966,491
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY     $ 2,192,869   $ 2,106,215

 

 

 

 

 

 

See accompanying notes to interim unaudited condensed consolidated financial statements

 

F-1 

Global Ship Lease, Inc.

 

Interim Unaudited Condensed Consolidated Statements of Income

 

(Expressed in thousands of U.S. dollars except share and per share data)

 

 

             
     

Six months ended

June 30,

 

 

Note

  2023     2022
OPERATING REVENUES            

Time charter revenues (include related party revenues of $nil and $66,929 for each of the periods ended June 30, 2023 and 2022, respectively)

$

316,326 $

284,667

Amortization of intangible liabilities-charter agreements (includes related party amortization of intangible liabilities-charter agreements of $nil and $5,385 for each of the periods ended June 30, 2023 and 2022, respectively)

4

5,045   23,420
Total Operating Revenues     321,371     308,087
             
OPERATING EXPENSES            

Vessel operating expenses (include related party vessel operating expenses of $8,901 and $8,609 for each

of the periods ended June 30, 2023 and 2022, respectively)

7

  86,169     80,886

Time charter and voyage expenses (include related party time charter and voyage

expenses of $3,662 and $2,950 for each of the periods ended June 30, 2023 and 2022, respectively)

7

  12,139     9,458
Depreciation and amortization 3   43,356     40,125
General and administrative expenses     9,500     10,292
Operating Income     170,207     167,326
             
NON-OPERATING INCOME/(EXPENSES)            
Interest income     4,394     515

Interest and other finance expenses (include acceleration of deferred financing costs of $108 and prepayment fees, acceleration of

deferred financing costs and premium of $19,053 for each of the periods ended June 30, 2023 and 2022, respectively)

   

(22,008)

    (48,742)
Other income, net     1,160     178
Fair value adjustment on derivative asset 5   (1,368)     6,648
Total non-operating expenses     (17,822)     (41,401)
Income before income taxes     152,385     125,925
Income taxes     (5)    
Net Income   $ 152,380   $ 125,925
Earnings allocated to Series B Preferred Shares 9   (4,768)     (4,768)
Net Income available to Common Shareholders   $ 147,612   $ 121,157
Earnings per Share            
             
Weighted average number of Class A common shares outstanding            
Basic 11   35,533,273     36,578,297
Diluted 11   36,206,309     37,288,826
             
Net Earnings per Class A common share            
Basic 11 $ 4.15   $ 3.31
Diluted 11 $ 4.08   $ 3.25

 

 

 

 

 

See accompanying notes to interim unaudited condensed consolidated financial statements

  

F-2 

Global Ship Lease, Inc.

 

Interim Unaudited Condensed Consolidated Statements of Comprehensive Income

 

(Expressed in thousands of U.S. dollars)

 

 

               
       

Six months ended

June 30,

 

 

Note

    2023     2022
Net Income available to Common Shareholders     $ 147,612   $ 121,157
Other comprehensive income:              
Cash Flow Hedge:              
Unrealized (loss)/gain on derivative assets 5     (5,231)     22,914
Amortization of interest rate cap premium       1,936     129
Amounts reclassified to earnings       (176)    
Total Other Comprehensive (Loss)/Income       (3,471)     23,043
Total Comprehensive Income     144,141    $ 144,200

 

 

 

 

 

 

 

See accompanying notes to interim unaudited condensed consolidated financial statements

  

F-3 

Global Ship Lease, Inc.

 

Interim Unaudited Condensed Consolidated Statements of Cash Flows

 

(Expressed in thousands of U.S. dollars)

 

             
     

Six months ended

June 30,

 

 

Note

  2023     2022
Cash flows from operating activities:            
Net Income    $ 152,380    $ 125,925
Adjustments to reconcile net income to net cash provided by operating activities:            
Depreciation and amortization 3   43,356     40,125
Amounts reclassified from other comprehensive income     (176)    
Amortization of derivative asset’s premium     1,936     129
Amortization of deferred financing costs 6   2,836     6,093
Amortization of original issue premium on repurchase of notes         326
Amortization of intangible liabilities - charter agreements 4   (5,045)     (23,420)
Fair value adjustment on derivative asset 5   1,368     (6,648)
Prepayment fees on debt repayment 6       15,197
Stock-based compensation expense 10   5,179     5,661
Changes in operating assets and liabilities:            
Increase in accounts receivable and other assets     (2,462)     (6,184)
Increase in inventories     (1,162)     (543)
Increase in derivative asset 5       (15,370)
Decrease in accounts payable and other liabilities     (10,668)     (1,015)
Decrease in related parties' balances, net 7   745     2,183
Increase in deferred revenue     12,240     607
Unrealized foreign exchange loss     1     4
Net cash provided by operating activities   $ 200,528   $ 143,070
Cash flows from investing activities:            
Acquisition of vessels     (123,300)    
Cash paid for vessel expenditures     (4,551)     (3,225)
Advances for vessels acquisitions and other additions     (5,945)     (2,324)
Cash paid for drydockings     (18,300)     (15,253)
Net proceeds from sale of vessel     5,940    
Time deposits (acquired)/withdrawal     (4,050)     100
Net cash used in investing activities   $ (150,206)   $ (20,702)
Cash flows from financing activities:            
Repurchase of 2024 Notes, including premium 6       (29,070)
Proceeds from drawdown of credit facilities 6   76,000     60,000
Proceeds from 2027 Secured Notes 6       350,000
Repayment of credit facilities/sale and leaseback 6   (100,271)     (79,918)
Repayment of refinanced debt, including prepayment fees 6       (276,671)
Deferred financing costs paid     (1,140)     (9,264)
Cancellation of Class A common shares 9   (16,980)     (4,925)
Class A common shares - dividend paid 9   (26,691)     (23,093)
Series B Preferred Shares - dividend paid 9   (4,768)     (4,768)
Net cash used in financing activities   $ (73,850)   $ (17,709)
Net (decrease)/increase in cash and cash equivalents and restricted cash     (23,528)     104,659

Cash and cash equivalents and restricted cash at beginning of the period

    269,930     195,642

Cash and cash equivalents and restricted cash at end of the period

 

$

246,402  

$

300,301
             
Supplementary Cash Flow Information:            
Cash paid for interest   $ 33,329   $ 25,297
Cash received from interest rate caps     15,916     254
Non-cash investing activities: