Exhibit 99.1
Performance Shipping Inc.
Unless otherwise specified herein, references to the “Company” or “we”, “us” and “our” shall include Performance Shipping Inc. and its subsidiaries. The following management’s discussion and analysis should be read in conjunction with our interim unaudited consolidated financial statements and their notes attached hereto. This discussion contains forward-looking statements that reflect our current views with respect to future events and financial performance. Our actual results may differ materially from those anticipated in these forward-looking statements. For additional information relating to our management’s discussion and analysis of financial condition and results of operations, please see our annual report on Form 20-F for the year ended December 31, 2022 filed with the Securities and Exchange Commission (the “SEC”) on April 28, 2023.
Management’s Discussion and Analysis of Financial Condition and Results of Operations for the Six Months Ended June 30, 2023
Our Operations
We have historically chartered our vessels to customers primarily pursuant to short-term and long-term time charters and on spot voyages, and also through pool arrangements. Under our time charters, the charterer typically pays us a fixed daily charter hire rate and bears all voyage expenses, including the cost of bunkers (fuel oil) and port and canal charges. Under spot charter arrangements, voyage expenses that are unique to a particular charter are paid for by us. Under our pool arrangements, the pool manager charters our vessels, prices the charters, and is required to pay all voyage costs, including port charges, fuel and canal tolls and to collect receivables. We receive a portion of the total revenues generated by the pool, net of expenses incurred by the pool, and the amount allocated to our participating vessel, is determined in accordance with an agreed-upon formula determined by the margins allocated to our participating vessel based on her age, design and other performance characteristics. In all three types of charters, we remain responsible for paying the chartered vessel’s operating expenses, including the cost of crewing, insuring, repairing and maintaining the vessel, the costs of spares and consumable stores, tonnage taxes, environmental costs, and other miscellaneous expenses. We also pay commissions to unaffiliated shipbrokers, and to related party brokers when they are involved, for the arrangement of the relevant charter.
Factors affecting our results of operations
We believe that the important measures for analyzing trends in our results of operations consist of the following:
| • | Ownership days. We define ownership days as the aggregate number of days in a period during which each vessel in our fleet has been owned by us. Ownership days are an indicator of the size of our fleet over a period and affect both the amount of revenues and the amount of expenses that we record during a period. |
| • | Available days. We define available days as the number of our ownership days less the aggregate number of days that our vessels are off-hire due to scheduled repairs or repairs under guarantee, vessel upgrades or special surveys, including the aggregate amount of time that we spend positioning our vessels for such events. The shipping industry uses available days to measure the number of days in a period during which vessels should be capable of generating revenues. |
| • | Operating days, including ballast leg. We define operating days, including ballast leg, as the number of available days in a period less the aggregate number of days that our vessels are off-hire. The specific calculation counts as on-hire the days of the ballast leg of the spot voyages, as long as a charter party is in place. The shipping industry uses operating days to measure the aggregate number of days in a period during which vessels actually generate revenues. |
| • | Fleet utilization. We calculate fleet utilization by dividing the number of our operating days during a period by the number of our available days during the period. The shipping industry uses fleet utilization to measure a company’s efficiency in finding suitable employment for its vessels and minimizing the amount of days that its vessels are off-hire for reasons other than scheduled repairs or repairs under guarantee, vessel upgrades and special surveys, including vessel positioning for such events. |
| • | Time Charter Equivalent (TCE) rates. We define TCE rates as our voyage and time charter revenues, less voyage expenses during a period divided by the number of our available days during the period, which is consistent with industry standards. Voyage expenses include port charges, bunker (fuel) expenses, canal charges and commissions. TCE is a non-GAAP measure. TCE rate is a standard shipping industry performance measure used primarily to compare daily earnings generated by vessels despite changes in the mix of charter types (i.e., voyage (spot) charters, time charters, and bareboat charters). |
| • | Daily Operating Expenses. We define daily operating expenses as total vessel operating expenses, which include crew wages and related costs, the cost of insurance and vessel registry, expenses relating to repairs and maintenance, the costs of spares and consumable stores, lubricant costs, tonnage taxes, regulatory fees, environmental costs, lay-up expenses and other miscellaneous expenses divided by total ownership days for the relevant period. |
The following tables reflect our ownership days, available days, operating days, fleet utilization, TCE rate, and daily operating expenses for our total fleet, as well as a calculation for our TCE rates, for the periods indicated.
| | | For the six months ended June 30, | |
| | | 2023 | | | 2022 | |
| Ownership days | | | 1,448 | | | | 905 | |
| Available days | | | 1,408 | | | | 875 | |
| Operating days, including ballast leg | | | 1,390 | | | | 855 | |
| Fleet utilization | | | 99 | % | | | 98 | % |
| Time charter equivalent (TCE) rate | | $ | 41,526 | | | $ | 18,888 | |
| Daily vessel operating expenses | | $ | 7,135 | | | $ | 6,936 | |
| | | For the six months ended June 30, | |
| | | 2023 | | | 2022 | |
| | | (in thousands of U.S. dollars, except for available days and TCE rate) | |
| Voyage and time charter revenues | | $ | 60,984 | | | $ | 25,275 | |
| Less: voyage expenses | | | (2,515 | ) | | | (8,748 | ) |
| | | | | | | | | |
| Time charter equivalent revenues | | $ | 58,469 | | | $ | 16,527 | |
| | | | | | | | | |
| Available days | | | 1,408 | | | | 875 | |
| Time charter equivalent (TCE) rate | | $ | 41,526 | | | $ | 18,888 | |
Voyage and Time Charter Revenues
Our revenues are driven primarily by the number of vessels in our fleet, the number of days that our vessels operate, and the amount of daily charter hire that our vessels earn under charters which, in turn, are affected by a number of factors, including:
| • | the duration of our charters; |
| • | our decisions relating to vessel acquisitions and disposals; |
| • | the amount of time that we spend positioning our vessels; |
| • | the amount of time that our vessels spend in drydock undergoing repairs; |
| • | maintenance and upgrade work; |
| • | the age, condition, and specifications of our vessels; |
| • | levels of supply and demand in the shipping industry; and |
| • | other factors affecting spot market charter rates for vessels. |
Vessels operating on time charters for a certain period of time provide more predictable cash flows over that period of time, but can yield lower profit margins than vessels operating in the spot charter market during periods characterized by favorable market conditions. Vessels operating in the spot charter market, or through pool arrangements, generate revenues that are less predictable but may enable their owners to capture increased profit margins during periods of improvements in charter rates, although their owners would be exposed to the risk of declining charter rates, which may have a materially adverse impact on financial performance. As we employ vessels on time and spot charters, or through pool arrangements, we mitigate our charter rates fluctuation exposure.
Currently, the vessels in our fleet are employed on time charter voyages, spot voyages or through pool arrangements. Our charter agreements subject us to counterparty risk. In depressed market conditions, charterers may seek to renegotiate the terms of their existing charter agreements or avoid their obligations under those contracts. Should a counterparty fail to honor its obligations under agreements with us, we could sustain significant losses, which could have a material adverse effect on our business, financial condition, results of operations and cash flows.
Voyage Expenses
We incur voyage expenses that include port and canal charges, bunker (fuel oil) expenses and commissions. Port and canal charges and bunker expenses primarily increase in periods during which vessels are employed on voyage charters because these expenses are for the account of the owner of the vessels, while they are on the account of the charterer when vessels are time-chartered. Laid-up vessels, if any, do not incur bunkers costs. However, at times when our vessels are off-hire due to other reasons, we incur port and canal charges and bunker expenses.
We have paid commissions ranging from 1.25% to 6.25% of the total daily charter hire rate of each charter to unaffiliated shipbrokers, depending on the number of brokers involved with arranging the charter, and to Pure Brokerage and Shipping Corp. (or “Pure Brokerage”), a related party shipbroker. Our in-house fleet manager, UOT, our wholly-owned subsidiary, receives a commission that is equal to 2% of our gross revenues in exchange for providing us with technical and commercial management services in connection with the employment of our fleet. However, this commission is eliminated from our consolidated financial statements as an intercompany transaction.
Vessel Operating Expenses
Vessel operating expenses include crew wages and related costs, the cost of insurance and vessel registry, expenses relating to repairs and maintenance, the cost of spares and consumable stores, tonnage taxes, regulatory fees, environmental costs, lay-up expenses, and other miscellaneous expenses. Other factors beyond our control, some of which may affect the shipping industry in general, including, for instance, COVID-related disruptions, inflationary pressures or the war in Ukraine, which could cause our crew costs and other operating expenses to increase, developments relating to market prices for crew wages and insurance, may also cause these expenses to increase. In conjunction with our senior executive officers, UOT has established an operating expense budget for each vessel and performs the day-to-day management of our vessels under separate management agreements with our vessel-owning subsidiaries. We monitor the performance of UOT by comparing actual vessel operating expenses with the operating expense budget for each vessel.
Vessel Depreciation
We depreciate all our vessels on a straight-line basis over their estimated useful lives, which we estimate to be 25 years for our tanker vessels from the date of their initial delivery from the shipyard. Depreciation is based on the cost less the estimated salvage values. Each vessel’s salvage value is the product of her light-weight tonnage and estimated scrap rate, which is estimated at $350 per light-weight ton for all vessels in our fleet. We believe that these assumptions are common in the tanker industry.
General and Administrative Expenses
We incur general and administrative expenses, including our onshore related expenses such as legal and professional expenses. Certain of our general and administrative expenses have been provided for under our Brokerage Services Agreement with Pure Brokerage. We also incur payroll expenses of employees and general and administrative expenses reflecting the costs associated with running a public company, including board of director costs, director and officer insurance, investor relations, registrar and transfer agent fees, and legal and accounting costs related to our compliance with public reporting obligations.
Interest and Finance Costs
We have historically incurred interest expense and financing costs in connection with vessel-specific debt. As of June 30, 2023, our aggregate outstanding debt, amounted to $120.0 million. We expect to manage any exposure in interest rates through our regular operating and financing activities and, when deemed appropriate, through the use of derivative financial instruments.
The following table presents interim unaudited results of operations for the six month periods ended June 30, 2023 and 2022. This information was derived from the interim unaudited financial statements of operations for the respective periods.
| Results of Operations | | For the Six Months Ended June 30, | |
| | | 2023 | | | 2022 | | | Variation | | | % change | |
| | | in millions of U.S. dollars | | | | |
| Revenue | | | 61.0 | | | | 25.3 | | | | 35.7 | | | | 141 | % |
| Voyage expenses | | | (2.5 | ) | | | (8.7 | ) | | | 6.2 | | | | (71 | %) |
| Vessel operating expenses | | | (10.3 | ) | | | (6.3 | ) | | | (4.0 | ) | | | 63 | % |
| Depreciation and amortization of deferred charges | | | (7.5 | ) | | | (4.1 | ) | | | (3.4 | ) | | | 83 | % |
| General and administrative expenses | | | (3.4 | ) | | | (3.3 | ) | | | (0.1 | ) | | | 3 | % |
Reversal / (Provision) for credit losses and write offs | | | 0.1 | | | | (0.1 | ) | | | 0.2 | | | | (200 | %) |
Foreign currency gains / (losses) | | | 0.0 | | | | 0.1 | | | | (0.1 | ) | | | (100 | %) |
| Interest and finance costs | | | (5.4 | ) | | | (1.1 | ) | | | (4.3 | ) | | | 391 | % |
| Interest income | | | 1.2 | | | | 0.0 | | | | 1.2 | | | | - | |
| Changes in fair value of warrants’ liability | | | 0.9 | | | | 0.0 | | | | 0.9 | | | | - | |
| Net income | | | 34.1 | | | | 1.8 | | | | 32.3 | | | | 1.794 | % |
For the six months ended June 30, 2023, compared to the six months ended June 30, 2022
Net income for the six months ended June 30, 2023, amounted to $34.1 million, compared to net income of $1.8 million for the same period in 2022. The increase in net income for the six months ended June 30, 2023 was mainly attributable to the higher revenues by 35.7 million that the Company generated during the period ended June 30, 2023 compared to similar period in 2022, as a result of the overall improved market conditions in the tankers’ industry, the increase by 543 in fleet ownership days as a consequence of the purchase of the new vessels during 2022 and the increase by 14% in the fleet utilization deriving from the increased employment of vessels in time charters and pool arrangements.
Voyage and Time Charter Revenues for the six months ended June 30, 2023, amounted to $61.0 million, compared to $25.3 million for the same period in 2022. The increase in time charter revenues is mainly attributable to the increased time-charter equivalent rates (TCE rates) by $22,638 and the increase in available days by 533 as a consequence of the purchase of the new vessels during 2022, which was a combined result of the improved tanker charter rate environment achieved during the six months ended June 30, 2023, of decreased voyage expenses by $6.2 million as a consequence of the shift in the vessel’s employment strategy from spot to pool arrangements, and of the improvement in the vessels’ utilization by 14% deriving from the increased employment of vessels in time charters and pool arrangements.
Voyage Expenses for the six months ended June 30, 2023, amounted to $2.5 million, compared to $8.7 million for the same period in 2022. Voyage expenses of our tanker vessels mainly consist of bunkers costs, port and canal expenses, and commissions paid to third-party brokers. The decrease of the voyage expenses was mainly attributable to the decrease of spot charters and the increase of pool charters and time-charter voyages, and also to the increase of the fleet utilization that contributed to the decrease of certain voyage expenses, such as the bunkers costs. Such decrease was partially offset by the increase in voyage expenses due to the increase in the number of vessels owned in the two periods.
Vessel Operating Expenses for the six months ended June 30, 2023 amounted to $10.3 million, compared to $6.3 million for the same period of 2022 and mainly consist of expenses for running and maintaining our vessels, such as crew wages and related costs, consumables and stores, insurances, repairs and maintenance, environmental compliance costs and other miscellaneous expenses. The increase in vessel operating expenses was mainly attributable to increase in the average number of tanker vessels owned by us, after the acquisition of four tanker vessels in the second half of 2022 (and the disposal of one tanker vessel also within the same period) and was also reinformed by the slight increase in the daily operating expenses of our tanker vessels. The daily operating expenses mainly increased due to slightly increased daily crew, stores and spare costs.
Depreciation and amortization of deferred charges for the six months ended June 30, 2023 amounted to $7.5 million, compared to $4.1 million for the same period in 2022, and represents the depreciation and amortization expense of our tanker vessels. The increase of $3.4 million was attributable to the increase in depreciation, due to the expansion of our fleet and the improvement costs that were capitalized as vessels’ costs during the period.
Interest and Finance Costs were $5.4 million for the period ended June 30, 2023, compared to $1.1 million for the same period in 2022. The increase is mainly attributable to the increase of our average debt outstanding, and also due to increased average interest rates for our loan facilities, which were 7.35% for the first six months of 2023, compared to 3.25% in the first six months of 2022.
Interest Income was $1.2 million for the period ended June 30, 2023, compared to $nil for the same period in 2022. The amount relates solely to interest earned from time deposits. The increase mainly derived from the increase in the amount of time deposits in the first six months period June 30, 2023, in comparison with the same period in prior year.
Changes in fair value of warrants’ liability was $0.9 million for the period ended June 30, 2023, compared to $nil for the same period in 2022. The gain of $0.9 million resulted from the change in the fair value of the liability for the unexercised Series A warrants as of June 30, 2023 as compared to the fair value that those warrants were initially measured and the settlements of the liability throughout the six months ended June 30,2023 that was recorded as a change in fair value of the warrant liability.
Inflation and Interest rates
Inflation has a near-term impact on our business due to elevated inflation in the United States of America, Eurozone and other countries, including ongoing global prices pressures in the wake of the war in Ukraine, driving up energy prices, commodity prices, which continue to have a moderate effect on our operating expenses. Interest rates have increased rapidly and substantially as central banks in developed countries raise interest rates in an effort to subdue inflation. The eventual implications of tighter monetary policy, and potentially higher long-term interest rates may drive a higher cost of capital for our business.
Liquidity and Capital Resources
We have historically financed our capital requirements with cash flow from operations, equity contributions from shareholders, and long- and medium-term debt. Our operating cash flow is generated from charters on our vessels, through our subsidiaries. Our main uses of funds have been capital expenditures for the acquisition of new vessels, expenditures incurred in connection with ensuring that our vessels comply with international and regulatory standards, repayments of loans, and payments of dividends. At times when we are not restricted by our lenders from acquiring additional vessels, we will require capital to fund vessel acquisitions and debt service.
As of June 30, 2023 and December 31, 2022, our working capital, which is current assets minus current liabilities, including the current portion of long-term debt, was $58.9 million and $27.4 million, respectively. We expect that we will fund our operations with cash on hand, cash generated from operations, bank debt and equity offerings, or a combination thereof, in the twelve-month period ending one year after the financial statements’ issuance.
Cash Flow
As of June 30, 2023, cash and cash equivalents amounted to $69.7 million, compared to $38.7 million as of December 31, 2022. We consider highly liquid investments such as time deposits and certificates of deposit with an original maturity of three months or less to be cash equivalents. Cash and cash equivalents are primarily held in U.S. dollars.
Net Cash Provided by / (Used In) Operating Activities
Net cash provided by operating activities for the six-month period ended June 30, 2023, amounted to $40.8 million, compared to $1.6 million used in operating activities for the six-month period ended June 30, 2022. The increase of net cash provided by operating activities was mainly attributable to increased revenues, as a result of increased average time charter rates and to the decrease in the working capital outflow.
Net Cash Used In Investing Activities
Net cash used in investing activities in the six months ended June 30, 2023 and 2022 was $11.5 million and $4.0 million, respectively. The variance is mainly attributable to increase in advances for vessel acquisitions / under construction and other vessel costs by $8.2 million and the decrease of payments for vessels’ improvements by $0.7 million during the six-month period ended June 30, 2023.
Net Cash Provided By Financing Activities
Net cash provided by financing activities in the six months ended June 30, 2023, was $1.7 million and mainly consists of the proceeds from the issuance of common stock and warrants of $11.4 million, the issuance of common stock under ATM program of $0.7 million and the issuance of preferred stock of $0.5 million, partially counterbalanced by loan repayments of $8.5 million, payments under the share buy-back program of $1.4 million and cash dividends on Series B and C preferred shares of $1.0 million.
Net cash provided by financing activities in the six months ended June 30, 2022, was $9.3 million and mainly consists of the proceeds of $5.0 million from the related party loan and the proceeds from the issuance of common stock and units of $8.5 million, partially counterbalanced by loan repayments of $4.0 million and payments of financing costs of $0.2 million.
Capital Expenditures
Our future capital expenditures relate to the purchase of tanker vessels, vessel under construction and vessel upgrades. We also expect to incur additional capital expenditures when our vessels undergo surveys. This process of recertification may require us to reposition these vessels from a discharge port to shipyard facilities, which will reduce our operating days during the period. The loss of earnings associated with the decrease in operating days, together with the capital needs for repairs and upgrades results in increased cash flow needs which we will fund with cash on hand.
Recent Developments
Share Buy-Back Plan: Subsequent to the balance sheet date and up to August 4, 2023, the Company re-purchased and cancelled 164,493 common shares of gross value $0.1 million.
Nordea Bank Refinancing: On August 4, 2023, we refinanced the existing outstanding loan including interest of the amount of $17.9 million with Nordea bank which was initially entered to partially finance the acquisition of the vessels “Blue Moon” and “Briolette”, with a revolving credit in an aggregate amount not exceeding $20.0 million at any one time and will pay arrangement fees of $0.1 million. The new loan has a duration of 5 years from the signing date of the agreement, it will be paid in quarterly installments of the amount of $0.833 million with the remaining amount of $3.34 million to be paid on the maturity date and will bear variable interest at SOFR plus a fixed margin of 2.5% per annum.
The amount of long-term debt shown in the accompanying consolidated balance sheets is analyzed as follows:
| | | June 30, 2023
| | | Current | | | Non-current | | | December 31, 2022 | | | Current | | | Non-current | |
| | | | | | | | | | | | | | | | | | | |
| Nordea Bank secured term loan | | $ | 18,792 | | | $ | 3,739 | | | $ | 15,053 | | | $ | 20,663 | | | $ | 3,740 | | | $ | 16,923 | |
| Piraeus Bank secured term loans | | | 63,060 | | | | 8,073 | | | | 54,987 | | | | 67,584 | | | | 9,048 | | | | 58,536 | |
| Alpha Bank secured term loans | | | 38,150 | | | | 4,200 | | | | 33,950 | | | | 40,250 | | | | 4,200 | | | | 36,050 | |
| less unamortized deferred financing costs | | | (697 | ) | | | (226 | ) | | | (471 | ) | | | (822 | ) | | | (242 | ) | | | (580 | ) |
| Total debt, net of deferred financing costs | | $ | 119,305 | | | $ | 15,786 | | | $ | 103,519 | | | $ | 127,675 | | | $ | 16,746 | | | $ | 110,929 | |
Secured Term Loans: The Company, through its vessel-owning subsidiaries, has entered into various long term loan agreements with certain financial institutions (as described below) to partially finance the acquisition cost of its tanker vessels. All loans are repayable in quarterly installments plus one balloon installment per loan agreement to be paid together with the last installment, and bear variable interest at SOFR or LIBOR plus a fixed margin ranging from 2.35% to 2.85%. Their maturities fall due from July 2024 to December 2027, and at each utilization date, arrangement fees ranging from 0.50% to 1.00% were paid. As of June 30, 2023, the term loans were collateralized by the Company’s eight tanker vessels, whose aggregate net book value was $230,434.
In July 2019, the Company, through two of its vessel-owning subsidiaries, entered into a loan agreement with Nordea Bank Abp, Filial i Norge (“Nordea Bank”) for a senior secured term loan facility of up to $33,000, to partially finance the acquisition cost of the vessels “Blue Moon” and “Briolette”. In December 2019 and in March 2020, the Nordea Bank loan was twice amended and restated to increase the loan facility to up to $47,000 and $59,000, respectively, to partially support the acquisition cost of the tanker vessels “P. Fos” and “P. Kikuma”, respectively. In December 2020, the Company entered a Deed of Release with Nordea Bank, according to which the borrowers of the vessels “P. Fos” and “P. Kikuma” were released from all obligations under the agreement, in connection with the re-finance by Piraeus Bank S.A. (described below). Also in December 2020, the Company entered into a Supplemental Loan Agreement with Nordea Bank, to amend the existing repayment schedules of the “Blue Moon” and “Briolette” tranches and to amend the major shareholder’s clause included in the agreement.
In December 2020, the Company, through three of its vessel-owning subsidiaries, entered into a loan agreement with Piraeus Bank S.A. (“Piraeus Bank”) for a senior secured term loan facility of up to $31,526, to refinance the existing indebtedness of the vessels “P. Fos” and “P. Kikuma” with Nordea Bank, described above, and partially finance the acquisition cost of the vessel “P. Yanbu”. The three borrowers utilized in December 2020 an aggregate amount of $29,958 under the loan agreement, and no amount remained available for drawdown thereafter. The “P. Fos” trance was repaid in full and released from the loan agreement in November 2022, due to the vessels’ sale. Furthermore, the “P. Yanbu” and the “P. Kikuma” trances were also released from the specific loan agreement in July and December 2022, respectively, as part of their refinancing under the new loan agreements with Piraeus Bank signed in June and November 2022 (discussed below), and as such, the specific loan agreement was terminated.
In June 2022, the Company, through the vessel-owning subsidiaries of the vessels “P. Sophia” and “P. Yanbu”, entered into a new loan agreement with Piraeus Bank for a senior secured term loan facility of up to $31,933. The purpose of this facility was to finance the acquisition of “P. Sophia” by up to $24,600 and refinance the existing indebtedness of $7,333 of the vessel “P. Yanbu”. The Company utilized the full amount of $31,933 in July 2022. On May 29, 2023, the Company signed a Supplemental loan agreement with Piraeus Bank, the purpose of which was to replace LIBOR rate with SOFR rate, effective June 1, 2023. All other terms of the loan agreement remained unaltered. The Company accounted for the Supplemental loan agreement as a contract modification.
In November 2022, the Company, through the vessel-owning subsidiaries of the vessels “P. Monterey” and “P. Kikuma”, entered into a new loan agreement with Piraeus Bank for a senior secured term loan facility of up to $37,400. The purpose of this facility was to finance the acquisition of “P. Monterey” by up to $29,615 and refinance the existing indebtedness of $7,785 of the vessel “P. Kikuma”. The Company utilized the amount of $36,450 in November 2022, and no amount remained available for drawdown thereafter.
Also in November 2022, the Company, through the vessel-owning subsidiary of the vessel “P. Aliki” signed a loan agreement with Alpha Bank S.A (“Alpha Bank”), to support the acquisition of the vessel by providing a secured term loan of up to $18,250. The maximum loan amount was drawn down upon the vessel’s delivery to the Company in November 2022.
Finally, in December 2022, the Company, through the vessel-owning subsidiary of the vessel “P. Long Beach” signed a loan agreement with Alpha Bank S.A, to support the acquisition of the vessel by providing a secured term loan of up to $22,000. The maximum loan amount was drawn down upon the vessel’s delivery to the Company in December 2022.
All loans are guaranteed by Performance Shipping Inc. and are also secured by first priority mortgages over the financed fleet, first priority assignments of earnings, insurances and of any charters exceeding durations of certain length of time, pledge over the borrowers’ shares and over their earnings accounts, and vessels’ managers’ undertakings. The loan agreements also require a minimum hull value of the financed vessels, impose restrictions as to dividend distribution following the occurrence of an event of default and changes in shareholding, include customary financial covenants and require at all times during the facility period a minimum cash liquidity. As at June 30, 2023 and December 31, 2022, the maximum compensating cash balance required under the Company’s loan agreements amounted to $10,500 and $10,500, respectively, and is included in Cash and cash equivalents in the accompanying consolidated balance sheets. Also, as at June 30, 2023 and December 31, 2022, the restricted cash, being pledged deposits, required under the Company’s loan agreements amounted to $1,000 and $1,000, respectively, and is included in Restricted cash, non-current in the accompanying consolidated balance sheets. As at June 30, 2023 and December 31, 2022, the Company was in compliance with all of its loan covenants.
The weighted average interest rate of the Company’s bank loans for the six months ended June 30, 2023 and 2022, was 7.35% and 3.25%, respectively.
For the six months ended June 30, 2023 and 2022, interest expense on long-term bank debt amounted to $4,427 and $789, respectively, and is included in Interest and finance costs in the accompanying unaudited interim consolidated statement of operations. Accrued interest on bank debt as of June 30, 2023 and December 31, 2022, amounted to $396 and $390, respectively, and is included in Accrued liabilities in the accompanying consolidated balance sheets. Capitalized interest amounting to $153 for the six months ended June 30, 2023, was capitalized to the vessel under construction cost, presented under Advances for vessel under construction and other vessels’ cost in the accompanying consolidated balance sheets (Note 5).
As at June 30, 2023, the maturities of the drawn portions of the debt facilities described above, are as follows:
| | | Principal Repayment | |
| | | | |
| July 1, 2023 through June 30, 2024 | | $ | 16,012 | |
| July 1, 2024 through June 30, 2025 | | | 26,352 | |
| July 1, 2025 through June 30, 2026 | | | 11,298 | |
July 1, 2026 through June 30, 2027
| | | 11,298 | |
July 1, 2027 through December 31, 2027
| | | 55,042 | |
| Total | | $ | 120,002 | |
