Danaos reported adjusted net income for the fourth quarter that was down 50% from a year earlier due to the ongoing weakness in the containership market. But adding in the company's Hanjin exposure and other impairments resulted in a much bigger loss.

The company reported adjusted net income of $23.2m for the quarter, compared to $47m in the year-earlier quarter. The earnings per share of $0.21 were better than analysts' mean estimate of a $0.15 per share result.

Operating revenue of $112m was 21% below year-ago levels. Chief executive John Coustas said the results "reflect the impact of the bankruptcy of Hanjin Shipping, which represented 20% of its fixed contract revenue.

But including one-time items, Danaos would have reported a $446m net loss for a $4.07 per share loss. The biggest component of the loss stemmed from an impairment of $415.1m on its vessels.

$415.1m impairment loss

Danaos reported a $205.2m charge for five 3,400-teu vessels that were formerly chartered to Hanjin. It also recorded a $209.9m impairment on 18 vessels "as a result of the continued weakness of containership market and the other than temporary nature of the decline in these vessels' values."

Troubles in other container lines also meant write-downs. Danaos took a $29.4m loss on equity and debt holdings in Zim, a $15.8m bad debt expense related to Hanjin, and a loss on the sale of securities in Hyundai Merchant Marine.

Beyond the headline issues, containership fundamentals were still weak in the fourth quarter.

Danaos reported vessel utilistaion of 90.4% in the quarter, the lowest of the year and below the 98.3% rate in the year earlier quarter. The average daily charter rate improved slightly to just under $24,500 per day, but remained below the $28,291 per day rate of a year earlier.

Covenants waived until April

The decrease in operating income has put Danaos is breach of financial covenants, the company said.

It has obtained waivers on the covenants until April and it said it is in talks with lenders to address the covenants. But it was forced to move some $2.4bn in long-term debt to current liabilities since the waivers were for less than a year.

"During this extended period of market weakness which has presented many challenges, we remain focused on taking necessary actions to preserve the value of our company by managing our fleet efficiently and taking prudent measures to manage and ultimately deleverage our balance sheet," Coustas said.