Hauled back from the brink of bankruptcy in 2018, Greek containership company Danaos Corp has said it is faring better than ever before, and is reinstating a dividend after 13 years.
The John Coustas-led outfit declared a $0.50 per share payout after reported net income rocketed to $297m in the first quarter from $29m in the same period last year.
That includes a $248m non-cash benefit from the appreciating value of the company's holding in Israeli operator Zim. Danaos’s 8.9% stake in US-listed ZIM is currently worth about $400m – about twice as high as three months ago.
Zim-related benefits will continue to accrue to Danaos in the second quarter, in which the Athens-based company expects to receive a $75m cash injection as Zim redeems early some of its bonds.
“We are currently in the best ever position and reaping the benefits of the current market environment,” Danaos said in an earnings statement.
Underlying growth
Even adjusting for one-off Zim items, adjusted net income almost doubled to $58m from $33m in the first quarter of 2020. Operating revenues jumped by a quarter year-on-year to $132m.
“The dramatic turnaround and strength of the market which we experienced in the beginning of the year continues unabated, if not stronger,” Coustas said in the statement.
The liner sector is “at the limit of its capacity,” Coustas said, adding: “Every fixture we concluded was done at a new record level”.
The decision to reinstate a “fixed” and “regular” dividend was taken on the back of the company’s “strong financial standing and optimistic view for the future,” Coustas said.
Danaos, which listed in New York in 2006, last offered a dividend in 2008 and was not permitted to do so again until 2019, under the terms of a financial rescue.
The reinstatement of the dividend doesn’t come unexpectedly - the company already said last year it was considering such a move.
Jefferies' analyst Randy Giveans wrote in a note in December that he expected Danaos, which owns 65 boxships, to announce a dividend of $0.25 per share.
Stock buy-backs
In place of of dividends, Danaos has been buying back stock from investors. In October 2020 it returned $31.3m to the Royal Bank of Scotland and an entity affiliated with Greek owner George Economou, in privately negotiated transactions.
The Coustas family holds about 38% of the company stock. The only other major shareholders the company revealed in its latest annual filing are boutique asset management firm RBF Capital, which holds a 7% stake and No Street GP LP, another fund with a 5.6% holding.
“We believe that our new fixed dividend will both expand our shareholder base to a new group of yield-driven institutional investors and also enhance liquidity of the stock,” the company said.
On 12 April, the company refinanced “a substantial majority” of outstanding debt, drawing $1.2bn of liquidity through $940m in new loans from Citibank and National Westminster Bank, issuing $300m worth of seven-year bonds fetching 8.5% per year and by concluding a $135m sale-and-leaseback agreement for five vessels with Oriental Fleet International, an affiliate of Cosco Shipping Lease.
