Shipping IPO: Highlights from Danaos' SEC Filing

 |  Includes: DAC, SSW
by: Evelyn Rubin

Danaos Corporation, one of the world's top ten containership charter owners, filed last week to go public on Nasdaq. Highlights and excerpts from the company's F-1 filing:

Proposed Ticker: (NYSE:DAC)

Offering: 10.25 million shares at a range of $20-22 per share. At mid-range, net proceeds are estimated to be $198.2 million.

Underwriters: Merrill Lynch, CitiGroup and four co-managers

Business Overview: (from F-1)

We are an international owner of containerships, chartering our vessels to many of the world's largest liner companies. Our current fleet of 27 containerships aggregating 116,115 TEUs makes us among the ten largest containership charter owners in the world, based on total TEU capacity. Our strategy is to charter our containerships under multi-year, fixed-rate time charters to a geographically diverse group of liner companies, including many of the largest such companies globally, as measured by TEU capacity. Currently, these customers include Maersk, COSCO, Hapag-Lloyd, CMA-CGM, Hyundai, APL-NOL, Norasia, Yang Ming, Wan Hai and China Shipping. Our charters range from two and a half to 12 years, which provides us with stable cash flows and high utilization rates. The average remaining duration of the charters for our containership fleet, including 16 contracted vessels for which we have arranged charters, will be 10.6 years as of October 1, 2006 (weighted by aggregate contracted charter hire).

Our company has a long history of operating and investing in the shipping industry. We are principally owned by the Coustas Family. Dimitris Coustas, the father of our chief executive officer, John Coustas, first invested in shipping in 1963 and founded our manager, Danaos Shipping Company Limited, or Danaos Shipping, in 1972. After assuming management of our company in 1987, John Coustas has focused our strategy on building a large, modern containership fleet to serve the container shipping industry. We believe we are well positioned to continue to grow our business and benefit from the growth in the container shipping industry, which grew at a compound annual rate in excess of 10.0% between 2003 and 2005. Since early 1993, under John Coustas' leadership, our containership fleet has grown from three multi-purpose vessels with a capacity of 2,395 TEUs to our current fleet of 27 containerships with a capacity of 116,115 TEUs, representing a compounded annual growth rate in TEU capacity of approximately 34.8%. This growth has occurred through multiple shipping cycles and, we believe, has resulted from the broad range of relationships we have developed and the quality of service provided to our customers, as well as our ability to exploit market opportunities during different periods in the charter market cycle.

Financial Highlights:

Our history of profitable operations has given us strong financial results and enabled us to grow our company. For the year ended December 31, 2005, we generated operating revenues of $241.4 million, net income of $122.9 million and EBITDA of $171.0 million. For the six months ended June 30, 2006, we generated operating revenues of $114.5 million, net income of $44.4 million and EBITDA of $73.8 million. After giving effect to the application of the proceeds of this offering and the financing of our contracted vessels upon execution of the new senior revolving credit facilities, we expect to have in excess of $500.0 million of undrawn availability. We believe that this financing capacity, together with our policy of retaining a portion of our cash flows, will afford us financial flexibility and allow us to continue to make selective acquisitions.

Use of Proceeds: The financing will be used to repay a $99.1 million credit facility with the Royal Bank of Scotland and a $99.1 million credit facility with Aegean Baltic Bank.

Key Competitors: German companies are the largest charter owner group, comprising 61% of fully cellular containerships worldwide and 73% of containerships on order. Only one of the top ten players --Seaspan Corp (NYSE:SSW)--is currently publicly traded in the US.

In the drybulk market, ownership is fragmented (1,276 owners controlling 6,271 ships worldwide). 28.4% of the global fleet is controlled by the twenty largest owning groups. COSCO, the largest group, controls 319 ships or 5.3% of the total fleet as measured by dwt. Mitsui OSK Lines, next in line, controls just 3.2% of the worldwide drybulk fleet.


Dr. John Coustas is our President, Chief Executive Officer and a member of our board of directors. Dr. Coustas has over 25 years of experience in the shipping industry. Dr. Coustas assumed management of our company in 1987 from his father, Dimitris Coustas, who founded Danaos Shipping in 1972, and has been responsible for our corporate strategy and the management of our affairs since that time. Dr. Coustas is also a member of the board of directors of Danaos Management Consultants, The Swedish Club, the Union of Greek Shipowners and the Cyprus Union of Shipowners. Dr. Coustas holds a degree in Marine Engineering from National Technical University of Athens as well as a Master's degree in Computer Science and a Ph.D in Computer Controls from Imperial College, London.

Current Ownership: The Coustas family currently owns almost the entire (98.6%) company; post-offering, they are expected to hold 80% of the company.

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