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 year ended December 31, 2021
Commission File Number 001-39237
ATLAS CORP.
(Exact name of Registrant as specified in its Charter)
23 Berkeley Square
London, United Kingdom
W1J 6HE
(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 ☒
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). Yes ☐ No
☒
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). Yes ☐ No
☒
Item A — Information Contained in this Form 6-K Report
This report on Form 6-K of Atlas Corp., or this Report, is hereby
incorporated by reference into: the Registration Statement of Atlas
Corp. filed with the Securities and Exchange Commission, (the
“SEC”), on May 30, 2008 on Form F-3D (Registration No. 333-151329),
as amended on February 28, 2020, the Registration Statement of
Atlas Corp. filed with the SEC on March 31, 2011 on Form S-8
(Registration No. 333-173207), as amended on February 28, 2020, the
Registration Statement of Atlas Corp. filed with the SEC on June
20, 2013 on Form S-8 (Registration No. 333-189493), as amended on
February 28, 2020, the Registration Statement of Atlas Corp. filed
with the SEC on April 24, 2012 on Form F-3 (Registration No.
333-180895), as amended on March 22, 2013 and February 28, 2020,
the Registration Statement of Atlas Corp. filed with the SEC on
April 29, 2014 on Form F-3 (Registration No. 333-195571), as
amended on March 6, 2017, April 19, 2017 and February 28, 2020, the
Registration Statement of Atlas Corp. filed with the SEC on
November 28, 2014 on Form F-3 (Registration No. 333-200639), as
amended on March 6, 2017, April 19, 2017 and February 28, 2020, the
Registration Statement of Atlas Corp. filed with the SEC on
November 28, 2014 on Form S-8 (Registration No. 333-200640), as
amended on February 28, 2020, the Registration Statement of Atlas
Corp. filed with the SEC on March 12, 2015 on Form F-3D
(Registration No. 333-202698), as amended on February 28, 2020, the
Registration Statement of Atlas Corp. filed with the SEC on June
24, 2016 on Form S-8 (Registration No. 333-212230), as amended on
February 28, 2020, the Registration Statement of Atlas Corp. filed
with the SEC on August 25, 2017 on Form F-3 (Registration No.
333-220176), as amended on February 28, 2020, the Registration
Statement of Atlas Corp. filed with the SEC on December 21, 2017 on
Form S-8 (Registration No. 333-222216), as amended on February 28,
2020, the Registration Statement of Atlas Corp. filed with the SEC
on April 13, 2018 on Form F-3D (Registration No. 333-224291), as
amended on February 28, 2020, the Registration Statement of Atlas
Corp. filed with the SEC on April 13, 2018 on Form F-3
(Registration No. 333-224288), as amended on May 3, 2018, May 7,
2018 and February 28, 2020, the Registration Statement of Atlas
Corp. filed with the SEC on September 28, 2018 on Form F-3
(Registration No. 333-227597), as amended on February 28, 2020, the
Registration Statement of Atlas Corp. filed with the SEC on January
18, 2019 on Form F-3 (Registration No. 333-229312), as amended on
February 28, 2020, the Registration Statement of Atlas Corp. filed
with the SEC on March 27, 2019 on Form F-3 (Registration No.
333-230524), as amended on February 28, 2020, the Registration
Statement of Atlas Corp. filed with the SEC on May 11, 2020 on Form
F-3 (Registration No. 333-238178), as supplemented on December 7,
2020, the Registration Statement of Atlas Corp. filed with the SEC
on June 30, 2020 on Form S-8 (Registration No. 333-239578), the
Registration Statement of Atlas Corp filed with the SEC on March
19, 2021 on Form F-3 (Registration No. 333-254536), and the
Registration Statement of Atlas Corp filed with the SEC on July 16,
2021 on Form F-3 (Registration No. 333-257967).
Seaspan Corporation Financial Information
Part I to this Report contains certain financial information of
Seaspan Corporation, a wholly owned subsidiary of Atlas Corp., as
of and for the year ended December 31, 2021.
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.
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ATLAS CORP. |
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Date: March 25,
2022
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By: |
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/s/ Graham Talbot |
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Graham Talbot |
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Chief Financial Officer |
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(Principal Financial and Accounting Officer) |
INDEX
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Part I |
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Item 1. |
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Item 2. |
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Item 3. |
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PART II
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Item 1. |
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Unless we otherwise specify, when used in this Report, the terms
“Seaspan”, the “Company”, “we”, “our” and “us” refer to Seaspan
Corporation and its subsidiaries.
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING
FIRM
To the Shareholder and Board of Directors of
Seaspan Corporation:
Opinion on the Consolidated Financial Statements
We have audited the accompanying consolidated balance sheets of
Seaspan Corporation (the Company) as of December 31, 2021 and 2020,
the related consolidated statements of operations, comprehensive
income, shareholder’s equity, and cash flows for each of the years
in the three‑year period ended December 31, 2021, and the related
notes (collectively, the consolidated financial statements). In our
opinion, the consolidated financial statements present fairly, in
all material respects, the financial position of the Company as of
December 31, 2021 and 2020, and the results of its operations and
its cash flows for each of the years in the three‑year period ended
December 31, 2021, in conformity with U.S. generally accepted
accounting principles.
Changes in Accounting Principles
As discussed in Note 2(q) to the consolidated financial statements,
effective January 1, 2020, the Company adopted Accounting Standards
Update (ASU) 2017-04, “Simplifying the Test for Goodwill
Impairment”, which eliminates the need to determine the fair value
of individual assets and liabilities of a reporting unit to measure
the implied goodwill impairment. Our opinion is not modified with
respect to this matter.
Basis for Opinion
These consolidated financial statements are the responsibility of
the Company’s management. Our responsibility is to express an
opinion on these consolidated financial statements based on our
audit. We are a public accounting firm registered with the Public
Company Accounting Oversight Board (United States) (PCAOB) and are
required to be independent with respect to the Company in
accordance with the U.S. federal securities laws and the applicable
rules and regulations of the Securities and Exchange Commission and
the PCAOB.
We conducted our audit in accordance with the standards of the
PCAOB. Those standards require that we plan and perform the audit
to obtain reasonable assurance about whether the consolidated
financial statements are free of material misstatement, whether due
to error or fraud. Our audits included performing procedures to
assess the risks of material misstatement of the consolidated
financial statements, whether due to error or fraud, and performing
procedures that respond to those risks. Such procedures included
examining, on a test basis, evidence regarding the amounts and
disclosures in the consolidated financial statements. Our audits
also included evaluating the accounting principles used and
significant estimates made by management, as well as evaluating the
overall presentation of the consolidated financial statements. We
believe that our audits provide a reasonable basis for our
opinion.
Critical Audit Matter
The critical audit matter communicated below is a matter arising
from the current period audit of the consolidated financial
statements that was communicated or required to be communicated to
the Board and that: (1) relates to accounts or disclosures that are
material to the consolidated financial statements and (2) involved
our especially challenging, subjective, or complex judgment. The
communication of a critical audit matter does not alter in any way
our opinion on the consolidated financial statements, taken as a
whole, and we are not, by communicating the critical audit matter
below, providing a separate opinion on the critical audit matter or
on the accounts or disclosures to which it relates.
Assessment of indicators of impairment for vessels
As discussed in Note 2(e) to the consolidated financial statements,
property, plant and equipment that are held for use are evaluated
for impairment when events or circumstances indicate that their
carrying amounts may not be recoverable from future undiscounted
cash flows. Examples of such events or changes in circumstances for
vessels (“impairment indicators”) include, among others, a
significant adverse change in the extent or manner in which the
asset is being used or in its physical condition; a significant
adverse change in legal factors or in the business climate that
could affect the asset’s value, including an adverse action or
assessment by a foreign government that impacts the use of the
asset; or a current-period operating or cash flow loss combined
with a history of operating or cash flow losses; or a projection or
forecast that demonstrates continuing losses associated with the
asset’s use. The determination of whether impairment indicators
exist requires significant judgment in evaluating underlying
significant assumptions including charter rates, utilization rates,
operating costs and current vessel market values. The Company did
not identify any indicators of impairment related to the vessels
for the year ended December 31, 2021. As discussed in Note 5 and
Note 6, the total carrying value of the Company’s vessels,
including right of use vessels, was $7,297.1 million as of December
31, 2021.
We identified the assessment of indicators of impairment for
vessels as a critical audit matter. A higher degree of subjective
auditor judgment was required to assess the Company’s determination
of whether an indicator of impairment existed, based on the
Company’s evaluation of the significant assumptions. Changes in
these significant assumptions could have changed the Company’s
conclusion that no indicators of impairment were
identified.
The following are the primary procedures we performed to address
this critical audit matter. We evaluated the design and tested the
operating effectiveness of certain internal controls over the
Company’s impairment indicator assessment process. This included
controls related to the identification and evaluation of indicators
of impairment and underlying significant assumptions. We evaluated
significant
assumptions used in the Company’s evaluation by comparing current
charter rates to existing customer contracts and estimates of
future charter rates to third-party industry publications for
vessels with similar characteristics. We evaluated the Company’s
anticipated future utilization rates and operating costs
assumptions by comparing to the Company’s historical utilization
rates and operating costs. For utilization rates, we also compared
anticipated supply and demand conditions that would impact
utilization to third party industry publications. We evaluated the
Company’s assessment of current market values of vessels by
comparing to recent vessel purchases and third-party industry
publications
/s/ KPMG LLP
Chartered Professional Accountants
We have served as the Company’s auditor since 2000.
Vancouver, Canada
March 25, 2022
SEASPAN CORPORATION
Consolidated Balance Sheets
(Expressed in millions of United States dollars)
December 31, 2021 and 2020
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December 31, 2021 |
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December 31, 2020 |
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Assets |
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Current assets: |
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Cash and cash equivalents |
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$ |
169.0 |
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$ |
243.5 |
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Accounts receivable |
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28.8 |
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20.9 |
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Due from related party (note 3) |
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38.3 |
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19.5 |
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Prepaid expenses and other |
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36.6 |
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31.5 |
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Net investment in lease (note 4) |
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16.8 |
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10.7 |
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289.5 |
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326.1 |
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Vessels (note 5) |
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7,676.1 |
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6,619.6 |
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Right-of-use asset (note 6) |
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720.4 |
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838.6 |
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Net investment in lease (note 4) |
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741.5 |
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418.6 |
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Goodwill |
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75.3 |
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75.3 |
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Derivative instruments (note 17(c)) |
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49.0 |
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19.2 |
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Other assets (note 7) |
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270.6 |
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186.9 |
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$ |
9,822.4 |
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$ |
8,484.3 |
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Liabilities and shareholder's equity |
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Current liabilities: |
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Accounts payable and accrued liabilities |
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$ |
136.7 |
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$ |
88.9 |
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Deferred revenue |
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44.7 |
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26.3 |
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Long-term debt - current (note 8) |
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542.1 |
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321.7 |
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Operating lease liabilities - current (note 9) |
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153.8 |
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159.1 |
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Other financing arrangements - current (note 10) |
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100.5 |
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64.1 |
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Other liabilities - current |
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7.6 |
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2.8 |
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985.4 |
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662.9 |
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Long-term debt (note 8) |
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3,480.9 |
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3,025.0 |
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Operating lease liabilities (note 9) |
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558.6 |
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668.1 |
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Other financing arrangements (note 10) |
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1,239.3 |
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801.7 |
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Derivative instruments (note 17(c)) |
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66.5 |
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68.9 |
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Other liabilities |
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10.4 |
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10.4 |
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Total liabilities |
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6,341.1 |
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5,237.0 |
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Shareholder's equity: |
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Share capital |
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2.5 |
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2.5 |
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Additional paid in capital |
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3,565.1 |
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3,557.8 |
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Deficit |
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(67.2) |
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(292.7) |
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Accumulated other comprehensive loss |
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(19.1) |
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(20.3) |
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3481.3 |
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3247.3 |
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$ |
9,822.4 |
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$ |
8,484.3 |
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See accompanying notes to consolidated financial
statements.
SEASPAN CORPORATION
Consolidated Statements of Operations
(Expressed in millions of United States dollars)
Years ended December 31, 2021, 2020 and 2019
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2021 |
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2020 |
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2019 |
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Revenue (note 14) |
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$ |
1,470.3 |
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$ |
1,230.8 |
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$ |
1,131.5 |
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Operating expenses: |
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Ship operating |
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289.3 |
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243.4 |
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229.8 |
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Depreciation and amortization |
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307.9 |
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288.1 |
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254.3 |
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General and administrative |
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42.4 |
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29.7 |
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33.1 |
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Operating leases (note 9) |
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143.0 |
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147.3 |
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154.3 |
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Gain on disposal of vessels |
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(15.9) |
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— |
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— |
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Income related to modification of time charters |
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— |
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— |
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(227.0) |
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766.7 |
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708.5 |
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444.5 |
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Operating earnings |
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703.6 |
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522.3 |
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687.0 |
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Other expenses (income): |
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Interest expense |
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178.8 |
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176.0 |
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218.9 |
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Interest income |
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(0.3) |
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(1.4) |
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(9.3) |
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Loss on debt extinguishment (note 8) |
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127.0 |
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— |
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— |
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(Gain) loss on derivative instruments (note 17 (c)) |
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(5.7) |
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31.5 |
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35.1 |
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Other expenses |
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9.3 |
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2.8 |
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3.2 |
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309.1 |
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208.9 |
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247.9 |
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Net earnings |
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$ |
394.5 |
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$ |
313.4 |
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$ |
439.1 |
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See accompanying notes to consolidated financial
statements.
SEASPAN CORPORATION
Consolidated Statements of Comprehensive Income
(Expressed in millions of United States dollars)
Years ended December 31, 2021, 2020 and 2019
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2021 |
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2020 |
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2019 |
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Net earnings |
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$ |
394.5 |
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$ |
313.4 |
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$ |
439.1 |
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Other comprehensive income: |
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Amounts reclassified to net earnings during the period
relating to cash flow hedging instruments (note 17(c)) |
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1.2 |
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1.3 |
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1.0 |
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Comprehensive income |
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$ |
395.7 |
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$ |
314.7 |
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$ |
440.1 |
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See accompanying notes to consolidated financial
statements.
SEASPAN CORPORATION
Consolidated Statements of Shareholder's Equity
(Expressed in millions of United States dollars, except number of
shares)
Years ended
December 31, 2021, 2020 and 2019
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Series D puttable |
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Number of |
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Number of non-puttable |
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Non-puttable |
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Additional |
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Accumulated other |
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Total |
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preferred shares |
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common |
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preferred |
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Common |
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preferred |
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paid-in |
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comprehensive |
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shareholder's |
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Shares |
Amount |
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shares |
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shares |
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shares |
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shares |
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capital |
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Deficit |
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loss |
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equity |
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Balance, December 31, 2018 |
1,986,449 |
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$ |
48.1 |
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176,835,837 |
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33,272,706 |
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$ |
1.4 |
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0.3 |
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$ |
3,126.5 |
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$ |
(645.6) |
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$ |
(22.6) |
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$ |
2,460.0 |
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Impact of accounting policy change |
— |
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— |
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— |
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— |
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— |
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— |
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— |
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181.1 |
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— |
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181.1 |
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Adjusted balance, December 31, 2018 |
1,986,449 |
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48.1 |
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176,835,837 |
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33,272,706 |
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1.4 |
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0.3 |
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3,126.5 |
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(464.5) |
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(22.6) |
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2,641.1 |
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Net earnings |
— |
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— |
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— |
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— |
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— |
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— |
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— |
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439.1 |
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— |
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439.1 |
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Other comprehensive income |
— |
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— |
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— |
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— |
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— |
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— |
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— |
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— |
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1.0 |
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1.0 |
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Exercise of puttable preferred shares |
(1,923,585) |
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(47.7) |
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— |
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— |
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— |
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— |
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— |
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— |
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— |
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— |
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Cancellation of put option on puttable preferred shares |
(62,864) |
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(1.6) |
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— |
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62,864 |
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— |
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— |
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1.6 |
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— |
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— |
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1.6 |
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Exercise of warrants |
— |
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— |
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38,461,539 |
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— |
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0.4 |
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— |
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321.2 |
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— |
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— |
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321.6 |
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Fees and expenses in connection with issuance of Fairfax
warrants |
— |
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— |
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— |
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— |
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— |
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— |
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(0.2) |
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— |
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— |
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(0.2) |
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Dividends on common shares |
— |
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— |
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— |
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— |
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— |
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— |
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— |
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(103.0) |
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— |
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(103.0) |
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Dividends on preferred shares |
— |
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— |
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— |
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— |
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— |
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— |
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— |
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(70.4) |
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— |
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(70.4) |
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Accretion of preferred shares with holder put option |
— |
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1.2 |
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— |
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— |
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— |
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— |
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— |
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(1.2) |
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— |
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(1.2) |
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Shares issued through dividend
reinvestment program |
— |
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— |
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122,148 |
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— |
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— |
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— |
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1.2 |
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— |
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— |
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1.2 |
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Share-based compensation expense |
— |
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— |
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257,799 |
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— |
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— |
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— |
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2.6 |
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(0.7) |
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— |
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1.9 |
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Treasury shares |
— |
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— |
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(1,724) |
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— |
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— |
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— |
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— |
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|
— |
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|
— |
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|
— |
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Balance, December 31, 2019 |
— |
$ |
— |
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|
215,675,599 |
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33,335,570 |
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$ |
1.8 |
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0.3 |
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$ |
3,452.9 |
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$ |
(200.7) |
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$ |
(21.6) |
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$ |
3,232.7 |
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|
|
|
|
|
|
|
|
|
|
|
See accompanying notes to consolidated financial
statements.
SEASPAN CORPORATION
Consolidated Statements of Shareholder's Equity
(Continued)
(Expressed in millions of United States dollars, except number of
shares)
Years ended
December 31, 2021, 2020 and 2019
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Number of
common
shares |
|
Number of non-puttable
preferred
shares |
|
Common
shares |
|
Non-puttable
preferred
shares |
|
Additional
paid-in
capital |
|
Deficit |
|
Accumulated other
comprehensive
loss |
|
Total
shareholder's equity |
|
Balance, December 31, 2019 |
|
215,675,599 |
|
|
33,335,570 |
|
|
$ |
1.8 |
|
|
$ |
0.3 |
|
|
$ |
3,452.9 |
|
|
$ |
(200.7) |
|
|
$ |
(21.6) |
|
|
3,232.7 |
|
|
Impact of accounting policy change (note 2(q)) |
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
(2.3) |
|
|
— |
|
|
$ |
(2.3) |
|
|
Adjusted balance, December 31, 2019 |
|
215,675,599 |
|
|
33,335,570 |
|
|
1.8 |
|
|
0.3 |
|
|
3,452.9 |
|
|
(203.0) |
|
|
(21.6) |
|
|
3,230.4 |
|
|
Net earnings |
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
313.4 |
|
|
— |
|
|
313.4 |
|
|
Other comprehensive income |
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
1.3 |
|
|
1.3 |
|
|
Capital contribution from Atlas |
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
100.0 |
|
|
— |
|
|
— |
|
|
100.0 |
|
|
Cancellation of preferred shares |
|
33,335,570 |
|
|
(33,335,570) |
|
|
0.3 |
|
|
(0.3) |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
Dividends on common shares |
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
(389.7) |
|
|
— |
|
|
(389.7) |
|
|
Dividends on preferred shares |
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
(16.8) |
|
|
— |
|
|
(16.8) |
|
Shares issued through dividend
reinvestment program |
|
7,943 |
|
|
— |
|
|
— |
|
|
— |
|
|
0.1 |
|
|
(0.1) |
|
|
— |
|
|
— |
|
|
Share-based compensation expense |
|
162,910 |
|
|
— |
|
|
— |
|
|
— |
|
|
4.8 |
|
|
(0.1) |
|
|
— |
|
|
4.7 |
|
|
Treasury shares |
|
37,778 |
|
|
— |
|
|
0.4 |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
0.4 |
|
|
Deconsolidation of Atlas |
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
3.6 |
|
|
— |
|
|
3.6 |
|
|
Balance, December 31, 2020 |
|
249,219,800 |
|
|
— |
|
|
2.5 |
|
|
— |
|
|
$ |
3,557.8 |
|
|
$ |
(292.7) |
|
|
$ |
(20.3) |
|
|
$ |
3,247.3 |
|
See accompanying notes to consolidated financial
statements.
SEASPAN CORPORATION
Consolidated Statement of Shareholder's Equity
(Continued)
(Expressed in millions of United States dollars, except number of
shares)
Years ended December 31, 2021, 2020 and 2019
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Number of |
|
|
|
Additional |
|
|
|
Accumulated other |
|
Total |
|
|
common |
|
Common |
|
paid-in |
|
|
|
comprehensive |
|
shareholder's |
|
|
shares |
|
shares |
|
capital |
|
Deficit |
|
loss |
|
equity |
|
Balance, December 31, 2020, carried forward |
|
249,219,800 |
|
|
$ |
2.5 |
|
|
$ |
3,557.8 |
|
|
$ |
(292.7) |
|
|
$ |
(20.3) |
|
|
$ |
3,247.3 |
|
|
Net earnings |
|
— |
|
|
— |
|
|
— |
|
|
394.5 |
|
|
— |
|
394.5 |
|
|
Other comprehensive income |
|
— |
|
|
— |
|
— |
|
— |
|
1.2 |
|
1.2 |
|
Dividends on common shares |
|
— |
|
|
— |
|
— |
|
(169.0) |
|
— |
|
(169.0) |
Share-based compensation expense (note 3)
|
|
— |
|
|
— |
|
7.3 |
|
— |
|
— |
|
7.3 |
|
Balance, December 31, 2021 |
|
249,219,800 |
|
|
$ |
2.5 |
|
|
$ |
3,565.1 |
|
|
$ |
(67.2) |
|
|
$ |
(19.1) |
|
|
$ |
3,481.3 |
|
See accompanying notes to consolidated financial
statements.
SEASPAN CORPORATION
Consolidated Statements of Cash Flows
(Expressed in millions of United States dollars)
Years ended December 31, 2021, 2020 and 2019
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2021 |
|
2020 |
|
2019 |
|
Cash from (used in): |
|
|
|
|
|
|
|
Operating activities: |
|
|
|
|
|
|
|
Net earnings |
|
$ |
394.5 |
|
|
$ |
313.4 |
|
|
$ |
439.1 |
|
|
Items not involving cash: |
|
|
|
|
|
|
|
Depreciation and amortization |
|
307.9 |
|
|
288.1 |
|
|
254.3 |
|
|
Change in right-of-use asset |
|
123.9 |
|
|
118.6 |
|
|
111.8 |
|
|
Non-cash interest expense and accretion |
|
34.9 |
|
|
37.5 |
|
|
38.4 |
|
|
Unrealized change in derivative instruments |
|
(32.2) |
|
|
8.9 |
|
|
(20.0) |
|
|
Amortization of acquired revenue contracts |
|
15.0 |
|
|
16.9 |
|
|
13.8 |
|
|
Loss on debt extinguishment |
|
127.0 |
|
|
— |
|
|
— |
|
|
Gain on vessel disposal |
|
(15.9) |
|
|
— |
|
|
— |
|
|
Other |
|
5.0 |
|
7.2 |
|
|
1.5 |
|
|
Changes in assets and liabilities: |
|
|
|
|
|
|
|
Accounts receivable |
|
(30.8) |
|
|
(41.8) |
|
|
(2.3) |
|
|
Net investment in lease |
|
14.9 |
|
|
13.3 |
|
|
9.3 |
|
|
Prepaid expenses and other |
|
(5.3) |
|
|
(1.9) |
|
|
5.4 |
|
|
Deferred dry-dock |
|
(38.7) |
|
|
(45.4) |
|
|
(22.3) |
|
|
Other assets |
|
(9.3) |
|
|
(6.5) |
|
|
— |
|
|
Accounts payable and accrued liabilities |
|
44.9 |
|
|
5.2 |
|
|
11.5 |
|
|
Deferred revenue |
|
18.1 |
|
|
6.5 |
|
|
(0.6) |
|
|
Operating lease liabilities |
|
(120.5) |
|
|
(115.1) |
|
|
(111.9) |
|
|
Derivative instruments |
|
26.6 |
|
|
22.5 |
|
|
55.0 |
|
|
Cash from operating activities |
|
860.0 |
|
|
627.4 |
|
|
783.0 |
|
|
|
|
|
|
|
|
|
|
Investing activities: |
|
|
|
|
|
|
|
Acquisition of /additions to vessels, including vessels under
construction |
|
(1,547.0) |
|
(806.7) |
|
|
(331.6) |
|
|
Short-term investments |
|
— |
|
|
— |
|
|
2.5 |
|
|
Prepayment on vessel purchase |
|
(132.3) |
|
|
(40.2) |
|
|
(13.0) |
|
|
Payment on settlement of interest swap agreements |
|
(26.8) |
|
(21.8) |
|
|
(126.8) |
|
|
Other assets and liabilities |
|
38.1 |
|
|
(22.8) |
|
|
(6.7) |
|
|
Capitalized interest relating to vessels under
construction |
|
(15.7) |
|
|
— |
|
|
— |
|
|
Cash used in investing activities |
|
(1,683.7) |
|
|
(891.5) |
|
|
(475.6) |
|
|
|
|
|
|
|
|
|
|
Financing activities: |
|
|
|
|
|
|
|
Repayments of long-term debt and other financing
arrangements |
|
(1,455.6) |
|
|
(770.9) |
|
|
(1,961.9) |
|
|
Issuance of long-term debt and other financing
arrangements |
|
3,148.3 |
|
|
1,108.5 |
|
|
1,227.3 |
|
|
Redemption of Fairfax Notes |
|
(300.0) |
|
|
— |
|
|
— |
|
|
Payment to Atlas to settle Fairfax Exchange (note 3) |
|
(300.0) |
|
|
— |
|
|
— |
|
|
Repayment of promissory note payable to Atlas (note 3) |
|
(52.3) |
|
|
— |
|
|
— |
|
|
Issuance of senior unsecured Exchangeable Notes |
|
— |
|
201.3 |
|
|
— |
|
|
Purchase of capped call |
|
— |
|
|
(15.5) |
|
|
— |
|
|
Notes and warrants issued |
|
— |
|
|
100.0 |
|
|
250.0 |
|
|
Proceeds from exercise of warrants |
|
— |
|
|
— |
|
|
250.0 |
|
|
Redemption of preferred shares |
|
— |
|
— |
|
|
(47.7) |
|
|
Financing fees |
|
(122.2) |
|
|
(26.4) |
|
|
(27.0) |
|
|
Dividends on common shares |
|
(169.0) |
|
|
(369.9) |
|
|
(101.8) |
|
|
Dividends on preferred shares |
|
— |
|
|
(16.8) |
|
|
(70.4) |
|
|
Capital contribution from Atlas |
|
— |
|
|
100.0 |
|
|
— |
|
|
Cash from/(used in) financing activities |
|
749.2 |
|
|
310.3 |
|
|
(481.5) |
|
|
(Decrease) increase in cash and cash equivalents |
|
(74.5) |
|
|
46.2 |
|
|
(174.1) |
|
|
Cash and cash equivalents and restricted cash, beginning of
period |
|
243.5 |
|
|
197.3 |
|
|
371.4 |
|
|
Cash and cash equivalents and restricted cash, end of
period |
|
$ |
169.0 |
|
|
$ |
243.5 |
|
|
$ |
197.3 |
|
See accompanying notes to consolidated financial
statements.
SEASPAN CORPORATION
Notes to Consolidated Financial Statements
(Tabular amounts in millions of United States dollars, except per
share amount and number of shares)
Years Ended December 31, 2021, 2020 and 2019
1.General:
Seaspan Corporation (“Seaspan” or the “Company”) was incorporated
on May 3, 2005 in the Marshall Islands and owns and operates
containerships pursuant to primarily long-term, fixed-rate time
charters to major container liner companies.
In February 2020, Seaspan completed a holding company
reorganization (the “Reorganization”) whereby Seaspan became a
direct, wholly owned subsidiary of Atlas Corp. ("Atlas"). Pursuant
to the Reorganization, common and preferred shareholders of Seaspan
became common and preferred shareholders of Atlas, as applicable,
on a one-for-one basis, maintaining the same number of shares and
ownership percentage held in Seaspan immediately prior to the
Reorganization. The Company’s common shares and preferred shares
were cancelled and re-issued to Atlas as common shares. Atlas
assumed all of Seaspan’s share purchase warrants and equity plans
and will perform all relevant obligations.
2.Significant
accounting policies:
(a)Basis
of presentation:
These consolidated financial statements have been prepared in
accordance with accounting principles generally accepted in the
United States of America and the following accounting policies have
been consistently applied in the preparation of the consolidated
financial statements.
(b)Principles
of consolidation:
The accompanying consolidated financial statements include the
accounts of Seaspan Corporation and its wholly-owned subsidiaries.
All significant intercompany balances and transactions have been
eliminated upon consolidation.
The Company also consolidates any variable interest entities
(“VIEs”) of which it is the primary beneficiary. The primary
beneficiary is the enterprise that has both the power to make
decisions that most significantly affect the economic performance
of the VIE and has the right to receive benefits or the obligation
to absorb losses that in either case could potentially be
significant to the VIE. The impact of the consolidation of these
VIEs is described in
note 10.
The Company accounts for its investment in companies in which it
has significant influence by the equity method. The Company’s
proportionate share of earnings is included in earnings and added
to or deducted from the cost of the investment.
(c)Foreign
currency translation:
The functional and reporting currency of the Company is the United
States dollar. Transactions involving other currencies are
converted into United States dollars using the exchange rates in
effect at the time of the transactions. At the balance sheet date,
monetary assets and liabilities that are denominated in currencies
other than the United States dollar are translated into United
States dollars using exchange rates at that date. Exchange gains
and losses are included in net earnings.
(d)Cash
equivalents:
Cash equivalents include highly liquid securities with terms to
maturity of three months or less when acquired.
(e)Vessels:
Except as described below, vessels are recorded at their cost,
which consists of the purchase price, acquisition and delivery
costs, less accumulated depreciation.
SEASPAN CORPORATION
Notes to Consolidated Financial Statements
(Tabular amounts in millions of United States dollars, except per
share amount and number of shares)
Years Ended December 31, 2021, 2020 and 2019
2.Significant
accounting policies (continued):
(e) Vessels (continued):
Vessels purchased from the Company’s predecessor upon completion of
the Company’s initial public offering in 2005 were initially
recorded at the predecessor’s carrying value.
Vessels under construction include deposits, installment payments,
interest, financing costs, transaction fees, construction design,
supervision costs, and other pre-delivery costs incurred during the
construction period.
Depreciation is calculated on a straight-line basis over the
estimated useful life of each vessel, which is 30 years from the
date of completion. The Company calculates depreciation based on
the estimated remaining useful life and the expected salvage value
of the vessel.
Vessels that are held for use are evaluated for impairment when
events or circumstances indicate that their carrying amounts may
not be recoverable from future undiscounted cash flows. Such
evaluations include the comparison of current and anticipated
operating cash flows, assessment of future operations and other
relevant factors. If the carrying amount of the vessel exceeds the
estimated net undiscounted future cash flows expected to be
generated over the vessel’s remaining useful life, the carrying
amount of the vessel is reduced to its estimated fair
value.
(f)Dry-dock
activities:
Classification rules require that vessels be dry-docked for
inspection including planned major maintenance and overhaul
activities for ongoing certification. The Company generally
dry-docks its vessels once every five years. Dry-docking activities
include the inspection, refurbishment and replacement of steel,
engine components, electrical, pipes and valves, and other parts of
the vessel. The Company uses the deferral method of accounting for
dry-dock activities whereby capital costs incurred are deferred and
amortized on a straight-line basis over the period until the next
scheduled dry-dock activity.
(g)Goodwill:
Goodwill represents the excess of the purchase price of an acquired
enterprise over the fair value assigned to assets acquired and
liabilities assumed in a business combination. Goodwill is not
amortized, but reviewed for impairment annually or more frequently
if impairment indicators arise. When goodwill is reviewed for
impairment, the Company may elect to assess qualitative factors to
determine whether it is more likely than not that the fair value of
a reporting unit is less than its carrying amount, including
goodwill. Alternatively, the Company may bypass this step and use a
fair value approach to identify potential goodwill impairment and,
when necessary, measure the amount of impairment. The Company uses
a discounted cash flow model to determine the fair value of
reporting units, unless there is a readily determinable fair market
value.
(h)Deferred
financing fees:
Deferred financing fees represent the unamortized costs incurred on
issuance of the Company’s credit facilities and other financing
arrangements and are presented as a direct deduction from the
related debt liability when available. Amortization of deferred
financing fees on credit facilities is provided on the effective
interest rate method over the term of the facility based on amounts
available under the facilities. Amortization of deferred financing
fees on other financing arrangements is provided on the effective
interest rate method over the term of the underlying obligation.
Amortization of deferred financing fees is recorded as interest
expense.
(i)Revenue:
The Company derives its revenue primarily from the charter of its
vessels. Each charter agreement is evaluated and classified as an
operating lease or financing lease based on the lease term, fair
value associated with the lease and any purchase options or
obligations. The assessment is done at lease commencement and
reassessed only when a modification occurs that is not considered a
separate contract.
Charters classified as operating leases include a lease component
associated with the use of the vessel and a non-lease component
related to vessel management. Total consideration in the lease
agreement is allocated between the lease and non-lease components
based on their relative standalone selling prices. For arrangements
where the timing and pattern of transfer to the lessee is
consistent between the lease and non-lease components and the lease
component, if accounted for separately, would be classified as an
operating lease, the Company has elected to treat the lease and
non-lease components as a single lease component. Revenue is
recognized each day the vessels are on-hire, managed and
performance obligations are satisfied.
SEASPAN CORPORATION
Notes to Consolidated Financial Statements
(Tabular amounts in millions of United States dollars, except per
share amount and number of shares)
Years Ended December 31, 2021, 2020 and 2019
2. Significant accounting policies (continued):
(j) Revenue (continued):
For charters that are classified as direct financing leases and
sales-type leases, the present value of minimum lease payments and
any unguaranteed residual value are recognized as net investment in
lease. The discount rate used in determining the present values is
the interest rate implicit in the lease. The lower of the fair
value of the vessel based on information available at lease
commencement date and the present value of the minimum lease
payments computed using the interest rate implicit specific to each
lease, represents the price, from which the carrying value of the
vessel and any initial direct costs are deducted in order to
determine the selling profit or loss.
For charters that are classified as direct financing leases, the
unearned lease interest income including any selling profit and
initial direct costs are deferred and amortized to income over the
period of the lease so as to produce a constant periodic rate of
return on the net investment in lease. Any selling loss is
recognized at lease commencement date.
For charters that are classified as sales-type leases, any selling
profit or loss is recognized at lease commencement date. Initial
direct costs are expensed at lease commencement date if the fair
value of the vessel is different from its carrying amount. If the
fair value of the vessel is equal to its carrying amount, initial
direct costs should be deferred and amortized to income over the
term of the lease.
(j)Leases:
The Company is the lessee in certain of its vessel sale-leaseback
transactions. Leases classified as operating leases are recorded as
lease liabilities based on the present value of minimum lease
payments over the lease term, discounted using the lessor’s rate
implicit in the lease for each individual lease arrangement or the
Company’s incremental borrowing rate, if the lessor’s implicit rate
is not readily determinable. The lease term includes all periods
covered by renewal and termination options where the Company is
reasonably certain to exercise the renewal options or not to
exercise the termination options. Corresponding right-of-use assets
are recognized consisting of the lease liabilities, initial direct
costs and any lease incentive payments.
Lease liabilities are drawn down as lease payments are made and
right-of-use assets are depreciated over the term of the lease.
Operating lease expenses are recognized on a straight-line basis
over the term of the lease, consisting of interest accrued on the
lease liability and depreciation of the right-of-use asset,
adjusted for changes in index-based variable lease payments in the
period of change.
Lease payments on short-term operating leases with lease terms of
twelve months or less are expensed as incurred.
Transactions are determined to be sale-leaseback transactions when
control of the vessel is transferred. For sale-leaseback
transactions, where the Company is the seller-lessee, any gains or
losses on sale are recognized upon transfer.
(k)Derivative
financial instruments:
From time to time, the Company utilizes derivative financial
instruments. All of the Company’s derivatives are measured at their
fair value at the end of each period. Derivatives that mature
within one year are classified as current. For derivatives not
designated as accounting hedges, changes in their fair value are
recorded in earnings.
The Company’s hedging policies permit the use of various derivative
financial instruments to manage interest rate risk.
The Company had previously designated certain of its interest rate
swaps as accounting hedges and applied hedge accounting to those
instruments. By September 30, 2008, the Company de-designated all
of the interest rate swaps it had accounted for as hedges to that
date. Subsequent to their de-designation dates, changes in their
fair value are recorded in earnings.
The Company evaluates whether the occurrence of any of the
previously hedged interest payments are considered to be remote.
When the previously hedged interest payments are not considered
remote of occurring, unrealized gains or losses in accumulated
other comprehensive income associated with the previously
designated interest rate swaps are recognized in earnings when and
where the interest payments are recognized. If such interest
payments are identified as being remote, the accumulated other
comprehensive income balance pertaining to these amounts is
reversed through earnings immediately.
SEASPAN CORPORATION
Notes to Consolidated Financial Statements
(Tabular amounts in millions of United States dollars, except per
share amount and number of shares)
Years Ended December 31, 2021, 2020 and 2019
2. Significant accounting policies (continued):
(m) 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 the Company has 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.
(n) Share-based compensation:
The Company has granted restricted shares, phantom share units,
restricted stock units and stock options to certain of its
officers, members of management and directors as compensation. Upon
completion of the Reorganization, Atlas assumed all of Seaspan’s
share purchase warrants and equity plans and has and will perform
all relevant obligations. Compensation cost is measured at the
grant date fair values as follows:
•Restricted
shares, phantom share units and restricted stock units are measured
based on the quoted market price of the common shares on the date
of the grant.
•Stock
options exercisable into Atlas common shares are measured at fair
value using the Black-Scholes model.
The fair value of each grant is recognized on a straight-line basis
over the requisite service period. The Company accounts for
forfeitures in share-based compensation expense as they
occur.
(o) Use of estimates:
The preparation of consolidated financial statements requires
management to make estimates and assumptions that affect
the:
•reported
amounts of assets and liabilities,
•disclosure
of contingent assets and liabilities at the balance sheet dates
and
•reported
amounts of revenue and expenses during the reporting fiscal
periods.
Areas where accounting judgments and estimates are significant to
the Company and where actual results could differ from those
estimates, include the:
•assessment
of going concern;
•assessment
of vessel useful lives;
•expected
vessel salvage values;
•recoverability
of the carrying value of vessels which are subject to future market
events;
•carrying
value of goodwill; and
•fair
value of interest rate swaps, other derivative financial
instruments.
(p) Comparative information:
Certain information has been reclassified to conform to the
financial statement presentation adopted for the current
year.
(q)Recently
adopted and future accounting pronouncements:
Measurement of credit loss
Effective January 1, 2020, the Company adopted Accounting Standards
Update (“ASU”) 2016-13, “Measurement of Credit Loss on Financial
Instruments”. ASU 2016-13 replaces the current incurred loss
impairment methodology with the expected credit loss impairment
model (“CECL”), which requires consideration of a broader range of
reasonable and supportable information to estimate expected credit
losses over the life of the instrument instead of only when losses
are incurred. This standard applies to financial assets measured at
amortized cost basis and investments in leases recognized by the
lessor. Upon adoption, a cumulative effect adjustment of $2,293,000
was made to deficit as part of the modified retrospective
transition approach.
SEASPAN CORPORATION
Notes to Consolidated Financial Statements
(Tabular amounts in millions of United States dollars, except per
share amount and number of shares)
Years Ended December 31, 2021, 2020 and 2019
2. Significant accounting policies (continued):
(q) Recent accounting
pronouncements:
Simplifying test for goodwill impairment
Effective January 1, 2020, the Company adopted ASU 2017-04,
“Simplifying the Test for Goodwill Impairment”. ASU 2017-04
eliminates the need to determine the fair value of individual
assets and liabilities of a reporting unit to measure the implied
goodwill impairment. The goodwill impairment will now be the amount
by which a reporting unit’s carrying value exceeds its fair value,
not to exceed the carrying amount of goodwill. The adoption of ASU
2017-04 did not have a material impact on the Company.
Discontinuation of LIBOR
The Company adopted ASU 2020-04, “Reference Rate Reform (Topic
848)”, prospectively to contract modifications. The guidance
provides optional relief for the discontinuation of LIBOR resulting
from rate reform. Contract terms that are modified due to the
replacement of a reference rate are not required to be remeasured
or reassessed under FASB’s relevant U.S. GAAP Topic. The election
is available by Topic. The Company has elected to apply the
optional relief for contracts under ASC 470, “Debt”, ASC 840 and
842, “Leases”, and ASC 815, “Derivatives and Hedging”. There was no
impact to the Company's financial statements upon initial adoption.
The LIBOR replacement modifications for Debt contracts will be
accounted for by prospectively adjusting the effective interest
rate in the agreements. Existing lease and derivative contracts
will require no reassessments. Transition activities are focused on
the conversion of existing LIBOR based contracts to the Secured
Overnight Financing Rate.
Debt with conversion and other options
Effective January 1, 2022, the Company adopted ASU 2020-06, “Debt –
Debt with Conversion and Other Options (Subtopic 470-20)”, using
the modified retrospective method, whereby the accounting for
convertible debt instruments is simplified by reducing the number
of accounting models and circumstances when embedded conversion
features are separately recognized. The adoption of this standard
is not expected to have a material impact to the
Company.
3.Related
party transactions:
(a) The income or expenses with related parties relate to amounts
paid to or received from individuals or entities that are
associated with the Company or with the Company’s directors or
officers and these transactions are governed by pre-arranged
contracts.
(b) On each of February 14, 2018 and January 15, 2019, the Company
issued to Fairfax $250,000,000 aggregate principal of 5.50% senior
notes due on February 14, 2025 (“2025 Fairfax Notes”) and January
15, 2026 (“2026 Fairfax Notes”), respectively, and a tranche of
warrants to purchase 38,461,539 common shares of Seaspan at an
exercise price of $6.50 per share, on each date. On February 28,
2020, Seaspan issued to Fairfax, in a private placement,
$100,000,000 aggregate principal amount of 5.50% senior notes due
on March 1, 2027 (the “2027 Fairfax Notes” and together with the
2025 Fairfax Notes and the 2026 Fairfax Notes, the “Fairfax Notes”)
(note 8(e)).
In June 2021, Atlas and Seaspan exchanged and amended the Fairfax
Notes. Pursuant to this transaction, Atlas exchanged $200,000,000
aggregate principal amount of the 2026 Fairfax Notes and all
$100,000,000 aggregate principal amount of the 2027 Fairfax Notes
for (i) 12,000,000 Series J 7.00% Cumulative Redeemable Perpetual
Preferred Shares of Atlas (the “Series J Preferred Shares”),
representing total liquidation value of $300,000,000, and (ii)
1,000,000 five year warrants to purchase an equal number of Atlas
common shares at an exercise price of $13.71 per share (the
“Fairfax Exchange”) (note 8(e)). Subsequent to the Fairfax
Exchange, Seaspan paid $300,000,000 to Atlas to settle the
exchanged 2026 Fairfax Notes and 2027 Fairfax Notes and the notes
were cancelled.
In connection with the Fairfax Exchange, the Fairfax Holders also
agreed to amend the terms of the $300,000,000 aggregate principal
amount of the Fairfax Notes that remained outstanding following the
Fairfax Exchange (the “Amendment”), which included all $250,000,000
aggregate principal amount of the 2025 Fairfax Notes and
$50,000,000 aggregate principal amount of the 2026 Fairfax Notes.
The Amendment, among other things, eliminated the Fairfax Holders’
mandatory redemption and put rights and released and discharged all
outstanding guarantees and liens on collateral thereunder. The
Fairfax Holders also agreed to terminate Seaspan’s Amended and
Restated Pledge and Collateral Agent Agreement and to release and
discharge all liens on collateral thereof (note 8(e)). During the
year ended December 31, 2021, the Company redeemed for cash the
remaining 2025 Fairfax Notes and 2026 Fairfax Notes at a redemption
price equal to 100% of the principal amount plus any accrued and
unpaid interest.
For the year ended December 31, 2021, interest expense related to
the Fairfax Notes, excluding amortization of the debt discount, was
$19,204,000 (2020 - $32,114,000; 2019 - $26,927,000). For the year
ended December 31, 2021, amortization of debt discount was
$14,188,000 (2020 - $19,963,000; 2019 - $17,347,000).
SEASPAN CORPORATION
Notes to Consolidated Financial Statements
(Tabular amounts in millions of United States dollars, except per
share amount and number of shares)
Years Ended December 31, 2021, 2020 and 2019
3.Related
party transactions (continued):
(c) In March 2021, Atlas entered into a joint venture with Zhejiang
Energy Group (“ZE”) and executed a shareholders agreement with ZE
to form the joint venture (“ZE JV”). Atlas owns 50% of the ZE JV.
The purpose of the joint venture is to develop business in relation
to container vessels, LNG vessels, environmental protection
equipment and power equipment supply.
In October 2021, through as series of transactions with a wholly
owned subsidiary of the ZE JV as the ultimate purchaser, Atlas sold
one 4,250 TEU vessel for an aggregate purchase price of $38,280,000
(note 5). The Company continues to manage the ship operations of
the vessel. During the year ended December 31, 2021, the Company
earned revenue of $325,000 (2020 - $nil) and incurred expenses of
$285,000 (2020 - $nil) in connection with the ship management of
the vessel.
Transactions with Atlas Corp.
In March 2020, the Company received a capital contribution of
$100,000,000 from Atlas.
On December 21, 2020, the Company issued $201,250,000 aggregate
principal amount of 3.75% exchangeable senior unsecured notes due
on December 15, 2025 in a private placement (the “Exchangeable
Notes”). These notes are exchangeable into common shares of Atlas
(note 8(f)).
Atlas grants restricted shares, restricted stock units and stock
options to the Company’s employees under the Atlas Corp. Stock
Incentive Plan (the “Atlas Plan”) (note 12). The value of the
awards granted to the Company’s employees is considered a capital
contribution from Atlas. During the year ended December 31, 2021,
the Company recognized capital contribution in respect of such
grants of $7,340,000 (2020 - $2,940,000).
The Company routinely makes payments for expenses on behalf of
Atlas. As of December 31, 2021, amounts due from Atlas are
non-interest bearing, unsecured and have no fixed repayment
terms.
During the year ended December 31, 2021, the Company repaid an
intercompany promissory note of $52,349,825 to Atlas in relation to
the exchange of the Company's previously outstanding 7.125% senior
unsecured notes due 2027 (note 8(d)).
During the year ended December 31, 2021, the Company declared
dividends of $169,000,000 (2020 - $363,000,000) to Atlas. The
Company makes dividend payments to Atlas on a quarterly basis to
service Atlas’ payment of dividends to shareholders of its common
and preferred shares and interest on Atlas' 7.125% senior unsecured
notes due 2027.
The Company provides certain management services to Atlas in
exchange for a management fee. For the period ended December 31,
2021, the management service revenue recognized from this
arrangement was $9,927,000 (2020 - $8,029,000).
4.Net
investment in lease:
|
|
|
|
|
|
|
|
|
|
|
|
|
December 31, 2021 |
|
December 31, 2020 |
|
Undiscounted lease receivable |
$ |
1,448.2 |
|
|
$ |
773.2 |
|
|
Unearned interest income |
(689.9) |
|
|
(343.9) |
|
|
Net investment in lease |
$ |
758.3 |
|
|
$ |
429.3 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
December 31, 2021 |
|
December 31, 2020 |
|
Lease receivables |
$ |
751.4 |
|
|
$ |
429.3 |
|
|
Unguaranteed residual value |
6.9 |
|
|
— |
|
|
Net investment in lease |
758.3 |
|
|
429.3 |
|
|
Current portion of net investment in lease |
(16.8) |
|
|
(10.7) |
|
|
Long-term portion of net investment in lease |
$ |
741.5 |
|
|
$ |
418.6 |
|
In February 2020, the bareboat charters for the six vessels
acquired in November 2019 were modified to extend the terms of the
leases by six years, with similar purchase options. As a result of
the modification, it was determined that the customer is no longer
reasonably certain to exercise the purchase options and these
leases were reclassified as operating leases.
In February 2021, the Company commenced a fixed rate bareboat
charter with a term of 18 years on a recently acquired 12,000 TEU
vessel, which has been classified as a sales-type lease. No gain or
loss was recognized on commencement date.
SEASPAN CORPORATION
Notes to Consolidated Financial Statements
(Tabular amounts in millions of United States dollars, except per
share amount and number of shares)
Years Ended December 31, 2021, 2020 and 2019
4.Net
investment in lease (continued):
In September and November 2021, the Company commenced one and two
18-year fixed rate bareboat charters, respectively, each for a
12,200 TEU vessel. The bareboat charters have been classified as a
sales-type lease and no gain or loss was recognized on the
commencement dates.
At December 31, 2021, the undiscounted minimum cash flows related
to lease receivable on direct financing leases are as
follows:
|
|
|
|
|
|
|
|
|
|
2022 |
|
$ |
79.3 |
|
|
2023 |
|
79.3 |
|
2024 |
|
79.5 |
|
2025 |
|
79.3 |
|
2026 |
|
79.3 |
|
Thereafter |
|
1051.5 |
|
|
|
$ |
1,448.2 |
|
5.Vessels:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
December 31, 2021 |
Cost |
|
Accumulated
depreciation |
|
Net book
value |
|
Vessels |
$ |
9,410.9 |
|
|
$ |
(2,830.4) |
|
|
$ |
6,580.5 |
|
|
Vessels under construction |
1,095.6 |
|
|
— |
|
|
1,095.6 |
|
|
Total |
$ |
10,506.5 |
|
|
$ |
(2,830.4) |
|
|
$ |
7,676.1 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
December 31, 2020 |
Cost |
|
Accumulated
depreciation |
|
Net book
value |
|
Vessels |
$ |
9,148.9 |
|
|
$ |
(2,571.3) |
|
|
$ |
6,577.6 |
|
|
Vessels under construction |
42.0 |
|
|
— |
|
|
42.0 |
|
|
Total |
$ |
9,190.9 |
|
|
$ |
(2,571.3) |
|
|
$ |
6,619.6 |
|
During the year ended December 31, 2021, depreciation and
amortization expense relating to vessels was $279,879,000 (2020 -
$259,869,000; 2019- $233,729,000).
In February 2020, sales-type leases related to six bareboat
charters were re-assessed to be operating leases at lease
modification. Accordingly, vessels of $377,393,000 were
reclassified to vessels and recorded at a value equal to the net
investment in leases derecognized (note 4).
Upon commencement of a fixed rate bareboat charter in February
2021, $88,060,575 was reclassified to net investment in lease from
vessels (note 4).
During the year ended December 31, 2020, the Company took delivery
of ten secondhand vessels, with an aggregate purchase price of
$785,033,000, including one vessel that was reclassified to net
investment in
leases
at lease modification, subsequent to initial acquisition during the
year.
During the year ended December 31, 2021, the Company took delivery
of two secondhand 8,500 and two secondhand 15,000 vessels, for an
aggregate purchase price of $358,500,000.
During the year ended December 31, 2021, the Company sold one 4,250
TEU vessel to a wholly owned subsidiary of the ZE JV for
$38,280,000 (note 3), resulting in a gain on sale of
$15,884,000.
Vessels under construction:
.As at December 31, 2021, the Company has 67 vessels under
construction (December 31, 2020 – 5 vessels).
SEASPAN CORPORATION
Notes to Consolidated Financial Statements
(Tabular amounts in millions of United States dollars, except per
share amount and number of shares)
Years Ended December 31, 2021, 2020 and 2019
5.Vessels
(continued):
Vessels under construction (continued):
As at December 31, 2021, the vessels under construction
balance includes $18,870,000 of capitalized interest for the year
ended December 31, 2021 (2020 – $nil).
During the year ended December 31, 2021, the Company took delivery
of three 12,200 TEU vessels that were previously under construction
for an aggregate purchase price of $251,895,000. The vessels
commenced 18-year bareboat charters upon delivery and are
classified as a sales-type lease (note 4)
6.Right-of-use
assets:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
December 31, 2021 |
Cost |
|
Accumulated amortization |
|
Net book value |
|
|
|
|
|
|
|
Vessel operating leases |
$ |
1,066.6 |
|
|
$ |
(350.0) |
|
|
$ |
716.6 |
|
|
Other operating leases |
9.4 |
|
|
(5.6) |
|
|
3.8 |
|
|
Right-of-use assets |
$ |
1,076.0 |
|
|
$ |
(355.6) |
|
|
$ |
720.4 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
December 31, 2020 |
Cost |
|
Accumulated amortization |
|
Net book value |
|
|
|
|
|
|
|
Vessel operating leases |
$ |
1,060.9 |
|
|
$ |
(228.0) |
|
|
$ |
832.9 |
|
|
Other operating leases |
9.4 |
|
|
(3.7) |
|
|
5.7 |
|
|
Right-of-use assets |
$ |
1,070.3 |
|
|
$ |
(231.7) |
|
|
$ |
838.6 |
|
During the year ended December 31, 2021, the change in
right-of-use assets was $123,900,000 (2020 - $118,577,000; 2019 -
$111,810,000).
7.Other
assets:
|
|
|
|
|
|
|
|
|
|
|
|
|
December 31, 2021 |
|
December 31, 2020 |
|
Intangible assets
(a)
|
$ |
65.2 |
|
|
$ |
78.5 |
|
|
Deferred dry-dock
(b)
|
79.4 |
|
|
63.8 |
|
|
Deferred financing fees on undrawn financings
(c)
|
77.0 |
|
— |
|
Other |
49.0 |
|
44.6 |
|
Other assets |
270.6 |
|
|
186.9 |
|
(a)Intangible
assets
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
December 31, 2021 |
Cost |
|
Accumulated amortization |
|
Net book value |
|
Customer contracts |
$ |
129.9 |
|
|
$ |
(76.2) |
|
|
$ |
53.7 |
|
|
Other |
16.5 |
|
|
(5.0) |
|
|
11.5 |
|
|
|
$ |
146.4 |
|
|
$ |
(81.2) |
|
|
$ |
65.2 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
December 31, 2020 |
Cost |
|
Accumulated amortization |
|
Net book value |
|
|
|
|
|
|
|
Customer contracts |
$ |
129.9 |
|
|
$ |
(58.6) |
|
|
$ |
71.3 |
|
|
Other |
11.5 |
|
|
(4.3) |
|
|
7.2 |
|
|
|
$ |
141.4 |
|
|
$ |
(62.9) |
|
|
$ |
78.5 |
|
Intangible assets are primarily comprised of the acquisition date
fair value of time charter contracts acquired. During the year
ended December 31, 2021, the Company recorded $18,442,000
(2020 - $20,155,000; 2019 - $20,729,000) of amortization expense
related to intangible assets.
Acquired customer contracts are amortized on a straight-line basis
over their remaining useful lives. As of December 31, 2021,
the weighted average useful lives of acquired customer contracts
was 4 years (2020 - 5 years; 2019 - 5 years).
SEASPAN CORPORATION
Notes to Consolidated Financial Statements
(Tabular amounts in millions of United States dollars, except per
share amount and number of shares)
Years Ended December 31, 2021, 2020 and 2019
7.Other
assets (continued):
(a)Intangible
assets (continued):
Future amortization expense of intangible assets is as
follows:
|
|
|
|
|
|
|
2022 |
$ |
17.0 |
|
|
2023 |
13.3 |
|
|
2024 |
10.5 |
|
|
2025 |
6.6 |
|
|
2026 |
3.0 |
|
|
Thereafter |
14.8 |
|
|
|
$ |
65.2 |
|
(b) Deferred dry-dock
During the years ended December 31, 2021 and 2020, changes in
deferred dry-dock were as follows:
|
|
|
|
|
|
|
December 31, 2019 |
$ |
41.3 |
|
|
Costs incurred |
45.2 |
|
|
Amortization expensed
(1)
|
(22.7) |
|
|
December 31, 2020 |
63.8 |
|
|
Costs incurred |
40.0 |
|
|
Amortization expensed
(1)
|
(24.4) |
|
|
December 31, 2021 |
$ |
79.4 |
|
(1)Amortization
of dry-docking costs is included in depreciation and
amortization.
(c) Deferred financing fees on undrawn financings:
The Company has entered into financing arrangements for certain of
its vessels under construction. As the financing arrangements are
undrawn as at December 31, 2021, the amounts incurred have been
capitalized and recorded as long-term asset. As the financing is
drawn, the amounts will be reclassified and presented as a direct
deduction from the related debt liability.
8.Long-term
debt:
|
|
|
|
|
|
|
|
|
|
|
|
|
December 31, 2021 |
|
December 31, 2020 |
|
Revolving credit facilities
(a) (c)
|
$ |
— |
|
|
$ |
283.0 |
|
|
Term loan credit facilities
(b) (c)
|
2,128.6 |
|
|
2,355.6 |
|
|
Senior unsecured notes
(d)
|
1,250.0 |
|
|
80.0 |
|
|
Fairfax Notes
(e)
|
— |
|
|
600.0 |
|
|
Senior Unsecured Exchangeable Notes
(f)
|
201.3 |
|
|
201.3 |
|
|
Senior Secured Notes
(g)
|
500.0 |
|
|
— |
|
|
|
4,079.9 |
|
|
3,519.9 |
|
|
Fair value adjustment on term loan credit facilities
(b)
|
— |
|
|
(0.1) |
|
|
Debt discount on Fairfax Notes |
— |
|
|
(130.9) |
|
|
Debt discount on Senior Unsecured Exchangeable Notes |
(5.1) |
|
|
(6.1) |
|
|
Deferred financing fees |
(51.8) |
|
|
(36.1) |
|
|
Long-term debt |
4,023.0 |
|
|
3,346.7 |
|
|
Current portion of long-term debt |
(542.1) |
|
|
(321.7) |
|
|
Long-term debt |
$ |
3,480.9 |
|
|
$ |
3,025.0 |
|
SEASPAN CORPORATION
Notes to Consolidated Financial Statements
(Tabular amounts in millions of United States dollars, except per
share amount and number of shares)
Years Ended December 31, 2021, 2020 and 2019
8.Long-term
debt (continued):
(a)Revolving
credit facilities:
As at December 31, 2021, the Company had two revolving credit
facilities available (December 31, 2020 – two revolving credit
facilities) which provided for aggregate borrowings of up to
$550,000,000 (December 31, 2020 – $450,000,000), of which
$550,000,000 (December 31, 2020 - $167,000,000) was
undrawn.
In May 2021, the Company amended and restated one revolving credit
facility which increased the aggregate commitments by $100,000,000
and extended the maturity by two years.
Revolving credit facilities and Term loan credit facilities
balances as at December 31, 2020 have been reclassified to
conform to the financial statement presentation adopted for the
current year.
As at December 31, 2021, the Company has no drawn revolving
credit facilities. As at December 31, 2020 , the one month and
three month average LIBOR on the Company’s revolving credit
facilities was 0.0%, and 0.2%, respectively and the margins ranged
between 0.0% and 2.3%. The weighted average rate of interest,
including the margin, for the Company’s revolving credit facilities
was 1.1% at December 31, 2021 (December 31, 2020 – 1.4%). Interest
payments are made monthly, quarterly or semi-annually.
The Company is subject to commitment fees ranging between 0.5% and
0.6% (December 31, 2020 – 0.2% and 0.6%) calculated on the undrawn
amounts under the various facilities.
(b)Term
loan credit facilities:
As at December 31, 2021, the Company has entered into
$3,838,853,000 (December 31, 2020 - $2,605,600,000) of term
loan credit facilities, of which 1,710,224,000 (December 31,
2020 - $250,000,000) was undrawn. One of the term loan credit
facilities has a revolving loan component which has been included
in the revolving facilities.
In February 2020 and March 2020, the Company increased the
aggregate commitment under an existing term loan credit facility
(the “December 2019 Term Loan”) which matures on December 30, 2025,
by $100,000,000.
On October 15, 2020, the Company entered into a
sustainability-linked term loan facility (the “October 2020 Term
Loan”) with an aggregate principal of $200,000,000, which was
subsequently upsized to $250,000,000 on December 14, 2020. The
facility matures on October 14, 2026 and bears an initial
interest rate of three month LIBOR plus 2.25% margin. The margin
may be subsequently adjusted if the Company meets certain
sustainability metrics during the term of the loan.
The December 2019 Term Loan and the October 2020 Term Loan are
secured by a portfolio of vessels, which also secured some of the
Company’s other credit facilities.
In May 2021, the Company amended and restated three term loan
credit facilities which increased the aggregate commitments by
$79,540,000 and extended maturities by two years.
In June 2021, the Company made early prepayment of $59,961,000 on
one term loan that matures on July 6, 2025.
In May 2021, the Company entered into a $6,500,000 term loan credit
facility, which bears a fixed interest rate of 3.8% per annum and
matures on May 30, 2024.
In July 2021, the Company entered into a $6,500,000 term loan
credit facility, which bears a fixed interest rate of 3.8% per
annum and matures on July 2, 2024.
In October 2021, the Company entered into a $633,088,000 term loan
credit facility, which bears an initial interest rate of three
month LIBOR plus 1.4% margin. No amounts have been drawn under the
facility as of December 31, 2021.
In December 2021, the Company entered into a $1,077,137,000 term
loan credit facility, which bears an initial interest rate of three
month LIBOR plus 3.39% margin. No amounts have been drawn under the
facility as of December 31, 2021.
Term loan credit facilities drawn mature between December 31, 2022
and January 21, 2030.
For the Company’s term loan credit facilities, except for one,
interest is calculated on three month or six month LIBOR plus a
margin per annum. The three month and six month average LIBOR was
0.2% and 0.2%, respectively (December 31, 2020 – 0.2% and 0.3%,
respectively) and the margins ranged between 0.4% and 2.3% as at
December 31, 2021 (December 31, 2020 – 0.4% and
4.3%).
For one of our term loan credit facilities with a total principal
outstanding of $27,198,000 (December 31, 2020 - $39,970,000),
interest is calculated based on the Export-Import Bank of Korea
(KEXIM) rate plus 0.7% per annum.
For two of the term loan credit facilities with a total principal
amount outstanding of $921,000,000
(December 31, 2020 – nil), interest is calculated based on a
contractual rate of 3.8% per annum for both.
SEASPAN CORPORATION
Notes to Consolidated Financial Statements
(Tabular amounts in millions of United States dollars, except per
share amount and number of shares)
Years Ended December 31, 2021, 2020 and 2019
8.Long-term
debt (continued):
(b) Term loan credit facilities (continued):
The weighted average rate of interest, including the applicable
margin, was 1.8% at December 31, 2021 (December 31, 2020 –
2.0%) for term loan credit facilities. Interest payments are made
in monthly, quarterly or semi-annual payments.
Repayments under term loan credit facilities are made in quarterly
or semi-annual payments. For those related to newbuild
containerships, payments commence three, six or thirty-six months
after delivery of the associated newbuild containership,
utilization date or the inception date of the term loan credit
facilities.
The following is a schedule of future minimum repayments under our
term loans credit facilities as of December 31, 2021:
|
|
|
|
|
|
|
2022 |
$ |
543.5 |
|
|
2023 |
268.2 |
|
|
2024 |
138.9 |
|
|
2025 |
136.1 |
|
|
2026 |
778.6 |
|
|
Thereafter |
263.3 |
|
|
|
$ |
2,128.6 |
|
(c)Credit
facilities – other:
As of December 31, 2021, the Company’s credit facilities were
secured by first-priority mortgages granted on 65 of its vessels,
together with other related security. The security for each of the
Company’s current secured credit facilities may
include:
•A
first priority mortgage on the collateral vessels funded by the
related credit facility;
•An
assignment of the Company’s time charters and earnings related to
the related collateral vessels;
•An
assignment of the insurance on each of the vessels that are subject
to a related mortgage;
•An
assignment of the Company’s related shipbuilding contracts and the
corresponding refund guarantees;
•A
pledge over shares of various subsidiaries; and
•A
pledge over the related retention accounts.
As at December 31, 2021, 1,511,365,000 principal amount of
indebtedness under the Company’s term loan and revolving credit
facilities was secured by a portfolio of 52 vessels, the
composition of which can be changed and is subject to a borrowing
base and portfolio concentration requirements, as well as
compliance with financial covenants and certain negative
covenants.
The Company may prepay certain amounts outstanding without penalty,
other than breakage costs in certain circumstances. A prepayment
may be required as a result of certain events, including without
limitation the sale or loss of a vessel, a termination or
expiration of a charter (and the inability to enter into a
replacement charter acceptable to lenders within a prescribed
period of time). The amount that must be prepaid may be calculated
based on the loan to market value. In these circumstances,
valuations of the Company’s vessels are conducted on a “without
charter” basis as required under the credit facility
agreement.
Each credit facility contains a mix of financial covenants
requiring the Company to maintain minimum liquidity, tangible net
worth, interest and principal coverage ratios and/or debt to assets
ratios, as defined.
Certain facilities are guaranteed by an intermediate parent entity,
in which case the parent entity must meet certain consolidated
financial covenants under those term loan facilities including
maintaining certain minimum tangible net worth, cash requirements
and debt-to-asset ratios.
Some of the facilities also have an interest and principal coverage
ratio, debt service coverage and vessel value requirement for the
subsidiary borrower. The Company was in compliance with these
covenants as at December 31, 2021.
(d)Senior
unsecured notes:
In February 2021, the Company issued $200,000,000 of 6.5% senior
unsecured sustainability-linked bonds in the Nordic bond market
(“2024 Bonds”). In April 2021, the Company issued a further
$300,000,000 of senior unsecured sustainability-linked bonds in the
Nordic bond market (the “2026 Bonds” and together with the 2024
Bonds, the “Bonds”). The Bonds mature in February 2024 and April
2026, respectively, and bear interest at 6.5% per annum. If the
sustainability performance targets are not met during the term of
the Bonds, the Bonds will be settled at maturity at 100.5% of the
initial principal. The Bonds are listed on the Oslo Stock
Exchange.
SEASPAN CORPORATION
Notes to Consolidated Financial Statements
(Tabular amounts in millions of United States dollars, except per
share amount and number of shares)
Years Ended December 31, 2021, 2020 and 2019
8.Long-term
debt (continued):
(d) Senior unsecured notes (continued):
In May 2021, Atlas exchanged an aggregate principal amount of
$52,198,825 7.125% senior notes due 2027 of Seaspan Corporation
(the “Seaspan 2027 Notes”) for an equivalent amount of its 7.125%
senior notes due 2027 (the “Atlas 2027 Notes”), registered under
the Securities Act of 1933, as amended, and listed on the Nasdaq
Global Market. In July 2021, Atlas exchanged an additional $151,000
of Seaspan 2027 Notes for Atlas 2027 Notes, following which the
Company redeemed all remaining Seaspan 2027 Notes.
In July 2021, the Company issued $750,000,000 of senior unsecured
notes. These notes mature in 2029 and accrue interest at 5.5% per
annum, payable semi-annually beginning on February 1, 2022. The
notes are a blue transition bond developed to further the Company’s
sustainability efforts.
(e)Fairfax
Notes:
Pursuant to the Fairfax Exchange, as described in note 3, Atlas
exchanged $200,000,000 aggregate principal amount of the 2026
Fairfax Notes and all $100,000,000 aggregate principal amount of
the 2027 Fairfax Notes for (i) 12,000,000 Series J Preferred
Shares, representing total liquidation value of $300,000,000, and
(ii) 1,000,000 five year warrants to purchase an equal number of
Atlas common shares at an exercise price of $13.71 per share.
Subsequent to the Fairfax Exchange, Seaspan paid $300,000,000 to
Atlas to settle the exchanged 2026 Fairfax Notes and 2027 Fairfax
Notes and the notes were cancelled.
In connection with the Fairfax Exchange, the Fairfax Holders also
agreed to amend the terms of the $300,000,000 aggregate principal
amount of the Fairfax Notes that remained outstanding following the
Fairfax Exchange, which included all $250,000,000 aggregate
principal amount of the 2025 Fairfax Notes and $50,000,000
aggregate principal amount of the 2026 Fairfax Notes. The
Amendment, among other things, eliminated the Fairfax Holders’
mandatory redemption and put rights and released and discharged all
outstanding guarantees and liens on collateral thereunder. The
Fairfax Holders also agreed to terminate Seaspan’s Amended and
Restated Pledge and Collateral Agent Agreement and to release and
discharge all liens on collateral thereof.
In August 2021, the remaining 2025 Fairfax Notes and 2026 Fairfax
Notes were redeemed for cash at a redemption price equal to 100% of
the principal amount plus accrued and unpaid interest. As a result
of the Fairfax Exchange and subsequent redemptions, the Company
recorded a loss on debt extinguishment of $121,715,000 for the year
ended December 31, 2021, respectively (2020 – $nil; 2019 –
$nil), representing the write-off of the existing associated debt
discount and deferred financing fees.
(f)Senior
Unsecured Exchangeable Notes:
In December 2020, the Company issued $201,250,000 aggregate
principal amount of Exchangeable Notes in a private placement. The
Exchangeable Notes are exchangeable at the holders’ option into an
aggregate 15,474,817 Atlas common shares at an initial exchange
price of $13.005 per share, in equivalent cash or a combination of
Atlas common shares and cash, as elected by the Company, on or
after September 15, 2020, or earlier in the following
circumstances:
•After
December 31, 2020, if the last reported price of an Atlas common
share is at least 130% of the exchange price then in effect over a
specified measurement period;
•If
the trading price per $1,000 principal amount of Exchangeable Notes
during a specified measurement period is less than 98% of the last
reported sale price on Atlas common shares multiplied by the
applicable exchange rate; and
•Upon
the occurrence of certain significant corporate events, or in
response to early redemption elected by the Company.
The exchange price is subject to anti-dilution and make-whole
clauses.
The holders may require the Company to redeem the Exchangeable
Notes held by them upon the occurrence of certain corporate events
qualifying as a fundamental change in the business. The Company may
redeem the Exchangeable Notes in connection with certain
tax-related events or on any business day on or after December 20,
2023 and prior to September 15, 2025, if the last reported sale
price of an Atlas common share is at least 130% of the exchange
price during a specified measurement period. A redemption of the
Exchangeable Notes is made at 100% of the principal amount, plus
accrued and unpaid interest. The Exchangeable Notes mature on
December 15, 2025, unless earlier exchanged, repurchased or
redeemed.
Upon issuance, the proceeds from the Exchangeable Notes were
allocated between debt, measured at fair value of $195,000,000, and
the value of the embedded exchange feature, valued at $6,250,000.
The difference between the face value and carrying value of the
debt reflects the debt discount, which is amortized through
interest expense using an
effective interest rate of 4.5%,
over the
remaining life of the debt. Interest is payable semiannually in
arrears on June 15 and December 15 of each year, beginning on June
15, 2021.
SEASPAN CORPORATION
Notes to Consolidated Financial Statements
(Tabular amounts in millions of United States dollars, except per
share amount and number of shares)
Years Ended December 31, 2021, 2020 and 2019
8. Long-term debt (continued):
(f) Senior Unsecured Exchangeable Notes (continued):
The embedded exchange feature is a derivative liability. This
derivative liability is carried at fair value, remeasured at the
end of each reporting period, with gains or losses on derivative
instruments included in net earnings. The fair value of the
embedded exchange feature derivative liability was $37,972,000 as
of December 31, 2021.
Capped Call Transactions
In connection with the issuance of the Exchangeable Notes, the
Company entered into capped call transactions with affiliates of
certain of the initial purchasers of the Exchangeable Notes and
other financial institutions, using $15,536,000 in proceeds from
the issuance, to reduce the potential dilution to Atlas common
shares upon any exchange of notes and/or offset any cash payments
the Company is required to make upon exchange of the Exchangeable
Notes, in excess of the principal amount. They may be settled in
cash, shares, or a combination of cash and shares as determined by
the settlement method of the Exchangeable Notes, at a strike price
with underlying shares equal to that of the Exchangeable Notes and
subject to anti-dilution adjustments substantially similar to those
applicable to the Exchangeable Notes.
The capped calls are exercisable up to a maximum price of $17.85
per share, subject to certain adjustments.
The instruments expire on December 15, 2025.
The capped calls are carried at fair value as a derivative asset,
remeasured at the end of each reporting period, with gains or
losses on derivative instruments included in net earnings. The fair
value of capped call derivative assets was $42,914,000 as of
December 31, 2021.
(g) Senior Secured Notes:
In May 2021, the Company entered into a note purchase agreement to
issue $500,000,000 of sustainability-linked, senior secured notes
(the “Senior Secured Notes”) in a US private placement. The Senior
Secured Notes comprise four series, each ranking pari passu with
the Company’s existing and future debt financing program. The
Series A, Series C and Series D Senior Secured Notes were issued in
May 2021, with interest rates ranging from 3.91% to 4.26% and
maturities from June 2031 to June 2036. The Series B Senior Secured
Notes, which bear interest at 3.91% per annum and mature in 2031,
were issued in August 2021. The Senior Secured Notes contain
certain sustainability features and are subject to adjustment based
on Seaspan’s achievements relative to certain key performance
indicators.
9. Operating lease liabilities:
|
|
|
|
|
|
|
|
|
|
|
|
|
December 31,
2021 |
|
December 31,
2020 |
|
Operating lease commitments |
$ |
785.1 |
|
|
$ |
923.8 |
|
|
Impact of discounting |
(103.5) |
|
|
(141.3) |
|
|
Impact of changes in variable rates |
30.8 |
|
|
44.7 |
|
|
Operating lease liabilities |
712.4 |
|
|
827.2 |
|
|
Current portion of operating lease liabilities |
(153.8) |
|
|
(159.1) |
|
|
Operating lease liabilities |
$ |
558.6 |
|
|
$ |
668.1 |
|
Operating lease liabilities relate to vessel sale-leaseback
transactions and other operating leases. Vessel sale-leaseback
transactions under operating lease arrangements are, in part,
indexed to three month LIBOR, reset on a quarterly basis. For one
of the Company’s vessel operating leases, an option to repurchase
the vessel exists at the end of its lease term. For all other
arrangements, the lease may be terminated prior to the end of the
lease term, at the option of the Company, by repurchasing the
respective vessels on a specified repurchase date at a
pre-determined fair value amount. For one of these arrangements, if
the Company elects not to repurchase the vessel, the lessor may
choose not to continue the lease until the end of its term. Each
sale-leaseback transaction contains financial covenants requiring
the Company to maintain certain tangible net worth, interest
coverage ratios and debt-to-assets ratios, as defined.
These vessels are leased to customers under time charter
arrangements.
SEASPAN CORPORATION
Notes to Consolidated Financial Statements
(Tabular amounts in millions of United States dollars, except per
share amount and number of shares)
Years Ended December 31, 2021, 2020 and 2019
9. Operating lease liabilities (continued):
Operating lease costs related to vessel sale-leaseback transactions
and other leases are summarized as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
December 31, |
|
December 31, |
|
2021 |
|
2020 |
|
Lease costs: |
|
|
|
|
Operating lease costs |
$ |
160.2 |
|
|
$ |
163.2 |
|
|
Variable lease adjustments |
(13.7) |
|
|
(12.4) |
|
|
|
|
|
|
|
Other information: |
|
|
|
|
Operating cash outflow used for operating
leases |
143.2 |
|
|
147.4 |
|
|
Weighted average discount rate |
4.8 |
% |
|
4.8 |
% |
|
Weighted average remaining lease term |
6 years |
|
7 years |
In September 2021, an amendment was made to extend the lease term
on an existing lease for an additional five years. The amendment
resulted in the continuation of its treatment as an operating
lease.
The reassessment due to the modification resulted in an increase of
$5,753,000 to lease liabilities and a corresponding increase to
right-of-use assets.
10.Other
financing arrangements:
|
|
|
|
|
|
|
|
|
|
|
|
|
December 31, 2021 |
|
December 31, 2020 |
|
Other financing arrangements |
$ |
1,363.1 |
|
|
$ |
879.5 |
|
|
Deferred financing fees |
(23.3) |
|
|
(13.7) |
|
|
Other financing arrangements |
1,339.8 |
|
|
865.8 |
|
|
Current portion of other financing arrangements |
(100.5) |
|
|
(64.1) |
|
|
Other financing arrangements |
$ |
1,239.3 |
|
|
$ |
801.7 |
|
The Company, through certain of its wholly-owned subsidiaries, has
entered into non-recourse or limited recourse sale-leaseback
arrangements with financial institutions to fund the acquisition of
vessels.
Under these arrangements, the Company has agreed to transfer the
vessels to the counterparties and lease the vessels back from the
counterparties over the applicable lease term as a financing lease.
In the arrangements where the shipbuilding contracts are novated to
the counterparties, the counterparties assume responsibility for
the remaining payments under the shipbuilding
contracts.
In certain of the arrangements, the counterparties are companies
whose only assets and operations are to hold the Company’s leases
and vessels. The Company operates the vessels during the lease
term, supervises the vessels’ construction before the lease term
begins, if applicable, and/or is required to purchase the vessels
from the counterparties at the end of the lease term. As a result,
in most cases, the Company is considered to be the primary
beneficiary of the counterparties and consolidates the
counterparties for financial reporting purposes. In all cases,
these arrangements are considered failed-sales. The vessels are
recorded as an asset and the obligations under these arrangements
are recorded as a liability. The terms of the leases are as
follows:
(i)COSCO
Faith - 13100 TEU vessel:
Under this arrangement, the counterparty has provided financing of
$109,000,000. The 12-year lease term began in March 2012, which was
the vessel’s delivery date. Lease payments include an interest
component based on three month LIBOR plus a 3.0% margin. At the end
of the lease, the Company will have the option to purchase the
vessel from the lessor for $1. In January 2020, the Company made a
prepayment of $48,316,000 on the remaining balance of the
arrangement.
(ii)Leases
for three 4500 TEU vessels:
Under these arrangements, the counterparty has provided refinancing
of $150,000,000. The five year lease terms began in March 2015. At
delivery, the Company sold and leased the vessels back over the
terms of the sale-leaseback transactions. At the end of the lease
terms, the Company is obligated to purchase the vessels at a
pre-determined purchase price. The remaining balance was paid in
March 2020.
SEASPAN CORPORATION
Notes to Consolidated Financial Statements
(Tabular amounts in millions of United States dollars, except per
share amount and number of shares)
Years Ended December 31, 2021, 2020 and 2019
10.Other
financing arrangements (continued):
(iii)Leases
for five 11000 TEU vessels:
Under these arrangements, the counterparty has provided financing
of $420,750,000. The 17-year lease terms began between August 2017
and January 2018, which were the vessels’ delivery dates. Lease
payments include interest components based on three month LIBOR
plus a 3.3% margin. At delivery, the Company sold and leased the
vessels back over the term of the sale-leaseback transactions. At
the end of the lease terms, the Company is obligated to purchase
the vessels at a pre-determined purchase price. In October 2020,
the Company made a prepayment of $71,084,000 on the remaining
principal balance of one of the 11000 TEU vessels under
sales-leaseback financing arrangement. In January 2021, the Company
made a payment of $69,166,000 to early terminate a sale-leaseback
financing arrangement secured by one 11,000 TEU vessel. In March
2021, the Company entered into a new sale-leaseback financing
arrangement of $83,700,000, secured by the same 11,000 TEU
vessel.
(iv)Leases
for four 12000 TEU vessels:
Under these arrangements, the counterparty has provided refinancing
of $337,732,000. The 10-year lease terms began in March and April
2020, which were the vessels’ delivery dates. Lease payments
include interest components based on one month LIBOR plus a 2.75%
margin. At delivery, the Company sold and leased the vessels back
over the terms of the sale-leaseback transactions. At the end of
the lease terms, the Company is obligated to purchase the vessels
at a pre-determined purchase price.
(v)Leases
for two 13000 TEU vessels:
Under these arrangements, the counterparty has provided refinancing
of $138,225,000. The 10-year lease terms began in August and
September 2020, which were the vessels’ delivery dates. Lease
payments include interest components based on three month LIBOR
plus a 2.75% margin. At delivery, the Company sold and leased the
vessels back over the terms of the sale-leaseback transactions. At
the end of the lease terms, the Company is obligated to purchase
the vessels at a pre-determined purchase price.
(vi)Leases
for two 12000 TEU vessels:
Under these arrangements, the counterparty has provided refinancing
of $158,400,000. The 10-year and 12-year lease terms began in
October and November 2020, respectively, which were the vessels’
delivery dates. Lease payments include interest components based on
three month LIBOR plus a 2.75% margin. At delivery, the Company
sold and leased the vessels back over the terms of the
sale-leaseback transactions. The Company has the option to purchase
the vessels throughout their respective lease terms at a
pre-determined purchase price.
(vii)Leases
for three vessels:
In April 2021, the counterparty provided refinancing of
$235,000,000 in sale-leaseback financing for three vessels ranging
in size between 10,000 TEU and 13,100 TEU. The lease terms, ranging
between 96 and 162 months, began in April 2021. Lease payments
include interest components based on one month LIBOR plus a 2.75%
margin. The Company sold and leased the vessels back over the term
of the sale-leaseback transactions. At the end of the lease term,
the Company is obligated to purchase the vessels at a
pre-determined purchase price. The Company has the option to
purchase the vessels after the second anniversary date of delivery
through their respective lease terms at a pre-determined purchase
price.
(viii)
Leases for three 12000 TEU vessels:
In April 2021, the counterparty provided sale-leaseback financing
of $243,000,000. The 12-year lease term for one of the vessels
began in November 2021, which was the vessel’s delivery date. The
amounts drawn on this facility for the other two vessels relate to
the vessel construction first installment. Lease payments include
interest components based on one month LIBOR plus a 2.95% margin.
At delivery, the Company sells and leases the vessels back over the
term of the sale-leaseback transactions. At the end of the lease
term, the Company is obligated to purchase the vessels at a
pre-determined purchase price. The Company has the option to
purchase the vessels after the second anniversary date of delivery
through their respective lease terms at a pre-determined purchase
price.
(ix)Leases
for two 12000 TEU vessels:
In May 2021, the counterparty provided sale-leaseback financing of
$162,000,000. The 10-year lease terms began in September and
November 2021, which were the vessels’ delivery dates. Lease
payments include interest components based on one month LIBOR plus
a 2.95% margin. At delivery, the Company sold and leased the
vessels back over the term of the sale-leaseback transactions. The
Company has the option to purchase the vessels after the first
anniversary date of delivery through their respective lease terms
at a pre-determined purchase price.
SEASPAN CORPORATION
Notes to Consolidated Financial Statements
(Tabular amounts in millions of United States dollars, except per
share amount and number of shares)
Years Ended December 31, 2021, 2020 and 2019
10.Other
financing arrangements (continued):
(x)Leases
for six 7000 TEU vessels:
In October 2021, the counterparty provided sale-leaseback financing
of $445,000,000. Lease payments include interest components based
on one month LIBOR plus a 2.45% margin. At delivery, the Company
will sell and lease the vessels back over the term of the
sale-leaseback transactions. At the end of the lease term, the
Company is obligated to purchase two of the vessels at a
pre-determined purchase price. For all six vessels, the Company has
the option to purchase the vessels after the first anniversary date
of delivery through their respective lease terms at a
pre-determined purchase price. At December 31, 2021, the amounts
drawn on this facility relate to the first advance.
(xi)Leases
for eight vessels:
In June 2021, the counterparty provided sale-leaseback financing of
$895,520,000 for eight vessels ranging in size from 15500 TEU to
24000 TEU. Lease payments include interest components based on one
month LIBOR plus a 2.80% margin. At delivery, the Company will sell
and lease the vessels back over the term of the sale-leaseback
transactions. The Company has the option to purchase the vessels
after the second anniversary date of delivery through their
respective lease terms at a pre-determined purchase price. At
December 31, 2021, no amounts have been drawn under this
facility.
(xii)Leases
for six 15500 TEU vessels:
In August 2021, the counterparty provided sale-leaseback financing
of $661,826,000. Lease payments include interest components based
on one month LIBOR plus a 2.50% margin. At delivery, the Company
will sell and lease the vessels back over the term of the
sale-leaseback transactions. The Company has the option to purchase
the vessels after the second anniversary date of delivery through
their respective lease terms at a pre-determined purchase price. At
December 31, 2021, no amounts have been drawn under this
facility.
(xiii)
Leases for six 15000 TEU and four 7000 TEU vessels:
In November 2021, the counterparty provided sale-leaseback
financing of $889,000,000. Lease payments include interest
components based on one month LIBOR plus a 2.45% margin. At
delivery, the Company will sell and lease the vessels back over the
term of the sale-leaseback transactions. The Company has the option
to purchase the vessels after the first anniversary date of
delivery through their respective lease terms at a pre-determined
purchase price. At December 31, 2021, no amounts have been drawn
under this facility.
(xiv)
Leases for two 12000 TEU vessels
In December 2021, the Company entered into a $169,500,000 financing
arrangement to finance two vessels upon delivery. Lease payments
include interest components based on a secured overnight financing
rate plus a credit spread and a 1.8% margin. No amounts have been
drawn under the financing as of December 31, 2021.
In May 2021, the Company repaid $59,300,000 upon early termination
of a sale-leaseback financing arrangement secured by a 13,100 TEU
vessel.
The weighted average rate of interest, including the margin, was
3.08% at December 31, 2021 (2020 – 3.12%).
Based on amounts funded, payments due to the counterparties are as
follows:
|
|
|
|
|
|
|
2022 |
$ |
101.0 |
|
|
2023 |
101.4 |
|
|
2024 |
102.6 |
|
|
2025 |
97.4 |
|
|
2026 |
94.2 |
|
|
Thereafter |
866.5 |
|
|
|
$ |
1,363.1 |
|
SEASPAN CORPORATION
Notes to Consolidated Financial Statements
(Tabular amounts in millions of United States dollars, except per
share amount and number of shares)
Years Ended December 31, 2021, 2020 and 2019
11.Share
Capital:
On February 27, 2020, the Company completed a Reorganization
whereby it became a wholly owned subsidiary of Atlas, a newly
formed entity, to establish a holding company structure. Holders of
the Company’s common and preferred shares became holders of Atlas
common and preferred shares, as applicable, on a one-for-one basis,
maintaining the same number of shares, ownership percentage and
associated rights and privileges as they held of Seaspan
immediately prior to the Reorganization. The Company’s common
shares and preferred shares were cancelled and re-issued to Atlas
as common shares. All outstanding common shares held in treasury
were cancelled. In addition, as part of the Reorganization, the
Company's warrants were assumed by Atlas pursuant to an assignment
and assumption agreement and are now exercisable for Atlas common
shares.
The Company has 425,000,100 common shares and 150,000,000 preferred
shares authorized with par value $0.01 per share at December 31,
2021.
SEASPAN CORPORATION
Notes to Consolidated Financial Statements
(Tabular amounts in millions of United States dollars, except per
share amount and number of shares)
Years Ended December 31, 2021, 2020 and 2019
12.Share-based
compensation:
In December 2005, Seaspan’s board of directors adopted the Seaspan
Corporation Stock Incentive Plan, which was administered by
Seaspan’s board of directors and, under which its officers,
employees and directors could be granted options, restricted
shares, phantom share units and other stock-based awards as
determined by the Seaspan board of directors. Upon consummation of
the Reorganization, Atlas assumed Seaspan’s equity-based
compensation plans, including the Seaspan Corporation Stock
Incentive Plan, which was amended and restated as the Atlas Corp.
Stock Incentive Plan. Awards previously granted under the Seaspan
Corporation Incentive Plan are now exercisable for Atlas common
shares instead of Seaspan common shares. Any future share-based
compensation granted to the Company’s employees will be issued
through the Atlas Plan.
|
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|
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|
|
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|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Restricted shares |
|
Phantom share units |
|
Restricted stock units |
|
Stock options |
|
|
Number |
|
W.A. grant |
|
Number |
|
W.A. grant |
|
Number |
|
W.A. grant |
|
Number |
|
W.A. grant |
|
|
of shares |
|
date FV |
|
of units |
|
date FV |
|
of units |
|
date FV |
|
of options |
|
date FV |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
December 31, 2018 |
|
85,742 |
|
$ |
7.28 |
|
|
567,002 |
|
$ |
12.97 |
|
|
584,771 |
|
$ |
7.91 |
|
|
500,000 |
|
$ |
2.45 |
|
|
Granted |
|
67,400 |
|
8.15 |
|
— |
|
— |
|
249,732 |
|
8.90 |
|
— |
|
— |
|
Vested or exchanged |
|
(85,742) |
|
7.28 |
|
(60,001) |
|
16.68 |
|
(224,073) |
|
8.59 |
|
— |
|
— |
|
Cancelled |
|
— |
|
— |
|
— |
|
— |
|
(33,466) |
|
9.05 |
|
— |
|
— |
|
December 31, 2019 |
|
67,400 |
|
$ |
8.15 |
|
|
507,001 |
|
$ |
12.53 |
|
|
576,964 |
|
$ |
8.01 |
|
|
500,000 |
|
$ |
2.45 |
|
|
Granted |
|
51,492 |
|
13.41 |
|
— |
|
— |
|
1,824,786 |
|
7.83 |
|
1,500,000 |
|
2.57 |
|
Vested or exchanged |
|
(67,400) |
|
8.15 |
|
(20,000) |
|
6.85 |
|
(313,231) |
|
9.32 |
|
— |
|
— |
|
Cancelled |
|
(51,492) |
|
13.41 |
|
— |
|
— |
|
(79,635) |
|
9.84 |
|
— |
|
— |
|
December 31, 2020 |
|
— |
|
$ |
— |
|
|
487,001 |
|
$ |
12.76 |
|
|
2,008,884 |
|
$ |
7.57 |
|
|
2,000,000 |
|
$ |
2.51 |
|
|
Granted |
|
— |
|
— |
|
|
— |
|
— |
|
|
807,277 |
|
13.44 |
|
— |
|
— |
|
Vested or exchanged |
|
— |
|
— |
|
|
— |
|
— |
|
|
(322,100) |
|
10.22 |
|
— |
|
— |
|
Cancelled |
|
— |
|
— |
|
|
— |
|
— |
|
|
(27,333) |
|
12.14 |
|
— |
|
— |
|
December 31, 2021 |
|
— |
|
$ |
— |
|
|
487,001 |
|
$ |
12.76 |
|
|
2,466,728 |
|
$ |
9.10 |
|
|
2,000,000 |
|
$ |
2.51 |
|
|
Vested and excercisable, December 31, 2021 |
|
— |
|
$ |
— |
|
|
487,001 |
|
$ |
12.76 |
|
|
— |
|
$ |
— |
|
|
600,000 |
|
$ |
2.55 |
|
(a)Restricted
stock units:
The restricted stock units generally vest over two or five years,
in equal tranches. Upon vesting of the restricted stock units, the
participant will receive common shares.
During the year ended 2021, the Company granted certain executive
officers and members of management 807,277 restricted stock units.
The restricted stock units vest in five tranches annually beginning
on January 3, 2022 and have a grant date fair value of 13.44 per
unit.
SEASPAN CORPORATION
Notes to Consolidated Financial Statements
(Tabular amounts in millions of United States dollars, except per
share amount and number of shares)
Years Ended December 31, 2021, 2020 and 2019
13.Other
information:
(a)Accounts
payable and accrued liabilities:
The principal components of accounts payable and accrued
liabilities are:
|
|
|
|
|
|
|
|
|
|
|
|
|
2021 |
|
2020 |
|
Accrued interest |
$41.8 |
|
$ |
15.5 |
|
|
Accounts payable and other accrued liabilities |
94.9 |
|
73.4 |
|
|
|
$ |
136.7 |
|
|
$ |
88.9 |
|
(b)Supplemental
cash flow information:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2021 |
|
2020 |
|
2019 |
|
|
|
|
|
|
|
Interest paid |
$ |
136.5 |
|
|
$ |
142.6 |
|
|
$ |
183.1 |
|
|
Interest received |
0.4 |
|
|
1.5 |
|
|
8.9 |
|
|
Undrawn credit facility fee paid |
1.9 |
|
|
0.5 |
|
|
1.7 |
|
|
Non-cash investing and financing transactions: |
|
|
|
|
|
|
Dividend reinvestment |
— |
|
|
0.1 |
|
|
1.2 |
|
|
Non-cash dividend to Atlas |
— |
|
|
20.0 |
|
|
— |
|
|
Payment to the shipbuilders by the financing company |
180.0 |
|
|
— |
|
|
— |
|
|
Commencement of sales-type lease |
343.9 |
|
|
57.0 |
|
|
316.7 |
|
|
Reclassification on lease modification |
— |
|
|
377.4 |
|
|
— |
|
|
Refinancing of existing term loan credit facilities with draws made
on the new debt |
— |
|
|
— |
|
|
302.7 |
|
|
Change in right-of-use assets and operating lease
liabilities |
5.8 |
|
|
— |
|
|
— |
|
|
Prepayments transferred to vessels upon vessel delivery |
12.7 |
|
|
46.8 |
|
|
— |
|
|
Interest capitalized on vessels under construction |
18.9 |
|
|
— |
|
|
— |
|
The following table provides a reconciliation of cash, cash
equivalents and restricted cash reported within the consolidated
balance sheets that sum to the amounts shown in the consolidated
statements of cash flows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2021 |
|
2020 |
|
2019 |
|
Cash and cash equivalents |
$ |
169.0 |
|
|
$ |
243.5 |
|
|
$195.0 |
|
Restricted cash included in prepaid and other |
— |
|
— |
|
2.3 |
|
Total cash, cash equivalents and restricted cash |
$ |
169.0 |
|
|
$ |
243.5 |
|
|
197.3 |
14.Revenue:
For the year ended December 31, 2021, 2020, and 2019, revenue
consists of:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2021 |
|
2020 |
|
2019 |
|
Time charter revenue |
$ |
1,409.9 |
|
|
$ |
1,180.0 |
|
|
$ |
1,096.0 |
|
|
Interest income from leasing |
46.1 |
|
|
40.5 |
|
|
35.5 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other |
14.3 |
|
|
10.3 |
|
|
— |
|
|
|
|
|
|
|
|
|
$ |
1,470.3 |
|
|
$ |
1,230.8 |
|
|
$ |
1,131.5 |
|
In March 2019, the Company entered into an agreement with a
customer to modify seven time charters such that the charters
terminated effective March 31, 2019, subsequent to which the
vessels were re-chartered to other customers. Pursuant to this
agreement, the Company received a settlement payment of
$227,000,000, which was recorded in income related to modification
of time charters.
SEASPAN CORPORATION
Notes to Consolidated Financial Statements
(Tabular amounts in millions of United States dollars, except per
share amount and number of shares)
Years Ended December 31, 2021, 2020 and 2019
14.Revenue
(continued):
At December 31, 2021, the minimum future revenues to be received on
committed operating leases and interest income to be earned from
direct financing leases are as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating lease
(1)
|
|
Finance lease
(2)
|
|
Total committed revenue |
|
2022 |
$ |
1,474.3 |
|
|
$ |
63.5 |
|
|
$ |
1,537.8 |
|
|
2023 |
1,406.1 |
|
|
61.0 |
|
|
1,467.1 |
|
|
2024 |
1,180.0 |
|
|
58.2 |
|
|
1,238.2 |
|
|
2025 |
806.8 |
|
|
55.2 |
|
|
862.0 |
|
|
2026 |
463.3 |
|
|
53.1 |
|
|
516.4 |
|
|
Thereafter |
344.7 |
|
|
393.1 |
|
|
737.8 |
|
|
|
$ |
5,675.2 |
|
|
$ |
684.1 |
|
|
$ |
6,359.3 |
|
1.Minimum
future operating lease revenue includes payments from signed
charter agreements that have not yet commenced.
2.Minimum
future interest income includes direct financing leases currently
in effect.
Minimum future revenues assume 100% utilization, extensions only at
the Company’s unilateral option and no renewals.
15.Commitments
and contingencies:
(a)Operating
leases:
As at December 31, 2021, the commitment under operating leases for
vessels is $780,745,000 for the years from 2022 to 2029 and for
other operating leases is $4,318,000 for the years from 2021 to
2024. Total commitments under these leases are as
follows:
|
|
|
|
|
|
|
2022 |
$ |
143.6 |
|
|
2023 |
146.4 |
|
|
2024 |
150.1 |
|
|
2025 |
126.4 |
|
|
2026 |
111.5 |
|
|
Thereafter |
107.1 |
|
|
|
$ |
785.1 |
|
For operating leases indexed to three month LIBOR, commitment under
these leases are calculated using the LIBOR in place as at December
31, 2021 for the Company.
(b) Vessel commitment:
As at December 31, 2021, the Company had entered into agreements to
acquire 67 vessels (December 31, 2020 – five vessels).
The Company has outstanding commitments for installment payments as
follows:
|
|
|
|
|
|
|
2022 |
1,103.2 |
|
|
2023 |
2,712.5 |
|
|
2024 |
2,457.8 |
|
|
Total |
$ |
6,273.5 |
|
SEASPAN CORPORATION
Notes to Consolidated Financial Statements
(Tabular amounts in millions of United States dollars, except per
share amount and number of shares)
Years Ended December 31, 2021, 2020 and 2019
16.Concentrations:
The Company’s revenue is derived from the following
customers:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2021 |
|
2020 |
|
2019 |
|
COSCO |
$ |
492.2 |
|
|
$ |
401.1 |
|
|
$ |
407.4 |
|
|
Yang Ming Marine |
249.9 |
|
|
255.7 |
|
|
257.5 |
|
|
ONE |
255.2 |
|
|
237.3 |
|
|
199.4 |
|
|
Other |
473.0 |
|
|
336.7 |
|
|
267.2 |
|
|
|
$ |
1,470.3 |
|
|
$ |
1,230.8 |
|
|
$ |
1,131.5 |
|
17.Financial
instruments:
(a)Fair
value:
The carrying values of cash and cash equivalents, short-term
investments, restricted cash, accounts receivable, accounts payable
and accrued liabilities approximate their fair values because of
their short term to maturity.
As of December 31, 2021, the fair value of the Company’s revolving
credit facilities and term loans excluding deferred financing fees
was $2,113,824,000 (December 31, 2020 - $2,599,197,000) and the
carrying value was $2,128,629,000
(December 31, 2020 - $2,638,522,000). As of December 31, 2021, the
fair value of the Company’s other financing arrangements, excluding
deferred financing fees, was $1,419,508,000 (December 31, 2020 -
$891,710,000) and the carrying value was $1,363,098,000 (December
31, 2020 - $879,468,000). The fair value of the revolving and term
loan credit facilities and other financing arrangements, excluding
deferred financing fees, are estimated based on expected principal
repayments and interest, discounted by relevant forward rates plus
a margin appropriate to the credit risk of the Company. Therefore,
the Company has categorized the fair value of these financial
instruments as Level 2 in the fair value hierarchy.
As of December 31, 2021, the fair value of the Company’s senior
unsecured notes was $1,291,476,000 (December 31, 2020 –
$89,207,000) and the carrying value was $1,250,000,000 (December
31, 2020 – $80,000,000). The
fair value of the Company’s Exchangeable Notes was $209,566,000
(December
31,
2020 - $195,232,000) and the carrying value was $201,250,000
(December
31,
2020 - $201,250,000) or $196,177,000 (December
31,
2020 - $195,000,000), net of debt discount. The fair value of the
Company’s Senior Secured Notes was $456,875,000 and the carrying
value was $500,000,000. The fair value is calculated using the
present value of expected principal repayments and interest
discounted by relevant forward rates plus a margin appropriate to
the credit risk of the Company. As a result, these amounts are
categorized as Level 2 in the fair value hierarchy.
The Company’s interest rate derivative financial instruments are
re-measured to fair value at the end of each reporting period. The
fair values of the interest rate derivative financial instruments
have been calculated by discounting the future cash flow of both
the fixed rate and variable rate interest rate payments. The
discount rate was derived from a yield curve created by nationally
recognized financial institutions adjusted for the associated
credit risk. The fair values of the interest rate derivative
financial instruments are determined based on inputs that are
readily available in public markets or can be derived from
information available in publicly quoted markets. Therefore, the
Company has categorized the fair value of these derivative
financial instruments as Level 2 in the fair value
hierarchy.
The exchange feature embedded in the Exchangeable Notes and capped
calls entered into in connection with the Exchangeable Notes are
derivatives measured at fair value at the end of each reporting
period.
The embedded exchange feature derivative is measured at fair value
using a partial differential equation, with a Monte Carlo model for
certain features. The capped call derivative is measured at fair
value using a binomial tree. These models utilize observable and
unobservable market data, including stock price, expected
volatility, risk-free interest rate and expected dividend yield, as
applicable.
The embedded exchange feature and capped call derivatives are
classified as Level 3 as the Company uses expected volatility that
is unobservable and significant to the valuation. In general, an
increase in Atlas’s stock price or stock price volatility will
increase the fair value of the embedded exchange feature and capped
call derivatives which will result in an increase in loss and gain,
respectively. As time to the expiration of the derivatives
decreases, the fair value of the derivatives will decrease. The
volatilities used as of December 31, 2021, for the embedded
exchange feature were 44.40% and 41.19% for the capped call. The
fair value of the embedded exchange feature and capped calls
resulting from a change in volatility are included
below.
|
|
|
|
|
|
|
|
|
|
|
|
|
10% increase in volatility |
|
10% decrease in volatility |
|
Embedded exchange feature |
$ |
44.2 |
|
|
$ |
31.4 |
|
|
Capped calls |
48.1 |
|
|
34.8 |
|
Unobservable inputs for recurring and non-recurring Level 3
disclosures are obtained from third parties whenever possible and
reviewed by the Company for reasonableness.
SEASPAN CORPORATION
Notes to Consolidated Financial Statements
(Tabular amounts in millions of United States dollars, except per
share amount and number of shares)
Years Ended December 31, 2021, 2020 and 2019
17.Financial
instruments (continued):
(b) Interest rate swap derivatives:
The Company uses interest rate derivative financial instruments,
consisting of interest rate swaps, to manage its interest rate risk
associated with its variable rate debt. If interest rates remain at
their current levels, the Company expects that $16,818,000 would be
settled in cash in the next 12 months on instruments maturing after
December 31, 2021. The amount of the actual settlement may be
different depending on the interest rate in effect at the time
settlements are made.
As of December 31, 2021, the Company had the following outstanding
interest rate derivatives:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Fixed per annum rate
swapped for LIBOR |
|
Notional amount as of
December 31, 2021 |
|
Maximum notional
amount(1)
|
|
Effective date |
|
Ending date |
|
5.4200% |
|
$ |
269.6 |
|
|
$ |
269.6 |
|
|
September 6, 2007 |
|
May 31, 2024 |
|
1.6490% |
|
160.0 |
|
|
160.0 |
|
|
September 27, 2019 |
|
May 14, 2024 |
|
0.7270% |
|
125.0 |
|
|
125.0 |
|
|
March 26, 2020 |
|
March 26, 2025 |
|
1.6850% |
|
110.0 |
|
|
110.0 |
|
|
November 14, 2019 |
|
May 15, 2024 |
|
0.6300% |
|
92.0 |
|
|
92.0 |
|
|
January 21, 2021 |
|
October 14, 2026 |
|
0.6600% |
|
92.0 |
|
|
92.0 |
|
|
February 4, 2021 |
|
October 14, 2026 |
|
1.4900% |
|
26.9 |
|
|
26.9 |
|
|
February 4, 2020 |
|
December 30, 2025 |
(1)Over
the term of the interest rate swaps, the notional amounts increase
and decrease. These amounts represent the peak notional amount over
the remaining term of the swap.
(c) Financial instruments measured at fair value:
The following provides information about the Company’s
derivatives:
|
|
|
|
|
|
|
|
|
|
|
|
|
2021 |
|
2020 |
|
Derivative assets |
|
|
|
|
Interest rate swaps |
$ |
6.1 |
|
|
$ |
— |
|
|
Capped call derivative asset |
42.9 |
|
|
19.2 |
|
|
Derivative liabilities |
|
|
|
|
Interest rate swaps |
28.5 |
|
|
63.0 |
|
|
Derivative embedded exchange feature |
38.0 |
|
|
5.9 |
|
There are no amounts subject to the master netting arrangements in
2021 or 2020.
The following table provides information about gains and losses
included in net earnings and reclassified from accumulated other
comprehensive loss (“AOCL”) into earnings:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2021 |
|
2020 |
|
2019 |
|
|
|
|
|
|
|
(Gain) loss recognized in net earnings: |
|
|
|
|
|
|
(Gain) loss on interest rate swaps(1)
|
$ |
(14.0) |
|
|
$ |
36.4 |
|
|
$ |
58.8 |
|
|
(Gain) loss on derivative put instrument |
(0.1) |
|
|
(0.9) |
|
|
(23.7) |
|
|
(Gain) loss on capped call derivative asset |
(23.6) |
|
|
(3.7) |
|
|
— |
|
|
(Gain) loss on derivative embedded exchange feature |
32.0 |
|
|
(0.3) |
|
|
— |
|
|
Loss reclassified from AOCL to net earnings(2)
|
|
|
|
|
|
|
Interest expense |
0.2 |
|
|
0.3 |
|
|
0.3 |
|
|
Depreciation and amortization |
1.0 |
|
|
1.0 |
|
|
0.7 |
|
(1)For
the years ended December 31, 2021, 2020 and 2019, cash flows
related to actual settlement of interest rate swaps were
$26,758,000, $21,789,000, and $126,782,000. These are included in
investing activities on the consolidated statements of cash
flows.
(2)The
effective portion of changes in unrealized loss on interest rate
swaps was recorded in accumulated other comprehensive loss until
September 30, 2008 when these contracts were voluntarily
de-designated as accounting hedges. The amounts in accumulated
other comprehensive loss are recognized in earnings when and where
the previously hedged interest is recognized in
earnings.
The estimated amount of AOCL expected to be reclassified to net
earnings within the next 12 months is approximately
$1,019,000.
SEASPAN CORPORATION
Notes to Consolidated Financial Statements
(Tabular amounts in millions of United States dollars, except per
share amount and number of shares)
Years Ended December 31, 2021, 2020 and 2019
18.Subsequent
events:
(a)On
January 3, 2022, the Company declared dividends of $47,500,000 on
its common shares to Atlas, which was paid on January 24,
2022.
(b)In
January 2022, the Company exercised its option under an existing
lease financing arrangement to purchase one 10,000 TEU vessel. The
purchase is expected to complete in January 2023 at the
pre-determined purchase price of $52,690,000.
(c)In
January 2022, the Company entered into an interest rate swap with a
notional amount of $500,000,000. The swap has a 10-year term and
the Company pays a fixed rate of 1.925% and receives a floating
rate based on three month LIBOR.
(d)In
February 2022, the Company sold one 4,250 TEU vessel for an
aggregate purchase price of $32,750,000. The Company continues to
manage the ship operations of the vessel.
(e)In
February 2022, the Company entered into a $250,000,000 3-year
sustainability-linked unsecured revolving credit facility (the
“2022 RCF”). The 2022 RCF replaces the Company’s $150,000,000
2-year unsecured revolving credit facility and bears interest at
market rate.
ITEM 2 - MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND
RESULTS OF OPERATIONS
The following should be read in conjunction with the unaudited
consolidated financial statements and related notes included in
this Report and the audited consolidated financial statements and
related notes for the year ended December 31, 2021 filed with
the U.S. Securities and Exchange Commission on an Atlas Corp. Form
6-K. Unless otherwise indicated, all amounts are presented in U.S.
dollars, or USD. We prepare our consolidated financial statements
in accordance with U.S. GAAP.
Overview
General
Seaspan was incorporated on May 3, 2005, in the Republic of the
Marshall Islands. Seaspan is a leading independent charter owner
and manager of containerships, which we charter primarily pursuant
to long-term, fixed-rate time charters with major container liner
companies. We primarily deploy our vessels on long-term,
fixed-rate time charters to take advantage of the stable cash flow
and high utilization rates that are typically associated with
long-term time charters. As of March 10, 2022, we operated a fleet
of 132 vessels that have an average age of approximately eight
years, on a TEU weighted basis.
Customers for our operating fleet as at March 10, 2022 are as
follows:
|
|
|
|
|
|
|
|
|
|
Customer for Current Fleet |
Number of vessels under charter |
TEUs under charter |
|
CMA CGM |
17 |
160,950 |
|
COSCO |
28 |
243,750 |
|
Hapag-Lloyd |
14 |
114,350 |
|
Maersk |
20 |
90,500 |
|
MSC |
9 |
103,600 |
|
ONE |
23 |
194,550 |
|
Yang Ming Marine |
15 |
210,000 |
|
ZIM |
6 |
30,600 |
Our primary objective for Seaspan is to continue to grow our
containership leasing business through accretive vessel
acquisitions as market conditions allow. Most of our customers’
containership business revenues are derived from the shipment of
goods from the Asia Pacific region to various overseas export
markets in the United States and in Europe.
We use the term “twenty-foot equivalent unit”, or TEU, the
international standard measure of containers, in describing the
capacity of our containerships, which are also referred to as our
“vessels”.
The following table summarizes key facts regarding Seaspan’s fleet
as of December 31, 2021:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Vessel Class
(TEU) |
|
# Vessels (Total Fleet) |
|
# Vessels (of which are unencumbered) |
|
Average Age (Years)(7) |
|
Average Remaining Charter Period (Years)(1)(7) |
|
Average Daily Charter Rate (in thousands of USD) |
|
Days Off-Hire(5) |
|
Total Ownership Days(6) |
|
2500-3500 |
|
14 |
|
6 |
|
13.6 |
|
2.4 |
|
22.3 |
|
99 |
|
5110 |
|
4250-5100 |
|
32 |
|
21 |
|
14.5 |
|
3.0 |
|
21.2 |
|
413 |
|
11982 |
|
8500-9600(2) |
|
18 |
|
3 |
|
11.9 |
|
4.1 |
|
53.4 |
|
7 |
|
6315 |
|
10000-11000(3) |
|
33 |
|
4 |
|
6.2 |
|
5.8 |
|
32.1 |
|
80 |
|
12045 |
|
12000-13100(4) |
|
19 |
|
0 |
|
6.7 |
|
7.0 |
|
42.4 |
|
9 |
|
6002 |
|
14000+ |
|
17 |
|
2 |
|
5.8 |
|
4.2 |
|
48.0 |
|
6 |
|
5878 |
|
Total/Average |
|
133 |
|
36 |
|
8.2 |
|
5.0 |
|
34.8 |
|
614 |
|
47,332 |
(1)Excludes
options to extend charter.
(2)Includes
3 vessels on bareboat charter.
(3)Includes
8 vessels on bareboat charter.
(4)Includes
1 vessel on bareboat charter.
(5)Days
Off-Hire includes scheduled and unscheduled days related to vessels
being off-charter during the year ended December 31,
2021.
(6)Total
Ownership Days for the quarter ended December 31, 2021 includes
time charters and bareboat charters and excludes days prior to the
initial charter hire date.
(7)Averages
shown are weighted by TEU
Significant Developments During the Year ended December 31,
2021
Shipbuilding Contracts for Newbuild Containerships
Commencing in December 2020 through to December 2021, Seaspan
entered into agreements with shipyards to build 70 newbuild
containerships, three of which were delivered in 2021. The
remaining 67 vessels to be delivered are summarized in the
table
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Newbuilds |
Total TEU |
Month Acquired |
|
12200 TEU |
2 |
24,400 |
December 2020 |
|
24000 TEU |
2 |
48,000 |
February 2021 |
|
15000 TEU LNG |
10 |
150,000 |
February 2021 |
|
12000 TEU |
4 |
48,000 |
February 2021 |
|
15000 TEU |
4 |
60,000 |
February 2021 |
|
16000 TEU |
9 |
144,000 |
March 2021 |
|
15500 TEU |
6 |
93,000 |
March 2021 |
|
12000 TEU |
2 |
24,000 |
June 2021 |
|
15000 TEU |
3 |
45,000 |
June 2021 |
|
7000 TEU LNG |
15 |
105,000 |
July and September 2021 |
|
7000 TEU |
10 |
70,000 |
August 2021 |
|
Total |
67 |
811,400 |
|
These vessels will commence long-term charters with leading global
liner companies, some of which are subject to vessel purchase
options or obligations at the conclusion of their respective
charters.
Vessel Acquisitions and Deliveries
During the year ended December 31, 2021, we took delivery of
seven vessels. The additions to our fleet are summarized
below.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Vessel |
|
Year Built |
|
Vessel Class
(TEU) |
|
Purchase price (in millions of US dollars) |
|
Delivery
Date |
|
Mediterranean Bridge |
|
2010 |
|
8500 |
|
$ |
52.3 |
|
|
April 2021 |
|
Gulf Bridge |
|
2010 |
|
8500 |
|
52.3 |
|
May 2021 |
|
CMA CGM Chile |
|
2019 |
|
15000 |
|
127.0 |
|
May 2021 |
|
CMA CGM Mexico |
|
2019 |
|
15000 |
|
127.0 |
|
July 2021 |
|
MSC Carole |
|
2021 |
|
12200 |
|
84.0 |
|
September 2021 |
|
MSC Alanya |
|
2021 |
|
12200 |
|
84.0 |
|
November 2021 |
|
MSC Rayshmi |
|
2021 |
|
12200 |
|
84.0 |
|
November 2021 |
Vessel sales
On October 29, 2021, the Company sold one 4,250 TEU vessel for an
aggregate purchase price of $38.3 million. Through a series of
transactions, the vessel was ultimately purchased by a wholly owned
subsidiary of Zhejiang Energy Atlas Marine Technology Co., Ltd,
which is 50% owned by Atlas. Seaspan continues to manage the ship
operations of the vessel.
In December 2021, we entered into agreements to sell six 4,250 TEU
vessels for an aggregate $186.8 million. Three of the vessels will
ultimately be purchased by subsidiaries of the ZE JV and three of
the vessels are being purchased by a liner customer. One sale
completed in February 2022 for gross proceeds of $32.8 million. We
continue to manage the ship operations of this vessel. The
remaining five vessel sales are expected to complete in the second
quarter of 2022, subject to closing conditions.
Atlas Exchange Offer and Notes Redemptions
In May 2021, Atlas exchanged an aggregate principal amount of $52.2
million 7.125% senior notes due 2027 of Seaspan (the “Seaspan 2027
Notes”) for an equivalent amount of its 7.125% senior notes due
2027 (the “Atlas 2027 Notes”).
In July 2021, Atlas exchanged an additional $151,000 of Seaspan
2027 Notes for Atlas 2027 Notes, following which the Company
redeemed the remaining $27.6 million of Seaspan 2027 Notes for cash
plus accrued and unpaid interest.
Fairfax Notes Exchange and Redemption
In June 2021, Atlas and Seaspan completed an exchange and amendment
of $600.0 million aggregate principal amount of Seaspan’s senior
notes, including $250.0 million of 2025 Fairfax Notes, $250.0
million of 2026 Fairfax Notes and $100.0 million of 2027 Fairfax
Notes. The outstanding Fairfax Notes were held by certain
affiliates of Fairfax Financial Holding Limited (the “Fairfax
Holders”).
Pursuant to this transaction, the Company exchanged $200.0 million
aggregate principal amount of the 2026 Fairfax Notes and all $100.0
million aggregate principal amount of the 2027 Fairfax Notes for
(i) 12,000,000 Series J 7.00% Cumulative Redeemable Perpetual
Preferred Shares of Atlas, representing total liquidation value of
$300.0 million and (ii) 1,000,000 five year warrants to purchase an
equal number of Atlas common shares at an exercise price of $13.71
per share (the “Fairfax Exchange”). The exchanged 2026 Fairfax
Notes and 2027 Fairfax Notes were subsequently
cancelled.
In August 2021, the Company redeemed the remaining Fairfax Notes,
which included $250.0 million of 2025 Fairfax Notes and $50.0
million of 2026 Fairfax Notes, for cash on August 23,
2021.
Sale-Leaseback Financing
In April 2021, the Company entered into $235.0 million in
sale-leaseback financing arrangements (the “Sale-Leasebacks”) to
refinance three operating vessels, the funding of which was
completed in May 2021.
Enhancement of the Company’s Vessel Portfolio Financing
Program
In May 2021, the Company entered into amendments and restatements
(the “Amendment and Restatement”) of the senior secured loan
facilities and intercreditor and proceeds agreement that compromise
its vessel portfolio financing program (the “Program”) to, among
other things, (i) increase the capacity under the Program to $2.5
billion, including the Sustainability-Linked Notes, (ii) increase
the size of the revolving credit facility from $300.0 million to
$400.0 million, (iii) increase the commitments under the bank loan
facilities by $180.0 million and (iv) extend the maturities of
tranches due to 2024 and 2025 by approximately two
years.
Additional Financings
In January 2021, the Company made a payment of $69.2 million to
early terminate a sale-leaseback financing arrangement secured by a
11,000 TEU vessel. In March 2021, the Company entered into a new
sale-leaseback financing arrangement for $83.7 million, secured by
the same 11,000 TEU vessel.
In April through November 2021, the Company entered into $3.3
billion in sale-leaseback financing arrangements (the “Newbuild
Sale-Leasebacks”) related to 35 newbuild containerships, subject to
satisfaction of customary closing conditions. The Newbuild
Sale-Leasebacks partially fund pre-delivery payments related to the
35 newbuild containerships. As of December 31, 2021, the Company
received aggregate funding of $310.4 million from these financings
related to vessels under construction and three delivered
vessels.
In October and December 2021, the Company entered into facility
agreements providing for an aggregate $2.3 billion in term loans,
to finance 18 newbuild containerships. The facility agreements
partially fund pre-delivery payments relating to the 18 vessels. At
delivery, pursuant to the facility agreements, the Company may
elect to convert the term loan in respect of each vessel into a
lease financing arrangement, whereby we will sell the vessel to
Japanese special purpose companies ("SPCs") and lease it back over
a term of approximately 14 years, with one or more options to
purchase the vessel at the 9.5 year anniversary and, for certain
vessels, the 12-year anniversary of the lease for a pre-determined
fair value purchase price. As at December 31, 2021, the Company has
not drawn on these facilities.
In October 2021, the Company entered into agreements relating to
underwritten financing arrangements totaling $1.4 billion, related
to 17 newbuild containerships. In December 2021, the Company
entered into lease financing arrangements for two
of the 17 vessels. The lease financing arrangements are expected to
provide gross financing proceeds of approximately $113.0 million
per vessel upon delivery of each vessel, or $226.0 million in
total. Under the lease financing arrangements, we will sell the
vessels to SPCs and lease the vessels back over a term of 13.25
years, with an option to purchase the vessels at the 5-year
anniversary of the lease for a pre-determined fair value purchase
price.
In February 2022, the Company entered into a $250.0 million 3-year
sustainability-linked unsecured revolving credit facility, to be
used to fund vessels under construction and secondhand vessel
acquisitions and for general corporate purposes (the “2022 RCF”).
The 2022 RCF replaces the Company’s $150.0 million 2-year unsecured
revolving credit facility and bears interest at market rate. To
date, the Company has not drawn on the 2022 RCF.
Debt Offerings
In February 2021 and April 2021, we issued $200.0 million and
$300.0 million, respectively, of 6.5% senior unsecured
sustainability-linked bonds into the Nordic marketplace
(collectively, the “NOK Bonds”). The bonds mature in February 2024
and April 2026, respectively, and bear interest at 6.5% per annum.
If certain sustainability linked targets in the NOK Bonds are met,
they are to be redeemed at maturity at 100.0% of the initial
principal amount. If the sustainability linked targets are not met,
the NOK Bonds are to be settled at maturity at 100.5% of the
initial principal amount. The NOK Bonds are listed on the Oslo
Stock Exchange.
In May 2021, the Company entered into a note purchase agreement to
issue, in a private placement (the “Private Placement”), $500.0
million aggregate principal amount of fixed rate,
sustainability-linked senior secured notes (the “Senior Secured
Notes”). On May 21, 2021, the Company issued $450.0 million of such
notes, comprised of $150.0 million aggregate principal amount of
3.91% Series A Senior Secured Notes due 2031, $170.0 million
aggregate principal amount of 4.06% Series C Senior Secured Notes
due 2033 and $130.0 million aggregate principal of 4.26% Series D
Senior Secured Notes due 2036. The Company issued the remaining
$50.0 million aggregate principal amount of 3.91% Series B Senior
Secured Notes due 2031 in August 2021. The Private Placement was
completed as part of an amendment and upsize of the
Program.
In July 2021, the Company issued $750.0 million aggregate principal
amount of 5.50% senior unsecured notes due 2029. The notes are a
blue transition bond and Seaspan’s senior unsecured obligations and
accrue interest at a rate of 5.50% per year, payable semi-annually
in arrears on February 1 and August 1 of each year, beginning on
February 1, 2022. The notes are not guaranteed by Atlas or any of
its or Seaspan’s respective subsidiaries. The notes will mature on
August 1, 2029, unless earlier repurchased or
redeemed.
Debt Offerings
In March 2022, Seaspan entered into a joint venture agreement to
form a procurement joint venture with a leading independent ship
management company to leverage the combined purchasing power of the
partners and their respective affiliates to procure products and
services. The business of the joint venture may be expanded in
future to include offering procurement services to third party
customers and any other business as may be agreed between the
partners.
Changes to Senior Management
In January 2021, Graham Talbot was appointed Chief Financial
Officer of Atlas and Seaspan.
In February 2022, Karen Lawrie resigned as General Counsel of Atlas
and Seaspan.
Subsequent Events
Dividends
On January 3, 2022, the Company declared dividends of $47.5 million
on its common shares to Atlas, which was paid on January 24,
2022.
Exercised Option
In January 2022, the Company exercised its option under an existing
lease financing arrangement to purchase one 10,000 TEU vessel. The
purchase is expected to complete in January 2023 at the
pre-determined purchase price of $52.7 million
Interest Rate Swap
In January 2022, the Company entered into an interest rate swap
with a notional amount of $500.0 million. The swap has a 10-year
term and the Company pays a fixed rate of 1.925% and receives a
floating rate based on three month LIBOR.
Vessel Sale
In February 2022, the Company sold one 4,250 TEU vessel for an
aggregate purchase price of $32.8 million. The Company continues to
manage the ship operations of the vessel.
New Financing
In February 2022, the Company entered into a $250.0 million 3-year
sustainability-linked unsecured revolving credit facility (the
“2022 RCF”). The 2022 RCF replaces the Company’s $150.0 million
2-year unsecured revolving credit facility and bears interest at
market rate.
Impact of COVID-19 on our Business
The COVID-19 pandemic initially negatively affected global demand
for seaborne transportation, decreasing freight and charter rates
in the first half of 2020. Since then, however, the shipping
industry has seen robust demand for seaborne transportation, with
freight volumes and freight rates rebounding sharply. High demand
for containerships has resulted in negligible vessel capacity
available in certain size segments as of December 31, 2021,
increasing charter rates for all segments and enabling us to
recharter and forward fix many of our vessels which had charters
expiring this year or in the near term at higher rates. Increased
demand has also enabled us to execute shipbuilding contracts for 70
newbuilds since December 2020, with long-term charters attached. We
believe future significant downside risk to our containership
business is mitigated by our longstanding business relationships
and the long-term contracts securing the majority of our
fleet.
In our containership business, costs of operations have increased
due to COVID-19’s impact on supply chains, on workers’, surveyors’
and other specialists’ access to the shipyards to complete repairs
and inspections, and on the ability to conduct crew transfers. The
average daily operating cost per vessel per day for vessels on time
charter for the year ended December 31, 2021 increased to $6,766.0
compared to $6,010.0 per vessel per day for the year ended December
31, 2020. To mitigate, we have made logistical changes and worked
with vendors to ensure continued access to equipment and supplies.
We have also intentionally delayed or altered plans for repairs and
vessel projects where practicable. For our crew, we have developed
and implemented extended onboard management procedures and we have
prepared response plans should any crew member fall ill onboard. In
addition, although embarkation and disembarkation of seafarers
remains challenging and there are increased costs associated, we
are conducting crew changes at ports where transfers are permitted.
Management has obtained agreements from certain charterers to alter
trading routes to facilitate crew changes.
Some of our office staff continue to work remotely, but many have
started to return to our physical offices. The return to office is
being done on a gradual basis, as local health authorities ease
COVID-19 related restrictions. During 2021, there was no meaningful
increase in costs or expenses resulting from measures to facilitate
remote working.
We continuously monitor the developing situation, as well as our
customers’ response thereto, and make all necessary preparations to
address and mitigate, to the extent possible, the impact of
COVID-19 to our Company.
Impact of Recent Developments in Ukraine
In February 2022, as a result of the invasion of Ukraine by Russia,
economic sanctions were imposed by the U.S., the EU, the UK and a
number of other countries on Russian financial institutions,
businesses and individuals, as well as certain regions within the
Donbas region of Ukraine. While it is difficult to estimate the
impact of current or future sanctions on the Company’s business and
financial position, these sanctions could adversely impact the
Company’s operations and/or financial results. In the near term, we
expect increased volatility in the region due to these geopolitical
events and, with the support of our customers, our vessels have
ceased trading to Russia for the time being. We also anticipate we
could face challenges to recruit seafarers in sufficient numbers to
replace Ukrainians seafarers who are not able or permitted to leave
their country, given that Ukrainians constitute a significant
number of our seafarers. Finally, we expect that the Russia-Ukraine
conflict may exacerbate market volatility, and may impact access to
and pricing of capital. For more information regarding the risks
relating to economic sanctions as a result of Russia’s invasion of
Ukraine as well as the impact on retaining and sourcing our crew,
see “Item 3. Key Information—D. Risk Factors” in Atlas' Annual
Report for the year ended December 31, 2021.
Results of Operations
Year Ended December 31, 2021, Compared with Year Ended December 31,
2020
The following tables summarize Seaspan’s consolidated financial
results for the years ended December 31, 2021, and
2020.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Consolidated Financial Summary
(in millions of US dollars) |
|
December 31, |
|
|
|
2021 |
|
2020 |
|
Revenue |
|
$ |
1,470.3 |
|
|
$ |
1,230.8 |
|
|
Ship operating expense |
|
289.3 |
|
|
243.4 |
|
|
Depreciation and amortization expense |
|
307.9 |
|
|
288.1 |
|
|
General and administrative expense |
|
42.4 |
|
|
29.7 |
|
|
Operating lease expense |
|
143.0 |
|
|
147.3 |
|
|
Operating earnings |
|
703.6 |
|
|
522.3 |
|
|
Interest expense |
|
178.8 |
|
|
176.0 |
|
|
Net earnings |
|
394.5 |
|
|
313.4 |
|
|
Cash from operating activities |
|
860.0 |
|
|
627.4 |
|
Operating Results
Ownership Days are the number of days a vessel is owned and
available for charter. Ownership Days On-Hire are the number of
days a vessel is available to the charterer for use. The primary
driver of Ownership Days is the increase or decrease in the number
of vessels in our fleet.
Total Ownership Days increased by 2,466 days for the year ended
December 31, 2021, compared with the same period in 2020. The
increase was due to the delivery of seven vessels between December
2020 and December 2021, which contributed 1,040 days. Additionally,
full year benefits from the fifteen vessels delivered during 2020
contributed 1,644 days.
Vessel Utilization represents the number of Ownership Days On-Hire
as a percentage of Total Ownership Days. The following table
summarizes Seaspan’s Vessel Utilization for the last eight
consecutive quarters:
|
|
|
|
|
|
|
|
|
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2020 |
|
2021 |
|
YTD |
|
|
Q1 |
|
Q2 |
|
Q3 |
|
Q4 |
|
Q1 |
|
Q2 |
|
Q3 |
|
Q4 |
|
2020 |
2021 |
|
Vessel Utilization: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Time Charter Ownership Days
(1)
|
|
9,646 |
|
|
10,047 |
|
|
10,284 |
|
|
10,520 |
|
|
10,318 |
|
|
10,609 |
|
|
10,946 |
|
|
10,885 |
|
|
40,497 |
|
42,758 |
|
|
Bareboat Ownership Days
(1)
|
|
1,069 |
|
|
1,092 |
|
|