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Note 11 - Capital Leased Assets and Capital Lease Obligations

6 Months Ended

Jun. 30, 2017

Notes to Financial Statements

Debt and Capital Leases Disclosures [Text Block]

11.

Capital Leased Assets and Capital Lease Obligations:

Between

January

and

April 2014,

the Company took delivery of the newbuild vessels

MSC Azov

,

MSC Ajaccio

and

MSC Amalfi

. Upon the delivery of each vessel, the Company agreed with a financial institution to refinance the then outstanding balance of the loans relating to these vessels by entering into a

ten

-year sale and leaseback transaction for each vessel. The shipbuilding contracts were novated to the financial institution for an amount of

$85,572

each.

On

July 6, 2016

and

July 15, 2016

the Company agreed with a financial institution to refinance the then outstanding balance of the loans relating to the

MSC Athos

and the

MSC Athens

(Note

10.B.4

), by entering into a

seven

-year sale and leaseback transaction for each vessel.

On

June 19, 2017,

the Company entered into

two seven

-year sale and leaseback transactions with a financial institution for the

Leonidio

and

Kyparissia

(Note

6

).

The sale and leaseback transactions were classified as capital leases. As the fair value of each vessel sold was in excess of its carrying amount, the difference between the sale proceeds and the carrying amount was classified as prepaid lease rentals or as unearned revenue. In this respect, in

2016,

an aggregate amount of

$26,390

(including the net settlements on interest rate swaps qualifying for hedge accounting of

$1,076

) was transferred to prepaid lease rentals and in

2017,

an aggregate amount of

$4,481

was transferred to unearned revenue (Note

12.b

).

The total value of the vessels, at the inception of the capital lease transactions, was

$452,564,

in the aggregate. The depreciation charged during the

six

-month periods ended

June 30, 2016

and

2017,

amounted to

$3,770

and

$6,269,

respectively, and is included in Depreciation in the accompanying consolidated statements of income. As of

December 31, 2016

and

June 30, 2017,

accumulated depreciation amounted to

$23,692

and

$29,961,

respectively, and is included in Capital leased assets, in the accompanying consolidated balance sheets. As of

December 31, 2016

and

June 30, 2017,

the net book value of the vessels amounted to

$384,872

and

$422,603,

respectively, and is separately reflected as Capital leased assets, in the accompanying consolidated balance sheets.

The balance of prepaid lease rentals, as of

December 31, 2016

and

June 30, 2017,

is as follows:

		December 31, 2016				June 30, 2017
Prepaid lease rentals		$	40,811			$	60,422
Additions			26,390				-
Less: Amortization of prepaid lease rentals			(6,779	)			(4,340	)
Prepaid lease rentals		$	60,422			$	56,082
Less: current portion			(8,752	)			(8,752	)
Non-current portion		$	51,670			$	47,330

The capital lease obligations amounting to

$392,959

as at

June 30, 2017

are scheduled to expire through

2024

and include a bargain purchase option to repurchase the vessels at any time during the charter period. Total interest expenses incurred on capital leases for the

six

-month periods ended

June 30, 2016

and

2017

amounted to

$8,177

and

$10,538,

respectively, and are included in Interest and finance costs in the accompanying consolidated statements of income. Finance lease obligations of

MSC Athos

and

MSC Athens

bear interest at LIBOR plus a spread, which is

not

included in the annual lease payments table below.

The annual lease payments under the capital leases after

June 30, 2017,

are in the aggregate as follows:

Year ending December 31,		Amount
2017		$	25,096
2018			49,798
2019			49,798
2020			49,895
2021			49,798
2022 and thereafter			253,339
Total		$	477,724
Less: Amount of interest ( MSC Azov , MSC Ajaccio , MSC Amalfi , Leonidio and Kyparissia )			(84,765	)
Total lease payments		$	392,959
Less: Financing costs, net			(4,375	)
Total lease payments, net		$	388,584

The total capital lease obligations, net of related financing costs, are presented in the accompanying

June 30, 2017,

consolidated balance sheet as follows:

Capital lease obligation – current		$	33,210
Less: current portion of financing costs			(859	)
Capital lease obligation – non-current			359,749
Less: non-current portion of financing costs			(3,516	)
Total		$	388,584

X

- Definition

The entire disclosure for debt and capital lease obligations can be reported. Information about short-term and long-term debt arrangements, which includes amounts of borrowings under each line of credit, note payable, commercial paper issue, bonds indenture, debenture issue, own-share lending arrangements and any other contractual agreement to repay funds, and about the underlying arrangements, rationale for a classification as long-term, including repayment terms, interest rates, collateral provided, restrictions on use of assets and activities, whether or not in compliance with debt covenants, and other matters important to users of the financial statements, such as the effects of refinancing and noncompliance with debt covenants. Also includes descriptions and amounts of capital leasing arrangements that consist of direct financing, sales type and leveraged leases. Disclosure may include the effect on the balance sheet and the income statement resulting from a change in lease classification for leases that at inception would have been classified differently had guidance been in effect at the inception of the original lease.

+ References

Reference 1: http://www.xbrl.org/2003/role/presentationRef
-Publisher FASB
-Name Accounting Standards Codification
-Topic 840
-URI http://asc.fasb.org/topic&trid=2208923

Reference 2: http://www.xbrl.org/2003/role/presentationRef
-Publisher FASB
-Name Accounting Standards Codification
-Topic 470
-URI http://asc.fasb.org/topic&trid=2208564

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- References

No definition available.

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