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Long Term Debt | 12 Months Ended
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Dec. 31, 2019
Debt Disclosure [Abstract] |
Long Term Debt | Long Term Debt Long term debt is comprised of the following borrowings:
|  |  |  |  |  | December 31,
Borrower |  | Commencement |  | Maturity |  | 2018 |  | 2019
Safe Bulkers |  | November 2018 |  | October 2021 |  | 30,000 |  |  | 27,500 |
Maxdeka |  | August 2011 |  | November 2019 |  | 13,635 |  |  | — |
Shikoku |  | October 2011 |  | November 2019 |  | 18,667 |  |  | — |
Maxdekatria |  | July 2018 |  | January 2020 |  | 11,750 |  |  | 10,250 |
Glovertwo |  | July 2018 |  | November 2019 |  | 13,420 |  |  | — |
Shikokutessera |  | July 2018 |  | November 2019 |  | 14,430 |  |  | — |
Gloversix - Shikokuokto |  | December 2018 |  | December 2019 |  | 35,000 |  |  | — |
Safe Bulkers |  | April 2019 |  | March 2022 |  | — |  |  | 10,000 |
Maxtessera |  | November 2018 |  | October 2022 |  | 26,000 |  |  | 24,000 |
Shikokupente - Shikokuennia - Pemer - Petra |  | July 2019 |  | January 2023 |  | — |  |  | 10,000 |
Shikokupente |  | August 2018 |  | August 2023 |  | 14,930 |  |  | 13,455 |
Shikokuennia |  | October 2018 |  | October 2023 |  | 17,730 |  |  | 15,267 |
Petra |  | November 2018 |  | November 2023 |  | 9,075 |  |  | 7,343 |
Pemer |  | November 2018 |  | November 2023 |  | 9,075 |  |  | 7,343 |
Maxeikosiepta |  | December 2018 |  | December 2023 |  | 5,000 |  |  | 4,500 |
Shikokuepta |  | February 2016 |  | February 2024 |  | 20,417 |  |  | 18,783 |
Pentakomo |  | July 2018 |  | January 2020 |  | 11,750 |  |  | 10,250 |
Avstes |  | June 2019 |  | May 2024 |  | — |  |  | 6,190 |
Maxeikositria |  | September 2017 |  | August 2024 |  | 11,930 |  |  | 11,239 |
Maxeikosi |  | September 2017 |  | August 2024 |  | 11,930 |  |  | 11,239 |
Maxpente |  | September 2017 |  | August 2024 |  | 17,400 |  |  | 16,750 |
Maxeikositessera |  | September 2017 |  | August 2024 |  | 12,090 |  |  | 11,700 |
Maxenteka |  | September 2017 |  | August 2024 |  | 14,332 |  |  | 13,934 |
Maxeikosiexi |  | September 2015 |  | September 2024 |  | 5,248 |  |  | 5,186 |
Marathassa |  | September 2015 |  | September 2024 |  | 5,690 |  |  | 5,622 |
Marinouki |  | September 2015 |  | September 2024 |  | 8,590 |  |  | 8,487 |
Kerasies |  | September 2015 |  | September 2024 |  | 6,014 |  |  | 5,942 |
Soffive |  | September 2015 |  | September 2024 |  | 9,305 |  |  | 9,193 |
Eptaprohi |  | September 2015 |  | September 2024 |  | 43,818 |  |  | 43,294 |
Safe Bulkers |  | November 2014 |  | September 2024 |  | 118,925 |  |  | 86,504 |
Pelea - Vasstwo - Eniaprohi - Vassone |  | December 2018 |  | December 2024 |  | 20,075 |  |  | 44,750 |
Maxdeka |  | November 2019 |  | August 2025 |  | — |  |  | 21,020 |
Shikoku Friendship |  | November 2019 |  | August 2025 |  | — |  |  | 22,111 |
Shikokutessera |  | November 2019 |  | August 2025 |  | — |  |  | 21,459 |
Glovertwo |  | November 2019 |  | August 2025 |  | — |  |  | 20,209 |
Maxeikosiena |  | September 2015 |  | September 2025 |  | 20,314 |  |  | 19,292 |
Youngtwo |  | January 2017 |  | January 2027 |  | 23,039 |  |  | 22,207 |
Shikokuokto |  | December 2019 |  | December 2027 |  | — |  |  | 20,000 |
Gloversix |  | December 2019 |  | December 2027 |  | — |  |  | 20,800 |
Total |  |  |  |  |  | 579,579 |  |  | 605,819 |
Current portion of Long-term debt |  |  |  |  |  | 37,431 |  |  | 65,473 |
Long-term debt |  |  |  |  |  | 542,148 |  |  | 540,346 |
Total debt |  |  |  |  |  | 579,579 |  |  | 605,819 |
Current portion of deferred financing costs |  |  |  |  |  | 1,246 |  |  | 1,419 |
Deferred financing costs non-current |  |  |  |  |  | 3,640 |  |  | 3,351 |
Total deferred financing costs |  |  |  |  |  | 4,886 |  |  | 4,770 |
Total debt |  |  |  |  |  | 579,579 |  |  | 605,819 |
Less: Total deferred financing costs |  |  |  |  |  | 4,886 |  |  | 4,770 |
Total debt, net of deferred financing costs |  |  |  |  |  | 574,693 |  |  | 601,049 |
Less: Current portion of long-term debt, net of current portion of deferred financing costs |  |  |  |  |  | 36,185 |  |  | 64,054 |
Long-term debt, net of deferred financing costs, non-current |  |  |  |  |  | 538,508 |  |  | 536,995 |
In addition to the above facilities, in December 2019, we entered into a revolving credit facility for an amount of up to $20,000 maturing in December 2022. No amount was outstanding under this facility as of December 31, 2019. The above table includes eight facilities whereby the relevant vessels were formerly owned by our respective subsidiaries and have been sold to third parties and taken back by us on a bareboat charter basis with either an obligation to purchase them or a purchase option at the end of the respective charter period or an option to buy them during the respective charter period at predermined purchase prices. Ownership will revert back to the Company on settlement of the outstanding amounts. Details of these facilities are as follows; Each of Maxeikosiena, Youngone and Youngtwo entered into a sale and leaseback agreement in 2015, 2015 and 2017, respectively, with third party companies, subsidiaries of a financial institution, regarding the respective vessel owned by the relevant subsidiary. Under these agreements, each vessel was sold and leased back on a bareboat charter basis for a period of 10 years, with a purchase obligation at the end of the 10 t h year. Furthermore, each subsidiary holds an option to purchase back the respective vessel after the second year of the bareboat charter, at annual intervals and predetermined purchase prices. In view of the obligation of the subsidiaries to purchase the respective vessels at the end of the bareboat charter, the Company has assessed that these transactions be recorded as financing transactions. During the year ended December 31, 2018, the Company exercised the option to purchase back the vessel owned by Youngone. Each of Shikokutessera, Maxdeka, Shikoku and Glovertwo entered into a sale and leaseback agreement in November 2019, with third party companies, subsidiaries of a financial institution, regarding the respective vessel owned by the relevant subsidiary. The proceeds from each of these agreements were used to fully prepay the outstandings under credit facilities secured by the respective vessels and for general corporate purposes. Under these agreements, the respective vessel was sold and leased back on a bareboat charter basis, in the case of the vessel owned by Shikokutessera for a period of 8 years, and in the case of the other three vessels for seven and a half years . Each respective subsidiary holds an option to purchase back its respective vessel five years and nine months after the commencement of the respective bareboat charter. The sale and leaseback agreements include onerous provisions for the relevant subsidiaries in the event that such options are not exercised. The Company has verbally committed to exercise this purchase option for all four vessels. In view of this commitment and the onerous provisions if the options are not exercised, the Company has assessed that these transactions be recorded as financing transactions. Each of Shikokuokto and Gloversix entered into a sale and leaseback agreement in December 2019, with third party companies, subsidiaries of a financial institution, regarding the respective vessel owned by the relevant subsidiary. The proceeds from each of these agreements were used to fully prepay the outstandings under credit facilities secured by the respective vessels and for general corporate purposes. Under these agreements, each vessel was sold and leased back on a bareboat charter basis for a period of 8 years, with a purchase obligation at the end of the 8 th year. Furthermore, each respective subsidiary holds an option to purchase back its respective vessel after the third year of the bareboat charter, at predetermined purchase prices. In view of the obligation of the subsidiaries to purchase the respective vessels at the end of the bareboat charter, the Company has assessed that these transactions be recorded as financing transactions. In addition to the above described facilities, in January 2020, each of Pentakomo and Maxdekatria entered into a sale and leaseback agreement, with third party companies, subsidiaries of a financial institution, regarding the respective vessel owned by the relevant subsidiary. The proceeds from each of these agreements were used to fully prepay the outstandings under credit facilities secured by the respective vessels and for general corporate purposes. Under these agreements, each vessel was sold and leased back on a bareboat charter basis for a period of 6 years, with a purchase obligation at the end of the 6 th year. Furthermore, each respective subsidiary holds an option to purchase back its respective vessel after the third year of the bareboat charter, at predetermined purchase prices. This transaction was consummated in January 2020. In view of the obligation of the subsidiaries to purchase the respective vessels at the end of the bareboat charter, the Company has assessed that these transactions be recorded as financing transactions. Our credit and loan facilities bear interest at LIBOR plus a margin, except for each of Maxeikosiena and Youngtwo loan facilities and for a portion of each of Shikokutessera, Maxdeka, Shikoku and Glovertwo loan facilities. Each of the Maxeikosiena and Youngtwo loan facilities are deemed to incur interest at a fixed rate calculated so that the initial facility amount be amortized to maturity down to the purchase obligation price of each vessel. A portion of each of the Shikokutessera, Maxdeka, Shikoku and Glovertwo loan facilities are deemed to incur interest at a fixed rate calculated so that the initial facility amount be amortized to maturity down to the purchase option price of each vessel. Our loans and credit facilities are generally repayable by either quarterly or semi-annual principal instalments and a balloon payment due on maturity, with the exception of the Maxeikosiena and Youngtwo loan facilities, that are repayable by principal instalments every 45 days out of a portion of the bareboat hire payment and a balloon payment due on maturity equal to the purchase obligation. The fair value of debt outstanding on December 31, 2019 amounted to $605,949 when valuing the Maxeikosiena, Youngtwo, Shikokutessera, Maxdeka, Shikoku and Glovertwo loan facilities on the basis of the deemed equivalent fixed rate, as applicable on December 31, 2019, which is considered to be Level 2 items in accordance with the fair value hierarchy. As of December 31, 2019, an amount of $20,000 was available for drawdown under the above loans and credit facilities. The estimated minimum annual principal payments required to be made after December 31, 2019, based on the loan and credit facility agreements as amended, are as follows:
To December 31, |
2020 | $ | 65,473 |
2021 | 90,681 |
2022 | 89,123 |
2023 | 77,538 |
2024 | 189,896 |
2025 and thereafter | 93,108 |
Total | $ | 605,819 |
Total interest incurred on long-term debt for the years ended December 31, 2017, 2018 and 2019 amounted to $23,266, $25,713 and $26,815, respectively, which includes interest capitalized of $42, $0 and $114 for the years ended December 31, 2017, 2018 and 2019, respectively. The average interest rate (including the margin) for all bank loan and credit facilities during the years 2017, 2018 and 2019 was 3.838% p.a., 4.428% p.a. and 4.624% p.a., respectively. As of December 31, 2019, the foregoing loan and credit facilities were secured as follows:
• | First priority mortgages over the vessels owned by the Company or title of ownership for the vessels under sale and lease back finance arrangements;
• | For one of the Safe Bulkers credit facilities, second priority mortgages over the vessels Kanaris, Efrossini, Venus Horizon, Pedhoulas Builder and Pedhoulas Fighter;
• | First priority assignment of all insurances and earnings of the relevant vessels; and
• | Corporate guarantee from Safe Bulkers in respect of facilities entered into by the Subsidiaries.
The Safe Bulkers revolving credit facility is not secured by any security. The loan and credit facility agreements contain debt covenants including restrictions as to changes in management and ownership of the vessels, entering into certain long-term charters, additional indebtedness and mortgaging of vessels without the respective lender’s prior consent, minimum vessel insurance cover ratio requirements, as well as minimum fair vessel value ratio to outstanding loan principal requirements (the “Minimum Value Covenant”). The Minimum Value Covenant must not fall below 115% or 120% as the case may be. The borrowers are permitted to pay dividends to their owners as long as no event of default under the respective loan has occurred or has not been remedied or would occur as a result of the payment of such dividends. Certain of the loan and credit facility agreements require the respective borrowers to maintain at all times a minimum balance in each vessel operating account, from $150 to $1,000. The Safe Bulkers facilities and the corporate guarantees of the Company include the following financial covenants:
• | its total consolidated liabilities divided by its total consolidated assets (based on the market value of all vessels owned or leased on a finance lease taking into account their employment, and the book value of all other assets), must not exceed 85% (the “Consolidated Leverage Covenant”);
• | its total consolidated assets (based on the market value of all vessels owned or leased on a finance lease taking into account their employment, and the book value of all other assets) less its total consolidated liabilities must not be less than $150,000 (the “Net Worth Covenant”);
• | the ratio of its EBITDA over consolidated interest expense must not be less than 2.0:1, on a trailing 12 months’ basis (the “EBITDA Covenant”);
• | its consolidated debt in relation to the 41 vessels currently owned by the respective Subsidiaries must not exceed $630,000 (the “Maximum Debt Covenant”);
• | a minimum of 30% or 35%, as per the relevant agreement, of its voting and ownership rights shall remain directly or indirectly beneficially owned by the Hajioannou family for the duration of the relevant credit facilities and in the case of one facility Polys Hajioannou beneficially holds a minimum of 20% of the voting and ownership rights (the “Control Covenant”): and
• | payment of dividends is subject to no event of default having occurred and be continuing or would occur as a result of the payment of such dividends.
The Minimum Value Covenant, Consolidated Leverage Covenant, EBITDA Covenant, Net Worth Covenant and Control Covenant do not apply to the Shikokuepta loan facility. The Minimum Value Covenant and EBITDA Covenant do not apply to the Maxeikosiena and Youngtwo financing agreements. The EBITDA Covenant does not apply to the Shikokuokto, Gloversix, Pentakomo and Maxdekatria financing agreements. The Maximum Debt Covenant only applies to the Safe Bulkers revolving credit facility. As of December 31, 2019, the Company was in compliance with all debt covenants in effect, with respect to its loans and credit facilities.

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- Definition The entire disclosure for 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. + References Reference 1: http://fasb.org/us-gaap/role/ref/legacyRef -Publisher FASB -Name Accounting Standards Codification -Topic 470 -URI http://asc.fasb.org/topic&trid=2208564 + Details
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