UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 20-F
 
(Mark One)
REGISTRATION STATEMENT PURSUANT TO SECTION 12(b) OR (g) OF THE SECURITIES
EXCHANGE ACT OF 1934
OR
 
ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF
1934
 
For the fiscal year ended December 31, 2021
OR
 
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934
 
OR
 
SHELL COMPANY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
 
Date of event requiring this shell company report  _______________________________
For the transition period from ____ to ____.
Commission file number
000-29106
 
 
Golden Ocean Group Limited
(Exact name of Registrant as specified in its charter)
 
(Translation of Registrant's name into English)
 
Bermuda
(Jurisdiction of incorporation or organization)
 
Par-la-Ville Place, 14 Par-la-Ville Road, Hamilton, Bermuda, HM 08
(Address of principal executive offices)
 
James Ayers, Telephone: (1) 441 2956935, Facsimile: (1) 441 295 3494,
Par-la-Ville Place, 14 Par-la-Ville Road, Hamilton, HM 08, Bermuda
(Name, Telephone, E-mail and/or Facsimile number and Address of Company Contact Person)
Securities registered or to be registered pursuant to Section 12(b) of the Act
Title of each class
Trading Symbol
Name of each exchange on which registered
Common Shares, Par Value $0.05 Per Share
GOGL
NASDAQ Global Select Market
Securities registered or to be registered pursuant to Section 12(g) of the Act.
None
(Title of Class)
Securities for which there is a reporting obligation pursuant to Section 15(d) of the Act.
None
(Title of Class)
Indicate the number of outstanding shares of each of the issuer's classes of capital or common stock as of the close of the period
covered by the annual report.
200,435,621 Common Shares, Par Value $0.05 Per Share
Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act.
Yes o
No x
If this report is an annual or transition report, indicate by check mark if the registrant is not required to file reports pursuant to
Section 13 or 15(d) of the Securities Exchange Act of 1934.
Yes o
No x
Note – Checking the box above will not relieve any registrant required to file reports pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934 from their obligations under those Sections.
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the
Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to
file such reports), and (2) has been subject to such filing requirements for the past 90 days.
Yes x
No o
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted
pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period
that the registrant was required to submit such files).
Yes  x
No o
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or an
emerging growth company. See definition of "large accelerated filer", "accelerated filer", and "emerging growth company" in
Rule 12b-2 of the Exchange Act.:
Large accelerated filer  x
Accelerated filer  o
Non-accelerated filer  o
Emerging growth company  
If an emerging growth company that prepares its financial statements in accordance with U.S. GAAP, indicate by check mark if
the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting
standards† provided pursuant to Section 13(a) of the Exchange Act. ☐
† The term ''new or revised financial accounting standard'' refers to any update issued by the Financial Accounting Standards
Board to its Accounting Standards Codification after April 5, 2012.
Indicate by check mark whether the registrant has filed a report on and attestation to its management's assessment of the
effectiveness of its internal control over financial reporting under Section 404(b) of the Sarbanes-Oxley Act (15 U.S.C.
7262(b)) by the registered public accounting firm that prepared or issued its audit report. x
Indicate by check mark which basis of accounting the registrant has used to prepare the financial statements included in this
filing:
U.S. GAAP x
International Financial Reporting Standards as issued by the
International Accounting Standards Board o
Other o
If "Other" has been checked in response to the previous question, indicate by check mark which financial statement item the
registrant has elected to follow:
Item 17 o
Item 18 o
If this is an annual report, indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the
Exchange Act).
Yes ☐
No
Document and Entity Information
December 31, 2021
Entity Central Index Key
0001029145
Document Fiscal Year Focus
2021
Document Fiscal Period Focus
FY
Amendment Flag
false
Hidden Table for Cover Page Sub-
cell Linking
INDEX TO REPORT ON FORM 20-F
 
 
PAGE
 
 
 
Item 16I.
Disclosure Regarding Foreign Jurisdictions that Prevent Inspections
 
CAUTIONARY STATEMENT REGARDING FORWARD-LOOKING STATEMENTS AND SUMMARY OF RISK
FACTORS
Matters discussed in this annual report and the documents incorporated by reference may constitute forward-looking statements.
The Private Securities Litigation Reform Act of 1995 (the "PSLRA"), provides safe harbor protections for forward-looking
statements in order to encourage companies to provide prospective information about their business. Forward-looking
statements include, but are not limited to, statements concerning plans, objectives, goals, strategies, future events or
performance, underlying assumptions and other statements, which are other than statements of historical facts.
We are taking advantage of the safe harbor provisions of the PSLRA and are including this cautionary statement in connection
with this safe harbor legislation. This annual report and any other written or oral statements made by us or on our behalf may
include forward-looking statements, which reflect our current views with respect to future events and financial performance.
This annual report includes assumptions, expectations, projections, intentions and beliefs about future events. These statements
are intended as "forward-looking statements." We caution that assumptions, expectations, projections, intentions and beliefs
about future events may and often do vary from actual results and the differences can be material. When used in this document,
the words "believe," "expect," "anticipate," "estimate," "intend," "plan," "targets," "projects," "likely," "will," "would," "could,"
"seeks," "potential," "continue," "contemplate," "possible," "might," "forecasts," "may," "should" and similar expressions or
phrases may identify forward-looking statements.
The forward-looking statements in this annual report are based upon various assumptions, including without limitation,
management's examination of historical operating trends, data contained in our records and data available from third parties.
Although we believe that these assumptions were reasonable when made, because these assumptions are inherently subject to
significant uncertainties and contingencies which are difficult or impossible to predict and are beyond our control, we cannot
assure you that we will achieve or accomplish these expectations, beliefs or projections. As a result, you are cautioned not to
rely on any forward-looking statements.
In addition to these important factors and matters discussed elsewhere herein, and in the documents incorporated by reference
herein, important factors that, in our view, could cause actual results to differ materially from those discussed in the forward-
looking statements include among other things:
general market trends in the dry bulk industry, which is cyclical and volatile, including fluctuations in charter hire rates
and vessel values;
a decrease in the market value of our vessels;
changes in supply and demand in the dry bulk shipping industry, including the market for our vessels and the number
of newbuildings under construction;
an oversupply of dry bulk vessels, which may depress charter rates and profitability;
our future operating or financial results;
our continued borrowing availability under our debt agreements and compliance with the covenants contained therein;
our ability to procure or have access to financing, our liquidity and the adequacy of cash flows for our operations;
the failure of our contract counterparties to meet their obligations, including changes in credit risk with respect to our
counterparties on contracts;
the loss of a large customer or significant business relationship;
the strength of world economies;
the volatility of prevailing spot market and charter-hire charter rates, which may negatively affect our earnings;
our ability to successfully employ our dry bulk vessels and replace our operating leases on favorable terms, or at all;
changes in our operating expenses and voyage costs, including bunker prices, fuel prices (including increased costs for
low sulfur fuel), drydocking, crewing and insurance costs;
the adequacy of our insurance to cover our losses, including in the case of a vessel collision;
vessel breakdowns and instances of offhire;
our ability to fund future capital expenditures and investments in the construction, acquisition and refurbishment of our
vessels (including the amount and nature thereof and the timing of completion of vessels under construction, the
delivery and commencement of operation dates, expected downtime and lost revenue);
risks associated with any future vessel construction or the purchase of second-hand vessels;
effects of new products and new technology in our industry, including the potential for technological innovation to
reduce the value of our vessels and charter income derived therefrom;
the impact of an interruption or failure of our information technology and communications systems, including the
impact of cyber-attacks, upon our ability to operate;
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potential liability from safety, environmental, governmental and other requirements and potential significant additional
expenditures (by us and our customers) related to complying with such regulations;
changes in governmental rules and regulations or actions taken by regulatory authorities and the impact of government
inquiries and investigations;
the arrest of our vessels by maritime claimants;
government requisition of our vessels during a period of war or emergency;
our compliance with complex laws, regulations, including environmental laws and regulations and the U.S. Foreign
Corrupt Practices Act of 1977;
potential difference in interests between or among certain members of our board of directors, executive officers, senior
management and shareholders;
our ability to attract, retain and motivate key employees;
work stoppages or other labor disruptions by our employees or the employees of other companies in related industries;
potential exposure or loss from investment in derivative instruments;
stability of Europe and the Euro or the inability of countries to refinance their debts;
fluctuations in currencies, interest rates and foreign exchange rates and the impact of the discontinuance of the London
Interbank Offered Rate ("LIBOR"), after June 30, 2023 of our debt that reference LIBOR in the interest rate;
acts of piracy on ocean-going vessels, public health threats, terrorist attacks and international hostilities and political
instability;
potential physical disruption of shipping routes due to accidents, climate-related (acute and chronic), political
instability, terrorist attacks, piracy or international hostilities, including the ongoing developments in the Ukraine
region;
general domestic and international political and geopolitical conditions or events, including any further changes in
U.S. trade policy that could trigger retaliatory actions by affected countries;
the impact of adverse weather and natural disasters;
the impact of increasing scrutiny and changing expectations from investors, lenders and other market participants with
respect to our Environmental, Social and Governance ("ESG") policies;
changes in seaborne and other transportation;
the length and severity of epidemics and pandemics, including the ongoing global outbreak of COVID-19
("COVID-19") and governmental responses thereto and the impact on the demand for seaborne transportation in the
dry bulk sector;
fluctuations in the contributions of our joint ventures to our profits and losses;
the potential for shareholders to not be able to bring a suit against us or enforce a judgement obtained against us in the
United States;
our treatment as a “passive foreign investment company” by U.S. tax authorities;
being required to pay taxes on U.S. source income;
our operations being subject to economic substance requirements;
the volatility of the stock price for our common shares, from which investors could incur substantial losses, and the
future sale of our common shares, which could cause the market price of our common shares to decline; and
other factors discussed in "Item 3. Key Information D. Risk Factors." in this annual report.
We caution readers of this report not to place undue reliance on these forward-looking statements, which speak only as of their
dates. Except to the extent required by applicable law or regulation, we undertake no obligation to release publicly any revisions
to these forward-looking statements to reflect events or circumstances after the date of this annual report or to reflect the
occurrence of unanticipated events. These forward-looking statements are not guarantees of our future performance, and actual
results and future developments may vary materially from those projected in the forward-looking statements.
ii
PART I
ITEM 1.  IDENTITY OF DIRECTORS, SENIOR MANAGEMENT AND ADVISERS
Not applicable.
ITEM 2.  OFFER STATISTICS AND EXPECTED TIMETABLE
Not applicable.
ITEM 3.  KEY INFORMATION
On October 7, 2014, Knightsbridge Shipping Limited, (''Knightsbridge''), and Golden Ocean Group Limited, (''Former Golden
Ocean''), entered into an agreement and plan of merger ("the Merger Agreement"), pursuant to which the two companies
agreed to merge ("the Merger"), with Knightsbridge serving as the surviving legal entity. The Merger was completed on March
31, 2015, and the name of Knightsbridge was changed to Golden Ocean Group Limited. The Merger has been accounted for as
a business combination using the acquisition method of accounting, with us selected as the accounting acquirer. See "Item 4.
Information on the Company - A. History and Development of the Company" for more information.
Throughout this report, unless the context otherwise requires, "Golden Ocean," the "Company," "we," "us" and "our" refer to
Golden Ocean Group Limited and its subsidiaries.
The term deadweight ton ("dwt"), is used in describing the capacity or size of vessels. Dwt, expressed in metric tons, each of
which is equivalent to 1,000 kilograms, refers to the maximum weight of cargo and supplies that a vessel can carry.
We own and operate dry bulk vessels of the following sizes:
Newcastlemax, which are vessels with carrying capacities of between 200,000 dwt and 210,000 dwt;
Capesize, which are vessels with carrying capacities of between 105,000 dwt and 200,000 dwt;
Panamax, which are vessels with carrying capacities of between 65,000 and 105,000 dwt; and
Ultramax, which are vessels with carrying capacities of between 55,000 and 65,000 dwt.
Unless otherwise indicated, all references to "USD", "US$" and "$" in this report are to, and amounts are presented in U.S.
dollars.
A.  [RESERVED]
B.  CAPITALIZATION AND INDEBTEDNESS
Not applicable.
C.  REASONS FOR THE OFFER AND USE OF PROCEEDS
Not applicable.
D. RISK FACTORS
Our assets are primarily engaged in international dry bulk shipping. The risk factors summarized in the Cautionary Statement
Regarding Forward Looking Statements and Summary of Risk Factors and detailed below, summarize the risks that may
materially affect our business, financial condition or results of operations. Unless otherwise indicated in this annual report on
Form 20-F, all information concerning our business and our assets is as of March 23, 2022.
Risk Factors Summary
The principal risks that could adversely affect, or have adversely affected, our Company’s business, operation results and
financial conditions are categorized and detailed below.
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Risk Related to Our Industry
Our assets operate worldwide within the dry bulk shipping sector which is volatile and unpredictable. Several risk factors
including but not limited to our global and local market presence will impact our widespread operations. We are exposed to
regulatory, statutory, operational, technical, counterpart, environmental, and political risks, developments and regulations that
may impact and or disrupt our business. Details of specific risks relating to our industry are described below.
Risks Related to our Business
Our Company is subject to a significant number of external and internal risks. As an entity incorporated in Bermuda with
operations in different jurisdictions, markets and industries, with numerous employees, shareholders, customers and other
stakeholders with varying interests, we engage activities, operations and actions that would result in harming our Company,
financial performance, position and ability to maintain. Details of specific risks relating to our Company are described below.
Risk Related to an Investment in Our Securities
Our common shares are subject to a significant number of external and internal risks. The market price of our common shares
has historically been unpredictable and volatile. As a holding company, we depend on the ability of our subsidiaries to
distribute funds to satisfy our financial and other obligations. As we are a foreign corporation, our shareholders may not have
the same rights as a shareholder in a U.S. corporation may have. In addition, our shareholders may not be able to bring suit
against us or enforce a judgement obtained in the U.S. against us since our offices and the majority of our assets are located
outside of the U.S. Furthermore sales of our common shares or conversions of our convertible notes could cause the market
price of our common shares to decline. Details of specific risks relating to our common shares are described below.
Some risks are static while other risks may change and will vary depending on global and corporate developments that may
occur now or in the future. The risk factors below identify risks relating to our industry, Company and common shares. These
risks may not cover all risk factors applicable to the Company.
Risks Related to Our Industry
Charter hire rates for dry bulk vessels are volatile, have fluctuated significantly the past years and may decrease below our
break-even rates in the future, which may adversely affect our earnings, revenues and profitability and our ability to comply
with our loan covenants.
Substantially all of our revenues are derived from a single market, the dry bulk segment, and therefore our financial results are
subject to the cyclicality of the dry bulk shipping industry and any attendant volatility in charter hire rates and profitability. The
degree of charter hire rate volatility among different types of dry bulk vessels has varied widely, and time charter and spot
market rates for dry bulk vessels have in the recent past declined below operating costs of vessels.
The dry bulk charter market, from which we derive and plan to continue to derive our revenues, has been extremely strong in
2021, with freight rates at decade-high levels in the start of fourth quarter of 2021 due to a combination of higher demand and
supply-side inefficiencies. In January 2022, we saw spot rates fall to low levels, following normal seasonal patterns as well as
impacted by the Olympic games in China, which has reduced industrial activity in the region. The rates improved in February
and March 2022, however we cannot guarantee any trend towards recovery will continue, including recent hostilities between
Russia and Ukraine.
Charter rate fluctuations result from changes in the supply and demand for vessel capacity for the major commodities carried on
water internationally. Because the factors affecting the supply and demand for vessels are outside of our control and are
unpredictable, the nature, timing, direction and degree of changes in charter rates are also unpredictable. Since we charter our
vessels principally in the spot market, we are exposed to the cyclicality and volatility of the spot market. Please refer to risk
factor "We are dependent on spot charters and any decrease in spot charter rates in the future may adversely affect our
earnings and ability to pay our dividends."
Furthermore, a significant decrease in charter rates would cause asset values to decline which may require us to record an
impairment charge in our consolidated financial statements, which in turn could adversely affect our financial results. In 2020,
we recorded an impairment loss of $94.2 million on our leased assets equal to the difference between the asset's carrying value
and fair value, which has been recorded as a result of an impairment review performed on an asset by asset basis. In 2021, we
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have not had any impairment losses on our leased assets. Further, because the market value of our vessels may fluctuate
significantly, we may also incur losses when we sell vessels, which may adversely affect our earnings. If we sell vessels at a
time when vessel prices have fallen and before we have recorded an impairment adjustment to our financial statements, the sale
may be at less than the vessel's carrying amount in our financial statements, resulting in a loss and a reduction in earnings. For
instance, during the year ended December 31, 2021 and 2020, we recorded impairment losses of $4.2 million and $0.7 million,
respectively, related to sales of vessels. There were no sales of vessels in 2019.
Factors that influence demand for vessel capacity include:
supply of and demand for energy resources, commodities, and semi-finished and finished consumer and industrial
products;
changes in the exploration or production of energy resources, commodities, and semi-finished and finished consumer
and industrial products;
the location of regional and global exploration, production and manufacturing facilities;
the location of consuming regions for energy resources, commodities, and semi-finished and finished consumer and
industrial products;
the globalization of production and manufacturing;
global and regional economic and political conditions, armed conflicts, including the recent conflicts between Russia
and Ukraine, including developments in international trade and fluctuations in industrial and agricultural production;
disruptions and developments in international trade;
changes in seaborne and other transportation patterns, including the distance cargo is transported by sea;
international sanctions, embargoes, import and export restrictions, nationalizations, piracy and terrorist attacks;
legal and regulatory changes including regulations adopted by supranational authorities and/or industry bodies, such as
safety and environmental regulations and requirements;
weather and natural disasters;
currency exchange rates, most importantly versus USD; and
pandemics, such as the COVID-19 outbreak, and other diseases and viruses, affecting livestock and humans.
Demand for our dry bulk oceangoing vessels is dependent upon economic growth in the world's economies, seasonal and
regional changes in demand and changes to the capacity of the global dry bulk fleet and the sources and supply of dry bulk
cargo transported by sea. Continued adverse economic, political or social conditions or other developments could further
negatively impact charter rates and therefore have a material adverse effect on our business results, results of operations and
ability to pay dividends.
Factors that influence the supply of vessel capacity include:
number of newbuilding orders and deliveries;
the number of shipyards and ability of shipyards to deliver vessels;
port and canal congestion;
potential disruption, including supply chain disruptions, of shipping routes due to accidents or political events;
scrapping of older vessels;
speed of vessel operation;
vessel casualties;
the degree of recycling of older vessels, depending, among other things, on recycling rates and international recycling
regulations;
number of vessels that are out of service, namely those that are laid-up, drydocked, awaiting repairs or otherwise not
available for hire;
availability of financing for new vessels and shipping activity;
changes in national or international regulations that may effectively cause reductions in the carrying capacity of
vessels or early obsolescence of tonnage; and
changes in environmental and other regulations that may limit the useful lives of vessels.
In addition to the prevailing and anticipated freight rates, factors that affect the rate of newbuilding, scrapping and laying-up
include newbuilding prices, secondhand vessel values in relation to scrap prices, costs of bunkers and other operating costs,
costs associated with classification society surveys, normal maintenance costs, insurance coverage costs, the efficiency and age
profile of the existing dry bulk fleet in the market, and government and industry regulation of maritime transportation practices,
particularly environmental protection laws and regulations. These factors influencing the supply of and demand for shipping
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capacity are outside of our control, and we may not be able to correctly assess the nature, timing and degree of changes in
industry conditions.
Further, the market may fluctuate widely based on a variety of factors including changes in overall market movements, political
and economic events, wars, acts of terrorism, natural disasters (including disease, epidemics and pandemics) and changes in
interest rates or inflation rates.
Global economic conditions may negatively impact the dry bulk shipping industry and we face risks attendant in economic
and regulatory conditions around the world.
Major market disruptions and adverse changes in market conditions and regulatory climate in China, the United States, the
European Union and worldwide may adversely affect our business or impair our ability to borrow amounts under credit
facilities or any future financial arrangements.
Chinese dry bulk imports have accounted for the majority of global dry bulk transportation growth annually over the last
decade. Accordingly, our financial condition and results of operations, as well as our future prospects, would likely be hindered
by an economic downturn in any of these countries or geographic regions. While global economic activity levels, led by China,
have improved, the outlook for China and the rest of the world remains uncertain and is highly dependent on the path of
COVID-19 and measures taken by governments around the world in response to it. Global vaccination rates and effectiveness,
together with the development of COVID-19 variants, could impact sustainability of this recovery, in addition to dry-bulk-
specific seasonality described in further detail below. In addition, the International Monetary Fund has warned that continuing
trade tensions, including significant tariff increases, between the United States and China could derail recovery from the
impacts of COVID-19.
While global economic conditions have generally improved, any renewed adverse economic and governmental factors, together
with the concurrent volatility in charter rates and vessel values, may have a material adverse effect on our results of operations,
financial condition and cash flows and could cause the price of our common shares to decline. An extended period of
deterioration in the outlook for the world economy could reduce the overall demand for our services and could also adversely
affect our ability to obtain financing on acceptable terms or at all.
An over-supply of dry bulk vessel capacity may lead to reductions in charter hire rates, vessel values and profitability.
In the past, the supply of dry bulk vessels has outpaced vessel demand growth over the past few years, thereby causing
downward pressure on charter rates. In such cases, if the supply of dry bulk vessels is not fully absorbed by the market, charter
rates and value of the vessels may have a material adverse effect on our results of operations, our ability to pay dividends and
our compliance with current or future covenants in any of our agreements.
Risks involved with operating ocean-going vessels could result in the loss of life or harm to our seafarers, environmental
accidents or otherwise affect our business and reputation, which could have a material adverse effect on our results of
operations and financial condition.
The operation of an ocean-going vessel carries inherent risks. These risks include the possibility of:
loss of life or harm to seafarers;
an accident involving a vessel resulting in damage to the asset or a total loss of the same;
a marine disaster;
terrorism;
piracy or robbery;
environmental accidents;
cargo and property losses and damage; and
business interruptions caused by mechanical failure, human error, war, political action in various countries, labor
strikes, or adverse weather conditions.
Any of these circumstances or events could increase our costs or lower our revenues. The involvement of our vessels in an
environmental disaster may harm our reputation as a safe and reliable dry bulk operator.
4
Political instability, terrorist or other attacks, war, international hostilities and global public health threats can affect the
seaborne transportation industry, which could adversely affect our business.
We conduct most of our operations outside the United States, and our business, results of operations, cash flows, financial
condition and ability to pay dividends, if any, in the future may be adversely affected by changing economic, political and
government conditions in the countries and regions where our vessels are employed or registered. Moreover, we operate in a
sector of the economy that is likely to be adversely impacted by the effects of political conflicts.
Currently, the world economy faces a number of challenges, including trade tensions between the United States and China,
stabilizing growth in China, geopolitical events such as Brexit, continuing threat of terrorist attacks around the world,
continuing instability and conflicts and other recent occurrences in the Middle East, Ukraine, and in other geographic areas and
countries, as well as the public health concerns stemming from the ongoing COVID-19 outbreak.
In the past, political instability has also resulted in attacks on vessels, mining of waterways and other efforts to disrupt
international shipping, particularly in the Arabian Gulf region and most recently in the Black Sea in connection with the recent
conflicts between Russia and Ukraine. Acts of terrorism and piracy have also affected vessels trading in regions such as the
South China Sea and the Gulf of Aden off the coast of Somalia. Any of these occurrences could have a material adverse impact
on our future performance, results of operation, cash flows and financial position.
Beginning in February of 2022, President Biden and several European leaders announced various economic sanctions against
Russia in connection with the aforementioned conflicts in the Ukraine region, which may adversely impact our business. Our
business could also be adversely impacted by trade tariffs, trade embargoes or other economic sanctions that limit trading
activities by the United States or other countries against countries in the Middle East, Asia or elsewhere as a result of terrorist
attacks, hostilities or diplomatic or political pressures. Any violations of sanctions by our charter parties, any extension or
worsening of the conflict in these regions, as well as any significant sanctions resulting from the conflicts that affect, among
other things, the performance of our charter party agreements specifically or the dry bulk industry more generally, may have a
material adverse impact on our future performance, results of operations, cash flows and financial position.
In addition, public health threats, such as COVID-19, influenza and other highly communicable diseases or viruses, outbreaks
of which have from time to time occurred in various parts of the world in which we operate, including China, Japan and South
Korea, which may even become pandemics, such as the COVID-19 virus, could lead to a significant decrease of demand for the
transportation of dry bulk cargoes. Such events may also adversely impact our operations, including timely rotation of our
crews, the timing of completion of any outstanding or future newbuilding projects or repair works in drydock as well as the
operations of our customers. Delayed rotation of crew may adversely affect the mental and physical health of our crew and the
safe operation of our vessels as a consequence.
Our financial results and operations have been and may continue to be adversely affected by the ongoing outbreak of
COVID-19, and related governmental responses thereto.
In response to the outbreak of COVID-19 in late 2019 governments and governmental agencies around the world took
numerous actions, including travel bans, quarantines, and other emergency public health measures, including lockdown
measures, which resulted in a significant reduction in global economic activity and extreme volatility in the global financial
markets. By 2021, however, many of these measures were relaxed and as part of a broader economic recovery, freight rates
reached unprecedented levels in the year. Nonetheless, we cannot predict whether and to what degree emergency public health
and other measures will be reinstituted in the event of any resurgence in the COVID-19 virus or any variants thereof. If the
COVID-19 pandemic continues on a prolonged basis or becomes more severe, the adverse impact on the global economy and
the rate environment for dry bulk and other cargo vessels may deteriorate further and our operations and cash flows may be
negatively impacted. Relatively weak global economic conditions during periods of volatility have and may continue to have a
number of adverse consequences for dry bulk and other shipping sectors, as we experienced in 2020 and we may experience in
the future including, among other things:
low charter rates, particularly for vessels employed on short-term time charters or in the spot market;
decreases in the market value of dry bulk vessels and limited second-hand market for the sale of vessels;
limited financing for vessels;
loan covenant defaults; and
declaration of bankruptcy by certain vessel operators, vessel owners, shipyards and charterers.
The COVID-19 pandemic and measures to contain its spread have negatively impacted regional and global economies and trade
patterns in markets in which we operate, the way we operate our business, and the businesses of our charterers and suppliers.
These negative impacts could continue or worsen, even after the pandemic itself diminishes or ends. Companies, including us,
have also taken precautions, such as requiring employees to work remotely and imposing travel restrictions, while some other
5
businesses have been required to close entirely. Moreover, we face significant risks to our personnel and operations due to the
COVID-19 pandemic. Our crews face risk of exposure to COVID-19 as a result of travel to ports in which cases of COVID-19
have been reported. Our shore-based personnel likewise face risk of such exposure, as we maintain offices in areas that have
been impacted by the spread of COVID-19.
Measures against COVID-19 in a number of countries have restricted crew rotations on our vessels, which may continue or
become more severe. As a result, in 2021, we experienced and may continue to experience disruptions to our normal vessel
operations caused by increased deviation time associated with positioning our vessels to countries in which we can undertake a
crew rotation in compliance with such measures. Delays in crew rotations have led to issues with crew fatigue and may
continue to do so, which may result in delays or other operational issues. We have had and expect to continue to have increased
expenses due to incremental fuel consumption and days in which our vessels are unable to earn revenue in order to deviate to
certain ports on which we would ordinarily not call during a typical voyage. We may also incur additional expenses associated
with testing, personal protective equipment, quarantines, and travel expenses such as airfare costs in order to perform crew
rotations in the current environment. In 2021, delays in crew rotations have also caused us to incur additional costs related to
crew bonuses paid to retain the existing crew members on board and may continue to do so.
This and future epidemics may affect personnel operating payment systems through which we receive revenues from the
chartering of our vessels or pay for our expenses, resulting in delays in payments. We continue to focus on our employees well-
being, whilst making sure that our operations continue undisrupted and at the same time, adapting to the new ways of operating.
As such employees are encouraged and in certain cases required to operate remotely which significantly increases the risk of
cyber security attacks.
The occurrence or continued occurrence of any of the foregoing events or other epidemics or an increase in the severity or
duration of the COVID-19 or other epidemics could have a material adverse effect on our business, results of operations, cash
flows, financial condition, value of our vessels, and ability to pay dividends.
Changes in the economic and political environment in China and policies adopted by the government to regulate its
economy may have a material adverse effect on our business, financial condition and results of operations.
The Chinese economy differs from the economies of western countries in such respects as structure, government involvement,
level of development, growth rate, capital reinvestment, allocation of resources, bank regulation, currency and monetary policy,
rate of inflation and balance of payments position. Since 1978, there has been an increasing level of freedom and autonomy in
areas such as allocation of resources, production, pricing and management and a gradual shift in emphasis to a ''market
economy'' and enterprise reform. Many of the reforms are unprecedented or experimental and may be subject to revision,
change or abolition based upon the outcome of such experiments. The level of imports to and exports from China could be
adversely affected by the failure to continue market reforms or changes to existing pro-export economic policies. For example,
China imposes a tax for non-resident international transportation enterprises engaged in the provision of services of passengers
or cargo, among other items, in and out of China using their own, chartered or leased vessels. The regulation may subject
international transportation companies to Chinese enterprise income tax on profits generated from international transportation
services passing through Chinese ports. This tax or similar regulations, such as the recently promoted environmental taxes on
coal, by China may result in an increase in the cost of raw materials imported to China and the risks associated with importing
raw materials to China, as well as a decrease in any raw materials shipped from our charterers to China. This could have an
adverse impact on our charterers’ business, operating results and financial condition and could thereby affect their ability to
make timely charter hire payments to us and to renew and increase the number of their time charters with us. The level of
imports to and exports from China may also be adversely affected by changes in political, economic and social conditions
(including a slowing of economic growth) or other relevant policies of the Chinese government, such as changes in laws,
regulations or export and import restrictions, internal political instability, changes in currency policies, changes in trade policies
and territorial or trade disputes. In recent years, China and the United States have implemented certain increasingly protective
trade measures with continuing trade tensions, including significant tariff increases, between these countries. Although the
United States and China successfully reached an interim trade deal in January 2020 that de-escalated the trade tensions with
both sides rolling back tariffs, the extent to which the trade deal will be successfully implemented is unpredictable. A decrease
in the level of imports to and exports from China could adversely affect our business, operating results and financial condition.
In addition, President Xi Jinping committed his country to achieving carbon neutrality by 2060 at the UN General Assembly,
despite that carbon emissions are currently a prominent part of China’s economic and industrial structure as it relies heavily on
nonrenewable energy sources, generally lacks energy efficiency, and has a rapidly growing energy demand. Depending on how
China attempts to achieve carbon neutrality by 2060, including through the reduction in the use of coal, an overall increase in
the use of nonrenewable energy as part of the energy consumption mix and through other means and any reduction in the
demand for coal and related products could have a material adverse effect on our business, cash flows and results of operations.
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We conduct a substantial amount of business in China. The legal system in China has inherent uncertainties that could
have a material adverse effect on our business, financial condition and results of operations.
The Chinese legal system is based on written statutes and their legal interpretation by the Standing Committee of the National
People's Congress. Prior court decisions may be cited for reference but have limited precedential value. Since 1979, the Chinese
government has been developing a comprehensive system of commercial laws dealing with economic matters such as foreign
investment, corporate organization and governance, commerce, taxation and trade. However, because these laws and
regulations are relatively new, there is a general lack of internal guidelines or authoritative interpretive guidance and because of
the limited number of published cases and their non-binding nature, interpretation and enforcement of these laws and
regulations involve uncertainties. Any administrative and court proceedings in China may be protracted, resulting in substantial
costs and diversion of resources and management attention. Since Chinese administrative and court authorities have significant
discretion in interpreting and implementing statutory and contractual terms, it may be more difficult to evaluate the outcome of
administrative and court proceedings and the level of legal protection we enjoy than in more developed legal systems.
To the extent our charters, shipbuilding contracts and financing agreements that are governed by English law, if we are required
to commence legal proceedings against a customer, a shipbuilder or a lender based in China, we may have difficulties in
enforcing any judgment rendered by an English court (or other non-Chinese court) in China.
Changes in laws and regulations, including with regards to tax matters, and their implementation by local authorities could
affect our vessels that are either chartered to Chinese customers or that call to Chinese ports and our vessels that undergo
drydocking, or to which we install scrubbers, at Chinese shipyards, and the financial institutions with whom we have entered
into financing agreements, could have a material adverse effect on our business, results of operations and financial condition.
If our vessels may call at ports located in countries or territories that are the subject of sanctions or embargoes imposed by
the U.S. government, the European Union, the United Nations or other governmental authorities, it could lead to monetary
fines or penalties and adversely affect our reputation and the market for our shares of common stock and its trading price.
None of our vessels called on ports located in countries or territories that are the subject of country-wide or territory-wide
sanctions or embargoes imposed by the U.S. government or other applicable governmental authorities (“Sanctioned
Jurisdictions”) in 2021 in violation of applicable sanctions or embargo laws. Although we intend to maintain compliance with
all applicable sanctions and embargo laws during 2021, and we endeavor to take precautions reasonably designed to mitigate
such risks, it is possible that in the future our vessels may call on ports located in Sanctioned Jurisdictions on charterers’
instructions and/or without our consent. If such activities result in a violation of sanctions or embargo laws, we could be subject
to monetary fines, penalties, or other sanctions, and our reputation and the market for our common shares could be adversely
affected.
The applicable sanctions and embargo laws and regulations vary in their application, as they do not all apply to the same
covered persons or proscribe the same activities, and such sanctions and embargo laws and regulations may be amended or
expanded over time. Current or future counterparties of ours may be affiliated with persons or entities that are or may be in the
future the subject of sanctions imposed by the United States, EU and and/or other international bodies. If we determine that
such sanctions require us to terminate existing or future contracts to which we, or our subsidiaries, are party or if we are found
to be in violation of such applicable sanctions, our results of operations may be adversely affected, or we may suffer
reputational harm.
Although we believe that we have been in compliance with all applicable sanctions and embargo laws and regulations in 2021,
and intend to maintain such compliance, there can be no assurance that we will be in compliance in the future, particularly as
the scope of certain laws may be unclear and may be subject to changing interpretations. Any such violation could result in
fines, penalties or other sanctions that could severely impact our ability to access U.S. capital markets and conduct our business,
and could result in some investors deciding, or being required, to divest their interest, or not to invest, in us. In addition, certain
institutional investors may have investment policies or restrictions that prevent them from holding securities of companies that
have contracts with countries or territories identified by the U.S. government as state sponsors of terrorism. The determination
by these investors not to invest in, or to divest from, our common shares may adversely affect the price at which our common
shares trade. Moreover, our charterers may violate applicable sanctions and embargo laws and regulations as a result of actions
that do not involve us or our vessels, and those violations could in turn negatively affect our reputation. Investor perception of
the value of our common shares may be adversely affected by the consequences of war, the effects of terrorism, civil unrest and
governmental actions in countries or territories that we operate in.
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Compliance with safety and other vessel requirements imposed by classification societies may require additional investments
and could reduce our net cash flows and net income.
A classification society authorized by the country of registry of a commercial vessel must certify such vessel as being "in class"
and safe and seaworthy in accordance with the applicable rules and regulations of the country of registry of the vessel and the
Safety of Life at Sea Convention. Most insurance underwriters make it a condition for insurance coverage and lending that a
vessel be certified “in class” by a classification society which is a member of the International Association of Classification
Societies, the IACS. The IACS has adopted harmonized Common Structural Rules, or “the Rules,” which apply to oil tankers
and bulk carriers contracted for construction on or after July 1, 2015. The Rules attempt to create a level of consistency between
IACS Societies. All of our vessels are certified as being “in class” by all the applicable Classification Societies (e.g., American
Bureau of Shipping, Lloyd's Register of Shipping).
Additionally a vessel must undergo annual surveys, intermediate surveys, drydockings and special surveys. Alternatively, a
vessel's machinery may be placed on a continuous survey cycle, under which the machinery would be surveyed periodically
over a five-year period. We expect our vessels to be on special survey cycles for hull inspection and continuous survey cycles
for machinery inspection.
Every vessel is also required to be drydocked every 30 to 36 months for inspection of the underwater parts of the vessel. If any
vessel does not maintain its class and/or fails any annual survey, intermediate survey, drydocking or special survey, the vessel
will be unable to carry cargo between ports and will be unemployable and uninsurable which could cause us to be in violation
of certain covenants in our loan agreements. Any such inability to carry cargo or be employed, or any such violation of
covenants, could have a material adverse impact on our financial condition and results of operations.
Compliance with the above requirements may require significant additional investments by us. If any vessel does not maintain
its class or fails any annual, intermediate or special survey or drydocking, the vessel will be unable to trade between ports and
will be unemployable and uninsurable, which could cause us to be in violation of certain covenants in our loan agreements. Any
such inability to carry cargo or be employed, or any such violation of covenants, could have a material adverse effect on our
business, results of operations, cash flows, financial condition and ability to pay dividends.
Increasing scrutiny and changing expectations from investors, lenders and other market participants with respect to our
ESG policies may impose additional costs on us or expose us to additional risks.
Companies across all industries are facing increasing scrutiny relating to their ESG policies. Investor advocacy groups, certain
institutional investors, investment funds, lenders and other market participants are increasingly focused on ESG practices and in
recent years have placed increasing importance on the implications and social cost of their investments. The increased focus and
activism related to ESG and similar matters may hinder access to capital, as investors and lenders may decide to reallocate
capital or to not commit capital as a result of their assessment of a company’s ESG practices. Additionally, we may face
increasing pressures from investors, lenders and other market participants, who are increasingly focused on climate change, to
prioritize sustainable energy practices, reduce our carbon footprint and promote sustainability. Certain investors and lenders
may exclude transportation companies, such as us, from their investing portfolios altogether due to environmental, social and
governance factors. Companies which do not adapt to or comply with investor, lender or other industry shareholder
expectations and standards, which are evolving, or which are perceived to have not responded appropriately to the growing
concern for ESG issues, regardless of whether there is a legal requirement to do so, may suffer from reputational damage, costs
related to litigation, and the business, financial condition, and/or stock price of such a company could be materially and
adversely affected.
Under local, national and foreign laws, as well as international treaties and conventions, we could incur material liabilities,
including clean-up obligations and natural resource damages liability, in the event that there is a release of hazardous materials
from our vessels or otherwise in connection with our operations. Environmental laws often impose strict liability for
remediation of spills and releases of oil and hazardous substances, which could subject us to liability, without regard to whether
we were negligent or at fault.
Many environmental requirements are designed to reduce the risk of pollution and our compliance with these requirements
could be costly. For example, Annex VI of the International Convention for the Prevention of Marine Pollution from Ships
(“MARPOL”), which instituted a global 0.5% (lowered from 3.5% as of January 1, 2020) sulfur cap on marine fuel consumed
by a vessel, unless the vessel is equipped with a scrubber As of March 23, 2022, 23 of our vessels have been equipped with
scrubbers to comply with this change in regulation ("Scrubber Program") and as of January 1, 2020, we have transitioned to
burning IMO compliant fuels in our non-scrubber equipped vessels as necessary.
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In addition, regulations relating to ballast water discharge may adversely affect our revenues and profitability. The IMO has
imposed updated guidelines for ballast water management systems specifying the maximum amount of viable organisms
allowed to be discharged from a vessel's ballast water. Depending on the date of the International Oil Pollution Prevention (the
"IOPP") renewal survey, existing vessels constructed before September 8, 2017, must comply with the updated D-2 standard on
or after September 8, 2019. For most vessels, compliance with the D-2 standard will involve installing on-board systems to treat
ballast water and eliminate unwanted organisms. Ships constructed on or after September 8, 2017 are to comply with the D-2
standards upon delivery. We currently have 10 vessels in our fleet constructed prior to September 8, 2017 that do not have
ballast water management systems installed and will need such systems installed on the first upcoming IOPP renewal in order
to be D-2 compliant. Costs in order to become D-2 compliant for these vessels is estimated to be approximately $8.0 million in
total.
Furthermore, United States regulations are currently changing. Although the 2013 Vessel General Permit (''VGP'') program and
U.S. National Invasive Species Act (''NISA'') are currently in effect to regulate ballast discharge, exchange and installation, the
Vessel Incidental Discharge Act (''VIDA''), which was signed into law on December 4, 2018, requires that the U.S.
Environmental Protection Agency (“EPA”) develop national standards of performance for approximately 30 discharges, similar
to those found in the VPG within two years. On October 26, 2020, the EPA published a Notice of Proposed Rulemaking for
Vessel Incidental Discharge National Standards of Performance under VIDA. Within two years after the EPA publishes its final
Vessel Incidental Discharge National Standards of Performance, the U.S. Coast Guard must develop corresponding
implementation, compliance and enforcement regulations regarding ballast water. The new regulations could require the
installation of new equipment, which may cause us to incur substantial costs.
Please see “Item 4. Information on the Company—B. Business Overview—Environmental and Other Regulations in the
Shipping Industry” for a discussion of the environmental and other regulations applicable to us.
If we fail to comply with international safety regulations, we may be subject to increased liability, which may adversely affect
our insurance coverage and may result in a denial of access to, or detention in, certain ports.
The operation of our vessels is affected by the requirements set forth in the IMO's International Safety Management Code (the
“ISM Code”). The ISM Code requires shipowners, ship managers and bareboat charterers to develop and maintain an extensive
"Safety Management System" that includes the adoption of a safety and environmental protection policy setting forth
instructions and procedures for safe operation and describing procedures for dealing with emergencies. If we fail to comply
with the ISM Code, we may be subject to increased liability, or may invalidate existing insurance or decrease available
insurance coverage for our affected vessels, and such failure may result in a denial of access to, or detention in, certain ports.
The U.S. Coast Guard and European Union authorities enforce compliance with the ISM and International Ship and Port
Facility Security Code (the “ISPS Code”), and prohibit non-compliant vessels from trading in U.S. and European Union ports.
This could have a material adverse effect on our future performance, results of operations, cash flows and financial position.
Given that the IMO continues to review and introduce new regulations, it is impossible to predict what additional regulations, if
any, may be passed by the IMO and what effect, if any, such regulations might have on our operations.
Because such conventions, laws, and regulations are often revised, we cannot predict the ultimate cost of complying with such
conventions, laws and regulations or the impact thereof on the resale prices or useful lives of our vessels. Additional
conventions, laws and regulations may be adopted which could limit our ability to do business or increase the cost of our doing
business and which may materially adversely affect our operations. We are required by various governmental and quasi-
governmental agencies to obtain certain permits, licenses, certificates, and financial assurances with respect to our operations.
Please see “Item 4. Information on the Company - B. Business Overview - Environmental and Other Regulations in the
Shipping Industry” for a discussion of the environmental and other regulations applicable to us.
Developments in safety and environmental requirements relating to the recycling of vessels may result in escalated and
unexpected costs.
The 2009 Hong Kong International Convention for the Safe and Environmentally Sound Recycling of Ships (the "Hong Kong
Convention"), aims to ensure ships, being recycled once they reach the end of their operational lives, do not pose any
unnecessary risks to the environment, human health and safety. The Hong Kong Convention has yet to be ratified by the
required number of countries to enter into force. Upon the Hong Kong Convention's entry into force, each ship sent for
recycling will have to carry an inventory of its hazardous materials. The hazardous materials, whose use or installation are
prohibited in certain circumstances, are listed in an appendix to the Hong Kong Convention. Ships will be required to have
surveys to verify their inventory of hazardous materials initially, throughout their lives and prior to the ship being recycled. The
Hong Kong Convention, which is currently open for accession by IMO member states, will enter into force 24 months after the
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date on which 15 IMO member states, representing at least 40% of world merchant shipping by gross tonnage, have ratified or
approved accession. As of the date of this annual report, 17 countries have ratified or approved accession of the Hong Kong
Convention but the requirement of 40% of world merchant shipping by gross tonnage has not yet been satisfied.
On November 20, 2013, the European Parliament and the Council of the EU adopted the Ship Recycling Regulation, which
retains the requirements of the Hong Kong Convention and requires that certain commercial seagoing vessels flying the flag of
an EU member state may be recycled only in facilities included on the European list of permitted ship recycling facilities.
Apart from that, any vessel, including ours, is required to set up and maintain an Inventory of Hazardous Materials from
December 31, 2018 for EU flagged new ships and from December 31, 2020 for EU flagged existing ships and Non-EU flagged
ships calling at a port or anchorage of an EU member state. Such a system includes Information on the hazardous materials with
a quantity above the threshold values specified in relevant EU Resolution and are identified in ship’s structure and equipment.
This inventory should be properly maintained and updated, especially after repairs, conversions or unscheduled maintenance on
board the ship.
These regulatory requirements may lead to cost escalation by shipyards, repair yards and recycling yards. This may then result
in a decrease in the residual recycling value of a vessel, which could potentially not cover the cost to comply with the latest
requirements, which may have an adverse effect on our future performance, results of operations, cash flows and financial
position.
Maritime claimants could arrest or attach one or more of our vessels, which could interrupt our customers' or our cash
flows.
Crew members, suppliers of goods and services to a vessel, shippers of cargo and other parties may be entitled to a maritime
lien against a vessel for unsatisfied debts, claims or damages. In many jurisdictions, a maritime lien holder may enforce its lien
by "arresting" or "attaching" a vessel through judicial or foreclosure proceedings. The arrest or attachment of one or more of
our vessels could interrupt the cash flow of the charterer and/or our cash flow and require us to pay a significant amount of
money to have the arrest lifted, which would have an adverse effect on our financial condition and results of operations. In
addition, in jurisdictions where the "sister ship" theory of liability applies, such as South Africa, a claimant may arrest the
vessel that is subject to the claimant's maritime lien and any "associated" vessel, which is any vessel owned or controlled by the
same owner. In countries with "sister ship" liability laws, claims may be asserted against us or any of our vessels for liabilities
of other vessels that we own.
Governments could requisition our vessels during a period of war or emergency resulting in a loss of earnings.
A government of a vessel's registry could requisition for title or seize one or more of our vessels. Requisition for title occurs
when a government takes control of a vessel and becomes the owner. Such government could also requisition one or more of
our vessels for hire. Requisition for hire occurs when a government takes control of a vessel and effectively becomes the
charterer at dictated charter rates. Generally, requisitions occur during a period of war or emergency. Government requisition of
one or more of our vessels could have a material adverse effect on our business, results of operations, cash flows, financial
condition and ability to pay dividends.
Risks Related to Our Business
The market values of our vessels may decline, which could limit the amount of funds that we can borrow, cause us to breach
certain financial covenants in our credit facilities, or result in an impairment charge, and cause us to incur a loss if we sell
vessels following a decline in their market value.
The fair market values of dry bulk vessels, including our vessels, have generally experienced high volatility and may decline in
the future. The fair market value of vessels may increase and decrease depending on but not limited to the following factors:
general economic and market conditions affecting the shipping industry;
the balance between the supply of and demand for ships of a certain type;
competition from other shipping companies;
the availability of ships of the required size and design;
the availability of other modes of transportations;
cost of newbuildings;
shipyard capacity;
governmental or other regulations;
changes in environmental and other regulations that may limit the useful lives of vessels;
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distressed asset sales, including newbuilding contract sales below acquisition costs due to lack of financing;
types, sizes and ages of vessels;
prevailing level of charter rates;
the need to upgrade secondhand and previously owned vessels as a result of charterer requirements, and
technological advances in vessel design or equipment or otherwise.
During the period a vessel is subject to a charter, we might not be permitted to sell it to take advantage of increases in vessel
values without the charterer's consent. If we sell a vessel at a time when ship prices have fallen, the sale may be at less than the
vessel's carrying amount in our financial statements, with the result that we could incur a loss and a reduction in earnings.
During the year ended December 31, 2021 and 2020, we recorded impairment losses of $4.2 million and $0.7 million,
respectively, related to the sales of vessels. There were no sales of vessels in 2019. The carrying values of our owned and leased
vessels are reviewed quarterly or whenever events or changes in circumstances indicate that the carrying amount of the vessel
may no longer be recoverable. We assess recoverability of the carrying value by estimating the future net cash flows expected
to result from the vessel, including eventual disposal for owned vessels. If the future net undiscounted cash flows and the
estimated fair market value of the vessel are less than the carrying value, an impairment loss is recorded equal to the difference
between the vessel's carrying value and fair value. In 2020, we recorded an impairment loss of $94.2 million on our leased
vessels equal to the difference between the asset's carrying value and fair value, which was recorded as a result of an
impairment review performed on an asset by asset basis. Any impairment charges incurred as a result of declines in charter rates
and other market deterioration could negatively affect our business, financial condition or operating results or the trading price
of our common shares.
Conversely, if vessel values are elevated at a time when we wish to acquire additional vessels, the cost of acquisition may
increase and this could adversely affect our business, results of operations, cash flow and financial condition.
We are dependent on spot charterers and any decrease in spot charter rates in the future may adversely affect our earnings
and ability to pay dividends.
As of December 31, 2021, 84 of the 92 vessels, which are owned, leased or chartered-in by us, were employed in the spot
market or on short-term or variable time rate charters, and we are therefore exposed to fluctuations in spot market charter rates.
We may also employ any additional vessels that we acquire to take delivery of in the spot market.
Although the number of vessels in our fleet that participate in the spot market will vary from time to time, we anticipate that a
significant portion of our fleet will participate in this market. As a result, our financial performance will be significantly
affected by conditions in the dry bulk spot market and only our vessels that operate under fixed-rate time charters may, during
the period such vessels operate under such time charters, provide a fixed source of revenue to us.
Historically, the dry bulk markets have been volatile as a result of the many conditions and factors that can affect the price,
supply of and demand for dry bulk capacity. Weak global economic trends may further reduce demand for transportation of dry
bulk cargoes over longer distances, which may materially affect our revenues, profitability and cash flows. The spot market
may fluctuate significantly based upon supply of and demand for vessels and cargoes. The successful operation of our vessels in
the competitive spot market depends upon, among other things, obtaining profitable spot charters and minimizing, to the extent
possible, time spent waiting for charters and time spent traveling unladen to pick up cargo. The spot market is volatile and there
have been periods when spot rates have declined below the operating cost of vessels. If future spot market rates decline, then
we may be unable to operate our vessels trading in the spot market profitably, or meet our obligations, including payments on
indebtedness, or to pay dividends in the future. Furthermore, as charter rates for spot charters are fixed for a single voyage,
which may last up to several weeks during periods in which spot charter rates are rising, we will generally experience delays in
realizing the benefits from such increases.
Our ability to renew the charters on our vessels on the expiration or termination of our current charters, or on vessels that we
may acquire in the future, or the charter rates payable under any replacement charters and vessel values will depend upon,
among other things, economic conditions in the sectors in which our vessels operate at that time, changes in the supply and
demand for vessel capacity and changes in the supply and demand for the seaborne transportation of energy resources.
Our credit facilities impose operating and financial restrictions, which could significantly limit our ability to execute our
business strategy and increase the risk of default under our debt obligations.
As of December 31, 2021, we had $1,273.7 million of outstanding indebtedness under our credit facilities and debt securities, of
which $105.9 million was classified as current portion of long-term debt. We cannot assure you that we will be able to generate
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cash flow in amounts that is sufficient to satisfy these obligations. If we are not able to satisfy these obligations, we may have to
undertake alternative financing plans or sell our assets. In addition, debt service payments under our credit facilities may limit
funds otherwise available for working capital, capital expenditures, payment of cash distributions and other purposes. If we are
unable to meet our debt obligations, or if we otherwise default under our credit facilities, our lenders could declare the debt,
together with accrued interest and fees, to be immediately due and payable and foreclose on our fleet, which could result in the
acceleration of other indebtedness that we may have at such time and the commencement of similar foreclosure proceedings by
other lenders
Our credit facilities impose operating and financial restrictions on us that limit our ability, or the ability of our subsidiaries party
thereto, as applicable, to:
pay dividends and make capital expenditures if there is an event of default under our credit facilities;
incur additional indebtedness, including the issuance of guarantees, or refinance or prepay any indebtedness, unless
certain conditions exist;
create liens on our assets, unless otherwise permitted under our credit facilities;
change the flag, class or management of our vessels or terminate or materially amend the management agreement
relating to each vessel;
merge or consolidate with, or transfer all or substantially all our assets to, another person; or
enter into a new line of business.
In addition, our loan agreements, which are secured by liens on our vessels, contain various financial covenants. Among those
covenants are requirements that relate to our financial position, operating performance and liquidity. For example, there are
financial covenants that require us to maintain (i) an equity ratio fixing a minimum value of adjusted equity that is based, in
part, upon the market value of the vessels securing the loans, (ii) minimum levels of free cash, (iii) positive working capital, and
(iv) a minimum value, or loan-to-value, covenant, which could require us to post collateral or prepay a portion of the
outstanding borrowings should the value of the vessels securing borrowings decrease below a required level.
Our ability to comply with the covenants and restrictions contained in our current or future credit facilities may be affected by
events beyond our control, including prevailing economic, financial and industry conditions, interest rate developments,
changes in the funding costs of our banks and changes in vessel earnings and asset valuations. If market or other economic
conditions deteriorate, our ability to comply with these covenants may be impaired. For example, the market value of dry bulk
vessels is likewise sensitive to, among other things, changes in the dry bulk market, with vessel values deteriorating in times
when dry bulk rates are falling or anticipated to fall and improving when charter rates are rising or anticipated to rise. Such
conditions may result in us not being in compliance with our loan covenants. In such a situation, unless our lenders are willing
to provide further waivers of covenant compliance or modifications to our covenants, or would be willing to refinance our
indebtedness, we may have to sell vessels in our fleet and/or seek to raise additional capital in the equity markets in order to
comply with our loan covenants. Furthermore, if the value of our vessels deteriorates significantly, we may have to record an
impairment adjustment in our financial statements, which would adversely affect our financial results and further hinder our
ability to raise capital. The fair market values of our vessels may decline, which could limit the amount of funds that we can
borrow, cause us to breach certain financial covenants in our credit facilities, or result in an impairment charge, and cause us to
incur a loss if we sell vessels following a decline in their market value.
If we are not in compliance with our covenants and are not able to obtain covenant waivers or modifications, our lenders could
require us to post additional collateral, enhance our equity and liquidity, increase our interest payments, pay down our
indebtedness to a level where we are in compliance with our loan covenants, sell vessels in our fleet, or they could accelerate
our indebtedness, any of which would impair our ability to continue to conduct our business. If our indebtedness is accelerated,
we might not be able to refinance our debt or obtain additional financing and could lose our vessels if our lenders foreclose on
their liens. In addition, if we find it necessary to sell our vessels at a time when vessel prices are low, we will recognize losses
and a reduction in our earnings, which could affect our ability to raise additional capital necessary for us to comply with our
loan agreements.
Furthermore, certain of our credit facilities contain a cross-default provision that may be triggered by a default under one of our
other credit facilities. A cross-default provision means that a default on one loan would result in a default on certain of our other
loans. Because of the presence of cross-default provisions in certain of our credit facilities, the refusal of any one lender under
our credit facilities to grant or extend a waiver could result in certain of our indebtedness being accelerated, even if our other
lenders under our credit facilities have waived covenant defaults under the respective credit facilities. If our secured
indebtedness is accelerated in full or in part, it would be very difficult for us to refinance our debt or obtain additional financing
and we could lose our vessels securing our credit facilities if our lenders foreclose their liens, which would adversely affect our
ability to conduct our business.
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Also, any contemplated vessel acquisitions will have to be at levels that do not impair the required ratios set out above. The
global economic downturn that occurred within the past several years had an adverse effect on vessel values, which may occur
again if an economic slowdown arises in the future. If the estimated asset values of the vessels in our fleet decrease, such
decreases may limit the amounts we can draw down under our future credit facilities to purchase additional vessels and our
ability to expand our fleet. In addition, we may be obligated to prepay part of our outstanding debt in order to remain in
compliance with the relevant covenants in our current or future credit facilities. If funds under our current or future credit
facilities become unavailable as a result of a breach of our covenants or otherwise, we may not be able to perform our business
strategy, which could have a material adverse effect on our business, results of operations and financial condition and our
ability to pay dividends.
Technological innovation and quality and efficiency requirements from our customers could reduce our charter hire income
and the value of our vessels.
Our customers have a high and increasing focus on quality and compliance standards with their suppliers across the entire
supply chain, including the shipping and transportation segment. Our continued compliance with these standards and quality
requirements is vital for our operations. The charter hire rates and the value and operational life of a vessel are determined by a
number of factors including the vessel’s efficiency, operational flexibility and physical life. Efficiency includes speed, fuel
economy and the ability to load and discharge cargo quickly. Flexibility includes the ability to enter harbors, utilize related
docking facilities and pass through canals and straits. The length of a vessel’s physical life is related to its original design and
construction, its maintenance and the impact of the stress of operations. We face competition from companies with more
modern vessels with more fuel efficient designs than our vessels, or eco vessels, and if new dry bulk vessels are built that are
more efficient or more flexible or have longer physical lives than the current eco vessels, competition from the current eco
vessels and any more technologically advanced vessels could adversely affect the amount of charter hire payments we receive
for our vessels and the resale value of our vessels could significantly decrease. Similarly, technologically advanced vessels are
needed to comply with environmental laws the investment in which along with the foregoing could have a material adverse
effect on our results of operations, charter hire payments and resale value of vessels. This could have an adverse effect on our
results of operations, cash flows, financial condition and ability to pay dividends.
We may be unable to successfully compete with other vessel operators for charters, which could adversely affect our results
of operations and financial position.
The operation of dry bulk vessels and transportation of dry bulk cargoes is extremely competitive. Competition for the
transportation of dry bulk cargoes by sea is intense and depends on price, location, size, age, condition and the acceptability of
the vessel and its operators to the charterers. Through our operating subsidiaries, we compete with other vessel owners, and, to
a lesser extent, owners of other size vessels. The dry bulk market is highly fragmented. Due in part to the highly fragmented
market, competitors with greater resources could enter the dry bulk shipping industry and operate larger fleets through
consolidations or acquisitions and may be able to offer lower charter rates and higher quality vessels than we are able to offer.
As a result, we cannot assure you that we will be successful in finding continued timely employment of our existing vessels,
which could adversely affect our results of operations and financial position.
We are subject to certain risks with respect to our counterparties on contracts, and failure of such counterparties to meet
their obligations could cause us to suffer losses or otherwise adversely affect our business.
We have entered, and may enter in the future, into various contracts, including charter parties with our customers, loan
agreements with our lenders, and vessel management, pooling arrangements, newbuilding contracts and other agreements with
other entities, which subject us to counterparty risks. The ability of each of the counterparties to perform its obligations under a
contract with us or contracts entered into on our behalf will depend on a number of factors that are beyond our control and may
include, among other things, general economic conditions, the condition of the shipping sector, the overall financial condition
of the counterparty, charter rates received for our vessels and the supply and demand for commodities. Should a counterparty
fail to honor its obligations under any such contract, we could sustain significant losses which could have a material adverse
effect on our business, financial condition, results of operations and cash flows.
Charterers are sensitive to the commodity markets and may be impacted by market forces affecting commodities. In addition, in
depressed market conditions, charterers may have incentive to renegotiate their charters or default on their obligations under
charters. Should a charterer in the future fail to honor its obligations under agreements with us, it may be difficult to secure
substitute employment for such vessel, and any new charter arrangements we secure on the spot market or on charters may be at
lower rates, depending on the then existing charter rate levels, compared to the rates currently being charged for our vessels. In
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addition, if the charterer of a vessel in our fleet that is used as collateral under one or more of our loan agreements defaults on
its charter obligations to us, such default may constitute an event of default under our loan agreements, which may allow the
bank to exercise remedies under our loan agreements. If our charterers fail to meet their obligations to us or attempt to
renegotiate our charter agreements, we could sustain significant losses which could have a material adverse effect on our
business, financial condition, results of operations, cash flows and compliance with covenants in our loan agreements.
Volatility of LIBOR and potential changes of the use of LIBOR as a benchmark could affect our profitability, earnings and
cash flow.
As certain of our current financing agreements have, and our future financing arrangements may have, floating interest rates,
typically based on LIBOR, movements in interest rates could negatively affect our financial performance. The publication of
U.S. Dollar LIBOR for the one-week and two-month U.S. Dollar LIBOR tenors ceased on December 31, 2021, and the ICE
Benchmark Administration (“IBA”), the administrator of LIBOR, with the support of the United States Federal Reserve and the
United Kingdom’s Financial Conduct Authority, announced the publication of all other U.S. Dollar LIBOR tenors will cease on
June 30, 2023. The United States Federal Reserve concurrently issued a statement advising banks to cease issuing U.S. Dollar
LIBOR instruments after 2021. As such, any new loan agreements we enter into will not use LIBOR as an interest rate, and we
will need to transition our existing loan agreements from U.S. Dollar LIBOR to an alternative reference rate prior to June 2023.
In response to the anticipated discontinuation of LIBOR, working groups are converging on alternative reference rates. The
Alternative Reference Rate Committee, a committee convened by the Federal Reserve that includes major market participants,
has proposed an alternative rate to replace U.S. Dollar LIBOR: the Secured Overnight Financing Rate, or “SOFR”. At this time,
it is not possible to predict how markets will respond to SOFR or other alternative reference rates. The impact of such a
transition from LIBOR to SOFR or another alternative reference rate could be significant for us.
In order to manage our exposure to interest rate fluctuations under LIBOR, SOFR or any other alternative rate, we have and
may from time to time use interest rate derivatives to effectively fix some of our floating rate debt obligations. No assurance
can however be given that the use of these derivative instruments, if any, may effectively protect us from adverse interest rate
movements. The use of interest rate derivatives may affect our results through mark to market valuation of these derivatives.
Also, adverse movements in interest rate derivatives may require us to post cash as collateral, which may impact our free cash
position. Interest rate derivatives may also be impacted by the transition from LIBOR to SOFR or other alternative rates.
Our financing agreements contain a provision requiring or permitting us to enter into negotiations with our lenders to agree to
an alternative interest rate or an alternative basis for determining the interest rate in anticipation of the cessation of LIBOR.
These clauses present significant uncertainties as to how alternative reference rates or alternative bases for determination of
rates would be agreed upon, as well as the potential for disputes or litigation with our lenders regarding the appropriateness or
comparability to LIBOR of any substitute indices, such as SOFR, and any credit adjustment spread between the two
benchmarks. In the absence of an agreement between us and our lenders, most of our financing agreements provide that LIBOR
would be replaced with some variation of the lenders’ cost-of-funds rate. The discontinuation of LIBOR presents a number of
risks to our business, including volatility in applicable interest rates among our financing agreements, potential increased
borrowing costs for future financing agreements or unavailability of or difficulty in attaining financing, which could in turn
have an adverse effect on our profitability, earnings and cash flow.
Certain of our directors, executive officers and major shareholders may have interests that are different from the interests of
our other shareholders.
Certain of our directors, executive officers and major shareholders may have interests that are different from, or are in addition
to, the interests of our other shareholders. In particular, Hemen Holding Limited ("Hemen") and certain related companies
whose shares are indirectly held by trusts settled by Mr. Fredriksen, our director, for the benefit of his family beneficially own
approximately 39.2% of our issued and outstanding common shares as of March 23, 2022.
Hemen is also a principal shareholder of a number of other large publicly traded companies involved in various sectors of the
shipping and oil services industries (the "Hemen Related Companies"). In addition, certain of our directors, including Mr.
Lorentzon, Mr. Fredriksen, Mr. O'Shaughnessy, Mr. Svelland and Mr. Jensen, also serve on the boards of one or more of the
Hemen Related Companies, including but not limited to, Frontline Ltd. (NYSE:FRO) ("Frontline"), SFL Corporation Ltd.
(NYSE:SFL) ("SFL"), Archer Limited (OSE:ARCHER) ("Archer"), Avance Gas Holding Ltd. (OSE:AGAS) ("Avance"), ST
Energy Transition 1 Ltd. (NASDAQ: STET) (''ST ENERGY'') and Flex LNG Ltd. (OSE:FLNG) ("FLEX"). There may be real
or apparent conflicts of interest with respect to matters affecting Hemen and other Hemen Related Companies whose interests
in some circumstances may be adverse to our interests.
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To the extent that we do business with or compete with other Hemen Related Companies for business opportunities, prospects
or financial resources, or participate in ventures in which other Hemen Related Companies may participate, these directors and
officers may face actual or apparent conflicts of interest in connection with decisions that could have different implications for
us. These decisions may relate to corporate opportunities, corporate strategies, potential acquisitions of businesses, newbuilding
acquisitions, inter-company agreements, the issuance or disposition of securities, the election of new or additional directors and
other matters. Such potential conflicts may delay or limit the opportunities available to us, and it is possible that conflicts may
be resolved in a manner adverse to us or result in agreements that are less favorable to us than terms that would be obtained in
arm's-length negotiations with unaffiliated third-parties.
For so long as Hemen owns a significant percentage of our outstanding ordinary shares, it may be able to exercise significant
influence over us and will be able to strongly influence the outcome of shareholder votes on other matters, including the
adoption or amendment of provisions in our articles of incorporation or bye-laws and approval of possible mergers,
amalgamations, control transactions and other significant corporate transactions. This concentration of ownership may have the
effect of delaying, deferring or preventing a change in control, merger, amalgamations, consolidation, takeover or other
business combination. This concentration of ownership could also discourage a potential acquirer from making a tender offer or
otherwise attempting to obtain control of us, which could in turn have an adverse effect on the market price of our ordinary
shares. Hemen, may not necessarily act in accordance with the best interests of other shareholders. The interests of Hemen may
not coincide with the interests of other holders of our ordinary shares. To the extent that conflicts of interests may arise, Hemen
may vote in a manner adverse to us or to you or other holders of our securities.
The increased costs associated with operating and maintaining secondhand vessels could adversely affect our earnings.
In general, the costs to operate and maintain a vessel in good operating condition increase with the age of the vessel. As of the
date of this annual report, the average age of our dry bulk vessel fleet is approximately 6.9 years. In February 2022, we entered
into an agreement to sell en-bloc three older Panamax vessels, Golden Empress, Golden Enterprise and Golden Endeavour.
After this sale, the average age of our dry bulk fleet is estimated to be approximately 6.8 years. As our fleet ages, we will incur
increased costs. Older vessels are typically less fuel efficient than more recently constructed vessels due to improvements in
engine and hull technology. Governmental regulations, safety and other equipment standards related to the age of vessels may
require expenditures for alterations or the addition of new equipment to some of our vessels and may restrict the type of
activities in which these vessels may engage. We cannot assure you that, as our vessels age, market conditions will justify those
expenditures or enable us to operate our vessels profitably during the remainder of their useful lives. As a result, regulations and
standards could have a material adverse effect on our business, financial condition, results of operations, cash flows and ability
to pay dividends.
Delays or defaults by the shipyards in the construction of our newbuildings could increase our expenses and diminish our
net income and cash flows.
As of December 31, 2021, we had contracts for seven newbuilding vessels. Vessel construction projects are generally subject to
risks of delay that are inherent in any large construction project, which may be caused by numerous factors, including shortages
of equipment, materials or skilled labor, unscheduled delays in the delivery of ordered materials and equipment or shipyard
construction, failure of equipment to meet quality and/or performance standards, financial or operating difficulties experienced
by equipment vendors or the shipyard, unanticipated actual or purported change orders, inability to obtain required permits or
approvals, design or engineering changes and work stoppages and other labor disputes, adverse weather conditions or any other