Danaos Corp (DAC)

[grantastic]

Have you done some math on this or is it a gut feeling?

I believe DAC is laying up several of its ships. Simply because it's cheaper to store them than to operate them at a loss.

So what happens if container rates stay where they are? Once the charters are complete, half of DAC's fleet gets laid up or sold for scrap, and the other half (e.g., supermaxes) ekes out a meagre profit.

that's not even thinking about the financing situation, which may indeed be dire. DAC's been in default for 2 years. Who knows what's going to happen, if anything, to remedy the default. However, 8 years ago the defaults were remedied with a giant equity dilution at slightly below market prices ($3/share I believe). If that happens again, the dilution would have to be massive since it would be something like $0.80/share.

So we've got a 1-2-3 punch of expiring charters, low spot market rates, and looming dilution.

5 years from now, DAC could have an EPS of $0.05/share. So while the numbers today look good at a superficial level, they are not sustainable and they don't really matter since DAC doesn't have cash available to return shareholder value.

Aside from a miraculous, drastic jump in containership rates, i don't see how DAC avoids becoming a barely-breakeven shipper in the long term.

Just how i see it. If you have an angle I've missed, I'd love to hear it.