Investing in Shipping has a high degree of risk. Prospective investors, prior to making an investment should consider the following risks and speculative factors inherent in and affecting the business of the Company:
- Depressed Conditions of the Market for Bulk Carriers. The charter and resale markets for bulk carriers have been severely depressed for some years. Average charter rates have been rather low in the recent years during the shipping recession to enable many owners of such vessels to meet capital and operating costs and a number of owners of bulk carriers have been the subject of bankruptcy or reorganization proceedings. There can be no assurance that charter rates will in the future be sufficient to enable owners, to operate such bulk carriers profitably.
- Possible Catastrophic Loss and Liability. The operation of any ocean going vessel has an inherent risk of catastrophic marine disasters. In addition, the proposed business of the Company will be affected by the risk of mechanical failure of the Company’s vessels, collisions, property losses to the vessels, the risk of cargo loss or damage, the risk of business interruption due to political action in foreign countries and labor strikes and adverse weather conditions which could result in loss of revenues or increased costs. The Company plans to maintain insurance against these risks. However, there can be no assurance that such insurance would be sufficient to cover the cost of any damages asserted against the Company, nor would it likely cover the loss of income resulting from the ship being removed from operations.
- Risks Associated with the Purchase of Used Vessels. The useful lives of Dry Bulk carriers have been estimated by industry sources to be approximately 20 to 25 years depending on the vessel’s type. The Company intends to purchase vessels of approximately 15-20 years of age and their remaining useful life could therefore be limited. In general, capital expenditures necessary for maintaining the vessels in good operating condition increase with the age of the vessels. In addition, changes in governmental regulations, safety or other equipment standards may require alterations to, or the addition of, new equipment to the vessels. There can be no assurance that market conditions will justify such expenditures on the Company’s vessels or enable the Company during the remainder of the useful life of its vessels to be profitable or to sell its vessels at prices in excess of the cost of the vessels plus any capital improvements made by the Company. In addition, if any vessels are unable to operate for a lengthy period due to the need for repairs or other factors, the Company’s operations will be severely impacted.
- Disposition of the Vessels. Although the values of vessels have increased historically on a cyclical basis, it may be the case that either an excessive supply of vessels or a decrease of seaborne transportations of dry bulk commodities would cause prices for second hand vessels to decline. In a depressed market only a few buyers are available and the sale of the vessels may not be feasible.
- Possible Volatility. Historically the dry bulk carrier market has been highly volatile and subject to significant changes. Announcements affecting the price of certain dry bulk commodities or charter rates for, or resale values of dry bulk carriers could have a significant effect.