UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549

FORM 6-K

REPORT OF FOREIGN PRIVATE ISSUER
PURSUANT TO RULE 13a-16 OR 15d-16
UNDER THE SECURITIES EXCHANGE ACT OF 1934

For the month of October 2019

Commission File Number: 001-33869

STAR BULK CARRIERS CORP.
(Translation of registrant’s name into English)

Star Bulk Carriers Corp.
c/o Star Bulk Management Inc.
40 Agiou Konstantinou Street,
15124 Maroussi,
Athens, Greece
(Address of principal executive offices)

Indicate by check mark whether the registrant files or will file annual reports under cover of Form 20-F or Form 40-F.

Form 20-F ☒

Form 40-F ☐

Indicate by check mark if the registrant is submitting the Form 6-K in paper as permitted by Regulation S-T Rule 101(b)(1): ☐

Indicate by check mark if the registrant is submitting the Form 6-K in paper as permitted by Regulation S-T Rule 101(b)(7): ☐



INFORMATION CONTAINED IN THIS FORM 6-K REPORT

On September 12, 2019, Star Bulk Carriers Corp. (the “Company” or “Star Bulk”) announced the resignation of Mr. Roger Schmitz from the Company’s Board of Directors. His resignation is effective immediately. Additionally, the Company announced that it will not fill, temporarily, the seat made vacant by the resignation of Mr. Schmitz, and consequently, the size of the Board is reduced to nine directors.

In addition, attached as Exhibit 99.1 to this Form 6-K is a Management’s Discussion and Analysis of Financial Condition and Results of Operations and the unaudited interim condensed consolidated financial statements of the Company as of and for the six months ended June 30, 2018 and 2019.

CAUTIONARY STATEMENT CONCERNING FORWARD-LOOKING INFORMATION

This Form 6-K, and the documents to which the Company refers in this Form 6-K, as well as information included in oral statements or other written statements made or to be made by the Company, contain “forward-looking statements,” within the meaning of Section 27A of the Securities Act of 1933, as amended (the “Securities Act”), and Section 21E of the Exchange Act, with respect to our financial condition, results of operations and business and our expectations or beliefs concerning future events. Words such as, but not limited to, “believe,” “expect,” “anticipate,” “estimate,” “intend,” “plan,” “targets,” “projects,” “likely,” “would,” “could” and similar expressions or phrases may identify forward-looking statements.

All forward-looking statements involve risks and uncertainties. The occurrence of the events described, and the achievement of the expected results, depend on many events, some or all of which are not predictable or within our control. Actual results may differ materially from expected results.

In addition, important factors that, in our view, could cause actual results to differ materially from those discussed in the forward-looking statements include:

general dry bulk shipping market conditions, including fluctuations in charter rates and vessel values;
the strength of world economies;
the stability of Europe and the Euro;
fluctuations in interest rates and foreign exchange rates;
changes in demand in the dry bulk shipping industry, including the market for our vessels;
changes in our operating expenses, including bunker prices, dry docking and insurance costs;
changes in governmental rules and regulations or actions taken by regulatory authorities;
potential liability from pending or future litigation;
general domestic and international political conditions;
potential disruption of shipping routes due to accidents or political events;
the availability of financing and refinancing;
our ability to meet requirements for additional capital and financing to grow our business;
the impact of our indebtedness and the compliance with the covenants included in our debt agreements;
vessel breakdowns and instances of off-hire;
risks associated with vessel construction;
potential exposure or loss from investment in derivative instruments;
potential conflicts of interest involving our Chief Executive Officer, his family and other members of our senior management;
our ability to complete acquisition transactions as and when planned; and
the risk factors and other factors referred to in the Company’s reports filed with or furnished to the SEC.


Consequently, all of the forward-looking statements we make in this document are qualified by the information contained or referred to herein, including, but not limited to, (i) the information contained under this heading and (ii) the information disclosed in the Company’s annual report on Form 20-F for the fiscal year ended 2018, filed with the SEC on March 21, 2019.

You should carefully consider the cautionary statements contained or referred to in this section in connection with any subsequent written or oral forward-looking statements that may be issued by us or persons acting on our behalf. Except as required by law, the Company undertakes no obligation to update any of these forward-looking statements.


SIGNATURE

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.

Dated: October 7, 2019

 
COMPANY NAME
       
 
By:
/s/ Simos Spyrou
   
Name:
Simos Spyrou
   
Title:
Co-Chief Financial Officer


EXHIBIT INDEX

Exhibit
Number
 
Description
     
 
Management’s Discussion and Analysis of Financial Condition and Results of Operations and our unaudited interim condensed consolidated financial statements of the Company as of and for the six months ended June 30, 2018 and 2019.




Exhibit 99.1

MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

The following is a discussion of the financial condition and results of operations of Star Bulk Carriers Corp.  (“Star Bulk”) for the six-month periods ended June 30, 2018 and 2019.  Unless otherwise specified herein, references to the “Company,” “we,” “us” or “our” shall include Star Bulk and its subsidiaries.  You should read the following discussion and analysis together with the unaudited interim condensed consolidated financial statements and related notes included elsewhere herein. For additional information relating to our management’s discussion and analysis of financial conditions and results of operations, please see our Annual Report on Form 20‑F for the year ended December 31, 2018 (the “2018 Annual Report”), which was filed with the U.S. Securities and Exchange Commission (the “Commission”) on March 21, 2019. Unless otherwise defined herein, capitalized words and expressions used herein shall have the same meanings ascribed to them in the 2018 Annual Report. This discussion includes forward-looking statements which, although based on assumptions that we consider reasonable, are subject to risks and uncertainties which could cause actual events or conditions to differ materially from those currently anticipated and expressed or implied by such forward-looking statements.

Overview

We are a global shipping company providing worldwide seaborne transportation solutions in the dry bulk sector. Our vessels transport major bulks, which include iron ore, coal and grain, and minor bulks which include bauxite, fertilizers and steel products. We were incorporated in the Marshall Islands on December 13, 2006 and on December 3, 2007, we commenced operations when we took delivery of our first vessel. We maintain offices in Athens, Oslo, New York, Limassol and Geneva. Our common shares trade on the Nasdaq Global Select Market and the Oslo Børs under the symbol “SBLK.” 

On May 27, 2019, we entered into an en bloc definitive agreement with entities controlled by Delphin Shipping, LLC (“Delphin”), an entity affiliated with Kelso & Company, pursuant to which we agreed to acquire 11 operating dry bulk vessels (the “Delphin Vessels”) for an aggregate purchase price of $139.5 million (“Delphin Purchase Price”), which was paid in (a) $80.0 million of cash and (b) 4.503 million common shares of Star Bulk (the “Delphin Consideration Shares”). We have secured exhaust gas cleaning systems (the “Delphin Scrubbers”) for all of the Delphin Vessels with attractive delivery dates. The cash portion of the Delphin Purchase Price was financed through proceeds of a new seven-year finance lease of $91.4 million with China Merchants Bank Leasing, and an additional tranche of $15.0 million for financing of the Delphin Scrubbers. Delphin has agreed not to sell, contract to sell, or otherwise dispose more than 2,251,685 of the Delphin Consideration Shares prior to November 23, 2019. All 11 Delphin Vessels had been delivered to the Company as of September 30, 2019.

1

Our Fleet

As of September 24, 2019, our owned fleet consisted of 118 operating vessels with an aggregate carrying capacity of approximately 13.0 million dwt, consisting of Newcastlemax, Capesize, Mini-Capesize, Post Panamax, Kamsarmax, Panamax, Ultramax and Supramax vessels. Additionally, through our subsidiary, Star Logistics, we charter-in a number of third-party vessels on a short- to medium- term basis (usually not exceeding one year) to increase our operating capacity in order to satisfy our clients’ needs. We believe our Company is the largest US listed dry bulk operator in terms of number of vessels and deadweight tonnage.

The following tables present summary information relating to our fleet as of September 24, 2019:

Existing On the Water Fleet (as of September 24, 2019)

 
 
Vessel Name
Vessel Type
Capacity
(dwt.)
 
Year Built
Date Delivered to
Star Bulk
1
 
Goliath
Newcastlemax
209,537
2015
July-15
2
 
Gargantua
Newcastlemax
209,529
2015
April-15
3
 
Star Poseidon
Newcastlemax
209,475
2016
February-16
4
 
Maharaj
Newcastlemax
209,472
2016
July-15
5
 
Star Leo (1)
Newcastlemax
207,939
2018
May-19
6
 
Star Laetitia
Newcastlemax
207,896
2017
August-18
7
 
Star Ariadne
Newcastlemax
207,812
2017
March-17
8
 
Star Virgo
Newcastlemax
207,810
2017
March-17
9
 
Star Libra (1)
Newcastlemax
207,765
2016
June-16
10
 
Star Sienna
Newcastlemax
207,721
2017
August-18
11
 
Star Marisa
Newcastlemax
207,709
2016
March-16
12
 
Star Karlie
Newcastlemax
207,566
2016
August-18
13
 
Star Eleni (1)
Newcastlemax
207,555
2018
January-18
14
 
Star Magnanimus
Newcastlemax
207,490
2018
March-18
15
 
Debbie H
Newcastlemax
206,861
2019
May-19
16
 
Star Ayesha
Newcastlemax
206,852
2019
July-19
17
 
Katie K
Newcastlemax
206,839
2019
April-19
18
 
Leviathan
Capesize
182,511
2014
September-14
19
 
Peloreus
Capesize
182,496
2014
July-14
20
 
Star Claudine (1)
Capesize
181,258
2011
July-18
21
 
Star Ophelia (1)
Capesize
180,716
2010
July-18
22
 
Star Martha
Capesize
180,274
2010
October-14
23
 
Star Pauline
Capesize
180,233
2008
December-14
24
 
Pantagruel
Capesize
180,181
2004
July-14
25
 
Star Borealis
Capesize
179,678
2011
September-11
26
 
Star Polaris
Capesize
179,546
2011
November-11
27
 
Star Lyra (1)
Capesize
179,147
2009
July-18
28
 
Star Janni
Capesize
178,978
2010
January-19
29
 
Star Marianne
Capesize
178,906
2010
January-19
30
 
Star Angie
Capesize
177,931
2007
October-14
31
 
Big Fish
Capesize
177,662
2004
July-14
32
 
Kymopolia
Capesize
176,990
2006
July-14
33
 
Star Triumph
Capesize
176,343
2004
December-17
34
 
Star Scarlett
Capesize
175,800
2014
August-18
35
 
Star Audrey
Capesize
175,125
2011
August-18
36
 
Big Bang
Capesize
174,109
2007
July-14
37
 
Star Paola
Mini-Capesize
115,259
2011
August-18
38
 
Star Eva
Mini-Capesize
106,659
2012
August-18
39
 
Amami
Post Panamax
98,681
2011
July-14
40
 
Madredeus
Post Panamax
98,681
2011
July-14

2

Existing On the Water Fleet (as of September 24, 2019) - continued

 
Vessel Name

Vessel Type

Capacity
(dwt.)
Year Built
Date Delivered to
Star Bulk

41

 

Star Sirius

Post Panamax

98,681

2011

March-14

42

 

Star Vega

Post Panamax

98,681

2011

February-14

43

 

Star Aphrodite

Post Panamax

92,006

2011

August-18

44

 

Star Piera

Post Panamax

91,952

2010

August-18

45

 

Star Despoina

Post Panamax

91,945

2010

August-18

46

 

Star Electra (1)

Kamsarmax

83,494

2011

July-18

47

 

Star Angelina

Kamsarmax

82,981

2006

December-14

48

 

Star Gwyneth

Kamsarmax

82,790

2006

December-14

49

 

Star Kamila

Kamsarmax

82,769

2005

September-14

50

 

Star Luna (1)

Kamsarmax

82,687

2008

July-18

51

 

Star Bianca (1)

Kamsarmax

82,672

2008

July-18

52

 

Pendulum

Kamsarmax

82,619

2006

July-14

53

 

Star Maria

Kamsarmax

82,598

2007

November-14

54

 

Star Markella

Kamsarmax

82,594

2007

September-14

55

 

Star Danai

Kamsarmax

82,574

2006

October-14

56

 

Star Jeannette

Kamsarmax

82,567

2014

August-18

57

 

Star Georgia

Kamsarmax

82,298

2006

October-14

58

 

Star Sophia

Kamsarmax

82,269

2007

October-14

59

 

Star Mariella

Kamsarmax

82,266

2006

September-14

60

 

Star Moira

Kamsarmax

82,257

2006

November-14

61

 

Star Nina

Kamsarmax

82,224

2006

January-15

62

 

Star Renee

Kamsarmax

82,221

2006

December-14

63

 

Star Nasia

Kamsarmax

82,220

2006

August-14

64

 

Star Laura

Kamsarmax

82,209

2006

December-14

65

 

Star Jennifer

Kamsarmax

82,209

2006

April-15

66

 

Star Mona (1)

Kamsarmax

82,188

2012

July-18

67

 

Star Helena

Kamsarmax

82,187

2006

December-14

68

 

Star Astrid (1)

Kamsarmax

82,158

2012

July-18

69

 

Star Alessia

Kamsarmax

81,944

2017

August-18

70

 

Star Calypso (1)

Kamsarmax

81,918

2014

July-18

71

 

Star Charis

Kamsarmax

81,711

2013

March-17

72

 

Star Suzanna

Kamsarmax

81,711

2013

May-17

73

 

Mercurial Virgo

Kamsarmax

81,545

2013

July-14

74

 

Stardust (1)

Kamsarmax

81,502

2011

July-18

75

 

Star Sky (1)

Kamsarmax

81,466

2010

July-18

76

 

Star Lydia

Kamsarmax

81,187

2013

August-18

77

 

Star Nicole

Kamsarmax

81,120

2013

August-18

78

 

Star Virginia

Kamsarmax

81,061

2015

August-18

79

 

Star Genesis (1)

Kamsarmax

80,705

2010

July-18

80

 

Star Flame (1)

Kamsarmax

80,448

2011

July-18

81

 

Star Iris

Panamax

76,466

2004

September-14

82

 

Star Emily

Panamax

76,417

2004

September-14

83

 

Idee Fixe (1)

Ultramax

63,458

2015

March-15

84

 

Roberta (1)

Ultramax

63,426

2015

March-15

85

 

Laura (1)

Ultramax

63,399

2015

April-15

86

 

Kaley (1)

Ultramax

63,283

2015

June-15

87

 

Kennadi

Ultramax

63,262

2016

January-16

88

 

Mackenzie

Ultramax

63,226

2016

March-16

89

 

Apus (1)

Ultramax

63,123

2014

July-19

90

 

Star Wave (1)

Ultramax

61,491

2017

July-18


3

Existing On the Water Fleet (as of September 24, 2019) - continued

   
Vessel Name
Vessel Type
Capacity
(dwt.)
Year Built
Date Delivered to
Star Bulk

91

 

Star Challenger (1)

Ultramax

61,462

2012

December-13

92

 

Star Fighter (1)

Ultramax

61,455

2013

December-13

93

 

Star Lutas

Ultramax

61,347

2016

January-16

94

 

Honey Badger

Ultramax

61,320

2015

February-15

95

 

Wolverine

Ultramax

61,292

2015

February-15

96

 

Star Antares

Ultramax

61,258

2015

October-15

97

 

Star Monica

Ultramax

60,935

2015

August-18

98

 

Star Acquarius

Ultramax

60,916

2015

July-15

99

 

Star Pisces (1)

Ultramax

60,916

2015

August-15

100

 

Star Glory (1)

Supramax

58,680

2012

July-18

101

 

Pyxis (1)

Supramax

56,615

2013

July-19

103

 

Hydrus (1)

Supramax

56,604

2013

August-19

105

 

Diva

Supramax

56,582

2011

July-17

102

 

Leo (1)

Supramax

56,582

2013

July-19

104

 

D Centaurus (1)

Supramax

56,559

2012

September-19

109

 

Hercules (1)

Supramax

56,545

2012

July-19

111

 

Pegasus (1)

Supramax

56,540

2013

July-19

107

 

Cepheus (1)

Supramax

56,539

2012

July-19

108

 

Columba (1)

Supramax

56,530

2012

July-19

110

 

Dorado (1)

Supramax

56,507

2013

July-19

106

 

Aquila (1)

Supramax

56,506

2012

July-19

112

 

Star Bright

Supramax

55,783

2010

October-18

113

 

Strange Attractor

Supramax

55,742

2006

July-14

114

 

Star Omicron

Supramax

53,489

2005

April-08

115

 

Star Zeta

Supramax

52,994

2003

January-08

116

 

Star Theta

Supramax

52,425

2003

December-07

117

 

Star Epsilon

Supramax

52,402

2001

December-07

118

 

Star Cosmo

Supramax

52,345

2005

July-08


 

Total dwt:

12,964,047




 
(1)
Subject to a bareboat charter with purchase obligation at the expiration of the bareboat term. See Note 7 to our consolidated financial statements included elsewhere herein.

4

Liquidity and Capital Resources

Our principal sources of funds have been equity provided by our shareholders through equity offerings, additional debt under secured credit facilities, debt securities, finance lease agreements or sale and lease back arrangements, cash flows from operations and vessel sales. Our principal uses of funds have been capital expenditures to grow our fleet, maintain the quality of our dry bulk carriers and comply with international shipping standards, environmental laws and regulations, to fund working capital requirements, interest and principal payments on outstanding indebtedness and to make dividend payments when approved by the Board of Directors.

Our short-term liquidity requirements include paying operating costs, funding working capital requirements and the short-term equity portion of the cost of vessel acquisitions and vessel upgrades, interest and principal payments on outstanding indebtedness and maintaining cash reserves to strengthen our position against adverse fluctuations in operating cash flows. Our primary source of short-term liquidity is cash generated from operating activities, available cash balances and portions from debt and equity financings.

Our medium- and long-term liquidity requirements are funding the equity portion of newbuilding vessel installments and second hand vessel acquisitions, funding required payments under our vessel financing and other financing agreements and paying cash dividends when declared. Sources of funding for our medium and long-term liquidity requirements include cash flows from operations, new debt, finance lease agreements or sale and lease back arrangements, equity issuances and vessel sales.

As of June 30, 2019, the Company has negative working capital of $45.2 million, and remaining capital commitments for vessel upgrades (procurement and installation of scrubbers) totaling $106.2 million. The Company has secured total financing of $127.3 million which remained undrawn as of June 30, 2019. In addition, prior to June 30, 2019, the Company had a committed excess cash from the refinancing of loans to be finalized subsequent to June 30, 2019 amounting to $13.7 million as well as agreed sale proceeds, net of debt repayment, from the sale of two vessels amounting to $20.1 million and committed net inflows of $11.5 million from the excess debt proceeds over the cash consideration related to the acquisition of 11 vessels from Delphin. The Company also generates positive cash flows from operating activities.

As of June 30, 2019, we had $1,466.4 million of outstanding indebtedness under our outstanding credit facilities and debt securities, including our finance lease obligations and the 2022 Senior Notes, net of unamortized debt issuance costs, of which $167.3 million is scheduled to be repaid in the next twelve months. As of June 30, 2019, our cash balance was $96.4 million (including $13.3 million of legally restricted cash, due to cash collateral requirements contained in our loan agreements) compared to $213.9 million (including $9.0 million of legally restricted cash, due to cash collateral requirements contained in our loan agreements) as of December 31, 2018. For further information relating to our loan agreements, 2022 Senior Notes, finance lease obligations and our commitments, please see Notes 5, 6, 8 and 16 to our audited consolidated financial statements for the year ended December 31, 2018, included in our 2018 Annual Report, and Notes 6, 7, 9 and 13 to our unaudited interim condensed consolidated financial statements for the six-month period ended June 30, 2019, included elsewhere herein.

Our debt agreements contain financial covenants and undertakings requiring us (or the borrowing entity) to maintain various ratios, including:

 
·
a minimum percentage of aggregate vessel value to secured debt amounts (the security cover ratio or “SCR”);

 
·
a maximum ratio of total liabilities to market value adjusted total assets;

 
·
a minimum EBITDA to interest coverage ratio;

 
·
a minimum liquidity; and

 
·
a minimum market value adjusted net worth.

5

We have decided to install scrubbers on the majority of our vessels, which we are financing, in part, with the proceeds of new indebtedness. We believe such investment will increase our competitive advantage commercially by making our fleet more attractive to charterers and cargo owners due to our lower total fuel costs as compared to vessels not equipped with scrubbers. As of September 24, 2019, the remaining payments under our Scrubber Retrofitting Program are expected to be $78.7 million, including those related to the Delphin Vessels, and will be made through 2020 when the installations will be completed. As of the date of this report, the undrawn portion of scrubber related financing under all of our debt and lease agreements stands at $87.6 million.

We may fund possible growth through our cash balances, operating cash flows, additional long-term borrowing, finance leases, sale and lease back arrangements and the issuance of new equity. Our practice has been to acquire dry bulk carriers using a combination of funds received from our equity investors and financings secured by mortgages on our dry bulk carriers.   In the event that we determine to finance a portion of the purchase price for new vessel acquisitions with debt, and if conditions in dry bulk market deteriorate, we may not be able to obtain new borrowing capacity on favorable terms or at all. Furthermore, our stock price and the stock prices of shipping companies in general have been volatile, and if adverse market conditions prevail, we may not be able to raise additional equity financing. Our business is capital intensive, and our future success will depend on our ability to maintain a high-quality fleet through the acquisition of newer dry bulk carriers and the selective sale of older dry bulk carriers. These transactions will be principally subject to management’s expectation of future market conditions as well as our ability to acquire dry bulk carriers on favorable terms.

Other Recent Developments

Please refer to Note 16 to our unaudited interim condensed consolidated financial statements, included elsewhere herein, for developments that took place after June 30, 2019.

Operating Results

Factors Affecting Our Results of Operations

We deploy our vessels on a mix of short to medium time charters or voyage charters, or in dry bulk carrier pools, according to our assessment of market conditions.  We adjust the mix of these charters to take advantage of the relatively stable cash flow and high utilization rates associated with medium to long-term time charters, or to profit from attractive spot charter rates during periods of strong charter market conditions, or to maintain employment flexibility that the spot market offers during periods of weak charter market conditions. The following table reflects certain operating data of our fleet, including our ownership days, fleet utilization and TCE rates, which we believe are important measures for analyzing trends in our results of operations, for the periods indicated:

   
Six-month period ended June 30,
 
(TCE rates expressed in U.S. Dollars)
 
2018
   
2019
 
Average number of vessels (1)
   
72.8
     
107.2
 
Number of vessels (2)
   
74
     
108
 
Average age of operational fleet (in years) (3)
   
8.3
     
8.1
 
Ownership days (4)
   
13,174
     
19,412
 
Available days (5)
   
13,116
     
17,987
 
Charter-in days (6)
   
2,085
     
3,208
 
Fleet utilization (7)
   
99.6
%
   
93.7
%
Time Charter Equivalent Rate  (TCE rate) (8)
 
$
13,208
   
$
10,880
 

(1)
Average number of vessels is the number of vessels that constituted our owned fleet for the relevant period, as measured by the sum of the number of days each operating vessel was a part of our owned fleet during the period divided by the number of calendar days in that period.
(2)
As of the last day of the periods reported.
(3)
Average age of our operational fleet is calculated as of the end of each period.

6

(4)
Ownership days are the total calendar days each vessel in the fleet was owned by us for the relevant period, including vessels subject to sale and leaseback transactions and finance leases.
(5)
Available days for the fleet are the Ownership days after subtracting off-hire days for major repairs, dry docking or special or intermediate surveys and scrubber installation, if any.
(6)
Charter-in days are the total days that we charter-in third-party vessels.
(7)
Fleet utilization is calculated by dividing (x) Available days plus Charter-in days by (y) Ownership days plus Charter-in days for the relevant period.
(8)
Represents the weighted average daily TCE rates of our operating fleet (including owned fleet and fleet under charter-in arrangements). TCE rate is a measure of the average daily net revenue performance of our vessels. Our method of calculating TCE rate is determined by dividing voyage revenues (net of voyage expenses, charter-in hire expense, amortization of fair value of above/below market acquired time charter agreements, if any, as well as adjusted for the impact of realized gain/(loss) on forward freight agreements (“FFAs”) and bunker swaps) by Available days for the relevant time period. Available days do not include the Charter-in days as per the relevant definitions provided above. Starting with the second quarter of 2019, we include the realized gain/(loss) on FFAs and bunker swaps in the calculation of the TCE Revenues. We believe the revised method better reflects the chartering result of our fleet and is more comparable to the method used by our peers. The change has been applied retrospectively for all periods presented herein. TCE revenues, a non-GAAP measure, provides additional meaningful information in conjunction with voyage revenues, the most directly comparable GAAP measure, because it assists Company’s management in making decisions regarding the deployment and use of its vessels and because the Company believes that it provides useful information to investors regarding the Company’s financial performance. TCE rate is a standard shipping industry performance measure used primarily to compare period-to-period changes in a shipping company’s performance despite changes in the mix of charter types (i.e., voyage charters, time charters, bareboat charters and pool arrangements) under which its vessels may be employed between the periods. Our method of computing TCE may not necessarily be comparable to TCE of other companies due to differences in methods of calculation. The above reported TCE rate for the six months ended June 30, 2018, was calculated excluding Star Logistics. We have excluded the revenues and expenses of Star Logistics for the respective period because Star Logistics was formed in October 2017, and its revenues and expenses had not yet normalized in this period, which obscures material trends of our TCE rate. As a result, we believe it is more informative to our investors to present the TCE rate excluding the revenues and expenses of Star Logistics for this period.

The following table reflects the calculation of our TCE rates as discussed in footnote (8) above. The table presents reconciliation of TCE revenue to voyage revenue as reflected in the unaudited interim condensed consolidated statement of operations, (excluding voyage revenue earned from Star Logistics for the six months ended June 30, 2018, for the reasons discussed in footnote (8) above).

   
Six-month period ended June 30,
 
(In thousands of U.S. Dollars, except for TCE rates expressed in U.S. Dollars)
 
2018
       
2019
 
Voyage revenues
 
$
201,620
 
a
)
 
$
324,282
 
Less:
                   
Voyage expenses
   
(30,032
)
b
)
   
(91,329
)
Charter-in hire expenses
   
-
 
c
)
   
(44,442
)
Realized gain/(loss) on FFAs/bunker swaps
   
1,651
         
8,370
 
Time charter equivalent revenues
   
173,239
         
196,881
 
Less:
                   
Amortization of fair value of below/above market acquired time charter agreements
   
-
         
(1,186
)
Adjusted Time charter equivalent revenues
 
$
173,239
       
$
195,695
 
Available days
   
13,116
         
17,987
 
Daily time charter equivalent rate ("TCE")
 
$
13,208
       
$
10,880
 

a)
Voyage revenues used to calculate TCE rate for the six months ended June 30, 2018 consist of (1) reported voyage revenues of $253.7 million minus (2) voyage revenues of $52.0 million attributable to Star Logistics.
b)
Voyage expenses used to calculate TCE rate for the six months ended June 30, 2018 consist of (1) reported voyage expenses of $42.6 million minus (2) voyage expenses of $12.6 million attributable to Star Logistics.
c)
Charter-in hire expenses used to calculate TCE rate for the six months ended June 30, 2018 consist of (1) reported charter-in hire expenses of $40.8 million minus (2) charter-in hire expenses of $40.8 million attributable to Star Logistics.

7

Voyage Revenues

Voyage revenues are driven primarily by the number of vessels in our fleet, the number of days during which our vessels operate, the number of charter-in days, the amount of daily charter hire and freight rates that our vessels earn under time and voyage charters, respectively, which, in turn, are affected by a number of factors, including our decisions relating to vessel acquisitions and disposals and the number of vessels chartered-in, the amount of time that we spend positioning our vessels, the amount of time that our vessels spend in dry dock undergoing repairs, maintenance and upgrade work, scrubber installation, the age, condition and specifications of our vessels, levels of supply and demand in the seaborne transportation market.

Vessels operating on time charters for a certain period of time provide more predictable cash flows over that period of time, but can yield lower profit margins than vessels operating in the spot charter market during periods characterized by favorable market conditions. Vessels operating in the spot market generate revenues that are less predictable, but may enable us to capture increased profit margins during periods of improvements in charter rates, although we would be exposed to the risk of declining vessel rates, which may have a materially adverse impact on our financial performance. If we employ vessels on period time charters, future spot market rates may be higher or lower than the rates at which we have employed our vessels on period time charters.

Voyage Expenses

Voyage expenses include port and canal charges, agency fees, fuel (bunker) expenses and brokerage commissions payable to related and third parties. Bunkers expenses, port and canal charges primarily increase in periods during which vessels are employed on voyage charters because these expenses are paid by the owners. Our voyage expenses primarily consist of bunkers cost, port expenses and commissions paid in connection with the chartering of our vessels.

Charter-in hire expenses

Charter-in hire expenses represent hire expenses for chartering-in third party vessels, either under time charters or voyage charters.

Vessel Operating Expenses

Vessel operating expenses include crew wages and related costs, the cost of insurance and vessel registry, expenses relating to repairs and maintenance, the cost of spares and consumable stores, tonnage taxes, regulatory fees, technical management fees, lubricants and other miscellaneous expenses. Other factors beyond our control, some of which may affect the shipping industry in general, including for instance, developments relating to market prices for crew wages, lubricants and insurance, may also cause these expenses to increase.

Dry Docking Expenses

Dry docking expenses relate to regularly scheduled intermediate survey or special survey dry docking necessary to preserve the quality of our vessels as well as to comply with international shipping standards and environmental laws and regulations. Dry docking expenses can vary according to the age of the vessel, the location where the dry docking takes place, shipyard availability and the number of days the vessel is under dry-dock. We utilize the direct expense method, under which we expense all dry docking costs as incurred.

Depreciation

We depreciate our vessels on a straight-line basis over their estimated useful lives, which is determined to be 25 years from the date of their initial delivery from the shipyard.  Depreciation is calculated based on a vessel’s cost less the estimated residual value.

Management Fees

Management fees include fees paid to third and related parties providing certain procurement services to our fleet.

General and Administrative Expenses

We incur general and administrative expenses, including our onshore personnel related expenses, directors and executives’ compensation, share based compensation, legal, consulting, audit and accounting expenses.

8

(Gain) / Loss on Forward Freight Agreements and Bunker Swaps

From time to time, we may take positions in freight derivatives, including freight forward agreements (the “FFAs”) and freight options with an objective to utilize those instruments as economic hedges that are highly effective in reducing the risk on specific vessels trading in the spot market and to take advantage of short term fluctuations in the market prices. Upon the settlement, if the contracted charter rate is less than the average of the rates, as reported by an identified index, for the specified route and time period, the seller of the FFA is required to pay the buyer the settlement sum, being an amount equal to the difference between the contracted rate and the settlement rate, multiplied by the number of days in the specified period. Conversely, if the contracted rate is greater than the settlement rate, the buyer is required to pay the seller the settlement sum. All of our FFAs are settled on a daily basis through reputable exchanges such as London Clearing House (LCH) or Singapore Exchange (SGX). Customary requirements for trading in FFAs include the maintenance of initial and variation margins based on expected volatility, open position and mark to market of the contracts. Freight options are treated as assets/liabilities until they are settled. Any such settlements by us or settlements to us under FFAs or freight options are recorded under (Gain)/Loss on forward freight agreements and bunker swaps.

Also, from time to time, we may enter into bunker swap contracts to manage our exposure to fluctuations of bunker prices associated with the consumption of bunkers by our vessels. Bunker swaps are agreements between two parties to exchange cash flows at a fixed price on bunkers, where volume, time period and price are agreed in advance.   Our bunker swaps are settled through reputable clearing houses, including the London Clearing House. The fair value of bunker swaps is the estimated amount that we would receive or pay to terminate the swaps at the reporting date (Level 2). Bunker price differentials paid or received under the swap agreements are recognized under (Gain)/Loss on forward freight agreements and bunker swaps.

Interest and Finance Costs

We incur interest expense and financing costs in connection with our outstanding indebtedness under our existing loan facilities (including finance leases) and the 2022 Notes. We also incurred financing costs in connection with establishing those facilities, which are presented as a direct deduction from the carrying amount of that debt liability and amortize them to interest and financing costs over the term of the underlying obligation using the effective interest method.

Interest Income

We earn interest income on our cash deposits with our lenders and other financial institutions.

Gain / (Loss) on Derivative Financial Instruments

We may enter into interest rate swap transactions to manage interest costs and risk associated with changing interest rates with respect to our variable interest loans and credit facilities. Interest rate swaps are recorded in the balance sheet as either assets or liabilities, measured at their fair value (Level 2), with changes in such fair value recognized in earnings under (gain)/loss on derivative financial instruments, unless specific hedge accounting criteria are met.

Inflation

Inflation does not have a material effect on our expenses given current economic conditions. In the event that significant global inflationary pressures appear, these pressures would increase our operating, voyage, administrative and financing costs.

9

Results of Operations

The six-month period ended June 30, 2019 compared to the six-month period ended June 30, 2018

Voyage revenues net of Voyage expenses: Total revenues for the six months ended June 30, 2019 increased to $324.3 million from $253.7 million in the corresponding period in 2018. Time charter equivalent revenues (“TCE Revenues”) (total voyage revenues net of voyage expenses, charter-in hire expense and realized gain/(loss) on FFAs/bunker swaps) were $196.9 million compared to $173.2 million (excluding Star Logistics for the reasons discussed in footnote (8)) for the corresponding period in 2018. This increase was primarily attributable to the increase in the average number of vessels in our fleet to 107.2 for the six months ended June 30, 2019, up from 72.8 for the six months ended June 30, 2018, which caused an increase in Available days for our fleet. In addition, realized gain on FFAs/bunker swaps was $8.4 million for the six months ended June 30, 2019 compared to $1.7 million for the same period in 2018. The TCE rate for the six months ended June 30, 2019 was $10,880 compared to a TCE rate of $13,208 for the corresponding period in 2018, reflecting the weaker dry bulk market environment in 2019 compared to the same period in 2018.

Charter-in hire expenses: Charter-in hire expenses for the six months ended June 30, 2019 and 2018 were $44.4 million and $40.8 million, respectively. The increase in charter-in hire expense was due to a combination of an increase in charter-in days to 3,208 in the six months ended June 30, 2019, compared to 2,085 in the corresponding period in 2018 and a decrease in charter-in rates.

Vessel operating expenses: For the six months ended June 30, 2019 and 2018, vessel operating expenses were $78.1 million and $53.7 million, respectively. This increase was primarily due to the increase in the average number of vessels as described above. Vessel operating expenses for the six months ended June 30, 2019 and 2018 include pre-delivery and pre-joining expenses of $0.9 million and $1.1 million, respectively, incurred mainly in connection with the delivery of the new vessels in our fleet during each period.

Dry docking expenses: Dry docking expenses for the six months ended June 30, 2019 and 2018 were $28.7 million and $3.3 million, respectively. During the six months ended June 30, 2019, 12 of our vessels completed their periodic dry docking surveys, resulting in expenses of $12.3 million, and remaining $16.4 million of expenses were incurred in connection with in progress and forthcoming dry dockings. During the six months ended June 30, 2018 two of our vessels underwent their periodic dry docking surveys. During the six months ended June 30, 2019, we installed scrubbers on certain of our vessels, some of which were scheduled to undergo their dry docking surveys in 2020. In order to avoid any further off hire days for these vessels due in 2020, we decided to complete the dry docking survey for the vessels concurrently with the installation of scrubbers. As a result, in the six month period ended June 30, 2019, we incurred $10.5 million of total dry docking expenses, associated with the dry docking of these vessels, which would have otherwise been incurred in 2020.

Depreciation:  Depreciation expense increased to $59.8 million for the six-month period ended June 30, 2019, compared to $43.2 million for the corresponding period in 2018.  The increase was mainly driven by the higher average number of vessels in 2019 compared to 2018.

Management fees:  Management fees increased to $8.2 million for the six-month period ended June 30, 2019, compared to $3.9 million for the corresponding period in 2018.  The increase is attributable to the new management agreements entered into in connection with the fleets acquired in the third quarter of 2018.

General and administrative expenses: General and administrative expenses for the six months ended June 30, 2019 and 2018 were $17.1 million and $17.7 million, respectively. These expenses for the six months ended June 30, 2019 and 2018 include stock-based compensation expense of $2.9 million and $5.0 million, respectively.

Impairment loss: For the six months ended June 30, 2019, impairment loss of $3.4 million was recognized in anticipation of the sale of the Star Anna and Star Gamma and their deliveries to their new owners in September 2019.

(Gain)/Loss on forward freight agreements and bunker swaps: For the six-month period ended June 30, 2019, (Gain)/Loss on forward freight agreements and bunker swaps amounted to a $7.4 million gain (consisting of realized gain of $8.4 million and unrealized loss of $1.0 million), compared to $2.0 million gain for the corresponding period in 2018 (consisting of unrealized gain of $0.3 million and realized gain of $1.7 million).

Interest and finance costs net of interest and other income/(loss): Interest and finance costs net of interest and other income/ (loss) for the six months ended June 30, 2019 and 2018 were $42.7 million and $29.9 million, respectively. The increase is primarily attributable to the increase in the weighted average balance of our outstanding indebtedness of $1,468.4 million during the first half of 2019 compared to $1,054.3 million for the same period in 2018.

10

Loss on debt extinguishment: During the six months ended June 30, 2019, we recorded a $1.6 million loss on debt extinguishment representing expenses and the non-cash write-off of unamortized deferred finance charges in connection with the refinancing of certain lease and loan agreements. During the six months ended June 30, 2018, we recorded a loss on debt extinguishment of $0.02 million.

Cash Flows

Net cash provided by operating activities

Net cash provided by operating activities for the six months ended June 30, 2019 and 2018 was $7.6 million and $61.1 million, respectively.

The reduction was due to the weaker dry bulk market in the first half of 2019 compared to the same period in 2018, which resulted in a significantly lower TCE rate of $10,880 compared to $13,208 for the first half of 2018. Despite the increase in the average number of vessels in our fleet, the decrease in TCE rates as well as the increased dry docking activity during the first half of 2019 resulted in the decrease of our operating income (excluding non-cash items) to $66.6 million for the six months ended June 30, 2019 from $98.5 million for the corresponding period in 2018. This decrease was combined also with (i) a net working capital outflow of $19.1 million during the first half of 2019 compared to a net working capital outflow of $6.9 million for the first half of 2018 and (ii) higher net interest expense for the first half 2019 compared to the corresponding period in 2018.

Net cash used in investing activities

Net cash used in investing activities for the six months ended June 30, 2019 and 2018 was $132.1 million and $115.6 million, respectively.

For the six months ended June 30, 2019, net cash used in investing activities mainly consisted of (a) $93.2 million paid in connection with our newbuilding and newly acquired vessels and other capitalized expenses and (b) $64.6 million paid for the acquisition and installation of scrubber equipment and ballast water management systems for certain of our vessels, offset partially by proceeds from the sale of three vessels concluded during the period of $20.0 million and insurance proceeds of $5.7 million.

For the six months ended June 30, 2018, net cash used in investing activities mainly consisted of $115.9 million paid for advances and other capitalized expenses for our newbuildings and newly delivered vessels during the period.

Net cash provided by financing activities

Net  cash  provided  by  financing  activities  for  the  six months ended June 30, 2019 and  2018  was  $7.0 million and $21.5 million, respectively.

For the six months ended June 30, 2019, net cash provided by financing activities consisted of:

a)        $392.4 million of proceeds from financing, including financing from leases which were used to refinance the below mentioned lease and debt agreements and partly finance the delivery installments of our newbuildings and the cost of the newly acquired vessels;
offset partially by:
b)        $366.1 million lease and debt obligations paid in aggregate in connection with: (i) the regular amortization of outstanding vessel financings and finance lease installments, and (ii) early repayment due to the refinancing of certain of our finance agreements and the sale of three of our vessels;
c)        $11.6 million used mainly to repurchase our common shares in open market transactions;
d)        $6.2 million of financing fees paid in connection with the new financing agreements; and
e)        $1.5 million of prepayment fees paid in connection with early repaid debt.

For the six months ended June 30, 2018, net cash provided by financing activities consisted of:

a)        $130.0 million of proceeds from financing including financing from leases
offset partially by:
b)        $108.7 million paid in aggregate in connection with: (i) $43.1 million at regular amortization of outstanding vessel financings and finance lease installments and (iii) $65.6 million of excess cash for the quarters ended December 31, 2017 and March 31, 2018, paid pursuant to the cash sweep mechanism in our Supplemental Agreements, during the first half of 2018.

11

Significant Accounting Policies and Critical Accounting Policies

For a description of our critical accounting policies and all of our significant accounting policies, see Note 2 to our audited financial statements and “Item 5 — Operating and Financial Review and Prospects,” included in our 2018 Annual Report. There have been no material changes from the “Critical Accounting Policies” previously disclosed in our 2018 Annual Report except for the new accounting pronouncements adopted as of January 1, 2019. Please refer to Note 2 “Significant accounting policies and recent accounting pronouncements” to the unaudited interim condensed consolidated financial statements for the six-month period ended June 30, 2019, included elsewhere herein, for further discussion.

12

STAR BULK CARRIERS CORP.

INDEX TO UNAUDITED INTERIM CONDENSED CONSOLIDATED
FINANCIAL STATEMENTS

Consolidated Balance Sheets as of December 31, 2018  and June 30, 2019 (unaudited)
F-2
   
Unaudited Interim Condensed Consolidated Statements of Operations for the six-month periods ended June 30, 2018 and 2019
F-3
   
Unaudited Interim Condensed Consolidated Statements of Comprehensive Income/(Loss) for the six-month periods ended June 30, 2018 and 2019
F-4
   
Unaudited Interim Condensed Consolidated Statements of Stockholders’ Equity for the six-month periods ended June 30, 2018 and 2019
F-5
   
Unaudited Interim Condensed Consolidated Statements of Cash Flows for the six-month periods ended June 30, 2018 and 2019
F-6
   
Notes to Unaudited Interim Condensed Consolidated Financial Statements
F-7

F-1

STAR BULK CARRIERS CORP.
Consolidated Balance Sheets
As of December 31, 2018  and June 30, 2019 (unaudited)
(Expressed in thousands of U.S. dollars except for share and per share data, unless otherwise stated)

 

 

December 31, 2018

   

June 30, 2019

 

ASSETS

           

CURRENT ASSETS

       
 

Cash and cash equivalents

 

$

204,921

   

$

83,088

 

Restricted cash, current (Note 9)

   

6,435

     

6,271

 

Trade accounts receivable, net

   

38,402

     

41,794

 

Inventories (Note 4)

   

27,436

     

46,691

 

Due from managers

   

284

     

264

 

Due from related parties (Note 3)

   

1,322

     

317

 

Prepaid expenses and other receivables

   

6,504

     

14,529

 

Derivative asset, current (Note 14)

   

537

     

-

 

Other current assets

   

7,046

     

13,820

 

Vessel held for sale (Note 5)

   

5,949

     

-

 

Total Current Assets

   

298,836

     

206,774

 

 

               

FIXED ASSETS

               

Advances for vessels under construction and acquisition of vessels (Note 6)

   

59,900

     

21,203

 

Vessels and other fixed assets, net (Note 5)

   

2,656,108

     

2,791,157

 

Total Fixed Assets

   

2,716,008

     

2,812,360

 

 

               

OTHER NON-CURRENT ASSETS

               

Long term investment

   

1,108

     

1,163

 

Restricted cash, non-current (Note 9)

   

2,521

     

7,021

 

Fair value of above market time charters acquired (Note 8)

   

-

     

169

 

Leased buildings, right-of-use assets (Note 2)

   

-

     

1,140

 

Other non-current assets

   

3,664

     

3,801

 

TOTAL ASSETS

 

$

3,022,137

   

$

3,032,428

 

 

               

LIABILITIES & SHAREHOLDERS' EQUITY

               

CURRENT LIABILITIES

               

Current portion of long term debt (Note 9)

 

$

101,007

   

$

122,919

 

Lease commitments short term (Note 7)

   

65,837

     

44,333

 

Accounts payable

   

20,959

     

29,598

 

Due to managers

   

3,757

     

10,366

 

Due to related parties (Note 3)

   

1,649

     

497

 

Accrued liabilities

   

16,854

     

26,049

 

Derivative liability (Note 14)

   

1,799

     

2,398

 

Deferred revenue

   

10,855

     

15,771

 

Total Current Liabilities

   

222,717

     

251,931

 

 

               

NON-CURRENT LIABILITIES

               

8.30% 2022 Notes, net of unamortized debt issuance costs of $1,590 and $1,386, as of December 31, 2018 and June 30, 2019, respectively (Note 9)

   

48,410

     

48,614

 

Long term debt, net of current portion and unamortized debt issuance costs of $10,997 and $12,676, as of December 31, 2018 and June 30, 2019, respectively (Note 9)

   

685,819

     

893,660

 

Lease commitments long term, net of unamortized debt issuance costs of $2,975 and $3,404, as of December 31, 2018 and June 30, 2019 respectively (Note 7)

   

540,925

     

356,840

 

Fair value of below market time charters acquired (Note 8)

   

3,553

     

3,469

 

Leased buildings, operating lease liabilities (Note 2)

   

-

     

1,140

 

Other non-current liabilities

   

668

     

884

 

TOTAL LIABILITIES

   

1,502,092

     

1,556,538

 

 

               

COMMITMENTS & CONTINGENCIES (Note 13)

               

               

SHAREHOLDERS' EQUITY

               

Preferred Shares; $0.01 par value, authorized 25,000,000 shares; none issued or outstanding at December 31, 2018 and June 30, 2019, respectively (Note 10)

   

-

     

-

 

Common Shares, $0.01 par value, 300,000,000 shares authorized; 92,627,349 shares issued and 92,285,986 shares (net of treasury shares) outstanding at December 31, 2018; 91,750,000 shares issued and 91,743,029 shares (net of treasury shares) outstanding as of June 30, 2019 (Note 10)

   

926

     

917

 

Additional paid in capital

   

2,502,429

     

2,500,746

 

Treasury shares (341,363 and 6,791 shares at December 31, 2018 and June 30, 2019, respectively)

   

(3,145

)

   

(93

)

Accumulated other comprehensive income/(loss)

   

-

     

-

 

Accumulated deficit

   

(980,165

)

   

(1,025,680

)

Total Shareholders' Equity

   

1,520,045

     

1,475,890

 

TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY

 

$

3,022,137

   

$

3,032,428

 

The accompanying notes are integral part of these unaudited interim condensed consolidated financial statements.

F-2

STAR BULK CARRIERS CORP.
Unaudited Interim Condensed Consolidated Statements of Operations
For the six-month periods ended June 30, 2018 and 2019
(Expressed in thousands of U.S. dollars except for share and per share data, unless otherwise stated)

 

 

Six months ended June 30,

 

 

 

2018

   

2019

 

 

           

Revenues:

           

Voyage revenues (Note 15)

 

$

253,661

   

$

324,282

 

 

   

253,661

     

324,282

 

 

               

Expenses

               

Voyage expenses

   

42,586

     

91,329

 

Charter-in hire expenses

   

40,763

     

44,442

 

Vessel operating expenses

   

53,681

     

78,133

 

Dry docking expenses

   

3,269

     

28,702

 

Depreciation

   

43,243

     

59,781

 

Management fees

   

3,913

     

8,188

 

General and administrative expenses

   

17,702

     

17,062

 

Impairment loss (Note 5)

   

-

     

3,411

 

Other operational gain

   

(41

)

   

(171

)

Provision for doubtful debts

   

-

     

1,250

 

(Gain)/Loss on forward freight agreements and bunker swaps (Note 14)

   

(2,000

)

   

(7,383

)

(Gain)/Loss on sale of vessels ( Note 5)

   

-

     

700

 

 

   

203,116

     

325,444

 

Operating income / (loss)

   

50,545

     

(1,162

)

 

               

Other Income/ (Expenses):

               

Interest and finance costs (Note 9)

   

(30,338

)

   

(43,826

)

Interest and other income/(loss)

   

394

     

1,096

 

Gain / (Loss) on derivative financial instruments, net (Note 14)

   

(1

)

   

-

 

Loss on debt extinguishment (Notes 7 and 9)

   

(21

)

   

(1,619

)

Total other expenses, net

   

(29,966

)

   

(44,349

)

 

               

 Income / (loss) before taxes and equity in income of investee

 

$

20,579

   

$

(45,511

)

Income taxes

   

-

     

(59

)

Income/(Loss) before equity in income of investee

   

20,579

     

(45,570

)

Equity in income of investee

   

49

     

55

 

Net income/(loss)

   

20,628

     

(45,515

)

Earnings / (Loss) per share, basic

 

$

0.32

   

$

(0.49

)

Earnings / (Loss) per share, diluted

   

0.32

     

(0.49

)

Weighted average number of shares outstanding, basic (Note 11)

   

64,170,654

     

92,457,415

 

Weighted average number of shares outstanding, diluted  (Note 11)

   

64,468,860

     

92,457,415

 

The accompanying notes are integral part of these unaudited interim condensed consolidated financial statements.

F-3

STAR BULK CARRIERS CORP.
Unaudited Interim Condensed Consolidated Statements of Comprehensive Income / (Loss)
For the six-month periods ended June 30, 2018 and 2019
(Expressed in thousands of U.S. dollars except for share and per share data, unless otherwise stated)

   
Six months ended June 30,
 
             
   
2018
   
2019
 
Net income / (loss)
 
$
20,628
   
$
(45,515
)
Other comprehensive income / (loss):
               
Unrealized gains / losses from cash flow hedges:
               
Unrealized gain / (loss) from hedging interest rate swaps recognized in Other comprehensive income/(loss) before reclassifications (Note 14)
   
110
     
-
 
Less:
               
Reclassification adjustments of interest rate swap gain/(loss) (Note 14)
   
73
     
-
 
Other comprehensive income / (loss)
   
183
     
-
 
Total comprehensive income / (loss)
 
$
20,811
   
$
(45,515
)

The accompanying notes are integral part of these unaudited interim condensed consolidated financial statements.

F-4

STAR BULK CARRIERS CORP.
Unaudited Interim Condensed Consolidated Statements of Stockholders’ Equity
For the six-month periods ended June 30, 2018 and 2019
(Expressed in thousands of U.S. dollars except for share and per share data, unless otherwise stated)

   
Common Stock
                               
   
# of Shares
   
Par Value
   
Additional Paid-
in Capital
   
Accumulated Other
Comprehensive
income/(loss)
   
Accumulated
deficit
   
Treasury
stock
   
Total
Stockholders'
Equity
 
                                           
BALANCE, January 1, 2018
   
64,160,004
   
$
642
   
$
2,123,108
   
$
605
   
$
(1,036,303
)
 
$
-
   
$
1,088,052
 
Cumulative effect of accounting change
   
-
     
-
     
-
     
-
     
(1,857
)
   
-
     
(1,857
)
Net income / (loss)
   
-
     
-
     
-
     
-
     
20,628
     
-
     
20,628
 
Other comprehensive income / (loss)
   
-
     
-
     
-
     
183
     
-
     
-
     
183
 
Amortization of share-based compensation (Note 12)
   
-
     
-
     
5,011
     
-
     
-
     
-
     
5,011
 
Secondary offering expenses
   
-
     
-
     
(439
)
   
-
                     
(439
)
Acquisition of OCC vessels (Note 6)
   
3,304,735
     
33
     
42,929
     
-
                     
42,962
 
BALANCE, June 30, 2018
   
67,464,739
   
$
675
   
$
2,170,609
   
$
788
   
$
(1,017,532
)
 
$
-
   
$
1,154,540
 
                                                         
BALANCE, January 1, 2019
   
92,627,349
   
$
926
   
$
2,502,429
   
$
-
   
$
(980,165
)
 
$
(3,145
)
 
$
1,520,045
 
Net income / (loss)
   
-
     
-
     
-
     
-
     
(45,515
)
   
-
     
(45,515
)
Amortization of share-based compensation (Note 12)
   
-
     
-
     
2,857
     
-
     
-
     
-
     
2,857
 
Acquisition of Songa Vessels
   
-
     
-
     
-
     
-
     
-
     
(93
)
   
(93
)
Acquisition of E.R Vessels (Notes 5 and 10)
   
999,336
     
10
     
10,053
     
-
     
-
     
-
     
10,063
 
Purchase of treasury stock (Note 10)
   
(1,876,685
)
   
(19
)
   
(14,593
)
   
-
     
-
     
3,145
     
(11,467
)
BALANCE, June 30, 2019
   
91,750,000
   
$
917
   
$
2,500,746
   
$
-
   
$
(1,025,680
)
 
$
(93
)
 
$
1,475,890
 

The accompanying notes are integral part of these unaudited interim condensed consolidated financial statements.

F-5

STAR BULK CARRIERS CORP.
Unaudited Interim Condensed Consolidated Statements of Cash Flows
For the six-month periods ended June 30, 2018 and 2019
(Expressed in thousands of U.S. dollars except for share and per share data, unless otherwise stated)

   
Six months ended June 30,
 
   
2018
   
2019
 
Cash Flows from Operating Activities:
           
Net income / (loss)
 
$
20,628
   
$
(45,515
)
Adjustments to reconcile net income/(loss) to net cash provided by/(used in) operating activities:
               
Depreciation
   
43,243
     
59,781
 
Amortisation of fair value of above market time charters (Note 8)
   
-
     
167
 
Amortization of debt issuance costs (Note 9)
   
1,367
     
2,575
 
Loss on debt extinguishment (Note 9)
   
21
     
1,619
 
Amortisation of fair value of below market time charters (Note 8)
   
-
     
(1,353
)
Impairment loss (Note 5)
   
-
     
3,411
 
Loss / (gain) on sale of vessels (Note 5)
   
-
     
700
 
Provision for doubtful debts
   
-
     
1,250
 
Share-based compensation (Note 12)
   
5,011
     
2,857
 
Non-cash effects of derivative financial instruments
   
(573
)
   
149
 
Fair value hedge adjustment (Note 18)
   
(1,405
)
   
-
 
Change in fair value of forward freight derivatives and bunker swaps
   
(349
)
   
987
 
Other non-cash charges
   
60
     
142
 
Gain on hull and machinery claims
   
-
     
(30
)
Equity in income of investee
   
(49
)
   
(55
)
                 
Changes in operating assets and liabilities:
               
(Increase)/Decrease in:
               
Trade accounts receivable
   
(8,572
)
   
(3,392
)
Inventories
   
(2,912
)
   
(19,255
)
Prepaid expenses and other receivables
   
(1,429
)
   
(18,919
)
Due from related parties
   
151
     
1,005
 
Due from managers
   
-
     
20
 
Increase/(Decrease) in:
               
Accounts payable
   
3,771
     
6,019
 
Due to related parties
   
26
     
(1,152
)
Accrued liabilities
   
957
     
5,091
 
Due to managers
   
2,984
     
6,609
 
Deferred revenue
   
(1,843
)
   
4,916
 
Net cash provided by / (used in) Operating Activities
   
61,087
     
7,627
 
                 
Cash Flows from Investing Activities:
               
Advances for vessels under construction and acquisition of vessels and other fixed assets
   
(115,896
)
   
(157,794
)
Cash proceeds from vessel sales (Note 5)
   
-
     
20,026
 
Hull and machinery insurance proceeds
   
304
     
5,675
 
Net cash provided by / (used in) Investing Activities
   
(115,592
)
   
(132,093
)
                 
Cash Flows from Financing Activities:
               
Proceeds from bank loans, leases and notes
   
129,984
     
392,387
 
Loan and lease prepayments and repayments
   
(108,722
)
   
(366,116
)
Financing and debt extinguishment fees paid
   
(569
)
   
(7,740
)
Proceeds from issuance of common stock
   
-
     
-
 
Offering expenses paid related to the issuance of common stock
   
(439
)
   
-
 
Repurchase of common shares
   
-
     
(11,562
)
Refund of financing premia
   
1,247
     
-
 
Net cash provided by / (used in) Financing Activities
   
21,501
     
6,969
 
                 
Net increase/(decrease) in cash and cash equivalents and restricted cash
   
(33,004
)
   
(117,497
)
Cash and cash equivalents and restricted cash at beginning of period
   
273,500
     
213,877
 
                 
Cash and cash equivalents and restricted cash at end of period
 
$
240,496
   
$
96,380
 
                 
Reconciliation of (a) cash and cash equivalents, and restricted cash reported within the consolidated balance sheets to (b) the total amount of such items reported in the statements of cash flows:
               
Cash and cash equivalents
 
$
218,651
   
$
83,088
 
Restricted cash, current (Note 9)
   
10,425
     
6,271
 
Restricted cash, non-current (Note 9)
   
11,420
     
7,021
 
Cash and cash equivalents and restricted cash at end of period shown in the statement of cash flows
 
$
240,496
   
$
96,380
 
                 
SUPPLEMENTAL CASH FLOW INFORMATION:
               
                 
Cash paid during the year for:
               
Interest
 
$
27,774
   
$
41,502
 
Non-cash investing activities:
               
Shares issued in connection with vessel acquisitions
   
-
     
10,063
 
Vessel upgrades
   
780
     
5,742
 

The accompanying notes are integral part of these unaudited interim condensed consolidated financial statements.

F-6

STAR BULK CARRIERS CORP.
Notes to Unaudited Interim Condensed Consolidated Financial Statements June 30, 2019
(Expressed in thousands of U.S. dollars except for share and per share data, unless otherwise stated)

1.
Basis of Presentation and General Information:

Star Bulk Carriers Corp. (“Star Bulk”) is a global shipping company providing worldwide seaborne transportation solutions in the dry bulk sector.  Star Bulk was incorporated in the Marshall Islands on December 13, 2006 and maintains offices in Athens, Oslo, New York, Limassol and Geneva. Star Bulk shares trade on the NASDAQ Global Select Market under the ticker symbol “SBLK” (primary listing). Following, and in connection with, the Songa Vessel Purchase Transaction, as defined in the Company’s Annual Report on Form 20-F for the year ended December 31, 2018 (the “2018 Annual Report”) Star Bulk’s common shares also trade on the Oslo Stock Exchange (secondary listing) under the same ticker.

The unaudited interim condensed consolidated financial statements include the accounts of Star Bulk and its wholly owned subsidiaries, as set forth below (collectively, the “Company”) and have been prepared in accordance with accounting principles generally accepted in the United States of America (“U.S. GAAP”) and applicable rules and regulations of the U.S. Securities and Exchange Commission (the “SEC”) for interim financial information. Accordingly, they do not include all the information and notes required by U.S. GAAP for annual financial statements.

These unaudited interim condensed consolidated financial statements have been prepared on the same basis as the annual consolidated financial statements and, in the opinion of management, reflect all normal recurring adjustments considered necessary for a fair presentation of the Company’s financial position, results of operations and cash flows for the periods presented.  Operating results for the six-month period ended June 30, 2019 are not necessarily indicative of the results that might be expected for the fiscal year ending December 31, 2019.

The unaudited interim condensed consolidated financial statements presented in this report should be read in conjunction with the 2018 Annual Report.  The balance sheet as of December 31, 2018 has been derived from the audited consolidated financial statements as of that date, but, pursuant to the requirements for interim financial information, does not include all of the information and footnotes required by U.S. GAAP for complete financial statements.

Unless otherwise defined herein, capitalized words and expressions used herein shall have the same meanings ascribed to them in the 2018 Annual Report.

As of June 30, 2019, the Company owned a modern fleet of 108 dry bulk vessels consisting primarily of Newcastlemax, Capesize, Post Panamax, Kamsarmax, Panamax, Ultramax and Supramax vessels with a carrying capacity between 52,000 deadweight tonnage (“dwt”) and 209,000 dwt, and a combined carrying capacity of 12,244,681 dwt. Additionally, through its subsidiary Star Logistics, during the six-month period ended June 30, 2019, the Company chartered-in a number of third-party vessels on a short to medium term basis (not exceeding one year) to increase its operating capacity in satisfying its clients’ needs.

2.
Significant accounting policies and recent accounting pronouncements:

A summary of the Company’s significant accounting policies and recent accounting pronouncements is included in Note 2 to the Company’s consolidated financial statements included in the 2018 Annual Report.  There have been no changes to the Company’s significant accounting policies and recent accounting pronouncements in the six-month period ended June 30, 2019, except for the following:

F-7

STAR BULK CARRIERS CORP.
Notes to Unaudited Interim Condensed Consolidated Financial Statements June 30, 2019
(Expressed in thousands of U.S. dollars except for share and per share data, unless otherwise stated)

2.
Significant accounting policies and recent accounting pronouncements – continued:

Leases: On January 1, 2019, the Company adopted ASC 842 Leases (“ASC 842”). ASC 842 revises the accounting for leases. According to the new Accounting Standard, lessees are required to recognize assets and liabilities on the balance sheet for the rights and obligations created by all leases with term of more than 12 months. For lessees, leases are classified as either capital or operating, with classification affecting the pattern of expense recognition on the income statement. ASC 842 requires lessors to classify leases as a sales-type, direct financing, or operating lease. A lease is a sales-type lease if any one of five criteria included in ASC 842 are met, each of which indicates that the lease, in effect, transfers control of the underlying asset to the lessee. If none of those five criteria are met, and two other criteria included also in ASC 842 are both met, indicating that the lessor has transferred substantially all of the risks and benefits of the underlying asset to the lessee, the lease is classified as a direct financing lease. All leases that are not sales-type leases or direct financing leases are operating leases.

The Company elected to use the optional new transition method for adoption that results in initial recognition of a cumulative effect adjustment to retained earnings in the year of adoption. As a result, prior periods as reported by the Company, have not been impacted by the adoption.  The Company also elected to use the practical expedient for lessors to combine the lease and non-lease components of revenues for recognition, measurement and presentation purposes, as also described below.

In addition, in connection with its adoption of ASC 842, the Company elected to use the “package of 3” practical expedients permitted under the transition guidance, which exempts the Company from reassessing:

• whether any expired or existing contracts are or contain leases;
• any expired or existing lease classifications; and
• initial direct costs for any existing leases.

Lastly, the Company elected not to use the practical expedient of hindsight in determining the lease term and in assessing the impairment of the Company’s operating lease right-of-use assets.

The Company’s adoption did not have a material effect on the consolidated financial statements for the reasons discussed below:

Company acting as Lessor:

As also described in Note 2t) to the Company’s consolidated financial statements included in the 2018 Annual Report, the Company generates its revenues from charterers for the charter hire of its vessels under time charter agreements, in which a contract is entered into for the use of a vessel for a specific period of time and a specified daily charter hire rate, or voyage charter agreements, where a contract is made in the spot market for the use of a vessel for a specific voyage at a specified freight rate per ton. The Company considered the provisions of ASC 842 and determined that its voyage charter agreements do not contain a lease because the charterer under such contracts does not have the right to control the use of the vessel since the Company, as the ship-owner, retains control over the operations of the vessel, provided also that the terms are pre-determined and any change requires the Company’s consent.. On the other hand, the Company determined that its time charter agreements are leases that are governed by ASC 842 because, pursuant to the time charter agreements, (a) the vessel is an identifiable asset, (b) the Company does not have substitution rights and (c) the charterer has the right to control the use of the vessel during the term of the contract and derives the economic benefits from such use. In addition, provided that none of the criteria for classification as sales-type leases or direct financing leases are met, the Company’s time charter agreements are classified as operating leases.

F-8

STAR BULK CARRIERS CORP.
Notes to Unaudited Interim Condensed Consolidated Financial Statements June 30, 2019
(Expressed in thousands of U.S. dollars except for share and per share data, unless otherwise stated)

2.
Significant accounting policies and recent accounting pronouncements – continued:

Upon adoption of ASC 842, the timing and recognition of earnings from time charter contracts to which the Company is party did not change from previous practice, with the exception of ballast bonuses which were recognized during the ballast leg while they are now deferred and recognized over time during the charter period as well as the deferral of certain direct costs incurred during the ballast leg that meet the required criteria for capitalization and amortize during the charter period. Included in the charter hire rate is also compensation for running the vessel, such as crewing expenses, repairs and maintenance and insurance. The Company, making use of the practical expedient for lessors, has elected not to separate the lease and non-lease components included in the time charter revenue but rather to recognize lease revenue as a combined single lease component for all time charter contracts (operating leases) as the related lease component and non-lease component have the same timing and pattern of transfer (both the lease and non-lease components are earned by passage of time) and the predominant component is the lease. The performance obligations in a time charter contract are satisfied over the term of the contract on a straight-line basis, beginning when the vessel is delivered to the charterer and ending when it is redelivered back to the Company. As a result, the adoption of this standard with respect to charter agreements for which the Company acts as lessor did not have an effect on the Company’s consolidated opening retained earnings, balance sheets and consolidated statements of operations, except for the additional disclosure requirements of ASC 842.

Company acting as Lessee:

a)
All charter-in operating leases that the Company had entered into and were effective as of December 31, 2018 and during the six month period ended June 30, 2019 are short-term leases (i.e., less than 12 months). The Company elected to use the practical expedient of ASC 842 that allows for time charter-in contracts with an initial term of less than 12 months to be excluded from the operating lease right-of use assets and the corresponding lease liabilities recognition on the consolidated balance sheet. The Company continues to recognize the lease payments for all charter-in operating leases as charter-in hire expenses on the consolidated statements of operations on a straight-line basis over the lease term. Revenues generated from those charter-in vessels during the six month periods ended June 30, 2018 and 2019 amounted to $56,093 and $78,449 and are included in Voyage revenues in the consolidated statement of operations, out of which $7,402 and $11,399 constitute sublease income deriving from time charter agreements.
b)
The adoption of ASC 842 did not change the accounting for the leases already recognized on the balance sheet as capital leases under the previous leasing guidance given the transition provisions of ASC 842 and the practical expedients elected by the Company as discussed above. As such, those leases existing as of January 1, 2019, including all bareboat charter agreements that the Company had entered into that were in place as of that date, are classified as finance leases under the new leasing guidance of ASC 842, with the Company having reclassified the existing capital lease assets as of December 31, 2018 of $1,047,780 as right-of-use assets being reflected within Fixed Assets and the existing lease obligations as of December 31, 2018 of $609,737 as lease liabilities being reflected within Lease commitments.
c)
Each sale and lease back transaction that the Company had entered into as of December 31, 2018 or entered into during the six month period ended June 30, 2019, involved a purchase obligation and was therefore treated as failed sale or merely a financing arrangement both before and after adoption of ASC 842, and therefore was not within the scope of sale and leaseback accounting.
d)
The Company has determined its office rental arrangements are operating leases. The assets and liabilities recognized in respect of these agreements that correspond to the underlying rights and obligations were $1,198 as of January 1, 2019 and $1,140 as of June 30, 2019 and are presented within “Leased buildings, right-of-use assets” and “Leased buildings, operating lease liabilities” in the consolidated balance sheet. The lease expenses attributable to these leases are recognized on a straight line basis over the lease term and are recorded as part of General and Administrative expenses. These lease expenses were $192 and $121 for the six months ended June 30, 2018 and 2019, respectively. The weighted average remaining lease term of the Company’s office rent arrangements is 4.4 years. Future minimum rental payments as of June 30, 2019 for these contracts are presented in Note 13 below.

F-9

STAR BULK CARRIERS CORP.
Notes to Unaudited Interim Condensed Consolidated Financial Statements June 30, 2019
(Expressed in thousands of U.S. dollars except for share and per share data, unless otherwise stated)

3.
Transactions with Related Parties:

Details of the Company’s transactions with related parties did not change in the six-month period ended June 30, 2019 and are discussed in Note 3 of the Company’s consolidated financial statements for the year ended December 31, 2018, included in the 2018 Annual Report.

Transactions and balances with related parties are analyzed as follows:

Balance Sheets

   
December 31,
2018
   
June 30,
2019
 
Due from related parties
           
Oceanbulk Maritime S.A. and its affiliates
 
$
85
   
$
264
 
Interchart Shipping Inc.
   
-
     
1
 
Starocean Manning Philippines Inc.
   
65
     
52
 
Sellers of the Augustea Vessels
   
867
     
-
 
Songa Shipmanagement Ltd.
   
305
     
-
 
Due from related parties
 
$
1,322
   
$
317
 
                 
Due to related parties
               
Management and Directors Fees
 
$
236
   
$
131
 
Sydelle Marine Limited
   
302
     
-
 
Augustea Technoservices Ltd.
   
1,111
     
366
 
Due to related parties
 
$
1,649
   
$
497
 

Statements of Operations

   
Six months ended June 30,
 
   
2018
   
2019
 
Voyage expenses-Interchart
 
$
(1,650
)
   
(1,950
)
Consultancy fees
   
(262
)
   
(328
)
Directors compensation
   
(72
)
   
(87
)
Office rent - Combine Marine Ltd. &  Alma Properties
   
(19
)
   
(9
)
Voyage revenues - profit sharing agreement-Sydelle Marine Limited
   
(4
)
   
-
 
Management fees- Augustea Technoservices Ltd.
   
-
     
(3,254
)
Management fees- Songa Shipmanagement Ltd.
   
-
     
(32
)
General and administrative expenses - Oceanbulk Maritime S.A. and its affiliates
   
-
     
(78
)

F-10

STAR BULK CARRIERS CORP.
Notes to Unaudited Interim Condensed Consolidated Financial Statements June 30, 2019
(Expressed in thousands of U.S. dollars except for share and per share data, unless otherwise stated)

4.
Inventories:

The amounts shown in the consolidated balance sheets are analyzed as follows:

   
December 31,
2018
   
June 30,
2019
 
Lubricants
 
$
12,071
   
$
12,613
 
Bunkers
   
15,365
     
34,078
 
Total
 
$
27,436
   
$
46,691
 

5.
Vessels and other fixed assets, net:

Changes in the six months ended June 30, 2019 are summarized as follows:

   
Vessel cost
   
Accumulated
depreciation
   
Net Book
Value
 
Balance, December 31, 2018
 
$
3,149,274
   
$
(493,166
)
 
$
2,656,108
 
- Transfer from advances for vessels under construction and acquisition of vessels
   
104,528
     
-
     
104,528
 
- Acquisitions, improvements and other vessel costs
   
108,411
     
-
     
108,411
 
- Vessel disposal
   
(58,904
)
   
44,206
     
(14,698
)
- Impairment loss
   
(24,551
)
   
21,140
     
(3,411
)
- Depreciation for the period
   
-
     
(59,781
)
   
(59,781
)
Balance, June 30, 2019
 
$
3,278,758
   
$
(487,601
)
 
$
2,791,157
 

As of June 30, 2019, 81 of the Company’s 108 owned vessels, having a net carrying value of $2,041,280, were subject to first-priority mortgages as collateral to the Company’s loan facilities (Note 9) and all 26 of the Company’s bareboat chartered vessels, having a net carrying value of $732,153 were pledged as collateral under the Company’s bareboat charter agreements. In addition, the seven vessels financed under the ABN $115,000 Facility also secure the Atradius Facility on a second priority basis.

Vessels acquired / delivered / disposed of during the six-month period ended June 30, 2018

Delivery of newbuilding vessels:

On January 3, 2018, March 26, 2018 and May 14, 2018, the Company took delivery of the Newcastlemax vessels Star Eleni (ex HN 1342), Star Magnanimus (ex HN 1361) and Star Leo (ex HN 1343) which, were financed under bareboat leases with CSSC (Hong Kong) Shipping Company Limited, or CSSC.

Vessels acquired / delivered / disposed of during the six-month period ended June 30, 2019

Delivery of secondhand vessels:

On January 7 and 14, 2019, the Company took delivery of the Capesize vessels Star Janni and Star Marianne as part of the Step 1 Acquisition of the E.R. Vessels. The vessels were delivered to the Company in exchange for an aggregate of 999,336 of its common shares and cash consideration of $31,772, with the total acquisition cost being $41,837. The cash consideration was partially financed through the third and fourth tranche of the ABN $115,000 Facility. The cost of the shares issued in connection with this acquisition was determined by reference to the Company’s closing share market prices of $10.41 and $9.66 on the delivery dates of the Star Janni and the Star Marianne, respectively.

F-11

STAR BULK CARRIERS CORP.
Notes to Unaudited Interim Condensed Consolidated Financial Statements June 30, 2019
(Expressed in thousands of U.S. dollars except for share and per share data, unless otherwise stated)

5.
Vessels and other fixed assets, net – continued:

Delivery of newbuilding vessels:

On April 16, 2019 and May 28, 2019, the Company took delivery of the Newcastlemax vessels Katie K (ex-HN 1388) and Debbie H (ex-HN 1389), two of the OCC Vessels acquired through the OCC Vessel Purchase Transaction, which were financed under bareboat leases with CSSC.

Sale of vessels:

On November 20, 2018, the Company entered into an agreement with a third party to sell the vessel Star Delta. The vessel was delivered to its new owner on January 8, 2019.  As of December 31, 2018, the vessel met the criteria for classification as held for sale and was therefore separately presented within “Vessel held for sale” in the consolidated balance sheet, at the agreed selling price less cost to sell. In addition in February 2019, the Company entered into two separate agreements with third parties to sell the vessels Star Aurora and Star Kappa, which were delivered to their new owners on March 6 and 8, 2019, respectively. In connection with the above mentioned sales, the Company recognized an aggregate net loss on sale of vessels of $700.

On June 21, 2019 and July 8, 2019, the Company entered into two separate agreements with third parties to sell the vessels Star Anna and Star Gamma, which were delivered to their new owners on September 23 and 5, 2019, respectively. The Company decided to sell the respective vessels as part of its strategic goal to dispose the older vessels in its fleet. In connection with the aforementioned sales, the Company recognized an aggregate impairment loss of $3,411. None of these two vessels met the criteria to be classified as held for sale as of June 30, 2019.

No other impairment charge was deemed necessary for the six-month period ended June 30, 2019.

6.
Advances for vessels under construction and acquisition of vessels:

 Movements in the six months ended June 30, 2019 are summarized as follows:

Balance, December 31, 2018
 
$
59,900
 
- Additions
   
65,202
 
- Capitalized interest
   
629
 
- Transfers to Vessel cost
   
(104,528
)
Balance, June 30, 2019
   
21,203
 

As of June 30, 2019, the Company had one Newcastlemax dry bulk carrier vessel on order, the Star Ayesha (ex-HN 1390), which was acquired through the OCC Vessel Purchase Transaction. The Star Ayesha was constructed at Shanghai Waigaoqiao Shipbuilding Co., Ltd. (“SWS”) and delivered to the Company on July 15, 2019. The remaining contracted price plus agreed extra for the Star Ayesha, as of June 30, 2019 was $30,312 and financed via a ten-year bareboat charter with CSSC.

F-12

STAR BULK CARRIERS CORP.
Notes to Unaudited Interim Condensed Consolidated Financial Statements June 30, 2019
(Expressed in thousands of U.S. dollars except for share and per share data, unless otherwise stated)

7.
Lease Commitments:

Details of the Company’s lease commitments are discussed in Note 5 and Note 6 of the Company’s consolidated financial statements for the year ended December 31, 2018, included in the 2018 Annual Report and are supplemented by the below new activities.

During the six-month period ended June 30, 2019, the Company recognized new lease liabilities of $65,250 in connection with the OCC Vessels, as discussed in Note 5 and Note 6.

On March 29, 2019, the Company entered into an agreement to sell the Star Pisces and simultaneously entered into a bareboat charter party contract with SK Shipholding S.A. to bareboat charter the vessel for seven years. Pursuant to the terms of the bareboat charter, the Company pays a daily bareboat charter hire rate monthly plus interest, and the Company has an option to purchase the vessel starting on the third anniversary of the vessel’s delivery to the Company at a pre-determined, amortizing purchase price. The Company also has an obligation to purchase the vessel at the expiration of the bareboat term at a purchase price of $7,628. The amount of $19,125 provided under the respective agreement which was concluded in April 2019, was used to pay the remaining amount of $11,671 under the NIBC $32,000 Facility.

On May 22, 2019, the Company entered into an agreement to sell the Star Libra and simultaneously entered into a bareboat charter party contract with Ocean Trust Co. Ltd. to bareboat charter the vessel for seven years. Pursuant to the terms of the bareboat charter, the Company pays a daily bareboat charter hire rate quarterly plus interest, and the Company has an option to purchase the vessel at any time after the vessel’s delivery to the Company at a pre-determined, amortizing purchase price. The Company also has an obligation to purchase the vessel at the expiration of the bareboat term at a purchase price of $18,107. The amount of $33,950 provided under the respective agreement which was concluded in July 2019, was used to pay the remaining amount under the previous lease agreement of the Star Libra.

On July 10, 2019, the Company entered into an agreement to sell the Star Challenger and simultaneously entered into a bareboat charter party contract with Kyowa Sansho Co. Ltd. to bareboat charter the vessel for eleven years. Pursuant to the terms of the bareboat charter, the Company pays a daily bareboat charter hire rate monthly plus a variable amount and the Company has an option to purchase the vessel starting on the third anniversary of vessel’s delivery to the Company at a pre-determined, amortizing purchase price. The Company also has an obligation to purchase the vessel at the expiration of the bareboat term. The amount of $15,000 provided under the respective agreement was used to pay the remaining amount of approximately $10,874 under the HSH Nordbank AG $35,000 Facility.

During the six-month period ended June 30, 2019, the Company repaid the outstanding amounts under the lease agreements of the Star Magnanimus, the Star Ariadne, the Star Laetitia, the Star Sienna, the Star Virgo, the Star Marisa and the ABOY Karlie with CSSC. The lease agreements were refinanced with the proceeds from the following loan facilities: (i) ING $100,600 Facility, (ii) E.SUN Facility, (iii) SEB Facility, (iv) Citibank $62,600 Facility and (v) CTBC Facility, which are described in Note 9. In addition the Company repaid the outstanding amount under the lease agreement of the Star Alessia (ex-ABY Asia) using the amount drawn under the ING $100,600 Facility (Note 9).

As of June 30, 2019, the Company was party to 27 bareboat leases, including the bareboat lease for the Star Ayesha as described above. The respective leases, among others, require the Company to acquire each underlying vessel at a specified price upon the completion of its bareboat term or grant the option to purchase the underlying vessel that the Company is reasonably certain that will exercise and as a result, vessels subject to these bareboat leases were recognized as fixed assets in the Company’s balance sheet.

The interest expense on the financial liability related to these leases for the six-month periods ended June 30, 2018 and 2019 was $8,905 and $14,652, respectively, and is included within “Interest and finance costs” in the unaudited interim condensed consolidated statements of operations. As of June 30, 2019, the gross amount recognized for the vessels under bareboat leases was $783,634, with accumulated depreciation of $51,481. Depreciation expense for the bareboat leased vessels for the six month periods ended June 30, 2018 and 2019 amounted to $7,319 and $12,688, respectively.

F-13

STAR BULK CARRIERS CORP.
Notes to Unaudited Interim Condensed Consolidated Financial Statements June 30, 2019
(Expressed in thousands of U.S. dollars except for share and per share data, unless otherwise stated)

7.
Lease Commitments - continued:

In connection with the refinancing of the aforementioned lease agreements, we incurred expenses of $1,399 and $25 of unamortized debt issuance costs were written off, which are both included under “Loss on debt extinguishment,” in the consolidated statement of operations for the six months ended June 30, 2019.

The principal payments required to be made after June 30, 2019 for the outstanding lease obligations are as follows:

Twelve month periods ending
 
Amount
 
June 30, 2020
 
$
60,245
 
June 30, 2021
   
58,150
 
June 30, 2022
   
56,770
 
June 30, 2023
   
74,736
 
June 30, 2024
   
119,562
 
June 30, 2025 and thereafter
   
89,059
 
Total bareboat lease minimum payments
 
$
458,522
 
Unamortized debt issuance costs
   
3,404
 
Total bareboat lease minimum payments, net
 
$
455,118
 
Excluding bareboat lease interest
   
53,945
 
Lease commitments – short term
   
44,333
 
Lease commitments – long term
   
356,840
 

8.
Fair value of Above / Below Market Acquired Time Charters:

Details of the Company’s fair value of above/below market acquired time charters are discussed in Note 7 of the Company’s consolidated financial statements for the year ended December 31, 2018, included in the 2018 Annual Report and are supplemented by the below new activities.

As part of the Step 1 Acquisition of the E.R. Vessels, the Company took delivery of the vessels Star Marianne and Star Janni (Note 5) with time charter agreements attached. The Company recognized a liability of $1,269 and an asset of $336, since it determined that the charter rate of the Star Marianne was below market rates and Star Janni was above market rates on the date of each vessel’s delivery (Level 2).

For the six-month period ended June 30, 2019, the amortization of fair value of the below market acquired time charters was $1,353 and of the above market acquired time charters was $167 and are included under “Voyage revenues” in the consolidated statement of operations. The accumulated amortization of the below market time charters as of June 30, 2019 was $3,173 and of the above market acquired time charters was $167.

The unamortized balance of the intangible asset as of June 30, 2019 of $169 will be amortized in the third quarter of 2019 while the unamortized balance of the intangible liability as of June 30, 2019 of $3,469 is expected to be amortized over the weighted average period of 2.41 years as follows:

Twelve month periods ending
 
Amount
 
June 30, 2020
 
$
1,714
 
June 30, 2021
   
924
 
June 30, 2022
   
831
 
Total
 
$
3,469
 

F-14

STAR BULK CARRIERS CORP.
Notes to Unaudited Interim Condensed Consolidated Financial Statements June 30, 2019
(Expressed in thousands of U.S. dollars except for share and per share data, unless otherwise stated)

9.
Long-term Debt:

Details of the Company’s credit facilities and debt securities are discussed in Note 8 of the Company’s consolidated financial statements for the year ended December 31, 2018, included in the 2018 Annual Report and are supplemented by the below new activities.

New Financing Activities

i) SEB Facility:

On January 28, 2019, the Company entered into a loan agreement with Skandinaviska Enskilda Banken AB (SEB), the “SEB Facility,” for the financing of an amount up to $71,420. The facility is available in four tranches. The first two tranches of $32,825 each were drawn on January 30, 2019 and used together with cash on hand to refinance the outstanding amounts under the lease agreements of the Star Laetitia and the Star Sienna (Note 7). Each tranche matures six years after the drawdown date and is repayable in 24 consecutive, quarterly principal payments of $677 for each of the first 10 quarters and of $524 for each of the remaining 14 quarters, and a balloon payment of $18,723 payable simultaneously with the last quarterly installment, which is due in January 2025. The remaining two tranches of approximately $1,260 each, which will be used to finance the acquisition and installation of scrubber equipment for the respective vessels, are expected to be drawn in 2019 and are repayable in 12 equal quarterly installments. The SEB Facility is secured by a first priority mortgage on the two vessels.

ii) E SUN Facility:

On January 31, 2019, the Company entered into a loan agreement with E. SUN Commercial Bank, Hong Kong branch, (the “E.SUN Facility”), for the financing of an amount of $37,100 which was used to refinance the outstanding amount under the lease agreement of the Star Ariadne (Note 7). On March 1, 2019, the Company drew the amount of $37,100 which is repayable in 20 consecutive, quarterly principal payments of $618, plus a balloon payment of $24,733 payable simultaneously with the last quarterly installment, which is due in March 2024. The E.SUN Facility is secured by a first priority mortgage on the vessel.

iii) Atradius Facility:

On February 28, 2019, the Company entered into a loan agreement with ABN AMRO Bank N.V. (the “Atradius Facility”) for the financing of an amount up to $36,645 that will be used to finance the acquisition and installation of scrubber equipment for 42 vessels. The financing is credit insured (85%) by Atradius Dutch State Business N.V. of the Netherlands (the “Atradius”). The first tranche of $11,659 was drawn in April 2019. The remaining available amount is expected to be drawn during 2019. The facility is repayable in 10 consecutive semi-annual installments of $3,664 and is secured by a second-priority mortgage on certain of the 42 vessels.

iv) ING $100,600 Facility:

On March 28, 2019, the Company entered into an amended and restated facility agreement with ING Bank N.V., London Branch, the “ING $100,600 Facility”, in order to increase the financing by $52,800 and to include additional borrowers under the existing ING $47,800 Facility. The additional financing amount of $52,800 is available in four tranches. The first two tranches of $32,100 and $17,400, were drawn in March 2019 and April 2019, respectively and used to refinance the outstanding amounts under the lease agreements of the Star Magnanimus and the Star Alessia (Note 7). Each tranche is repayable in 28 consecutive, quarterly principal payments of $535 and $311, plus a balloon payment of $17,120 and $8,700, for each of the two vessels, both due seven years after the drawdown date. The remaining two tranches of $1,400 each will be used to finance the acquisition and installation of scrubber equipment for the aforementioned vessels. The first was drawn in May 2019, and the second is expected to be drawn during the remainder of 2019. Both tranches are repayable in 16 equal quarterly installments. The ING $100,600 Facility is also secured by a first priority mortgage on the two aforementioned vessels.

F-15

STAR BULK CARRIERS CORP.
Notes to Unaudited Interim Condensed Consolidated Financial Statements June 30, 2019
(Expressed in thousands of U.S. dollars except for share and per share data, unless otherwise stated)

9.
Long-term Debt - continued:

v) Citibank $62,600 Facility:

On May 8, 2019, the Company entered into a loan agreement with Citibank N.A., London Branch (the “Citibank $62,600 Facility”). In May 2019, the Company drew the aggregate amount of $62,563, which was used, together with cash on hand, to refinance the outstanding amounts under the lease agreements of the Star Virgo and the Star Marisa (Note 7). The facility is repayable in 20 quarterly principal payments of $1,298 and a balloon payment of $36,611 payable simultaneously with the last quarterly installment, which is due in May 2024. The Citibank $62,600 Facility is secured by a first priority mortgage on the aforementioned vessels.

vi) CTBC Facility:

On May 24, 2019, the Company entered into a loan agreement with CTBC Bank Co., Ltd, the “CTBC Facility,” for an amount of $35,000, which was used to refinance the outstanding amount under the lease agreement of the ABOY Karlie (Note 7). The facility is repayable in 20 quarterly principal payments of $730 and a balloon payment of $20,400 payable simultaneously with the last quarterly installment, which is due in May 2024. The CTBC Facility is secured by first priority mortgage on the aforementioned vessel.

vii) NTT Facility:
 
On July 31, 2019, the Company entered into a loan agreement with a wholly owned subsidiary of NTT Finance Corporation, the “NTT Facility,” for an amount of $17,500. The amount was drawn in August and was used to refinance the outstanding loan amount of $11,161 of the Star Aquarius under the “NIBC $32,000 Facility.” The facility is repayable in 27 quarterly principal payments of $313 and a balloon payment of $9,063 which is due in August 2026. The NTT Facility is secured by first priority mortgage on the Star Aquarius.

viii) CEXIM $106,470 Facility:

In July 2019, the Company entered into a committed term sheet with China Export-Import Bank for the financing of up to $106,470 (the “CEXIM $106,470 Facility”). The facility will be available in three tranches of $35,490 each and will be used to finance the outstanding amounts under the lease agreements of the Katie K, the Debbie H and the Star Ayesha. The three tranches are expected to be drawn by November 2019 and will each mature 10 years after its drawdown date. The CEXIM $106,470 Facility will be secured by first priority mortgages on the three aforementioned vessels. The loan documentation was finalized and the agreement was signed on September 23, 2019.
 
Scrubber Financing:

During the six months ended June 30, 2019, the Company drew down an amount of (i) $11,659 under the Atradius Facility, (ii) $9,385 under the DNB $310,000 Facility and (iii) $1,400 under the ING $100,600 Facility to finance the acquisition and installation of scrubber equipment for several of its vessels. As of June 30, 2019, the undrawn portion of scrubber-related financing under all facilities following these drawdowns stands at $112,321.

The Company’s credit facilities contain financial covenants and undertakings requiring the Company to maintain various financial ratios, including:


a minimum percentage of aggregate vessel value to secured loans (the security cover ratio or “SCR”);

a maximum ratio of total liabilities to market value adjusted total assets;

a minimum EBITDA to interest coverage ratio;

a minimum liquidity; and

a minimum market value adjusted net worth.

F-16

STAR BULK CARRIERS CORP.
Notes to Unaudited Interim Condensed Consolidated Financial Statements June 30, 2019
(Expressed in thousands of U.S. dollars except for share and per share data, unless otherwise stated)

9.
Long-term Debt - continued:

As of December 31, 2018 and June 30, 2019, the Company was required to maintain minimum liquidity, not legally restricted, of $53,500 and $54,000, respectively, which is included within “Cash and cash equivalents” in the consolidated balance sheets.  In addition, as of December 31, 2018 and June 30, 2019, the Company was required to maintain a minimum liquidity, legally restricted, of $8,956 and $13,292, which is included within “Restricted cash, current and non-current” in the consolidated balance sheets.

As of June 30, 2019, the Company was in compliance with the applicable financial and other covenants contained in its debt agreements, including the 2022 Notes.

The principal payments required to be made after June 30, 2019 for all of the then-outstanding bank debt, are as follows:

Twelve month periods ending
 
Amount
 
June 30, 2020
 
$
122,919
 
June 30, 2021
   
135,789
 
June 30, 2022
   
130,259
 
June 30, 2023
   
141,977
 
June 30, 2024
   
365,608
 
June 30, 2025 and thereafter
   
132,703
 
Total Long term debt
 
$
1,029,255
 
Unamortized debt issuance costs
   
12,676
 
Total Long term debt, net
 
$
1,016,579
 
Current portion of long term debt
   
122,919
 
Long term debt, net
   
893,660
 

The 2022 Notes mature in November 2022 and are presented in the consolidated balance sheets as of June 30, 2019 net of unamortized debt issuance costs of $1,386.

For the six-month periods ended June 30, 2018 and 2019, the Company’s existing financing agreements (including lease agreements)  bore interest at a weighted-average rate of approximately 5.40% and 5.65%, respectively.

All of the Company’s financing agreements (including lease agreements) bear interest at LIBOR plus a margin.  The amounts of “Interest and finance costs” included in the unaudited interim condensed consolidated statements of operations are analyzed as follows:

   
2018
   
2019
 
Interest on long term debt and bareboat leases
 
$
28,691
   
$
41,034
 
Less: Interest capitalized
   
(468
)
   
(629
)
Reclassification adjustments of interest rate swap loss/(gain) transferred to Interest and finance costs from Other Comprehensive Income (Note 18)
   
73
     
-
 
Amortization of debt issuance costs
   
1,367
     
2,575
 
Other bank and finance charges
   
675
     
846
 
Interest and finance costs
 
$
30,338
   
$
43,826
 

F-17

STAR BULK CARRIERS CORP.
Notes to Unaudited Interim Condensed Consolidated Financial Statements June 30, 2019
(Expressed in thousands of U.S. dollars except for share and per share data, unless otherwise stated)

9.
Long-term Debt - continued:

During the six-month periods ended June 30, 2018 and 2019, $21 and $80 of unamortized debt issuance costs were written off and included under “Loss on debt extinguishment” in the consolidated unaudited interim condensed consolidated statements of operations. In addition, in connection with the refinancing of the credit facilities as described above, we incurred expenses of $115, which are also included under “Loss on debt extinguishment” in the unaudited interim condensed consolidated statements of operations for the six-month period ended June 30, 2019.

10.
Preferred and Common Shares and Additional Paid-in Capital:

Details of the Company’s Preferred and Common Shares are discussed in Note 9 of the Company’s consolidated financial statements for the year ended December 31, 2018, included in the 2018 Annual Report.

In January 2019, the Company issued 999,336 common shares in connection with the acquisition of the Star Janni and the Star Marianne (Note 5).

Pursuant to the Company’s share repurchase program, during the six month period ended June 30, 2019, the Company repurchased 1,535,322 of its common shares in open market transactions at an average price of $7.45 for an aggregate consideration of $11,467. The respective repurchased shares along with the 341,363 shares repurchased in 2018 were cancelled and removed from the Company’s share capital as of June 30, 2019.

11.
Earnings / (Loss) per Share:

The computation of basic earnings/(loss) per share is based on the weighted average number of common shares outstanding for the six-months ended June 30, 2018 and 2019. The calculation of basic earnings per share does not consider the non-vested shares as outstanding until the time-based vesting restriction has lapsed. Diluted earnings/(loss) per share gives effect to stock awards, stock options and restricted stock units using the treasury stock method, unless the impact is anti-dilutive. Diluted earnings per share for the six-months ended June 30, 2018 does not include the effect of 104,250 non-vested share options outstanding as of that date, as that effect was anti-dilutive. Diluted net loss per share for the six months ended June 30, 2019 does not include the effect of the 956,500 non-vested shares and of the 104,250 non-vested share options outstanding as that date, as their effect was anti-dilutive.

The Company calculates basic and diluted earnings / (loss) per share as follows:
  
   
Six months ended June 30,
 
   
2018
   
2019
 
Income / (Loss) :
           
Net income / (loss)
 
$
20,628
   
$
(45,515
)
                 
Basic earnings / (loss) per share:
               
Weighted average common shares outstanding, basic
   
64,170,654
     
92,457,415
 
Basic earnings / (loss) per share
 
$
0.32
   
$
(0.49
)
                 
Effect of dilutive securities:
               
Dillutive effect of non vested shares
   
298,206
     
-
 
Weighted average common shares outstanding, diluted
   
64,468,860
     
92,457,415
 
                 
Diluted earnings / (loss) per share
 
$
0.32
   
$
(0.49
)

F-18

STAR BULK CARRIERS CORP.
Notes to Unaudited Interim Condensed Consolidated Financial Statements June 30, 2019
(Expressed in thousands of U.S. dollars except for share and per share data, unless otherwise stated)

12.
Equity Incentive Plans:

Details of the Company’s Equity Incentive Plans and share awards granted up to December 31, 2018 are discussed in Note 12 of the Company’s consolidated financial statements for the year ended December 31, 2018, included in the 2018 Annual Report.

On January 7, 2019, the Company’s Board of Directors and Compensation Committee established an incentive program for key employees, pursuant to which an aggregate of 4,000,000 restricted share units (each, a “RSU”) will be issued. Each RSU represents, upon vesting, a right for the relevant beneficiary to receive one common share of the Company. The RSUs are subject to the satisfaction of certain performance conditions, which apply if the Company’s fleet performs better than relevant dry bulk charter rate indices as reported by the Baltic Exchange (the “Indices”) during 2020 and 2021. The RSUs start to vest if the Company’s fleet performs better than the Indices by at least $120,000, and vest in increasing amounts if and to the extent the performance of the Company’s fleet exceeds the performance that would have been derived based on the Indices by up to an aggregate of $300,000. As of June 30, 2019, the Company takes the view that the likelihood of vesting of these RSUs does not meet a “more likely than not” standard under US GAAP, and as a result no charge is amortized through the Company’s statement of operations, until vesting becomes probable. Subject to the vesting conditions being met on April 30, 2021 and April 30, 2022 (each, a “Vesting Date”) two million RSUs will vest on each Vesting Date, and the relevant common shares of the Company will be issued and distributed to the relevant beneficiaries as per the allocation of the Board of Directors. Any non-vested RSUs at the applicable Vesting Date will be cancelled.

On May 22, 2019, the Company’s Board of Directors adopted the 2019 Equity Incentive Plan (the “2019 Plan”) and reserved for issuance 900,000 common shares thereunder. The terms and conditions of the 2019 Plan are substantially similar to the terms and conditions of the Company’s previous equity incentive plans. On the same date, 885,000 restricted common shares were granted to certain of the Company’s directors, officers and employees of which 685,462 restricted common shares vest in August 2019, 99,769 restricted common shares vest in August 2020 and the remaining 99,769 restricted common shares vest in August 2022.  The fair value of each share was $8.13, based on the closing price of our common shares on May 22, 2019.

All non-vested shares and options vest according to the terms and conditions of the applicable award agreements. The grantee does not have the right to vote the non-vested shares or exercise any right as a shareholder of the non-vested shares, although the issued and non-vested shares pay dividends as declared.  The dividends with respect to these shares are forfeitable if the service conditions are not fulfilled.  Share options have no voting or other shareholder rights. For the six-months ended June 30, 2018 and 2019, the Company paid no dividends on non-vested shares.

The Company currently expects that there will be no forfeitures of non-vested shares or options. The shares which are issued in accordance with the terms of the Company’s equity incentive plans or awards remain restricted until they vest.  For the six-month periods ended June 30, 2018 and 2019, the total share-based compensation cost was $5,011 and $2,857, respectively, included under “General and administrative expenses” in the unaudited interim condensed consolidated statements of operations.

F-19

STAR BULK CARRIERS CORP.
Notes to Unaudited Interim Condensed Consolidated Financial Statements June 30, 2019
(Expressed in thousands of U.S. dollars except for share and per share data, unless otherwise stated)

12.
Equity Incentive Plans - continued:

A summary of the status of the Company’s non-vested share options and restricted shares as of June 30, 2019 and the movement during the six-month period ended June 30, 2019 is presented below.

Options
 
Number of
options
   
Weighted average
exercise price
   
Weighted Average
Grant Date Fair Value
 
Outstanding at beginning of period
   
104,250
   
$
27.5
   
$
7.0605
 
Granted
   
-
     
-
     
-
 
Vested
   
-
     
-
     
-
 
Outstanding at end of period
   
104,250
   
$
27.5
   
$
7.0605
 

Unvested shares
 
Number of
shares
   
Weighted
Average
Grant
Date Fair
Value
 
Unvested as at January 1, 2019
   
143,000
   
$
12.49
 
Granted
   
885,000
     
8.13
 
Vested
   
(71,500
)
   
12.49
 
Unvested as at June 30, 2019
   
956,500
   
$
8.46
 

The estimated compensation cost relating to non-vested restricted share awards and share options not yet recognized was $5,195 and $116, respectively, as of June 30, 2019 and is expected to be recognized over the weighted average period of 0.89 years and 0.79 years, respectively.

F-20