If this Form is filed to register additional securities for an offering pursuant to Rule 462(b) under the Securities Act, please check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering. [  ]

 

If this Form is a registration statement pursuant to General Instruction I.C. or a post-effective amendment thereto that shall become effective upon filing with the Commission pursuant to Rule 462(e) under the Securities Act, check the following box. [X]

 

If this Form is a post-effective amendment to a registration statement filed pursuant to General Instruction I.C. filed to register additional securities or additional classes of securities pursuant to Rule 413(b) under the Securities Act, check the following box. [  ]

 

 

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CALCULATION OF REGISTRATION FEE

________________________________________________________________________________________________________

Title of Each Class of Securities to be Registered	Amount to be Registered		Proposed Maximum Aggregate Offering Price	Amount of Registration Fee
Class A Common Shares, par value $0.01 per share	1,440,248		$53,353,987(1)	$2,096.81(2)

Total

1,440,248

$53,353,987(1)

$2,096.81

 

 

(1)

Estimated solely for the purpose of calculating the registration fee pursuant to Rules 457(c) of the Securities Act of 1933, as amended (the “Securities Act”), based upon the average of the high and low sales prices on the New York Stock Exchange on June 12, 2008 of the Common Shares of the Registrant.

 

(2)	Determined in accordance with Section 6(b) of the Securities Act to be $2,096.81, which is equal to 0.00003930 multiplied by the proposed maximum aggregate offering price of $53,353,987.

 

 

 

 

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Subject to completion dated June 13, 2008

 

Up to 1,440,248 Class A Common Shares

 

 

 

 

 

Excel Maritime Carriers Ltd.

 

 

Through this prospectus, the selling securityholders are offering up to

1,440,248 Class A common shares

 

 

This prospectus relates to the proposed sale from time to time by certain holders listed below under the section entitled “Selling Shareholders” of up to 1,440,248 Class A common shares of Excel Maritime Carriers Ltd., or Excel.  The selling shareholders may sell any or all of their Excel Class A common shares on any stock exchange, market or trading facility on which the shares are traded or in privately negotiated transactions at fixed prices that may be changed, at market prices prevailing at the time of sale or at negotiated prices.   Information on these selling shareholders and the times and manner in which they may offer and sell Excel Class A common shares is described under the sections entitled “Selling Shareholders” and “Plan of Distribution” in this prospectus.  We are not selling any Excel Class A common shares under this prospectus and will not receive any of the proceeds from the sale of these Excel Class A common shares by the selling shareholders.

 

Our Class A common stock is listed on the New York Stock Exchange under the symbol “EXM.”  On June 12, 2008, the last reported sale price of our Class A common stock was $36.28 per share.  Class B shareholders together own 100% of the shares of our issued and outstanding Class B common stock, representing approximately 76% of the voting power of our outstanding capital stock.

 

Investing in our securities involves significant risks.  See the section titled “Risk Factors” beginning on page 11 of this prospectus.  You should read this prospectus and any accompanying prospectus supplement carefully before you make your investment decision.

 

_________________

 

The securities issued under this prospectus may be offered directly or through underwriters, agents or dealers as set forth in the prospectus.

 

NEITHER THE SECURITIES AND EXCHANGE COMMISSION NOR ANY STATE SECURITIES COMMISSION HAS APPROVED OR DISAPPROVED THESE SECURITIES, OR DETERMINED IF THIS PROSPECTUS IS TRUTHFUL OR COMPLETE.  ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.

 

The date of this prospectus is June 13, 2008

 

 

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TABLE OF CONTENTS

 

 

ABOUT THIS PROSPECTUS	ii
PROSPECTUS SUMMARY	1
RISK FACTORS	11
FORWARD LOOKING STATEMENTS	28
PER SHARE MARKET PRICE INFORMATION	29
USE OF PROCEEDS	30
CAPITALIZATION	31
ENFORCEMENT OF CIVIL LIABILITIES	32
TAXATION	33
DESCRIPTION OF CAPITAL STOCK	39
SELLING SHAREHOLDERS	42
PLAN OF DISTRIBUTION	43
EXPENSES	45
LEGAL MATTERS	45
EXPERTS	45
WHERE YOU CAN FIND ADDITIONAL  INFORMATION	45

 

 

 

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ABOUT THIS PROSPECTUS

 

In this prospectus, “we”, “us”, “our” and the “Company” all refer to Excel Maritime Carriers Ltd.

 

Unless otherwise indicated, all dollar references in this prospectus are to U.S. dollars and financial information presented in this prospectus that is derived from financial statements incorporated by reference is prepared in accordance with accounting principles generally accepted in the United States.

 

This prospectus is part of a registration statement that we filed with the Securities and Exchange Commission, or Commission.  You should read carefully both this prospectus and the additional information described below.

 

This prospectus is part of a registration statement that we filed with the Commission utilizing a shelf registration process.  Under this shelf registration process, the selling securityholders may sell, from time to time, shares of our Class A common stock.  This prospectus provides you with a general description of shares of our Class A common stock.  When the selling securityholders sell the shares of our Class A common stock registered under the registration statement of which this prospectus is part, we may provide a prospectus supplement that will contain specific information about the terms of shares of our Class A common stock offered, and about their offering.  A prospectus supplement may also add, supplement, update or change information in this prospectus.

 

In addition, this prospectus does not contain all the information provided in the registration statement that we filed with the Commission.  For further information about us or the securities offered hereby, you should refer to that registration statement, which you can obtain from the Commission as described below under “Where You Can Find More Information.”

 

 

 

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PROSPECTUS SUMMARY

 

This section summarizes some of the information that is contained later in this prospectus or in other documents incorporated by reference into this prospectus.  As an investor or prospective investor, you should review carefully the risk factors and the more detailed information that appears later in this prospectus or is contained in the documents that we incorporate by reference into the prospectus.

 

Our Company

 

We are an international provider of dry bulk seaborne transportation services, with a focus on the transport of iron ore, coal and grain, collectively referred to as “major bulks,” and steel products, fertilizers, cement, bauxite, sugar and scrap metal, collectively referred to as “minor bulks.”  Our Class A common stock trades on the New York Stock Exchange, or NYSE under the symbol “EXM.”  We recently completed an acquisition of Quintana Maritime Limited, or Quintana, formerly a NASDAQ-listed international provider of dry bulk seaborne transportation services, in which Quintana merged with one of our wholly-owned subsidiaries.

 

We currently operate a fleet of 47 dry bulk vessels consisting of four Capesize, 14 Kamsarmax, 21 Panamax, six Handymax, and two Supramax vessels, representing a total carrying capacity of approximately 3.7 million dwt.  We acquired 29 of our vessels in the merger with Quintana, and we own all of the 47 vessels we operate except for seven Panamax vessels that we operate under bareboat charters pursuant to sale and lease-back transactions entered into by Quintana in July 2007.  Currently, the average age of our vessels is approximately 8.6 years.

 

In addition, we have acquired Quintana’s interests in seven joint venture vessel-owning companies that were each formed in 2007 to purchase a newbuilding Capesize drybulk vessel.  We own a 50% interest in six of these joint venture companies and a 42.8% interest in the other.  The seven new vessels are expected to be delivered to the joint ventures during 2010 and will have a total carrying capacity of approximately 1.3 million dwt. We expect to manage these vessels on behalf of the joint ventures and to receive management fees from the joint ventures.  For four of these vessels, no refund guarantee has yet been received. Until such time as a refund guarantee is received, no installments will be paid for these vessels and as a result, these vessels may be delivered late or may never be delivered at all.  We have also assumed Quintana’s contract to purchase a Capesize vessel with expected delivery in the fourth quarter of 2008.

 

The technical management of our fleet is conducted by our wholly-owned subsidiary Maryville Maritime Inc. (“Maryville”).

 

 

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Our Fleet

 

The following is a list of the 47 vessels in our current fleet as of June 1, 2008, all of which are dry bulk carriers:

 

Vessel Name	DWT	Year Built	Type
Iron Miner	177,000	2007	Capesize
Lowlands Beilun	170,162	1999	Capesize
Iron Beauty	165,500	2001	Capesize
Kirmar	165,500	2001	Capesize
Iron Bradyn	82,769	2005	Kamsarmax
Coal Gypsy	82,300	2006	Kamsarmax
Coal Hunter	82,300	2006	Kamsarmax
Iron Brooke	82,300	2007	Kamsarmax
Iron Lindrew	82,300	2007	Kamsarmax
Iron Manolis	82,300	2007	Kamsarmax
Pascha	82,300	2006	Kamsarmax
Santa Barbara	82,266	2006	Kamsarmax
Iron Fuzeyya	82,229	2006	Kamsarmax
Ore Hansa	82,229	2006	Kamsarmax
Iron Kalypso	82,204	2006	Kamsarmax
Iron Anne	82,000	2006	Kamsarmax
Iron Bill	82,000	2006	Kamsarmax
Iron Vassilis	82,000	2006	Kamsarmax
Grain Express	76,466	2004	Panamax
Iron Knight	76,429	2004	Panamax
Grain Harvester	76,417	2004	Panamax
Isminaki	74,577	1998	Panamax
Angela Star	73,798	1998	Panamax
Elinakos	73,751	1997	Panamax
Coal Glory (1)	73,670	1995	Panamax
Fearless I (1)	73,427	1997	Panamax
Barbara (1)	73,390	1997	Panamax
Linda Leah (1)	73,390	1997	Panamax
King Coal (1)	72,873	1997	Panamax
Coal Age (1)	72,861	1997	Panamax
Iron Man (1)	72,861	1997	Panamax
Rodon	73,670	1993	Panamax
Coal Pride	72,600	1999	Panamax
Happy Day	71,694	1997	Panamax
Birthday	71,504	1993	Panamax
Renuar	70,128	1993	Panamax
Powerful	70,083	1994	Panamax
Fortezza	69,634	1993	Panamax
First Endeavour	69,111	1994	Panamax
July M	55,567	2005	Supramax
Mairouli	53,206	2005	Supramax
Emerald	45,588	1998	Handymax
Marybelle	42,552	1987	Handymax
Attractive	41,524	1985	Handymax
Lady	41,090	1985	Handymax
Princess I	38,858	1994	Handymax
Swift	37,687	1984	Handymax
TOTAL DWT	3,718,065

 

(1)	Indicates a vessel sold to a third party in July 2007 and subsequently leased back to the Company under a bareboat charter.

 

 

 

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Our Business Strategy

 

We intend to increase our profitability and strengthen our core business through the following principal strategies:

 

Fleet Expansion and Reduction in Average Age.  We intend to continue to grow and, over time, reduce the average age of our fleet. Most significantly, our recent merger with Quintana has allowed us to add 29 young and well maintained dry bulk carriers to our fleet.  Our acquisition candidates generally are chosen based on economic and technical criteria.  We also expect to explore opportunities to sell some of our older vessels at attractive prices.

 

Balanced Fleet Deployment Strategy. Our fleet deployment strategy seeks to maximize charter revenue throughout industry cycles while maintaining cash flow stability.  We intend to achieve this through a balanced portfolio of spot and period time charters.  As of June 1, 2008, 11 vessels in our fleet are on spot or short duration charters and 36 are on period time charters.  Upon completion of their current charters, our recently acquired vessels may or may not be employed on spot / short-duration time charters, depending on the market conditions at the time.  We currently expect that the combined fleet charter coverage, following the acquisition of Quintana’s fleet, is expected to be approximately 75% for the second half of 2008 with projected net revenues under these time charters for the second-half of 2008 being approximately $188 million.

 

Capitalizing on our Established Reputation.  We believe that we have established a reputation in the international shipping community for maintaining high standards of performance, reliability and safety.  We further believe that our acquisition of Quintana will only enhance our reputation for maintaining such high standards.  In addition, Maryville carries the distinction of being one of the first Greece-based ship management companies to have been certified ISO 14001 compliant by Bureau Veritas.

 

Expansion of Operations and Client Base. We aim to become one of the world's premier full service dry bulk shipping companies. The acquisition of Quintana was an important step towards achieving this goal. Following the merger, we now operate a fleet of 47 vessels with a total carrying capacity of 3.7 million dwt and a current average age of approximately 8.5 years, which makes us one of the largest dry bulk shipping companies in the industry and gives us the largest dry bulk fleet by dwt operated by any U.S.-listed company. We also anticipate considerable synergy benefits from the merger.

 

Competitive Strengths

 

We believe that we possess a number of competitive strengths in our industry:

 

Experienced Management Team.  Our management team has significant experience in operating dry bulk carriers and expertise in all aspects of commercial, technical, operational and financial areas of our business, promoting a focused marketing effort, tight quality and cost controls, and effective operations and safety monitoring.  We have added to our ranks several experienced members of the previous Quintana management team, including our new president and  Chief Executive Officer, Mr. Stamatis Molaris.

 

Strong Customer Relationships.  We have strong relationships with our customers and charterers that we believe are the result of the quality of our fleet and our reputation for quality vessel operations.  Through our wholly-owned management subsidiary, Maryville, we have many long-established customer relationships, and our management believes it is well regarded within the international shipping community.  During the past 16 years, vessels managed by Maryville have been repeatedly chartered by subsidiaries of major dry bulk operators, including Oldendorff Carriers GMBH & Co. KG and Rizzo Bottiglieri De Carlini Armatori Spa. In 2007, we derived approximately 44% of our gross revenues from five charterers (out of which 11.5% was derived from a single charterer, Armada (Singapore) Pte Ltd.).  However, we expect that our customer base will broaden significantly following the merger.  In addition, we anticipate opportunities to establish or strengthen relationships with Quintana's existing customers, such as EDF Trading, BHP Billiton, Bunge, and Cargill.

 

 

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Cost Efficient Operations.  We have historically operated our fleet on a high quality, cost effective basis by carefully selecting quality second hand vessels, competitively commissioning and actively supervising cost efficient shipyards to perform repair, reconditioning and systems upgrading work, together with a proactive preventive maintenance program both ashore and at sea, and employing professional, well-trained masters, officers and crews.  We believe that this combination has allowed us to minimize off-hire periods, effectively manage insurance costs and control overall operating expenses.  We expect to achieve further cost efficiencies following our merger with Quintana, including improved purchasing and placing power, enhanced fleet utilization (e.g., fewer dry docking days) and lower general and administrative expenses through the elimination of redundancies, which are expected to yield annual savings of between $15 million and $20 million.

 

Corporate Structure

 

Excel Maritime Carriers Ltd. is a holding company, incorporated under the laws of The Republic of Liberia on November 2, 1988.  We own our vessel-owning subsidiaries through Point Holdings Ltd., a wholly-owned subsidiary incorporated in Liberia and Bird Acquisition Corp., a wholly-owned subsidiary incorporated in the Marshall Islands.  We own each of our vessels through separate wholly-owned subsidiaries.  In addition, we own approximately 18.9% of the outstanding common stock of Oceanaut Inc., a corporation in the development stage, organized in May 2006 under the laws of the Republic of the Marshall Islands.  Oceanaut is a blank check company formed to acquire vessels or one or more operating businesses in the shipping industry.  On April 15, 2008, we completed our merger with Quintana, which is described below in “—Recent Developments.”

 

We maintain our principal executive offices at 17th km National Road Athens, Lamia & Finikos Street, 145-64 Nea Kifisia, Athens, Greece.  Our telephone number at that address is (011)(30) (210) 620-9520.  In addition, our registered office is located at 14 Par-la-Villa Road, Hamilton HM, JX Bermuda.  Our website is www.excelmaritime.com. As of September 15, 2005, our Class A common shares have been listed on the NYSE under the symbol “EXM.”  Previously, our shares were listed on the American Stock Exchange under the symbol “EXM.”

 

The Securities We Are Registering

           We are using this prospectus to register up to 1,440,248 Class A common shares, par value $ 0.01 per share, to be sold by the selling shareholders listed herein.

 

 

 

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Our vessels may suffer damage and we may face unexpected drydocking costs which could affect our cash flow and financial condition.

If our vessels suffer damage, they may need to be repaired at a drydocking facility for an indeterminable period of time. The costs of drydock repairs are unpredictable and can be substantial. We may have to pay drydocking costs that our insurance does not cover. This would decrease earnings.

Risk of loss and lack of adequate insurance may affect our results.

Adverse weather conditions, mechanical failures, human error, war, terrorism, piracy and other circumstances and events create an inherent risk of catastrophic marine disasters and property loss in the operation of any ocean-going vessel. In addition, business interruptions may occur due to political circumstances in foreign countries, hostilities, labour strikes, and boycotts. Any such event may result in loss of revenues or increased costs.

Our business is affected by a number of risks, including mechanical failure of our vessels, human error, collisions, property loss to the vessels, cargo loss or damage, adverse weather conditions, piracy, terrorism, and business interruption due to political circumstances in foreign countries, hostilities and labor strikes. Any such event may result in loss of revenues or increased costs. In addition, the operation of any ocean-going vessel is subject to the inherent possibility of catastrophic marine disaster, including oil spills and other environmental mishaps, severe weather conditions, and the liabilities arising from owning and operating vessels in international trade. The United States Oil Pollution Act of 1990, or OPA, by imposing potentially unlimited liability upon owners, operators and bareboat charterers for certain oil pollution accidents in the U.S., has made liability insurance more expensive for ship owners and operators and has also caused insurers to consider reducing available liability coverage.

We carry insurance to protect against most of the accident-related risks involved in the conduct of our business and we maintain environmental damage and pollution insurance coverage. We do not carry insurance covering the loss of revenue resulting from vessel off-hire time. We believe that our insurance coverage is adequate to protect us against most accident-related risks involved in the conduct of our business and that we maintain appropriate levels of environmental damage and pollution insurance coverage. Currently, the available amount of coverage for pollution is $1.0 billion for dry bulk carriers per vessel per incident. However, there can be no assurance that all risks are adequately insured against, that any particular claim will be paid or that we will be able to procure adequate insurance coverage at commercially reasonable rates in the future. More stringent environmental regulations in the past have resulted in increased costs for insurance against the risk of environmental damage or pollution. In the future, we may be unable to procure adequate insurance coverage to protect us against environmental damage or pollution.

Because most of our employees are covered by industry-wide collective bargaining agreements, failure of industry groups to renew those agreements may disrupt our operations and adversely affect our earnings.

We currently employ approximately 1,100 seafarers and 126 land-based employees in our Athens office. The 126 employees in Athens are covered by industry-wide collective bargaining agreements that set basic employment standards. We cannot assure you that these agreements will prevent labour interruptions. Any labour interruptions could disrupt our operations and harm our financial performance.

Because we generate all of our revenues in U.S. dollars but incur a significant portion of our expenses in other currencies, exchange rate fluctuations could hurt our results of operations.

We generate all of our revenues in U.S. dollars but incur approximately 20% of our vessel operating expenses in currencies other than U.S. dollars. This variation in operating revenues and expenses could lead to fluctuations in net income due to changes in the value of the U.S. dollar relative to the other currencies, in particular the Japanese yen, the Euro, the Singapore dollar and the British pound sterling. Expenses incurred in foreign currencies against which the U.S. dollar falls in value may increase as a result of these fluctuations, therefore decreasing our net income. We do not currently hedge against these currency fluctuation risks. Our results of operations could suffer as a result.

 

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We may not be exempt from Liberian taxation which would materially reduce our net income and cash flow by the amount of the applicable tax.

The Republic of Liberia enacted a new income tax law generally effective as of January 1, 2001, (the “New Act”), which repealed in its entirety the prior income tax law (the “Prior Law”), in effect since 1977, pursuant to which we and our Liberian subsidiaries, as non-resident domestic corporations, were wholly exempt from Liberian tax.

In 2004, the Liberian Ministry of Finance issued regulations pursuant to which a non-resident domestic corporation engaged in international shipping such as ourselves will not be subject to tax under the New Act retroactive to January 1, 2001 (the “New Regulations”).  In addition, the Liberian Ministry of Justice issued an opinion that the New Regulations were a valid exercise of the regulatory authority of the Ministry of Finance. Therefore, assuming that the New Regulations are valid, we and our Liberian subsidiaries will be wholly exempt from tax as under the Prior Law. If we were subject to Liberian income tax under the New Act, we and our Liberian subsidiaries would be subject to tax at a rate of 35% on our worldwide income.  As a result, our net income and cash flow would be materially reduced by the amount of the applicable tax. In addition, our shareholders would be subject to Liberian withholding tax on dividends at rates ranging from 15% to 20%.

U.S. tax authorities could treat us as a “passive foreign investment company,” which could have adverse U.S. federal income tax consequences to U.S. holders.

A foreign corporation will be treated as a "passive foreign investment company," or PFIC, for U.S. federal income tax purposes if either (1) at least 75% of its gross income for any taxable year consists of certain types of "passive income" or (2) at least 50% of the average value of the corporation's assets produce or are held for the production of those types of "passive income."  For purposes of these tests, "passive income" includes dividends, interest, and gains from the sale or exchange of investment property and rents and royalties other than rents and royalties which are received from unrelated parties in connection with the active conduct of a trade or business.  For purposes of these tests, income derived from the performance of services does not constitute "passive income."  U.S. shareholders of a PFIC are subject to a disadvantageous U.S. federal income tax regime with respect to the income derived by the PFIC, the distributions they receive from the PFIC and the gain, if any, they derive from the sale or other disposition of their shares in the PFIC.

Based on our proposed method of operation, we do not believe that we will be a PFIC with respect to any taxable year. In this regard, we intend to treat the gross income we derive or are deemed to derive from our time chartering activities as services income, rather than rental income.  Accordingly, we believe that our income from our time chartering activities does not constitute "passive income," and the assets that we own and operate in connection with the production of that income do not constitute passive assets.

There is, however, no direct legal authority under the PFIC rules addressing our proposed method of operation. Accordingly, no assurance can be given that the U.S. Internal Revenue Service, or IRS, or a court of law will accept our position, and there is a risk that the IRS or a court of law could determine that we are a PFIC.  Moreover, no assurance can be given that we would not constitute a PFIC for any future taxable year if there were to be changes in the nature and extent of our operations.

If the IRS were to find that we are or have been a PFIC for any taxable year, our U.S. shareholders will face adverse U.S. tax consequences.  Under the PFIC rules, unless those shareholders make an election available under the Code (which election could itself have adverse consequences for such shareholders, as discussed below under “Taxation”), such shareholders would be liable to pay U.S. federal income tax at the then prevailing income tax rates on ordinary income plus interest upon excess distributions and upon any gain from the disposition of our common shares, as if the excess distribution or gain had been recognized ratably over the shareholder's holding period of our common shares.

Please see the section of this prospectus entitled “Taxation—U.S. Federal Income Tax Considerations” beginning on page 33 for a more comprehensive discussion of the U.S. federal income tax consequences to U.S. shareholders if we are a passive foreign investment company.

We may have to pay tax on United States source income, which would reduce our earnings.

 

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Under the United States Internal Revenue Code of 1986, or the Code, 50% of the gross shipping income of a vessel owning or chartering corporation, such as ourselves and our subsidiaries, that is attributable to transportation that begins or ends, but that does not both begin and end, in the United States may be subject to a 4% United States federal income tax without allowance for deduction, unless that corporation qualifies for exemption from tax under section 883 of the Code and the applicable Treasury Regulations recently promulgated thereunder.

We do not believe that we are currently entitled to exemption under Section 883 for any taxable year.  Therefore, we are subject to an effective 2% United States federal income tax on the shipping income that we derive during the year that are attributable to the transport or cargoes to or from the United States.

Oceanaut, Inc., a company in which we own stock, may complete an acquisition that would result in Oceanaut competing with us.

We own 18.9% of Oceanaut, Inc., or Oceanaut, a newly organized special purpose acquisition company formed for the purpose of acquiring, through a merger, capital stock exchange, asset acquisition, stock purchase or other similar business combination, vessels or one or more operating businesses in the shipping industry, including the dry bulk industry. Until Oceanaut makes such an acquisition, our management also acts as management for Oceanaut. We have the right of first refusal of any proposed acquisition in the dry bulk industry by Oceanaut, pursuant to which our independent directors have the right to review any proposed acquisition to determine whether the proposed transaction would be a transaction that we, rather than Oceanaut, should complete. If the proposed transaction involves assets in the dry bulk industry and we do not exercise our right of first refusal, it is possible that Oceanaut may compete with us.

If Oceanaut does not complete a business combination within the time limits required by the terms of its public offering and is liquidated, we will experience a loss of some of our investment in Oceanaut and we may be required to cover any shortfall in Oceanaut’s trust account for third party claims.

We have invested a total of $11 million into Oceanaut, for which we acquired 18.9% of Oceanaut’s common stock, 1,125,000 units, each of which consists of one share of common stock and one warrant, and 2,000,000 warrants. 500,000 of the units and 2,000,000 warrants, which we acquired for $6 million, have no liquidation rights. This means that if Oceanaut fails to perform a business combination within the time limits (September 6, 2008 or March 6, 2009 if certain extension criteria have been satisfied) required by the terms of its public offering and Oceanaut is liquidated, we would lose our $6 million investment in the units and warrants. In addition, in the event of a dissolution and liquidation of Oceanaut, we are required to cover any shortfall in Oceanaut’s trust account resulting from any claims of vendors, prospective target businesses or other entities for services rendered or products sold to Oceanaut, if such vendor or prospective target business or other third party does not execute a valid and enforceable waiver of any rights or claims to the trust account.

As a holding company, our only source of cash is distributions from our subsidiaries.

We are a holding company with no operations of our own and we conduct all of our business through our subsidiaries.  The Class A common shares are exclusively obligations of Excel Maritime Carriers Ltd.  We are wholly dependent on the cash flow of our subsidiaries and dividends and distributions to us from our subsidiaries in order to service our current indebtedness, and any of our future obligations.  Our subsidiaries are separate and distinct legal entities and have no obligation, contingent or otherwise, to pay any dividends pursuant to the Class A common shares or to make any funds available therefor.  The ability of our subsidiaries to pay such dividends and distributions will be subject to, among other things, statutory or contractual restrictions including those restriction provisions contained in our subsidiaries’ indebtedness.  We cannot assure you that our subsidiaries will generate cash flow sufficient to pay dividends or distributions to us in order to declare dividends under our dividend policy.

 

 

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We have a substantial amount of indebtedness, which may adversely affect our cash flow and our ability to operate our business, remain in compliance with debt covenants of future credit facilities and make payments on our debt.

As of June 1, 2008, after giving effect to the recently completed offering and drawdown of the $1.4 billion credit facility following the acquisition of Quintana, we had total debt of approximately $1,668 million, including the $150 million of convertible notes.  Our level of debt could have important consequences for you, including the following:

·	we may have difficulty borrowing money in the future for acquisitions, capital expenditures or to meet our operating expenses or other general corporate obligations;

·	we will need to use a substantial portion of our cash flows to pay interest on our debt, which will reduce the amount of money we have for operations, working capital, capital expenditures, expansion, acquisitions or general corporate or other business activities;

·	we may have a higher level of debt than some of our competitors, which may put us at a competitive disadvantage;

·	we may be more vulnerable to economic downturns and adverse developments in our industry or the economy in general; and

·	our debt level, and the financial covenants in our various debt agreements, could limit our flexibility in planning for, or reacting to, changes in our business and the industry in which we operate.

To service our indebtedness, we will require a significant amount of cash.  Our ability to generate cash depends on many factors beyond our control, and any failure to meet our debt obligations could harm our business, financial condition and results of operations.

Our ability to make scheduled payments on and to refinance our indebtedness and to fund future capital expenditures will depend on our ability to generate cash from operations in the future.  This, to a certain extent, is subject to general economic, financial, competitive, legislative, regulatory and other factors that are beyond our control.  We cannot assure you that our business will generate sufficient cash flow from operations in an amount sufficient to enable us to pay our indebtedness or to fund our other liquidity needs.  If our cash flow and capital resources are insufficient to fund our debt obligations, we may be forced to sell assets, seek additional equity or debt capital or restructure our debt.  We cannot assure you that any of these remedies could, if necessary, be effected on commercially reasonable terms, or at all.  In addition, any failure to make scheduled payments of interest and principal on any outstanding indebtedness would likely result in a reduction of our credit rating, which could harm our ability to incur additional indebtedness on acceptable terms.  Our cash flow and capital resources may be insufficient for payment of interest on and principal of our debt in the future and any such alternative measures may be unsuccessful or may not permit us to meet scheduled debt service obligations, which could cause us to default on our obligations and could impair our liquidity.

We have taken on substantial additional indebtedness to finance our acquisition of Quintana, and this additional indebtedness, together with the restrictions and limitations that will be contained in the credit agreement we expect to enter into, could significantly impair our ability to operate our business.

In connection with the merger, we entered into a $1.4 billion senior secured credit facility that consists of a $1.0 billion term loan and a $400 million revolving loan.  The security for the credit facility includes, among other assets, mortgages on certain vessels previously owned by us and the vessels previously owned by Quintana and assignments of earnings with respect to certain vessels previously owned by us and the vessels previously operated by Quintana. Such increased indebtedness could limit our financial and operating flexibility, by requiring us to dedicate a substantial portion of our cash flow from operations to the repayment of our debt and the interest on its debt, making it more difficult to obtain additional financing on favorable terms, limiting our ability to capitalize on significant business opportunities and making us more vulnerable to economic downturns.

 

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The credit facility contains covenants that, among other things, will limit our ability and the ability of certain of our subsidiaries to:

 

·	incur additional indebtedness;

·	pay dividends;

·	engage in mergers, acquisitions or consolidations;

·	create liens on assets;

·	enter into sale-leaseback transactions; and

·	enter into transactions with affiliates.

 

In addition, we will be required to comply with certain financial covenants in connection with the credit facility.  Failure to comply with any of these covenants could result in a default under the credit facility.  A default would permit lenders to accelerate the maturity of the debt and to foreclose upon any collateral securing the debt.  Under such circumstances, we may not have sufficient funds or other resources to satisfy all of its obligations.  In addition, the limitations imposed on our ability to incur additional debt and to take other action might significantly impair our ability to obtain other financing.  There can be no assurance that we will be granted waivers or amendments to these covenants if for any reason we are unable to comply with such covenants or that we will be able to refinance its debt on terms acceptable to us, or at all.

Our substantial operations outside the United States expose us to political, governmental and economic instability, which could harm our operations.

Because our operations are primarily conducted outside of the United States, they may be affected by economic, political and governmental conditions in the countries where we are engaged in business or where our vessels are registered. Future hostilities or political instability in regions where we operate or may operate could have a material adverse effect on our business, results of operations and ability to pay dividends. In addition, tariffs, trade embargoes and other economic sanctions by the United States or other countries against countries where our vessels trade may limit trading activities with those countries, which could also harm our business, financial condition, results of operations and ability to pay dividends.

A decline in the market value of our vessels could lead to a default under our loan agreements and the loss of our vessels.

When the market value of a vessel declines, it reduces our ability to refinance the outstanding debt or obtain future financing. Also, declining vessel values could cause us to breach of some of the covenants under our financing agreements.  In such an event, if we are unable to pledge additional collateral, or obtain waivers from the lenders, the lenders could accelerate the debt and in general, if we are unable to service such accelerated debt, we may have vessels repossessed by our lenders.

Servicing our debt limits funds available for other purposes, and if we cannot service our debt, we may lose our vessels.

We must dedicate a large part of our cash flow from operations to paying principal and interest on our indebtedness. These payments limit the funds that are available to us for working capital, capital expenditures and other purposes and if we cannot service our debt, we may lose our vessels.

 

Restrictive covenants in the senior credit facility we executed in connection with our acquisition of Quintana (the “Credit Facility”) impose financial and other restrictions on us, including our ability to pay dividends.

 

Our Credit Facility imposes operating and financial restrictions on us and requires us to comply with certain financial covenants. These restrictions and covenants limit our ability to, among other things:

 

·	pay dividends if an event of default has occurred and is continuing under our proposed new revolving credit facility or if the payment of the dividend would result in an event of default;

·	incur additional indebtedness, including through the issuance of guarantees;

 

 

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·	change the flag, class or management of our vessels;

·	create liens on our assets;

·	sell our vessels without replacing such vessels or prepaying a portion of our loan;

·	merge or consolidate with, or transfer all or substantially all our assets to, another person; or

·	change our business.

 

Therefore, we may need to seek permission from our lenders in order to engage in some corporate actions. Our lenders’ interests may be different from ours and we cannot guarantee that we will be able to obtain our lenders’ consent when needed. If we do not comply with the restrictions and covenants in our revolving credit facility, we will not be able to pay dividends to you, finance our future operations, make acquisitions or pursue business opportunities.

Loan agreements may prohibit or impose certain conditions on the payment of dividends.

Certain of our subsidiaries have entered into loan facilities that contain a number of financial covenants and general covenants prohibit, among other things, a subsidiary from paying dividends without the consent of our lenders until the respective loan facility is paid in full. This prohibition on paying dividends means that these subsidiaries cannot pay dividends to us until the respective loan facilities are paid in full or with out the consent of our lenders, which in turn may affect our ability to make dividend payments to our shareholders. There can be no assurance that our subsidiaries will pay dividends to us or that we will make dividend payments to our shareholders even after all loan facilities are paid in full.

Class B shareholders can exert considerable control over us, which may limit future shareholders’ ability to influence our actions.

As of June 1, 2008, we had 135,326 Class B common shares issued and outstanding.  Our Class B common shares have 1,000 votes per share and our Class A common shares have one vote per share. Class B shareholders, including certain executive officers and directors, together own 100% of our issued and outstanding Class B common shares, representing approximately 76% of the voting power of our outstanding capital stock.

Because of the dual class structure of our capital stock, the holders of Class B common shares have the ability to control and will be able to control all matters submitted to our stockholders for approval even if they come to own less than 50% of our outstanding common shares. Even though we are not aware of any agreement, arrangement or understanding by the holders of our Class B common shares relating to the voting of their shares of common stock, the holders of our Class B common shares have the power to exert considerable influence over our actions.

As of June 1, 2008, Argon S.A. owned approximately 11.6% of our outstanding Class A common shares and none of our outstanding Class B common shares, representing approximately 2.8% of the total voting power of our outstanding capital stock.  Argon S.A. holds the shares pursuant to a trust in favor of Starling Trading Co., a corporation, whose sole shareholder is Ms. Ismini Panayotides, the adult daughter of our Chairman, Mr. Panayotides.  Ms. Panayotides has no power of voting or disposition of these shares, and she has disclaimed beneficial ownership of these shares.

 

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As of June 1, 2008, Boston Industries S.A. owned approximately 0.3% of our outstanding Class A common shares and approximately 41.1% of our outstanding Class B common shares, together representing approximately 31.2% of the total voting power of our outstanding capital stock.  Based on publicly available information, Boston Industries S.A. is controlled by Mrs. Mary Panayotides, the wife of our Chairman.  Our Chairman disclaims beneficial ownership of these shares.

As of June 1, 2008, our Chairman owned approximately 15.1% of our outstanding Class B common shares and through his controlling interest in Excel Management, 0.7% of our outstanding Class A common shares, representing approximately 11.6% of the total voting power of our capital stock. Under the anti-dilutive provisions of the management termination agreement between us and Excel Management, we are required to issue to Excel Management an addition 357,812 shares of our Class A common shares following the completion of the acquisition of Quintana.  After such issuance, Excel Management will own 656,215 shares of our Class A common shares, and our Chairman, through his controlling interest in Excel Management, will have beneficial ownership over stock representing 11.8% of our voting power.

Because we are a foreign corporation, you may not have the same rights that a shareholder in a U.S. corporation may have.

We are a Liberian corporation. Our articles of incorporation and bylaws and the Business Corporation Act of Liberia 1976 govern our affairs. While the Liberian Business Corporation Act resembles provisions of the corporation laws of a number of states in the United States, Liberian law does not as clearly establish your rights and the fiduciary responsibilities of our directors as do statutes and judicial precedent in some U.S. jurisdictions. However, while the Liberian courts generally follow U.S. court precedent, there have been few judicial cases in Liberia interpreting the Liberian Business Corporation Act. Investors may have more difficulty in protecting their interests in the face of actions by the management, directors or controlling shareholders than would shareholders of a corporation incorporated in a U.S. jurisdiction which has developed a substantial body of case law.

Risks Relating to our Class A Common Shares

Future sales of our Class A common stock or the issuance of other equity may adversely affect the market price of our Class A common stock.

Sales of our Class A common stock or other equity-related securities could depress the market price of our Class A common stock and impair our ability to raise capital through the sale of additional equity securities.  We cannot predict the effect that future sales of our Class A common stock or other equity-related securities would have on the market price of our Class A common stock.  The price of our Class A common stock could be affected by by hedging or arbitrage trading activity that we expect to develop involving our Class A common stock.

Our obligations to issue shares of Class A common stock to Excel Management Ltd. (“Excel Management”) under the terms of our management termination agreement are dilutive to our other investors.

In the management termination agreement that we entered into in early March 2005 with Excel Management, our previous vessel manager, we agreed to issue to Excel Management 205,442 shares of our Class A common stock, which, on March 2, 2005, was approximately 1.5% of the total number of shares of our outstanding Class A common stock.  On June 19, 2007 we issued to Excel Management 298,403 shares of our Class A common stock for approximately $2.0 million.  We are further required to issue to Excel Management, at any time that we issue additional shares of our Class A common stock to any third party for any reason, such number of additional shares of Class A common stock which, together with the shares of Class A common stock issued to Excel Management in the original issuance, equals 1.5% of our total outstanding Class A common stock after taking into account the third-party issuance and the shares to be issued to Excel Management under the anti-dilution provisions of the agreement.  We will not receive any consideration from Excel Management, other than that already received, for any shares of Class A common stock issued by us to Excel Management pursuant to an anti-dilution issuance. Our obligation with respect to anti-dilution issuances ends on December 31, 2008.  Issuances of shares of Class A common stock to Excel Management as a result of the original issuance and anti-dilution issuances would be dilutive to our shareholders.  As of December 31, 2007 we have issued to Excel Management 298,403 shares of our Class A common stock, consisting of the initial 205,442 shares plus the 92,961 anti-dilution shares required to be issued as a result of the March 21, 2005 share issuance to other third parties.  In addition, we are required to issue to Excel Management 357,812 shares of our Class A common stock under the anti-dilutive provisions of the management termination agreement as a result of our merger with Quintana.

 

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The price of our Class A common stock may be volatile.

The price of our Class A common stock prior to and after an offering may be volatile, and may fluctuate due to factors such as:

·	actual or anticipated fluctuations in quarterly and annual results;

·	mergers and strategic alliances in the shipping industry;

·	market conditions in the industry;

·	changes in government regulation;

·	fluctuations in our quarterly revenues and earnings and those of our publicly held competitors;

·	shortfalls in our operating results from levels forecast by securities analysts;

·	announcements concerning us or our competitors; and

·	the general state of the securities markets.

Future sales of our Class A common stock may depress our stock price.

The market price of our Class A common stock could decline as a result of sales of substantial amounts of our Class A common stock in the public market or the perception that these sales could occur. In addition, these factors could make it more difficult for us to raise funds through future equity offerings.

Additionally, in connection with the acquisition of Quintana, we have issued restricted shares of our Class A common stock to certain persons who previously were officers and directors of Quintana.  We have agreed to file in the immediate future a shelf registration statement to enable such shareholders to sell these shares to the public.  The sales of these shares under such registration statement could also adversely affect the market price of our Class A common stock.

Issuance of preferred stock may adversely affect the voting power of our shareholders and have the effect of discouraging, delaying or preventing a merger or acquisition, which could adversely affect the market price of our common stock.

Our articles of incorporation currently authorize our board of directors to issue preferred shares in one or more series and to determine the rights, preferences, privileges and restrictions, with respect to, among other things, dividends, conversion, voting, redemption, liquidation and the number of shares constituting any series subject to prior shareholders’ approval. If our board of directors determines to issue preferred shares, such issuance may discourage, delay or prevent a merger or acquisition that shareholders may consider favorable.  The issuance of preferred shares with voting and conversion rights may also adversely affect the voting power of the holders of common shares. This could substantially impede the ability of public shareholders to benefit from a change in control and, as a result, may adversely affect the market price of our common stock and your ability to realize any potential change of control premium.

It may be difficult to enforce a U.S. judgment against us, our officers and directors  in The Republic of Liberia or the United States, or to assert U.S. securities laws claims in The Republic of Liberia or serve process on our officers and directors.

None of our executive officers and directors are residents of the United States, and substantially all of our assets and the assets of these persons are located outside the United States.  Therefore, it may be difficult for an investor, or any other person or entity, to enforce a U.S. court judgment based upon the civil liability provisions of the U.S. federal securities laws against us or any of these persons in a U.S. or Liberian court, or to effect service of process upon these persons in the United States.  Additionally, it may be difficult for an investor, or any other person or entity, to assert U.S. securities law claims in original actions instituted in the Republic of Liberia.

 

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