Star Bulk Carriers (SBLK) 6-KReport of Foreign Private Issuer

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 August 2023 

Commission File Number 001-33869

STAR BULK CARRIERS CORP.

--12-31

(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)

June 30, 2023 

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

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 Star Bulk Carriers Corp. (the “Company”) as of and for the six months ended June 30, 2022 and 2023.

Attached as Exhibit 99.2 to this Form 6-K is a copy of the Company's press release (the “Press Release”) announcing its unaudited financial and operating results for the Company's three and six months ended June 30, 2023, which was issued on August 3, 2023.

The information contained in Exhibit 99.1 of this Form 6-K is hereby incorporated by reference into the registrant's Registration Statements on Form F-3 (File Nos. 333-264226, 333-232765, 333-234125 and 333-252808) and Registration Statement on Form S-8 (File No. 333-176922), in each case to the extent not superseded by information subsequently filed or furnished (to the extent we expressly state that we incorporate such furnished information by reference) by the Company under the Securities Act of 1933 or the Securities Exchange Act of 1934, in each case as amended.

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,” “will,” “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:

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 2022, filed with the SEC on March 7, 2023.

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, whether as a result of new information, future events, a change in the Company’s views or expectations or otherwise, except as required by applicable law. New factors emerge from time to time, and it is not possible for the Company to predict all of these factors. Further, the Company cannot assess the impact of each such factor on its business or the extent to which any factor, or combination of factors, may cause actual results to be materially different from those contained in any forward-looking statement.

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: August 3, 2023

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, 2022 and 2023. 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, 2022, which was filed with the U.S. Securities and Exchange Commission (the “Commission”) on March 7, 2023 (the “2022 Annual Report”). Unless otherwise defined herein, capitalized words and expressions used herein shall have the same meanings ascribed to them in the 2022 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, New York, Limassol, Singapore and Germany. Our common shares trade on the Nasdaq Global Select Market under the symbol “SBLK.”

Our Fleet

During the first quarter of 2023, we agreed with the war risk insurers of the vessel Star Pavlina, that the vessel became a constructive total loss on February 24, 2023, given its prolonged detainment in Ukraine following the commencement of Russia’s military action against Ukraine on February 24, 2022.

During the six-month period ended June 30, 2023, we decided to sell opportunistically certain vessels and renew our fleet taking advantage of the elevated vessel market values.

In particular, on March 24, 2023, we agreed to sell the vessels Star Borealis and Star Polaris which were delivered to their new owner on May 4, 2023 and on July 7, 2023, respectively.

In addition, on May 26, 2023, we agreed to sell the vessels Star Centaurus, Star Columba, Star Aquila, Star Hercules and Star Cepheus. Star Centaurus, Star Columba and Star Aquila were delivered to their new owner in July 2023 and it is expected that the remaining two vessels will be delivered within August 2023.

As of August 2, 2023 and as adjusted for the delivery of Star Hercules and Star Cepheus, as further discussed above, our owned fleet consisted of 120 operating vessels with an aggregate carrying capacity of approximately 13.3 million dwt, consisting of Newcastlemax, Capesize, Post Panamax, Kamsarmax, Panamax, Ultramax and Supramax vessels.

The following tables present summary information relating to our fleet as of August 2, 2023 (as adjusted for the delivery of Star Hercules and Star Cepheus to their new owner as discussed above):

Operating Fleet:

In addition, we have entered into long-term charter-in arrangements with respect to four Kamsarmax newbuildings and two Ultramax newbuildings which are expected to be delivered during 2024 with an approximate duration of seven years per vessel plus optional years. Furthermore, in November 2021 we took delivery of the Capesize vessel Star Shibumi, under a long-term charter-in contract for a period up to November 2028. Please see below a summary table of the respective contracts:

Liquidity and Capital Resources

Our principal sources of funds have been cash flow from operations, equity offerings, borrowings under secured credit facilities, debt securities or bareboat lease financings and proceeds from vessel sales. Our principal uses of funds have been capital expenditures to establish and grow our fleet, maintain the quality of our dry bulk carriers, comply with international shipping standards, environmental laws and regulations, fund working capital requirements, make principal and interest payments on outstanding indebtedness and 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 new debt and refinancings as well as equity financings.

Our medium- and long-term liquidity requirements are funding the equity portion of our newbuilding vessel installments and secondhand vessel acquisitions, if any, 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 and refinancings or bareboat lease financings, sale and lease back arrangements, equity issuances and vessel sales. Please also refer to Note 12 to our unaudited interim condensed consolidated financial statements, included elsewhere herein, for further discussion on our commitments as of June 30, 2023.

As of August 2, 2023, we had total cash of $456.5 million and outstanding borrowings (including bareboat lease financing) of $1,181.7 million, as adjusted for the proceeds from vessel sales and repayment of loans/leases, as further described in Notes 8 and 15 to our unaudited interim condensed consolidated financial statements as of June 30, 2023, included herein. In addition, following a number of interest rates swaps that we have entered into, we have converted a total of $349.3 million of such debt from floating to an average fixed rate of 42 bps with average maturity of 1.3 year.

Our debt agreements contain financial covenants and undertakings requiring us to maintain various ratios. A summary of these terms is included in Note 8 of the Company’s consolidated financial statements for the year ended December 31, 2022, included in the 2022 Annual Report.

We believe that our current cash balance and our operating cash flows to be generated over the short-term period will be sufficient to meet our liquidity needs for the foreseeable future (and at least through the end of the third quarter of 2024), including funding the operations of our fleet, capital expenditure requirements and any other present financial requirements, including the cost for the installation of ballast water treatment systems (“BWTS”) and Energy Saving Devices (“ESD”). In addition, we may sell and issue shares under our two effective At-the-Market offering programs of up to $150.0 million at any time and from time to time. As of August 2, 2023, cumulative gross proceeds under our At-the-Market offering programs were $20.2 million. We may seek additional indebtedness to finance future vessel acquisitions in order to maintain our cash position or to refinance our existing debt on more favorable terms. Our practice has been to fund the cash portion of the acquisition of dry bulk carriers using a combination of funds from operations and bank debt or lease financing secured by mortgages or title of ownership on our dry bulk carriers held by the relevant lenders, respectively. We may also use the proceeds from potential equity or debt offerings to finance future vessel acquisitions. Our business is capital-intensive and its 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 acquisitions 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. However our ability to obtain bank or lease financing, to refinance our existing debt or to access the capital markets for offerings in the future, may be limited by our financial condition at the time of any such financing or offering, including the market value of our fleet, as well as by adverse market conditions resulting from, among other things, general economic conditions, weakness in the financial and equity markets and contingencies and uncertainties that are beyond our control. Our liquidity is also impacted by our dividend policy, as discussed below.

The 2019 Novel Coronavirus (“COVID-19”) pandemic resulted in a significant reduction in global economic activity and extreme volatility in the global financial market. During the second half of 2022, freight rates declined from highs seen earlier in the year as China’s COVID-related lockdown measures intensified. The end of the zero COVID-19 policy by the Chinese authorities during the first quarter of 2023 fueled markets with optimism that resulted in the rebound of freight levels. During the second quarter of 2023, freight rates have receded, as despite the uplift of the exporting activity, the relaxation of COVID-19 related inefficiencies resulted in the increase of effective ship supply. Concurrently, Chinese macro data are implying a stalling economy, while the outlook of the western economies is getting worse as a result of the tightening cycle that central banks are implementing in order to fight inflation. There continues to be a high level of uncertainty relating to how the COVID-19 pandemic will evolve, the evolution and emergence of existing and future variants, the availability of vaccines and their global deployment, the development of effective treatments, the imposition of effective public safety and other protective measures and the public's and government's responses to such measures. As a result of the COVID-19 pandemic restrictions imposed since 2020, additional crew expenses have been incurred. An increase in the severity or duration or a resurgence of the COVID-19 pandemic and any significant disruption of wide-scale vaccine distribution could have a material adverse effect on our business, results of operations, cash flows, financial condition, the carrying value of our assets, the fair values of our vessels, and our ability to pay dividends.

Dividend Policy

Our dividend policy is described in Item 8. Financial Information-A. Consolidated statements and other financial information—Dividend Policy of our 2022 Annual Report.

On August 3, 2023, pursuant to our dividend policy, our Board of Directors declared a quarterly cash dividend of $0.40 per share, payable on or about September 7, 2023 to all shareholders of record as of August 22, 2023. The ex-dividend date is expected to be August 21, 2023.

Since Star Bulk is a holding company with no material assets other than the shares of its subsidiaries through which it conducts its operations, Star Bulk’s ability to pay dividends in the future will depend on its subsidiaries’ ability to distribute funds to it. Any future dividends declared will be at the discretion and remain subject to approval of our Board of Directors each quarter after its review of our financial condition and other factors, including but not limited to our earnings, the prevailing charter market conditions, capital requirements, limitations under our debt agreements and applicable provisions of Marshall Islands law, which generally prohibits the payment of dividends other than from operating surplus or while a company is insolvent or would be rendered insolvent upon the payment of such dividend. Star Bulk’s dividend policy and declaration and payment of dividends may be changed at any time and are subject to legally available funds and our Board of Directors’ determination that each declaration and payment is at the time in the best interests of Star Bulk and its shareholders after its review of our financial performance. There can be no assurance that our Board of Directors will declare or pay any dividend in the future.

Other Recent Developments

Please refer to Note 15 to our unaudited interim condensed consolidated financial statements, included elsewhere herein, for developments that took place after June 30, 2023.

Operating Results

Factors Affecting Our Results of Operations

We deploy our vessels on a mix of short to medium time charters or voyage charters, contracts of affreightment 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 and TCE rates, which we believe are important measures for analyzing trends in our results of operations, for the periods indicated: 

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The following table reflects the calculation of our TCE rates as discussed in footnote (7) above. The table presents reconciliation of TCE Revenues to voyage revenues as reflected in the unaudited interim condensed consolidated income statements.

Voyage Revenues

Voyage revenues are driven primarily by the number of vessels in our operating fleet, the duration of our charters, the number of charter-in days, the amount of daily charter hire or 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, 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, 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 charter 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 may include port and canal charges, agency fees, fuel (bunker) expenses and brokerage commissions payable to related and third parties. Voyage expenses are incurred for our owned and chartered-in vessels during voyage charters or when the vessel is unemployed. Bunker 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 and related 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, vessel scrubbers and BWTS maintenance expenses, 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 and its condition, 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. Effective January 1, 2023, following management’s reassessment of the residual value of our vessels, we increased the estimated scrap rate per lightweight ton from $300 to $400. The current value of $400 was based on the historical average demolition prices prevailing in the market in the last 20 years. The change in this accounting estimate, which pursuant to ASC 250 “Accounting Changes and Error Corrections” was applied prospectively and did not require retrospective application, decreased the depreciation expense and increased the net income for the six-month period ended June 30, 2023 by $8.0 million or $0.08 per basic and diluted share.

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.

Management Fees

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

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

When deemed appropriate from a risk management perspective, we take positions in freight derivatives, including freight forward agreements (the “FFAs”) and freight options, with an objective to utilize those instruments as economic hedges to reduce 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. The settlement amount is an amount equal to the difference between the contracted rate and the settlement rate, multiplied by the number of days in the specified period covered by the FFA. Conversely, if the contracted rate is greater than the settlement rate, the buyer is required to pay the seller the settlement sum. Our FFAs are settled mainly through reputable exchanges such as European Energy Exchange (“EEX”) or Singapore Exchange (“SGX”) so as to limit our exposure in over-the-counter transactions. 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. The fair value of the FFAs or freight options is treated as asset or liability until they are settled. Any such settlements by us or settlements to us under FFAs or freight options, if any, are recorded under (Gain)/ Loss on forward freight agreements and bunker swaps, net.

Also, when deemed appropriate from a risk management perspective, we 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 mainly through reputable exchanges such as Intercontinental Exchange (“ICE”) so as to limit our counterparty exposure in over the counter transactions. Bunker price differentials paid or received under the swap agreements are recognized under (Gain)/Loss on forward freight agreements and bunker swaps, net.

The fair value of freight derivatives and bunker swaps is determined through Level 1 inputs of the fair value hierarchy (quoted prices from the applicable exchanges such as EEX, SGX or ICE). Our FFAs and bunker swaps do not qualify for hedge accounting and therefore unrealized gains or losses are recognized under (Gain)/Loss on forward freight agreements and bunker swaps, net.

Impairment loss

When indicators of impairment are present for the Company’s vessels and the undiscounted cash flows estimated to be generated by those vessels are less than their carrying value, the carrying value is reduced to its estimated fair value and the difference is recorded under “Impairment loss” in the consolidated statements of operations.

Other operational gain/(loss)

Other operational gain/(loss) includes gain/loss from all other operating activities which are not related to the principal activities of the Company, such as gain/loss from insurance claims.

Loss on Write-Down of Inventory

Loss on write-down of inventory results from the valuation of the bunkers remaining onboard our vessels following the decrease of bunkers’ net realizable value compared to their historical cost as of each period end.

Interest and Finance Costs

We incur interest expense and financing costs in connection with our outstanding indebtedness under our existing loan facilities (including sale and leaseback financing transactions). We also incur financing costs in connection with establishing those facilities, which are presented as a direct deduction from the carrying amount of the relevant 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 Interest Rate Swaps, net

We 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 interest rate swaps, net, unless specific hedge accounting criteria are met. When interest rate swaps are designated and qualify as cash flow hedges, the effective portion of the unrealized gains/losses from those swaps is recorded in Other Comprehensive Income / (Loss) while any ineffective portion is recorded as Gain/(loss) on interest rate swaps, net.

Results of Operations

The six-month period ended June 30, 2023 compared to the six-month period ended June 30, 2022

Voyage revenues net of Voyage expenses: Voyage revenues for the six months ended June 30, 2023 decreased to $462.7 million from $778.2 million in the corresponding period in 2022. Time charter equivalent revenues (“TCE Revenues”) (as defined above) were $331.7 million compared to $642.4 million for the corresponding period in 2022. As a result, the TCE rate for the first half of 2023 was $15,020 compared to $28,924 for the corresponding period in 2022, which is indicative of the weaker market conditions prevailing during the recent period. Please refer to the table above for the calculation of the TCE Revenues and TCE and their reconciliation with Voyage Revenues, which is the most directly comparable financial measure calculated and presented in accordance with U.S. GAAP.

Charter-in hire expenses: Charter-in hire expenses for the six months ended June 30, 2023 and 2022 were $9.7 million and $13.0 million, respectively. This decrease is mainly attributable to the decrease in charter-in days to 429 in the six months ended June 30, 2023 from 506 in the corresponding period in 2022 as well as lower charter-in rates prevailing in the market following the weaker market conditions discussed above.

Vessel operating expenses: For the six months ended June 30, 2023 and 2022, vessel operating expenses were $112.3 million and $115.8 million, respectively. The decrease is mainly due to the decrease in the average number of vessels in our fleet to 127.0 in the six months ended June 30, 2023 from 128.0 for the respective period of 2022. Vessel operating expenses for the first half of 2023 included additional i) crew expenses related to the increased number and cost of crew changes performed during the period as a result of COVID-19 related restrictions, estimated to be $2.1 million and ii) $1.4 million pre-delivery expenses, due to change of management of certain vessels from third party to in-house. For the first half of 2022, the additional COVID-19 related costs and pre-delivery expenses were estimated to be $5.6 million and $1.1 million, respectively.

Dry docking expenses: Dry docking expenses for the six months ended June 30, 2023 and 2022 were $18.9 million and $19.2 million, respectively. During the first half of 2023, 16 vessels completed their periodic dry-docking surveys while during the corresponding period in 2022, 15 vessels completed their periodic dry docking surveys.

Depreciation: Depreciation expense decreased to $70.1 million for the six-month period ended June 30, 2023 compared to $77.5 million for the corresponding period in 2022. The decrease is primarily driven by the change in the estimated scrap rate per light weight tonnage from $300 to $400 effective January 1, 2023, which resulted in lower depreciation expense by $8.0 million together with the decrease in the average number of vessels in our fleet, discussed above.

Impairment loss: During the six months ended June 30, 2023, an impairment loss of $7.7 million was incurred, resulting from the agreement to sell the vessels Star Borealis and Star Polaris described above as part of our fleet update under “Our Fleet”.

Other operational gain: Other operational gain for the six months ended June 30, 2023 of $33.7 million includes: a) gain from insurance proceeds relating to Star Pavlina’s total loss discussed in our fleet update above of $28.2 million, b) daily detention compensation for Star Pavlina pursuant to its war risk insurance policy of $2.7 million in aggregate and c) other gains from insurance claims relating to other vessels of $2.8 million in aggregate. Other operational gain for the six months ended June 30, 2022 of $2.1 million included a) daily detention compensation for two vessels blocked in Ukraine pursuant to their war risk insurance policy of $1.7 million and b) other gains from insurance claims relating to other vessels of $0.4 million.

Management fees: Management fees decreased to $8.5 million for the six-month period ended June 30, 2023 compared to $9.8 million for the corresponding period in 2022 due to the change of management of certain vessels, from third party to in-house.

General and administrative expenses: General and administrative expenses for the six-month periods ended June 30, 2023 and 2022 were $22.7 million and $25.9 million, respectively. The decrease is mainly attributable to the decrease in stock based compensation expense to $6.4 million for the first half of 2023 compared to $11.5 million for the corresponding period in 2022 counterbalanced by the effect of the increase in the Euro/USD exchange rate.

(Gain)/Loss on forward freight agreements and bunker swaps, net: For the six-month period ended June 30, 2023, we incurred a net gain on FFAs and bunker swaps of $4.2 million, consisting of an unrealized loss of $3.1 million and a realized gain of $7.3 million. For the six-month period ended June 30, 2022, we incurred a net loss on FFAs and bunker swaps of $3.9 million, consisting of an unrealized loss of $0.8 million and a realized loss of $3.1 million.

Loss on write-down of inventory: Our results for the six months ended June 30, 2023 include a loss on write-down of inventories of $4.7 million in connection with the valuation of the bunkers remaining on board our vessels, as a result of the bunkers’ lower net realizable value compared to their historical cost.

Interest and finance costs: Interest and finance costs for the six-month periods ended June 30, 2023 and 2022 were $31.7 million and $24.3 million, respectively. The driving factor for this increase is the significant increase in variable interest rates, which was partially offset by the positive effect from our interest rate swaps and the decrease in our weighted average outstanding indebtedness.

Interest income and other income/(loss): Interest income and other income/ (loss) for the six-month period ended June 30, 2023 amounted to $6.6 million, compared to interest income and other income/ (loss), of $0.1 million in the six-month period ended June 30, 2022. The increase of interest income is mainly due to higher interest rates earned from our fixed deposits during the first half of 2023 and foreign exchange gains incurred in the same period compared to the foreign exchange losses recognized in the first half of 2022.

Cash Flows

Net cash provided by operating activities for the six months ended June 30, 2023 and 2022 was $180.1 million and $469.1 million, respectively. This decrease was primarily driven by the lower charter rates due to the weaker market conditions prevailing during the recent period compared to the corresponding period in 2022, and the increase in our interest payments for the reasons outlined above under “Interest and finance costs”.

Net cash provided by investing activities for the six months ended June 30, 2023 was $79.2 million and consisted of $87.4 million of insurance proceeds received in connection with Star Pavlina’s constructive total loss and vessel sale proceeds received, partially offset by payments of $8.8 million, made for the acquisition of other fixed assets and vessel upgrades. Net cash used in investing activities for the six months ended June 30, 2022 was $45.9 million and consisted mainly of cash placed in treasury bills of $35.2 million and $12.4 million paid in connection with the acquisition of other fixed assets and vessel upgrades.

Net cash used in financing activities for the six months ended June 30, 2023 and 2022 was $244.2 million and $546.1 million, respectively. The decrease was primarily driven by lower dividend payments of $98.2 million in 2023 compared to $375.3 million in the corresponding period in 2022 as well as lower net debt outflows of $132.0 million in the six months ended June 30, 2023 compared to $167.4 million in the same period of 2022.

Significant Accounting Policies and Critical Accounting Estimates

For a description of our critical accounting estimates 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 2022 Annual Report. There have been no material changes from the “Critical Accounting Estimates” previously disclosed in our 2022 Annual Report, except as discussed above under “Depreciation”.

STAR BULK CARRIERS CORP.
INDEX TO UNAUDITED INTERIM CONDENSED CONSOLIDATED
FINANCIAL STATEMENTS

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

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

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

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

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

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, New York, Limassol, Singapore and Germany. Star Bulk’s common shares trade on the NASDAQ Global Select Market under the ticker symbol “SBLK”.

The unaudited interim condensed consolidated financial statements include the accounts of Star Bulk and its wholly owned subsidiaries (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 for the year ended December 31, 2022 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, 2023 are not necessarily indicative of the results that might be expected for the fiscal year ending December 31, 2023.

The unaudited interim condensed consolidated financial statements presented in this report should be read in conjunction with the annual consolidated financial statements for the year ended December 31, 2022 included in the Company’s Annual Report on Form 20-F for the year ended December 31, 2022 (the “2022 Annual Report”). The balance sheet as of December 31, 2022 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 2022 Annual Report.

The 2019 Novel Coronavirus (“COVID-19”) pandemic resulted in a significant reduction in global economic activity and extreme volatility in the global financial market. During the second half of 2022, freight rates declined from highs seen earlier in the year as China’s COVID-related lockdown measures intensified. The end of the zero COVID-19 policy by the Chinese authorities during the first quarter of 2023 fueled markets with optimism that resulted in the rebound of freight levels. During the second quarter of 2023, freight rates have receded, as despite the uplift of the exporting activity, the relaxation of COVID-19 related inefficiencies resulted in the increase of effective ship supply. Concurrently, Chinese macro data are implying a stalling economy, while the outlook of the western economies is getting worse as a result of the tightening cycle that central banks are implementing in order to fight inflation. There continues to be a high level of uncertainty relating to how the COVID-19 pandemic will evolve, the evolution and emergence of existing and future variants, the availability of vaccines and their global deployment, the development of effective treatments, the imposition of effective public safety and other protective measures and the public's and government's responses to such measures. As a result of the COVID-19 pandemic restrictions imposed since 2020, additional crew expenses have been incurred. An increase in the severity or duration or a resurgence of the COVID-19 pandemic and any significant disruption of wide-scale vaccine distribution could have a material adverse effect on the Company’s future business, results of operations, cash flows, financial condition, the carrying value of the Company’s assets, the fair values of the Company’s vessels, and the Company’s ability to pay dividends.

As of June 30, 2023 and as adjusted for the delivery to the buyers of the vessel Star Polaris and the five Delphin Vessels, discussed in Note 5, the Company owned a modern fleet of 120 dry bulk vessels consisting of Newcastlemax, Capesize, Post Panamax, Kamsarmax, Panamax, Ultramax and Supramax vessels with a carrying capacity between 52,425 deadweight tonnage (“dwt”) and 209,529 dwt, a combined carrying capacity of 13.3 million dwt and an average age of 11.5 years.

2.               Significant accounting policies and recent accounting pronouncements: Significant Accounting Policies and Recent Accounting Pronouncements

A summary of the Company’s significant accounting policies and recent accounting pronouncements is provided in Note 2 to the Company’s consolidated financial statements included in the 2022 Annual Report. Other than the change in accounting estimate described below, there have been no changes to the Company’s significant accounting policies and recent accounting pronouncements in the six-month period ended June 30, 2023.

Vessel Depreciation:

The cost of each of the Company’s vessels is depreciated beginning when the vessel is ready for its intended use, on a straight-line basis over the vessel’s remaining economic useful life, after considering the estimated residual value (vessel’s residual value is equal to the product of its lightweight tonnage and estimated scrap rate per ton).

Effective as of January 1, 2023, following management’s reassessment of the residual value of the Company’s vessels, the Company increased the estimated scrap rate per lightweight ton from $0.3 to $0.4. The current value of $0.4 was based on the historical average demolition prices prevailing in the market in the last 20 years. The change in this accounting estimate, which pursuant to ASC 250 “Accounting Changes and Error Corrections” was applied prospectively and did not require retrospective application, decreased the depreciation expense and increased the net income for the six-month period ended June 30, 2023 by $7,982 or $0.08 per basic and diluted share.

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, 2023 and are discussed in Note 3 of the Company’s consolidated financial statements for the year ended December 31, 2022, included in the 2022 Annual Report.

Transactions and balances with related parties are analyzed as follows:

Transactions with Related Parties - Balance Sheets (Table)

Balance Sheets

3.        Transactions with Related Parties - continued:

 Transactions with Related Parties - Income Statements (Table)

Income statements

4.               Inventories:

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

Inventories (Table) 

5.               Vessels and other fixed assets, net:

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

 Vessels and other fixed assets, net - Schedules of vessels and other fixed assets, net (Table)

During the first quarter of 2023, the Company agreed with the war risk insurers of the vessel Star Pavlina, that the vessel became a constructive total loss on February 24, 2023 and as a consequence that the Company is entitled to be indemnified for the vessel’s total insurance value given its prolonged detainment in Ukraine following the commencement of Russia’s military action against Ukraine on February 24, 2022 as further disclosed in Notes 15b) and 19c) of the Company’s consolidated financial statements for the year ended December 31, 2022, included in the 2022 Annual Report. As a result, the Company recognized a gain of $28,163 which is included within “Other operational gain” in the unaudited interim condensed consolidated income statement for the six-month period ended June 30, 2023. In addition, in 2023 and up to February 24, 2023, the Company earned through its war risk insurance policy detention compensation with respect to this vessel, an amount of $2,658 which is also included within “Other operational gain” in the 2023 unaudited interim condensed consolidated income statement. On April 12, 2023 and on May 4, 2023 the Company received the total insurance value of the vessel Star Pavlina.

During the six-month period ended June 30, 2023, the Company decided to sell opportunistically certain vessels and renew its fleet taking advantage of the elevated vessel market values. On March 24, 2023, the Company agreed to sell to a third party the vessels Star Borealis and Star Polaris with delivery to their new owner upon completion of their then-existing employment. Star Borealis and Star Polaris were delivered to their new owner on May 4, 2023 and July 7, 2023 (Note 15), respectively. With respect to the sale of Star Borealis, a loss of $34 was recognized for the six-month period ended June 30, 2023 which is separately reflected in the unaudited interim condensed consolidated income statement for the corresponding period. By reference to the agreed sale prices of Star Borealis and Star Polaris (Level 2), the Company recognized an impairment loss of $7,700 for the six-month period ended June 30, 2023, which is separately reflected in the unaudited interim condensed consolidated income statement for the corresponding period. In addition, on May 26, 2023, the Company agreed to sell to a third party the vessels Star Centaurus, Star Columba, Star Aquila, Star Hercules and Star Cephueus (five of the Delphin Vessels), with delivery to their new owner upon completion of their then-existing employment. Star Centaurus, Star Columba and Star Aquila were delivered to their new owner in July 2023 (Note 15) while the delivery of Star Hercules and Star Cepheus is expected within August 2023. Given their employment as of June 30, 2023, none of the above-mentioned vessels met the criteria to be classified as held for sale as of that date and by reference to their agreed sale prices, no impairment loss was recognized for the six-month period ended June 30, 2023. The gain from the sale of the above-mentioned vessels that will be recognized in the third quarter of 2023 is expected to be approximately $20.0 million in aggregate.

As of June 30, 2023, 98 of the Company’s vessels, having a net carrying value of $2,149,014, serve as collateral under certain of the Company’s loan facilities and were subject to first-priority mortgages (Note 8). Title of ownership is held by the relevant lenders for another 11 vessels with a carrying value of $319,558 to secure the relevant sale and lease back financing transactions (Note 7). In addition, 18 of the Company’s vessels having a net carrying value of $352,136 are subject to second-priority mortgages and serve as collateral under one of the Company’s loan facilities (Note 8).

During the six month period ended June 30, 2023, the Company continued the technical upgrades to its fleet, such as the installation of ballast water treatment systems (“BWTS”) and Energy Saving Devices (“ESD”).

6.               Operating leases:

a) Time charter-in vessel agreements

The carrying value of the assets and liabilities recognized on the balance sheet as of December 31, 2022 and June 30, 2023 in connection with the time charter-in vessel arrangements with an initial term exceeding 12 months, as described in Note 6 to the Company’s consolidated financial statements included in the 2022 Annual Report, amounted to $37,191 and $31,774, respectively and are included under “Operating lease liabilities current and non- current” in the consolidated balance sheets. The time charter-in hire payments required to be made after June 30, 2023, for these outstanding operating lease liabilities are as follows:

Operating leases - Operating lease liabilities of time charter-in vessel agreements (Table)

The weighted average remaining lease term of these charter-in vessel arrangements as of June 30, 2023 is 5.19 years. The charter-in hire expenses for these long-term charter-in arrangements for the six-month periods ended June 30, 2022 and 2023, were $5,953 and $5,960, respectively and are separately presented in the unaudited interim condensed consolidated income statements.

6.               Operating leases - continued:

b) Office rental arrangements

The carrying value of the assets and liabilities recognized on the balance sheet as of December 31, 2022 and June 30, 2023 in connection with the office rental arrangements as described in Note 6 to the Company’s consolidated financial statements included in the 2022 Annual Report, amounted to $427 and $379, respectively and are included under “Operating lease liabilities current and non- current” in the consolidated balance sheets. The office rental payments required to be made after June 30, 2023, for these outstanding operating lease liabilities are as follows:

Operating leases - Operating lease liabilities of office rental agreements (Table)

The weighted average remaining lease term of these office rental arrangements as of June 30, 2023 is 1.36 years. The lease expenses for these office rental arrangements for the six-month periods ended June 30, 2022 and 2023, were $247 and $255, respectively and are included under “General and administrative expenses” in the unaudited interim condensed consolidated income statements.

7.               Lease financings:

Details of the Company’s lease financings are discussed in Note 7 of the Company’s consolidated financial statements for the year ended December 31, 2022, included in the 2022 Annual Report.

All of the Company’s lease financings bear interest at SOFR plus a margin, with the exception of three of them, which are expected to have been refinanced by October 2023. The corresponding interest expense of the Company’s bareboat lease financing activities is included within “Interest and finance costs” in the unaudited interim condensed consolidated income statements (Note 8).

Some of the Company’s lease financings contain financial and other covenants similar to those included in its credit facilities, as described in Note 8 below and in Note 8 of the Company’s consolidated financial statements for the year ended December 31, 2022, included in the 2022 Annual Report, with which, as of June 30, 2023, the Company was in compliance (Note 8).

The principal payments required to be made after June 30, 2023, for the Company’s outstanding finance lease obligations recognized on the balance sheet, as of that date, are as follows:

Lease financings - Capital lease obligations, Principal payments (Table)

8.               Long-term bank loans:

Details of the Company’s credit facilities are discussed in Note 8 of the Company’s consolidated financial statements for the year ended December 31, 2022, included in the 2022 Annual Report and supplemented by the below new activities during the six-month period ended June 30, 2023.

As further discussed in Note 19a) and Note 8 of the Company’s consolidated financial statements for the year ended December 31, 2022, included in the 2022 Annual Report, on January 13, 2023, the Company drew down the amounts of $22,829 and $24,171, under the two tranches available of the “Standard Chartered $47,000 Facility”.

In addition to the scheduled repayments during the six-month period ended June 30, 2023, on March 10, 2023 the Company prepaid an amount of $18,236 corresponding to the outstanding loan amount of the vessel Star Pavlina under the ING $310,600 Facility following the developments around the said vessel discussed in Note 5 above. In addition, in view of their agreed sales, as further discussed in Note 5 above, the Company prepaid i) on March 29, 2023, an amount of $26,207 corresponding to the outstanding loan amount of the vessels Star Borealis and Star Polaris under the DNB $107,500 Facility and ii) on June 27, 2023, an amount of $6,256 corresponding to the outstanding loan amount of the vessel Star Columba under the Citi $100,000 Facility.

8.        Long-term bank loans - continued:

In March 2023, the Company entered into a committed term sheet with Skandinaviska Enskilda Banken AB for a loan facility of up to $30,000 (the “SEB $30,000 Facility”) which was signed on May 25, 2023. The facility amount of $30,000 was drawn on May 30, 2023 and was used to replenish the funds used by the Company in May 2023 to prepay the outstanding loan amount of the vessel Star Aquarius of $13,125 and the outstanding lease amount of the vessel Star Pisces of $12,418. The SEB $30,000 Facility was drawn in two equal tranches, each repayable in 20 equal consecutive quarterly installments of $413 and a balloon payment of $6,750 due in May 2028, along with the last installment. The loan is secured by first priority mortgages on the vessels Star Aquarius and Star Pisces.

In March 2023, the Company entered into a committed term sheet with Nordea Bank Abp for a loan facility of up to $50,000 (the “Nordea $50,000 Facility”), which was signed on July 10, 2023. The facility amount was drawn on July 12, 2023 and was used to replenish the funds used by the Company in May 2023 to prepay the outstanding loan amount under the DSF $55,000 Facility of the vessels Star Eleni and Star Leo, of $42,308, in aggregate. The Nordea $50,000 Facility was drawn in two equal tranches, each repayable in 20 equal consecutive quarterly installments of $521 and a balloon payment of $14,583 due in July 2028, along with the last installment. The loan is secured by first priority mortgages on the vessels Star Eleni and Star Leo.

The Company’s credit facilities contain financial covenants and undertakings, a summary of which is included in Note 8 of the Company’s consolidated financial statements for the year ended December 31, 2022, included in the 2022 Annual Report.

As of December 31, 2022 and June 30, 2023, the Company was required to maintain minimum liquidity, not legally restricted, of $64,000 and $63,000, respectively, which is included within “Cash and cash equivalents” in the consolidated balance sheets. In addition, as of December 31, 2022 and June 30, 2023, the Company was required to maintain a minimum liquidity, legally restricted, of $16,590 and $16,204, respectively, and is included within “Restricted cash, current and non-current” in the consolidated balance sheets.

As of June 30, 2023, the Company was in compliance with the applicable financial and other covenants contained in its credit facilities and lease financings as described in Note 7.

The principal payments required to be made after June 30, 2023 for the Company’s then-outstanding bank loans, are as follows:

Long-term bank loans - Principal repayments (Table)

8.        Long-term bank loans - continued:

As of June 30, 2023, all of the Company’s bank loans bear interest at SOFR plus a margin, with the exception of five of them which are expected to have been transitioned to SOFR by August 2023. In addition, following a number of interest rate swaps that it has entered into, the Company has converted a total of $431,559 of its outstanding debt as of June 30, 2023 from floating benchmark rate to an average fixed rate of 40 bps with average maturity of 1.2 years. The weighted average interest rate (including the margin) related to the Company’s existing bank loans and lease financings (Note 7) for the six-month periods ended June 30, 2022 and 2023 was 2.82% and 4.67%, respectively.

The amounts of “Interest and finance costs” included in the unaudited interim condensed consolidated income statements are analyzed as follows:

Long-term bank loans - Interest and finance costs (Table)

During the six-month period ended June 30, 2023, the Company wrote off an amount of $785 of unamortized debt issuance costs and incurred other expenses of $103, mainly in connection with the loan prepayments discussed above, which are included under “Gain/(Loss) on debt extinguishment, net” in the unaudited interim condensed consolidated income statement for the corresponding period.

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

Details of the Company’s preferred shares and common shares are discussed in Note 9 of the Company’s consolidated financial statements for the year ended December 31, 2022, included in the 2022 Annual Report.

During the six-month period ended June 30, 2023, the Company issued 450,000 common shares pursuant to its Performance Incentive Program discussed in Note 11 of the Company’s consolidated financial statements for the year ended December 31, 2022, included in the 2022 Annual Report.

In 2023 and until May 16, 2023 when the new Share Repurchase Program, discussed below, was adopted, the Company repurchased 531,223 shares under the previous authorized share repurchase program in open market transactions at an average price of $20.98 per share, for an aggregate consideration of $11,159 including commissions.

On May 16, 2023, the Company’s Board of Directors cancelled the previous share repurchase program under which $8,549 was still outstanding to be repurchased and authorized a new share repurchase program of up to an aggregate of $50,000 (together with the previous authorized share repurchase program “Share Repurchase Program”). The timing and amount of any repurchases will be in the sole discretion of the Company’s management team, and will depend on legal requirements, market conditions, share price, alternative uses of capital and other factors. The Company is not obligated under the terms of the Share Repurchase Program to repurchase any of its common shares. The Share Repurchase Program has no expiration date and may be suspended or terminated by the Company’s Board of Directors at any time without prior notice. Common shares purchased as part of this program will be cancelled by the Company.

9.        Preferred and Common Shares and Additional Paid-in Capital - continued:

In June 2023, under the Share Repurchase Program, the Company repurchased 107,349 common shares in open market transactions at an average price of $17.65 per share for an aggregate consideration of $1,897 including commissions. All the repurchased shares in 2023 under the Share Repurchase Program described above were cancelled and removed from the Company’s share capital as of June 30, 2023.

Pursuant to its dividend policy, during the six-month period ended June 30, 2023, the Company declared and paid a cash dividend of $98,196 or $0.95 per common share.

10.            Earnings per Share:

The computation of basic earnings per share is based on the weighted average number of common shares outstanding for the six-month periods ended June 30, 2022 and 2023. 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 per share gives effect to stock awards and restricted stock units using the treasury stock method, unless the impact is anti-dilutive.

The Company calculates basic and diluted earnings per share as follows:

Earnings per Share (Table)