Credit Facility

While the Company's stable business model largely insulates it from volatility in the freight and charter markets, a covenant in the credit facility with respect to the Leverage Ratio, which is the ratio of outstanding drawings under the credit facility and the aggregate charter free market value of the secured vessels, causes the Company to be sensitive to significant declines in vessel values. Under the terms of the credit facility, the Leverage Ratio cannot exceed 75%. The Leverage Ratio has little impact on the Company's operating performance as cash flow is largely predictable under its business model.

Due to the continuing excess supply of capacity, there has been a decline in charter free market values of containerships in recent months. The Company anticipated that the Leverage Ratio as at November 30, 2012 would, if tested, exceed 75%. Therefore, it has agreed with its lenders a further waiver for two years of the requirement to perform the Leverage Ratio test. The next scheduled test will be as at December 1, 2014. During the waiver period, the fixed interest margin to be paid over LIBOR is 3.75%, prepayments are based on cash flow, subject to a minimum of $40 million on a rolling 12 month basis, rather than a fixed amount, and dividends on common shares cannot be paid. It has also been agreed that all secured vessels will be included in the Leverage Ratio test, whether they are subject to a charter or not.

In the three months ended December 31, 2012, a total of $11.1 million of debt was prepaid leaving a balance outstanding of $425.7 million. In the year ended December 31, 2012, a total of $57.9 million of debt was prepaid.

Preferred Shares

In connection with the agreement with CMA CGM in July 2012, granting the Company the right but not the obligation to enter new charters for Ville d'Orion and Ville d'Aquarius on the expiry of the then current charters, the Company redeemed $3.0 million of preferred shares held by CMA CGM, out of restricted cash received from the exercise of warrants in 2008 and for which the sole use is the redemption of these preferred shares. The remaining balance outstanding of preferred shares is $45.0 million.

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