Financial Instruments and Fair Value Disclosures

6 Months Ended

Sep. 30, 2024

Financial Instruments and Fair Value Disclosures:

Financial Instruments and Fair Value Disclosures

13.  Financial Instruments and Fair Value Disclosures

Our principal financial assets consist of cash and cash equivalents, investment securities, amounts due from related parties, derivative instruments, and trade accounts receivable. Our principal financial liabilities consist of long-term debt, accounts payable, amounts due to related parties, and accrued liabilities.

(a) Concentration of credit risk:  Financial instruments, which may subject us to significant concentrations of credit risk, consist principally of amounts due from our charterers, including the receivables from Helios Pool, and cash and cash equivalents. We limit our credit risk with amounts due from our charterers, including those through the Helios Pool, by performing ongoing credit evaluations of our charterers’ financial condition and generally do not require collateral from our charterers. We limit our credit risk with our cash and cash equivalents and restricted cash by placing it with highly-rated financial institutions and directly or indirectly highly liquid, short term highly rated debt obligations.

(b) Interest rate risk:  One of our long-term bank loans is based on SOFR and hence we are exposed to movements thereto. We entered into interest rate swap agreements in order to hedge a majority of our variable interest rate exposure related to our 2023 A&R Debt Facility. We have no exposure to floating rate movements on any of our other debt financings.

(c) Fair value measurements: Interest rate swaps are stated at fair value, which is determined using a discounted cash flow approach based on market‑based SOFR swap yield rates. SOFR swap rates are observable at commonly quoted intervals for the full terms of the swaps and, therefore, are considered Level 2 items in accordance with the fair value hierarchy. The fair value of the interest rate swap agreements approximates the amount that we would have to pay or receive for the early termination of the agreements.

Additionally, we  have taken positions in freight forward agreements (“FFAs”) as economic hedges to reduce the risk related to vessels trading in the spot market and to take advantage of fluctuations in market prices. Customary requirements for trading FFAs include the maintenance of initial and variation margins based on expected volatility, open position and mark-to-market of the contracts. FFAs are recorded as assets/liabilities until they are settled. Changes in fair value prior to settlement are recorded in unrealized gain/(loss) on derivatives. Upon settlement, if the contracted charter rate is less than the average of the rates for the specified route and time period, as reported by an identified index, the seller of the FFA is required to pay the buyer the settlement sum, being an amount equal to the difference between the contracted rate and the settlement rate, multiplied by the number of days in the specified period 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. Settlement of FFAs are recorded in realized gain/(loss) on derivatives. FFAs are considered Level 2 items in accordance with the fair value hierarchy.

The following table summarizes the location on the balance sheet of the financial assets and liabilities that are carried at fair value on a recurring basis, which comprise our financial derivatives, all of which are considered Level 2 items in accordance with the fair value hierarchy as of:

		September 30, 2024				March 31, 2024
	Current assets		Current liabilities		Current assets		Current liabilities
Derivatives not designated as hedging instruments	Derivative instruments		Derivative instruments		Derivative instruments		Derivative instruments
Forward freight agreements	$	—	$	46,220	$	—	$	—
Interest rate swap agreements	$	2,025,695	$	—	$	5,139,056	$	—
Total	$	2,025,695	$	46,220	$	5,139,056	$	—
		September 30, 2024				March 31, 2024
	Other non-current assets		Long-term liabilities		Other non-current assets		Long-term liabilities
Derivatives not designated as hedging instruments	Derivative instruments		Derivative instruments		Derivative instruments		Derivative instruments
Interest rate swap agreements	$	1,299,869	$	—	$	4,145,153	$	—

The effect of derivative instruments within the unaudited interim condensed consolidated statements of operations for the periods presented is as follows:

		Three months ended
Derivatives not designated as hedging instruments	Location of gain/(loss) recognized	September 30, 2024		September 30, 2023
Forward freight agreements—change in fair value	Unrealized loss on derivatives	$	(46,220)	$	—
Interest rate swaps—change in fair value	Unrealized gain/(loss) on derivatives	$	(5,537,018)	$	1,560,594
Forward freight agreements—realized loss	Realized loss on derivatives		(13,690)		—
Interest rate swaps—realized gain	Realized gain on derivatives		1,667,809		1,928,217
Gain/(Loss) on derivatives, net		$	(3,929,119)	$	3,488,811

		Six months ended
Derivatives not designated as hedging instruments	Location of gain/(loss) recognized	September 30, 2024		September 30, 2023
Forward freight agreements—change in fair value	Unrealized loss on derivatives	$	(46,220)	$	—
Interest rate swaps—change in fair value	Unrealized gain/(loss) on derivatives		(5,958,645)		4,419,868
Forward freight agreements—realized loss	Realized loss on derivatives		(13,690)		—
Interest rate swaps—realized gain	Realized gain on derivatives		3,385,058		3,775,981
Gain/(Loss) on derivatives, net		$	(2,633,497)	$	8,195,849

As of September 30, 2024 and March 31, 2024, no fair value measurements for assets or liabilities under Level 1 or Level 3 were recognized in the consolidated balance sheets with the exception of Level 1 items cash and cash equivalents, restricted cash, and investment securities. We did not have any other assets or liabilities measured at fair value on a non-recurring basis during the three and six months ended September 30, 2024 and 2023.

(d) Book values and fair values of financial instruments:  In addition to the derivatives that we are required to record at fair value on our balance sheet (see (c) above) we have investment securities that are recorded at fair value and included in other current assets in our balance sheet and available-for-sale debt securities (U.S. treasury notes with a fair value of $9.9 million as of September 30, 2024 and a face value of $10.0 million maturing March 15, 2025) that are recorded at fair value as a current asset on our balance sheet. We have other financial instruments that are carried at historical cost including trade accounts receivable, amounts due from related parties, cash and cash equivalents, restricted cash, accounts payable, amounts due to related parties and accrued liabilities for which the historical carrying value approximates the fair value due to the short-term nature of these financial instruments.

The summary of gains and losses on our investment securities included in other gain/(loss), net on our unaudited interim condensed consolidated statements of operations for the periods presented is as follows:

	Three months ended
	September 30, 2024		September 30, 2023
Unrealized gain/(loss) on investment securities	$	(639,697)	$	684,984
	Six months ended
	September 30, 2024		September 30, 2023
Unrealized gain/(loss) on investment securities	$	(326,903)	$	1,106,236

We have long-term bank debt, the 2023 A&R Debt Facility, for which we believe the carrying value approximates fair value as the facility bears interest at variable interest rates based on SOFR at September 30, 2024 and 2023, which is observable at commonly quoted intervals for the full terms of the loans, and hence are considered as a Level 2 item in accordance with the fair value hierarchy. We have long-term debt related to the Corsair Japanese Financing, Cresques Japanese Financing, Cratis Japanese Financing, Copernicus Japanese Financing, Chaparral Japanese Financing, Cougar Japanese Financing, Caravelle Japanese Financing, and Captain Markos Dual-Fuel Japanese Financing, (collectively, the “Japanese Financings”) that incur interest at a fixed rate. We have long-term debt related to the BALCAP Facility that incurs interest at a fixed rate. The Japanese Financings and BALCAP Facility are considered Level 2 items in accordance with the fair value hierarchy and the fair value of each is based on a discounted cash flow analysis using current observable interest rates. The following table summarizes the carrying value and estimated fair value of our fixed rate debt obligations as of:

	September 30, 2024				March 31, 2024
	Carrying Value		Fair Value		Carrying Value		Fair Value
Corsair Japanese Financing	$	29,520,834	$	29,165,337	$	31,145,834	$	29,624,330
Cresques Japanese Financing		24,724,678		26,282,426		25,608,991		26,180,173
Cratis Japanese Financing		39,460,000		37,766,405		41,500,000		38,302,845
Copernicus Japanese Financing		39,460,000		37,766,405		41,500,000		38,302,845
Chaparral Japanese Financing		58,623,495		58,588,001		59,896,473		57,627,652
Caravelle Japanese Financing		40,700,000		38,951,839		42,500,000		39,003,038
Cougar Japanese Financing		41,900,000		43,548,452		43,700,000		43,715,910
Captain Markos Dual-Fuel Japanese Financing		52,010,000		55,899,882		53,270,000		54,923,798
BALCAP Facility		62,336,329		60,257,302		66,330,459		62,186,682