SecProbe.io

CORRESP
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    d803791_corresp.htm

       August 24, 2007

    VIA
      EDGAR

    Mr.
      Michael Fay

    Division
      of Corporation Finance

    Securities
      and Exchange Commission

    CF/AD5

    100
      F
      Street, N.E.

    Washington,
      D.C. 20549

    Re:  TOP
      Tankers Inc. Form 20-F for Fiscal Year

    Ended
      December 31, 2006 (File No. 000-50859)

    Dear
      Mr.
      Fay:

    This
      letter responds to comments of the staff (the “Staff”) of the Securities and
      Exchange Commission (the “SEC”) to the Annual Report on Form 20-F for the fiscal
      year ended December 31, 2006 (“Form 20-F”) of TOP Tankers Inc. (the “Company”)
      filed April 20, 2007, as provided in a letter to Evangelos J. Pistiolis, the
      Company’s President and Chief Executive Officer, dated August 2,
      2007.  This letter sets forth the Company’s responses to the Staff’s
      comments.

    For
      your
      convenience, the Staff’s comments have been restated in their entirety, with the
      responses to each comment set forth immediately under the comment.

    Form
      20-F: For the Year Ended December 31, 2006

    Item
      3.  Key Information

    A.
      Selected Financial Information

              Comment
                1.

              You
                present the non-GAAP measure “adjusted EBITDA” because you believe it
                provides investors with an understanding of operating performance
                over
                comparative periods.  However, it is not clear why the GAAP
                measure “operating income” would not provide the appropriate level of
                understanding of your operating performance to investors.  In
                this regard, please tell us and expand your disclosure to demonstrate
                clearly: (i) the substantive reasons specific to you how the measure
                is
                useful in assessing your operating performance; and (ii) the
                meaningfulness of each reconciling item presented in arriving at
                the
                measure specific to your circumstances.  Further, disaggregate
                the reconciling item “interest and finance, net” into its separate
                components for more transparency of what this item represents and
                the
                related amounts therein. In the alternative, please consider eliminating
                use of this non-GAAP performance measure in your
                filings.

              Response:

              Use
                of Adjusted EBITDA

              While
                the Company recognizes that EBITDA is a non-GAAP performance measure
                and
                acknowledges this point in its Form 20-F, it believes that this measure
                is
                useful, as a supplemental information, in assessing its operating
                performance and is a measure that is extensively utilized in financial
                reporting (both in earnings announcements and SEC filings) by many
                companies within the shipping industry. Specifically, the Company
                understands that financial analysts who follow the shipping industry
                use
                EBITDA in assessing and comparing the operating performance of companies
                within the shipping industry because EBITDA facilitates operating
                performance comparisons from period to period and company to company
                by
                backing out potential differences caused by variations in capital
                structure (which impacts relative interest expense); tax positions
                (such
                as the impact on periods or companies of changes in effective tax
                rates or
                net operating losses); the age, book depreciation, changes in the
                fair
                value that affect acquisition prices of facilities and equipment
                (which
                impacts relative depreciation expense); and timing and costs of
                dry-docking (which impacts relative amortization
                expense).

              Traditionally,
                EBITDA is calculated as earnings before interest, taxes, depreciation
                and
                amortization. The Company makes further adjustments to traditional
                EBITDA
                to arrive at adjusted EBITDA to primarily eliminate the financial
                accounting effects attributable to interest rate swaps. The Company
                believes that such effects are directly related to the interest expense
                adjustment used in calculating traditional EBITDA since the Company
                uses
                interest rate swaps as economic hedges of fluctuations in the interest
                rate on its variable rate debt.  Thus, for reasons stated in the
                foregoing, the Company believes that the following items are meaningful
                adjustments in determining adjusted EBITDA: (a) depreciation and
                amortization, which includes vessels and other fixed assets’ depreciation
                and amortization of dry docking expenses according to the Company’s
                relevant accounting policies, and (b) interest and finance costs,
                net,
                which includes all financing related expenses, such as loan interest
                expenses, amortization of financing fees associated with loans, gain
                or
                loss from termination of interest rate swaps, fair value changes
                of
                interest rate swaps, bank charges and other financial costs, less
                interest
                income.

              The
                reconciling item “Interest and Finance Costs, Net” is derived by deducting
                “Interest Income” from “Interest and Finance Costs,” both of which are
                separate line items under the “Other Income (Expense) section of the
                Company’s consolidated statements of income. In addition, the composition
                of “Interest and Finance Costs” is shown in Note 17 to the notes to
                the Company’s consolidated financial statements. The Company respectfully
                advises the Staff that the Company will disaggregate the reconciling
                item
                “Interest and Finance Costs, Net” in its future filings and present
                “Interest and Finance Costs” and “Interest Income” as separate reconciling
                items.

              The
                Company respectfully advises the Staff that in future filings, it
                will
                enhance disclosures to more specifically address the points made
                in the
                Staff’s comment and that the disclosures will include the points described
                above.

              Item
                11.

              Quantitative
                and Qualitative Disclosure About Market Risk

              Comment
                2.

              Please
                expand your disclosure to discuss how interest rate swaps were factored
                in
                the interest rate sensitivity presented and the impact of the swaps
                on the
                amounts presented.

              Response:

              The
                interest rate sensitivity analysis takes into account the impact
                of the
                interest rate swaps.  The interest the Company pays on its
                variable rate debt (which is based on LIBOR plus a margin) matched
                the
                interest that the Company received on its interest rate swaps (which
                are
                also based on LIBOR plus a margin).  So, in the sensitivity
                analysis, the Company excluded the interest expense impact attributable
                to
                the portion of the principal of its variable rate debts covered by
                an
                interest rate swap.  The table below represents the Company’s
                total outstanding debt (all debt of the Company is variable rate
                debt), as
                of the end of the presented years, including existing and expected
                indebtedness for scheduled loan drawdowns until the delivery of contracted
                new vessel constructions. It also includes the outstanding principal
                amount of the Company’s variable debt and the aggregate outstanding
                notional amount of the Company’s interest rate swaps.  The
                sensitivity to 100 basis points of interest rate change is calculated
                by
                applying 100 basis points to the portion of the Company’s outstanding
                variable rate debts not covered by our interest rate
                swaps:

              Date

              Total
                Variable Rate Debt Outstanding

              Outstanding
                Amounts of Interest Rate Swaps

              Total
                Variable Rate Debt Outstanding Not Recovered by Interest Rate
                Swap

              Interest
                Rate Impact of a 100bp Change

              31-Dec-07

              213,000,000

              145,939,848

              67,060,153

              670,602

              31-Dec-08

              285,896,000

              138,934,303

              146,961,697

              1,469,617

              31-Dec-09

              348,802,100

              109,770,320

              239,031,780

              2,390,318

              31-Dec-10

              337,802,100

              80,000,000

              257,802,100

              2,578,021

              31-Dec-11

              292,637,827

              80,000,000

              212,637,827

              2,126,378

              31-Dec-12

              247,473,554

              80,000,000

              167,473,554

              1,674,736

              The
                Company respectfully advises the Staff that the following format will
                be used to present the Item 11 interest rate sensitivity disclosure
                in
                future filings:

              Interest
                Rate Fluctuation. The international tanker shipping industry is capital
                intensive, requiring significant amounts of investment.  Much of
                this investment is provided in the form of long-term
                debts.  Interest expense on the variable
                rate debt that is not fixed through interest rate
                swaps is affected by changes in the general level of interest rates,
                and increasing interest rates could adversely impact future
                earnings.

              Consolidated
                Statements of Cash Flows

              Comment
                3.

              Please
                explain to us why the increase in restricted cash is presented as
                a
                financing activity for 2004 and 2005 and an investing activity for
                2006.

              Response:

              The
                Company, as more fully described in Note 11(b) and Note 11(c) to
                the
                financial statements, entered into sale and leaseback transactions
                in
                March 2006 and April 2006.  Also, as disclosed in Note 11 to the
                financial statements, the bareboat charter agreements related to
                the March
                and April 2006 sale and leaseback transactions require that a minimum
                amount of $20 million (through December 15, 2006) and $25 million
                (thereafter and until the final date of the bareboat charters) shall
                be
                maintained on deposit by the Company.  In addition, the Company,
                during the period covered by the bareboat charter agreements, is
                required
                to maintain consolidated cash balances of at least $50 million, including
                the $20 million or $25 million, as the case may be, mentioned
                above.  The $50 million required to be maintained is presented
                in the balance sheet as of December 31, 2006 as restricted cash and
                the
                corresponding increase in restricted cash in 2006 of $36.5 million
                as
                required under the bareboat charter agreements was presented as cash
                flows
                from investing activities in the statements of cash
                flows.

              The
                Company believes that restricted cash represents an investment;
                accordingly, a balance on deposit in a restricted cash account should
                be
                deemed the equivalent of an investment whose return of principal
                requires
                the satisfaction of conditions rather than a mere withdrawal demand.
                Therefore, deposits and withdrawals of principal balances in restricted
                cash accounts represent the creation or return of investment, which
                generally should be presented as investing activities in the statement
                of
                cash flows. In addition, the Company believes that the foregoing
                is
                consistent with views that the Staff of the Commission expressed
                during
                the 2006 AICPA National Conference on Current SEC and PCAOB Developments
                that for most entities, changes in restricted cash represent investing
                activities.

              The
                Company believes, however, that in certain instances, other cash
                flow
                classifications are appropriate. In particular, the Company believes
                that
                if restricted cash is maintained as a condition of debt financing,
                it is
                appropriate to present changes in such restricted cash as a financing
                activity in the statement of cash flows. In connection with its debt
                financings in 2004 and 2005 (as discussed in Note 8 to the Company’s
                financial statements), the lending banks required the Company to
                maintain
                liquid funds in an amount equal to the higher of $10 million or $0.5
                million per vessel. The Company has determined that such a requirement
                meets the condition for classification as restricted cash. The Company
                presented the gross proceeds from its bank loans as cash inflow from
                financing activities. Because the requirement to maintain liquid
                funds was
                a covenant under the 2004 and 2005 debt financings, the Company has
                determined that it is appropriate to present the cash outflow associated
                with maintenance of such liquid funds as a financing
                activity.

              Notes
                to Consolidated Financial Statements

              Note
                2. Significant Accounting Policies

              (m)
                Accounting for Dry docking Costs

              Comment
                4.

              Please
                explain to us what “dry dock dues” and “general services for vessel
                preparation” represent and why it is appropriate to consider these as dry
                docking costs that are deferred and amortized.

              Response: