Atlas Corp (ATCO) 2020 Q1 法說會逐字稿

Welcome to the Atlas Corp. Conference Call to discuss the financial results for the quarter ended March 31, 2020. I would like to remind everyone that this conference call is being recorded today, May 5, 2020 at 8:30 a.m. Eastern Time and will be available for replay starting today at 11:38 a.m. Eastern time.

Hosting the call today are Bing Chen, President and Chief Executive Officer of Atlas; Peter Curtis, Executive Vice President and Chief Commercial and Technical Officer of Seaspan; and Ryan Courson, Chief Financial Officer of Atlas. We will open the call for questions after the presentation from management, at which point, David Sokol, Chairman of Atlas; and Torsten Pedersen, Executive Vice President of Seaspan ship management, will also be available for questions.

I will now turn the call over to Ryan Courson.

Good morning, everyone, and thank you for joining us to discuss Atlas' first quarter earnings. This is our first earnings call since the closing of Seaspan's holding company reorganization and our first quarter reporting combined Atlas, Seaspan and APR financials. We are excited to share our recent developments and financial results for the quarter.

This morning, prior to the call, we issued a press release announcing Atlas' first quarter results for the period ended March 31, 2020. The release as well as the accompanying presentation for this conference call are available on the Investor Relations section of our website.

If you'd please turn to Slide 3. I would like to remind you that our discussion today contains forward-looking statements. Actual results may differ materially from those stated or implied by forward-looking statements due to risks and uncertainties associated with our business, which are discussed in the Risk Factors section of our annual report filed with the SEC on Form 20-F for the year ended December 31, 2019. Our risk factors may be updated from time to time in our filings with the SEC. Please note that we assume no obligation to update any forward-looking statements.

I would also like to note that the acquisition of APR was completed on February 28, 2020, and as such, Atlas financial results for the first quarter of 2020 include APR's financial performance for the period starting on February 29, 2020, and ending on March 31, 2020.

With that, I will now pass the call over to Mr. Bing Chen.

Thank you, Ryan. Please turn to Slide 4. Since the beginning, it has been our vision to transform Seaspan into a global diversified asset owner operator. Now that our Atlas structure's in place, we can further work towards our vision of sustainable growth and value creation. 2020 has so far proven to be a turbulent and uncertain time thus far. However, as our Chairman, David Sokol, mentioned at our last Investor Day, Atlas business is not about booms and busts. We have built a robust platform to succeed through market cycles and are not surprised with how resilient both our leading operating platforms, Seaspan and APR, have proven to be. This quarter marks the first time combining Seaspan and APR together. Our performance in the first quarter, along with the month of April, reflects our focus on operational excellence, the strength of our business model backed by long-term contract cash flow and our robust liquidity position despite the extreme COVID-19 environment.

Before going into the detail, I would like to briefly highlight what we have achieved in 2020. Despite this unprecedented pandemic, we have immediately taken proactive measures to ensure our customers are well served. In parallel, we've had a robust business continuity plan across Seaspan and APR. As a result, we have experienced no disruptions to our customers nor to ourselves.

I want to thank our customers for their trusted long-term partnership, our employees, especially our seafarers for their dedication and hard work and all of their families for their support and sacrifice. Our consistently best-in-class customer services and the safety of our seafarer and corporate staff are our highest priority. We continue to maintain safety measures as outlined by respective authorities.

Atlas delivered a record Q1 revenue of $308.4 million. While we announced our first dividend, it is the 59th consecutive distribution since Seaspan's IPO. We are proud of our consistent track record as it is a reflection of our commitment to thoughtful capital allocation and creating long-term value for our shareholders. In terms of Seaspan, over March and April, at the height of COVID-19, we took delivery of 5 vessels and deployed them all on long-term charters with global leading liners. For the 4 recently acquired 12,000 TEU vessels, we closed a $340 million flexible financing facility and ended the quarter with a liquidity position of $393.7 million. We are increasing our full year 2020 revenue guidance, up $50 million on the bottom end to $1.185 billion and up $30 million on the top end to $1.225 billion for Seaspan.

In terms of APR, although we have only consolidated results for one month, we have already made meaningful improvements, completing the $285 million refinancing of APR's debt and announced new contracts. We're excited to continue to expand this business, which I will discuss later.

Please turn to Slide 5. We are laser-focused on building a platform for sustainable growth and value creation. And this starts with our 5 key priorities, along with our people, processes, structures and systems. During this quarter, we have made significant progress, and I will provide a brief overview as they relate to Atlas, Seaspan and APR.

As a leading global asset owner and operator, we continually focus on operational excellence and providing full integrated best-in-class services. This crisis has demonstrated more than ever how operational excellence is the foundation of our robust business model.

As the news of COVID-19 was announced in late January, we took immediate measures to mitigate potential impacts. Throughout these difficult times, we're continually finding efficiencies within our daily operations and invested the savings back into improving our customer services. Especially, we invested our resources and capital in technologies, services and crew capabilities to ensure that our customers remain best serviced and well protected.

At the heart of our business are the 4,600 global Seaspan employees and 600 APR employees, whose efforts ensure we continue to exceed at the high standards and expectations. So again, thank you all very much.

In both the global maritime and power sectors, Atlas is focused on building creative customer partnership and structuring mutually beneficial solutions. Our strong customer base includes the leading global liners for Seaspan and government-backed utilities for APR. The formation of Atlas and the acquisition of APR enhances our financial strength and stability to support our future growth. Our committed shareholders of Washington Group and Fairfax Financial Holdings, our strategic partnership with long-term capital partners as well as our innovative financings have positioned us to continue to lead. Atlas provides the organizational structure for us to pursue in long-term value-accretive growth opportunities while allocating capital to attractive investments, such as our recent vessel acquisitions. The Atlas structure allows both Seaspan and APR to optimize its respective capital structures and growth objectives while creating synergy through shared services.

Please turn to Slide 6, where I will provide an overview of financial highlights for the quarter, and Ryan will further elaborate on this. Atlas demonstrates its resiliency, delivering strong financial performance for the quarter while maintaining a strong liquidity position of $393.7 million. We are confident in our long-term contract cash flow and are increasing our Seaspan revenue guidance. 2020 revenue is now expected to be between $1.185 billion and $1.225 billion. The bottom end has been revised upwards by $15 million and the top end has been revised upwards by $30 million.

Atlas recorded a record quarterly revenue of $308.4 million. Operating earnings were $127.5 million, and our cash flow from operations was $130.7 million. EPS per diluted shares was $0.15 for the first quarter of 2020. Loss on derivative instruments contributed a $0.10 per share loss for the quarter.

Seaspan's vessel utilization was strong at 97.9%, a slight decline from the first quarter of 2019, primarily due to an increase in dry docking rather than unscheduled off hire days. Container ship leasing revenue for the quarter was $292.5 million, an improvement over Q1 2019 revenue of $285.3 million.

As of today, all 123 vessels in our global fleet have secured charters in place. APR's power fleet utilization for the quarter was 63.6%, which is calculated by the weighted number of megawatts contracted over the total fleet capacity. In April, contracts for 8 turbines have been signed for deployment in Mexico, which will improve this utilization rate to 82.3%. Given the mobile nature of APR's fleet of gas turbine, there will be downtime as assets are mobilized to new project sites. APR's gas turbine utilization was near 100% at the end of third quarter of 2019, and the commercial team has done a great job of putting these turbines back to work.

Please turn to Slide 7. As Seaspan continues to execute on transformative improvements and growth, we remain focused on delivering quality customer service and solid financial performance. For Seaspan corporate developments, Seaspan closed its holding company reorganization on February 28 to create Atlas Corp. Atlas began trading on New York Stock Exchange under the ticker symbol ATCO, and both Seaspan and APR become wholly owned subsidiaries of Atlas.

During the quarter and throughout April, we continue to grow our fleet and sign long-term charters as a testament of our long-term customer partnership. Year-to-date, we have taken the delivery of 6 vessels, which were immediately deployed on long-term charters, growing our fleet to 123 vessels with over 1 million TEU. 4 of the 12,000 TEU vessels were financed through $340 million of flexible financing arrangement at attractive terms, providing cost-effective, flexible and long-term financing with a tenure of 10 years. This achievement, in addition to adding $100 million of new commitments under our award-winning portfolio financing program, demonstrates Seaspan's financial strength, innovation and access to capital markets despite a challenging market.

As previously mentioned, Seaspan's business has been minimally affected by COVID-19 as the result of our team's proactive and effective mitigation actions. For commercial and operational developments, we also finalized a mutually beneficial charter modification with a key liner for 6 of our vessels, extending the bareboat charter from 4 years to 10 years. Operationally, despite delays at shipyards, we completed 3 of the 10 announced scrubber retrofits and expect to complete the rest within Q2 2020.

Seaspan's LTIF decreased 5% from December 2019 to 0.76, and we are working to achieve our ISO 104001 certification by Q2 2020. Seaspan's future committed revenue stands at a robust $4.3 billion.

Please turn to Slide 8. As we continue to integrate the APR business, we have already made strides in improving the business commercially, operationally and financially. For APR corporate developments, concurrent with the closing of the acquisition, we successfully completed the refinancing of APR's debt with a $285 million of senior secured financing program, consisting of a $135 million of term loan, $50 million of revolver, $100 million of institutional private placement tranche funded by BlackRock. This financing optimizes APR's capital structure and positions the company for future growth.

For commercial and operational developments, in April, APR signed contracts for 265 megawatts in Mexicali. In addition to supporting high demand during the peak hours, the 8 mobile gas turbine will help ensure grid stability as the region adjusts to recent decrease in power imports. We expect the turbines to be operational in the second quarter of 2020. With these Mexicali contracts, it brings the APR's power fleet utilization to approximately 82% pro forma in the second quarter. We continue to execute on our business strategy with strong commitment to ESG, divesting idle diesel generators and making operational improvements. To highlight, during Q1, APR overall plant availability was maintained at over 99%.

So in summary, I'm extremely proud of the Atlas teams for consistently driving operational excellence while delivering high-quality customer services under these extreme circumstances. I'm confident that we will emerge from this crisis stronger and well positioned to succeed.

With that, I will now hand over to Peter, who will discuss the containership industry developments.

Thank you Bing. Please turn to Slide 9, where I will discuss recent developments in the container shipping industry. There have been significant impacts on the container industry in the first quarter. This has been understandably primarily driven by the developing contraction in global trade as a result of COVID-19 and the associated lockdowns in China followed by cascading to other nations as the pandemic has spread. However, as Bing mentioned, these changing industry dynamics, which we view as being of a relatively temporary nature, are mitigated by Seaspan's business model of long-term contracted cash flows with the leading global liner companies.

That said, I will start with an overview of what we see in terms of global container shipping supply and demand dynamics, and then I shall offer some comments on their effects on Seaspan. In terms of global trade, while much remains uncertain, the decline on world trade volumes year-on-year 2019 to 2020 is expected to be in the range of 5% to 10% in terms of TEU volumes. While we have seen positive signs of recovery from China, many third-party research reports anticipate global trade levels recovering by the end of 2020. The IMF has recently provided a projection that 2021 should see a global GDP growth of some 5.3%. As for the present, order impact of COVID-19 on global trade remains with uncertainties due to evolving COVID effects outside of Asia, notably in the main markets of North America, Europe and Africa.

We have recently seen a significant slowdown of demand from Europe and North America, which is reflected in the forecasted demands referenced on the slide. I'll remind you that the main trades of Asia-Europe and Asia North America each comprise about 13% of global annual TEU moves, while Intra-Asia comprises about 30% of global moves. Lines are managing freight rates by extracting capacity through blanking sailings, and holding tonnage idle for full round voyages. We are cautiously optimistic about a volume recovery emerging in the second half of 2020. And we have seen this before during the post-2008 period. If that happens, we expect continued robust growth in trade volumes in 2021 onwards, as the world recovers from this exogenous shock and the likelihood of catch-up demand and volumes emerge.

Moving onto the idle fleet. It is not surprising that this continues to grow as a result of declining global trade due to the COVID effect compounding the previous trade war impacts and the Chinese New Year seasonality in Q1. The idle fleet is still mostly made up of size segments, less than 3,000 TEU. Although we now see small numbers distributed through the size ranges up to 9,000 TEU as well as larger vessels withdrawn by means of liner blank sailings.

In addition to these, I remind you that the idle fleet includes vessels undergoing scrubber retrofitting through 2020, representing about 2.5% of capacity and where the vessels are typically 10,000 TEU and above in size. We do anticipate the increase of the idle fleet will cause adverse pressure on charter rates for vessels. As a result, we are focused on actively managing our fleet of short-term vessels, which makes up approximately 12% of our fleet in terms of TEU or about 5% in terms of revenue to ensure continued employment through this COVID-affected period. Given this period of uncertainty, we have seen customers favor larger and stronger tonnage providers, which is a benefit to Seaspan.

The order book remains at historically low levels, and we expect a meaningful slowdown of deliveries through construction deferrals due to current conditions. The liners have shown continued ordering discipline, partly as a result of the alliance partnerships, which has benefited the supply side. We expect the current COVID situation to cause extraordinary caution of liner companies in considering any new tonnage requirements and likely the deferral of decisions to execute on additional build contracts. The natural effect on charter tonnage providers is the adoption of a similar discipline.

I will highlight that a portion of the order book is made up of options, which are potentially not to be declared in this current environment and to be either foregone or deferred to a later date. As such, we expect the order book to decline further. Overall, liner companies have been most impacted by the declines in global trade with their revenues being dependent on TEU moves. Seaspan is relatively independent of actual trade volumes. While we expect meaningful impacts to our customers' bottom line for 2020, Seaspan's diversified customer mix consisting of the leading global liner companies mitigates our customer risk during this difficult period. Liners are currently benefiting from the low fuel price environment, considering that bunkers make up a meaningful portion of their costs. Seaspan does not pay for fuel, but we see this as a benefit in terms of supporting the liner's financial positions.

My final point to mention is that our scrubber retrofitting program continues on track with all our vessels expected to be completed by July. We continue to execute on disciplined growth, taking delivery of four 12,000 TEU vessels on 5-year charters and one 9,600 TEU vessel on a 3-year charter since the beginning of the year. We continue to work very closely with our customers through this interesting period in developing and evaluating meaningful transactions.

I will now hand the call over to Ryan to discuss the financial results for the quarter.

Thank you, Peter. If we could please turn to Slide 10. I will provide a summary of our financial results for the first quarter. As previously mentioned, the acquisition of APR was completed on February 28, 2020, and as such, Atlas financial results for the first quarter of 2020 include APR's financial performance for the period starting from February 29 and ending on March 31, 2020. APR is a strong addition to the Atlas portfolio, and we are excited to reintroduce the business to the public and hope to share more about the company and how we think about the business in the upcoming quarters.

Moving on to the key performance metrics. Utilization continues to be a key driver for both the Seaspan and APR businesses. Seaspan's utilization for the quarter was a strong 97.9%, a decrease from 98.2% in the first quarter of 2019, with the decrease primarily due to higher scheduled dry docking days. We achieved a 98.4% TEU weighted utilization for the first quarter of 2020. APR's fleet consists of mobile gas turbines, which are the current focus. The total power utilization for the quarter was 64%. This will increase as 8 of the company's fleet of 30 turbines are in process of being transported and mobilized to power projects in Mexico. Pro forma for these projects, APR's utilization will be approximately 82%.

As Bing mentioned, due to the nature of APR's contracts and time associated with mobilization, which is moving the assets to the project location and demobilization, which is the removal of the assets from the project location, we expect APR's utilization to fluctuate in periods where new contracts begin.

On the revenue side, revenue increased 8% to $308 million for the quarter. APR revenue contributed $16 million, with the remaining increase driven by the expansion of Seaspan's operating fleet. On the operating expense side, we saw an increase of 4% to $60 million for the first quarter. APR contributed $3 million of this and was partially offset by lower Seaspan operating costs per ownership day.

G&A increased 18% to $10 million. The increase was primarily due to the inclusion of APR for the consolidation period. Operating earnings and net earnings were $127.5 million and $35.1 million, respectively, for the quarter. The decrease compared to the prior year was primarily due to the $227 million onetime gain recognized in the first quarter of 2019. This gain -- this loss of the gain was offset by stronger operating performance from Seaspan and the contribution of APR. GAAP diluted EPS for the quarter was $0.15. The loss on derivative instruments had a negative $0.10 impact for the diluted EPS calculation for the quarter.

Cash flow from operations for the quarter was $130 million compared to $129.3 million in the same quarter over the prior year. Moving onto the balance sheet. Our cash balance at the end of the first quarter, including short-term investments, was $213.7 million. We brought this with a robust liquidity position of $394 million, which also included undrawn revolvers. We have demonstrated the ability to maintain a strong liquidity position while growing the business through thoughtful capital allocation and access to global capital markets. Total borrowings of $4.2 billion as of March 31, are up from $4 billion as at March 31, 2019, due to the acquisition of the APR and additional debt to finance the acquisitions of vessels described by Bing. Shareholders' equity was $3.6 billion as of March 31, 2020, an increase from $3.2 billion as of March 31, 2019, primarily related to the shares issued as part of the acquisition of APR.

If we could please turn to Slide 11. We will discuss developments in our capital structure and financial position. We continue to effectively manage our liquidity with a strong liquidity position of $394 million. We have maintained this liquidity position while growing our fleet and improving our maturity profile. One of the topics to continually discuss as a competitive advantage is our access to the global capital markets. Despite the challenging market environment, we were able to complete the $285 million refinancing of APR's debt, increased our portfolio financing program at Seaspan by an incremental $100 million and closed on an innovative $340 million flexible financing facility for 4 of the recently acquired vessels. Fairfax also contributed an additional $100 million through 5.5% debentures maturing in 2027. We were able to complete all of these financings, including pricing and tenor improvements to diversify and improve our maturity profile while increasing flexibility across the Atlas Corporation portfolio. This is a reflection of our global credit relationships and the trust they have in the stability of Seaspan and APR's business model. A core piece of Atlas' strategy is establishing an optimal capital structure at each of its business segments, and we have made significant process in this respect.

We continue to focus on improving our credit profile, maintaining our net debt-to-equity ratio at 1.1x over the last year, while growing the fleet and acquiring APR. APR is a conservatively leveraged business and is well positioned to grow in the near term. We will continue to focus on credit improvements and optimizing our portfolio company's capital structures, as there are meaningful benefits to continued credit enhancement, especially on our long-term path towards an investment-grade credit rating. I am very pleased with the progress we have made over the past quarter and believe we are uniquely well positioned in the current environment to leverage our strong balance sheet to explore new growth opportunities. Capital allocation is one of our key focuses, and we are excited with the platforms we have to deploy capital, strengthen our balance sheet and create long-term value for our shareholders.

Finally, if we could please turn to Slide 12. I will go over forward-looking guidance. In our previous earnings calls, we provided 2020 guidance for Seaspan with the various corporate developments at Atlas, including the addition of APR to the Atlas portfolio, we are providing updated guidance for Seaspan and issuing new guidance for APR. Please note, 2020 guidance for APR represents the period post-consolidation from February 29, 2020, to December 31, 2020.

For Seaspan, we are increasing our revenue and operating expense guidance, while maintaining our previously provided G&A administrative expense, operating lease guidance. As Bing mentioned, this demonstrates the confidence we have in our resilient business model and the success of our recent growth initiatives. For 2020 and APR's consolidated performance, we expect revenue to be in the range of $190 million to $220 million. Operating expense is expected to be within the range of $40 million and $54 million. G&A expense is expected to be within a range of $38 million and $40 million. And finally, operating lease expense is expected to be in a range between $3 million and $4 million.

We thank you for your time today. And with that, I will pass the call back to the operator, who will open the call for questions.

(Operator Instructions) You have a question from the line of Chris Wetherbee with Citi.

It's James on for Chris. Just wanted to touch on if any customers have contacted you about potential charter restructures, and if you anticipate any of those coming across the balance of the year, what they might look like. Just kind of wanted to get some color on some of the conversations you're having with customers broadly.

Yes. Chris, this is Bing. As you know, that it is normal course of our business to working very closely with our customers on looking at what their needs are. So in terms of the payments, as what you're referring to, if you may recall, at the same quarter of last year, we actually had a lease contract rewrite where, as what Ryan just mentioned, the result in $227 million of additional income for the last quarter. So in general, we are working very closely with our customers to providing the value through our expertise in whether it's technology, whether it's commercial, operations or financing to find the win-win solutions for both our customers and ourselves. So this is included in the easy time as well as in a difficult time right now. So we are very confident, and we are actually working very closely with our customers on a daily basis in developing any kind of solutions. So in so far to this year, other than the 6 vessels, we actually extended from 4 years to 10 years, as we previously mentioned, there's no other major material rewrite of the contract so far. But we are closing with our -- closely working with our customers.

Got it. And just touching on guidance as well. You increased it. Was that -- was the rewrite of those bareboat charges the driver behind the guidance uptick? Just trying to understand sort of what drove that relative to what you knew in the fourth quarter call?

Thanks, James. The increase in guidance as it relates to Seaspan, that's a culmination of a number of changes within the portfolio, but primarily driven by the increase of the new vessels we added to the portfolio in the first quarter.

Got it. And then touching on APR, you're focused on utilization. Obviously, and you have -- you're running at this -- at the pro forma of 82%. But just thinking about what's going on for the past 4 months and sort of -- and the conversations you're having with customers there, like, how should we think about that 82% across the balance of the year? Should it be relatively stable? Or should it sort of slowly glide down?

Yes. We don't particularly give any guidance on the utilization. But what you correctly pointed out in terms of what we were going to be achieving in terms of the pro forma of the utilization is a good reference. Due to the nature of the mobile power, we have to move the turbines from project-to-project, so that will inevitably cause some downtime. However, those other downtimes will be effectively taken into consideration when we're looking at each project's return, so that you need to look at both in terms of utilization and also the project return, and that's how we're managing the business. Specifically, I think given the current circumstances, I think given the nature of APR business, which is a critical infrastructure by nature, so the demand actually is quite stable. And I think our team actually are working very actively on several opportunities. And one of those opportunities actually, it's in the final stage, and that will become -- if we would complete that transaction, that will be material. So we are quite optimistic. And also, as I said, both Seaspan business as well as APR business are critical infrastructure. One is in transportation, the other one is in power solutions. So they are rather, I would say, immune in terms of the demand. And as I said, in terms of the APR business specifically, and I think we are working on quite a few opportunities.

Got it. And then also, if you already noticed that there was a men -- a leadership change. Just wanted to touch on if that was part of the initial plan, pre-acquisition? And if there's any plans for a replacement in the near term? Or what the plan is for replacement in the near term?

Yes. We're happy with the decision that Chuck makes, and we will be finding a replacement in due time to lead APR to the next level.

Your next question comes from the line of Sanjay Ramaswamy with Bank of America.

Guys, thanks a lot for the color on APR and putting that out in this result. Just help me understand, I know the press release talked about the -- about $4.8 billion of long-term cash flows here. So how do you think about that in terms of time frame and in terms of relevance versus Seaspan's $4 billion in long-term contracted cash flows. I mean, do we assume that this business is going to grow substantially from here? Or what kind of time frame do you assume for those cash flows?

Sanjay, it's Ryan. From the $4.3 billion of long-term contracted revenue that we talk about, that is a function of the entire fleet profile that we have at Seaspan. If you were to look through our disclosures, you would be able to think about the roll-off of how that cash flow profile looks over a period of time. It's one of the key performance indicators as it relates to our management team and how we think about engaging with our customers as well as structuring the platform for our business. And so I think what Bing would echo here is that we are focused on maintaining that long-term contracted revenue profile because it helps support not only the stability of our business, but also the liabilities associated with it.

That's helpful. And so just coming to APR then. So how do we think about the time frame for those cash flows?

From an APR perspective, on a forward-looking basis, what you have right now is through the APR guidance that we've provided. There will be incremental disclosures in a similar manner for the larger contracts we have in APR once we get our 6-K out. And you'll be able to see the same context from a cash flow profile rollout.

Okay. Sure. That's helpful. And maybe just moving to the 2020 revenue guidance. Just help me understand, does this incorporate any potential impact of COVID-19? I mean, I know the press release talked about the potential impact in terms of the liner customer perspective and in terms of the demand of these charters in the pricing. But does this actually incorporate anything from that? And how do we think about that?

It's a good question. When we put out guidance, we try to be as thoughtful as we can about the current macro environment as well as the micro engagements that we have with our customers. We feel confident in the guidance that we've put out, as it relates to looking on a full year basis throughout 2020, COVID and non-COVID-related factors. And so this guidance does encapsulate how we think about the current environment and our engagements with our customers.

Sure. Okay. And maybe just one for Peter. I mean I know Peter talked a little bit about this in his remarks. But just going more towards those conversations with liner customers and a potential worst-case scenario, if there was a potential bankruptcy in the space or a significant kind of material event with one of your liner customers. How do you guys think about that risk and the potential kind of for this COVID-19 environment to deteriorate further from here from a demand and pricing perspective?

Yes. Thanks. Very interesting question. I think fundamentally, it comes down to how do we think about the effect of COVID on our customers and of course, we -- as Bing has said, we work very closely with our customers in all cases. They do have reduced volumes, so that's something that is quite plainly -- plain to be seen. However, in terms of the longevity of the situation, in our -- in general market discussions, the opinion is that we've actually bottomed out now and that this would likely sustain through the rest of May. And the expectations are for increased [volume] into June and onwards. That said, the discipline affected by the liners working by themselves and then also the coordination through the alliances, you probably noticed that the freight rates have not dropped significantly. And this is through their discipline of withdrawing tonnage, avoiding overcapacity on the trades. Add to that the extremely low cost of fuel, which is a significant element in a line of company's cost basis has been quite advantageous to these companies at the moment. I hope that gives you some color.

Yes. Sanjay, this is Ben. I'll just add to what Peter has talked about. For Seaspan specifically, first of all, we only work with the top 7 of the top 10 customers. So in terms of the customers, they are the top customers within liners business. Secondly, we have a diversified portfolio amongst these top 7 customers. And thirdly, I think that the liners today are much different than 2008 or 5, 10 years ago, as you know, that they have gone through a quite significant consolidations together with the alliance structure in place. I think, today, if you're looking at the freight rate, for example, they actually hold quite well, although the volume comes down, but the freight rate has not come down. And then as Peter mentioned earlier, with the reduction of the -- with the decrease of the fuel price, I think there -- and plus on top of that, you have the government's assistance. So from all those aspects, I think we are pretty cautiously optimistic about the situation with the liners. And today, I think they are much more disciplined. They are much better positioned in dealing with such an unprecedented crisis.

(Operator Instructions) I would now like to turn the call back over to Bing Chen for closing remarks.

Well, thank you, everyone, for taking the time, and we appreciate your participation, and wish everyone stay healthy and safe, and we look forward to staying in touch and see you in the next quarter. Thank you all very much.

Ladies and gentlemen, this concludes today's teleconference. You may now disconnect.