Capital Clean Energy Carriers Corp (CCEC) 2008 Q4 法說會逐字稿

Welcome to the fourth-quarter earnings conference call for Capital Product Partners. As you know, earlier today the Partnership reported its financial results for the fourth quarter of 2008 and our press release has been posted to the Capital Product Partners website at www.CPLP.com. There are also slides supporting today's audio presentation available on the website. If you don't have access to the Internet or would like a copy of the release faxed or e-mailed to you, please contact Jerry Kalogiratos at 210-458-4950.

I would like to remind everybody that the conference call today will include some forward-looking statements that are subject to certain risks and uncertainties which are detailed in our 2007 Form 20F filing, as well as our other filings which we have made with the SEC. These and other forward-looking statements are made based on management's current plans, expectations, estimates, assumptions and beliefs concerning further events impacting the partnership.

The partnership cautions that forward-looking statements are not guarantees and that actual results could differ materially from those expressed or implied in the forward-looking statements. Please refer to our forward-looking statements included in the accompanying slides.

In addition, non-GAAP financial measures as defined by the SBC may be discussed on this call. To comply with the SEC rules reconciliations of the non-GAAP financial measures have been attached to this morning's release.

I will turn the call over to the primary speaker on today's call, Ioannis Lazaridis, Chief Executive Officer and Chief Financial Officer of Capital Product Partners -- General partner. Please go ahead, sir.

Thank you, Merriam. And thank you all for joining us today. As a reminder, we will be referring to the supporting slides available on our website as we go through today's presentation.

Starting with slide 1 -- Capital Product Partners achieved strong financial results in the fourth quarter due to solid profit sharing revenues which, combined with a full contribution of all 18 of our vessels following the completion of all planned acquisitions in the third quarter brought a strong finish to the year.

I'm going to make some comparison on today's call between the fourth quarter of 2008 and the fourth quarter of 2007 as, due to the seasonality of our business; this is the most meaningful period to compare to.

Net income for the quarter was $14.3 million compared with $10.3 million in the fourth quarter of last year. Earnings per limited partnership unit were $0.54 in the fourth quarter this year, up from $0.38 in the fourth quarter of last year and slightly lower compared to the record high $0.56 in the third quarter of 2008.

Profit sharing revenues amounted to a solid $6.1 million in the fourth quarter following the high utilization rates achieved by our charters in the clean product tanker market, as well as by the resilience of the Suezmax spot market. As a result, our operating surplus remains at a high level, at $17.4 million for the quarter.

The Partnership announced today a nonrecurring exceptional cash distribution of $1.05 per unit for the fourth quarter. We thus create value to our unitholders by returning excess cash, especially as there is greater opportunity for vessel acquisitions in the prevailing circumstances and since the Board believes that our current reserve levels are adequate.

The previous cash distribution paid for the third quarter of 2008 was $0.41. The Board of Directors stated that this extraordinary distribution is an exceptional nonrecurring event and that it does not anticipate that dividends will continue at this level in future periods.

Based on the current expectations and subject to actual results which may be substantially different, and to approval of the Board of Directors, the Partnership anticipates that starting with the first quarter of 2009 distributions will return to levels more consistent with prior periods.

We believe the Partnership continues to be well-positioned to weather the continuing turmoil in the financial and shipping markets. Effectively almost all of the Partnership's charter revenues are fixed with reliable counterparties for 2009 and it has no debt amortization obligations until June 2012.

Turning to slide 2, total revenues for the quarter were approximately $36.2 million, up from $29 million in the fourth quarter last year. The increase is primarily due to the higher average number of vessels in operation. 18 vessels were in operation during the fourth quarter of 2008, up from 13 vessels in the same period last year.

In addition, the profit share contribution of $6.1 million for the quarter is substantially higher than the $0.8 million earned in the fourth quarter of 2007. Total vessels operating expenses and SG&A costs for the period were $8.2 million compared with $5.9 million a year ago.

This increase was mainly due to the higher average number of vessels in operation compared to last year and includes approximately $1 million in extraordinary costs for both 2007 and 2008, which are not covered by the fixed management agreement. This consists primarily of additional vetting expenses and costs associated with accidental damages and repairs to our vessels.

Net interest expense and finance costs were $6.7 million, up from $5 million in the same period last year. The large increase was primarily due to the $200 million in additional long-term debt that we have incurred since the end of the third quarter 2007 to finance our fleet expansion. Net income for the fourth quarter was $14.3 million compared with $8.7 million in the same period last year.

Turning to slide three, we are pleased to announce that the Board declared a nonrecurring exceptional cash distribution of $1.05 which essentially returns the proceeds of our profit sharing agreements to our unitholders. Returning money to unitholders through an exceptional distribution in the absence of any investment opportunities demonstrates our belief in the underlying strength of the Partnership business model looking ahead.

The partnership has no debt amortization obligations till June 2012, zero future purchase on new building commitments and a solid balance sheet. 97% of charter revenues are fixed for 2009 and 60% for 2010 with reputable counterparties. After the payment of this exceptional distribution ensures the Partnership has adequate reserves and thus we believe it will generate adequate earnings; our intention is to return to our previously stated distribution policy.

I would also like to draw your attention to the fact that the payment of the exceptional distribution brings the total 2008 distributions to $2.27 or more than 50% of the annual minimum distribution of $1.50 meeting certain financial [tests] set out under the partnership agreement and thus allowing the sponsor to exit subordination 26 months earlier than the date generally expected under the partnership agreement.

This will allow the sponsor to automatically compare its subordinated units to common following the payment of the distribution on February 13th. Capital Maritime, our sponsor, is the largest single shareholder in the Partnership with a 46.6% ownership stake including the 2% GP units and as such the Partnership and disposal of their interest will align.

We expect to continue our stated distribution policy in 2009 and beyond subject to shipping, charter and financial market development and our Board of Directors approval. The nonrecurring exceptional cash distribution of $1.05 per unit results in a $12.5 million payment in incentive distribution rights to the general partner of the Partnership as this distribution exceeds certain street levels set out in our partnership agreement.

The GP elected to receive these incentive distribution rights in four equal quarterly installments instead of a single payment as it is entitled. The first installment is being paid this quarter and, subject to the Partnership distributing at least the minimum quarter distribution, in each subsequent quarter it will receive an additional installment. These payments will be made from operating surplus.

We have to note that the exit from the subordination provides additional flexibility to the Partnership to react to market developments. I would like to remind you that under the terms of the partnership agreement following the end of the subordination certain clauses can be amended with majority or super majority approval of the common unitholders of which Capital will own -- Capital Maritime will own 44.6%.

These include amendments to the definition of available cash, operating surplus and adjusted operating surplus, changes to the cash distribution portion of the Partnership, amendments to the method of approval of merger or consolidation, the removal of the general partner and the ability of the Board to sell, exchange or otherwise dispose of all or substantially all of the assets of the partnership.

For a more detailed explanation of the consequences of the sponsor's exit from subordination, please refer to the partnership agreement which is available through our website and today's press release with regard to the exceptional distribution.

Moving on to slide 4 we show the details of our operating surplus calculations that determine the distributions to our unitholders compared to the previous quarter. Operating surplus is a non-GAAP financial measure that is defined fully in our press release.

Adding certain non-cash items back to net income generated approximately $21.2 million in cash from operations during the fourth quarter of 2008. After setting aside $3.8 million in replacement capital expenditures we achieved third-quarter operating surplus of $17.4 million.

We reduced our reserves by $22 million to pay the nonrecurring exceptional cash distribution of $1.05 per unit for the fourth quarter and as this distribution exceeds certain street levels set out in our partnership agreement $12.5 million and is subject to distribution rights to the GP of the partnership. The exceptional distribution will be paid on February 13th to our unitholders of record on February 10th. The reduction in reserves is $28.3 million compared to the cash we have on the balance sheet today.

On slide 5 you can see that our balance sheet remains strong. The reduction of the equities related to the non-cash valuation effect of our interest rate swaps, which we have in place, our swap rates have declined considerably during the fourth quarter.

I would like to remind you that we have zero purchase and new building commitments and both our debt facilities are non-amortizing until June 2012 and March 2013 respectively. Of the total $720 million in facilities we have -- we still have $246 million in remaining undrawn amounts.

Turning to slide 6, we discussed the spot product and crude tanker markets which remain historically at high levels during the fourth quarter, although a decline from the record peaks of previous quarters was noticeable. The settlement on actual results on some of our profit sharing arrangements and the high utilization rates achieved for the vessels on time charter resulted in average spot rates of $31,284 per day for the partnership's MR vessels with profit share.

The Suezmax, Amore Mio II, achieved TC equivalent of $66,635,000 per day in the spot market in the fourth quarter. We have 50% of the difference between this rate and the respective basic rates. The softer undertone observed in the clean spot market during the fourth quarter can be attributed to the lower demand for oil products, the longer product lease and the higher inventory level due to the overall economic downturn.

The Suezmax spot market rates demonstrated significant resilience on the part of the largely balanced under fleet and demand for qualified tonnage. Period charters softened as a result of more owners and lower quality operators seeking period cover for their tonnage, therefore increasing supply of tonnage available for period employment.

Demand for approved modern tonnage however persisted, albeit at lower levels, as certain oil majors reportedly fixed [modern amounts] on time charter for one year or longer over the last quarter trade in the region of 19,500 to 22,500 per day. The protracted credit crunch and economic uncertainty have had an adverse effect on tanker asset values with current prices having declined versus the fixed prices reached in the third quarter 2008. The lack of transactions has currently made asset price assessments difficult.

Global oil product demand has been further revised downward and is expected to fall by 0.7% in 2009 according to the EIA. Moreover, since September members of OPEC have to (inaudible) cuts to oil production totaling 4.2 million barrels per day or nearly 12% of their capacity. The EIA projects that a slight economic recovery in 2010 will boost total petroleum product consumption by 1%.

We continue to face a severe deterioration in the banking and credit world as well as a major economic slowdown whose duration is very difficult to forecast and which will continue to significantly impact world trade and vessel values. We expect that the overall economic downturn will have an adverse effect on spot product including tanker markets in 2009 as another oil (inaudible) countries are either already or are entering a recession. That results to us being unable to forecast with certainty the period market ahead.

However, the phase out of older tonnage in 2010, the steady demand for approved high-quality modest tonnage by oil majors, the decreasing new buildings order book and the projected recovery in crude oil and oil product demand can be perceived as positive contributing factors from 2010 onwards.

You can see a description of our fleet on slide 7. With the addition of 10 vessels falling out (inaudible) last year we now have 18 tankers on the water. In August we took delivery of our last contracting new building, the Aris II. Our fleet is a very high specification modern fleet with an average age of only 2.8 years and includes 12 virtually brand-new Ice Class, [1AMR] vessels which represent the world's largest fleet of Ice Class 1A vessels.

All our vessels are charted with strong counterparties such as BP, Morgan Stanley, OSG, Shell and Trafigura. The average charter division is 4.5 years and 10 out of the 12 of our time charters have profit sharing arrangements which provide us with a significant upside when markets are strong, as was demonstrated through our results in the last few quarters.

Slide 8 provides an overview of our charter coverage by vessel. We have extensive charter coverage in the medium term with 97% of our fleet under charter for 2009, and 60% in 2010. In addition, six of our vessels are under long-term charters with reliable counterparties that expire during or after 2014 at the earliest. The current weak economic outlook may result in less activity in the time charter market, although stricter regulation, we believe, will result in oil companies continuing to favor modern, high specification tonnage and high-quality operations such as ours.

I would like to conclude by pointing out that we have executed successfully against our business model since our IPO last April despite the challenging debt and equity markets. We benefit from our sponsor's strong position in the shipping market and its relationships with oil majors and major (inaudible).

We have delivered significant growth from our contracted as well as additional acquisitions and now following the strong profit sharing revenues we received and in the absence currently of any opportunities, investment opportunities in the shipping market we (inaudible) excess capital our unitholders.

We would like to reiterate that our goal remains to revert to determining and paying our future distributions in the same manner as published and follow it up to the end of the third quarter. And with that I'll turn the call over to the operator and take any questions you may have.

(Operator Instructions). Ken Hoexter, Merrill Lynch.

Great, good morning. I just want to follow up on two things. One, on the costs, it looked like they came in a bit higher than we were expecting on the operating side. Just wondering, can you talk about what you're seeing in the marketplace right now as far as costs are going?

As I mentioned in the third quarter in the press release and as I repeated in the fourth quarter, the underlying development in costs is inflationary, especially as there is quite strong demand for qualified crews, there is inflation -- considerable inflation in [certain] premiums, also last year the dollar (inaudible) rate did not help in spares and repairs.

Regarding our operating expenses, as we know, during 2008 we had a fixed operating cost agreement. The difference between the multiple of days that we had vessels in operations and that fixed operating cost agreement rate is certain extraordinary costs that the manager, our manager has the right to claim under the management agreement. These extraordinary costs relate to vetting expenses, they relate to accidental damages and repairs of our vessels which are outside the scope of ordinary maintenance and these amounted to $1 million for both 2007 and 2008.

In particular 2008 was in the region of $520,000 and 2007 in the region of $480,000. And if you look in more detail in the numbers, especially for 2008, you will see that these costs -- these extraordinary costs represented approximately 2.25% of our daily fixed costs which we consider a very, very low number.

That's great. Was there some damage that we need to be concerned or is this just ordinary wear and tear?

As I mentioned to you, they constitute of many, many very small amounts.

Okay, okay. You said something before -- accidental damages; I just didn't hear what you had said.

I'm sorry?

You were giving a list of examples -- you were giving a list of examples. You said so and so and then accidental damages. I just didn't hear what you had said.

Vetting expenses --.

Oh, vetting expenses.

Accidental damages, repair, certain deductibles, (inaudible) deductibles.

Perfect, totally understand. Then that makes complete sense because that's the amount we were off. And then the dividend, I know you were explaining this, but I think I might have misunderstood what you were getting at there. As far as the extraordinary dividend, this does or does not impact that subordination time period before it converts?

The payment of this $1.05 distribution, which is going to be made on the 13th of February, automatically results to the conversion of the subordinated units that Capital Maritime owns to common units. So effectively from that date onwards there are not going to be any subordinated unitholders. What I said is that the subordination period would have ended anyway in March 2011 as long as the partnership kept paying at least the minimum quarterly distribution every quarter between now and then.

Again, by paying this extraordinary dividend you're expediting the end of the subordination?

Exactly. So it comes forward by 26 months.

By --.

26 months, Capital Maritime exits subordination effectively on the 13th of February.

Why is it expedited two years?

As I said, (multiple speakers)

You said it would end in February 2011, now it is going to be in February 2009?

According to the partnership agreement if the annual distribution exceeds by 50% the minimum annual distribution as it does, then automatically the sponsor exits subordination. We paid $2.27 during the fourth quarter ending December 2008. This $2.27 is more than 50% compared to the annual -- minimum annual distributional of $1.50. That event triggers effectively the end of the subordination. So as a result the sponsor stops being subordinated and all its units will convert to common on the 13th of February or approximately that date.

Okay, so to clarify, so one really good quarter at the end of the year expedites the subordination by two years?

(multiple speakers) good quarter. As I said, it is the accumulated distributions of four quarters that are in excess of $2.25, which is 50% over the minimum annual distribution. I will stress that you look at our dividend press release which explains the whole thing in great detail.

Sure. All right, great. Thanks for the time.

Scott Burk, Oppenheimer.

Good morning, Ioannis. I wanted to follow up first of all just -- is there any impact by changing the subordination or by getting out of the subordination period? Does it change the unit count at all or is there any impact on the unit count?

No, it doesn't.

Okay.

It does become -- the units -- the subordinated units become common. You can see the number of units at the bottom of the press release.

Got you. And then I just had a -- can you answer the question why and why now? What was the -- are you just anticipating -- you alluded to the fact that you don't anticipate any acquisitions in the near term. But why the extraordinary -- can you get into the reasoning behind -- your reasoning and the Board of Directors reasoning for doing this, taking this action now?

We paid the exceptional distribution because we believe that is the best way to create value to our unitholders. As you have asked this question I just want to say that since we've gone public in late March 2007 we have paid a total of $3.4 in units of distribution to our unitholders. So I think we have tried since the formation of the Partnership to return excess cash to our unitholders.

So our Board unanimously decided that the amounts we have earned in profit sharing revenues over the past year were unanticipated and in excess of the amounts required to sustain the current distribution policy and to be retained as reserve for the product -- for the proper conduct of the business of the Partnership.

So as you know, we do not determine future distributions as on the back of profit sharing. We determine future distributions on the back of base revenues. And we have said before, even during the IPO, that if we make significant amounts of money from profit sharing and we do not need these amounts, then we will distribute those to the unitholders.

In the current market it's very difficult to see any opportunities for accretive acquisitions given how currently the equity and the financial and the economic situation is. Also as I mentioned during my presentation, the Company has very good charter coverage both this year and next year with very good counterparties. It has no debt amortization until June 2012. We have a strong balance sheet, we have a young fleet, we have a good manager.

And, as most importantly, I mentioned and it is clearly stated in both the distribution release and the earnings release, the Partnership intends, after its exceptional distribution, to maintain its stated quarterly distribution looking ahead.

Okay. The kind of $0.41 levels is what I'm anticipating; would that be a correct --?

That's a fair anticipation.

And then I just wanted to ask about -- get into the impact. One thing it does is it removes some cash from your balance sheet. The way we calculate you still have plenty of room before you would potentially trigger loan-to-value covenants. But could you remind us what the loan-to-value covenants are? And also your view on what kind of cushion you have until you would potentially hit those?

As I mentioned to you, Scott, at this point it's very difficult to assess asset valuations because the market currently has seen very, very few transactions. So I would refrain from giving you a number. But certainly, as I mentioned, our balance sheet is strong, we wouldn't have done that if we anticipated anything else. And I think the most important thing is that our assets are young and well chartered.

Okay. And loan-to-value covenant, it's 80%, right? Or converted it would be --?

I'm sorry? (multiple speakers). The covenant for the collateral vessels is 80%, for the fleet as a whole it's 72.5%. But please note all our vessels are collateral vessels because we have effectively the same [bank] on the other side.

Okay. Okay, thank you.

Darren Horowitz, Raymond James.

Can you give us a little bit more color on the market for product tankers specifically in this current environment if it continues and the supply of available tonnage per period employment continues to increase, what do you see happening?

Hi, Darren, how are you? As I mentioned in the -- during the conference call earlier, what we have seen during the fourth quarter is a very high utilization of our product tanker fleet by our charterers and as a result we did better than the market. The market overall, the product tanker market during the fourth quarter was good, was healthy. And the Suezmax market also was as healthy as it was during a very good 2008.

However, you see that there is a recession in most of the oil (inaudible) countries; it's great uncertainty especially of how long and how deep this recession is going to be. So it's difficult to assess how the market will be ahead.

However, as I mentioned, we are fully chartered or 97% chartered for this year. We are chartered 60% in 2010 and, as I mentioned to you before, our distributions, the way they are determined they are based on base revenues. And as you understand, these are well covered by our charters. We do not want to make certain predictions at this point for the market given the fact that the outlook is quite poor.

Okay. Can you give us an update on the recontracting progress for the two vessels that come up for expiration this year?

We are working all the time with our charterers to recharter our vessels. As you saw recently, back in the third quarter we charted two of the vessels that were expiring during this year at good rates and we'll continue to talk to our charterers to fix the rate at good levels.

Okay. Thank you very much, Ioannis, I appreciate it.

Malcolm Day, Eagle Global Advisors.

Ioannis, thank you for having the call. I think that last quarter your tone about the need to keep cash in the Company prevented you from raising the distribution -- that was at least my perception from your comments. And this quarter you're more than happy to pay out all that cash, an amount that happens to coincide exactly with the amount that's necessary to trigger the conversion of the subordinated units. Can you maybe elaborate, because I think you're going to create a significant amount of confusion in the market as to what you're actually trying to do?

I don't think that there is any confusion in the market in what we're trying to do. I think, as I mentioned to you earlier and to the others, we generated enough profit-sharing, unanticipated profit sharing which we decided to distribute. The Board feels that the level of the reserves is adequate.

Certainly what has changed quite a lot over the past few months, Malcolm, is the fact that it is very difficult -- I will not say impossible -- but very difficult to be able to find any investment opportunities that will be accretive to the partnership. And as we have a full charter coverage throughout 2009 and quite a considerable charter coverage for 2010, in the absence of these investment opportunities and given that we do not -- given that we do not see any acquisitions we decided to return this money back to the unitholders. I think that's the best use of this cash.

As you can see, after this exceptional payment we reverted to the same way determining distributions as before. I think the fact that the sponsor does not receive all the [IDRs] today, but receives them in four quarters -- over four quarters, as long as [it fails the MTD], it shows it's a belief that the business model is robust and it's going to be able to deliver distributions looking ahead.

So I don't think our strategy is confusing at all. As we have always said from the very first day we've gone public, our business model generates stable cash flows and we plan to return a substantial portion of these cash flows to the unitholders. The only difference between now and the third quarter is that basically we do not see any investment opportunities and instead of keeping these amounts in the balance sheet we pay those to the unitholders.

Okay, let me ask, do you see any activity -- you mentioned about your Ice Class. Are you seeing any premiums for Ice Class vessels?

Not at this moment. Also traditionally it's a little later in the winter that you see those, but not at this moment. And February/March is the period that we would expect to see any and, as you always know, it depends where our charters trade the vessels.

Certainly. Can you also describe in a little detail what is made up in your other expense line that's about $7 million for the quarter?

The other expense line, let me just -- operating expenses, as you know, of the $7.5 million -- $7.5 million were operating expenses, about $0.7 million were SG&A expenses, of this 7.5 million of operating expenses $6.5 million were related to the fixed operating cost agreement that we have which is basically the product of [base]. We have the vessels in the [freed] times, the fixed management fee rate.

And the rest is, as I answered earlier, certain items, many small items that effectively we have to compensate our manager for costs of an extraordinary nature. Our management agreement, which is also in our website, certain extraordinary items that we have to compensate our managers for such as vetting expenses over a certain number of days, accidental damages, repairs of our vessels, of unforeseen events, etc., but -- and certain deductibles.

But as I mentioned earlier, these costs in 2008 were in the region of $520,000 for all our fleet, which equals about 2.2% of our daily fixed cost for the time charter vessels. And as you know, the fixed element in the agreement is I believe quite competitive.

All right, thank you.

Justin Yagerman, Wachovia.

Good morning this is Mike [Webber] filling in for Justin. Just wanted to get back to the special dividend one more time. Looking at the incentive distributions that go along with step-ups and dividends and I guess where you guys stand from a nominal debt perspective -- I realize it doesn't amortize until 2012, but it is $500 million.

Was there any thought to maybe just incrementally increasing the dividend to maybe 4313 or one of the other benchmarks to trigger an incentive distribution, but keeping the flexibility that would allow you to maybe pay to prepay some of that debt, considering everything that's going on with collateral maintenance covenants? How did you think about that (multiple speakers)?

As I mentioned, the balance sheet is strong and the debt is not amortizing until June 2012. The profit-sharing we made in 2008 was $17.5 million, that compares with $3.4 million in 2007. And in the second half of 2008 we made $12.5 million out of this $17.5 million. The way it came out is the way the Board assessed the total results. And given, as I mentioned, the lack of investment opportunities currently given the environment, they believe the best use of this cash is to pay this amount in one single payment. And that's why we decided to pay that as an exceptional non-recurring distribution.

Yes, I guess what I'm getting at is why was it better to do it in one single payment rather than maybe space it out and provide a little bit more flexibility? Any color there would be appreciated.

As I mentioned, we felt that this is the best use of the cash.

Okay. I guess just going back to the debt -- did you submit vessel appraisals to your lenders and can you give an update on where you guys stand with regard to your collateral maintenance covenants exactly (multiple speakers)?

I think I answered that a little earlier, Mike. As I mentioned, our balance sheet is strong, it is difficult to estimate asset values currently, but we wouldn't have done that unless we felt there is no issue at all with our banks.

Got you. And with those two facilities is there any sort of recourse back to capital and does that provide you any additional flexibility or is that purely following CPLP?

This is a CPLP facility.

Okay, if there's no relationship whatsoever, maybe --?

No, not at all.

Great. Thanks for your time.

(inaudible), Mountain Capital.

Good afternoon to you. I was wondering if there are any plans to go ahead with an exercise of the purchase option from Capital Maritime. I'm talking about the three vessels that are being delivered first quarter of 2009? And second quarter -- no, I think all three of them are being delivered first quarter of 2009.

As I mentioned during the press release, we do not anticipate any opportunities for acquisitions -- accretive acquisitions at this point. The whole point of the Partnership making acquisitions is to be able to generate extra distributions for the unit holders following those acquisitions. And you understand that if we make significant acquisitions we need certainly the help of the equity markets and the current valuations because we believe our share price is undervalued. At current valuations we don't think that we can enter into accretive acquisitions for our unit holders.

Okay, so you are actually saying there are no time charters attached to these vessels just yet?

But it's not only the function of time charters; it's also the function of how you fund those acquisitions. And if you make three more acquisitions as you contemplate or you imply, I think that then we would certainly need to enter into an equity raising. And certainly at these prices that would not result on an accretive transaction.

Okay. Do you have the option to reconsider the purchase of these vessels at a later date during 2009?

Of course (multiple speakers).

Has Capital Maritime given you (multiple speakers)?

(multiple speakers) subject to time charter rates, subject to the equity market, subject to credit markets, subject to the approval with the Board of Directors, we potentially (multiple speakers) any acquisitions (multiple speakers).

(multiple speakers) there are no other prospective buyers? Okay. And my other question is -- if there any changes in your revolving credit facility so far?

No changes at all.

Okay, thank you very much.

(Operator Instructions). Scott Burk, Oppenheimer.

One other question on the profit-sharing, we're almost halfway through the first quarter here. Do you have -- can you give us an outlook for what you expect profit-sharing in the first quarter?

At this point we are further down the quarter and not even the first month has been concluded. As you know, we have monthly settlements, so it's too early to predict any profit share or any estimations to give you at this point.

Okay. That's a good point to monthly settlements. I thought maybe it could be chartered out a couple weeks in advance.

As I said, it's very difficult at this point to give you any estimations.

Okay. The one other question is, when you look at the yield you mentioned how the stock or the units are undervalued. What would be a reasonable valuation in terms of yield that you believe the units should be trading at?

Then -- I think that's a very difficult question, Scott. We have a market which has been let's say unprecedented in many, many respects. The traditional way of valuing equities is very difficult. What we try to do is to prove to the market that we have stable cash flows, to be able to grow distributions, our ability to return value to shareholders; certainly we do not believe we should be yielding the double digits.

Okay. Thank you.

(Operator Instructions). [Mark Minnix], [Keane Anderson].

Hello, Ioannis. Just looking at the early conversion of the subordinated units and the common, it really looks like you're trying to get more flexibility for capital parent's stake in the Partnership.

I wouldn't agree with that, Mark. The decision was based on what was the best use of cash and what amount of reserves the Partnership requires to maintain its distribution policy and its business. After all I think we made it clear in many points during this conference call and in different parts of our distribution and earnings release that we intend to maintain our stated quarterly distribution policy.

Also you saw the way that the sponsor decided to receive its incentive distribution rights distributions is in a way that effectively is forced to pay the minimum quarterly distribution for a number of quarters ahead. And let's look -- let's not lose sight of the fact that the subordination would have ended anyway in 26 months. So I don't think you have to do anything to do that.

Yes, it's nice just having the extra 26 months. I mean, I think you had sort of given the impression before in prior calls that you were really focused a lot more on financial flexibility and retaining cash. And then to see this it seems to me to be somewhat of a deviation from prior public statements.

As I answered to Malcolm Day earlier, I think the difference between now and the previous quarter is the fact that simply the opportunities for accretive acquisitions are next to nothing. So we don't change anything. We maintain the way that we determine distributions, as I mentioned, as I will mention again, the way that we will pay the IDRs effectively takes you well into these 26 months in terms of the partnership paying a distribution anyway.

So, I think that it's as simple as that. We made a lot of money from profit sharing during the 2008. And as a result we decided that the best use of this cash on the back of a unanimous decision of the Board of Directors is to return this money to the unitholders. And as I said, those people, Mark, that have invested in us from the very first day until today, each one of them, they have received $3.4 per unit, which is a 16% return from the distributions alone during this one and three quarters years, which, at least in my mind, proves that both the partnership and the GP want to return money to the unitholders.

But just given the uncertain times we're living in and the potential for companies across the state to encounter financial difficulty, would it make sense to build up reserves so you potentially could see and take advantage of accretive opportunities in the future?

But we have reserves, we didn't eliminate the reserves, we have reserves and we will build more reserves because we are fully charted for this year and the operating days throughout 2009 will be higher than in 2008. I think we will build more reserves. And at the same time we'll be able to maintain our distribution policy.

And are there any plans right now or any thoughts what would cause a change in the partnership agreement?

Far too early for that yet. We will see based on the financial markets, we will see based on the shipping markets and subject to how the economy develops. As I mentioned earlier, I think we're living in uncertain times, the outlook is very difficult to forecast, the duration of this downturn is very difficult to forecast. So we have not -- as I say, it's too early to decide on these things.

Okay, thank you.

As there are no further questions, I'd like to turn the call back over to Mr. Lazaridis for any additional or closing remarks.

Thank you, Merriam. And thank you all for participating today. As I mentioned to you, we decided that for the best interest of our unitholders is to return money in the form of an exceptional distribution and we'd like to reiterate that our goal remains to revert in determining our future distributions the same way that we did before. Thank you very much.

Thank you. That will conclude today's conference call. Thank you for your participation, ladies and gentlemen. You may now disconnect.