Diana Shipping Inc (DSX) 2016 Q3 法說會逐字稿

Greetings and welcome to the Diana Shipping third quarter 2016 earnings conference call. At this time, all participants are in a listen-only mode. A brief question-and-answer session will follow the formal presentation. (Operator Instructions) As a reminder, this conference is being recorded. It is now my pleasure to introduce your host, Mr. Ed Nebb, Investor Relations Advisor for Diana Shipping. Thank you Mr. Nebb, you may begin.

Thank you, Michelle and thanks to all of you for joining us today for the Diana Shipping third quarter 2016 conference call. Members of the management team who are with us today include Mr. Simeon Palios, Chairman and Chief Executive Officer; Mr. Anastasios Margaronis, President; Mr. Andreas Michalopoulos, Chief Financial Officer; Mr. Ioannis Zafirakis, Chief Operating Officer and Secretary; and Ms. Maria Dede, Chief Accounting Officer.

Before management begins their remarks, let me remind you of the safe harbor notice. Certain statements made during this conference call which are not historical facts are forward-looking statements under the safe harbor provisions of the Private Securities Litigation Reform Act. Such forward-looking statements are based on assumptions, expectations, projections, and beliefs as to future events that may not prove to be accurate. For a description of the risks, uncertainties, and other factors that may cause future results to differ materially from the forward-looking statements, please refer to the Company's filings with the SEC. And now, with that, let me turn the call over to Mr. Simeon Palios, Chairman and Chief Executive Officer.

Thank you, Ed. Good morning and thank you for joining us today to discuss the results of Diana Shipping Inc. for the third quarter of 2016. During the third quarter of 2016, the drybulk trade continued to face extremely challenging market conditions. In this environment, we remain sharply focused on reinforcing our financial strength to ride out the current conditions and position the Company for the long-term.

To review our financial results as we reported on November 17, the Company incurred a net loss of $78.3 million and net loss attributed to common stockholders of $79.8 million for the third quarter of 2016. Of this amount, $50 million relates to loss and impairment of our investment in Diana Containerships Inc. This compares to a net loss of $17.4 million and the net loss attributed to common stockholders of $18.8 million for the third quarter of 2015.

Time charter revenues were $27.1 million for the third quarter of 2016 compared to $38.9 million for the same quarter of 2015. The decrease in time charter revenues was due to decreased average time charter rates for our vessels during the quarter, which was partly offset by revenues derived from the increase in ownership days resulting from the enlargement of our fleet. Currently, our fixed revenue days are 95% for 2016 and 12% for 2017.

Turning now to our balance sheet. Cash and cash equivalents were more than $131 million at September 30, 2016 including compensating cash balance and stockholders' equity was approximately $1.1 billion. As we have reported, the Company concluded without agreement its previously announced discussion with its lenders with respect to certain proposed amendments of its outstanding loan facilities, which were subject to the agreement of all of the Company's lenders on similar terms. The Company has also terminated its engagement of a financial advisor in connection with such discussions. The Company is current in all payments of principal and interest under each of its existing loan facilities. The Company does not currently anticipate resuming such discussions with its lenders.

In other deployments during the third quarter, we announced the consolidation of the shipbuilding contract for a Kamsarmax dry bulk carrier, Hull number DY6006. This action was taken pursuant to our contractual rights to cancel the contract due to a delay in delivery of 150 days. In connection with this consolidation, we have claimed a refund of the pre-delivery installment payments in an aggregate amount of approximately $8.65 million together with the interest at the rate of 5% per annum. The Company also signed Addenda to two shipbuilding contracts to extend the delivery dates of the two Newcastlemax dry bulk carriers. In conclusion, Diana Shipping will continue to respond to the challenges of our market by continuing to maintain our financial strength and managing our business in a prudent manner.

With that, I will now turn the call over to our President, Stacey Margaronis, for a perspective on industry conditions. He will then be followed by our Chief Financial Officer, Andreas Michalopoulos who will provide a more detailed financial overview. Thank you.

Thank you, Simeon and good morning to all the participants of this third quarter conference call of Diana Shipping Inc. Since earlier this year, when we saw the lowest rates in the bulk carrier industry that we have seen since the [early 1980s], the market has improved especially for the capesize bulkers. At the beginning of the third quarter, the Baltic Dry Index was at 677 and yesterday closed at 1,184. The Baltic Cape Index started at 1,030 and closed yesterday at a significantly higher level of 2,260. The Baltic Panamax Index started the quarter at 691 and closed at 1,400.

Macroeconomic developments now, the recent election in the United States has seen Donald Trump elected to the presidency of the largest economy in the world. Some of the policies he has been advocating prior to his election [are implemented], there are fears that the new era for protectionism could see global trade as a share of world GDP fall. Several trade agreements have so far been criticized by the President-elect. If these criticisms lead to actions, then the effects on world trade will be profound.

The IMF's latest projections for global economic growth stand at 3.1% in 2016 and 3.4% in 2017. These projections are weaker than previous forecasts for the same period due to lower than expected growth in advanced economies, which for 2016 has come down to 1.5% from 1.8%. JPMorgan's measure of worldwide PMI stood at 52 in October, which is the highest reading since October 2014. This has been underpinned by solid increases in output and new orders. In the United States, the October headline PMI was 53.4, which represented a marked improvement to September's 51.5 figure and was the best reading so far this year.

According to Clarksons, GDP growth in the United States is estimated to be 1.6% this year and about 2.2% in 2017. For China, this year's GDP growth rate is estimated to come in at 6.6% and ease slightly to 6.2% in 2017. For the euro area, the estimated growth rates are 1.7% for this year and 1.5% in 2017. The Eurozone Composite PMI was unchanged at 52.6 in September while the Services PMI rose slightly to 52.2 during the same month compared to 52.1 in August. In the United Kingdom, the September PMI rose to 55.4 from 53.4 in August. The weak pound following the Brexit vote has continued to boost exports. In Europe's largest economy, Braemar ACM report that German business confidence has rebounded to a two-year high and the index stood at 109.5 in September, up from 106.3 in August this year. The one rather serious cloud on the horizon is the warning recently issued by the IMF that unless the Chinese government takes appropriate measures to rein in the level of financial and corporate debt, China could slide into a financial crisis. Such an event would have very serious repercussions for the world global economy and world trade.

Cargo growth now, according to Clarksons, global seaborne drybulk trade is projected to grow 1% this year compared to an average of 5% per annum from 2011 to 2015. Expectations of subdued growth are largely due to a projected 2% fall in seaborne coal trade driven by a drop in European and Indian imports. On the other hand, expansion in Chinese seaborne drybulk trade has improved this year reaching 4% in the first seven months of 2016 following a 2% drop in the full year 2015. However, we will analyze this subject in more detail later on in this presentation. Looking ahead, Clarksons are forecasting a 2% increase in global seaborne drybulk trade in 2017. Seaborne coal trade is expected to stabilize while further growth in iron ore production by major miners in Australia and Brazil is expected to support a 4% rise in seaborne iron ore trade in 2017.

Turning to the [supply now of tonnage], the bulk carrier fleet is projected to expand by around 2% in 2016 according to Clarksons compared to an 8% average rate of growth from 2011 to 2015. This sluggish pace of fleet expansion is expected to be driven by relatively low levels of deliveries combined with historically high levels of demolition. Clarksons predicts that the bulk carrier fleet capacity will increase by a mere 0.8% in 2017, which if it materializes would be the slowest pace of fleet growth since 1998. Deliveries this year are expected to slow to [around 36 million deadweight tons] while demolition activity is expected to remain firm at around 31 million deadweight.

Iron ore now, total imports according to Clarksons are expected to increase by 4% in 2017 compared to 2016 and reached [1.483 billion tons]. During the first nine months of this year, China has increased its imports of iron ore by 9% compared to the same period last year. The increase so far this year has been largely supported by cuts in the country's domestic iron ore outputs. According to the Chinese National Bureau of Statistics from January to August this year, year-on-year production has been cut by 7% and stood at [820 million tons].

More recently however, Chinese iron ore import growth has also been supported by improvement in the country's steel industry. Iron ore stockpiles at all Chinese ports have grown to a near record level of [108.6 million tons] at the end of October according to Braemar ACM. Added volumes of iron ore, which are coming from Brazilian and Australian miners may according to Fearnley Consultants bring [28 million tons] of this commodity to the market, thus risking the creation of oversupply. This could bring down the price of iron ore, but at the same time create demand for 20 to 25 additional capesize liftings in 2017.

It is interesting to note that according to Fearnley's, Brazil has gained market share in the iron ore market exports to China. They have gone up 16% thus far this year creating business for capes with the favorable [ton mile] effect on the demand for these ships.

According to Commodore Research, thus far, China appears prepared to purchase as much iron ore as global miners want to sell and it remains clear that robust iron ore stockpiles do not limit Chinese iron ore import volumes. It is interesting to also note that so far this year, China's infrastructure investments are up 20% year-on-year. A large number of public-private partnership projects worth $156 billion are being launched by the Chinese government.

Coking coal, according to Clarksons, total imports of coking coal in 2017 will increase by approximately 1% and reach [239 million tons]. This will be supported by a recovery of coking coal imported into Asia. Chinese coking coal imports are projected to rise 3% to [around 39 million tons]. This will be the consequence of Beijing's determination to cut the country's domestic coking coal output combined with expectations for a slight rise in Chinese crude steel output in the early part of 2017.

As regards thermal coal now, imports are expected by Clarksons to remain steady at [around 875 million tons] in 2017 following a projected 2% decline this year. While Clarksons point to an anticipated reduction by 4% of imports of coal by India, they also forecast a healthy economic growth, rising power consumption, and the addition of new power plants in developing countries such as Vietnam and the Philippines will support a 4% increase in steam coal shipments to other Asian countries excluding China. These might reach [397 million tons]. As far as China is concerned, Braemar ACM predicts that total steam coal production is set to rise in coming years, but at a slower pace than in the past and at a greatly reduced share of the energy mix.

Seaborne coal suppliers and the bulkers that move the coal needed hope that China retains and even increases the curbs on local production that have been so beneficial to import demand this year. According to Commodore Research, power plant coal stockpiles as of the beginning of November have risen to [66.6 million tons]. In spite of this increase, however, the coal stockpiles are [down 8.4 million tons 11% compared to last year].

This has not yet led to any major decline in import demand, but Commodore Research sees very promising for coal demand and Chinese import prospects is that overall electricity production has increased significantly during the last [few] months. China's thermal coal derived electricity production has recently increased by 15% year-on-year and this strong growth is expected to continue throughout this quarter and probably into the first quarter of 2017 as well.

The same analysts report that Indian coal derived electricity output has also increased year-on-year by 7.8%. This comes at the time when a large drawdown in India's power plant coal stockpiles has been taking place. If this trend continues, India will be forced to increase its coal imports going forward and reverse the decline in the level of its coal imports established so far this year.

Grain trades now, according to Clarksons, global wheat and coarse grain trade is projected to decrease by 3% to [around 333 million tons] in the 2016 to 2017 crop year. This is expected to be largely driven by a 3% drop in grain shipments to Asia to [around 109 million tons]. From domestic output and high existing coarse grain stockpiles are expected to see Chinese grain imports drop by as much as 32% in 2016 to 2017. However, it is interesting to note that according to Gibson's, China is expected to import [around 86 million tons of soybeans in the 2016 to 2017 season, this will translate into around 7 million tons] per month. Most of this product will originate in the United States, but Brazil and Argentina are becoming major players in this trade as well. The second largest importer of soybeans is the European Union with [13 million tons] expected to be imported in 2016, 2017.

Turning to demolition now, Braemar ACM report that the Panamax sector maintains the highest number of ships scrapped year-to-date, consisting of 105 ships of [6.4 million deadweight tons]. During the first three quarters of this year, 66 standard capes have been scrapped with a total of 10.8 million deadweight capacity. Unfortunately, the improvement in the earnings of bulkers witnessed over the last few months has brought scrapping rate down considerably from the level seen during the first half of the year.

According to Fearnley, the monthly scrapping average for the first six months was 3.75 million deadweight whereas the last four months have averaged only 1.1 million deadweight. According to Clarksons, the average age of all bulkers demolished so far this year has dropped from 25.2 years at the end of 2015 to 23.3 years.

Time charter hire rates now, according to Clarksons, the one-year time charter rate for modern capes was [around $9,250 per day at the end of October and United States $7,375 per day] for modern Panamax. These rates were significantly higher to the average rate so far this year, which were $7,762 per day for the capes and $5,798 for the Panamax's. According to Commodore Research, for reasons explained earlier in this presentation, the near-term prospects for Chinese and Indian thermal coal imports are promising. This combined with US peak export season remaining underway has created the potential to see significant near-term strength in the Panamax and Supramax sectors.

New building order book. Since the beginning of 2016, the volume of tonnage on order in the drybulk sector has declined by 23% and currently stands at 1,155 vessels [of 100.8 million deadweight tons] representing 12.8% of the existing fleet. For Panamax's, which include Kamsarmax's and post-Panamax tonnage, the ships on order represent about 10.3% of the existing fleet and for capes, the 43.8 million deadweight on order represent 14% of the trading fleet. The cape deliveries are fairly evenly spread from 2017 onwards through 2019 while most of the Panamax and post-Panamax ships will be delivered next year with fewer scheduled for delivery from 2018 and beyond.

New building contract now, according to Braemar ACM, shipyards are becoming very concerned with the new building order book. As an example, they cite the fact that over the last 12 months, just 14 bulkers and 37 very large ore carriers have been contracted. This total number of 51 ships is the lowest 12-month total since Braemar's records began. It is also interesting to note that according to Clarksons, nearly 60% of all active yards are due to complete their current order book by the end of 2017.

Let's turn to regulatory developments. The most important regulatory development in the bulk carrier industry so far this year has been the Ballast Water Management Convention, which came into force on September 8 this year. As a consequence of this convention, vessels must retrofit the ballast water treatment systems upon their next International Oil Pollution Prevention renewal after September 8, 2017. Fearnley's believe that this will have an impact on demolition of bulk carriers going forward as the cost which varies between $0.5 million and $2.5 million will discourage owners of all the tonnage to take their vessels through a special survey and retrofit ballast water treatment systems. We agree with Fearnley's that what will most probably happen is that quite a few owners will opt for early IOPP renewal in order to avoid the cost now and gain another few years of trading in hope of better freight markets down the road.

Finally, let's turn to the outlook for our industry. As a general comment, we mentioned that in the view of Commodore Research, China remains [in control] of its economic development and there are many more decades for growth in China, which will support dry bulk shipping demand. The Clarksons outlook focuses on the limited pace of supply growth expected in coming years, which would help achieve a better balance between fleet and demand expansion. However, the continued low rate of demand growth is expected to make it difficult for the current oversupply to be absorbed quickly. It is for this reason that according to Clarksons, market conditions are likely to remain difficult in the short to medium-term.

For capes in particular, Clarksons predict that the short-term demand side trends appear relatively positive. Continued expansion of iron ore production by the major miners in Brazil and Australia is likely to support growth in global seaborne ore trade volumes next year. In coming years, continued displacement of domestic Chinese iron ore production could still support further growth in iron ore imports in 2017. Meanwhile, the capesize fleet growth is expected to be very limited in 2016 at 1.2% with a slight decline in fleet capacity possible in 2017.

On the negative side, we agree with Clarksons that continued management of supply side growth appears necessary to see a significant improvement in market conditions and there are also major concerns over the long-term outlook for demand growth.

Turning now to Panamax's, Clarksons predict that the outlook for global seaborne coal trade remain subdued with an increased focus in cleaner energy globally, likely to lead reduced reliance on coal imports in some areas such as Europe. However, increase in coal-fired power capacity in some Asian nations could support volumes to some extent, but Chinese imports will remain subject to variation in coal price trend. All-in-all, the outlook for the Panamax market remains difficult.

Fleet capacity is projected to grow by around 1% in 2016 and 2017. However, this slow rate of growth does not yet appear to be enough to help support the significant improvement in the market environment. Significantly, more scrapping is required going forward to help bring equilibrium to the market sooner rather than later.

All we can say with a reasonable degree of confidence for the dry bulk carrier market is that if the supply continues along the path it has been following for the last 18 months or so and further down the road demand growth picks up from present level, the market is bound to eventually reach equilibrium. The prospect of such an important development has become much more likely now than it was a few quarters ago when only few ships were being demolished and owners were still ordering new buildings in large numbers.

The business plan at Diana Shipping has been implemented thus far consistently and without many surprises. Leverage has gone up to the level which is appropriate at the trough of the shipping cycle in order to maximize the return on equity when recovery gets underway. Our balance sheet is still among the strongest in the industry and shareholder dilution has been absent for the duration of the poor market conditions and even long before that. I will now pass the call to our CFO, Andreas Michalopoulos who will provide you with the third quarter and nine month financial highlights. Thank you.

Thank you, Stacey and good morning. I'm pleased to be discussing today with you Diana's official results for the third quarter and nine months ended September 30, 2016. Third quarter of 2016 net loss and net loss attributed to common stockholders amounted to $78.3 million and $79.8 million respectively, of which $50 million was due to loss from equity method investments. Loss per common share was $0.99.

Time charter revenues decreased to $27.1 million compared to $38.9 million for the third quarter of 2015 and the decrease was due to the decreased average time charter rates that we achieved for our vessels during the quarter and was partly offset by revenues derived from the addition to our fleet of the vessels New Orleans and Seattle delivered in November 2015, Selina and Ismene delivered in March 2016 and Maia delivered in June 2016. Ownership days were 4,232 for the third quarter of 2016 compared to 3,772 for the same quarter of 2015. Fleet utilization was 99.4% compared to 99.9% for the same quarter of 2015 and the daily time charter equivalent rate was $5,914 compared to $9,688 for the same quarter of 2015.

Voyage expenses were $2.1 million for the quarter compared to $3.1 million for the same quarter of 2015 (technical difficulty) expenses was mainly due to decreased commissions deriving from decreased revenue and decreased loss from bunkers [amount to $0.5 million] compared to $1.1 million in the same quarter of last year.

Vessel operating expenses amounted to $21.2 million compared to $21.6 million for the third quarter of 2015 and decreased by 2% despite the 12% increase in ownership days resulting from the enlargement of the fleet. The decrease was a result of the Company's effort to minimize costs without compromising the vessels operations and safety and obtained reductions in all other operating expense categories except for taxes and other operating expenses.

Daily operating expenses were $5,014 for the third quarter of 2016 compared to $5,719 for the same quarter of 2015 representing a decrease of 12%. Depreciation and amortization of deferred charges amounted to $20.6 million. General and administrative expenses were $6 million, the same as for the same quarter last year. Management fees to related party were $0.4 million for the quarter and were the fees paid to Diana Wilhelmsen Management Limited for the management of six of our vessels.

Interest and finance costs amounted to $5.7 million compared to $4.8 million in 2015. This increase was mainly attributable to increased average debt and average interest rates during the quarter compared to the same quarter of 2015. Interest and other income amount to $0.5 million compared to $0.8 million and decreased due to the decrease in interest earned from a loan agreement with Diana Containerships Inc.

Loss from equity method investments amounted to $50 million compared to $2.4 million for the same quarter of 2015. The loss in the quarter was due to the result of Diana Containerships Inc. including impairment for some of its assets and an additional impairment of the investments to write it down to its market value as of September 30, 2016. This loss was partly offset by a minor gain in our investment in Diana Wilhelmsen Management Limited.

For the nine months ended September 30, 2016 now, net loss amounted to $141 million, net loss attributed to common stockholders amounted to $145.3 million and loss per share was $1.81. For the nine months ended September 30, the loss from the investment in Diana Containerships was $54.4 million. Time charter revenues decreased to $86.2 million compared to $119.4 million for 2015. The decrease was attributable to decreased average time charter rates that we achieved to our vessels during the period.

Ownership days for the nine months ended September 30, 2016 were 12,310 compared to 11,030 for the same period of 2015. Fleet utilization was 99.3% compared to 99.1% for 2015 and the daily time charter equivalent rate was $6,033 compared to $9,939 for 2015. Voyage expenses were $12.4 million for the nine months of 2016 and includes $7.6 million of loss from bunkers from the redelivery of our vessels.

Vessel operating expenses amounted to $65.1 million compared to $64.7 million for 2015 and the increase in operating expenses was due to the 12% increase in ownership days resulting from the enlargement of the fleet and was partly offset by decreased insurances, stores and spares, repairs and environmental costs. Daily operating expenses for the nine months ended September 30, 2016 were $5,288 compared to $5,865 for the same period of 2015, representing a 10% decrease.

Depreciation and amortization of deferred charges amounted to $60.9 million for 2016. General and administrative expenses amounted to $18.7 million compared to $17.9 million in 2015 and the increase was mainly attributable to increased payroll taxes and increased Board of Director fees and legal fees. Management fees to related party were $1.1 million and were the fees paid to the technical management of six vessels deferred to DWN progressively in [2015] from August to December.

Interest and finance costs amounted to $16.3 million compared to $10.7 million in nine months period of 2015. This increase was mainly attributable to increased average debt and average interest rates compared to last year. Interest expenses in the nine months period of 2016 amounted to $14.4 million compared to $9.5 million for the same period last year. Interest and other income amounted to $1.6 million compared to $2.6 million for 2015. This decrease was due to the decrease in interest income received from Diana Containerships Inc. during the period amounting to $1.2 million compared to $2.3 million for the same period in 2015.

Loss from equity method investments amounted to $54.3 million compared to a loss of $2.9 million for the nine months period of 2015 and was due to a loss and impairment of our investment in Diana Containerships Inc. which was partly offset by a gain from our investment in Diana Wilhelmsen Management Limited. Thank you for your attention. We would be pleased to respond to your questions now and I will turn the call to the operator who will instruct you as to the procedure for asking questions. Thanks a lot.

Thank you. We will now be conducting a question-and-answer session. (Operator Instructions). Amit Mehrotra, Deutsche Bank.

My first question was just around the breakdown of the discussions with the lenders. I joined the call a little bit late, so I apologize if you already addressed it, but it seemed like the discussions were pretty encouraging, you had the biggest lender onboard. Just trying to get a little bit color, Ioannis, if you could offer any in terms of what happened and whether any substantive issues that caused it or maybe the strategy of the negotiations. Any color you could provide would be very helpful. Thanks.

Hi, this is Ioannis speaking. Let me start by saying that we initiated the whole story proactively and we took the decision to stop the discussions. The reason why the discussion was stopped, it was because we were not getting anywhere. Although we had a good reference point, at the end of the day, we could not arrive into a meaningful result for everyone. So the same way we initiated as I said, the same way we stopped the discussions.

Okay, I guess the natural follow-up question to that is last quarter I mean -- last quarter you talked about an equity offering being off the table proactively. I just wanted an update on your thoughts on that given the break down in the negotiations about a potential equity offering obviously and what your ability is to sort of withstand given the cash balance?

We are reading the same stories, we are reading your opinions et cetera and all of the analysts, you have your models and you can clearly see that our cash position is such that we have power to sustain even worse charter rate scenario of today for easily till the first up to second quarter of 2018 before we have a cash flow problem. In a scenario where you run the numbers with existing charter rates, then you go even after third quarter of 2018. So why should we be talking about an equity offering or some analyst talk about an equity offering.

I thought that we all agree that predicting what the market is going to do after a quarter is dangerous, let alone after a year and a half from today because this is clearly what we are talking about. Suddenly someone is in a position to talk about an equity offering which is, it may be necessary after a one year and half from today, what type of liquidity problem Diana has if you can explain -- you are not sharing that view because we read what you were saying but others, they claim that we have a liquidity issue, but when after [a year and half from today].

Allow me to just ask maybe specific questions around the numbers then. I think based on our math, it looks like the company's all-in breakeven OpEx, debt service, and debt amortization is in that $12,500 per day level. Is that a correct figure by your estimate as well?

Yes, it is Amit.

And so you have I think a good amount of re-charterings that are coming up over the next three months or three to four months if I am correct. So would you expect the company in a quite a strong market, which is great, but would you expect the company's average TCE to be at or above that $12,500 level or somewhere in the neighborhood of that?

No, no. You have to take into account the fact that we have [approximately another $5,500 per vessel] if we use our current cash position. So any rate in the vicinity of an average of $8,000, it gives us the opportunity to end up well after the beginning of 2018 without having a cash problem.

Let alone the fact that today as we speak, you can fix a capesize vessel at $11,200 for a year on a time charter basis with an A class charter and a Panamax at $8,000.

Right, I agree. Andreas, let me ask you a couple of questions specifically just lastly for me. I think the debt amortization payments next year of $46 million and I know that we can communicate that on a per day basis but sometimes those payments can be lumpy and then you've also got some new building payments I think in the first quarter of next year or in the vicinity of that. Can you just break that down for us in terms of the lumpiness of cash calls next year both as it relates to debt amortization and the new building payments, please?

I will talk about the new building payments first. Actually, the CapEx for new buildings is $58.4 million remaining. So, as you probably know, the equity on that is not going to be very substantial because we have a loan with China Export Import Bank and this loan is 70% of the market value of the vessel at the time of delivery. So by making your mark, you will see how much CapEx we will need to come up with for that.

And if we take the loan repayments, if we start with -- I'll give you rough numbers, but I think that's what you're looking for, if we start with the first quarter of 2017, it's in the vicinity of $11 million. Then second quarter, it goes to $12 million, third quarter, south of $12 million and fourth quarter, $15.5 million. So, this is the way it is about to come up. (multiple speakers) for debt repayments, amortization repayments.

Great. Okay, that's helpful. One last quick one for me if I could, is on the loan to value last quarter, I think we talked about sort of an 80% LTV range but encouragingly, asset values have improved a little bit, more on the sort of newer vessels profiles than the older vessels. Just trying to get a better understanding of do you still look at your LTV in that 80% range or plus or minus or if it moved actually down a little bit over the last three or four months. Thanks.

Now, if you are referring, it depends what number you are looking for. If you are referring to the debt to asset number, its around 80% but if -- you know that this is based on various valuations, but I think it's safe to say that you're somewhere there and going back to your first question, of course everybody realize that what you have asked afterwards about the principal [repayment] et cetera, the amortization of debt is included in the $12,500 number that you talked about breakeven cash flow meaning in order to make myself clear that we have substantial amount of cash to sustain this bad environment till the middle of 2018 after having paid all principal and all interest payments that we have. And also on top of that, we have one unencumbered vessel, [modern vessel Seattle] which has a value today of $24 million.

Ben Friedman, Morgan Stanley.

Actually my questions were answered. They were around primarily centered around the remaining CapEx. Thanks.

(Operator Instructions) John Gandolfo, Clarksons Platou Securities.

Going off of Amit's previous question on the negotiations, I believe last call it was commented that should the negotiations fail, Diana would continue with business as usual which included potential fixed asset acquisitions. Is this still how you're looking to proceed going forward?

The model that we used earlier describing our ability to sustain in bad environment for till the end of -- middle of 2018 did not include any further acquisitions. However, depending on the chart -- these kind of assumptions about the charter rates that we estimate to receive in 2017 which are at the low side, but if the market shows signs of improvement, we may consider investing $20 million let's say for one or two vessels.

Don't forget that this acquisition is not burning any cash because if you buy a vessel full equity, for example today, you don't burn any cash with the existing time charter rates, but the cash flow position described earlier does not include any further acquisitions.

Thank you. There are no further questions. At this time, I would like to turn the call back over to management for closing remarks.

Excuse me, operator.

I'm sorry, we do have one more question. Jonathan Chappell, Evercore.

Ioannis, I was obviously one of the guys you were talking about with the liquidity. So I just want to walk through the numbers if it's okay. So, one last one for Andreas first, fourth quarter debt amortization, I think in the last call you had mentioned there was I think another $18 million or so in the fourth quarter of this year.

No, it's $11.2 million debt -- $11.1 million actually debt amortization for the fourth quarter.

Okay, so you ended the third quarter with $108 million. Over the next five quarters then you have about $62 million?

Sorry, Jon. End of the third quarter is [$131.382 million] because you're forgetting the restricted cash. It's not restricted, actually its compensating cash balance of $23 million. So, its $108 million plus $23 million, [$131.382 million, yes].

Okay. $131 million and then you have $50 million debt amortization next year, the $11 million this year and then [$58.4 million] of CapEx, but you're saying you're going to get financing of what maybe $50 million of that?

$46 million.

$46 million, so that's $57.6 million and then what is the minimum liquidity covenant per ship? [It's about $700,000, $800,000 per ship].

$500,000.

$500,000.

Not for every ship, [but yes on average $500,000].

So, the restricted cash or the compensating cash I guess is the key there as well as the ability then to get all the (multiple speakers).

No, no. This is only $24 million. This is the value of modern vessel Seattle. This is nothing.

But if we took that $24 million off where we were left with and we'll be down to like $32 million and then you'd be getting up against that buffer.

Yes, certainly.

At the end of 2017, we will. (multiple speakers).

And that we have to take into account what time charter rates are we going to be using. In our model, we are using very conservative. I think you are using better charter rates than we do. What average do you have for 2017 as a capesize vessel charter rate?

For capes, I'm using [$8,500].

Okay, this is what we are using as well. You are using the FFA curve?

Well, I'm using my own estimates. It just happened to match up with the FFA curve. So then the other thing we missed then was the operating cash burn because you burned by our estimates [$18.6 million through the first three quarters], that's about $6 million per quarter. So if you just sort of -- and we have the charter rates improving but say $20 million to $25 million of operating cash burn next year as well.

Yes $24 million.

So It's close.

It's close to the end of 2017. It's close to be beginning of 2018 and second quarter of 2018. Yes, it is close.

So then I guess the final question then and thank you for all the clarity on the numbers is what are next steps and I apologize if you said this earlier because I did jump on late, but with the negotiation stopped, is it just kind of hope for a better market environment or is there some type of proactive move in 2017 whether its with the banks or another way to shore up the financials before you get to that close level in [early 2018].

The termination of discussions, it is because we are considering one year and a half ahead, a time that may be sufficient not to need to raise equity for the Company. And as regards, the reason why we are resisting in issuing equity today is because it is not necessary and because we do not want to dilute the existing shareholders, but certainly another thing that should be clear to everyone is that the Mr. Palios, the main shareholder is going to participate in any equity offering if it happens after a year from today or a year and a half and we are not resisting in diluting the shareholders and Mr. Palios, we are resisting in diluting the shareholders because even if it was to be an equity offering today, Mr. Palios was going to participate.

Thank you. I would now like to turn the call back over to management for closing remarks.

Thank you again for your interest in and support of Diana Shipping. We look forward to speak with you in the months ahead. Thank you.

Thank you. This concludes today's teleconference. You may disconnect your lines at this time. Thank you for your participation and have a wonderful day.