Eagle Bulk Shipping Inc (EGLE) 2008 Q4 法說會逐字稿

Good day, ladies and gentlemen, and welcome to the fourth quarter 2008 Eagle Bulk Shipping earnings conference call. My name is Dan and I will be your coordinator for today. At this time, all participants are in listen-only mode. We will conduct a question-and-answer session toward the end of this conference. (Operator Instructions) As a reminder this conference is being recorded for replay purposes.

I would now like to turn the call over to your host today, Mr. Sophocles Zoullas, Chairman and CEO. Please proceed, sir.

Thank you and good morning. I would like to welcome everyone to Eagle Bulk Shipping's fourth quarter and fiscal year 2008 earnings call. To supplement our remarks today, I encourage participants to access a slide presentation that is available on our website at www.eagleships.com. Please note that part of our discussion today will include forward-looking statements. These statements are not guarantees of future performance and are inherently subject to risks and uncertainties. You should not place undue reliance on these forward-looking statements. We refer all of you to our filings with the Securities and Exchange Commission for a more detailed discussion of the risks and uncertainties that may have a direct bearing on our operating results, our performance and our financial condition. Please note on slide two the agenda for the call will follow our usual format.

After my opening remarks, I will discuss our fourth quarter and fiscal year 2008 highlights and provide an update of our fleet and our review of Eagle Bulk's charter contracts, which provides significant revenue visibility. I will also discuss recent events in the dry bulk market, both with regard to demand and supply before turning over the call to Alan Ginsberg, who will review the Company's financial performance. I will then end the management discussion with some concluding remarks before taking questions. Please turn to slide four for a review of our fourth quarter and fiscal year 2008. I am very pleased to report continued profitability during one of the dry bulk industry's most challenging quarters in history, which confirms the success of Eagle Bulk's strategy. During the quarter, our net income was $15.1 million or $0.32 per share adjusted for nonrecurring charges. Our gross time charter revenues were $62.4 million, up 64% quarter on quarter. EBITDA was $33.5 million, also representing a quarter on quarter increase of 20%.

Full year results were equally impressive. 2008 net income was $67.6 million or $1.44 per share adjusted for nonrecurring charges. Gross time charter revenues were $194.3 million, representing a 43% year-on-year increase. EBITDA increased 28% during the period to $127.7 million. Superior fleet utilization continues, as we maintained a 99.5% rating for the period. Slide five. 2008 operating and financial results demonstrate two very important differentiating factors at Eagle Bulk. One, consistent, strong across-the-board operating results and two, which is very important in today's markets, the ability of management to quickly make adjustments to our business to navigate the unprecedented changing macroeconomic environment that is affecting all industries worldwide. Regarding our operating results, we successfully took delivery of five vessels during 2008 and placed all of them on 1 to 10-year time charters.

During the year we took delivery of the Wren, which commenced a 10-year time charter at $24,750 a day, the Goldeneye, which commenced a one-year charter at $61,000 a day, the Redwing, which commenced a one-year charter at $50,000 a day, the Woodstar, which commenced a 10-year charter at $18,300 a day, and the Crowned Eagle, which commenced a one-year charter at $16,000 a day. During the year, we also expanded our multi-manager strategy and now have three managers, V-Chips, Wilhelmsen and Anglo Eastern. During the fourth quarter Eagle Bulk proactively and independently reached agreements with our shipyard and our lenders that significantly reduced our capital expenditure, while preserving growth potential when the markets normalize again. We also opportunistically extended our charters default insurance cover by another year to July, 2011. Please turn to slide seven for a review of our fleet.

The key message on this slide is that Eagle Bulk owns a modern, homogeneous fleet of the most flexible ships in the dry bulk market today. Modern, flexible ships have historically outperformed other asset classes in challenging markets and attributes such as on-board cranes and versatility across all cargo types becomes highly valued. As a result, we believe that Eagle Bulk's fleet is very well positioned for today's environment. The inherent flexibility of our ships becomes even more desirable to charters during current market conditions. Only two months ago, supramaxes were out earning capesize vessels, even though our ships are only one-third the size of the larger ships. Lastly, it's very important to note that in the current dry bulk market modern ships attract the most charter interest. Ships built after 2000 are much more desirable to a charter than ships built in the '90s or in the '80s.

And our current operating fleet has only two vessels built before the year 2000. Slide eight demonstrates an even more uniform supramax new build profile, as the vessels are intentionally set up in three groups of sister vessels, which provides us with increased operating efficiencies and the possibility of enhanced fleet revenues. It is important to note that these ships were not speculative orders, but were ordered at conservative prices, with significant charter cover and committed financing in place. Approximately 80% of Eagle Bulk's new builds have long-term time charters associated with the vessels. Slide nine is a new slide this quarter, which graphically demonstrates that Eagle Bulk new build vessels' contracts were put in place at significant discounts to new build contracts and prompt deliveries since Q4 2007. The graph on the left shows the prices for prompt vessels as compared to Eagle Bulk's average contract price for our new builds.

Modern secondhand capesizes during the period traded at around $150 million per vessel. Panamaxes traded around $100 million per vessel and supramaxes traded for about $80 million per vessel, which compares very favorably for Eagle Bulk's contracts inbetween $33 million and $36.5 million per vessel. Even though prompt delivery capesizes have fallen to around $60 million and panamaxes and supramaxes have fallen to under $40 million per vessel, Eagle Bulk's new build contracts still look reasonable in today's depressed market. The graph on the right shows a similar analysis for new build contract prices only and leads to the same conclusion, that Eagle Bulk's new build contracts compare well to today's market prices. During the same period, prior to the drop in the fourth quarter, the new build contracts for capesizes, panamaxes and supramaxes were about $95 million, $55 million and $45 million respectively, well above the average contract prices for Eagle Bulk's new supramaxes.

Slide ten provides additional new information and analysis regarding Eagle Bulk's liquidity position, which clearly demonstrates adequate liquidity for the remaining new builds. Starting with the CapEx table on the right, our total CapEx commitments through 2011 are approximately $625 million. It is very important to note and for me to point out that the CapEx schedule has a long timeline, which gives us payment flexibility to match cash flow to commitments, which is highly preferable to having the commitments -- than having the commitments all due within one or even two years. Further detail shows a breakout of the CapEx by quarter for 2009, as well as each of the three years, which shows annual CapEx of between $182 million and $248 million. The CapEx schedule is funded through current liquidity of $569 million, plus contracted revenues through 2011 of $391 million.

Even assuming the charter markets stays at today's levels and all open days revenue for the entire fleet for the next three years is only chartered at $12,000 per day per vessel, this would result and would provide additional liquidity of $239 million in revenues. Therefore, contracted and open days revenues could provide in excess of $600 million to Eagle Bulk to meet its commitments for growth. It's also important to note that our average CapEx per vessel is only $26 million, which averages to only $2,500 per day, assuming a 28-year useful life. Slide 11 shows Eagle Bulk's increased charter cover, which now stands at 74% for 2009, and provides significant cash flow to the Company and smooths out the volatility of trading vessels in the spot market. We continue to pursue our strategy of deploying our ships on time charter contracts, which provides our shareholders with transparent, stable, visible revenues, especially when external shocks to the market, such as the current global liquidity crisis, occur.

Time charter contracts also have the added benefit of insulating Eagle Bulk from any costs associated with fuel, ports, canals or delays. I would like to continue to advise everyone that we have maintained our consistent, conservative strategy in the charter market and avoided any FFA exposure. Please turn to slide 12 for a review of our charter default insurance policy. However, before I begin, I would like to confirm that all of our charters are current with their charter payments. People asked us to provide more details on the underwriter who provides us with this very beneficial charter default insurance for our fleet. Even though the contract has strict provisions of confidentiality that we must adhere to, we have received agreement from them to provide additional disclosure that substantiates the value for Eagle Bulk and our shareholders.

First, the insurance is provided by one of the world's largest credit insurers that underwrites more than 30% of the world's credit insurance. Second, they maintain A and A2 ratings by S&P and Moody's. Third, to put this in a financial context, the annual revenues are in excess of $2 billion. And fourth, importantly, the underwriter has no material adverse exposure to large troubled financial institutions and credit derivatives that have caused problems for so many other insurers. Lastly, the insurance has been placed by Seacurus. We believe this insurance gives us a strong competitive advantage in today's markets, as most other dry bulk companies have not been able to secure similar coverage for their fleets. Furthermore, our insurance would also assist us in any response to a default situation. Please turn to slide 14 for a discussion of the current state of the dry bulk market.

As we had anticipated by the steps we took during Q4 last year, the dry bulk market entered a new range of charter rates that was driven by credit, which in turn impacted demand. Since the lows in December, we have seen the Baltic Dry Index up approximately 200% and Chinese iron ore inventory levels finally start to reduce. Current levels are at 59 million tons, which represents an approximate 22% reduction in two months. Commodity prices have also risen, as steel prices are currently at a four-month high and copper futures have increased 20% this year. However, continued uncertainties in non-shipping industries, such as the global market for trade credit, may affect dry bulk trade. Also, it is too early to judge the effects of the Chinese stimulus package, which I will review on the next slide. Slide 15 illustrates the decisive steps that the Chinese government has taken to support its economy and maintain stable future GDP growth.

In December, the Chinese government announced a $586 billion stimulus package to boost their economy. This plan was reinforced when the premier pledged fresh measures to support an 8% GDP growth target during 2009 Davos meetings. Some market observers attribute this improvement in the dry bulk market to early investment from the stimulus plan. This view was supported by the CEO of Costco recently, who credited the stimulus plan for the current lift in the dry bulk market. This investment plan for infrastructure is directed to areas that will benefit dry bulk trade, such as an $88 billion investment in the Chinese railway system. The Chinese have also taken decisive steps to increase liquidity in their markets and as a consequence bank lending in January has more than doubled. Slide 16 is an update of our fleet deployment for Q4, which highlights how well the supramax asset class adjusts to cargo flows in volatile markets.

During the period, supramaxes carried more protected sub-panamax minor bulk cargoes than major bulk cargoes. As iron ore stopped moving during the last quarter of 2008, which negatively affected capesize and panamax vessels, the supramaxes moved back into the protected sub-panamax markets, such as cement, aggregates and sugar. We believe this fact explains why supramaxes were generating more revenues than capesizes and panamax vessels at the end of last year. Slide 17 is an update of Eagle Bulk's 2008 full year movements in which we carried almost 8 million tons during the period. It is important to note that the year was a tale of two markets, whereby our fleet carried more major bulk, capesize and panamax cargoes in the first nine months of the year and then switched into minor bulk cargoes in the fourth quarter as the market fell. Please turn to slide 18 for a discussion of dry bulk supply.

To best understand the current state of the dry bulk supply of vessels, it is important to understand that the order book is currently in flux and ship owners around the world are canceling orders as the financial crisis continues. These cancellations are accelerated as many ships had been ordered without no financing in place. By looking at some of the manufacturers of critical machinery for ships, one can understand the reality of these cancellations. Wartsila, one of the world's largest manufacturers of ship engines, confirmed that they had $428 million in canceled orders and warned of an additional $1 billion of orders at risk. To give everyone a yardstick to measure the importance of this statement, a supramax engine costs approximately $3 million to $4 million. Another leading manufacturer of main engines, MAN B&W, reported in December that approximately $500 million in orders could be canceled or postponed.

These two statements, coupled with the fact that 40% of the global dry bulk order book for the immediate delivery period of 2009 and 2010 is with greenfield or newly established yards, which strongly indicates a significant decrease in the supply of ships. Based on January 2009 deliveries alone, the dry bulk market has already realized a slippage or cancellation factor of 45% and the global dry bulk fleet contracted by 0.6 million dead weight tons to 418 million dead weight tons. Although the amount of the reduction of the dry bulk fleet is not large, it is significant to note that this is the first time in years that the global dry bulk fleet has contracted as cancellations, slippage, and demolition begin to affect vessel supply. Slide 19 reviews the second factor in ship supply, as demolition is expected to dramatically increase and older ships leave the market. To fully understand demolition and its impact on the dry bulk market, it is important to understand how the demolition market works.

Currently, the Indian subcontinent controls about 90% of the demolition market. India has 200 demolition yards, compared with 50 yards in Bangladesh and 25 yards in China and Turkey. Increasing efficiency in the demolition markets has reduced the time of breakup by about 35%, as a handy sized dry bulk carrier can now be broken up in 40 days from 60 days previously. This increased efficiency will accelerate the number of ships that the global demolition market can handle. Also importantly, the throughput of the demolition yards for dry bulk carriers is significantly faster than container ships, which take about six months to break up. To put this into context, Alang, which is the leading demolition yard for ships in the world today located in India, expects to scrap a record number of ships, with more than 600 vessels available for dismantling. GMS, one of the world's largest cash buyers for vessels for demolition, recently estimated over 1,000 vessels of all types will be scrapped during this year alone.

From an historically perspective, the potential for increased scrapping is very real and the average scrapping age for bulk carriers during the mid-1980s down market was 20 years old. This fact highlights the importance of owning a young fleet, since many times older ships in depressed markets enter lay-up, only to later be sold directly for scrap without returning to the market. I will now turn over the call to Alan, who will review our financial performance.

Thank you, Soph. Slide 21. I would like to offer a brief recap on our fourth quarter and full year results of operations. I want to emphasize again that Eagle posted positive results during the fourth quarter, while navigating the most precipitous drop in charter rates in the history of the dry bulk market. Net revenues for the quarter were $60 million, a 69% increase over 4Q '08 -- 4Q '07 figure of $35.6 million. Once again, all vessels were on time charter during the quarter. Of note, during the quarter we recorded an impairment charge of $3.9 million to write-off the carrying value of the vessel contracts converted into options. We also took a write-off of $2.1 million and deferred finance costs associated with the change in our credit facility. EBITDA as adjusted for exceptional items under the terms of our credit agreement was $33.5 million for the fourth quarter, an increase of 20% over the 4Q '07 figure of $27.9 million.

Net income adjusted for onetime write-offs of deferred financing and other costs related to amendments to our new building program was $15.1 million or $0.32 per share for the quarter. Net revenues for the year ended December 31st were $185.4 million, a 49% increase over the prior year figure of $124.8 million. EBITDA for the year was $127.7 million, a 28% increase over the prior year figure of $99.4 million. Net income adjusted for onetime write-offs of deferred financing and other costs related to amendments to our new building program for 2008 was $67.6 million, a 30% increase over the 2007 figure of $52.2 million. Finally, our utilization rate for the fourth quarter and the full year was a superb 99.5%. With all the noise about counter party risk, it's worth reminding investors that better quality charterers seek out quality owners. Slide 22. You will have seen this morning that we filed a registration, a shelf registration statement covering the possible sale of up to $500 million worth of securities.

We are doing this to allow us to enter into a program with UBS to permit us to sell up to 100 million of common shares at the market. We will also have seen a prospectus supplement filed after the close yesterday that covers our program with UBS. As the procep says, we may sell but we have no obligation to sell any shares under the UBS program. We were previously able to take advantage of a special provision that the SEC has for companies with market capitalization above $700 million. The SEC allows these companies to file unlimited shelf registration statements that do not specify a maximum dollar amount of securities to be sold, but rather to register as you go. When these companies do offerings, they then file prospectus supplements that list the dollar amount and the type of securities sold. As you know, a lot of companies, including Eagle, have fallen below the $700 million market capitalization.

The SEC has developed a procedure which allows these companies to convert from the register as you go method through traditional shelfs. In a traditional shelf, the SEC requires the Company to list the maximum total dollar amount which may eventually be sold under the shelf. The figure in the shelf in our case, $500 million, permits the Company to offer securities up to that number without having to go back through the SEC review process each time it wants to go to the market. That's why we have made the change. And by the way, once effective, the new shelf is good for up to three years. Slide 23. Next I would like to spend a few moments going over our expected cash costs for 2009, which we now estimate at a total of $11,097 per vessel per day. Our estimated daily vessel operating cost is $4,792. Our technical management fees paid to our third-party managers are estimated at $302 per day.

Please note, we have instructed our managers to hold the line on any further increases in crew wages and other vessel costs. With that said, we do expect to see further increases in insurance costs. Our estimated general and administrative expenses, cash expenses, for 2008 is $2,286 per vessel per day. Our estimated interest expense net of interest income is $3,181 per vessel per day. We have swapped nearly 100% of our current debt through 2009. The weighted average effective interest rate on our swap debt will be approximately 6.25%, inclusive of our 175 basis point margin. Finally, we estimate that our average drydock costs at $536 per vessel per day. And with that, I will turn it back to Soph who will complete the presentation.

In conclusion, slide 25 reviews the key factors driving value in today's market. First, Eagle Bulk's management team has operated for many years in the geared bulk carrier market and has managed assets through multiple market cycles. Second, in a market where cash flow and revenue visibility are increasingly important, we have $1 billion of contracted revenues to buffer the Company from the current market volatility and we have significantly increased our 2009 charter cover to 74%. Third, the revenues are supported with a charter policy, which is in place through July 2011, and is backed by an A, A2 rated insurer. Fourth, Eagle Bulk has a committed bank financing facility to finance ships through 2017 and a low cost breakeven, which provides us with adequate liquidity for our new buildings.

Fifth, our commitment to the supramax market has served us well, as the flexibility of our ships gives us the ability to trade cargoes the larger ships can't compete in. Lastly, we have proven our financial performance as we have been able to maintain profitability during the fourth quarter, which outlines our focus on long-term shareholder value creation. I believe all these factors positions Eagle Bulk well for the reality of today's global economy. I would now like to turn the call over to the operator for questions. Thank you.

(Operator instructions ) Your first question comes from the line of Doug Mavrinac with Jefferies & Company, please proceed.

Good morning, Soph and Alan.

Good morning, Doug.

Just had a handful of questions for you guys because you guys did a fantastic job of laying everything out as usual. My first couple of questions have to do with your charters. Soph and Alan, both of you talked about how your charters were performing, because I know there's been a lot of speculation in the market overall about the performance of charters. And you also mentioned about your back stop with your revenue insurance. But my question pertains to, have you had anyone coming to you, asking you to renegotiate or do you have the sense that some of your counter parties that up until now that have been performing may not be able to perform going forward?

Those are two questions that I think are on investors' minds. I think there is a couple of scenarios here that I would like to point out. What we have seen very publicly is a couple of very high-profile bankruptcies. It started in Q4 last year and continued into -- into today. Some were surprises, some weren't surprises. So we have been very fortunate to not have any indication of situations like that with the Eagle Bulk fleet. And what was interesting is if you go back to when we first announced this charter default insurance policy, we even received a little bit of criticism at the time, because I believe people were saying, why are you spending money on an insurance policy when the market is so healthy?

And that stemmed from the belief that you want to buy the proverbial umbrella when it's sunny, not when it's raining and that proved to be a very good choice. So to answer your question, first, we believe all of our charters are in good standing. And secondly, from time to time, we have received proposals that were not necessarily just, as some other owners have experienced, just a reduction in total cash flow, but we received proposals to reduce the charters rate, but extend the period, so the cash flow is the same or even more than if the charter had been in place as stated. So it's really a modification not a reduction in the total cash flow. But I would like to confirm that to date all of these proposals have been rejected by Eagle Bulk.

Okay. Okay. Great. Thank you. That helps a lot. And then as it relates to maybe some of your new builds and the ability of counterparties to perform on those contracts. What sort of flexibility do you have with both the shipyard and the banks, for that matter, or the bank for that matter, should Eagle be put in the position of having their counterparty not be able to -- to perform on the time charter contract as they are currently obliged?

Well, I think what is interesting to note and if people looked at the deals that we announced in December last year where we took a global solution approach to managing CapEx and managing the bank facility, what it had was a corresponding effect of dramatically increasing our charter cover because the ships that were ultimately modified that reduced the corresponding CapEx were charter free vessels. So what we are left with is a heavy -- heavily contracted new build fleet. Now, I think what's very important to answer the question, Doug, is to answer it in this sort of -- from the perspective of the charter.

So here we have, unlike some other new build programs that, or just CapEx programs where the, the obligations fall due in a very short period of time, say they're current obligations of less than 12 months, our obligations go through 2011. So if you are a charter, let's say hypothetically, and you have a ship, a 58,000-toner, one of Eagle's new builds that's delivering in the second half of 2011 and you've got a five, 10-year commitment and the charter rate is $18,000 a day, which by historical standards is not a crazy rate, charters are really going to look, we believe, to protect those contracts because there's a general industry belief that the second half of 2011 is going to be a hell of a lot better than February, March, 2009.

Right.

So I think there's so much confusion out there. And one of the reasons on the industry piece that I did, we spent a lot of time discussing supply, not by showing you a bunch of graphs or bar charts or pie charts showing you what the numbers are, but really trying to get behind the numbers to explain what the drivers are, because I think the investment community really needs to understand what is driving charters' views on how they make their decisions, on how they -- how and which owners they approach to do charter deals, and correspondingly the same goes true with shipyard, ship supply and demand for ships. So I hope that answers your question, probably a little more long winded than you wanted but -- .

No, that's perfect, actually. Thanks for that. And then just two other questions before I turn it over. These are just more bookkeeping type of things. First, you guys recently announced G&A guidance that was higher in '09 than it was previous. I was looking for just a little bit more color on the cause for the increase. And then the final thing, it relates to the shelf registration that, Alan, you spoke about. And just confirming, it sounds like the primary reason for the filing has more to do with just the market cap than anything else, but just looking for a little bit of color on that and then the first being the -- the G&A guidance.

Let's talk about G&A for a moment.

Okay.

G&A expenses in '08 were impacted primarily by cash and noncash compensation, performance-based compensation, including the amortization of restricted stock awards to the officers and staff of Eagle, and by administrative costs associated with operating a larger fleet, including our extensive new building program. So that's the reason for the G&A increase. The equity shelf program is -- I'm not usually given to this sort of language, it's another tool in the tool box, an arrow in the quiver. It's good housekeeping. Other companies have put it in place and Eagle has now put it in place.

Also, Doug, I will just jump in here. I think it was -- it was a timely review with our K to go through this kind of stuff and look for us to be very responsible with this. I mean, there's a very -- there's a likelihood that we might be doing our Q1 call and you will see that nothing has been done with this plan at all. I would also like to remind everyone that this plan would be very useful for acquisitions also.

Okay. Perfect. Great. Thanks for that, Soph, and thanks, Alan.

Your next question comes from the line of Natasha Boyden from Cantor Fitzgerald, please proceed.

Thank you, operator. Good morning, gentlemen.

Good morning, Natasha.

I was wondering if you have been in negotiations with your shipyards regarding any potential further order cancellations or potentially turning any further of these new builds into purchase options, if you have been able to do that.

The short answer is no and one of the things we wanted to do for the investment community on this call, which gives a much higher level of detail than we have ever given before, is you probably noticed that new liquidity slide where we go through very carefully and give quarter by quarter CapEx for '09 and then annualized CapEx for '09, '10 and '11. And what you see is the liquidity for the -- the fleet currently at $560 some odd million, combined with an additional revenue stream of contracted and open vessels at the assumed rate of $12,000 a day, brings in an additional over excess $600 million, which gives us the ability to comfortably take delivery of new buildings that were contracted at reasonable prices, where the CapEx, remaining CapEx per vessel averages only $26 million a ship, and has significant charter cover and goes through 2011, when we believe the market will be better than it is today. So I would say we are feeling relatively good about things today.

In other words, at this point, you don't see any need to change anything regarding the new build program?

That's correct.

Okay. All right. Great. In terms of your -- currently you do have some vessels coming open this year, I think one coming up fairly soon. What do you see (inaudible) rates going forward? I know that's a bit of an open question and where would you look to fix these ships right now. Are you looking at the shorter charters at these levels or are you trying to hold out for two plus year charters or are happy, more comfortable sticking with the one year?

I think right now we are probably on the shorter end of the spectrum. Usually we do one to 10 years. Originally it was one to three years and then we evolved into one to 10-year charter bandwidth. I would say in today's market look for us to be on the shorter spectrum of that range. I think it's -- if you want me to describe the charter market for 30 seconds, it's a very positional, very volatile market, as you've probably noticed from fixture reports where you can see what capesizes, panamaxes and supramaxes are being chartered for today. You see huge discrepancies between ships that are in the Atlantic markets or ships that are in the Pacific market.

And sometimes that volatility can swing 20%, 25% in a matter of a week. So I think the best way to describe how we will charter our open capacity for 2009, which only stands at 20%, 26%, will be to look very opportunistically. We also did -- I just want to remind everyone, we had a great opportunity on one of our ships that was open in South America. She was coming off a charter and she was due for drydock, so we even did a time charter basically directly to the drydock in China. So we are going to continue to monitor the fleet and look at it as a portfolio approach.

Okay. Great. And then -- excuse me. If you could perhaps just remind me here. RBS has recently announced that it's drastically cutting its shipping lending operations. Just remind me, does this have any impact on you?

Well, actually, I think there's some very interesting color on RBS that is important for people on the call, because like ship supply, demolition, new building order book, what charters are doing or not doing with their counterparties, on this point, there's been a lot of noise. I would like to say to everyone listening on the call today that we maintain a full service relationship with RBS. Now, independent of the statement that you just heard me make, RBS has publicly stated that they will support clients with new build contracts that have a full service relationship approach. So I feel, as we're speaking today, that we are in good standing with the bank and we're very happy with the relationship.

Okay. Great. That's very helpful. Thank you very much, gentlemen.

Thank you.

Your next question comes from the line of Charles Rupinski with Maxim, please proceed.

Good morning.

Hi, Charles.

Most of my questions have been answered, but I just wanted to follow-up quickly on the charter strategy for open days, both for the -- . You have several new buildings which are not chartered at all, so the ones that are rolling off. You did some novel things with your last charters where it was the ability to convert the charter to a fixed rate at a higher rate down the line. Assuming you do go, have the ability to go maybe a little longer than a year, do you see doing more profit sharing and having more conversion options in the

You've touched on a very interesting point, Charles. As I want to remind everyone on the call today, we were the first US-listed dry bulk Company, I think maybe two or three years ago, to actually start on this profit sharing charter concept. We are strong believers of this concept. I believe we continue to evolve in this strategy and adjust our charters profit sharing components in lights of the realities of today's market. We were very happy with the charters that we announced. And what I'll do is I'll spend just a quick review for everyone who might not know the specifics of it. They are fixed rate charters we did on two of our ships that convert, that have the option to convert , charters option to convert to continue the charter for another year, but the base rate increases roughly about 20%, 25% from the current base rate and has a profit sharing component on top.

Now, you all have seen that type of a structure from Eagle charters before. I think the novel concept you are referring to is the ability is if we see the market improve, we have the ability based on the forward Imorex curve of the remaining term of the charter, to convert the charter to a fixed rate off the curve, which gives us the ability to capture, if you will, market upside so we don't feel locked into a charter or locked into even a profit sharing charter when we would like to lock in a fixed rate. So if we can expand on that strategy, which we just announced for the first time this call, this new novel approach which we believe is very well suited for today's market, we will, of course, do

Great, thank you.

Your next question comes from the line of Jon Chappell from JPMorgan, please proceed.

Thank you. Good morning, guys.

Hi, Jon.

Just two quick questions. First on the default insurance, pretty -- I understand the part about the default through 2011, but I wanted to make clear if someone were to come to you and renegotiate and you had to take a lower charter rate, does the charter insurance cover the difference between the contracted rate and what the renegotiation may be or is it just for a pure default?

No, no. Actually, what I can't -- I will disclose as much as I can and I think one thing that is very important here is to understand how it works. So there are three basic scenarios that one encounters in shipping. One, which is the most straight forward and you guys have seen it happening already, some of these substandard charters have gone bankrupt and hit the proverbial wall. In a default situation like that, the charter, the charter's default insurance steps in and makes us whole effectively. Scenario two is the charter is solvent but just elects to pay less. Again, in that scenario, which I think is more what you were talking about, Jon, the insurance trues us up, if you will, from the lower rate to the contract rate. And scenario three is that there's some kind of a dispute and in that case, if we have a justifiable dispute that is proven we get trued up in that case too. So it's pretty, it's pretty all encompassing.

And does this include the new building fleet as well?

What happens with the new build fleet is we nominate the new builds one by one to our underwriter, as we have been doing with all of the new builds to date, and they roll in to the, to the policy based on our nomination and their acceptance.

Okay. And then one final question. Alan, you made mention in your comments and how you are asking the technical managers to kind of hold the line on crew wages. How is that possible. Given the massive inflation we've seen in crew wages over the last couple of years, given the size of the order book that's supposed to be delivered and the perceived shortages of crewmen right now, how can the technical manager really kind of keep costs down in this type of inflationary environment?

Okay. I will jump in on that one, Jon. There's a lot of detail on how we are able to do that through our expanded multi-manager strategy, which I will explain right now. I don't know if you remember, but going back about two years, we initially -- well, originally, when we started with a smaller fleet, we had full Ukrainian crews. So we were limited to one nationality. As we then evolved and the fleet grew, we went to a two nationality structure, where we had Romanian crew and Ukrainian crew. As the fleet has grown further and in light of our anticipated global shortage of crews that have become really the focus of cost expenditure, probably for the last 18 months with all shipping companies, we have expanded to a multi-manager strategy that's allowed us to also enter two additional nationalities, which have very, very robust supply of crews, which are the Filipino and Indian nationals as well. So I would say a greatly expanded labor pool is one of the reasons we are able to do that.

Okay. That's helpful, Soph. Thanks a lot.

Your next question comes from the line of Scott Burk from Oppenheimer, please proceed.

Good morning, Soph and Alan.

Hi, Scott.

Listen, a lot of questions have been answered already, but did want to try to get some more color on the equity distribution agreement with UBS. Specifically, I'm wondering if when you do offer shares are you going to put out a filing that day indicating the number of shares sold or will it just be something where you will update us at the end of each quarter?

The latter. That basically we will report back to the market at the end of the quarter with the -- in the Qs and the Ks.

Okay. And you kind of indicated that you don't need to do it right now, but it's just kind of a tool in the tool belt. What -- what kind of -- what would prompt you to start, to actually start doing the sells?

Well, I think, again, we are feeling comfortable with our liquidity today. We -- we're going to be opportunistic about it. Depending on where asset prices go, this might also be a tool for acquisitions. So it has multiple uses and acquisitions is one of the possible areas that we could utilize this product for. So I think the take away here, Scott, is its a flexible product. For those of you who have known Eagle management now for -- since 2005, know us to be a responsible group and look for us to utilize the same diligent conservative and responsible approach to this product that we have to our business strategy.

Okay. And then just one follow-up, you talked about how supramaxes have been doing quite well in terms of the rates. Just wondered how long do you think this premium can last, supramax rates being higher than panamax, and just the cargo flows that you think will support that?

What's happened, which is interesting to it this point, is capesizes now have shot past supramaxes recently. In other words, there is capesize charters at a much higher level than at supramax, which historically has been a lead indicator that the market is getting better. Our view is that, and I said this a little bit on the industry section, we feel that the market has improved since December. December was a historical low. There are very early signs that indicate the loosening of trade credit and the increase of demand. Remember, demand dropped, we think -- it was credit driving the market in December that had the follow-on effect on demand rather than the other way around.

And we believe that there are very early signs of things coming back a bit, but we really want to study the supply side a little better, get a -- I think -- let's put it this way, by the next time we all speak on the Q1 call, we feel all of us, not just Eagle Bulk, will have a lot more visibility on supply because we will have new statistics on the revised global order book and also on how much demolition has progressed. So that's our view on what charter rates are doing today and what the market can probably do in the next three months.

Okay. Thanks.

Thank you, Scott.

Your next question comes from the line of Justin Yagerman from Wachovia, please proceed.

Hey, guys. Are you how doing?

Hi, Justin.

I just wanted to get back to G&A for a couple of seconds here. Doug's question, I know you guys talked about the '08 versus '07 run rate, but the Q4 cash guidance was up materially off of the Q3 run rate and I wanted to get a sense of what you are expecting for full year 2009, both cash and noncash, and also get a sense for what the hurdles are for incentive comp in this market, as we look out and try to figure out how that noncash component has been growing over time.

The all-in G&A guidance that we are giving for 2009, cash and noncash, was $34.5 million. In our 10-K, which has now been filed, in the footnotes you will see that the amortization of restricted stock awards for 2009 is approximately $13 million. That's in the 10-K.

One thing I would like to say, Justin, on this, which is an important point in terms of guidance, is the noncash component, you guys have known about it for a while, because it's old amortization of awards that were given as far back as 2007. So that's really nothing new. That's just a legacy, if you will, of awards going back almost two years now.

But I guess, the second part of the question, when we think about hurdles for incentive comp in this market, do you have those delineated. How do we think about that? Is this a number that we should expect to hold firm through the year or are there -- if the market progresses, as you are saying, and things start to pick up that we should see some creep in this number as we go forward?

I think Alan already answered that question. He gave 2009 guidance to just stay at the 2008 level and all of that noncash stuff is just old incentive stuff going back two years.

Okay.

That's -- we have given you the guidance.

All right. And then on -- I think in the press release you guys had put out that under the new credit facility that the bank actually needs to approve charters in excess of a year. How does that process work and I'm assuming that is because they don't want submarket charters to impact asset values. Is that kind of the right way to think about that?

No, no, no. The right way to think about that is that's a legacy from basically the bank facility, I think going all the way back to the IPO and even when we were a private Company. So that's a term that just kept rolling forward. Don't look at that term, Justin, to be an insert as a new term that had some deeper meaning because of the current charter market. It's just, again, a legacy that was a holdover, I think, Alan, going back to 2005.

Yes, sir.

Okay. I didn't realize that was nothing new. And I guess just a last question, did you guys disclose or have you put out how frequent are appraisals taking place currently under the credit facility right now?

They are done at a minimum on a quarterly basis.

Okay. All right. Thanks a lot, guys. I appreciate the time as always.

Thanks, Justin.

Your next question comes from the line of Chris Wetherbee from Merrill Lynch, please proceed, sir.

Great, thanks, good morning, guys.

Hi, Chris.

I just have one question. It's really just a follow-up on the charter insurance. I just wanted to understand the actual the mechanical process if someone were to default or there's a renegotiation that would result in a charter -- in an insurance true up, what exactly is the process from day of default to actually when you guys start recognizing insurance revenue.

Well, bottom-line is it depends on the type of default. It's -- it's obviously a very complicated process, but it can be immediate. I think what's very important for people to be aware of, and this is -- this is actually probably the most important point on charter's default insurance, which is if someone tries to do something to Eagle, we have a tremendous insurance underwriter behind us that has specific experience in default proceedings and will be our partner, our rather important partner in going after anyone trying to pursue a default with Eagle, which gives us a significant advantage over other dry bulk owners who have to navigate that kind of a situation alone.

Okay. So -- and I guess if -- you had mentioned , I guess, which you guys had rejected. Is it fair to assume that the insurance Company would need to be actively involved in any of those types of discussions if you were to entertain

Oh, of course. They are hugely involved in this. They have much more experience in defaults than we do, thankfully. And -- and we would look to them to help -- help formulating a defense of any contract breach and they would be big partners in that.

Okay. Great. That's all I have. Thanks very much for your time.

Thank you.

Thank you, Chris.

This concludes the Q&A session for the call today. I would now like to turn the call back over to Mr. Zoullas for closing remarks.

Thank you very much, everyone, again, for attending our Q4 and full year 2008 results conference call. We look forward to speaking to you again for our Q1 call and we'll keep you updated with market developments as they arise. Thank you very much.

Thank you for your participation in today's conference. This concludes the presentation. You may now disconnect. Good day.