Eagle Bulk Shipping Inc (EGLE) 2010 Q4 法說會逐字稿

Good day ladies and gentlemen welcome to the 2010 Eagle Bulk Shipping conference call. My name is Ann, and I will be your coordinator for today's call. (Operator Instructions). I would now like to turn the presentation over to Mr. Sophocles Zoullas, Chairman and CEO. Please proceed, sir.

Thank you and good morning, everyone. I would like to welcome everyone to Eagle Bulk Shipping's fourth quarter and full year 2010 earnings call.

To supplement our remarks today, I encourage participants to access the slide presentation that is available at 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 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 3 the agenda for today's call will be as follows -- I will first brief you on our fourth quarter and full-year 2010 results and highlights, including an update of our business with Korea Lines Corporation, proceed with a company update, and lastly present our current views on the market. Alan will then give an overview of our financials before we open the call to questions.

Please turn to slide 5 for a review of our fourth quarter and full-year 2010 results.

Eagle Bulk generated earnings of $3 million or $0.05 per share, basic and diluted, for the fourth quarter of 2010 and $26.8 million or $0.43 per share basic and diluted for the full year. Revenues net of charter commissions totaled $72.4 million for the quarter and $265 million for the full year. EBITDA was $32.9 million for the quarter and $148.7 million for the full year ended 2010,representing year on year end increases of 31% and 23% respectively. Fleet utilization for the year remained an impressive 99.6%.

On slide 6, we review our 2010 and 2011 year to date highlights. Since our last earnings call in November, we took delivery of two additional newbuilding Supramaxes, bringing the total to 14 vessels, representing a 54% increase during the period. We are very proud of managing such impressive fleet growth while maintaining close to 100% utilization. I believe this highlights the operational excellence that remains at the core of the Eagle Bulk brand.

In the fall, we launched Eagle Bulk PTE LTD. This new business initiative will help Eagle Bulk evolve from a traditional owner-operator of tonnage to a more comprehensive industrial player. To date, we have expanded our commercial relationships with producers and end users and have already started to conduct contracts of affreightment or COA business. In short, we believe in taking in cargo contracts creates a logical and natural hedge for our large and growing fleet.

Separately, but in connection with our new unit, we opened a commercial and operational office in Singapore that will allow for us better to monitor the markets of our fleet on a 24-hour basis. Since Eagle Bulk PTE remains in its early stages, we do not anticipate any material contribution in the immediate term. On the S&P front, we completed one transaction in 2010. We sold the oldest and smallest vessel in our fleet, the Griffin, a 15-year-old Handymax for $21 million net of commissions, generating a small profit for the company while lowering our fleet's average age.

Please turn to slide 7 for an update on our business dealings with Korea Lines Corporation, also known as KLC. As of January 25th, the date KLC filed a request for receivership, we had 10 vessels on long term charters to Korea Lines on an approximate average base rate of $18,400 per vessel per day, roughly 15% over the current one-year period rate for Supramaxes.

On February 15th, the Korean courts approved KLC's request for protective receivership. This approval, which we view as a big positive, was originally expected to be issued in late February or early March, effectively allows for Korea Lines to commence its rehabilitation process, including a review of its outstanding charters and discussions with owners. Until we reach an agreement with KLC, though, which, as of now, remains uncertain and our charter agreements are reaffirmed, we have negotiated to temporarily assume employment of our own vessels, and we look to fully utilize Eagle Bulk PTE and its network to optimize our vessel performance. This agreement, which we view as being beneficial to Korea Lines, ourselves, and the market at large, allows for our vessels to keep operating and generating cash. Earnings generated by Eagle Bulk on the rechartering of these vessels will be used to offset any future hire due from KLC.

We are pleased to report that as of mid-February, Eagle Bulk has rechartered all of its own vesselsoriginally unchartered at KLC on short period, which is currently averaging around $15,000 per day,18% less than the average contract rates. In the interim, we will continue to trade our vessels until our business with Korea Lines has been settled. As of today, accrued receivables due from KLC amount to $8.3 million, of which $2.5 million was due as of January 25th filing. We are very pleased to have reached a quick short-term solution through the rechartering of our vessels and expect to update the market further as events warrant.

Please turn to slide 9 for a list of our on the water fleet, which currently totals 40 vessels or 2.2 million deadweight tons with an average age of only 4.6 years. We have taken delivery of two new build vessels, the Thrush and Nighthawk, since our last earnings call in November. As we continue to take delivery of remaining new builds in 2011, the average fleet age will decrease and improve further.

At the bottom of slide 9, we depict our updated chartering position. For 2011, 59% of our fleet is fixed, 13% is indexed to the Baltic Supramax Index or BSI, and 28% remains open. We will continue to employ an opportunistic strategy and look to fix tonnage on longer periods as the market normalizes.

Please turn to slide 10, where we depict a chart of our historical and projected vessel-owned days. Going forward, we have growth from six remaining new buildings take delivery of. All six of these vessels are fixed on long-term charters, including two to Korea Lines. If an agreement with KLC has not been reached, Eagle Bulk will, of course, pursue alternative employment for these vessels. Our fully delivered fleet by 2012 will number 46 vessels, representing a very impressive cumulative annual growth rate, or CAGR, of vessel owned days of over 25% since inception of our company in 2005.

In slide 11, we illustrate Eagle's cargos for fourth quarter and full year 2010. Our fleet carried approximately 4 million tons of cargo during the fourth quarter and over 14 million tons for the full year, representing impressive year on year increases of 40% and 48% respectively. The shift towards carrying more minor bulk cargos, first noticed during the third quarter, continued during the fourth quarter.

Minor bulk cargos as a percent of total cargos carried for the fourth quarter reached almost 48%. This compares to 45% for the third quarter and 35% for the second quarter of 2010. We attribute this trend to the relative strength and the minor bulk demand, specifically potash and other fertilizers, and relative weakness in the iron ore trade partly attributed by the exports trend issued by the Indian state of Karnataka. For the full year 2010, coal represented over 25% of our total cargos, underscoring the significance of this commodity in the seaborne trade. We believe this trend will continue going forward.

Please turn to slide 13 for a review of the market in 2010. Similar to 2009, 2010 turned out to be a better than expected year. At the end of 2009, beginning of 2010, market analysts were projecting healthy growth in seaborne trade demand for the important dry bulk categories on the back of robust growth in China, India, other Asia, and a recovering OECD. Except for iron ore, which still increased by a solid 9.3% in 2010, actual growth rates for the remaining categories all came in higher than expected. The largest positive surprises were in coal and grains, as well as growth in minor bulk trade which reached an impressive 12.1%.

On the supply side for 2010, although we had a large increase in the world's dry bulk fleet, actual deliveries were much lower than what was being projected at the beginning of the year. This can be attributed to a misstated order book, slippage, and outright cancellations of orders. In addition, supply growth was skewed toward the larger asset classes leaving the sub-Panamax segment in a more balanced position.

At the bottom of slide 13, we depict average spot rates for the three major asset classes in dry bulk. 2009 was a decent year for all classes, especially when considering the financial crisis only occurred one year prior. The forward market in November 2009 was indicating 2010 rates would be impacted by a large supply growth, but in actuality, this did not happen. Supramaxes average $22,400 per day in 2010, 40% over what the market was expecting and 25% over the prior year. Panamaxes averaged slightly more at $24,900 per day in 2010, a 30% increase over what the market was expecting and 23% over the prior year. Capes averaged $33,200 per day in 2010, flat to what the FFA market was indicating and 24% lower than the year prior.

On slide 14, we demonstrate the Supramax's outperformance in 2010. Apart from realizing lower supply growth in the larger asset classes, Supramaxes generally are considered to be the most versatile dry bulk vessel for a variety of reasons, including its size, which is optimal for being able to berth at most ports around the world, its size again for best matching cargo stems, especially for the minor bulks, and its on-board cranes which low for these vessels to load and discharge without requiring onshore equipment. On the left-hand side of the slide, we illustrate a typical year for a Supramax and its ability to triangulate and realize high utilization, in other words, sailing mostly laden with very few ballast trips. You will also notice the variety and diversification of cargos a Supramax can carry.

Please turn to slide 15 for a discussion of the current market. We view the current market weakness as a result of the few dislocating factors which we believe are subsiding. Indonesian coal exports have been negatively impacted in recent months due to both excessive rains and delays in the issuance of trading permits. However, recently, the Indonesian energy ministry has acted on this matter and approved over 70 permits in February alone. We expect there will be a ramp-up period until exports normalize. But we expect total effective cargos amount to approximately 12 million tons, equivalent to 240 Supramax voyages.

The iron ore export ban issued by the Indian state of Karnataka back in July of 2010 remains in effect and has affected over 23 million tons of product. This equates to more than 460 Supramax voyages. The iron ore export ban is expected to end in March with exports resuming at normalized levels beginning in April. Just this week, it was reported that India will increase its tax on iron ore exports by 5%. We believe this move might be a precursor to the ban being lifted later this month, a clear positive for Supramax rates going forward.

Much has been publicized of the flooding in Queensland, Australia and their impact on exports, including coal, wheat, and sugar. The coal industry has been most affected, with over 60 million tons of export product said to have been taken out of the market. This is equivalent to 1,200 Supramax voyages. Although exports have resumed somewhat, mines are not expected to reach pre-flooding production export capability at least until June, and some mines may not be fully operational until the end of the year.

Lastly, we believe the Korea Lines filing in January negatively impacted market sentiment. But the quick response by the Korean courts to grant KLC rehabilitation along with owners such as Eagle Bulk providing short-term solutions and reemploying vessels has alleviated the fear of a wider market effect. Supramax rates are currently in contango, indicating positive market expectations with one year time charter trading at $16,000 per day versus spot at $15,000 a day. The Baltic Supramax Index is up approximately 32% since hitting a low on February 7th.

On slide 16 we review the strong trade demand fundamentals for both coal and iron ore. Global seaborne trade for coal reached almost 912 million tons in 2010, up 13.4% from the prior year. China and India were strong contributors to this increase both posting over 40% increases.

On the top right corner of the slide, we depict China's 2010 coal imports by origin. It is interesting to note that Indonesia was the largest exporter of coal to China by far, increasing over 100 percent from the prior year. Long-term fundamentals remained very strong as well, with seaborne trade expected to increase 40% by 2015 and double by 2025 thanks to a number of coal-fueled power plants coming on line.

Global trade for iron ore totaled 986 million tons in 2010, up 9.3% from the prior year. Chinese imports were basically flat year on year but OECD posted a strong recovery, including western Europe of over 40%. Global steel production increased over 18% over the prior year and long-term fundamentals remain strong.

Please turn to slide 17 for a review of the agri cultural and minor bulk trades. Global seaborne trade in grains and agricultural products totaled 343 million tons for 2010, an increase of 8.5% from the prior year. China's appetite for grains and soybeans remains relentless. Grain imports total 60 million tons, an increase of 32.5% year on year.

On the top right-hand corner of slide 17, we depict Chinese historic soy consumption. Improvement in the Chinese population's standard of living over the last decade has led to strong growth and demand for soybeans, which is primarily imported from the U.S. and Brazil, both long-haul trades. Chinese soy consumption has more than doubled since 2000, about ten years ago. Minor bulks posted a strong recovery in 2010, with trade totaling 955 million tons, an increase of 11.6% over the prior year.

On slide 18, we review the current supply picture. Slippage and cancellations for the sub-Cape-size class totaled 40-plus%. As we said in the past, it is widely believed that these slippage and cancellation rates will continue into 2011. Primary reasons for this are shipyard and financing issues. Scrapping in 2010 accounted to a modest 5.7 million deadweight tons due to the healthy rate environment over the year. But as the market weakened in the fourth quarter, we saw scrapping activity pick up significantly. Over 1.5 million deadweight tons were scrapped this past January alone, representing 25% of last year's total. With scrap rates approaching $500 per lightweight ton, we believe 2011 could be a record year for demolition.

Almost 2,000 vessels are over 25 years of age, and will eventually need to be scrapped. As we have said on our previous calls, this phenomenon acts as a safety valve that will contain vessel growth and improve the supply/demand fundamentals going forward. On the bottom right-hand corner of the slide we depict historical scrapping by month. On the top right corner of the slide, we depict our standard dry bulk fleet age profile chart. The sub-Panamax vessels as a group remain the oldest, with 26% being over 25 years of age as compared with 13% for Panamaxes and under 7% for Capes.

Another factor that is expected to hinder supply growth is the appreciation of the RMB. Chinese new building contracts are denominated in dollars, while their labor costs are historically in local currency. As such, RMB's strength continues to squeeze shipyard's margins and may potentially lead to fewer orders and yard closures.

I will now turn the call over to Alan, who will review our financial performance.

Thank you, Soph.

Slide 20. I would like to go over and offer a brief recap on our fourth quarter and full-year results of operations. I want to emphasize up front that Eagle Bulk posted positive results during all four quarters of 2010 while we continue to navigate through one of the most volatile periods in the history of dry bulk market.

Net revenues for the quarter were $72.3 million compared to fourth quarter 2009 figure of $42 million. This increase in revenue is principally attributable to the increase in the size of our fleet and the commencement of our trading operation which began at the end of the third quarter. During the quarter, the fleet was on a mixture of voyage charters and short and long-term time charters. All vessels were on time charters during the fourth quarter of 2009.

Operating income for the fourth quarter was $14.9 million compared to the fourth quarter 2009 figure of $10.4 million. EBITDA, as adjusted for exceptional items under the terms of our credit agreement, was $32.9 million for the fourth quarter, compared to the fourth quarter 2009 figure of $25.2 million.

Net income was $3 million or $0.05 per share for the quarter, basic and diluted.

Net revenues for the year ended December 31 were $265 million compared to the prior year figure of $192.6 million. Operating income for the year was $75.7 million compared to the prior year figure of $65.4 million. EBITDA for the year was $148.7 million compared to the prior year figure of $121.2 million. Finally, our utilization rate continues to be at a superior 99.8% for the fourth quarter and 99.6%for the full year.

Slide 21. A few comments on our balance sheet.

We ended the year with $149 million in the bank, including close to $20 million of restricted cash. During the year, we borrowed $251 million in order to fund our new building program. We took delivery of 12 vessels last year and two more so far this year. We're scheduled to take delivery of six more before the end of the year, which will mark the end of our new building program. Our bank debt stands at 1.151 billion at the end of the year, and we're compliant with all of our bank covenants.

Slide 21. Our CapEx for 2011 is $165 million, which we've presented on a quarterly basis on this slide. As of today, we've taken delivery of two vessels this year and expect six more before the end of the fourth quarter. Please note that installments can move between quarters. Finally, we intend to meet our CapEx requirements with cash on hand and cash generated from operations.

With that, I'll turn the call back to the operator, who will open up the line for questions.

Thank you. (Operator Instructions). And our first question comes from the line of Natasha Boyden with Cantor Fitzgerald. Please proceed.

Thank you, operator. Good morning, everyone.

Hi Natasha.

Soph, as you rightly pointed out in your presentation the Supramax rates have performed pretty well in the last 6 to 12 months or so relative to larger vessels. But having said that, you do have a larger -- relatively large amount of unfixed days in 2011. What do you guys think of -- what level of spot exposure you're comfortable with in this market environment? And at some point, I'm assuming when the market improves, could we expect to see fixed more of your open vessels?

Great question, Natasha.

I think the one thing that we would like to highlight as we think about open days versus fixed days, and we did anticipate some weakness, but albeit, I don't think anyone expected these environmental dislocations like we've seen in Australia, New Zealand, Indonesia, and South Africa with regard to cyclones and flooding and things like that affecting output of mine -- mining output. But what we've been very fortunate is having set up Eagle Bulk PTE and having set up an office in the Pacific region so we have 24/7 trading.

We effectively have the ability, and we have taken in a bunch of cargo contracts before the market collapsed, which we've been able to deploy our own ships on. So, for example, and I think this is a very good one to point to, when literally one week after the absolute bottom of the dry bulk market February 7 we came to this temporary solution with Korea Lines to effectively redeploy all of our ships. We used our Singapore office and our new trading network to in a matter of days deploy ten ships very effectively, including taking a newbuild and putting it on one of our own cargos that we had booked through the trading group.

So I would say we now look at our matrix, our chartering matrix as fixed business on, say, fixed rate typical time charters, profit sharing charters with base rates which we still have, index charters based on the BSI, and also now we have a cargo book that we can use to offset our open days. So I would say we're taking a portfolio approach, having set up the cargo book timed very, very well with the drop in the markets. As the charter market went down we were able to have some cargos for our ships which also helped us with Korea Lines.

So I would say going forward, we're going to use that to supplement it. So I would say look at us to have maybe one-third open, two-thirds covered, and that two-thirds may be between fixed-rate charters, profit sharing, and putting some of our own ships on our cargos.

Okay. Great. Thank you.

And actually, I'm glad you brought up the trading business. That's sort of my next question. In terms of about business, can you give us any color as to how profitable the business was during the quarter and what you expect going forward? I think you mentioned during the call that there wasn't too much in the way of contributions, but if you could just give us some color on how that is doing and what your expectations are for the business, that would be helpful.

Sure. I would characterize it for everyone on the call today as still in what we call the ramp-up phase. So in terms of material tangible performance that we can report to you directly, it's not quite there yet. But there's been huge, I would say, indirect benefits. I mean I don't think we could have been as successful in deploying ten ships from the KLC situation into the market successfully generating cash in a matter of a few days in this market if Q3 didn't have this trading group set up. And actually, I think few owners have been as successful as we have with the KLC situation. So that's been sort of an indirect benefit.

The fact that we've taken in cargos that we put our ships on, you can't really put a P&L number on that, but it's given us cover from the spot market. So that's been a huge indirect benefit that we've noticed tangible advantages for Eagle. And we believe as we built this out, we are going to get to the point where we can actually start reporting results to you once we get out of the ramp-up phase.

Great. And then just in terms of Korea Lines itself, you've obviously taken those ships back from Korea Lines and are operating them yourself. What are the odds that Korea Lines actually comes back and takes those charters back in again? And I guess what I'm asking is how long do you expect to operate these vessels that were on, to Korea Lines on a short-term charter basis?

Okay. I'll answer this as best as I can with a huge caveat that I'm not an expert on Korean court proceedings.

But that being said, we announced a couple weeks ago -- first of all, we tried to be as transparent as possible because we believe that's the only way to be. So I believe this is our third communication in three weeks effectively on Korea Lines and we'll continue to keep the market updated. But basically, we, totally by coincidence, and we didn't know they were going to do this at the same day, we announced about two, three weeks ago that we thought and we expected that Korea Lines would be granted rehabilitation by the Korean court system at some point, and we thought it was going to be end February or maybe in March. Totally by coincidence, Korea Lines puts out a press release the same day we did when we said that that they had actually been granted rehabilitation several weeks early. Now, just the fact that it came earlier than expected, I think you can make an inference that there is a support structure within Korea for such an important public company within -- within the country. So we hope that they get through it.

We believe there have been indications to date that show the motions of a company that will get through it will happen. But, you know, they are still in process. So saying more than that would be tough now, Natasha. But I think things are looking positive.

Okay. Great. I totally understand. Thank you very much for your time.

You're welcome.

And our next question comes from the line of Doug Garber. Please proceed.

Good morning, guys. My first question is on -- did Korea Line, has that impacted your discussions with your banks at all?

No. In one sense -- there's a bit of an echo on the line with this call. But maybe you can turn off if there's another speaker in the room.

But basically, no, we're in compliance with our -- with all of our bank covenants. You know, the ships remained idle for a brief period until we struck a short-term deal with Korea Lines and then subsequently redeployed all the ships but that was a pretty short period of time. But we're in a very good position with our lenders, and I think the market, in general, is impressed with the outcome of us redeploying all the ships so quickly.

Yes. Thank you. And my next question is on the trade-in business. Is that business going to be solely focused on Supramaxes or would you expand into Panamaxes and larger vessels if the COA fit that better?

Well as the cargo books gross, we will have cargos from time to time that we will take advantage of different vessel sizes. So the guidance I'd like to give the market today is look to us to also charter in probably Panamaxes and go down to handy size. But I don't anticipate we'll be in the Cape size market.

In that business, do you have anything that's a longer term charter end to match a COA?What's the longest term charter in for that business currently?

Right now we're looking at doing these perfect matches to take ships in against the cargo so it's very well hedged. I would say the longest ones we've done have been Circle One here and they're kind of running off right now.

Okay. And --

I'm sorry. Let me interrupt. But most of them are matched up trip by trip or shorter durations. That's -- that's on the longer side of it.

Understood. And there must be some fuel risk in this new business. How are you managing that, fuel price risk?

Hedging the fuel.

So you guys -- are you taking on any risk or are you hedging all 100 percent of the fuel?

We're doing bunker hedging to neutralize the fuel risk when we're taking in COAs.

So there's really no exposure for rise in bunkering business for you guys in that business?

The hedges are not 100% perfect. In other words, you take -- you might take fuel, say, in West Africa but there's really no West African derivatives market for hedging fuel in a given port. So you'll do, say, a Singapore hedge for, you know, West African fuel stem. But it's pretty good.

And, you know, a lot of it is -- is not for -- it's not for a single trip. You're doing it on a longer COA. So it works out pretty well, we found, on longer term.

Great. Thank you. I'll turn it back.

Thanks, Doug.

And our next question comes from the line of Chris Wetherbee with Citigroup. Please proceed.

Good morning guys.

Good morning, Chris.

I just wanted to maybe get a little bit of clarity on the vessels you've taken back from KLC you mentioned in the call and on the press release about $15,000 per day the market for Supramax. I want it get a sense as we go back to the week following, the bottom of the market we were closer to $11,500or $12,000 a day. I want to make sure -- are you kind of implying that you're able to get chartered in the vessels or get business on the vessels in the neighborhood of $15,000 a day? How should we be thinking about.

Okay. The market -- I'll just recap for everyone just so we're talking about the same thing. So you're 100% right, Chris.

I think the index for Supramaxes as of close yesterday was $15,008 for the spot market. And the market when we were chartering the ships was significantly lower. The markets improved quite a bit in just a very short period of time. We effectively outperformed the market and through this -- what I -- to Natasha's question, the indirect but very tangible benefits of the Eagle Bulk PT division is we believe they beat the market and two, three weeks ago chartered at rates that are closer to the $15,000 mark than where the spot market was when they were doing the chartering.

Okay. That is helpful just to clarify.

And I guess you didn't provide the cash break even that I think previously in previous quarters you have going forward. Is there a number that you guys want to throw out there as what you think about for the first quarter? I guess is there a reason why you didn't have that in the slide deck unless I missed it.

We're going to give it out in Q1, Chris.

Okay. When you report Q1?

Yes.

Okay. All right. That's helpful.

And then just two quick modeling questions if I could.

I just wanted to get a sense on interest expense. You saw a nice sequential decline in your reported interest expense in the fourth quarter. I wanted to get a sense of what happened there. Did you have some hedges that were involved there that brought the effective interest rate down?I just want to understand that number better going forward a little bit better.

Basically the hedges we had were running off, so as of the year end we had around $750 million floating at quarterly LIBOR which is still around 31 basis points today. And some of the our more expensive hedges that were in the region of 4.2% in fact ran off.

Okay. And so should we see that number come down going forward in the first quarter? Should you have more rolling off as we move into 2011?

The hedge runoff, of course, it will be in the 10-K. And the next group of hedges run off in the fourth quarter of this year.

Okay. That's helpful. And then one final one.

When I think about D&A,I guess you also had it step down sequentially, I guess I'm trying to get a better understanding for you added I guess a vessel or so in the quarter. I just wanted to get a sense of what puts and takes in the fourth quarter relative to the third quarter as far as D&A was concerned.

Well, I think that the way we have explained it, I think for the better part of four quarters now is G&A usually runs -- the way we're running our business about six months ahead of company growth. In other words, it's wise to get people in the company working before the ships actually start coming into the company so they can effectively run them and that's why we had this very successful close to 100 percent utilization even though the company grew by 50%.

Okay.

So as we're getting really towards the tail end of our delivery program that's been two-plus years in the making, we -- the ramp-up in anticipation of the high fleet growth that we had last year has effectively tapered off and we're going to still have a 15% growth rate in the fleet but we don't feel we need to add any bodies. We're actually very comfortable with the size of the company from a G&A perspective even though we anticipate, you know, the company -- the company's fleet will grow by another 15%. So on a per vessel G&A, if you break it down per vessel you should actually see per vessel G&A go down.

Okay. I was actually asking about depreciation but G&A was my next question, so I appreciate the helpful answer there. But I guess for depreciation, just looking at that, that also took a step down, and I was trying to get my arms that, as well.

Nothing particular to report on it. The granular answer is the [NME] premiums that we paid when we bought the deal back in 2007 varies ship by ship, and depending on the delivery dates and the charters so that the amount attributable to each vessel varies, and the amount is slightly smaller for the vessels towards the back end of the program. But not a material amount.

Okay. All right. That was very helpful I appreciate the detail guys as always and I'll turn it back there.

The next question comes from the line of Fotis Giannakoulis with Morgan Stanley. Please proceed.

Good morning, Sopho. Good morning, Alan. I've mostly been covered by the previous questions, but I want to ask a little bit more of a details about the trading business. If you can give us some guidance about this quarter, how many vessels or how many days do you expect to increase your capacity because of the trading business?

Well, what we're going to do on a going forward basis, which I think will be very helpful for the market, is you'll see we'll report our vessel days. So, for example, we had in Q4 about 336 what we'll call -- we're going to call it chartered in under operating lease days. That's going to be a new line that everyone can look to to see what our trading platform is doing in terms of how many ships we're chartering in. So as I said we're in the ramp up stage. So look for that number.

If I'm going to give guidance to everyone, look for that number to grow in Q1 and maybe continue to grow in Q2. So effectively, in Q4, we had, say, roughly fourish total ships. They weren't all coming in the first day of the fourth quarter but roughly four ships of days we chartered in in Q4. Look for that number to be bigger in Q1 and probably bigger again in Q2 as we build out the chartered in fleet and as we build out our cargo book.

And may I ask given the current -- or the weakness of the previous weeks, it seems the Supramax market, although it's relatively better right now but in the beginning of the year, we saw some weakness. Shall we expect you took advantage of the opportunities to increase your chartered in portfolio and perhaps with some long term charters at low level?

Well, our focus more is on the cargo book. So we'll use chartered in vessels if we don't have our own vessels in position to cover the cargos. We don't want to as much -- we will do it a bit, but we don't view our core activity more as speculating on chartering in vessels because we already operate 40 vessels and we'll go up to 46 owned vessels. So the whole focus on the trading platform, because we own a lot of ships, is really to build cargos as a natural hedge for the own fleet and take in chartered in ships when we don't have our own ships in position for the cargos.

Okay. Understood.

And a little bit long shot of a question, but I see that the Korea Line has a pretty nice Supramax fleet that they -- it owns. Do you think that there are some chances of any acquisition opportunities there?

You know, out of respect for Korea Lines, I'd like to respectfully decline that question. I'm sure they're asked that a lot. We're obviously close to them, and we're looking to always help them in any way we can. And if that takes the shape of a vessel deal, we're happy to look at it.

Oh, of course. And if you can give us a lastly your view about the market, the next six to 12 months, and how do you see the time charter rates moving if you think they're going to stay stable or higher or lower? And what kind of a probability do you assign to these different scenarios?

Okay. I would say I'll answer that a little shorter. Because I want to try and be more right than wrong.

I think Q2 is going to be an improved quarter. We've already seen, as I said earlier, a 32% increase since the bottom in February 2007. A lot is seasonal. What we are seeing right now, we are seeing a precursor to Argentine grain season where ships are being redeployed from the Pacific into the Atlantic. That's started already. We have already started to see some Indonesian coal moving in bigger amounts. We're starting to see the drying out and operation of some of the Australian mines. So this is early days still. So I think Q2 should be pretty good.

Q3, Q4 is a little bit based on what happens in Q2 because it's a little bit of a domino effect. So if Q2 continues positive as we expect it will, there should be a follow-through. The other thing I would like to comment on is we've seen, you know, 40-plus percent slippage in the order book. I think it won't be until Q2 where we'll get a good sense on where supply is coming in for 2011. So I'm not ducking the -- answering the question, but I'm saying that Q2 -- all lies on Q2 because that will be an indicator of where the second half of the year will be.

Okay. Thank you, Soph. Thank you Alan.

Thank you, Fotis.

And our next question comes from the line of Justin Yagerman with Deutsche Bank. Please proceed.

Good morning. This is Josh Katzeff on for Justin.

Hi, Josh.

Hi. How are you?

Just a couple quick follow on questions. With regard to Korea Line, are you guys limited in how you're employing these vessels -- duration, location, or any of kind of thing?

I think because our situation is fluid with them, we're in ongoing talks with them currently. I think the best way to describe it is we've decided to go short because obviously if we come to terms with them next months, we're not going to be -- we don't want to have our ships locked away for two years because then we can't redeploy them into the charters. So I think the best guidance I can give everyone on the call is expect for us to keep those on spot for short term employment.

But that's not such a bad thing because the market is now trending up nicely. In fact, Capes, Panamaxes, Supramaxes, and Handies, have had two days in a row up, both days back to back which is something we haven't seen in a while on the index.

Thanks. That's helpful. I guess just two quick more kind of general market questions.

With regard to the age pool profile of the fleet is, it's definitely shifted towards the older vessels with the kind of sub-Panamax class range. At current rates is it economical to kind of go for your fourth or fifth dry docking at the $15,000 to $20,000 a day rate?So are owners scrapping tonnage when it's coming to the fourth or fifth dry docking or is it still profitable for them to operate?

If we're talking about older ships-- which we obviously are --it's really a bifurcated market. So much like in the tanker market you used to have a single whole market and double whole market and the rates are very different from one to the other. You get a similar type of dynamic in dry bulk. In other words, the $15,000 spot market that the BSI quotes for Supramaxes is for a 5-year-old-type Supramax. Remember Supramaxes have only about been around for about 11 years. So it's a misnomer to say 25-year-old Supramax because they didn't exist back then.

But I would just say if we're talking about a Handymax that's 25 years old, they've probably earning anywhere from $5,000 to $10,000, maybe $11,000 in the market. So if they're looking to pass a fifth special survey and it costs $1 million plus a day that's a pretty tough pill for an owner to swallow in this market. I would think most owners would opt to scrap especially with scrap rates of $500 a day.

Great. That's helpful.

I didn't realize there was such a large disparity between older and newer tonnage. Is that the same on the handy size, as well?

Maybe a little less but definitely is. Remember, if you're -- if your cargo or -- any charter and you have an option of chartering a 5-year-old or 25-year-old and your cargo is worth millions and millions of dollars and the differential of rate is $2,000 or $3,000 for a 30, 60 day trip, you as a trader of your commodity are going to rather pay a little bit more and be on a ship that's 20 years younger because don't forget when you're moving cargo, every break point over 10 or 15 years means you're paying a higher insurance premium on your cargo, which offsets the differential and the rate. So it's not really as economic to -- to find a cheaper older ship. It's much safer to stay with the young ones especially in a market like we have today.

Should we be expecting I guess continued Handymax sales from I guess you have two more Handymax ships --should we be expecting sales as kind of early 2011 or is this something -- are these ships you might be able to hold on to?

Well, even our oldest ship today which is a '97 built is in good survey position physically. And she has another, you know, 15 years of life left. So she's young by most other people's standards even though she's our oldest ship. So operationally and commercially, it's still a very viable unit.

I think our position has always been opportunistic. We sold the Griffin at $21 million. We made a bit of a profit. We were able to make our fleet more homogenous. As I said for a year plus now, over the long term we would like investors to think of us eventually of being a Supramax company. We have two more Handymaxes. At some point we'll look to sell those.

One last question.

There's definitely been a clear shift towards the minor bulk cargos you've seen and I understand there's been minor bulk growth year over year. But is most of the reason for the shift -- is it just more increased competition for major bulks maybe more Panamaxes carrying Supramaxes cargos just because of the weakness in the Panamax market and maybe Cape market, or is this really just kind of more growth from the minor bulks?

It's the latter. You're seeing more growth in minor bulks because there's pretty big barriers of entry for Panamaxes approaching Supramax -- that's why Supramax is at or above Panamax rates today.

I think what's interesting is historically, minor bulks grow in single digit annual growth rates and we've seen a real explosion in growth of minor bulks which as we know Supramax is a prime beneficiary of that. I think that also explains why there's been the relative outperformance of the Supramax asset class in the last say six months and we look for it to continue.

Thank you.

And our next question comes from the line of Urs Dur with Lazard Capital Markets. Please proceed.

Hi, guys.

Good morning, Urs.

I'm getting questions, and I pretty much feel I have the answer, but people talk about liquidity and where the rates are and you still have, I believe it's correct $170 million of CapEx, you know, in total this year. You know, you don't have any more room as far as I know under the credit facility. It doesn't look like it's a real problem cash flow wise unless rates really collapse from here. What's your view on the remaining CapEx? You feel fully covered, correct?

Yes. I think as Alan said, you know, unless the world falls off a cliff again, you know, it's pretty easy to model that -- the free cash flow from now what's a 40 strong ship fleet and growing even in this market environment which is improved we're fine on our CapEx.

Yes. That's good. I just wanted to hear it one more time.

And then on interest hedging, Alan, I was in and out. There are a lot of things going on. You mentioned a lot of the interest hedges had run off. We might be coming into a higher interest rate regime globally as we move forward in the next couple of years. What are you going to do, are you going to put new hedges on or are you just going to let it ride for a while?

No. At some point, Urs, we will look to it put hedges back in.

That's good. That's pretty much what we assumed. I just wanted to again hear it.

And let's see. You broke down that break even interest hedging, CapEx. Oh, debt repayment, you have no current at this point in time. Can you just remind everyone where you stand with debt repayment coming forward?

The first reduction in the size of the facility is July 2012.

Great. And how big is that reduction?

Roughly $56-odd million.

Perfect. Thanks for your time, guys.

Thanks Urs.

The next question comes from the line of Sal Vitale with Sterne Agee. Please proceed.

Good morning gentlemen, thanks for taking my call.

Good morning, Sal.

I got on the call a little late, so I apologize if some of the questions I'm going to be asking are a little redundant. But just one question I have is a little bit of clarification.

The $8.3 million, that is the amount that you are owed by KLC and of which $2.5 million was due prior to filing for rehabilitation. So does that mean that the difference, the $5.8 million, $8.3 million minus $2.5 million, does that represent the amount of the revenue that -- that's due to you from the point that they filed to the point that you rechartered out at, say, that $50,000 a day rate.

That's correct. It's also net of what we generated in rechartering revenues.

Okay. So that's net of what you generated. Okay. So that means -- okay.

So that -- if I think of the -- I guess worse case scenario, the total damage say in 2011 from the KLC situation, I guess it would be the $5.8 million, and then just let's just for argument's sake assume a $15,000 Supramax rate for the rest of the year and let's assume that the KLC situation does not get resolved or it gets resolved in a manner in which you take the vessels back and you employ them on the spot market. Is it the right way to think about it that the, you know, impact is basically that $18,000 -- roughly $18,000 a day rate you would have gotten had nothing occurred from KLC, minus the $15,000 a day rate the assumed spot rate for the rest of the year. So that's about $3,000 multiplied by, what is it, 13 ships? And then is that pretty much the revenue impact, the way to think about it?

I would say you could -- as a snapshot in time now look at it that way. But the situation with Korea Lines is still unfolding globally. So I would say why don't you wait and stay tuned. That's probably more appropriate.

Is there a -- so in the event that -- is there a possibility that the situation could be resolved that you take back the ships and you just employ them on the spot market until you find charters? is that a possibility?

Yes. Anything's possible. A final deal has not been struck yet.

Okay. Another possibility is that, you know, a deal is struck in which you actually go back to receiving the $18,000 a day, is that also possible? Or is it that you think it will be at least some haircut to that happen 18,000?

I would say it's dangerous to speculate. And I'm not not answering your question, but I'm cautioning you to not put assumptions in your model that not might bear to be accurate.

Okay. That's fair enough.

Things are happening that we cannot foresee, so we can only give you color on what our best guess is. And I think it's more prudent of us to give you guidance on what we know and not on what we don't know.

Okay. That's fair enough.

And then if I could just ask and again you may have touched on some of these items earlier, but just looking at the P&L items like, for example, the revenue was significantly more than I expected, and I'm just wondering is part of that related to the new venture? Because the charter hire expense of $7.1 million. Is that -- is it kind of like an offset to this? How do I think about that?

Yes, yes. That's the trading. I mean as we take in more and more business on the trading side, you're going to see the growth you just pointed to.

Okay. So how do I think about modeling that $7.1 million going forward. I assume it's not going to be static at this point, right?

I think at this point what you have to do is as was asked earlier in terms of ships we're taking in and cargos we're taking in, we've added that new line for you, you know, which is the chartered in line so you can calculate how many days we're going to be growing the call it the trading activities of the group.

Right.

And I've also given guidance to everyone on the call today. I don't know if you were on for that part, Sal, where I said the guidance for Q1 is that the number will be bigger than in Q4.

I actually wasn't. That's helpful.

Okay. But beyond that in terms of target numbers, we don't give -- we don't give that out.

Okay.

I can't tell you it's going to be double Q4 or triple or half. We're just indicating to the market today that we're pointing people to this new line that we've added in our financial report so you can calculate it, and we're also indicating that the number will be bigger in Q1 than in Q4.

Okay. And then on that -- on the revenue impact of the new business venture, is that something that I can deduce, you know, how much of the 70.1 is from the new venture or is that something you don't provide?

That's tough.

That's a little bit of a reach.

Okay. Thank you for your time.

Yes. Thank you.

Ladies and gentlemen, there being no further questions in the queue, this does conclude our question and answer session for today. I would now like to turn the call back over to Mr. Sophocles Zoullas for closing remarks.

Thanks. I'd like to thank everyone for taking the time to join us today to review our Q4 and 2010 full year results and we will continue to keep the market updated as and when appropriate. Thank you very much, everyone.

Ladies and gentlemen, we thank you for your participation in today's conference. This concludes the presentation, and you may now disconnect. Have a good day.