Euroseas Ltd (ESEA) 2023 Q2 法說會逐字稿

Thank you for standing by, ladies and gentlemen, and welcome to the Euroseas Conference Call on the Second Quarter 2023 financial results. We have with us, Mr. Aristides Chairman and Chief Executive Officer; and Mr. Tasos Aslidis, Chief Financial Officer of the company. (Operator Instructions) I must advise you that this conference is being recorded today.

Please be reminded that the company announced their results with a press release that has been publicly distributed. Before passing the floor to Mr. Pittas, I would like to remind everyone that in today's presentation and conference call, RSCs will be making forward-looking statements. These statements are within the meaning of the federal securities laws.

Matters discussed may be forward-looking statements, which are based on current management expectations that involve risks and uncertainties that may result in such expectations not being realized. I kindly draw your attention to Slide #2 of the webcast presentation, which has the full forward-looking statement, and the same statement was also included in the press release. Please take a moment to go through the whole statement and read it.

And now I would like to pass the floor to Mr. Pittas. Please go ahead, sir.

Good morning, ladies and gentlemen, and thank you all for joining us today for our scheduled conference call. Together with me is Tasos Aslidis, our Financial Officer. The purpose of today's call is to discuss our financial results for the 6-month period and costs that ended June 30, 2023.

Let’s turn to Slide 3 of the presentation to go over our income statement highlights. We are very pleased with our results for the second quarter of 2023, which are one of the best results we have ever had since Euroseas became a containership focused public company in 2018. For the second quarter of 2023, we reported total net revenues of $47.7 million and the net income of $28.9 million or $4.15 per diluted share. Adjusted net income was $29 million or $4.17 per diluted share. Adjusted EBITDA for the quarter was $30.6 million. We refer to the press release for a reconciliation between adjusted net loss and adjusted EBITDA.

As part of the company's common stock dividend plan, our Board of Directors declared a contrary dividend of $0.50 per common share for the second quarter of 2023, which will be payable on or about September '16 to the shareholders of record on September 9, 2023. The annualized dividend yield based on current share price is about 9%. This is the sixth consecutive quarter of the company paying meaningful dividends. We remain committed to continue paying significant dividends to our shareholders.

The original share repurchase program of $20 million approved by the Board in May 2022 has been extended for another year. As of August 9, we (inaudible) repurchased 396,000 of our common stock in the open market for a total of about $8.1 million. This represents close to 6% of our total sales.

Tasos will go over the financial highlights in more detail later on in the presentation. I'm also pleased to announce our final sustainability report, which covers our 2022 environmental, social and governance progress in achieving our sustainability goal, our commitment to responsible business practices and the social footprint.

[Now] in this new -- in this year's report is our materiality metrics, which includes input from all our stakeholders. The report is based as usual on the Sustainability Accounting Standards Board standards SASB but additional criteria have been considered, such as the Global Reporting Initiative, GRI and the NASDAQ ESG reporting guidelines plus the United Nations Sustainable Development. The ESG report is available under the Corporate Sustainability section of the company's website.

Please turn to Slide 4, where we discuss our recent acquisitions, chartering and operational developments. As previously announced on July 6, 2023, the company took delivery of its second newbuilding vessel Motor vessel Terataki an eco 2,800 TEU feeder containership from Hyundai Mipo Dockyard in South Korea. The vessel is EDI Phase III compliance and equipped with a Tier 3 engine and other sustainability-linked features, including installation of AMP, alternative maritime power.

The acquisition was financed with a combination of own funds and the sustainability-linked loan provided by the National Bank of Greece. Following its delivery, Motor vessel Terataki commenced the 36 to 40 months charter with the Asyad Lines at a gross rate of $48,000 per day.

Continuing on the chart front, the contract for [motor vessel Juan] was extended for a period 6 to 8 months on a daily rate of $13,900 per day. We also reached the mutual agreement with Zen to terminate the current charters for motor vessel Renay and (inaudible) while concurrently fixing the vessels on new charters for a period of 20 to 24 months at $21,000 per vessel per day. These new charters are expected to contribute $2 million to $4 million in extra revenues over the same period. During the second quarter of 2023, there were no dry docks or vessels of hire.

Please turn to Slide 5, where you can see our current fleet profile. $oseas’ current fleet is comprised of 19 vessels on the water, which includes 12 feet container ships and 7 intermediate container carriers with a total carrying capacity of about 59,000 TEU and an over range of just below 16 years.

Turning to Slide 6, we show our vessels under construction, which currently consists of 7 they were 9% up to very recently of new Eco-Fit containerships. The 7 newbuilding are expected to be delivered in 2024 and have a total carrying capacity of 16,000 (inaudible) TEU, 4, with a carrying capacity of 2,800 TEUs; and three, with a carrying capacity of 1,800 TEU each. After the delivery of the 7-feeder container ship newbuilding in 2024, Euroseas fleet will consist of 26 vessels and the total carrying capacity in excess of 75,000 TEU.

Let's now turn to Slide 7 for a graphic view of our vessel employment schedule. As you may see, with a very strong charter coverage throughout the next 2 years, with about 93% of our fleet being fixed for 2023 and only 64% for 2024. This very high charter coverage at quite profitable rates for the remainder of the year, but also for 2024 suggest that we should continue registering highly profitable quarters regardless of charter rate development.

Let's now turn to Slide 9 to review how the 6- to 12-month time charter rate has developed over the last 10 years. 1-year time charter rates were up during the first half of the second quarter, we have declined again by about 15% compared to the highs in May and about 75% lower than the levels a year ago. However, we are still significantly higher than the pre-pandemic levels. As of August 1, the 6- to 12-month time charter rate for the 2,500 TEU containership stood at $14,750 per day, which is higher than the 10-year median rate of $9,250 per day but lower than the 10-year average rate of around $18,000 per day.

Comparatively, the rate for the 4,400 TEU containers stood at $2,000 per day, which is much higher than the 10-year median rate of $10,750 per day, but still lower than the 10-year average rate of around 25%, which, of course, does influence (inaudible) high rates that we had in 2021 and 2022.

Moving on to Slide 10, we go over some further market highlights. During the second quarter of 2023, 1-year time charter rate as previously said, slightly improved, but sales have markedly decreased by about 15%. The average rate during the second quarter of 2023 was up by 19% compared to the previous quarter, as shown in the table. By and large, there was a resilience in the market during the second quarter and even some upward momentum in the first half of the quarter. In view of this, the rates across the size sectors have experienced some support amid an apparent uptick in line with done demand in tandem with the short-term lack of charter vessel availability, only lately are we seeing further [proration].

The average second half the price index increased by about 1% quarter-on-quarter, but has come down a bit since then, in line with the charter market decline. Second-hand prices remained high nevertheless. The newbuilding price index increased by about 3% in the second quarter compared to the previous quarter. Newbuilding prices generally remained high amid cost inflation and the extended and forward cover.

The idle container fleet as of July '17 stood at about 1.1% of the fleet. The idle fleet peaked in February 2023 at 0.8 million TEU, which has been trending downward ever since. Recycling activity edged higher during the second quarter with 39 vessels accounting for 74,000 TEUs having been scrapped. The volition remains fairly subdued amid some short-term improvements in freight and charter markets, which meant that some vessels circulated from (inaudible) were instead sold for further trading.

Recycling is anticipated to continue for the remainder of 2023 and 2024. Capping prices [system] have also incrementally softened during the second quarter to about $560 per (inaudible) tone, which still is about 40% above the 2019 average. Overall, the containership fleet has grown by approximately 4.2% year-to-date without accounting for idle vessels reactivation.

Please turn to Slide 11. With its latest update in July 2023, the IMS latest forecast is modestly higher than its previous prior predictions in April 2023. However, still weaker by historical standards. Global growth is projected to fall from an estimated 3.5% in 2022 to 3% in both '23 and '24 from previous predictions of 2.8% to 2023 and 3% in 2024.

Mark slowdown in global activities, therefore, anticipated in the second half of '23 and first half of 2024. With a look for the gradual stabilization in the second half of 2024, the latter supported by rate cuts in many areas around the world and the expectation that inflation will continue to fall.

China’s reopening appears to be an even and volatile, even stalled some might say, renewed softness in the housing market, growing concerns of local government financial risks and an uncertain external environment for the export sector weigh on the economy's near-term growth plan. China's growth forecast of 5.2% in 2023 and 4.5% in 2024 remains unchanged, while growth in other emerging and developing countries is projected to defy the overall global economic slowdown. There is strong demand from India, which delivered the biggest upside surprise so far this year with its high GDP growth in Q1 that existed expectations. This was driven by strong government CapEx and services exports.

Despite the general global slowdown, the U.S. economy is forecast to moderately grow by 1.8%, which compared to the previous IMF growth forecast of 1.6%, serious to suggest that the U.S. can potentially avoid recession concerns in the second half of 2023. However, the IMF seems to have lowered a little bit its growth projections for the U.S. in 2024 to just 1% on the previous 1.1% growth forecast.

On the other side of the world, literally, the Russian economy is faring better than expected with a revised estimate of 1.5% growth for 2023, up from 0.7% in the previous quarter. Despite the effect of the sanctions with Western financial markets and many export markets for us and companies and commodities close.

According to the latest Clarksons estimate container trade will continue to experience subdued demand for the remainder of the year due to the challenging market conditions with trade growth expected at just 1%. For 2024, demand is expected to return to positive trade growth level of about 3.4%.

Please turn to Slide 12, where you can see the total fleet age profile and containership orderbook. The containership fleet is relatively young with most vessels under 15 years old and only 10% of the fleet over 20 years old. The largest percentage of which lies within feeder vessels, suggesting high potential reciting for this type of ships. This is a size in which we mostly operate. The orderbook as a percentage of total fleet stands at 28.3% is August 2023.

Clarkson expects new deliveries of about 9.4% of the current fleet to be delivered within this year, 10.6% next year and 6.4% in 2025 with the majority of the delivery scheduled to start from the second half of 2023 through the first half of 2025.

Turning on to Slide 13. We also go over the fleet age profile and order book for ships in the 1,000 to 3,000 TEU range as these sizes are the backbone of our operations and the primary focus of our newbuilding program. The order book here stands at just 11% as of August 2023. According to Clarksons, new deliveries within this year are estimated at 9.4%, 5.6% in 2024 and 1.2% in 2025. Additionally, 50% of the fleet as the fleet is over 15 years old. Clearly, the dynamics are very favorable for this sector of the market as we can expect a decline in the size of the fleet in the next few years.

Let's move to Slide 14, where we discuss our outlook summary for the containership market. Daily higher rates for all size vessels have declined since last year's highs, following the pronounced correction in the second half of 2022. There are a number of signs that the previously sealed container ship charter market is now being affected by the decrease in demand for in (inaudible).

Additionally, there has been a noticeable accumulation of available tonnage in smaller decides, leading to a larger decline in charter rates for these vessels. One the container rate index initially rebounded in April 2023. Recently, freight rates softened again and further declines are anticipated as record deliveries continue to be incorporated by the market participants. Presently, the index sits at the level that is 80% lower than its peak in January 2022, returning to the recovered 10-year average.

Container volumes fell by 2% year-on-year, but still remain at above pre-pandemic levels. For the remainder of 2023, there are still considerable challenges ahead. General downward pressure is expected to emerge as supply growth accelerates and an increasing number of charter vessels are delivered. On the other hand, however, fleet growth could be somewhat mitigated by environmental regulations that will force some vessels to either reduce their speeds or stop trading, but it remains to be seen how economic developments will develop, especially starting from 2024. This, we believe, will essentially determine future shipping volumes and overall demand and thus the evolution of charter rates.

The energy transition continues to gain traction and will play an important role in the evolution of the vessels of the future, but also on the trading patterns within the industry. While it's evident that the shift is taking place, the long-term outlook is intact and uncertain. The direction, speed and metrics of the transition are yet to be fully determined. One thing though that is becoming obvious is that the spread between charter rates achieved by ECO vessels over conventional ones is expected to further increase.

Also, the smaller-sized vessels from 1,000 to 6,000 TEU are expected to recover faster from any downturn due to the healthier supply situation. As we said, many overage ships that will be scrapped and lower order book. Without doubt, though, scaling of larger vessels trades currently served by this size group fleet could mitigate it to an extent any differences.

Let's move to Slide 15. The left chart shows the evolution of 1-year time charter rate to containers with a capacity of 2,500 TEU since 2010. 1 year time charter rates are far below the early 2022 peak, that are above historical levels. As previously mentioned, the current 1-year time charter stands at $14,750 per day, which is a much higher and profitable level than the historical medium. At the same time, the right-hand chart shows the historical range for newbuilding and 10-year-old container ships with a capacity of 2,500 TEU.

As charter rates across the container market have remained relatively buoyant in the past several months. Values in the secondhand market have been equally resilient and stubbornly high. We believe that we are well protected against market volatility with a high contracted revenue coverage throughout 2023 and 2024 at very healthy rates. Our liquidity buildup will allow us to comfortably take delivery of the remaining 7 newbuilding vessels, whilst keeping leverage low at around 60%. It will also allow us to continue paying a significant dividend and executing on our stock repurchase program as our price continues to hover at levels below 50% of NAV. At the same time, we will continue to evaluate investment opportunities with low risk that will incrementally increase our revenues and growth potential.

And with that, I will pass the floor to our CFO, Tasos Aslidis, to go over our financial highlights in further detail.

Thank you very much, Aristides. Good morning from me as well, ladies and gentlemen. Over the next 4 slides, I will give you an overview of our financial highlights for the second quarter and first half of 2023 and compare them to the same periods of last year.

For that, let's turn to Slide 17. For the second quarter of 2023, the company reported total net revenues of $47.7 million, representing a 1.6% decrease over total net revenues of $48.5 million during the second quarter of last year, and that decrease was the result of the lower fund charter rates our vessels churn in the second quarter of 2023 as compared to the same period of last year, partly offset by the case in the average number of vessels we own and operated in the second quarter of this year.

The company reported a net income for the period of $28.9 million as compared to net income of $30.7 million for the same period of 2022. In terms and other financing costs for the second quarter of 2023 amounted to $1.2 million, which is the result of $2.4 million of interest and finance costs paid for our loans, partly offset by $1.2 million of imputed interest income as we self-financed the construction of our newbuilding before the deliver compared to $1.1 million for the same period of last year, during which we had not included interesting.

This in case of the interest paid for our loans is due to the increased amount of debt that we can and the increase in the weight [paver] of LIBOR and soft rates that we paid in the current period as compared to the same period of last year. Additionally, it should be noted that in the second quarter of 2023, we had interest income to about $265,000 compared to almost 0 interest during the same period of 2022.

Adjusted EBITDA for the second quarter of 2023 was $30.6 million compared to $34.2 million achieved during the same period in the second quarter of 2020. Basic and diluted earnings per share for the second quarter of this year was $4.17 and $4.15, respectively, calculated on about 6.9 million basic and about 7 million diluted weighted average number of shares outstanding compared to basic and diluted earnings per share of $4.26 and $4.24 for last year, respectively.

Excluding the effect on the income of the unrealized loan derivatives, the amortization of below market time charters acquired and the vessel depreciation on the portion of the consideration of vessels acquired with below-market charters allocated to the below market charters. The adapted earnings for the second quarter of 2023, which will be $4.19 per share basic and $4.17 diluted compared to adjusted earnings of $4.10 and $4.08 a basically diluted, respectively, for the same quarter of last year, making for a quarter similar adjustments. Usually, security analysts do not include the above items in their published estimates of earnings per share. That's why we're making these adjustments.

Let's now look at the numbers for the corresponding 6-month period ended June 30, 2023, in this year and compared to last year. For the first half of this year, the company reported total net revenues of $89.6 million, representing a 4.5% decrease over total net revenues of $ 93.9 million during the same period of 2022. The company reported a net income for the period of $57.6 million as compared to a net income of $60.7 million for the first half of last year.

(inaudible) and other financing costs for the first half of 2023 amounted to $2.1 million, which is the result of $4.4 million of indirect finance costs paid for our loans outstanding, also by $2.3 million of imputed interest income, as I mentioned, as we sat financed the construction of our newbuilding before they deliver compared to $2.1 million interest financing cost paid during the same period of last year, during which, again, we did not have any included interest income.

Again, this year, over the 6-month period, we had an interest income of about $500,000 compared to almost 0 interest during the same period of last year. Adjusted EBITDA for the first half of 2023 was $56.6 million compared to $65.3 million achieved during the first half of last year. Basic and diluted earnings per share for the first half of 2023 was $8.28 and $8.25, respectively, calculated on about 7 million weighted average number of social spending and that compares to basic diluted earnings per share of $8.4 and $8.36, respectively, for the same period of last year.

Making similar adjustments to our net income for the first half, as I described earlier that we did for the second quarter. The adjusted earnings per share for the 6-month period ended June 30, 2023, would have been $7.29 and $0.26 basic and diluted, respectively, compared to adjusted earnings of $7.81 basic and $7.77 diluted for the same period in the first half of 2022.

Let's now move to Slide 18 to review our fleet performance. We'll start our review by looking at our fleet utilization rates for the second quarter of 2023 and 2022. As usual, our fleet utilization rate is blocking down into commercial and operational components. During the second quarter of 2023, our commercial utilization rate was 100%, while our utilization rate, our operational utilization rate was 99.8% compared to 100% commercial and 99.7% operational for the second quarter of last year.

On average, 17.95 vessels were owned and operated during the second quarter of this year, adding another expand charter equivalent rate of $3,300 per day compared to 16.06 vessels that we only operated in the second quarter of last year, earnings on average $33,714 per vessel per day. Our vessel daily operating expenses, including management fees, other 7,114 per vessel per day for the second quarter of this year compared to $7,800 per vessel per day during the same period of 2022.

G&A expenses amounted to $715 and $652 per vessel per day, respectively, for the 2 periods. If we move further down on this table, we can see the cash flow breakeven rate for the second quarter of this year, which also takes into account targeting expenses, interest costs and loan repayments. Thus, for the second quarter of 2023, our cash flow breakeven rate was $13.37 per vessel per day compared to 3,562 per vessel per day during the second quarter of 2022.

Finally, in the last line of the table, you can see the common dividend paid expressed in dollars per day per vessel. In the second quarter of 2023, we paid the equivalent of $2,217 per vessel per day dividends compared to $2,414 for the same period of last year.

Let us now go over the same figures for the 6-month period of 2023 and compare them to the same month or the same period of. During the first half of 2023, our commercial utilization rate was 99.1% in our operational 98.7% compared to 99.8% commercial and 99.6% operational for the same period of last year. On average, we own and operated 17.52 vessels during the first half of this year, ending an over and charter equivalent of $29,705 per day, while for the same period of 2022, the company owned and operated in (inaudible) vessels, aiming an average of $33,843 per day.

Our vessel operating expenses, again, including management fees, were $7,215 per vessel per day in the first half of this year compared to $6,867 per vessel per day for the same period of last year. G&A expenses for the 2 periods amounted to $7,027 and $6,067, respectively. Again, looking at the bottom of this table, we can see the cash flow relative rate for the first half of 2023. We expect to open as I mentioned doing interest costs and loan repayments and that average $13,993 per vessel per day in the first half of this year, and that compares to $13,805 per bester day for the same period of last year.

The final line, we saw the dividend base expressing dollars per day during the first half of this year, that amount was $2,194 per vessel per day, and that compares to $1,207 per last year, the difference being due to the fact that we started paying dividends in the second quarter of last year.

Let’s move on and go to Slide 19 to review our debt profile and our forward cash flow breakeven levels. Our total debt as of June 5, 2023, stood at about $ 132.8 million. On the top of the slide, you can see a snapshot of our current debt repayment profile over the last several years. We have already made $ 27.5 million of loan repayments in 2023. And in the remaining part of the year, we have to make another $14.8 million of loan dependents as well as we are due to pay by loans amounting to $ 27 million. The latter, we are in the cost of refinance.

For 2024 and 2025, our loan repayments drop to about $ 31 million and $ 35 million, respectively, including value payments, which we should be able to refinance if we choose to do so. The average margin of our current (inaudible) stands at about 2.54% and assuming a soft rate of about [$5 and 36%], our senior -- our cost of our senior debt amounts to about 7.9%. That figure would love to ship to 7.6% if we account for the portion of our debt for which the underlying software rate has been kept. I should say that we plan to partly finance our remaining newbuildings with debt as over 2024, I would expect us to assume an additional about $ 165 million of debt to cover about 60% of the price of the newbuild investments.

I would like to draw your attention to the bottom of the slide now, where we present the level and components of our expected cash breakeven level for the next 12 months. We expect to have over the next 12 months an EBITDA breakeven level of about $8,851 per vessel per day. And in total, including interest and loan and payments and total cash flow breakeven level of about $14,682 per vessel per day.

Let's sum up our presentation by moving to Slide 20 to present some highlights from our balance As of June 30, 2020, our assets included cash and other current assets amounting to about $ 51.2 million. We also -- our assets included advances that we paid for our newbuilding programs, spending at about $ 93.8 million. And finally, that includes the book value of our vessels, which was $224.3 million, resulting in a total book value from our assets of around $394.1 million.

On the liability side, our debt as of June 30, 2023, as [Aristides] mentioned, $ 232.8 million, representing about 33.7% of the book value of our assets. The fair value of our below-market charters acquired is about $27.3 million, accounting for another about 7% of our assets and other liabilities of about $ 10 million account for another 25% of the total book value for our assets. However, it should be noted here that the charter adjusted market value of our fleet is much higher than its book value. Based on our own analysis and using market transactions, charter adapted value for our fleet and newbuilding contracts, we estimate the value of our fleet chartered again to be approximately $369.6 million, which translates to a net asset value for our company is about $ 372 million or about $53 per share. Recently, our search have been trading around $21 per share, thus having a GAP volume net asset value and that gap representing a good appreciation potential for our shareholders and investors.

With that, I would like to turn the floor back to Aristides to continue the call.

Thank you, Tasos. Let me open up the floor for any questions we may have.

(Operator Instructions) Our first question is from Tate Sullivan with Maxim Group.

On Slide 13, you showed a little more than 9% fleet growth this year for TEU vessels less than 3,000. Is that indicating what you indicate year-to-date that roughly half of the vessels have entered what so far this year with another half – and the other approximate numbers of the new ships entering the fleet this year?

Yes, half of the vessels that were supposed to a little bit less than half than the vessels that were supposed to enter the fleet this year have actually entered already, yes.

And then what have you observed in terms part in (inaudible).

Sorry, I didn't get you.

What have you observed in terms of chartering activity for those newbuilds entering the market in terms of securing contracts and the length of time securing contracts that had a delivery?

There were quite a few ships that were quite large that had already secured employment, even smaller ships had already secured employment. For example, (inaudible) that was delivered in July. We have secured the employment since last year, and it was obviously at very high rates, a similar vessel that opened up that was delivered to somebody else and was not chartered was able to be fixed at around $25,000 per day for the year. So the ships that are being delivered are being fixed today, but slightly but at lower rates than what was achievable last year.

And I think for the previous announcement, you announced that July 25 were the new contracts for the (inaudible) P and the Manolis P. And I think you mentioned that was with ZIM. Can you mention a part of how the negotiations went for that? I mean when I first went the headline, I was expecting lower contracts for yourself, but you did extend on for longer terms at higher rates than the previous contract. So can you give more of the situation behind those contract negotiations if you can?

Sure. I have to be very clear to you so that we don't give any wrong impression. We have no obligation to cancel the charters that we had with ZIM. There was no such request. We were told that if we wanted the vessels free, we could take them and charter them elsewhere. We looked in the market. We saw that we can get something a little bit better than what -- and for longer than what we had in our ZIM charters. And very amicably, we agreed with ZIM that we would cancel the charter with them, and we would fix with OCL at what we did. So everything was done very amicably and without any distress.

Do you think that kind of example will occur in the containership market for the rest of the year? I mean, is there out continue to be counterparty risk with longer-term contracts? And how do you manage that still?

I think that the main counterparties are all very credible operators of ships. So they will stick to the charters and will perform. I don't expect us to see non performances. Everything that will be done if there is some rearrangement because some lines want to reduce -- to reduce or others want to increase the number of ships on the charter. Everything will be done amicably and commercially and without dispute.

Next question is come from the line of Christopher [Cook] with Arctic Securities.

Congrats on a great quarter. I was just following if you can share some details on how you are progressing on the 7 new builds, both in terms of employment, but also on the financing side, I mean, how much is now remaining CapEx? And how much do you expect to fund through senior debt?

On the employment side, we haven't raised anything yet. We are in contact with various charters. But I think it's too early to fix the ships yet. So we will see closer to the delivery date, how we fix them. On the financial side, Tasos can brief a little bit more. We have a range or pretty close to a range in the financing of the first ship that we -- yet on the first ship that will be delivered in 2024. And in discussions with other financers regarding the rest. I feel very comfortable about it. But Tasos, your figures. Please, we had about $ 280 million of vessel payments to make. The value of the vessels that were to deliver about $ 290 million, which have made about $ 60 million of advanced payments against that through equity. We have the equity already built in our numbers that we'll be able to cover with our own cash flow generation. As I mentioned earlier, we expect to assume incremental debt of around $165 million, give or take, to finance the vessels. So $165 million about $60 million we made, and we're going to put another $60 million of equity to cover -- another $40 million of equity to cover the payments.

(inaudible) $165 and then remaining $40 cash on hand?

That’s correct.

And with that, I mean it's quite a comfortable cash level and you will definitely build a lot of cash over the coming quarters. You mentioned in your presentation and results that you -- that you are building a significant war chest in order to pursue investment opportunities. So I was just wondering, can you elaborate a bit what you mean about that? And are you starting to see any opportunities out there in the market on secondhand transactions that might be -- might be interesting?

Sure. As I said in the presentation, our cash flow buildup is sufficient to easily finance the new building program that we have. It is sufficient for us to continue paying dividends in the foreseeable future that are significant, that are close to the 10% yield and, of course, to continue acting on our stock repurchase plan. But in addition to all that, the liquidity we are building, and we currently have, I think, about $50 million is sufficient to also look at potentially new potential new acquisitions. At this stage, we would not buy something speculatively, we would only invest if we can find a deal that is backed by a charter that will bring the residual value of the vessel at the end of the charter at extremely low levels. So that is the strategy, and we feel comfortable about its implementation.

Our next question is from the line of Climent Molins with Vale Investors Edge.

I wanted to start by asking about the ADN Express. Could you provide an update on how the arbitration against the previous charter is going?

Yes. As we said in our previous call in the previous quarter, we have assumed that we will recover nothing from that arbitration. And unfortunately, it probably seems that we are moving along that line right now. The charter has disappeared. He is -- we think he has -- is winding down the business. We can't find him that we can't locate the assets, but we continue trying to do that. So hopefully, we will find something. But as we said, our projections suggest that this will be a loss that we will -- that we have incurred already. So if there is any surprise, it will be -- it can only be a positive surprise because we've planned for the world.

You've pursued a very balanced approach to capital allocation by ordering new build distributing dividends and repurchasing shares. Despite that, the market is still valuing the company at a significant discount to NAV. So share repurchases continue to make a lot of sense. Our tender offers something the Board has or would consider? Or do you prefer to stick with share repurchase in the open market?

I think that a purchasing in the open market is the way that we want to continue. It is (inaudible) usually has to be made at a higher price. And we think that by implementing gradually the strategy with the stock repurchases, we are doing it more economically.

Congratulations for the quarter.

At this time, we have reached the end of our question-and-answer session. I'll turn the call over to Aristides Pittas for closing remarks.

Thank you all for participating in this call, and we will be back with you in 3 months' time, hopefully, with a -- good results again.

This will conclude today's conference. You may disconnect your lines at this time. Thank you for your participation.