Global Ship Lease Inc (GSL) 2009 Q4 法說會逐字稿

Good day, everyone, and welcome to the Global Ship Lease fourth-quarter 2009 conference call. This call is being recorded. Joining us on the call today are Ian Webber, Chief Executive Officer; and Susan Cook, Chief Financial Officer. We will conduct a question and answer session after the opening remarks. Introductions will follow at that time. I will now turn the call over to Mr. Ian Webber. Please go ahead, sir.

Good morning, everybody, and thank you for joining us today. I hope you've had a chance to look at the earnings release that we issued earlier this morning and have been able to access the accompanying slides via our website. As normal, I'd like to start with slides one and two, to remind you that today's call may include forward-looking statements that are based on current expectations and assumptions and are by their very nature inherently uncertain and outside the Company's control. Actual results may differ materially from these forward-looking statements due to many factors, including those described in the risk factors section of our presentation. We also draw your attention to the risk factors section of our updated annual report on Form F-20 filed on December 9, 2009, which again you can access via our website or indeed via the SEC's.

All our statements are qualified by these and other disclosures and are, of course, filed with the SEC. We do not undertake any duty to update forward-looking statements.

The reconciliations of the non-US GAAP financial measures to which we will refer during the call are to the most directly comparable measures calculated and presented in accordance with GAAP. You should refer to the press release that we issued this morning, which is also available on our website and will be filed with the SEC later.

I would like to start by reviewing the fourth quarter and full year 2009 highlights. I will then review our fleet and charter portfolio before turning the call over to Susan to comment on our fourth-quarter and full-year financials. After that, as the operator said, we'll open the call up for questions.

Slide three shows fourth-quarter and full-year 2009 highlights. 2009 was a challenging year for the container shipping industry and for the global economy, but nonetheless, our entire fleet remains secured on long-term time charters. We have strong operating performance in the quarter with 99% utilization. There was no unplanned off-hire in fourth-quarter, and the only lost revenue days were for the planned dry docking of CMA CGM Utrillo at a cost of approximately $1 million.

Our expanded fleet grew both revenue and cash flow for the quarter and for the year as we had the full-year affect of the four ships that were delivered to us in December 2008 and a further ship in August 2009. Specifically, we reported revenue at $39.9 million for the fourth quarter and nearly $150 million for the full year. Results reflect the additions of the four ships I've just mentioned and the last ship in August last year.

For the quarter we generated $16.5 million of cash, which is an increase of $3.7 million over fourth quarter 2008. For the year we generated cash of $62 million.

For the quarter normalized net earnings were $7.3 million or $0.13 per A and B common share. This excludes a mark to market non-cash interest rate derivative gain of $5.1 million. Including these non-cash charges we reported a GAAP net income of $12.3 million or $0.23 per class A and class B common share.

For the full year normalized net earnings were $26.6 million or $0.49 per share for the year ended December 2009. These normalized net earnings exclude $17.9 million non-cash mark to market gain and also $2.2 million of accelerated deferred financing costs -- sorry -- deferred financing costs written off on an accelerated basis as a result of our amended credit facilities throughout 2009.

Operationally, we continue to focus on prudently controlling our day-to-day vessel operating costs while maintaining the vessels' operating efficiency. Our fourth quarter 2009 represents the sixth consecutive quarter that we have constrained special operating costs under the cap amount set out in our ship management agreement.

As I mentioned on our third quarter call back in November last year, we entered into an agreement to amend our credit facility in August 2009. This allowed us to obtain funding for the accretive purchase of the 2001-built 6600 TEU CMA CGM Berlioz, which is now let out on a 12-year charter. By successfully amending the credit facility we have also mitigated loan-to-value covenant concerns and protected the Company from short-term volatility and asset prices effectively through to April 2011, which is the next scheduled test date of the loan-to-value covenant.

We are now focusing our free cash flow on aggressively paying down debt. To this end we paid almost $11 million against our credit facility in November 2009, resulting in a reduced debt balance of just over $588 million as of the year end. We currently expect to repay approximately $68 million out of our cash flow in calendar 2010.

Moving on to slide four, which shows our fleet profile, this slide is unchanged from previous presentations and represents the full fleet, the 17 ships which we have on the water, modern container ships all secured on long-term time charters with an average remaining duration of something like nine years and an average age of the fleet of something like six years out of a total economic life of 30.

You will see that we have no time charter renewals until the end of 2012, at which point two out of our 17 charters expire, representing approximately 13% of our current daily revenue. Our next renewal after 2012 is not until 2016, on four further ships.

As I mentioned before, since November 2008 we have taken delivery of five vessels, expanding the size of our fleet and accordingly growing our annual revenue by 58% to approximately $155 million a year, not taking into account off-hire. In total, our current fleet represents contracted revenue of some $1.5 billion.

The 17 ships on the water are chartered to CMA CGM, who is also a 45% shareholder. CMA CGM, we understand, continues to explore with its lenders a potential financial restructuring to address it short and medium-term financing requirements, as CMA CGM announced in September last year. They also have announced, in the meantime, that they have reported a return to operating profit in fourth quarter 2009.

We are not involved in and cannot speculate on the outcome of CMA CGM's discussions with its lenders and also shipyards, but naturally we continue to closely monitor the situation.

As of the close of play yesterday, March 1, charter hire which was due on February 16 of around $5.6 million was outstanding and a further installment of around $6.4 million became due yesterday, that day being the beginning of the month. This situation is a little different from that at the year end, where we also had one period outstanding from the middle of December. That was successfully collected in January. We remain in close contact with CMA CGM to monitor our receivables.

Finally, before handing over to Susan, I would like to provide some context on the industry as a whole. As we all know, the last 18 months have been extremely challenging for the container industry, and demand for 2009 is currently estimated to be down by about 10% compared to 2008, which itself showed only 4% growth on 2007. Both years are a significant reversal for an industry that has, on average, shown 10% plus compound annual growth over the last 30 to 40 years.

Combined with a fall in container volumes shipped, supply has increased as the order book has been delivered. However, fleet growth net of increased scrappings at around 6% for 2009 -- it was estimated that supply growth in November when I spoke to you last was going to be around 7.5%, so the latest estimates show a contraction even over the last two or three months. This 6% growth for 2009 is down hugely from the 14% net growth that was forecast at the beginning of the year and from the 13% or so that was seen in 2008.

Owners have been very active in deferring and canceling orders converting container ships to other type of ship orders, firstly to manage their own order book and secondly with the added impetus of a general lack of finance for the sector.

That said, it does seem that recently the overall situation is improving, although idle capacity still represents around 10% of effective capacity, slow and super slow steaming, partly in response to high fuel prices but also partly in response to surface capacity, has absorbed capacity. And with modest recent improvements in the global economy and, it seems, continued discipline among the liner sector on pricing, many but not all carriers are reporting quarter on quarter improvements in operating and financial performance.

Although asset values and stock charter rates remained depressed, there are some signs that asset values and particularly stock charter rates may have come off the bottom, especially for larger ships with some relatively longer-term fixings compared to what we saw throughout 2009 at higher rates now being made.

What about the future? It's difficult to be precise, obviously; this is a forecast. But analysts are looking at maybe 7% to 9% demand growth a year over the next three to four years. Supply growth and estimates here vary much more significantly because it does require a view to be taken on the level of cancellations, deferrals of orders, etc. But nevertheless, supply growth in the round is estimated to be a little less than this demand forecast, and this gives us optimism that the industry will be in better balance in coming years.

I would like now to hand over to Susan, who will review the financial results for the quarter and for the year.

Thank you, Ian. Please note that the comparative financial information included in our unaudited financial statements is prepared under predecessor accounting rules and includes the results of operations of two of the vessels when they were owned by CMA CGM and operated in CMA CGM's business of earning revenue from carrying cargoes, up to the dates that we purchased them in January 2008. The predecessor and Global Ship Lease business models and, hence, financial results are not comparable.

Further, there were significant changes to the Company's legal and capital structure arising from the merger with Marathon, which completed on August 14, 2008, and which resulted in the Company being listed on the New York Stock Exchange. Our capital structure change significantly. Accordingly, due to these significant changes, only select comparative information will be presented on today's call and is included in the earnings release. For 2010 we will have more meaningful and directly comparable prior-period data to discuss.

With that said, turning to slide six, we present our financial results, which relate to our time charter business only. For the quarter ended December 31, 2009, we reported revenue of $39.9 million, up 52% from revenue of $26.3 million in the comparable period of 2008. In 2009 we recorded revenue of $148.7 million, up 57% from $95 million for the prior-year period. The increases reflect the purchase of four additional ships in December 2008 and one in August 2009, which earn an average charter rate of $31,450 a day, significantly higher than the $22,685 average daily charter rate of the previous fleet of 12 smaller vessels.

During the fourth quarter 2009 there were 1564 ownership days with no unplanned off-hire days. CMA CGM Utrillo was dry-docked for 16 days, leading to utilization of 99% for the quarter. Compared to the prior-year period, ownership was 36%, from 1153 days, due to the effect of four ships bought in December 2008 and one in August 2009.

For the full year it was 5968 ownership days with 42 unplanned off-hire days. Fleet utilization for this period was 98.8%, down slightly from 99% in the comparative period. For the fourth quarter, vessel operating cost, which include crew cost, lubricating oil, spares and insurance, were $9.9 million or, on average, $6299 per ownership day, which is an 8% decrease from $6820 in the previous quarter. The decline is primarily attributable to year-end adjustments, including recovery of certain items for the charterer's account. When compared to the fourth quarter of 2008, costs were down 8% from the daily average cost of $6873.

For the year period ended December 31, 2009, vessel operating expenses were $41.4 million with an average cost of $6932 per ownership day. This compares to $29.8 million vessel operating expenses associated with the time charter business in the comparative period of 2008 of $6748 per ownership day.

Vessel operating costs during the quarter and the year were affected by the impact of the four larger vessels delivered in December 2008 and the one vessel in August 2009 and are a little bit more expensive to operate. Vessel operating expenses continued to be at less than the capped amount included in Global Ship Lease's ship management agreements.

Depreciation for the three-month period was $10.1 million compared to $5.9 million in the same period in 2008. For the year, depreciation was $37.3 million against $20.6 million in 2008. Both the three- and 12-month periods include the effect of the purchase of four additional vessels in December 2008 and one in August 2009.

We incurred general and administrative costs in the three months ended December 31, 2009 of $2.2 million compared to $2.7 million for the time charter business in the comparable period in 2008. For the year, general and administrative costs were $8.7 million as compared to $6 million in 2008.

G&A through 2009 is significantly higher than 2008 when the Company was not listed, being a wholly-owned subsidiary of CMA CGM. A portion of the increase is a $2.5 million non-cash charge for stock-based incentives.

Interest expense excluding the effect of interest rates derivatives which do not qualify for hedge accounting for the three months ended December 31, 2009 were $6.1 million on average borrowings under the credit facility and approximately $593.8 million. There were also $48 million of preferred shares throughout the period. Interest expense in the comparative period in 2008 was $2.6 million, based on average borrowings including the preferred shares of $357.2 million in the quarter.

For the year ended December 31, 2009, interest expense was $24.2 million including $2.2 million write-off of deferred financing costs as a result of reduced borrowing capacity following amendments to the credit facility in 2009 as based on average borrowings, including the preferred shares of $608.7 million. This compares to $21.4 million of interest expense for the comparative period in 2008 based on average borrowings, including the preferred shares of $490.5 million.

We have hedged most of our interest rate exposure by entering into derivatives that swap floating-rate debt to fixed-rate to provide long-term stability and predictability to cash flows. As these hedges do not qualify for hedge accounting under US GAAP, the outstanding hedges are marked to market each period end, with any change in the fair value being booked to the income and expenditure account. The change in the fair value primarily from the movements in the forward curve for interest rates [falls] to $0.7 million gain in the three months ended December 31, 2009. Of this amount, $4.4 million was realized for settlement of swaps in the period, leaving $5.1 million unrealized gain for a revaluation of the balance sheet position. This compares to a $51 million loss in the three months ended December 31, 2008, of which $0.3 million was realized and $50.7 million unrealized.

For the year ended December 31, 2009, the reported gain was $4.8 million, which consisted of $13.1 million realized charge and $17.9 million unrealized gain. In the comparative period in 2008, there was a reported loss of $52.5 million, of which $0.8 million was realized and $51.8 million was unrealized. At December 31, 2009, the total mark to market unrealized loss recognized as a liability was $29.1 million.

Our interest rate swap strategy reduces risk, and the mark to market adjustments have no impact on operating performance or cash generation. We reported net earnings of $12.3 million for the fourth quarter of 2009 or $0.26 per class A and B common share. In the comparable 2008 period, we reported net losses of $43.7 million or a loss of $1.29 per share.

For full year 2009, we reported net income of $42.4 million or $0.91 per class A and B common share against a net loss of $36.6 million or a loss of $1.30 per class A and B common share in 2008. Normalized net earnings, which adjust for mark to market, were $7.3 million or $0.13 per class A and B common share for the fourth quarter 2009, which excludes a 5.1 million non-cash interest rate derivative mark to market gain. For the comparable period in 2008 and excluding a $50.7 million mark to market loss, we reported normalized net income of $7 million or $0.17 per share.

For 2009 normalized net earnings were $26.6 million or $0.49 per class A and B common shares excluding the $17.9 million non-cash mark to market gain and $2.2 million deferred financing costs written off. We believe that normalized net earnings is a useful measure with which to assess the Company's financial performance as this adjusts for the effects of non-cash and other items which do not affect the Company's ability to make distributions on common shares.

We generated $16.5 million in cash in the fourth quarter of 2009. For the year ended December 31, 2009, $62 million of cash was generated. However, given the amendment to our credit facility, no common dividends can be declared or paid until the later of November 30, 2010, or when the loan to value falls to 75% of the loan. Once the Company is able to resume its ability to pay dividends to its shareholders, the Board of Directors will review its policy.

Moving to the balance sheet and slide seven, the key items as of December 31 include cash at $30.8 million, total assets of $1 billion, of which $961.7 million is vessels in operation; current portion of long-term debt of $68.3 million and shareholders equity of $327.6 million. As mentioned earlier, the balance sheet position of our interest rate swaps is a liability of $29.1 million.

Slide eight, which we have shown before, summarizes the product facility. The loan to value maintenance covenant has been waived up to and including November 30, 2010, with the next test scheduled for April 30, 2011. Amounts borrowed under the amended credit facility bear interest at LIBOR plus a fixed interest margin of 3.5% until November 30, 2010, at which time the margin will be between 2.5% and 3.5%, depending on the loan to value ratio.

In connection with the amended credit facility, all long-term commitments, totaling approximately $200 million, were canceled and our dividend has been suspended. We are essentially using our cash flow to aggressively prepay borrowings under the credit facility. However, we can resume common dividends when the loan to value is at or below 75%, at which point the prepayment of borrowings becomes fixed at $10 million a quarter.

Additionally, in conjunction with the amended facility, CMA CGM has agreed to defer the commencement of redemption of the $48 million in preferred shares that it holds until August of 2016, which is the final maturity of the credit facility. The Company has also agreed to retain its current holdings Global Ship Lease common shares until at least November 30, 2010.

I would now like to hand over to the operator, who will explain the Q&A process.

(Operator instructions) [Greg Gerst], [Gerst] Capital.

Just a quick -- I wanted you to check my math here. So year end we had $588 million in long-term debt. So do you expect to pay off $68 million by the end of 2010, so we would end 2010 at $528 million. And my question is depreciation -- that is going to be running at $10 million a quarter; is that correct?

Well, we've got a full year of the fleet in quarter four, so it's the quarter four number, which is --

$40 million a year?

$10.1 million.

For the quarter?

Yes.

Okay. So I was just projecting forward. By the end of the year, the book value of your vessels would be somewhere around $921 million?

Yes.

So if I do the math on this, it says, based on your expected loan outstanding and your book value, I'm trying to compute what ship values -- what the discount and market value of ship values would have to be in order for you to get back into compliance with your loan. And it looks to me, if I do the math here, it's about 23% by the end of 2010. I don't know if that's clear. So basically, if the market value of ships are no more of a discount than 23% to your book value at that time, you would get back into compliance with your loans?

I'm sure you are right. I can't move fast enough to confirm it. But it's basic math, so --

Yes. But my question is, I know you guys -- you don't really have to get appraisals until April of 2011, based on your loan covenants. But it does -- given the numbers, we can pretty easily project forward, it does seem like latter half of the year it would be worth going through the exercise of getting ship valuations because if things continue the way they are going, you may actually get back into compliance a little sooner than we expected.

Yes. We do -- we monitor the situation. We haven't had formal valuations for quite a while now. But there is a cost associated with it, and we want to avoid that cost if we can, as prudent managers.

But clearly, if we see good signs of a positive recovery in ship values, and you are right; the mathematics is fairly straightforward -- then, yes; we will look to get a formal view on the fleet.

You've said in the past, rightfully so, you have seen either yourselves or other -- you have seen ship valuations, you just don't believe them. Have you seen -- are you able to see any valuations done in the last month or two, and would you characterize those as still being unbelievable, or could you comment on that?

Well, as I said, we haven't had any valuations done. So I don't think (multiple speakers) --

I know you yourself haven't. I'm asking what you've seen in the market about any sales that have happened. Are you thinking -- or what you have heard of appraisals -- is the --

Well, Greg, I understand where you are going. I don't know what brokers are doing in the appraisal side. I've not seen anybody else -- we haven't had any -- I've not seen anybody else's valuations, and I would hope you wouldn't expect me to. But nevertheless, there is an increasing level of activity in the sale and purchase market.

That does mean that it is, quote, easier, unquote, for brokers to come up with a valuation based on transactions. I still -- my personal view is, it's still that many of these transactions are in distressed or unusual circumstances. It can hardly be described as willing buyer/willing seller, which is the theoretical basis of these valuations.

But I would expect that as 2010 develops, then there will be an increasing number of sale and purchases and a proper market might begin to develop again. But it's very, very difficult to speculate on what's going to happen.

The class B shares, from what I recall in reading that the filings -- basically, when you do, even if you do start paying back dividends, basically they are subordinated to class A and they can't be paid until class A's are all caught up. Can you briefly comment on the class B? And the reason I ask is, when you look at your fully diluted share count, including class B's in there, for us class A shareholders, it seems we can look at those class B's as almost not -- they are not going to be relevant for quite a while until you catch us up on the dividend payments.

Well, I can't really comment on the value of the class B shares, but you're right in terms of the subordination. Under the terms of those shares, they don't get dividends until the class A are caught up at the rate of $0.23 a share per quarter.

Okay, that's (inaudible). Okay, well, thank you very much.

And by the way, your math is about right.

John Race, DePrince, Race & Zollo.

My question was I think primarily answered by the last questions. But, on the dividend, on a possible resumption of the dividend, you stated that you would first allocate $10 million to the banks. Let's say you had a $16 million quarter repeatable in terms of free cash flow. How much would then go to the preferred, and then what would be left over for the A common, under that scenario?

Well, the preferred is $48 million. Its interest rate is a 2% margin over LIBOR. (inaudible) take a view on what LIBOR is and add 2%, and that comes up with the annual interest cost or dividend cost for the preferred.

And that's sort of your answer. If you are looking at a full distribution, that's what would be left strictly on a quarter-to-quarter basis, if you were looking at it one quarter at a time.

Okay, so can you give me the number based on that, what you would be allocable to the A common?

Not off the top of my head. I'll make a mistake if I try and do mathematics on the call.

Okay. So is it also fair to say that, once the loan to value falls below 75%, you will go into renegotiation on your covenants? Or, is that just automatic, that you can start paying a dividend again?

Under the terms of the credit facility, it's automatic.

Would you envision, at any point, possibly, if things continued to improve, to completely renegotiate all the terms and conditions of your credit arrangement or possibly find other banks?

Well, we keep our financing under review all of the time. And sure; if we consider that we could get a more beneficial arrangement, then we would reopen negotiations with our bank group or, indeed, look at alternate financings.

Michael Demaray, Elevated Capital.

I actually wanted to follow up on that conversation that John was having with you. On the last call we briefly discussed the idea of doing a partial refinancing that was subordinated to the bank debt, to resume compliance with the LTV. Has management or the board given any further consideration to that sort of approach?

Well, as I said in response to John's question, we keep our financing under review and our capital structure under review. We evaluate all sorts of opportunities from time to time. But the financing environment, be it debt or equity, public or private, remains challenging for our industry, although the recent improvement in operating results for the liner sector, in particular, are encouraging, providing that continues. I really can't add much more than I've already said.

You mentioned in your comments earlier -- you went through the receivables. Can you go back through that again, just so I get the correct numbers? You mentioned that the receivable balance at year end had been paid down, but then there were some additional items that had come up since then?

Yes, sure. At the close of business yesterday, that was the end of the end of Monday, 1 March, the amount of charter hire that was due on 16 February was outstanding; that's $5.6 million. And, because charter hire is payable under the charter contracts every two weeks in advance on the first and the 16th of the month, the first half of March fell due yesterday as well, and that's around $6.4 million.

So substantively, ignoring the amount that feel due yesterday, we've got one period that is overdue.

You mentioned that you were seeing some stretching of the payables by CMA. Are you continuing to see that? What are you seeing there in terms of the trend?

Well, the position as of today, it's about the same as it was at the year end. If we had been having this call on January 2, I'd have been saying exactly the same thing. So the status quo is being maintained, from end of December to end of February.

And these are some obligatory questions that I feel I need to ask. Have you had any requests for charter reductions?

No.

Have there been any developments on the ZIM front, with the ZIM ships?

No. Those contracts remain unchanged, so no changes to the contractual position. I'm sure you are seeing last -- sometime in the fall, ZIM announced their own successful financial restructuring, which was good to see. We remain -- sorry, restate that. We're looking at alternative ways of finding finance for these ships, but it does remain tight. We are exploring all options. And as I said before, our purchase contracts are designed to provide protection in case that we are unable to buy the ships, limiting our loss to the forfeiture of the deposit and just to remind people they want to see the detailed wording, those purchase contracts are on file with the SEC dated, I think, September 18, 2009 -- sorry, 2008 it would have been.

Lastly, can you give us any color on maybe has there been any shift in the attitude of bankers since you had the last call, with the improvement in the liner market? How are they viewing things, just from your ongoing discussions?

Well, it's very difficult to generalize, but I guess we have to. I don't think there's been any substantial change in their current attitude to lending. But as I said before, if the recovery continues or gathers pace, then one would hope that some liquidity would return to the debt market. But we are not banking on it -- sorry; excuse the pun.

[Scott Fahey], [RLCD Asset Management].

Just extending that dialogue on the receivable just for a second, so the December payment -- you turned the clock back and said the December payment, if we were having this conversation at the beginning of January, hadn't been made. When did that payment actually come in?

It came in January, during January. I don't recall the exact date.

Okay. So, what I'm trying to get at is how we could possibly observe maybe a change in behavior on this February payment, like if it's not made by next week or not made by mid-month, not made even by the end of the month. I think you basically said this is not a change from recent behavior. What I'm trying to get at is, what would illustrate a change in behavior?

Well, when we publish our quarterly results having no outstanding receivables, I guess. We don't want to get in a position where we are updating the market every two weeks on exactly where our receivables are. I don't think that would be helpful to us or to our customer. That said, firstly, we monitor the situation very closely with CMA. We are in touch very frequently with their senior finance people to understand what's happening with our receivable, their payable.

Secondly, as I said --

So what is their explanation for being late?

The sector has gone through a massive downturn and the top 10-15 liner companies have lost billions of dollars in 2009. And CMA themselves have announced that they lost $0.5 billion in the first half of 2009. There's no public information about the second half. So that's going to put stress on cash flow. So, although we are not at all complacent about the situation, we would much prefer the charter hire to be paid promptly. I guess looking at it objectively, it's not surprising that liner companies generally and CMA CGM, in our case, in particular, are suffering a little bit of cash flow pressure.

Right, I understand that. Obviously, there aren't very many companies out there whose contracts are so heavily tilted towards one company, one customer, obviously. So you can, I'm sure, sympathize with shareholders being on edge about the behavior of that customer.

No; I understand that. And bear in mind that CMA CGM also owns 45% of Global Ship Lease. And so, in a perverse way, their interests are at least partly aligned with the interests of the wider shareholder community. And rest assured, we do keep this under very close control. And as I said, we have extremely good relationships with CMA CGM, both operational and specifically in these circumstances with the financial management.

Right; I don't doubt any of that. Just obviously, in extreme environments, people behave differently than they behave in normal environments, as it relates to business arrangements. And I think the question was already asked by another questioner relating to whether you've been approached as formally/informally presented with the proposal, something along those lines, around renegotiating some or all of the leases, and you answered no.

So I don't think it's a big -- I don't think it's an unfair question. I don't think it's something that you couldn't possibly see in this kind of stressed environment. So I think, like I said, you can understand why shareholders might have that at top of mind.

But just to switch gears, you mentioned that you are seeing a little bit more activity in the spot charter market. I think you specified around larger ships. Can you compare -- and I know it's a very, very rough number -- where you are seeing activity relative to your contracted day rates? How much lower is that activity occurring?

Before I answer that, let me just reemphasize the receivables position. We do understand that it's of significant interest to investors, which is why we've made specific disclosure this quarter compared to previous quarters. We've not talked about receivables before, so we are giving additional information, to the extent that we can, about that situation. And I hope that I've answered your questions at least to the best of my ability.

Turning to spot charter rates, it is difficult to generalize. There has been more activity, particularly on the sort of Panamax size of container ship; that's sort of roughly around 4000 TEU -- where fixings -- and above -- fixings might be 50% higher than the daily rates that the ships have been fixed at, at maybe 50% higher than they would have been nine months ago. They are still significantly below the long-term rates that we have under our contracts, however.

So that's down like 25%, down 40%? Just total meat cleaver kind of number?

I don't think that there is enough volume and quality in the spot market to be able to answer that question sensibly. But it is significant.

I will go back in the queue. Thank you for taking my questions.

[Nathan Lafune], [Online Productions Inc.]

Thank you very much for taking my call and thank you for your time today. Nice job. Michael caught by primary question, which was on the ZIM charters. But I might just ask, as a matter of color and relationship with you and your parent, the new management structure at CMA CGM -- how does that -- could you comment on that, how that -- does it make things easier, more defined; just any off-the-wall thoughts you have on CGM's evolution -- excuse me -- CMA's evolution?

Sure. I've always been brought up that off-the-wall thoughts on the investor calls are probably not a good idea. However, I've read about the management changes at CMA CGM. They are really a matter for that company, not for us. What I can say is that the operational relationship and the financial relationship is completely unaffected by those senior-level changes.

Greg Gerst, Gerst Capital.

Hi, Ian. Sorry to do this to you, but I --

That's okay.

-- I wanted to follow up on the receivables discussion again. You had commented -- and I think, your color on the industry, I don't disagree with; the first half going into third quarter, even, was a disaster for all the liners. But we've seen CMA state publicly, 4Q -- I'm not sure if they got to cash flow breakeven in 4Q, but things certainly got better. And we've heard recently that things are continuing to get better.

But if we look back at your receivables line going back to Q1, Q2, Q3 last year, it was already down $1 million or less during those points. And it got worse at the end of the fourth quarter, and it sounds like it's continuing at that level, at least.

So as just more a comment than a question -- as an outsider, hopefully, you can understand our -- I'm a little perplexed here that things have gotten better for them from a cash flow point of view more recently, yet for you guys the error has gotten worse. So that's just -- I don't know if you want to comment on that, but that's the discrepancy that at least I see here and that concerns me a little bit.

I understand what you are saying, Greg, but I really can't comment. I have no information about CMA's current position. I've seen their press release that states that they returned to an operating profit in the fourth quarter, which is indeed good news, and that the industry overall is performing better now than, firstly, it expected and, secondly, it has been, which is terrific. Not everybody, but many of the carriers that have reported fourth quarter or some measure of current levels of activity are looking more positive than they have been for quite a while, which is extremely encouraging.

That said, it does take a little time for cash to percolate through the system. Receivables -- CMA's receivables, any liner company's receivables, don't turn into cash instantly. And you've got to expect that it just takes a little time, as I say, for cash to work through.

You've mentioned, you guys are in close contact with CMA, and I'm sure you talk about this stuff. Do they give any indication that, hey, this is a temporary thing and things are going to get better? Or, is there anything you can tell us that they are telling you as an explanation for why things are bad now?

No, frankly, there isn't anything more I can add. But let me reiterate -- as of today, the situation on our receivables is no worse than it was at the end of December. It would be great if everything was up to date, but we have to be realistic here. It isn't. We are only one period behind. I wish we weren't, but we are.

And believe me, it takes a lot of my time and focus, and I have the primary relationship with CMA in this regard.

In the back of my mind I'm wondering, are they -- from what I read, it makes me feel better about them. But I'm wondering this. Are they doing this just because they can? Are they paying late just because they can, at this point? Anyway, that's it.

Sorry I couldn't be more helpful.

That does conclude today's teleconference. Thank you all for your participation.

Thank you very much. We look forward to talking to you in a couple months about Q1.