Global Ship Lease Inc (GSL) 2015 Q2 法說會逐字稿

Thank you very much. Good morning everybody and thanks for joining us. As ever, I hope you've been able to look at the earnings release that we issued earlier today, along with the press release announcing our third acquisition, and also been able to access the slides that accompany this call. As usual the first two slides remind you that the call may include forward-looking statements that are based on current expectations and assumptions and are, by their nature, inherently uncertain and outside of the Company's control. Actual results may differ materially from these forward-looking statements due to many factors, including those described in the Safe Harbor section of the slide presentation.

We also draw your attention to the Risk Factors section of our most recent annual report filed on Form 20-F, which is for 2014 and was filed with the SEC on April 21, 2015. You can obtain this via the SEC website or via our own website. All of our statements today are qualified by these and other disclosures included in our reports filed with the SEC. We do not undertake any duty to update forward-looking statements.

For reconciliations of the non-GAAP financial measures to which we will refer during this call to the most directly comparable measures calculated and presented in accordance with GAAP, please refer to the earnings release that we issued this morning. That release is also available on our website.

I'll start today's call by briefly reviewing the second quarter and subsequent highlights, followed by an overview of our fleet and the path forward for GSL. After some comments on the container shipping industry and vessel acquisition environment, I'll turn the call over to Susan for her comments on our financial statements. Then after some brief concluding remarks, I will be pleased to take your questions.

Slide 3 shows our highlights for the second quarter. The headline clearly is the initiation of a dividend for our Class A common shareholders, representing a major milestone for Global Ship Lease. I'll review the dividend in more detail in a moment.

But first, returning to the underlying business, let me say that our fleet continued to operate at a high level through the second quarter, earnings stable, predictable cash flows from long-term fixed-rate charters with top-quality charterers. During the quarter we generated $41 million in revenues, net income of a shade under $3 million, and adjusted EBITDA of almost $27 million.

The high level of operating performance, in addition to the first full quarter of actual -- rather than pro forma -- contribution for the Qingdao which was delivered to us in March this year, supplementing the contribution from the OOCL Tianjin which arrived in our fleet in October last year, has led us to exceed the 2.25 times fixed charge coverage ratio threshold that we've been targeting for some time. This unlocks our dividend paying capacity and puts us in a position to initiate the dividend.

Subsequent to the quarter end and as announced earlier today, we are delighted to have reached further agreement with OOCL to purchase and immediately charter back a third 8,000-TEU vessel, the 2004-built OOCL Ningbo, for a purchase price of $53.6 million and a charter rate of $34,500 a day for between 36 and 39 months, at charterer's option, essentially on the same terms as our two previous sale and leaseback transactions with OOCL. OOCL Ningbo is scheduled to deliver to us by late September and will add a further $9.4 million or more to our run-rate EBITDA which, taking into account our previous two acquisitions, raises our run-rate EBITDA level by approximately 35% in less than a year. We greatly value our expanding relationship with OOCL, who we see as a top-class counterparty.

Finally, as I said, we announced today the initiation of a regular quarterly dividend, which our Board has declared for the second quarter at an initial level of $0.10 per Class A share for the quarter. Given the acquisition of the Ningbo, the Board intends to raise the dividend to $0.125 per share or $0.50 annualized for the fourth quarter when, all things equal, we will have enjoyed a full quarter's contribution from the Ningbo.

Turning to slide 4, you can see outlined the various hurdles that we've cleared to enable us to initiate the dividend. As many if you are aware, we embarked on our current growth path in earnest with our refinancing in early 2014, which allowed us to shed restrictive maintenance covenants, notably loan-to-value, restrictions on capital allocation, and mandatory debt amortization via a full cash sweep.

Since that time we've increased the full fleet charter coverage, including maintaining employment of our two spot vessels in what has been until recently a difficult spot market. We've diversified our charter portfolio with top-tier charterers. We've accessed multiple sources of capital to fund growth at a lower cost and to strengthen our balance sheet.

We've accretively expanded our fleets, our contracted revenue, and our EBITDA. And we've passed the 2.25 fixed charge coverage ratio set out in our debt agreements, which has enabled us to initiate a dividend.

We believe that further acquisition opportunities exist that will provide additional support for our dividend. In the near term we add OOCL Ningbo to the fleet, with increased cash flow facilitating the increase in the dividend that I have just mentioned.

Turning to slide 5, we have now initiated the meaningful and sustainable dividend that we've been discussing for several months now -- several quarters, indeed -- with a clear path to near-term growth. We passed that fixed-charge coverage ratio by virtue of improved operational results for Q2 2015. We focused on controlling costs very closely.

We dropped a relatively poor quarter-two 2014 from the last 12 months record, and it's the 12 months' records that drives the calculation of the ratio. That quarter in 2014 was negatively affected by idle time and repositioning costs for our two spot vessels, Orion and Aquarius, both of which were without employment for some of that quarter. We've also benefited from the actual, rather than pro forma, results of the two new vessels -- the two vessels new to our fleet -- Tianjin and Qingdao, where actually we've earned a little bit more than the $9.4 million annualized EBITDA that we've discussed previously.

So in summary, in the second quarter we earned $13.3 million of cash available for distribution. That's before reserves for vessel acquisitions; the actual costs of any drydocking -- there weren't any in Q2; before scheduled amortization of debts; before the tender offer that was required under the notes; and obviously for anything else that we know we may need to incur.

At our initial dividend payment level of $0.10 per Class A common share, dividend coverage for the quarter was 2.8 times. I'll just note that the Class B shares, of which there are 7.4 million, are currently not eligible for dividend payment. The subordination feature that we included in those shares has worked to support the Class A shares.

Because our chartering strategy is based on long-term fixed-rate charters with high-quality counterparties, we have a great deal of forward visibility on our ability to sustain the dividend, with 5.5 years of weighted average remaining charter length and $870 million in contracted revenue spread over that period -- that includes the Ningbo -- and with only two vessels with charters that expire before late 2017. This allows the Board to take a clear view on the sustainability of the dividend in the short and medium term.

Furthermore, we believe that our current dividend payout level and the intended payout level provides considerable value to our shareholders, while also enabling us to pursue additional accretive acquisitions to reinforce and expand our cash flows, which in turn should increase our ability to support a growing dividend. We use the Ningbo as an example: with a full quarter's earnings contribution from that vessel in the fourth quarter, we believe that that will sustainably support a 25% increase in the quarterly dividend level to $0.125 per share, $0.50 a year on an annualized basis.

Turning to slide 5 -- sorry to slide 6, you've seen this slide before. You can see the high degree of consistency in both our operational and financial performance over the years. Our operational proficiency and our focus on long-term fixed-rate charters allows us to remain stable and insulated from volatility in the overall market, which is illustrated by the contrast between the top of the slide -- the red line, the volatile spot charter market -- and the bottom of the slide, which is our financial performance. In the most recent quarters you can see the significant earnings impact of our vessel acquisitions and leasebacks to OOCL, with the second acquisition, the Qingdao, only fully contributing in the second quarter of this year.

Just to note, our two recent successful recharterings of Ville d'Aquarius and the Ville d'Orion at significantly higher rates than previously only came into effect at the end of the second quarter and in July, respectively. So the impact of these higher earnings will only be evident in the Q3 numbers.

Before moving on from this slide I'd like to point out the consistently high level of our vessel utilization, which was 99.9% for this quarter, with only two days of unplanned off-hire across the entire fleet of 19 vessels. This level of operational performance we think is a key component of realizing maximized value from our long-term charters.

Off-hire means no revenue. Minimum off-hire means maximum revenue. Again, just to note we have no further regulatory drydocking scheduled for this current year.

Moving on to slide 7, we show our fleet and charter portfolio, including the new vessel which is scheduled to deliver and immediately commence its charter back to OOCL in late September of this year. As of June 30, the quarter end, the weighted average age of our fleet was approximately 11.2 years out of an economic life of 30 years.

Our weighted average remaining contract term is 5.5 years, excluding the two 4,100-TEU vessels, Orion and Aquarius, which operate on short-term contracts. At that date our contracted revenue stream was approximately $835 million. That doesn't include the Ningbo; she adds $38 million to $41 million for her 36 to 39 month charter.

Aside from Aquarius and Orion, which are in the spot market and were recently rechartered at rate increases of 28% and 38%, respectively, around about the $11,000 per day mark, we are insulated from rechartering risk and volatility in the charter market up until late 2017 when the first of our longer-term charters come up for renewal. Beyond that point, our charter expiration is staggered over a number of years, with our largest and highest-earning vessel, the CMA CGM Thalassa, chartered out through 2025.

These long-term contracted cash flows enable us to confidently continue to execute on our growth strategy, which is outlined on slide 8. First we look to maintain strong contract coverage for our fleet with high-quality counterparties, primarily on longer-term fixed-rate charters. As we expand our fleet we are focused on acquisition targets that have charters of this nature attached and are thus immediately cash generative.

Second, we continue to seek out opportunities to diversify our portfolio of top-tier charterers to complement our strong and long-term founding relationship with CMA CGM. We have progressed substantially on this front by chartering a total of five vessels to Sea Consortium and OOCL, and we believe that there is further value in diversification with other high-quality charterers, particularly in a sale and leaseback situation, while vessel values and returns remain attractive.

Third, we continue to evaluate opportunities that exist to enhance our capital structure. We've tapped a number of nondilutive sources -- nondilutive to equity sources of capital to fund our immediately accretive growth, most recently establishing a $35 million credit facility secured by the OOCL Tianjin with DVB Bank, which has assisted our purchase of the Ningbo. Recent financings, this credit facility with DVB, and the revolver which we put in place alongside the issuance of the high-yield debt back in March 2014, with drawdown of that -- these have been at a lower cost than our enabling issue of high-yield notes back in March last year and thus are reducing our overall run rate cost of capital. We believe -- and particularly with the reinstatement of a dividend -- that there should be a number of possibilities available to us in the near- and the mid-term by which we can actively manage our capital structure and pursue a lower cost of capital overall.

Finally on slide 8, the addition of the Tianjin and the Qingdao to the fleet, supplemented with the third vessel acquisition in the OOCL Ningbo, will bring our EBITDA generation capacity up to around 135% of its level a year ago. The contribution from these vessels and our focus on day-to-day operating performance has put us in a position where we can pursue a value-maximizing dividend payment and also fleet growth. Opportunities continue to exist in the market for the addition of midsize and smaller tonnage, and we view accretive acquisitions not as an alternative to dividend payment but rather as a method by which we will both support and potentially expand the capacity to pay the dividend.

Turning to slide 9, we've outlined the three vessel acquisitions from OOCL essentially on identical terms for what amount to effectively three sister vessels. Slight adjustments in purchase price for their relative ages: purchase prices ranging from $53.5 million to $55 million; all on 36 to 39 months charters back; all at a gross rate of $34,500 a day; adding in total $113 million to $123 million to our contracted revenue, spread out over approximately three years. These vessels have contributed to the increase in our run-rate EBITDA of over a third in the past year, generating an unlevered free cash flow yield of some 17%.

Each of these deliveries has been immediately accretive, and each has represented a significant milestone for GSL. As I said, we believe that there are further accretive and attractive acquisitions available to us in the market, and we are fully focused on seeking to acquire further vessels on appealing terms.

On slide 10 -- we have shown before -- shows how the deployment of midsize ships, which includes the 8,000-TEU class, has evolved over the past several years, giving us confidence on the attractiveness of the asset class, given its increasingly flexible deployment throughout the global container trading system and thus supporting rechartering opportunities at the end of the current charters.

Slide 11 gives an update on supply-and-demand fundamentals, which continue to be encouraging. The excess of fleet growth supply, supply growth over demand growth in 2014 and projected for 2015, is normal, all things equal, as supply needs to grow a little bit more quickly than demand.

However, our 2016 projections continue to show demand growth significantly outstripping supply growth, which is really good news and should support a firmer charter market, particularly if you take the recent strengthening in the charter market as an indication that supply/demand balance is just about in tension. As last time, it's worth noting that shipyards are broadly full into 2017, not just with containerships but with all types of maritime assets, so there isn't really a great deal of scope for the supply-side numbers for 2015/2016 to change materially.

In passing, the order book to fleet ratio for containerships continues to hover at around 20%, and it's been that for quite some time now. Compared, just to remind you, to the peaks in 2009 of 60%.

Slide 12 we continue to include. It's important to us because it does illustrate the differences between the main East/West trades, notably Asia to Europe and the transpacific, and the smaller trades, the intra-regional trades, notably the intra-Asia trade, and the north-south trades, North America/South America, for example. It shows that the medium-size and the smaller trades represents 70% or so in aggregate of global container trade, so a clear majority.

This is where medium-size and smaller ships tend to be deployed; and as we observed before, the order book for these vessels is very small. Indeed taking scrapping levels into account, even though these have eased recently with improved near-term earnings power for spot vessels, it could be that some segments of the small and medium-size fleets will contract over the next couple of years or so.

So controlled supply growth combined with reasonable demand growth should, and indeed has, introduced pricing tension into the dynamic for spot charter vessels, which has directly benefited us from the renewal at significantly higher rates for our two spot vessels and reinforces our review for a cyclical recovery in charter rates in the medium-term -- continued recovery in charter rates in the medium-term.

Turning to slide 13, despite the improvement in charter rates, freight rates as we know from reading the papers remain under considerable pressure, albeit they are spot market freight rates, not contracted rates, which represent a good chunk of carriers' business. These freight rates are under pressure. However, the quid pro quo is that carriers' financial performance is being supported by considerably lower bunker prices than even a year ago.

Slide 14 shows with the recovery in short-term charter rates that secondhand asset values have edged up, too. Nevertheless, we continue to believe that there are good investment opportunities for Global Ship Lease, particularly as we look to sale and leaseback transactions and structure transactions, which are in a different market to the asset values shown on this slide. And it may be that the liner sector, under some financial pressure, look to increase the frequency of sale and leaseback transactions as they look to manage their balance sheet and build liquidity.

Let me now hand over to Susan for her comments on our financials.

Thanks, Ian. Please turn to slide 16 for a summary of our financial results for the three months ended June 30, 2015. We generated revenue of $41 million during the second quarter, up approximately $7.5 million from revenue of $33.5 million in the comparative 2014 period. This increase in revenue is mainly due to the addition of OOCL Tianjin from October last year, and from March this year the Qingdao, each at a daily charter rate of $34,500.

With two days offhire in the three months ended June 30, 2015, both of which were unplanned, utilization was 99.9%. In the comparable quarter of 2014 there was one day of unscheduled offhire and 48 days idle time between charters for two vessels, giving a utilization of 96.8%.

Our vessel operating expenses were $12.7 million for the three-month period, up slightly from the prior-year period primarily due to the addition of the Tianjin and the Qingdao to our fleet, partially offset by reduced insurance costs and lower bunker costs related to idle days and vessel repositioning during the 2014 period. Our average cost per ownership day in the second quarter of 2015 was $7,327 compared to $7,853 for the same period in 2014, down $526; and this reflects the additional 182 ownership days in the quarter.

Interest expense for the three months ended June 30, 2015, was $11.8 million. This included interest on the notes and our drawings under the $40 million revolving credit facility, plus amortization of the original issue discount on the notes and deferred financing costs.

The net income available to common shareholders for the second quarter was $2.9 million. Normalized net income adjusted for non-cash items for the three months ended June 30, 2015, was $2.9 million, the same as the reported net income available for common shareholders for the quarter. The normalized net income for the comparable prior-year period was a loss of $2.3 million.

Moving on to the balance sheet, which is shown on slide 17, the key items as of the end of the second-quarter 2015 include cash of $41.4 million; total assets of $927 million, of which $869.4 million is vessels, including our latest additions to the fleet from the end of October and early March; long-term debt at $454.9 million, including the $40 million drawn under our revolving credit facility during the first quarter this year; and shareholders equity of $441.1 million.

The next slide, slide 18, shows our cash flows. The main items to mention here are net cash provided by operating activities, with $25.4 million in the second quarter. Cash used in investing activities was $1.2 million, and this was primarily for drydockings.

I would now like to turn the call back to Ian for closing remarks.

Thank you, Susan. Before taking your questions I would like to briefly summarize on slide 19. But before I go through that slide let me just reiterate: we have done at Global Ship Lease what we said we were going to do, following the refinancing by the issuance of the high-yield notes in March of last year.

We've deployed our capital successfully. We've made three -- we made two and have one more in the pipeline -- accretive acquisitions. We built the business. We passed the fixed charge coverage ratio.

We've initiated a dividend on our common shares. And we've pointed a path to increase that dividend when the third vessel comes into our fleet -- or after the third vessel comes into our fleet in September.

Specifically we've increased our contracted revenue by $113 million to $123 million through the three acquisitions, the sale and leaseback transactions with OOCL, in under a year. We've expanded our EBITDA generation capacity by more than $28 million, which is an increase of over a third from the third quarter 2014 run rate.

Secondly, excluding the two 4,100-TEU vessels that operate in the spot market and which we have successfully kept in employment through the difficult times of the last couple of years, our fleet is fully contracted through until late 2017, with contracted revenue of $835 million at June 30 -- and pro forma for the OOCL Ningbo, $870 million or so -- with a weighted average remaining contract duration of 5.5 years. This substantial forward visibility on cash flows enables us to support the regular payment of a dividend whilst also confidently continuing to pursue our growth strategy.

Third, particularly now that we've exceeded the fixed charge coverage ratio related to our debt, our strong, stable capital structure supports our strategic goals, with no scheduled refinancings until 2019. We also have opportunities to actively manage our capital structure, as we've done in the past, and to pursue reduction in our overall cost of capital.

Finally, for all of these reasons we believe we are well positioned to pursue additional acquisitions of midsize and smaller vessels under a charter-attach basis, while assets over all remain at cyclical lows. We have established a clear path to earnings and cash flow expansion. There are more opportunities to be seized on in the market.

At the same time we've established a strong foundation for the payment of a dividend, which we've consistently targeted and are delighted to have initiated today. The expected full quarter's contribution of the OOCL Ningbo in the fourth quarter will bring us to a place where we can confidently expand our dividend to an annualized rate of $0.50 per share, which is 25% up on the starting dividend of $0.40 per share annualized.

With that I'd now like to turn the call over to the operator for Q&A.

(Operator Instructions) Mark Suarez, Euro Pacific Capital.

Good morning, Ian, Susan; and congratulations on reaching the dividend milestone here. Maybe we can just start with the latest acquisition of the OOCL ship. What target leverage you will be thinking about, and should we expect a full year to fully draw the DVB Bank debt to finance it?

Yes, we will fully draw the DVB financing debt to finance that acquisition. The new credit facility is secured on the Tianjin.

And if you're looking at leverage it's a $35 million facility on a purchase price then of $55 million; so that's 64%. So it's consistent with what we are seeing in the market of -- other than brand new vessels with long-term charters -- 65% to 70% leverage is available.

Right. That makes sense. Just turning on to the sister ships of the OOCL, are there more sister OOCL vessel targets that you can go after under similar terms, to potentially add a fourth sister ship here?

And I guess you just answered the leverage question. Presumably you will also be targeting the same, the 60% to 70% target range; correct?

Taking your second question first, we've demonstrated clearly with the Tianjin and the new facility, and to a lesser extent the $40 million revolver which we drew down against the Qingdao to facilitate the purchase of the vessel, we've demonstrated the sorts of leverage percentages at least that we think are available for these types of assets. In terms of further vessels with OOCL, clearly they're a significant liner company and they have a large fleet. I would never want to comment specifically on individual opportunities.

They, although we are delighted to have a very strong and good relationship with them, as we do with CMA CGM, there are other liner companies out there in the marketplace as well. And we keep our minds open to every opportunity, providing the economics are appropriate.

Okay. Just touching on the secondhand tonnage market out there, are you still finding viable opportunities here in the Panamax or the post-Panamax sector? And are these mostly charter-free opportunities?

You talked about the sales-leaseback charter, the attach opportunities. Have you seen more charter-free opportunities vis-a-vis the traditional sales-leaseback types of transactions you have done in the past? And would you consider such an option outside of the sales-leaseback historical transactions like you have with OOCL?

It's really tough to be quantitative about this, but our feeling is that the level of sale and purchase activity or at least opportunity has remained reasonably constant over the last couple of years. In terms of the relative number of charter-attached versus charter-free opportunities, that's probably also consistent.

We focus, however, as we've explained previously and I mentioned in the prepared remarks, we focus on charter-attached opportunities. They are the ones that will and have demonstrably driven the GSL business forward and has allowed us to be able to pay the dividend.

We continue to look at those immediately cash accretive sale-leaseback charter-attach transactions with three, maybe four years' worth of charter coverage, to avoid excessive exposure to the short-term target market which, although it is much firmer than it was, remains volatile.

Got it. So should we say that your preference then would be to go after other liner companies and strike similar sales-leaseback transactions as you have done with OOCL? That would be your preference; is that correct?

In a nutshell, yes. But we would also look at charter-attach transactions, so that they are not sale and leaseback, but the purchasing of ships out there today that already have a charter in place and we effectively buy the pre-existing charter. So we define them as slightly structured transactions rather than spot market transactions.

Got it; okay. Then maybe turning onto the balance sheet and as you look into the first half of 2016, what are your thoughts concerning refinancing of your five-year credit facility via that call option that I think you have coming up in April? Have you had any discussions with existing lenders, other lenders, regarding an alternative to that five-year credit facility, if you in fact go after that call option, to call that bond? What your thoughts regarding that structure there?

Sure. The bond is callable April 2016 at 105%, so we have considerable control at that stage. We keep a very open mind to refinancing opportunities.

It's our firm desire to refinance that debt on more favorable terms, both economic and detailed structure. But we have to be realistic; so we will see what market opportunities there are at the time. I hope, as you would expect, we have begun to think about how we could approach a refinancing.

Right. As you approach those refinancing alternatives, are you beginning to find, given your contracted revenues and distributable cash flow potential here, that maybe you could in fact eliminate, if not significantly reduce, any restrictive covenant tests, so that you don't have to deal with them as you have done in the past?

I think it's a little too early to speculate on that, Mark.

Okay. Then I guess just finally on the dividends, obviously you initiated dividends. I'm wondering if you can give us a view of the dividend policy from your Board.

I know it is obviously at the discretion of the Board. But should we think about, as you increase your distributable cash flow and earnings capacity, that your dividend should in fact increase in line that that? How should we view that dividend policy going forward?

The first thing I'd like to say is that we've banged on about maintainable -- sorry, a meaningful and sustainable dividend; and the sustainable bit is really important to us. We don't want to fluctuate in terms of dividend level from quarter to quarter. So we are very comfortable with the $0.10 right now, and we are very comfortable with the $0.125 per quarter for Q4 and beyond.

In terms of a dividend policy we've avoided putting in the published material any sort of payout ratios or anything like that. We don't feel right now at this stage of GSL's development we want to be tied to a payout ratio. But we've given you an idea about how the Board is thinking on dividends by announcing the intent to increase when we've got a full quarter's contribution from an acquisition.

Come the day with further acquisitions and further distributable cash flow, we would look very closely at the competing uses of that capital. Can we redeploy it in the business? What's the appropriate share of increased cash flow between reinvestment and return to shareholders?

Got you. Okay. Well, thanks for the color here, Ian, as always, and thanks for your time.

Charles Rupinski, Seaport Global.

Thank you and congratulations on the quarter, Ian. I had just a couple questions, sort of a follow-up to what you discussed about charter arrangements and what you're looking to do when you make acquisitions.

Would it be fair to say that three to four years is the sweet spot in terms of charter coverage? Or is that just what is mainly available that's not a newbuild, that you really can't go out much further than that in terms of you're buying something in the secondhand market?

Is there some-- would you potentially go longer? Could you go longer, from what you're seeing in the marketplace?

There is no strict rule here, Charles. Clearly the three transactions with OOCL are all 3, 3.25 years' worth of charter and we are certainly not uncomfortable with that. There are other sale-leaseback transactions out there which have shorter duration; there are others that are longer duration.

If you are buying into a charter-attach transaction, it could be a three-year-old vessel that's got nine years of its 12-year charter to go. So it does vary.

What we would look -- we would look at every single situation on its merits. We would look at the counterparty; we would look at the asset; we would look at the residual value of that asset, its deployment in the market. Were we comfortable buying an asset that was going to become open in two years' time or in five years' time? What do the economics look like? And we would make a decision project by project.

No, makes sense. Very good. The other question I had is just in terms of -- I saw that you did extend charters on the vessels with the Sea Consortium. These are shorter-term charters.

Any idea about what we can think about as far as the long-term deployment of those vessels, how you're going to think about deploying them? I might've missed something. Is it a matter of keeping them in the same type of arrangement, or potentially getting them on longer-term deployment?

Yes, I mean we were pleased to renew both of the charters with Sea Consortium at significantly higher rates, as I mentioned, sort of 30%, 40% up on prior rates for relatively short periods of time, four to seven months or so, taking us through to the end of the year. That relatively short fixing would be typical in a market where there is a degree of uncertainty about which direction rates are going to go. We were very happy for those durations.

As ever with the ships, forecasting a longer-term view is very difficult. We will wait and see what happens to the charter market nearer renewal dates.

We continue to have options to renew with Sea Consortium, to find another charterer. Or if the economics don't work for us then we can dispose of the vessels.

We are also mindful of course, turning back to the overall supply/demand projections for the industry, 2015 as I said in my remarks doesn't look too bad. 2016 actually topped down with a 6% forecast demand growth and only a 5% forecast in the fleet to grow, and none or very little of that fleet growth in the medium-sized and smaller sectors. We're mindful that that could lead to a very strong charter rate environment for Panamax tonnage going forward.

Very good. I had to ask this, because this is a contradictory thing that I -- for my -- seeing the philosophies. Clearly you would prefer the long-term charters. But just on an opportunistic basis, given your view of the market, just on a one- or two-vessel type arrangement is there any conceivable way that you would say: look, here's one vessel? It's a great value right here; we have an 18- to 24-month view; we are going to try to do it short-term and then lock on with new vessels. Or is it really going to be any new vessel that you acquire is going to have at least three to four years on it?

We will look at every situation on its merits. It's very difficult to be definitive.

Okay. But it sounds like there could be -- I'm putting words in your mouth. But it sounds like if you do have a conviction on a strengthening market and the opportunity arose, then you would be open to doing something shorter or buying something that is not locked in, potentially.

Yes. If we were very confident about near-term prospects for improving charter rates, then yes.

Fair enough.

The key to our business model is predictability. As we grow the business we have room in our portfolio for more short-term exposure. But it's absolutely crucial to us that we have got a decent forward view on our revenue and therefore cash flow streams.

Right. Exactly. I believe that should this happen it would be something that's incremental, not a change of strategy. Okay. Well, congratulations again on the quarter and thanks.

Jim Marrone, Singular Research.

Very well done on the quarter. You have done everything that you set out to do as far as the turnaround plan, acquisitions, growing future cash flows, and initiating the dividend. So congratulations on that.

My question is really, like, as a result of all these actions when is it going to really resonate with investors? Because it's really -- the stock has been trading in the $5 to $6 range since really January, February this year. It's had recent dips down to $5.20 with a lot of volatility just in the past week.

So have -- is there a lag period, do you believe that it will resonate in the share price? Or are investors looking for something else with respect to corporate action? Perhaps maybe you can provide some insight with respect to that.

Well bearing in mind some of our investors are on the call, I'd better be polite, hadn't I? Look, we've seen before periods of volatility before earnings. Yesterday's price action was more extreme than perhaps we've seen before, and I have no idea what drives this sort of stuff.

Our stock can trade very thinly. Occasionally there are days where volumes are very firm.

But the crucial thing now is that we have a dividend in place. We've stated the intention to increase that dividend to an annualized rate of $0.50 a share. That's providing a return to shareholders, which they have not seen for the past few years.

So all things equal that should provide a floor, if you want to look at it that way, a floor to the stock price, and we'll have to see how the stock responds. I think we're in a very different place now from August 4, 2015, with that dividend -- and having demonstrated spectacular growth, I would argue, over the past 12 months -- than we've been in before today's date.

Yes, very good. I concur with many of your points. That's all I have.

(Operator Instructions) Zach Pancratz, DePrince, Race & Zollo.

Good afternoon and congratulations. We've been waiting for this for a while and be first to congratulate you. I think you can see by today's stock price that, as we've talked about in the past, the best way to create value for yourself and for shareholders is through the dividend, not through growing the fleet for growth's sake. So it's good to see we've reached our first step here and we can move forward.

Just first off on the Ningbo acquisition, you guys gave clarity on what your current distributable cash flow is. How much will the Ningbo add to that $13.3 million that you have through June 30?

Well, we've put out there the run-rate EBITDA for this vessel of $9.4 million, which is the same as the other two. And we've indicated that she is partly being financed by drawing $35 million of this new credit facility, which is priced at L-plus-2.75%, so call it 3% just to keep the maths easy. 3% on $35 million is $1 million.

So incremental cash flow before drydocking and all the rest of it is $8.3 million. That's ignoring amortization.

Right. So then we're looking at a full distributable cash flow annualized, once this ship is delivered of -- was that $0.45 a quarter? So we are looking at about $1.80 in distributable cash flow you guys will have with this vessel?

If that's what the maths works it out at, yes. I haven't done it quickly enough.

Right. So I look at your stock today trading up about 14%, 15% and yet it still yields about 8.5%; your peers are yielding closer to 7%. You're at about a turn discount from an EV-to-EBITDA standpoint to your peers, and your dividend coverage ratio will be over 2.5 times to closer 3.0 times versus your peers at 1.8 times.

Is it fair to say, even with this coverage ratio, that you guys would still be looking to grow this dividend even if fleet growth were not to occur?

Well, that's a hypothetical. We fully expect to be able to continue to grow the fleet and share incremental earnings from growth with shareholders, retaining some to reinvest in the business, as I explained, depending on what's exactly happening in the market at the time, what the opportunities are, and what alternate uses of our cash would be.

Right; okay. Well, the faster we can grow the dividend, as you can see, shareholders will be rewarded, as will you. So that's clearly what drives the stock here.

We appreciate that.

Yes. Then lastly what your current liquidity looks like: I know you still have the unencumbered vessel that you can draw on. What type of purchasing power do you guys have currently?

It's probably much the same as we had before we committed on the Ningbo. We feel right. That vessel is unencumbered, so prima facie we could raise $35 million on her; together with cash that we've got would mean that we should be able to make another investment of $50 million or $60 million in the relative near term.

We have to bear in mind, as you know, that our cash flow is lumpy. We've got the tender offer on our shares -- sorry, on our notes in early next year. That has to be done by the end of April. We have interest payments as well that we need to take account of.

But prima facie we have capacity today if we levered up Ningbo to buy another similar sized acquisition.

Can we expect when you guys purchase an additional vessel that, in conjunction with that, you would also announce the dividend increasing, seeing that it would be accretive to both cash flow and the dividend?

Well, that's what we did today.

Right; okay. That's all I have, and congratulations.

Showing no additional questions in the queue at this time, I would like to turn the conference back over to Mr. Ian Webber for any closing remarks.

Great; thanks very much. Thanks all. Thanks for listening, and we look forward to giving you a further update on progress late October, early November on our Q3 results. Thank you very much.