Navios Maritime Partners LP (NMM) 2012 Q4 法說會逐字稿

Thank you for joining us for this morning's call. With us today from the Navios Maritime Partners are Chairman and CEO, this Ms. Angeliki Frangou; SVP of Business Development, Mr. George Achniotis; and Chief Financial Officer, Mr. Efstratios Desypris.

This conference call is also being webcast. To access the webcast, please go to the investor section of Navios Partners' website at www.Navios-MLP.com, and you will see the webcasting link.

I would now like to read the Safe Harbor statement. This conference call could taint contain forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995 about Navios Partners. Forward-looking statements are statements that are not historical fact. Such forward-looking statements are based upon the current beliefs and expectations of Navios Partners' management and are subject to risks and uncertainties which could cause actual results to differ from forward-looking statements. Such risks are more fully discussed in Navios Partners' filings with the Securities and Exchange Commission. The information set forth therein should be understood in light of such risks. Navios Partners does not assume any obligation to update the information contained in this conference call.

At this time I would now like to review the agenda for today's call. First, Ms. Frangou will offer opening remarks; next, Mr. Desypris will provide a review of Navios Partners' fourth-quarter and full-year 2012 financial results; then Mr. Achniotis will give an operational update and an overview of market fundamentals; and finally, Ms. Frangou will then offer concluding remarks and we will open the call to take your questions.

I would now lie to turn the call over to Angeliki Frangou, Chairman and CEO of Navios Maritime Partners. Angeliki?

Thank you, Laura, and good morning to all of you joining us on today's call.

I am pleased with our results for the fourth quarter of 2012. Net income increased by 114% and EBITDA by almost 59%. Of course, this includes a $24.6 million cash compensation we received in the fourth quarter for the restructuring of our credit default insurance. We also recently announced a quarterly distribution of $0.4425 per unit with a record date of February 8, 2013. We have an annual distribution of $1.77, providing a current yield of about 12%. This is a minimum distribution to which we have committed for 2013.

As you can see from slide 2, Navios Holdings owns 25% of the equity of Navios Partners. With the assistance of our sponsors, Navios Partners has become a key player in the dry bulk industry. Today, Navios Partners has a market capitalization of about $900 million and an enterprise value of $1.1 billion. Navios Partners has a conservative balance sheet with net debt to our adjusted asset ratio of about 32% as of the end of 2012. Consistent performance has also enabled Navios Partners' continued access to the capital market and provides Navios Partners the ability to grow its fleet and cash flow.

In fact, since Navios Partners went public, we have increased our fleet almost threefold. Today, we have 21 vessels in the water with average added duration exceeding three years.

Looking back, 2012 began as another difficult year in shipping with the industry continuing to be buffeted by global uncertainty and market headwinds, as in 2010 and 2011. Indeed, the industry suffered, as evidenced by a 20-year low in the BDI. Many shipping companies were required to restructure their balance sheet.

However, 2013 began with a number of global uncertainties being resolved favorably, such as through the ECB strength of action, the US legislative action, the new proactive Japanese administration and the new pro-growth Chinese regime. Looking forward, there is a new optimism building as Chinese again (technical difficulty) seeks to invest in infrastructure to support urbanization. China's GDP grew in line with expectations with strong industrial output. Moreover, iron ore inventories in China were at a two-year low, suggesting a major upcoming Chinese buying cycle.

These positive events, coupled with a tightening on the global supply/demand balance and a record scrapping level should lend support to a recovery in shipping. Navios Partners is, along with some of its peers, uniquely positioned to take advantage of this market recovery.

On slide 3, we set forth our fleet development during the latest part of 2012. As you can see, we acquired three vessels for $109 million. The Navios Buena Ventura, a 2010-built Capesize, was delivered in the second quarter of 2012. She's chartered out at $29,356 net per day until October 2020 with a 50-50 profit setting.

The Navios Soleil, a 2009 Ultra-Handymax, was delivered in the third quarter of 2012, and she's chartered out at $8906 net per day until December 2013. Finally, the Navios Helios, a 2005 Panamax, was delivered in the third quarter of 2012. She's chartered out at $9738 net per day until September 2013. We financed these vessels through a new $44 million facility with DVB and ABN AMRO and a $70 million net process from our second-quarter 2012 offering of 4.6 million units.

As many of you know, we restructured our credit default insurance in the fourth quarter of 2012. Slide 4 summarizes our new insurance. In sum, we received $277.2 million of new coverage in a combination of cash and insurance. $252.6 million of revenue is now covered under two new insurance policies. One is a $175.9 million policy issued by an all AA-rated insurance company and a $76.7 million policy covered by Navios Holdings. I note that the maximum cash recovery under the new insurance policies is $140 million. However, 80% of the insured revenue under these policies, or more than $200 million of revenue, is from investment-grade counterparties. As for the non-investment grade portion, our maximum cash payment is equal to 278% of the non-investment grade exposure. We think that we are adequately insured at this point.

We also received $24.6 million of cash from our credit default insurance which we applied for the payment of debt, $10.8 million applied to repay debt otherwise due in 2013 and $13.8 million applied to repay debt otherwise due in 2014 and beyond. This prepayment improved our cash flow by the payment amount in those years. In 2013, this has an effect of reducing our cash breakeven by $1409 per day, per vessel.

Slide 5 shows the multiple ways we have been able to grow our fleet and distribution. To date, we have done so with our system a exposure through various drop-downs. We have also exercised purchase options we have on our chartered-in vessels. More recently, we have been active in the sales and purchase market and will continue to use this market to improve our fleet as opportunities arise. We consider all these acquisitions accretive but also believe that the sales and purchase markets, for the first time in awhile, provides attractive entry points. As a result, you can expect us to continue making acquisitions from the open market.

At this point, I would like to turn the call over to Mr. Efstratios Desypris, Navios Partners' CFO, who will take us through the results of the fourth quarter and the full year of 2012. Efstratios?

Thank you, Angeliki, and good morning, all. I will briefly review our unaudited financial results for the fourth quarter and year ended December 31, 2012. The financial information is included in the press release and is summarized in the slide presentation on the Company's website.

We had another quarter with a strong operational and financial performance. As a result of our continued growth in our operating metrics and the measures taken to lower our cash breakeven, we remain committed to a minimum annual distribution of $1.77 per common unit for 2013.

Before I start reviewing our results in detail, I would like to remind you that, as Angeliki mentioned earlier, in the fourth quarter of 2012, we received a cash compensation of $24.6 million for the restructuring of our credit default insurance. For accounting purposes, the net effect of this restructuring amounted to $22.5 million and has positively affected EBITDA, net income and earnings per unit calculation for both the quarter and the year ended December 31, 2012.

As shown in slide 6, revenue increased by 4.6% to $52.8 million, mainly due to the 267 more available days for the fourth quarter of 2012 compared to the same quarter of 2011. EBITDA increased by $22.7 million or 58.8% to $61.3 million for the fourth quarter of 2012. Net income increased by $21.4 million to $40.1 million. The increase in net income is mostly attributable to the accounting effect of the cash compensation received from the credit insurance discussed above and by increasing the number of available days, and it was adversely affected by a $1.5 million increase in depreciation and amortization expense due to our largest fleets.

Operating surplus for the quarter ended December 31, 2012 was $54.2 million, 73.2% higher than the corresponding quarter in 2011.

Our fleet continues to perform well. Vessel utilization for the third quarter was 99.9%. Moving to the 12-month operations, time charter revenue increased by $18.4 million to $205.4 million, mostly due to the 751 more available days. EBITDA increased by $39.6 million or 28.7% to $177.4 million. Net income increased by $30.6 million or 46.9% to $95.9 million. Operating surplus for the year ended December 31, 2012 was $148.9 million, which is 28.5% higher than the corresponding period in 2011.

Turning to slide 7, I will briefly discuss some key balance data for December 31, 2012. Cash and equivalents, including restricted cash, were $61.7 million. Total assets grew to $955 million, mainly due to the acquisition of three vessels during the year. Long-term debt, including current portion, decreased by $26.3 million. This was mainly due to the $70.3 million debt repayment made during the year, of which $24.6 million related to the prepayment made in the fourth quarter following the cash compensation received for the restructuring of our credit default insurance. This prepayment had an effect of lowering our cash breakeven for 2013 by $1409 per day per vessel. Furthermore, we have obtained additional financing of $44 million for the acquisition of the three vessels during the year.

Net debt to asset value on a charter-adjusted basis decreased to 32.4% at the end of the quarter. We are able to maintain this relatively low leverage ratio despite the decrease in their vessel values in the market. As of December 31, 2012 we were in compliance with the financial covenants of our credit facilities.

As shown on slide 8, we declare distribution for the fourth quarter of $0.4425 per common unit. This represents a 26.4% increase over our minimum quarter distribution. The record date for the distribution is February 8, and the payment date is February 14, 2015. Total distributions for the quarter amount to $27.6 million. Our distribution coverage for the quarter was 1.96 times. Our healthy coverage ratio and our strong financial performance enable us to remain committed to a minimum annualized distribution of $1.77 per common unit for 2013.

Here, I have to remind you that for US tax purposes, a portion of our distribution is treated as a return of capital. Also, we report the cumulative annual distributions to our common unitholders on Form 1099.

On slide 9, you can see that Navios Partners has consistently paid quarterly dividend distributions since its inception in November 2007. Furthermore, we have increased our quarterly dividend distribution nine times since 2008, which represents an average increase of almost once every two quarters. Our current annual distribution of $1.77 provides for an effective yield of 12.1% based on yesterday's closing price.

Slide 10 demonstrates our strong relationship with key participants in our industry. We have quality charters with an average remaining period of over three years. These charters are spread among a diverse group of counterparties. In addition, we have ensured our long-term charter out contracts for credit default with either a AA-rated insurance company in the EU or our sponsor, Navios Maritime Holdings.

As shown in slide 11, our fleet consists of 21 vessels -- 7 Capesizes, 12 Panamaxes and 2 Ultra-Handymax vessels. We have a relatively young fleet with an average age of 6.2 years as compared to the industry average of 10 years. Currently, we have contracted 87.6% of our available days for 2013 and 48.3% for 2014. The expiration dates are staggered and the charter durations extend to 2020, to the latest.

I now pass the call to George Achniotis, our Executive Vice President of Business Development, to discuss the industry section. George?

Thank you, Strat, and good morning, all. Please turn to slide 12. World GDP continues to be driven by developing economics. Developing economies now contribute a higher percentage of total world growth than the developed economies, representing over half of the global consumption of most commodities. Yesterday, the IMF slightly lowered its forecast for world growth to 3.5% for 2013 and 4.1% for 2014. Emerging economies are projected to grow at 5.5% in 2013 and 5.9% in 2014. The Chinese economic growth is unchanged at 8.2% in 2013 and 8.5% in 2014. India's economic growth is expected to be 5.9% in 2013 and 6.4% in 2014.

Change to slide 13, the primary engines of trade growth continue to be China, India and Brazil with other emerging countries adding strong growth. Dry bulk trade has expanded by an average of 5.4% per year in the last decade since China joined the WTO. Consensus focus for 2013 are for global dry bulk freight to grow approximately 5% and ton-mile growth of about 7%. A similar growth rate is estimated for net fleet growth, leading to balance to supply-demand dynamics.

Please turn to slide 14. In order to continue their urbanization and industrialization, China and India continue to invest heavily in infrastructure throughout Latin America, Africa and the Middle East. Both countries are securing supply lines of natural resources with these infrastructure investments to ensure continued growth. As a larger portion of world trade is occurring between emerging and developing countries, trade patterns are shifting eastward and southward. According to new figures from the World Bank, the value of exports from developing countries to other developing countries, the South-South trade, now exceeds exports from poor countries to rich ones, South-North trade.

Moving to slide 15, the development and urbanization of the western and central parts of China will contribute significantly to steel consumption in 2013 and onwards. Infrastructure, housing construction and consumer spending growth will underpin development in 2013 and beyond. Underlying this trend is the continued expansion of Yangtze River cargo traffic, which reached another record of 1.8 billion tons carried in 2012. Crude steel production in China in 2012 was about 5% more than 2011. In order to support this growth, China imported 745 million tons of iron ore, 9% more than 2011. Of particular note is that imports increased 9% in 2012 while domestic iron ore production was stagnant at about 1% increase year on year.

The current substitution of imported iron ore for low-quality domestic production is expected to continue and will increase the tons carried and ton miles. The chart on the upper-right shows (technical difficulty) estimated new iron ore mining capacity from Australia and Brazil graphed against the expected decline of domestic Chinese iron ore mining.

Turning to slide 16, India has taken initial steps to industrialize and urbanize. As you can see on the lower right-hand chart, India is expected to increase its urban population to 590 million people by 2030. That means India will have to build about 1.5 New York City's per year during that time. To keep pace with expanding steel and electricity production, Indian coal imports, shown on the left-hand chart, have increased at a 24% compound annual growth rate between 2006 and 2011. According to the Central Electricity Authority of India, substantial demand will continue as 65% of current planned new power generators will be coal-fired. India currently generates 79% of its power using coal. As a comparison, the US uses coal to generate about 40% to 45% of its electricity.

Turning to slide 17, low freight rates, expensive fuel and high ship scrap prices led to record scrapping of 33 million deadweight tons in 2012. Scrapping rates for older, less fuel-efficient vessels have continued at very high rates this year. Through January 18, about 1.5 million deadweight tons were scrapped. If this trend continues, scrapping could once again exceed 30 million tons in 2013. The current rate environment should keep scrapping levels high as over 6.4% of the fleet is 25 years of age or older and over 13% of the fleet is over 20 years old, providing about 89 million deadweight tons of scrapping potential. Of note is that the current 2013 scrapping totals already include three ships that were less than 20 years old and one that was less than 15 years of age. As demolition prices appear to depend on overall street prices and not on the supply of vessels, they are expected to remain high, thus making it economically logical to scrap older, less efficient vessels.

Moving to slide 18, 2012 new building deliveries totaled a record 98 million deadweight tons against an expected 139 million deadweight tons. As was the case in 2011, non-deliveries amounted to 30%, bringing 2012 net fleet growth at 10.3%, the lowest level in the last four years. Net fleet additions this year are expected to be lower than last year. This means that net fleet growth should balance with the expected ton-mile increase in demand during 2013. The order book declines dramatically in 2014 and beyond and is expected to remain that way as banks continue severe restrictions on new building loans.

Please now turn to slide 19. An oversupply of tonnage and continued economic weakness in 2012 contributed to the BDI reaching the lowest yearly average since 1986. Front-loaded deliveries of new vessels may keep Q1 rates under pressure, and this in turn should help to maintain current high scrapping rates. China seems to have returned to growth, meeting or exceeding their stated 7.5% growth goal. Steel prices are showing signs of recovery and power generation is up year on year.

So far in 2013, rates have stabilized, given the strong demand for South American grain exports. China is expected to deemphasize domestic iron ore production in favor of iron ore imports, which will support the Capesize vessels. In contrast, Panamax and Handymax rates are expected to be pressured as new buildings are delivered.

This concludes my presentation. I would now like to turn the call over to Angeliki for her final comments. Angeliki?

Thank you, George. This concludes our formal presentation and we will open the call to questions.

Michael Webber, Wells Fargo.

Hi, good morning, it's actually Ross on for Mike. I wanted to start with fleet growth. You mentioned the S&P market. I think on Q3, you had talked to something in the neighborhood of 4 to 6 vessels. I just wanted to -- I guess, one, is that still a target over the intermediate term? And second, are you out there looking at things? And if so, what kind of vessels are you looking at which? Are there distressed opportunities? Are they the bigger size? Just any color on that would be helpful.

First of all, we are very active on the S&P market. This is a market that is favorable for buyers, on -- both on the distressed deals and -- I mean, in essence, in this kind of a low level, usually you have owners that really are weak. That's why they would like to sell into today's market. Also, with again being weakened, I think that creates more activity from the Japanese market and we have a target of 4 to 5 vessels on a yearly basis.

Okay, is it fair to assume that those are the same size as you are already in -- Capes, Panamaxes? Would you go bigger than -- or, I'm sorry -- bigger than like the post-Panamaxes we have heard some people talk about, or is it just a matter of where values are?

This is driven by value, or the best relative value. But it will be on the sectors we are in.

Right, okay. Next, you have got a number of vessels rolling off in 2013. The ones that have come off recently, for the most part, you have been looking to move them relatively -- or on relatively short-term contracts. Is that fair to assume going forward that if rates stay where they are at, you would probably look to lock them up relatively short-term?

Yes. We are looking -- we see that 2012 was a difficult year. 2013 we have seen these positive things happening from the ECB to US legislation to a proactive Japanese administration to a pro-growth Chinese administration. So we see that there is positive things, and we also see, on the supply-demand side, that this net fleet growth this year will be balancing with dry bulk millions of tons.

So with this kind of -- at the current pace, and with the vessels coming in the second half, mostly, of the year, we like to keep it short so that we have the ability to see the upside of the recovery.

Got you, it makes sense. And then finally, a modeling question -- can you provide any details on the drydocking schedules for 2013, how many vessels and by quarter how many?

Yes. It was just an overview. We can take that off-line, if you want.

Sure, sure.

We expect around 5 to 6 vessels to go for drydock. I think only one of it is coming on Q1.

Okay, got you. That's fair enough. I'll turn it over. Thanks.

(Operator instructions) Natasha Boyden, Global Hunter.

So I just wanted to drill down a bit. As Ross pointed out, you do have a number of ships coming off charter this year and a number for next year as well. Obviously, given the current market environment, it's probable that the assumption for the new rates will be well below current rates. I'm just curious as to your thoughts on how you intend to make any dividend payouts at this point, should you recharter the vessels at market rates.

We have accounted that we will do it at market rates, and that's why we reiterate our commitment on minimum distribution of $1.77. We feel very comfortable about that and we feel that -- but of course, as I said before, we will do it in short periods. We are not going to lock in this rate. But we can say that we feel very comfortable on doing on distributions.

The comfort that you have is for 2013; is that correct, not necessarily 2014?

We can do the calculation; you can see that we easily can do 2014. We just -- the first time that we like to reiterate a commitment on minimum distribution be relevant to other additional purchases we may do in the year.

Okay, that's fair enough. So I'd like just a little bit more on the industry question. How do you view the new eco-designed ships impacting the broader dry bulk market, both in terms of their increased capabilities as well as any potential of new ordering that they could spark?

I will speak with you immediately on eco-design. One thing that I wanted to add on the previous question that maybe I didn't mention enough -- on the process we received on the $25 million we received from the insurance, which is -- was extra cash flow, we reduced our cash breakeven by $1400, a little bit more than $1400 per day per vessel, for 2013. And it is something that you should also take in your consideration and in your calculations. I just forgot to mention that before.

Okay, that's helpful. Thank you.

Now, on the eco-design, we are, of course, monitor the situation. But if you really do -- first of all, you can do an alteration that is relative -- with about $200,000, you can have an eco-speed and even less on certain vessels. As we have modern vessels that cost is even further reduced. You would be amazed that it goes down to about $50,000 at best. And in the eco-design, and you are actually -- at reduced speeds are very comparable with a couple -- maybe 2, 3 tons differential from existing vessels. Also, the real eco-designs will not come into effect until 2014, real eco-designs, not the reduced engines, which really do not produce anything; you can do it -- with a $50,000 alteration, you can actually do it in the existing modern vessels. As you remember, Navios has modern designed vessels, Japanese and South Korea. So the alterations to reduce -- to lower economic speed is really not very expensive. It's very inexpensive; it's about $50,000.

In the longer term, I think the differential is minimal. Of course, we will always commit to a newer design as we go along. And we have done that with some of our chartering inventions as we come in. They will be coming on the new eco-design.

Okay, great. And just moving back to the company-specific, I know, Angeliki, you have talked a lot in the past about the potential distressed opportunities. Could you talk about what the environment is like out there for those kind of opportunities and how willing the banks are to step in with you and execute?

The banks are willing to step in. The issues are really, with these kind of book values versus market values and the disparity that exists, it's quite tricky on every side how to accommodate these things. But I think with the European Union, I think one positive thing we can see that with the ECB action and with the European Union being able to come to a normality, countries can borrow. We saw Spain, Italy borrowing. And banks can borrow from the bond markets. That will allow them to take the losses which previously they were very unable to do it because it hits at the other one.

Also, with Basel III extended until 2019, you still have an execution of deal lockup. So now, banks can transact, which previously they could not take the loss. So there are two positive things -- having the Basel III extended until 2019, giving a brief before the (inaudible) capital to remain at a higher level, plus the ability of banks even in Spain to borrow directly from the market will allow banks to take their real losses and move forward, from book values at pre-crisis levels to realistic market values of today.

Okay, great, thank you very much for your time.

Christopher Combe. JPMorgan.

This is actually Nish Mani for Chris. Just a couple of quick questions on growth -- in terms of acquisitions you guys are looking at, we noticed that the Navios Buena Ventura was actually acquired with a pretty long-term charter. And obviously, you guys paid a premium in order to secure that charter. Is that a strategy you guys are willing to look at, come again? Or are you mostly looking at unchartered vessels in the S&P market at this time?

We have articulated that we are also looking. We believe that, in today's cycle and the moment in the cycle is also attractive to buy vessels from the open market. With no charters but, of course, with -- in today's values, today's charters make sense. So as you -- as market recover, the revenues recover, this becomes more accretive to the bottom line. I think for everyone $1000 that is above cash breakeven, you have $0.012 accretion to the older unitholders.

So, if you buy vessels today and you make sure that your breakevens make sense, so today's cash flow with today's values, okay, every $1000 that the market recovers, which will eventually happen, this will translate to $0.012 accretion to your entire unitholders. That is how you replenish the cash flows that you are going to be missing as the vessels are coming from their previous charters.

Okay. So it seems like a tactical mix, then, because obviously you are willing to go for the unchartered vessels as well. And how does this factor in with the drop-down program from the parent company? Is that something you guys are still actively pursuing and seeking candidates in the discussions ongoing now?

If you have seen in our page 5, we always articulated to you that we have three avenues of growth. One is the via the sponsor that creates a steady flow of vessels. And you have seen that we have (inaudible) about 11 vessels and over $115 million of EBITDA. We have exercised our purchase option, which is another area where you can have opportunities. As yen is now weakening and we broke the 90 level, we will see more from the Japanese market coming from purchase option. And the third option was always that, buying from the open market.

In today's levels, where they are really on the cyclical low and seasonal low and you have attractive distress opportunities, the dry bulk open market, the S&P market, is a very attractive market. That's how do you replenish assets in the low of cycle so that you are able to replenish your entire age profile and fleet.

Got it. And then just a final question -- on the Aldebaran, which the charter expires in March, are there any material updates as to the chartering strategy you will employ? Will it typically focus on the shorter charter with the profit share? Or how do you guys look at that?

We are going to be looking on the shorter period. The good thing, it's going to be opening up on Q2, which usually is the seasonally strongest quarter. As you know, we have the seasonality, Q2, Q4 being seasonally up with Q1, Q3 being the seasonally low. So I think it is in a good moment.

Okay, great, thank you so much for your time guys. I really appreciate it.

Joshua Katzeff, Deutsche Bank.

Just to start off on the balance sheet, it looks like related-party liabilities has been picking up steadily through the year. How should we think about that $21 million or so going forward? Is that going to be reduced or is this a good run rate going forward?

You can see that, first of all, this is more timing, a timing issue, but also there is the growth of our fleet that you have to take into account. So if you compare what is the balance now compared to the previous quarter, not a year ago, you will see that more or less the balances do not move so much higher.

So effectively, going forward, we should expect to have a little lower amount due to related parties, after we take into account the time difference, and we should expect it to hover at that level, somewhat lower than what you see now.

Okay, so Q3 might be a better run rate?

Yes, yes.

And then switching gears, with regard to fleet growth, how should we expect that to be funded? There's $30 million or so of free cash. Clearly, you could take on some leverage. But are you still thinking about potentials for further capital raises, or are there opportunities to get really attractive bank financing, where you could put up limited amounts of actual equity?

We have to wait. I think we can work with our banks and create a very attractive package for us where our breakeven become very attractive on the front end, or we can do acquisitions. Either/or is -- both ways can be done.

And I just wanted to clarify something from earlier on the call. I guess we should expect acquisitions to be used to bolster the dividend, particularly, correct, and not necessary for increases?

Sorry; can you repeat, because I didn't understand your question?

Sorry. I guess I just wanted to clarify that acquisitions are going to be used to maintain the dividend, not necessarily for increases.

Okay, let me repeat. We are committed in a dividend of 2013. Today's markets on all the refiner -- on all re-chartering of our vessels. On new acquisitions, this will have to be judged on the particular acquisition. It is a little bit difficult to say. It depends what kind of a vessel we find and what kind of a situation. So I think it is a little bit immature to give you those kind of answers.

Got it. And then I know Natasha asked this question earlier, but just wanted to clarify. So with regard to the distribution in 2014 and the time charters rolling, how do you think about the distribution in 2014?

We don't have any problems, as I stated, but that's why we gave that clarity.

Okay, I appreciate the time, thank you very much.

Ken Hoexter, Bank of America Merrill Lynch.

It's actually Wilson sitting in for Ken. If I could -- most of my questions have been answered, but comment at the distribution question from another angle. Obviously, the unit coverages seems relatively healthy, but as some of the charters roll off, you have spoken as much that the rates you are probably going to get are going to be lower. At what kind of coverage do you start getting more comfortable with increasing the distribution again, if you have a target in mind? Or any type of guidelines in that sense would be very helpful.

We feel comfortable on 110-115. So I think the moment we see more, better than that, we will definitely increase distribution. In essence, as it is, we all align in this and growth and distribution aligns the whole Company and the investors.

Great, that was all I had, thank you.

That was our final question, and I would like to turn the floor back over to Ms. Frangou for any closing remarks.

We thank you very much for attending our Q4 results.

Thank you. This concludes today's conference call. You may now disconnect.