Performance Shipping Inc (PSHG) 2012 Q4 法說會逐字稿

Greetings. Welcome to the Diana Containerships Incorporated fourth-quarter 2012 conference call and webcast. At this time, all participants are in a listen-only mode. A brief question-and-answer session will follow the formal presentation. (Operator Instructions). As a reminder, this conference is being recorded.

It is now my pleasure to introduce your host, Edward Nebb, IR Adviser for Diana Containerships Incorporated. Thank you, Mr. Nebb. You may now begin.

Thanks very much, Rob, and good morning and good afternoon to all. Welcome to the Diana Containerships Incorporated 2012 fourth-quarter and full-year conference call.

The leaders of the management team who are with us today include Mr. Symeon Palios, Chairman and Chief Executive Officer; Mr. Anastasios Margaronis, President; Mr. Andreas Michalopoulos, Chief Financial Officer; Mr. Ioannis Zafirakis, Chief Operating Officer and Secretary; and Ms. Maria Dede, Chief Accounting Officer.

Before management begins their remarks, let me briefly summarize the Safe Harbor notice. Certain statements made during this conference call which are not statements of historical fact are forward-looking statements pursuant to the Safe Harbor provisions of the Private Securities Litigation Reform Act. Such forward-looking statements are based on assumptions and expectations, projections, intentions and beliefs as to future events that may not prove to be accurate.

For a description of the risks, uncertainties and other factors that may cause future results to differ materially from what is expressed or forecast in the forward-looking statements, please refer to the Company's filings with Securities and Exchange Commission.

Now with that, let me turn the call over to Mr. Symeon Palios, Chairman and Chief Executive Officer.

Thank you, Ed. Good morning, and thank you for joining us. It is my pleasure to report to you on the performance of Diana Containerships Inc. for the fourth quarter and full-year 2012. Our performance for 2012 reflects our successful efforts to pursue growth opportunities in the containership market, to maintain a strong financial capacity and to build the foundation for long-term shareholder value. Now let me review some of the highlights of Diana Containerships' operational and financial performance during the past year.

We acquired five container vessels during 2012, bringing the total size of the fleet to 10 vessels at December 31, 2012. That represents a doubling of the fleet in just one year. In addition, we announced this morning that we have signed a memorandum of agreement for the purchase of a 1993-built Panamax container vessel, the motor vessel Hanjin Malta, for $22 million. The vessel, which is expected to be delivered in mid-March, is chartered to Hanjin Shipping Company Limited and is expected to generate approximately $27.98 million of gross revenue for the agreed minimum period of the charter.

Our fleet is time chartered to some of the industry's leading container lines for 68% of the days in 2013, approximately [36%] of the days in 2014, 15% in 2015 and a few days in 2016, providing a stable revenue stream. The contracted gross revenue of the fleet is approximately $116.4 million.

Looking at our financial results, time charter revenues for the 2012 fourth quarter were $14.6 million. This compared to $9.8 million for the same period of 2011. Time charter revenues for all of 2012 totaled $56.6 compared to $27 million for the year 2011.

Net income was $0.3 million for the 2012 fourth quarter and $6 million for the year. This compares with earnings of $1.3 million for the fourth quarter and $3.6 million for the full year 2011.

Our progress is also reflected in our strong balance sheet. At the end of 2012, the Company had $31.5 million in cash on the balance sheet and stockholders' equity of $238.8 million. We strengthened our capital during the past year, and thus our financial flexibility, through an offering of 9.1 million shares of Diana Containerships' common stock, including overallotment, completed in August 2012.

Our investment in the growth of the Company has enabled us to generate strong cash flow and to reward our shareholders with an increasing and attractive dividend. The Company paid a total of $1.00 per share in dividends during 2012, up from $0.18 per share paid in 2011.

Today, we have announced that the Board of Directors has declared a dividend of $0.30 per share payable on or around March 21, 2013 to all shareholders of record as at March 5, 2013.

We also announced today that Diana Containerships has established a new wholly-owned subsidiary, United Ocean Transport Limited, or UOT. After March 1, 2013, we intend for UOT to provide management services comparable to those now being provided by Diana Shipping Services S.A. We are taking this action because Diana Containerships has grown to a sufficient size that it is more appropriate for these management services to be provided by a directly-owned subsidiary rather than outsourced to Diana Shipping Services. We are expecting material terms of the new management agreement with UOT to be substantially similar to those with Diana Shipping Services.

In summary, the performance of Diana Containerships for 2012 reflected our strategic action to grow our fleet, to expand our potential to generate solid cash flow and to build on our strong financial capacity to support our continued growth. Going forward, we will continue to pursue the strategies that have driven our progress today and we remain committed to delivering shareholder value through our dividend policy.

Now I will turn the call over to our President, Anastasios Margaronis, for a perspective on (inaudible) conditions. He will then be followed by our Chief Financial Officer, Andreas Michalopoulos, who will provide a more detailed financial overview. Thank you.

Thank you, Simon, and welcome to everyone who has joined us in our first quarterly conference call of 2013. We would like to start this summary with the market conditions prevailing in the containership sector of the shipping industry by looking at the overall state of the world economy and the medium-term prospects thereof.

The IMF estimates that world growth will reach 3.5% in 2013. That is up from 3.2% in 2012. However, there remain (technical difficulty) of significant downside risk and emphasize that the growth is almost entirely reliant on emerging or developing countries and the United States. But they also emphasize in the report that if the [crisis] risks fail to materialize and financial conditions continue to improve, global growth [would even] strengthen.

In the United States, consumer spending climbed in December according to Maersk Broker, boosted by incomes rising by the most in eight years. Consumer spending, which accounts for 70% of economic activity in the United States, rose 0.2% in December following a 0.4% gain in November of 2012.

China's manufacturing now continued to expand in January this year, but at a slower pace than in the previous month. The China Federation of Logistics and Purchasing Managers Index was at 50.4 in January, down from 50.6 in December 2012.

Looking at world trade, the (inaudible) notes that China's foreign trade rebounded sharply in December 2012, with total value growing by 10.2% year-over-year, to reach $366.8 billion for that month. This brought the aggregate foreign trade value for 2012 to, United States dollars, $3.9 trillion, a 6.2% year-on-year increase. This latest increase, however, was (technical difficulty) sharp reduction from the 22.5% growth in foreign trade that we saw during 2011.

Turning now to the banking sector, which has had a profound effect on development in the containership industry during the last three years or so, we note that according to [Kupfertransport], the German Federal financial supervisory authority announced that they would give the shipping loan portfolios of German banks some special attention when checking their balance sheets.

An article in The New York Times last December may have stirred up things by reporting that according to Moody's, Germany's 10 largest banks have $128 billion in outstanding credit related to the global shipping industry. That is more than double the value of their holdings for government debt from Greece, Ireland, Italy, Portugal and Spain put together. It is also more than any other nation's financial exposure to the shipping industry. Yet, the German taxpayers have hardly noticed where a significant part of their savings has been invested by their bankers.

It remains to be seen now what effect this scrutiny by the regulators will have on the asset values of containerships, which form a large part of the German bank shipping loan portfolio.

Turning to the container space now, according to Clarkson, during 2011, global container trade expanded by 7.1%. The growth rate for 2012, again according to Clarkson, was only 4.8%. The total figure, however, had large differences among trade lanes. Combined mainlane trades contracted according to Clarkson by 0.7% in 2012, but are expected to return to modest growth in 2013. This projection does carry some downside risk due to fiscal uncertainty in the United States, as well as the potential for an extended Eurozone recession. By contrast, non-mainlane trade volumes increased 6.5% in 2012 and intraregional trade expanded by 6.8% during the same year.

The encouraging sign here is the growing significance of these fast-growing trades in the overall trade volume. For example, Asian exports through the southern hemisphere, such as exports to Latin America and Africa, are estimated to have expanded by 9.6% and 9.2%, respectively, during 2012. However, Clarkson does remind us that decelerating economic growth in Argentina and Brazil presents some downside risk going forward, although Latin American consumer demand should remain relatively robust going into 2013.

Furthermore, overall containership capacity deployed on intra-Asian trade has grown according to Clarkson by 23% during 2012 to reach almost 1.3 million TEU at the beginning of December.

In contrast to the above, European container import volumes declined by 2.7% in 2012. However, as we will see below, for 2013, the outlook presented by Clarkson is more positive, with European imports expected to grow again, assuming there is at least some improvement in the economic environment.

According to RS Platou Economic Research, the prevailing forecast for world (technical difficulty) GDP in -- growth in 2013 presents an increase in world container traffic of nearly 7%. This is based on a factor of container traffic to global GDP growth of two. However, European GDP is forecast to remain more or less stagnant in 2013, and this will probably limit the growth potential in container trade to Europe.

According to RS Platou, global container trade growth could therefore increase less than the overall macroeconomic forecast suggests. Therefore, we believe that the Clarkson projection of world box trade growth of about 6.6% in 2013 sounds very plausible.

Turning to supply, Clarkson's projected container capable fleets have grown by 6.7% in terms of capacity in 2012, reaching 18.6 million TEU. They also predict fully cellular containership supply to grow by a further 7.5% in 2013.

As for newbuilding delivery, Clarkson estimate that about 1.4 million TEU will actually be delivered in 2013 compared to the 1.6 million TEU which have been scheduled for delivery in 2012. Howe Robinson more or less agreed with the above by projecting that about 126 post-Panamax ships would be delivered in 2013, with a total capacity of 1.3 million TEUs. (inaudible) further, 57 mainly wide-beam 4000 to 5100 TEU ships scheduled for delivery this year, with a total of 260,000 TEU carrying capacity. However, how Robinson expects the delivery of about 300,000 TEU's worth of shipping to be pushed back into 2014.

The order book declined sharply in 2014, (inaudible) 0.94 million TEU are scheduled to be delivered in 2014 and 0.42 million TEU in 2015. According to Clarkson, even though supply growth may accelerate slightly in 2013, the thinness of the current order book for 2014 delivery onward suggests that the fleet growth may slow rapidly in the medium term.

The numbers of deliveries for 2014 and 2015 will undoubtedly change on the up side, but we feel that today's market sentiment places a cap on any new contracts.

After the above supply projections are taken into account, Howe Robinson calculates that there will be a further oversupply of approximately 325,000 TEU in 2013. This is should keep fleet utilization at about 83%. However, if demand was to rally to about 8.5%, there would be undersupply of about 400,000 TEU and this would increase utilization to 87%. This in turn would allow a return to more normalized pricing in the container trade.

Looking at the breakdown of the order book, we see that about 91,400 TEU are on order in the Panamax 3000-TEU plus category, representing a mere 2.3% of the existing fleet. In the post-Panamax sector, up to 8000 TEUs, there are 647,200 TEU on order, representing 18.8% of the existing capacity. In the 8000 TEU plus category, an enormous 2,519,000 TEU are on order, representing about 62.8% of the existing capacity.

Let's turn to slow steaming now. According to Clarkson, containership slow steaming may have absorbed up to 1.5 million TEU of nominal capacity during 2012. This refers as a yardstick for measuring the effects of further slow steaming on the overall containership supply. However, most analysts predict that the potential for further slow steaming is fairly limited going forward, as the trades that would most benefit from this practice have had this implemented and only super slow steaming now could have further been an official effect on the demand/supply balance.

Turning to lay-up, according to shipping analyst Banchero Costa, in 2009, over 10% of the (inaudible) fleet was put into lay-up, which was nearly 1.5 million TEU. In June 2011, the average capacity shrank to as little as 0.1 million TEU, or less than 1% of the fleet. Unfortunately, the trend has recently reversed with idle capacity at 3.5% of fleet in the form of 255 vessels of the total 550,000 TEU by the end of September 2012. The fleet in lay-up rose a further 800,000 TEU in November 2012. Almost all idle units are below Panamax size.

Let's look at demolition now. Demolition activity remains at high levels in 2012. According to Howe Robinson, during the whole of last year, 175 vessels were scrapped at an aggregate size of 1900 TEU and total capacity of 328,000 TEU. This will make 2012 the second highest year for scrapping on record, behind 2009. About 68% of the capacity scrapped in 2012 has been in the 1000 to 3000 TEU size range.

(inaudible) rate now. According to Clarkson, the impact of the delivery schedule and accompanying cascade of medium-size and smaller capacity onto non-mainlane traffic has continued to place a cap on the charter market. According to (inaudible) Freight Index, straight rates for boxes shipped from Shanghai to Europe averaged $1489 per box through the third quarter of 2012. This was 53% higher than freight rates at the beginning of the year. Unfortunately, rates dropped steadily through the end of 2012, only to start firming up again in January this year, reaching $1418 per box on January 11, 2013. Meanwhile, the Shanghai Mediterranean rates surged by 88% to $1356 per box since the end of August last year.

As for time charter rates, (inaudible) reported interest in the largest sizes has returned this year, and the scarcity of candidates are forcing charterers to rethink their plans. This activity has filtered down to the 5500 TEU sector, where during the last two weeks of January, time charter rates have gone up by approximately $4000 to $5000 per day on some recent fixtures.

Let's look at the cascade effect. Clarkson (inaudible) that in the longer term, the potential exhaustion of the ability to cascade capacity may lead to a supply shortage on certain trades that require lower capacity vessels. The fastest-growing trades require what Clarkson called smaller large and midsize vessels, with North, South and intraregional groups often calling at smaller ports that cannot handle very large ships or which generate regular volumes more appropriate for smaller tonnage. The inclination or ability to cascade may, according to Clarkson, slow over the next two to three years, owing to demand from ongoing freight volume growth or the fact that the vast majority of cascade double capacity on east to west mainlane may have been already redeployed.

The above trend is reinforced by the fact that there has been very limited investments in small and medium sized vessels. The sub-6000 TEU order book has fallen to historically low levels of about 8% of fleet capacity.

On the sale and purchase front, according to Clarkson, the containership sale and purchase market saw asset prices falling through the first nine months of 2012. At the end of the third quarter of last year, the containership secondhand price index was down 40% compared to the end of 2011. This trend is expected to continue well into 2013, and until attitudes change regarding the medium-term prospects of the containership industry.

As for newbuilding contracting, according to Clarkson, only [70] container vessels with a combined capacity of 430,000 TEU were ordered in 2012. This compares with 244 container vessels ordered in 2011 of a total 1.84 million TEU. Contracting in the smaller sizes was scarce, and only 25 vessels in the 3000 to 8000 TEU size range were contracted. A nearly identical number of ships was ordered in the 8000 TEU-plus size category.

According to Howe Robinson, ordering this year is likely to focus on new-design 2200 TEU and 4500 to 5000 TEU, as well as 6500 to 7000 TEU units, with a possibility of some speculative ordering developing in the 9000 TEU sector.

What is the outlook now as a result of all the above? According to Howe Robinson, the 2000 to 4000 TEU ships have experienced heightening availability since the beginning of this year. However, as mentioned above when describing the effects of cascading tonnage, we remain exposed to the fallout of surplus Panamax ships where availability has been building up for four months and currently running well ahead of previous all-time highs. Howe Robinson calculated about 80 ships of 4000 to 5100 TEU could be looking for employment over the next eight weeks.

However, there could be a sudden change in the market's dynamics after the Chinese New Year. An encouraging sign in that direction are the January trade figures, which were quite strong. If this trend persists, previous surpluses could be absorbed and the forthcoming order book will be the determining factor of future trends and thus earnings.

During 2013, Howe Robinson forecasts that demand will improve, which should help absorb just under 3 million TEU of surplus capacity which they calculate existed in the containership market at the end of 2012. However, they still see 2013 as another disappointing year for all of the ships below 6000 TEU. They did not make any forecasts for 2014 as they consider the demand and supply considerations unclear and volatile.

Howe Robinson believes that the world economy could slide into recession or there could be speedy recovery, or, yet again, it could stagnate for years to come. The latter, we consider highly unlikely. More visibility, though, could become possible after the second quarter of this year, by which time the newbuilding plans and deliveries will be clearer and their effects on supply/demand balance more easily ascertained.

In this kind of environment, we at Diana Containerships will continue implementing our current investment strategy of acquiring good-quality secondhand vessels. [We look at this] charter employment which will eventually be replaced with younger tonnage and newbuildings. The containership industry happens to be at the stage in the cycle which helps us in implementing this strategy, as liner companies are keen to sell vessels with decent time-charter employment attached so that they can finance their newbuilding tonnage. This policy also enables us to offer very attractive dividend payment to our shareholders. Conservative leverage will assist us in considerably enhancing the return on equity investments.

When the containership market starts moving higher, we will limit acquisitions which happen with bank debt and prefer to finance these with equity and surplus cash. This investment strategy has been implemented by the Company's management in Diana Shipping Inc. and has served that Company and its shareholders well over the last [several] years.

I will now pass you to our CFO, Andreas Michalopoulos, who will provide us with the financial highlights of the fourth quarter of 2012 and the 2012 year-end results.

Thank you, Stasi, and good morning. I am pleased to be discussing today with you Diana Containerships Inc. operational results for Q4 2012 and the year ended December 31, 2012. For the fourth quarter of 2012, net income of Diana Containerships Inc. amounted to $2.3 million and the earnings per share amounted to $0.01.

Time charter revenues net of prepaid charter revenue amortization amounted to $14.6 million compared to $9.8 million in 2011. The increase in time charter revenues was due to the enlargement of the fleet after the addition of the Cap San Marco, renamed to Cap Domingo, Cap San Raphael, renamed to Cap Doukato, APL Sardonyx, APL Spinel and APL Garnet, in February, March and November 2012. This increase was partly offset by decreased average time charter rates achieved during the quarter compared with the same period last year.

Ownership days were 871 for the quarter compared to 416 the same period of 2011. Fleet utilization was 99.9% compared to 99.8% in 2011, and the daily time charter equivalent rate was $15,374 compared to $20,765 in 2011.

Voyage expenses were $0.4 million for the quarter. Operating expenses amounted to $8.8 million compared to $4.6 million for the same quarter of 2011. Operating expenses in the fourth quarter of 2012 increased due to the enlargement of the fleet compared to the same quarter of 2011. On average, operating expenses increased mainly due to increased crew costs, repairs and maintenance costs, and were partly offset by decreased stores and spares. Daily operating expenses were $10,114 for the fourth quarter of 2011 compared to $10,095 in 2011.

Depreciation amounted to $3.3 million for the quarter. Management fees amounted to $0.4 million and represented fees paid to the managers during the quarter. General and administrative expenses were $0.8 million compared to $1 million in the fourth quarter of 2011. The decrease was mainly due to decreased audit, legal and Board of Directors fees and annual meeting expenses.

Interest in finance costs for the fourth quarter of 2012 amounted to $0.8 million and include the interest in loan fees relating to our $100 million credit facility with RBS. For the fourth quarter of 2011, we did not have any debt outstanding. However, we have paid commitment fees for our credit facility with RBS.

Turning now to the year ended December 31, 2012, net income of Diana Containerships Inc. amounted to $6 million and the earnings per share amounted to $0.22. Time charter revenues net of prepaid charter revenue amortization amounted to $56.6 million compared to $27 million in 2011. The increase in time charter revenues was due to the enlargement of the fleet following the addition to our fleet in 2012 of the five vessels mentioned earlier, and also the addition to our fleet of the three Maersk vessels, Maersk Malacca, Maersk Madrid and Maersk Merlion, in June 2011.

This increase was partly offset by decreased average daily rates achieved during the year ended December 31, 2012 compared to the same period in 2011.

Ownership days were 3156 in 2012 compared to 1320 in 2011. Fleet utilization was 99.8% compared to 99.3% in 2011. And the daily time charter equivalent rate was $17,499 for the period compared to $19,895 for the same period of 2011.

Voyage expenses were $1.4 million. Operating expenses for the year ended December 31, 2012 amounted to $29 million compared to $11.1 million for the same period of 2011. The increase was due to the enlargement of the fleet and also due to increased costs, including crew costs, repairs and maintenance, and was partly offset by decreased stores and spares. Daily operating expenses were $9,179 for the year ended December 31, 2012 compared to $8,435 in the prior year.

Depreciation amounted to $12.5 million. Management fees amounted to $1.6 million and represent the fees paid to the managers for the period. General and administrative expenses amounted to $3.5 million compared to $3.4 million for the same period in 2011. The increase was mainly due to increased legal and brokerage fees and Company promotion and was partly offset mainly by decreased NASDAQ fees, audit fees and restricted stock costs.

Interest and finance costs were $3.1 million for the year ended December 31, 2012 compared to $1.6 million in 2011. The increase in interest and finance costs were due to increased average debt outstanding in 2012 compared to 2011 and also due to increased average interest rates.

Turning to dividend policy, for the fourth quarter of 2012, the Board of Directors has decided to declare a dividend of $0.30 per share.

Thank you for your attention. We would now be pleased to respond to your questions, so I would turn the call to the operator, who will instruct you as to the procedure for asking questions.

(Operator Instructions) Michael Webber, Wells Fargo.

Good morning, guys. How are you? Obviously, there's a fair amount to get to this morning. It's been a pretty busy quarter for you guys.

Starting with the transaction and the distribution, you guys reupped the $0.30 this past quarter, and obviously this kind of a deal with a charter attached should help support the distribution through 2013. Can you give a little bit more color in terms of annual guidance around that distribution? It still seems like it's going to be a bit tight through 2013 and 2014. So what should expectations be around the sustainability of that $0.30? Obviously, this deal helps, but if you look out towards the back end of the year, how should we think about that?

This -- hi, this is (inaudible) speaking. We agree partly with your questioning. As regards 2013, it seems that 2013 is something that we cannot see and we do not know how it is going to go as regards to the ability of the Company to pay the $0.30 as a dividend. For 2014, it is too early for anyone to say. We believe that the market by that time will be much better than it what it is today.

Having said all of this, you see the introduction of Hanjin Malta, the new vessel, that helps a lot as regards to the ability of the Company to pay a dividend and compensate a lot as regards the lower rates as to someone safely may assume that the vessels that they are operating in 2013 are going to get.

You have to understand that what we do at the moment is we are gaining time by acquiring assets that are adding to the ability of the Company to pay a dividend. We will continue pay a dividend and have a yield that is going to be attractive to our shareholders. In order for us to be able to keep buying assets before the market turns and implement the strategy that we have done, the similar strategy to (inaudible) than Stasi mentioned earlier.

So as regards the first quarter now, 2013, you can clearly see that the numbers are there and we have an extra 15 days of revenue with the Hanjin Malta.

Right.

Let's see the next quarter first before we talk about the other quarters.

Sure, sure. I mean, that makes sense. And our quick numbers kind of show you guys climb through kind of the Q3 period and then some issues in Q4. And then there is obviously a lot of green between here and there. And that kind of leads me to my next question, around the fact that you guys have now more or less exhausted the equity you guys have raised and you would need to reload the gun in order to basically maintain that distribution [have in] Q4 of this year and in 2014.

So around the prospects of going back to the market, obviously, you're not going to pin down on a price or a level. But is it safe to say that you guys would not raise equity below the last done deal?

You should not have in mind a specific price. What we can certainly say, that we will not have an (technical difficulty) which is not going to be accretive to the dividend on a per-share basis. And it seems like in order to be able to do something like this, that the number that you talk about is not the one that we can do an offering below that.

But market conditions change. It is not in our intention to do imminently an offering. But you understand that from the moment we find an asset that creates a better dividend on a per-share basis, even after an offering, we may do it. But still, our shareholders, they will be better off than previously.

Fair enough. I've got some more questions around this, but I'll hop back in the queue to ask those.

I do want to touch on the new management agreement. And you mentioned that it seems, I guess, more appropriate to have those running through a different sub. And I'm a little curious as to what you guys mean by that. And I'd like to nail down exactly what the exact management fees are, the new operating fees, any change to the tenor on those contracts and what sort of impact this will have on the operating cost structure of DCIX.

Mike, you understand that the new company is going to be owned 100% by Diana Containerships Inc.

Sure.

And therefore, we are not going to have any outflow of money of the Company. So the management fees may become irrelevant because we are talking about the same company. What it matters is the cost of running that management company. And at this moment, with the number of vessels that we have, we feel that the cost of running is going to be a bit less or the same as the fees we were paying to the third-party Diana Shipping Services up to now. The more vessels we get, the more economies we have and the better it is for our Company.

We have said from the beginning that it is the intention of Diana Containerships Inc. to create its own management company, that management company be a 100% subsidiary of the holding company and not have any outflow money to a third party. And this is what we have achieved.

We are very proud to say that we have achieved something like this within a year. Even ourselves, we didn't expect that we would be in such a good position to do something like this. Also, our shareholders have to understand that we have managed to attract all the personnel from Diana Shipping Services that they were involved in the running of the containership vessels.

So basically, there will not be -- it seems as if there will not be any problem in the handover of the new management company and also in the running of the vessels, something that is not very easy to achieve and we think we have managed something like this at the moment.

That makes a lot of sense. And finally, you talked a little bit -- or Stasi talked a little bit in his sector review around, I guess, data effect, and it seems like we're kind of seeing the development of a two-tier market here, between the larger and the smaller assets, and also the fact that we are actually also hearing chatter around speculative orders around large containerships, which is something we haven't seen in quite a while.

Given the better prospects -- and I know that's a relative term -- of those larger assets and certainly the higher utilization rates of those larger assets, would placing spec orders for larger assets be something DCIX could feasibly do in the future? Obviously, there is a size limitation here. But I'm just curious as to what your all's appetite would be for larger kind of Asia -- Transpac or even Asia to Europe caliber assets.

We certainly have our sights, and Mr. Palios in particular, focuses on all kinds of ships. But we are moving, let's say, the focus towards the larger tonnage. Because of what I mentioned in my short presentation of forecast on demand increasing there, to the extent that the large ships that are going to be delivered might be absorbed more easily than we think.

In other words, we see that ships from the 6000 plus size category will be earning in 2014 and 2015 disproportionately higher rates than some smaller ships, until we fall in the size category, that we are going to see having a shortage. This is now everybody's guess. What size will that be? Will it be the 2000 to 4000? Will it be the 4000 to 5500 TEU? Unfortunately, the cascade effects being a dynamic process and reports around the world changing their capabilities of handling ships, it is impossible to pinpoint where the shortages will appear in the smaller times.

But there will be shortages. There is no doubt about it. And that is going to help the part of our fleet, at the time that this happens, it is going to be in that size category. But speculative ordering for our Company as it is now in the 8000 or 9000 plus TEU size category, we consider as being a low probability scenario.

What could look as being more attractive is the acquisition of larger tonnage with employment attached, or ordering 6000 to 7000 TEU ships at particularly attractive prices when shipyards will have dropped the price idea to what we consider as being the minimum for this part of the cycle.

So to sum it all up, no speculative, we feel, ordering of very large ships by our Company is on the cards, at least now. But yet we are moving our focus of attention to larger tonnage, preferably with employment, at this stage.

Got you. That certainly makes sense. That's enough for me. I'll turn it over. Thank you guys for the time.

Ken Hoexter, Bank of America.

Good morning, gentlemen. It's actually Wilson sitting in for Ken. I have one (inaudible) a couple of quick -- my own questions. So the (inaudible) of Malta is going to be 25, I believe. What kind of OpEx assumptions are you guys building into that? And in terms of just allocating the costs between the actual vessel itself and the charter, have you determined kind of what those values are yet?

I'll answer the OpEx assumption type of -- the OpEx assumption question. We have between $9,500 and $10,000 per day as OpEx assumption for that vessel.

And the second question, can you please repeat it a bit louder?

Sure. In terms of the $22 million that you are paying for the Malta, if I look at just some broker reports about what vessels looked of that age or similar are probably selling at, it's probably around $10 million a day -- I'm sorry -- $10 million per vessel. I mean, can you talk to what of the purchase price was allocated to the vessel itself and what is allocated to the charter, the value of the charter?

We feel that the actual price of a charter (inaudible) vessel is closer to $15 million ourselves for that (inaudible). But nevertheless, the rate that we will get is much higher than what the market pays at the moment certainly for the three-year period [flat].

Understood. In terms of just -- maybe you could dig in a little bit on the vessel itself. It looks to be on the other side almost 20 years old. Is that -- was this kind of more of a -- I guess a one-off type of transaction, where if I look at the rest of your fleet, they are probably more along the lines of being 10 to 15 years of age and the secondhand market. And so just kind of to me, it seemed to be more of an aberration. Could you at least speak to that?

What we are prepared to do at this stage in the cycle is, as I said earlier, by some time before the market turns. And the useful life together with a time charter attached of that vessel is a (inaudible), in our way of thinking, and to find a much better market, before that vessel has to be scrapped or get out of operation.

So we are not afraid to buy some secondhand vessels, based on the fact that we expect the market to become better within the next -- in the medium term -- in the short to medium term. So there is nothing to be worried about there in our way of thinking.

Okay. That's all my questions. Thank you.

Natasha Boyden, Global Hunter Securities.

Thank you, operator. Good morning, gentlemen. Just very quickly, you have a number of ships coming up for recharter in 2013, and really just wanted to drill down a little bit as to your employment plans for the fleet. If the market has a chance at that point, would you prefer shorter-term periods or would you be comfortable fixing down here for longer periods?

I think we are going to go for the 12 months on the vessels which are expiring soon. But it depends from the rates which we are going to be offered. But most likely, 12 months.

Okay, great. Thank you. And then Andreas, if you could maybe just touch on (inaudible). It appeared to be up fairly substantially this quarter. Was there any one-time reason for that or is this a general good run rate going forward?

I think considering the vessels and then our operating expenses and the preventive maintenance that we make and the routes that we follow, I think the $10,000 -- $9500, $10,000 run rate going forward is a safe assumption.

Okay, great. Thank you. And then just more generally, can you talk a little bit about -- I know this doesn't apply to the older ships you are buying probably -- but the newer ships that are out there, the fuel efficiency in the container market, and whether or not you believe that this is something that is becoming a reality or does it work for containers or does it not? I just really wanted to get your quick views on that.

If I can say something first, Natasha, the fuel economy of the younger ships, as you can imagine, becomes less important the slower the operational speed of these. And that is something we have to keep in mind. Because there is a misconception here that because at full speed, a modern ship be saving -- I don't know -- up to a larger ship, 20 pounds a day, there are huge economies to be made. True, if you operate the ships at low speeds.

However, the reality is slightly different here, and we are talking about ships operating at between 15 and 18 knots, and some liner operators talking about what I briefly mentioned in my short presentation as super slow steaming. Now, as you can imagine, the lower you go down the feed ladder, the smaller the difference in efficiency becomes. And that is something that we ought to keep in mind so that we don't exaggerate the economy or fuel economy and fuel efficiency of the modern tonnage.

The main efficiencies appear in what are called wide-beam ships, and those are very few and extremely modern. They are not Panamax, as far as their beam is concerned, size, at least as the Panama Canal is today. And the economy that they offer is that they have a higher 14-ton homogeneous intake in boxes. That is a real economy.

But in order to avail ourselves of this, we have to build these ships, because there are very, very few around to be had. And that is what is important and will be important going forward in the midsize containership trade.

And the other thing that we also keep in mind is that containerships do not age the same way that tankers and bulk carriers do. This is another important misconception that many analysts have, and they look at the age and decide that, well, if it is 20 years plus, maybe it is a scrap candidate. With the containerships, it all depends on how the ships are maintained mechanically, because the hulls of these ships are not worn anywhere near the rate of wear and tear that the bulk carrier and the tanker have.

So you can look at the 20 year old containership, which is well maintained as far as its mechanical parts are concerned, which is the main engine and auxiliary, and you can't believe your eyes. Because things might look brand-new there, and the ship having plenty of trading life ahead of her compared to her age.

The ships that are going to be scrapped are ships that either have been poorly maintained or have particular disadvantages as regards their trading characteristics. In other words, they are either too long or too narrow or have odd engines or peculiar auxiliaries where spares cannot be found. And that is where the scrapping is happening now, together with the smaller-sized tonnage.

So I don't know if I've answered after talking all this time about the economies, but I wanted to put a few things right as regards age and fuel efficiency of the younger tonnage and the older tonnage.

That's very helpful. Thanks very much, gentlemen. I appreciate your time.

Thank you. There are no further questions at this time. I would now like to turn the floor back to management for closing comments.

Thank you again for your interest and support of Diana Containerships. We look forward to speak with you in the months ahead. Thank you.

This concludes today's teleconference. You may now disconnect your lines at this time. Thank you for your participation.