Safe Bulkers Inc (SB) 2012 Q4 法說會逐字稿

Thank you for standing by, ladies and gentlemen, and welcome to the Safe Bulkers conference call to discuss financial results for the fourth quarter 2012.

Today we have with us from Safe Bulkers, Chairman and Chief Executive Officer, Polys Hajioannou, President, Dr. Loukas Barmparis, Chief Financial Officer, Konstantinos Adamopoulos, and Chief Operating Officer, Ioannis Foteinos.

At this time, all participants are in a listen-only mode. There will be a presentation, following by a question and answer session. (Operator instructions) Following this conference call, if you need any further information on the conference call or the presentation, please contact Matthew Abenante at Capital Link at 212-661-7566.

I must advise you that this conference is being recorded today, Thursday, February 21, 2013.

Before we begin, please note that this presentation contains forward-looking statements as defined in section 27A of the Securities Act of 1933 as amended, and Section 21E of the Securities Exchange Act of 1934 as amended, concerning future events, the Company's growth strategy and measures to implement such strategy, including expected vessel acquisitions and entering into further time charters. Words such as expects, intends, plans, believes, anticipates, hopes, estimates and variations of such words and similar expressions are intended to identify forward-looking statements.

Although the Company believes that the expectations reflected in such forward-looking statements are reasonable, no assurance can be given that such expectations will prove to have been correct. These statements involve known and unknown risks, and are based upon a number of assumptions and estimates which are inherently subject to significant uncertainties and contingencies, many of which are beyond the control of the Company. Actual results may differ materially from those expressed or implied by such forward-looking statements. Factors that could cause actual results to differ materially include, but are not limited to, changes in the demand for drybulk vessels, competitive factors in the market in which the Company operates, risks associated with operations outside the United States, and other factors listed from time to time in the Company's filings with the Securities and Exchange Commission.

The Company expressly disclaims any obligations or undertaking to release publicly any updates or revisions to any forward-looking statements contained herein to reflect any change in the Company's expectations with respect thereto, or any change in events, conditions or circumstances on which any statement is based.

And we now pass the floor over to Dr. Barmparis. Please go ahead, sir.

Good morning. (spoken in Greek) Welcome to our conference call and webcast. Let's move on to discuss the financial results for the fourth quarter of 2012, which were announced yesterday after the close of the market in New York.

In slide 5, we present the average 4TC Baltic Cape and Baltic Panamax index. Capes and Panamaxes have been trading at very low levels through the past period, which in many case, had lower [running] operating expenses. We expect increased volume of grain cargos, due to good harvest in South America, the spot Panamax market in the next quarter.

In the lower part, we present the various secondhand Capes and Panamaxes as published by Baltic Exchange. Such lower prices have cost (inaudible) in relation to debt covenants, and may lead to impairment losses. We expect that the secondhand market has either found its bottom, or it will find it in the following period.

In slide 6, we see that there is still a substantial order book for 2013. Going forward in 2014 and onwards, the order book is substantially lower. The average age of the fleet is reduced due to numerous newbuild deliveries, but still some 18% of the world dry bulk fleet is above 20 years old, and is expected to be scrapped in the following periods.

Under the present cargo market conditions with very low charter markets and (inaudible) values, it is expected that scrapping will accelerate, and (inaudible) vessels in the range of 15 to 20 years old will be scrapped.

Delayed deliveries and calculations of potential number of deliveries are shown in slide 7. Lack of financing is an additional factor contributing to cancellations or delays, which amounted to about 30% of the (inaudible) order book in 2012. We have seen through the past period that ships accounted for delays not only because of (inaudible) bias to finance their projects, but from the inability to finance, to secure finance (inaudible) to meet their contracted time schedules.

Finally, more scrapping activity will contribute in lowering the net fleet increase. During 2012, scrapping activity reached record levels, amounting to 34 million tons, exceeding the scrapping activity of 2011 of 23.8 million tons. The same trend is noted for the first months of 2013. Net fleet in 2012 increased by 64.1 million deadweight tons, or 10% versus increase by 76.7 million deadweight tonnage, or 14% during 2011.

In slide number 8, we present the world GDP on the left, and the Chinese GDP on the right. After a very difficult period for the world economy, there are some signs of recovery. In the case of China, the new government is introducing, announcing (inaudible) of the economy through the urbanization and industrialization, expecting to boost the demand for dry bulk cargos such as iron ore, coal and grains. This trend in shown in slide 9 figures, presenting exports of iron ore and coal, which were [topped] at the last month of 2012, partially counterbalancing the oversupply of vessels.

In slide 11, we present our fleet and order book, (inaudible) by the (inaudible) fleet of 25 [high specification] vessels, with an average age of 4.8 years, and a contracted order book of six newbuilds and one secondhand vessel from (inaudible) from Japan, delivered through 2015.

In slide 12, we provide certain information about certain markets. We would like to reiterate that management is fully aligned with our public shareholders.

Let's move to slide 13. Through these years in the shipping market, we have navigated through many shipping cycles, gaining experience and a proven track record, maintaining such an approach which resulted in low daily operating expenses and high utilization ratios. We expand our business sensibly, to create value for our shareholders, with whom we are fully aligned.

In the present prolonged adverse current market conditions, it is prudent to maintain a strong balance sheet, liquidity and comfortable debt, in compliance with loan governance, while rewarding our investors with regular payments of dividends.

We'll have a substantial expansion through 2015, as presented in slide number 14. We invest mainly in newbuild shallow-drafted (inaudible) vessels in the low part of the shipping cycle. We manage actively our order book. We have cancelled a newbuild Cape after contractual cancellation date for excessive construction delays, for which we are in an ongoing arbitration.

In this low priced (inaudible) environment, we decided to opportunistically acquire three secondhand vessels. Two 2003 Japanese Panamax vessels have already been delivered to us, at $14.2 million and $13.8 million, while a third 2008 Japanese built Kamsarmax at $19.4 million is expected to be delivered in March.

We have scheduled deliveries of three existing newbuilds, one for 2014 and two for 2015, plus (inaudible) the related cash outflows to the expected years.

Going to - (inaudible) to slide 15, we seek to employ our vessels in period time charters, in order to have visibility of future cash flows while maintaining certain vessels in the spot market to have the flexibility the spot market offers in low charter periods, and the upside potential overall market improves.

We have reduced our counterparty risk by agreeing to early deliveries of three vessels, for which we received compensation $25.1 million in total. We reemployed all redelivered vessels in spot and period time charter market.

As presented in slide 16, we evaluated performance of our chartering policy against the spot market, which we outperformed most of the times. Over the years, we have established close relations with some of the most respected carriers in the shipping industry, presented in slide 17. All of our charterers are performing. We maintain our cautious approach, monitoring closely (inaudible) market, which currently [is not satisfactory], affecting most companies in the industry.

In slide 18, we show our daily operating expenses and management fees. Compared to industry average, we reported at about $8,000, (inaudible) lean operations, (inaudible) markets and net income.

In slide 19, we present the net debt per vessel, together with the fleet expansion. We maintain low interest expense, as evidenced by our debt per margin levels. We will retain more earnings in the Company to further strengthen our balance sheet and our liquidity. We are going to finance our newbuild program through equity and debt, while we maintain comfortable debt to asset ratio, and comply with our financial covenants.

In slide 20, we (inaudible) liquidity, in order to build to finance capital expense requirements. As of February 15, 2013, our liquidity was $182.6 million, while our capital expenditure requirements were $193.5 million. Not including our operational cash flows, (inaudible) contracted period time charters, we also have the ability to raise additional indebteness against two existing and [seven] unencumbered contracted vessels upon their delivery, providing us with further financial flexibility.

The (inaudible) market can be used either for debt repayments in order to deleverage our balance sheet, or to be used as equity for further expansion.

In slide 21, we present a history of quarterly earnings per share, and our policy of dividends. Our Board has declared a dividend amount of $0.05 per share, payable on the 18th of March.

At this point, I would like to point out that the (inaudible) in slide 22, we remain committed to returning cash to our stockholders. We continue to actively manage our order book for selective reductions in newbuild operational costs, prolonging existing newbuild deliveries, and opportunistically acquiring newbuilds and secondhand vessels at attractive prices.

We maintain our low financial costs by continuing to make proactive repayments to our banks in order to ensure compliance with our financial covenants. We have a lean and efficient cost structure in relation to operating expenses. Management feels (inaudible) expenses.

We believe it is important to preserve our liquidity in this environment, as we aim to further strengthen our balance sheet, and deleverage our Company by maintaining the ability to make additional acquisitions in the depressed [asset market timely] for the next upward shipping cycle.

Our Chief Financial Officer, Konstantinos Adamopoulos, will now present (inaudible) financial results.

Thank you, Loukas, and good morning to you all. Moving on to slide 23, we present the operating highlights for the fourth quarter of 2012 and 2011.

As of 31st of December 2012, we owned and operated 24 vessels, and we achieved the utilization rate of 99.2%, compared with 18 vessels and the utilization rate of 99.1% during the same period of last year. The average daily time charter equivalent per vessel for 2012 was $22,979, compared to $27,932 for the same period of last year.

For the first quarter of 2012, daily running expenses increased slightly by 0.5%, to $4,511, compared to $4,487 in the same period of last year.

Slide 24 illustrates the comparison of selected 3-month financial key points of our performance for the quarter ended 31 December 2012, and the respective figures of the last quarter of last year.

For the fourth quarter of 2012, net revenues increased by 8%, to $46.4 million, from $42.9 million in the respective period of last year. Net income for the quarter of 2012 was $32.2 million, up 36% from net income of $23.6 million in the same period of 2011.

Adjusted net income for the same quarter of 2012 of $20.5 million, compared to $24 million during the same period of 2011. The increase in net income is maybe attributed to the net effect of the following factors. Net revenue of $46.4 million, compared to $42.9 million, less [the running] expenses of $9.8 million compared to $7.2 million, depreciation of $8.8 million compared to $6.6 million, (inaudible) income of $11.7 million compared to $100,000, interest expense of $2.9 million compared to $1.5 million for the relevant quarters of 2012 and 2011 respectively.

EBITDA was $43.9 million for the fourth quarter of 2012, an increase of 39% from $31.7 million in the respective period of 2011. Adjusted EBITDA was $32.2 million for the fourth quarter of 2012, unchanged from $32.1 million in the same period in 2011.

Earnings per share, and adjusted earnings per share for the fourth quarter of 2012 were $0.42 and $0.27 respectively, calculated on the weighted average number of 76.7 million shares, compared to $0.33 and $0.34 respectively in the fourth quarter of 2011, calculated on the weighted average number of 70.9 million shares.

For the definition and reconciliation of EBITDA and adjusted net income, EPS and EBITDA, please refer to slide 26.

Slide [27] (sic -- see Company presentation) presents a summary of our key financial figures during the fourth quarter of 2012, compared with the same period of last year of 2011.

Our net revenue increased by 8% to $46.4 million from $42.9 million. Our adjusted net income for the fourth quarter of 2012 decreased by 15%, to $20.5 million from $20 million during the same period of 2011. Our adjusted EBITDA for the fourth quarter of 2012 increased marginally to $32.2 million, from $32.1 million during the same period in 2011.

Adjusted EPS for the fourth quarter of 2012 of $0.27, compared to $0.34 in the fourth quarter of 2011, calculated respectively on the weighted average number of shares of 76.7 million and 70.9 million.

In the second table, in the bottom of slide 25, we see that the total debt as of 31 December 2012 increased by 27%, amounting to $615.7 million, as compared to $484.3 million as of the end of 2011.

The result of our financial performance is clearly demonstrated by the Company consistency in its dividend policy, maintaining a prudent and meaningful dividend throughout the last crisis, contrary to the vast majority of our industry peers.

Slide 26 represents the reconciliation of our adjusted net income, EPS and EBITDA from net income.

Turning to slide 27, the Company has declared for the fourth quarter of 2012 a cash dividend of $0.05 per common share, which is payable on March 8 to shareholders of record at the close of trading on March 4. This is the 19th consecutive quarterly cash dividend since our Company IPOs more than four years ago.

Summing up our presentation in slide 28, although market conditions at the moment are not rosy, we stand prepared as a long-term oriented company. We have been in shipping for more than 50 years. We know the industry, and we believe in this industry.

We actively monitor order book and fleet. As result of our track record and reputation in the industry, we have developed strong, long-term relationships with key shipyards, charters and banks in China and Japan.

We have a strong history and reputation of operating excellence, as reflected in our utilization rates and low operating expenses. We maintain low financial costs as a result of our low spreads and prudent leverage, in compliance with all financial covenants.

We actively monitor a young, shallow-drafted fleet of 25 dry bulk vessels, all of which are built 2003 onwards.

Our extensive charter coverage with established performing customers supports our strong balance sheet and liquidity, providing financial flexibility.

We remain committed to a prudent dividend policy to reward shareholders through payment of dividend, and at the same time, ensure future expansion and deleveraging.

Our contact details can be seen on slide 29. Thank you for all for listening, and we are now ready to accept and reply to your questions.

Thank you. (Operator instructions) Your first question today comes from the line of Gregory Lewis of Credit Suisse. Please go ahead.

Yes, thank you, and good afternoon, guys.

Good afternoon, Greg. Good morning to you.

Good morning -- yes, thanks. So I had a couple questions. First on the -- you had a couple vessels that were redelivered in late Q4 and early Q1. Could you just provide us a little more color on how that cash -- how those cash net income distributions were set? I mean, they look pretty attractive. It looks like you're going to get $25 million in cash from those three vessels. Could you just sort of -- how was that negotiations -- how does that work? How does it work, coming -- set into that $25 million number for those three vessels?

So, look, there was some discussions with -- as you know, with the large charters, we enjoy long cooperation and a very close relationship. And we thought that it was good to move proactively ahead of others, and ahead of things -- you know, getting worse or whatever, and take some cover.

And this money had been already collected, so $25 million have already been added in the accounts of the Company. And I think it was done on a very fair number for the Company. You have to remember that there were, in the past two years, many charterers redelivering ships without paying anything. Here, not only they paid, they paid the vast majority of the money that we are due to earn in the next couple of years.

And also, in the two out of three occasions, we have left all the upside open for the Company, so our result and with rates around $8,000, $8,500 a day, so if the next market improves in the next year to higher levels, and reach $12,000 or $13,000, there will be some added benefit from that part.

So it was a very good move for the Company to reduce its risk, and collect a substantial amount of money.

Okay, perfect. And then, clearly, there have been discussions over the last quarter or two about Safe Bulkers's decision to most likely terminate that -- terminate a newbuilding contract. Clearly, that happened, due to the shipyard's late delivery. Do you have any sense for -- I mean, do you have any sense for how long an arbitration like that typically lasts? Is this something that we should expect to be resolved in the next or two, or is this something that can drag out years?

I would expect that this is something that should be sorted out in the next quarter or so, so by the -- before the end of the first half, we should have positive news.

There is no (inaudible) as such, a normal practice of Chinese shipyards, when they have missed -- have messed around, and they have not delivered the ship in time, and in this case, it's not only a matter of not delivering the ship in time. The ship also still at [block] construction stage, so there is no dispute, as such.

But despite overall delaying tactics done by the yard in order to delay a little bit the unavoidable, so I mean, the Company is (inaudible) guarantee provides for interest 5%, so from our point of view, this is not that bad, in this market. And we hope that sometime in the next couple of months, three months maximum, there should be the money in the bank account.

Okay, great. And then just one real follow up question. One of those vessels that was redelivered, it looked like two of them, you actually put on sort of short-term contracts in line with where the market was. I guess, just looking at the one contract, and pardon me for the pronunciation, but the Maritsa --

Yes, Maritsa.

The Maritsa, that's a 2005-built Panamax, that really looked like maybe a little bit above where the market was when you fixed it, but I guess I'm just a little curious in the thought process, in wanting to sort of fix that vessel for two years, at that current rate, where you left the other two vessels on sort of short-term spot rates.

Yes. We cannot do all the time what we want to do, so we have to do sometimes what the other side is dictating us to do. So one -- on the one vessel, the charterer thought that there was (inaudible) rate of -- because we used this rate (inaudible) the $8,000, so when he realized that this rate is far too low and that the market could well pick up in the second half of 2013 or in 2014, so he said, yes, but I don't want to lose the upside, and then I lose from both sides, so I will re-charter the ship back for two years at this rate.

So it was -- so we are receiving compensation for that. We couldn't avoid it. I wish we could avoid it, but he had an argument that he would pay the money so long he would keep the ship. So, I mean, sometimes you have to give something to the other side.

Okay, perfect, guys. Thank you for the time. Makes sense.

Thank you.

Thank you. Your next question comes from the line of Fotis Giannakoulis of Morgan Stanley. Please go ahead.

Yes, good afternoon.

Hi, good morning.

I would like to ask regarding the cancelled vessel, the redelivered vessels. Shall I assume from your previous answer that the redeliveries were with different customers, or all the three vessels were chartered to the same customer before?

They were from different customers.

Can you identify how many?

We don't identify in particular each charterer, etc., but it was two charterers for [cruise] ships.

Okay, thank you. And my second question is about your latest acquisitions. We have seen that the last couple of quarters, you have been looking more on secondhand vessels. Is this a shift of strategy? Do you think that assets values for secondhand vessels, they have bottomed, and therefore, they are more attractive than newbuildings, or we might see you ordering additional newbuildings?

As you have seen in the presentation, the Company has substantial liquidity. So it's $182 million plus the expected $31.8 million from the refund [guarantor] of the other ships, so it's something like $250 million, plus nine vessels without debt. So we have substantial ability to move and to invest when the time is right.

We think right now, the time looks at the bottom, or near the bottom for secondhand acquisitions. And despite the tradition of the Company of being associated with newbuildings, we changed the policy for the last quarter and for this -- for the next one or two quarters, to take advantage of the pressure that is in the market to buy attractive secondhand ships, simply because we believe that these ships' price will recover first, when the freight market recovers.

So nobody knows exactly when the freight market will recover. It could be well end of this year, or it will be next year. But when it recovers, secondhand ships of 5, 10 years old, immediately their price will jump 30%, 40%, and the Company intends to sell most of those ships, the secondhand acquisitions, in that space over the next two to three years, and take the profit.

The newbuildings, we believe that will take a bit longer to recover, because the excess capacity of the shipyards will not allow them to raise prices up fast, so the market will improve, the freight market will improve, and it will take at least three or four quarters before yards are able to pass this on higher prices. So this is a short-term approach we are taking with the secondhand ships.

Can you give us a little bit of a background of how these acquisitions took place, how did you identify these vessels? Did they come from brokers, banks? And also, have you seen any difference in the people, are they approaching you in order to sell you vessels?

Yes. On the acquisitions we made, we bought them from Japanese owners. And they were the (inaudible) sellers in the last two, three months. I expect to see some more from this part of world, that part of the world, in the next six months, especially with the softening of their currency, especially after March with the new year. I expect to see more ships coming out from this country.

And our Company is very well known to Japanese market. I believe that they give us some sort of preference, [although] our price is fair, they give us some sort of preference, because they know the performance will be prompt and fast and quick.

The problem is to identify good quality tonnage, because sometimes, you know, you inspect five ships to find one that is of the standards we find acceptable. But generally, I think that our good reputation in the Japanese market helps us to have a good -- you know, response from the sellers from that part of the world.

And my last question, it has to do about the market. You expressed earlier at your presentation some optimism based on better Chinese growth numbers, and also the grain season in South America. What kind of impact do you think that this can have on charter rates? And do you see the rates moving closer to $10,000, or that would be overly optimistic?

Well, I think that it's approaching this number, in the Atlantic, the South American business. They can pay you around $10,000 at the moment for ships [ballasting] from India via South America to the Far East. And presently for the second quarter, we will reach and we will maintain this figure of around $10,000, possibly $11,000.

I'm not very optimistic for the summer. I think that after the South American market passes, there will be a bit of a quiet summer, like we had last year. And then, I mean, so long there is no surprises from financial markets, hopefully we should start seeing better numbers from the end of the year, maybe in the fourth quarter.

(inaudible) [2014], we are not very optimistic, so a couple of good [pictures] in the spring, and one good [picture] in the winter is not enough, if the summer will be bad.

So we cannot say it will be a lost year, but it will be a little bit better than last year. It won't be anything great for this year, and I think that we should be more optimistic for 2014, so long as there is not overreaction, and undue activity on the ordering. Because, you know, there isn't all this -- the Cape size bulk carriers reported in big numbers the last two, three weeks from two, three players, it's very, very pessimistic, and gives us very, very concern, a very big concern that maybe the market will be [killed] before it starts reviving again.

Thank you very much for your time.

Thank you.

Thank you. Your next question comes from the line of Natasha Boyden of Global Hunter. Please go ahead.

Thank you, operator. Good morning, gentlemen.

Good morning to you.

I just want to follow up on Greg's question, regarding the arbitration. Very quickly, what -- I'm just curious, what grounds is the shipyard claiming to keep the progress payments?

There is no grounds. They just say that you are not right to cancel the contract, and they go to arbitration, for the arbitrator to decide if we were right and if we were not right.

As far as we are concerned, you know, the ship was not ready, there was nothing on launch, let alone be ready or anywhere ready for delivery. So we had the right to cancel, and we canceled as per contract, and rightly, and giving the proper notices through our lawyers, and doing everything correctly.

The yard approached us a few days before the canceling to propose to substitute the ship with something else, and took up so much and also offering us a new delivery date in the summer of 2013, so you understand that -- I mean, it's a crystal clear case here.

But having said that, it's their normal practice, they've done it with previous owners, to refer matters to arbitration, and to pay the cost of arbitration, because the losing party will pay for all costs. They prefer to pay the costs and allow themselves the extra two, three months to see how they find the money and how they make some arrangements with their financing banks, the yard's financing banks, to see how they will keep the yard going.

So, it's a normal practice. It's a little bit frustrating, but it's a normal practice in China. So long -- if the guarantor is a big company, and is a sound company, there should be nothing to worry about. It's just that you wait for this money for two, three months, to go through the normal process.

Okay. All right, that's very helpful, thank you. And then just quickly, obviously, you had the early redelivery of the three charters. Looking out to what's remaining on your fleet, how comfortable are you with your counterparties at present, and have there been any issues or anything that would cause you to be concerned?

Look, I mean, we are more concerned last summer. Last summer, when they were some strong rumors about (inaudible), and which was a major charterer [throughout], I think they are in a much better shape now. They have the support from [MOL], and they have support from their financing banks, and they got also the support from the Japan (inaudible). So right now, it looks like this company will do -- will keep going and do well in the years to come.

So, apart from this, we have nothing else to worry, and the other charters we have, they are outperforming. And (inaudible) is performing 100%. They were never one day late on the higher payments. And you know, we are very confident that the Company will collect what it has to collect in the next couple of years.

Great, thank you. And then just lastly, you talked about potentially the market improving over the next -- say, call it 12 months and out. At what levels would you have to see rates to feel more comfortable placing your open ships back into long-term charters?

We will not place on these lousy numbers. Okay, to fix a ship up per year, you may fix, update [$9,000, $10,000], depending what -- where the ship opens. But to fix two or three years in this market, and then at these levels, I think it's not clever, because you simply lock the upside to protect the very limited downside.

So we will not go for charters longer than, maximum, a year, because we believe next year, we should see better market. Unless, I say that we see an unreasonable and speculative activity in the newbuilding market. And there is some Cape orders, it makes me wonder why people want to rush and destroy market when there are so many ships out there you can buy on the secondhand market.

Yes, that makes sense. Okay, thank you very much, gentlemen.

Thank you.

Thank you. Your next question comes from the line of Chris Wetherbee of Citi. Please go ahead.

Hey, hi, guys. How are you?

Good morning.

Maybe just following up on that comment, Polys, just about the order book, I mean, it does seem like there have been a few more orders than maybe you'd like to see over the course of the last several weeks. How do you think about -- you know, at least the mentality of the ship owner right now, relative to placing some of those orders? To your point, there seem to be quite a few secondhand vessels open fairly -- I guess, reasonably attractive prices. What are you hearing from other ship owners as far as placing new orders, and what do you need to see with, maybe, foreign currencies kind of coming in, potentially? Are you worried about seeing more incremental orders?

I think Greek owners generally take a very responsible approach to the new ordering. Everybody still have ships to get delivered off, and they are very skeptical and very concerned. That is despite the yards can do good prices at the moment.

So, you can catch the upside if you want to buy secondhand ships, then allow the market to do whatever, whatever moving parts, and then you could possibly order some more ships.

These orders came from overseas owners, from other nationalities, non-Greeks. I think it's too much, it's too many ships ordered in a very short period of time. You know, I can spot around 20 Cape size over the last two, three weeks. This is a worrying sign I don't like, because Cape size market is still at $6,000 a day, the spot market.

So, you know, I mean, it's too big a move to make in this environment, so -- I mean, it's -- the Greek owners are more, take a more responsible approach, I think, on this front. Because what's in the market the last years is not the lack of demand, it's the oversupply, and everybody knows this. So why add more ships before the market even starts recovering?

Sure. And what are the slots -- what's the timing of the slots that are being sold? Are we talking about early 2014 delivery, or something a little bit further than that, or are these kind of open slots that are popping up as a result of cancellations?

Yes. From what I see, it's mainly second half 2014 and 2015, the deliveries. That's why I say that they will come at the time when the market will start recovering, and it will -- should be -- [kill it off] again. So if we see another 20 Cape size order in the next couple of months, because once one owner start it, other owners bite the bullet and they say that, okay, we don't want to miss out on the party. If other owners follow this example and continue the ordering, this will make sure that 2015 will be not a good market for Cape size bulk carriers, if this situation continues.

So I think all owners should be more responsible and more, let's say, conservative on this approach.

Okay, that makes sense. And then, I know you addressed this. I just want to kind of circle back a second onto the existing vessels that are still running with above market charters. Everyone is current, you have -- you're not -- no discussions, as far as potential restructuring of any of the existing charters post what happened in the fourth quarter and the first quarter?

Yes, we don't have any discussions, so charterers are current, and they pay on the due date. So we are very happy with that.

As I say, with all our charterers, we have a very close relationship, and when there is opportunity to make a discussion, we will always sit down and find something that is [fair] for both sides. And for us, also, it's to our advantage to reduce our risk in the market, so when there is a logical proposal that is good for all parties, we will not be afraid of getting the money early and giving some discount. At the end of the day, financials is not so cheap out there, so you are saving from that cost as well.

Sure. Sure.

So when there is a call and there is a talk again, we will now revisit these issues. But at the moment, there is nothing ongoing. There is no discussion, as we talk of now.

Okay. Okay, that's very helpful. Thanks very much for the time. I appreciate it.

Thank you.

Thank you. (Operator instructions) Your next question comes from the line of Ken Hoexter of Bank of America. Please go ahead.

Hey, good afternoon. I just wanted to follow up on the vessels that you purchased. Were -- just -- maybe I missed it. Were these from distressed sellers, or could you kind of describe the mindset of where you're buying the vessels from?

Yes, so all the three vessels we bought, they are from Japanese owners, three different Japanese owners. You cannot call them distress sales. They wanted to sell ships that they had in their books, and collect some cash.

So, you know, we have inspected almost every ship that was in the market in the last five, six months. When we found the right vessel and the right quality and the right condition, because as I say, you inspect five ships to find one that is properly maintained and it has specs that are similar to the specs of the fleet that we have in the -- you know, in our Company, you know, like automated engine room and other features, we try to move as sharp as possible, and as I said before, but because we have good reputation in the local market in Japan, the owners, they know Safe Bulkers, they know our performance, and they are happy to fix a deal, provided we are at the same level with another buyer, generally they would prefer fixing it with us.

So we (multiple speakers) from three different Japanese owners, (inaudible) these ships.

Appreciate that, Polys. Now, just to follow up on your questions here on the building order book, are you then concerned about, now you've got eight vessels with very short turns at spot market exposure? Do you see the rates continuing to be pressured? Do you want to lock in some of those, or do you want to keep adding to the short-term nature of the vessels? Just want to get your outlook on the market here.

Yes -- no, we'll keep those vessels, the vessels we have in the spot market, we'll keep in the spot market. If we lock up, we lock up to maximum one year. We do not plan to lock more than that. We will lock $9,000, $10,000 a day, but up to a year, because locking higher, more than one year, we need higher rates. We cannot lock at $9,000, $10,000 for two or three years, because if the market recovers in 2014 or 2015, we will miss the upside, whilst we protect the very limited downside.

So for us, the policy is to fix spot ships on a tight basis, up to a short period, maximum a year, and wait for a better market, possibly 2014. Hopefully 2014.

Great. I appreciate the (inaudible). Thanks, Polys.

Thank you. There are no further questions. Please continue.

We don't have any questions left on the line, sir. Please continue.

Yes. Loukas?

Thank you very much for being with us today, and we are looking forward to discuss with you again in our next quarter conference call. Thank you.

Thank you. That does conclude our conference for today. Thank you all for participating. You may now disconnect.