Star Bulk Carriers Corp (SBLK) 2014 Q4 法說會逐字稿

Thank you for standing by, ladies and gentlemen, and welcome to the Star Bulk Carriers conference call on the fourth-quarter 2014 financial results. We have with us Mr. Petros Pappas, Chief Executive Officer; Mr. Hamish Norton, President; Mr. Simos Spyrou and Mr. Christos Begleris, co-Chief Financial Officers of the Company.

(Operator Instructions) I must advise you that this conference is being recorded today. We now pass the floor to one of your speakers today, Mr. Pappas. Please go ahead, sir.

Thank you, operator. I am Petros Pappas, the Chief Executive Officer of Star Bulk Carriers, and I would like to welcome you to the Star Bulk Carriers conference call discussing our financial results for the fourth quarter and full year of 2014.

Before we begin, I kindly ask you to take a moment to read the safe harbor statement on slide number 2 of our presentation.

This past year has been a transformational one for the Company. After the merger with Oceanbulk and the acquisition of 34 vessels from Excel Maritime, making Star Bulk the largest US-listed drybulk company with a fleet of 98 vessels on a fully-delivered basis. Looking ahead to a challenging 2015, we remain fully committed to take measures to protect our shareholders' equity value and enhance our ability to weather what has proved as one of the most challenging drybulk markets in the last 40 years.

If you can now please turn to slide number 3, I will walk you through the results of Q4 2014, full year 2014, and the current state of the Company.

Against a backdrop of weakening market conditions in the fourth quarter of 2014, the Company recorded an adjusted net loss of $5.5 million and adjusted EBITDA of $16.6 million on net revenues of $45.6 million. For the full year 2014, the Company recorded an adjusted net loss of $3.2 million and adjusted EBITDA of $43.6 million on net revenues of $111.2 million.

Our fleet currently consists of 66 vessels on the water. We have taken delivery of 33 out of a total of 34 vessels we acquired from Excel Maritime and expect to have the last vessels delivered to us by the end of this month. We continue to taking delivery of our eco newbuilding vessels in the first quarter of 2015, adding one JMU Capesize and two NACKS Ultramax vessels to our fleet on the water, with 32 vessels remaining to be delivered by September 2016.

As part of our planned fleet renewal, we have also sold for 90's-built Panamax and Handymax vessels and agreed the sale of one additional 1993-built Panamax.

On the chartering front we have partnered with owners of Capesize tonnage to create Capesize Chartering Limited, an information-sharing platform that will increase our visibility in the spot market and enable us to deploy our vessels in an increasingly effective manner. We have also been active in creating partnerships with owners of cargo, like the agreement with a major miner announced in December 2014 through which three of our eco Newcastlemax vessels will be employed for a period five years. This agreement will help us keep vessel utilization high and enable Star Bulk to retain the benefit of the eco-vessels fuel savings as we are being paid on a dollar per ton basis.

Finally, our chartering performance remains strong for the fourth year in a row with an average TCE in each vessel segment above the relevant Baltic Index on an adjusted basis. We continue to be mindful of the importance of low operating costs and corporate overhead in difficult market environment, not just today, and have managed to reduce our OpEx by 14% year-on-year to $4,750 per day. This makes us one of the lowest cost operators in the drybulk space.

Our increasing size has helped us build stronger relationships with key suppliers and service providers, which in turn helps us reduce our costs while we continue to grow. We are working to consistently provide our customers with high-quality services at low costs and we feel confident that going forward we will be able to achieve further synergies and economies of scale.

Regarding financing, we have been busy converting negotiated term sheets into committed debt. In February 2015, we executed loan documentation for $156.5 million [ACA] financing with Deutsche Bank, HSBC, and Sinosure for eight of our Ultramax vessels. During March, we were able to secure financing of $31 million and $30.2 million from DVB and BNP, respectively, for two of our JMU Capesize vessels delivering in 2015.

Finally, we also received commitments of $227.5 million from DNB, SEB, and the Export-Import Bank of China for financing seven of our newbuildings built in China, five Newcastlemax and two Capesize vessels. As of today, we have total debt commitments of $906 million for 30 out of the 32 newbuilding vessels of our fleet and are proceeding to convert $65 million of negotiated debt for the remaining two new building vessels into firm commitments.

An important update with respect to our new building program is the agreement with our builders for the postponement of certain predelivery installments from 2015 into 2016 and a similar shift of deliveries toward later dates. Due to confidentiality restrictions, we cannot disclose anything more on this issue at this point, but this is a result of the close relationship we have with our shipbuilding partners, which enabled us to find a mutually beneficial solution with respect to the scheduling of newbuilding vessel deliveries with no extra cost to the Company.

Finally, another key development was the successful completion of a primary public offering of $245 million on January 9, 2015. Through this raise we fully fund our newbuilding CapEx program and strengthen our balance sheet with over $100 million of excess cash. This transaction also demonstrates the commitment of the Company's core shareholders, who all participated to maintain their shareholding in the Company.

Our long-term goal remains to build a strong, well-capitalized drybulk shipping company that will continue to overcome market challenges and create long-term value for its shareholders. I would like now to pass the floor to one of our co-Chief Financial Officers, Christos Begleris, to walk you through our fourth-quarter and full-year financial statements.

Thank you, Petros. Let us now turn to slide number 5 of the presentation for a summary of our fourth-quarter 2014 financial highlights in comparison to last year's.

In the three months ended December 31, 2014, net revenues amounted to $45.6 million, more than double the $17.3 million for the same period in 2013. Net revenues represent our total revenues adjusted for non-cash items less voyage expenses. The reason we refer to our net revenues is because this figure nets out any difference in revenue recognition between voyage charter and time charters and, therefore, is directly comparable to other periods. This increase is mostly attributed to the significant increase of the average number of vessels to 50.8 in the fourth quarter of 2014 from 13.2 vessels in the fourth quarter of 2013.

Adjusted EBITDA for the fourth quarter 2014 was $16.6 million, an increase of 124% versus last year's figure of $7.4 million. Net loss for the fourth quarter 2014 was $8.1 million, or $0.083 per basic and diluted share, versus $0.054 million net income, or $0.002 per basic and diluted share, in the respective period of 2013.

Excluding non-cash items and one-off expenses, our adjusted net loss for the fourth quarter amounted to $5.5 million, or $0.06 loss per basic and diluted share, versus $2.1 million of adjusted net income, or $0.07 gain per basic and diluted share, during the respective period of 2013. Our time charter equivalent rate during this quarter was $11,384 per day compared to $14,467 last year. This is an illustration of the weaker-than-expected fourth quarter compared to last year's rally during the same period.

Our average daily OpEx were $4,704 per vessel compared to $5,392 during the same period last year, representing a reduction of 12.8%. You can clearly see the positive effect of our economies of scale on operating cost.

Continuing with slide number 6 of the presentation and a review of full-year 2014 financial highlights in comparison to 2013.

In 2014, net revenues amounted to $111.2 million, almost 62% higher than 2013's net revenue of 68.7%. This rise is attributed to the increase of the average number of vessels from 13.3 in 2013 to 28.9 this year.

Adjusted EBITDA for the year came in at $43.6 million, 34.7% higher than the $32.3 million last year. 2014 ended with a net loss of $11.7 million, or $0.20 loss per basic and diluted share, versus a net income of $1.1 million, or $0.13 gain per basic and diluted share, in 2013.

Excluding non-cash items and one-off expenses, our adjusted net loss for the fourth quarter amounted to $3.2 million, or $0.05 loss per basic and diluted share, versus $9.7 million adjusted net income, or $0.69 gain per basic and diluted share, in 2013.

Our time charter equivalent rate during 2014 was $12,161 per day, compared to $14,427 last year. Our average daily OpEx were $5,037 per day per vessel compared to $5,564 during the same period last year, representing a 9.5% reduction. This reduction is even bigger if we exclude approximately $3 million, or $286 per day, pre-joining and pre-delivery expenses related to the acquisition of the Excel fleet and the deliveries of our newbuilding vessels.

Taking these adjustments into account, average daily OpEx would have been $4,750, a reduction of 14% compared to 2013's similarly adjusted figure of $5,523. As you can see, our continued efforts to contain costs through increased synergies and economies of scale across the fleet have begun to bear fruit.

Kindly turn now to slide 7 for a review of our balance sheet as of December 31, 2014. As you can see from looking at the figures, Star Bulk is a completely different company compared to 2013. Total cash balance, including restricted and pledged cash, stood at $100 million. Please note that a few days later in January 2015 we significantly strengthened our balance sheet with $245 million equity raise that fully funded our newbuilding program and increased our cash balance.

Other current assets stood at $45 million, increase from $8.3 million the previous year. Net fixed assets stood at $1.4 billion versus $326 million 2013. The 2014 figure includes the 62 vessels on the water as of 31 December.

Advances for vessels under construction stood at $455 million, comprised of $302 million cash paid for newbuilding installments for our 35 remaining newbuildings as of December 31 and $13.5 million of capitalized borrowing and supervision costs. As we have noted previously as well, I would like to note that in the process of consolidation with Oceanbulk, as per US GAAP revision for business combinations, a fair value adjustment of $138 million was recorded in this account on top of the cash newbuilding installments paid.

On the liability side, total debt as of December 31, 2014, stood at $853.6 million versus $190.3 million for the same period last year. The former includes $50 million of our [baby bond] as well as $56.1 million of the bridge loan facility provided by Oaktree and Angelo, Gordon, which was repaid in its entirety in January 2015.

Total shareholders' equity as of December 31, 2014, stood at $1.15 billion versus $266 million for 2013. Based on the above, our net debt was $753.6 million as of December 31, 2014, implying a net debt to capitalization ratio of 37.5%, clearly a healthy level.

And now I will pass the floor to my co-Chief Financial Officer, Simos Spyrou, to continue with an update on our newbuilding debt commitments and OpEx performance.

Thank you, Christos. Moving out to slide 9, we are happy to report that we have now committed financing in place for 30 out of the 32 remaining newbuilding vessels, of which we are scheduled to take delivery by the third quarter of 2016. This illustrates the excellent relationship we have with both existing and new financial institutions and our ability to source debt financing, even in this difficult market environment.

We have committed financing for 30 out of the 32 newbuilding vessels. We have used bilateral loans, club deals, and ECA-backed financing to top various sources of credit with European and Asian financial institutions. Note that the Export-Import Bank of China has provided total commitment of close to $200 million against Chinese-built newbuildings.

We continue to see that banks prefer financing large and established companies that have access to various sources of financing and can withstand the market turbulence over smaller entities that might face increased headwinds during the downturn. We are currently in negotiations with two major financial institutions to finalize $65 million of financing for our remaining two newbuilding vessels and fully finance the debt portion of the newbuilding fleet. We expect these negotiations to turn into committed financing in the next one or two months.

Regarding the on-the-water vessels, during the fourth quarter of 2014 and the first quarter of 2015, we were able to finalize and drawn on facilities with DNB and Citigroup worth a combined of $212 million that helped us refinance the Oaktree and Angelo, Gordon bridge loan facility that was provided for the acquisition of the Excel vessels. As of today, this bridge facility has been repaid it its entirety.

We currently also have three 2004-built Panamaxes from the Excel fleet which have no leverage. We have received a commitment to finance one of these vessels and are in discussions with financial institutions to finance the remaining two as well.

Overall, we are in constant contact with all major lenders in ship financing and continue to see a desire to support our growth, notwithstanding the dire straits of the drybulk market. On a fully-delivered basis and excluding the bareboat financing schemes, we have agreed with certain yards we will have secure financing from more than 14 financial institutions. This broad pool of financial institutions creates a strong base from which the Company can continue to grow.

Please turn now to slide 10, where we summarize our operational performance over the last six years.

We are pleased to see that our persistent efforts to contain costs are continuing to bear fruit. In 2014, we have started to see in practice the effect of our economies of scale as the number of managed vessels increased to 62 as of December 31 of 2014. In this difficult market environment, low breakeven rates are vital and we aim to continue being one of the lowest-cost drybulk operators going forward without compromising our high quality and operational standards.

On the bottom-left graph, you can see the evolution of our average daily operating expenses over the past six years. Since 2009, our daily operating expenses have been reduced from $6,900 to $4,750 in 2014, a 31% cumulative reduction. It is also important to note that the reduction in average daily operating expenses is taking place without any compromise in the quality of maintenance of our fleet.

Almost 85% of the vessels managed by Star Bulk have a five-star Rightship rating, the highest level possible. The overall condition of our fleet is at excellent levels with all our vessels ranked with either four or five stars by Rightship.

On the bottom-right graph, you can see the evolution of our average daily net cash G&A expenses per vessel compared to the growth of personnel. Overall, while we have grown our headcount to accommodate for the increased number of managed vessels over the years, we have been lowering our core overhead cost per vessel. Given the transformational nature of 2014, the average number of employees increased by 83% to 110 for the year.

Our average daily net cash G&A expenses per vessel has remained almost stable to the 2013 levels at $1,440 per vessel per day, due to our hiring of the necessary people to manage our fully-delivered fleet of approximately 100 vessels ahead of time. We expect that as we continue taking delivery of our newbuilding vessels, we will have increased synergies across our fleet that will enable us to further reduce our operating expenses and G&A. We are building a platform that we hope will be one of the highest-quality, lowest-cost providers in the industry and we are dedicating time and resources to make it as efficient as possible.

Let me now pass the floor to our President, Mr. Hamish Norton, who will drive you through a discussion of our chartering performance and strategy, as well as an overview of our current fleet and its growth. Hamish, the floor is yours.

Thank you, Simos. 2014 has been another challenging year on the chartering side, but we have managed to outperform the relevant Baltic Indices for the fourth year in a row on an adjusted basis.

Turning to slide 11, you can see that for 2014 the vessels in our fleet were able to achieve 127% of the adjusted Baltic Capesize Index, 144% of the adjusted Baltic Panamax Index, and 110% of the adjusted Baltic Supramax Index. On the graph on the bottom of the slide, you can see that we have managed to beat these indices consistently over the years, as we continue to perform well in the volatile drybulk market.

Moving on to slide 12, we discuss our current chartering strategy, where we remain flexible and are exploring all available options as we go through the seasonally low part of the year. As you can see from the graph on this slide, the one-year time charter rates for Capesize and Panamax vessels are at historically low levels at the moment.

From a commercial standpoint, we are exploring opportunities for direct long-term cooperations with drybulk measures, which we hope will provide us with steady flows of cargoes and business. An example of such a cooperation was the announced strategic ownership with a leading mining company for the employment of three of our Newcastlemax vessels for a period of five years. This agreement allows us to ensure constant employment for those vessels for a long period, while also being paid on the prevailing spot dollars per ton rate, which will enable us to keep the benefit of all the fuel savings from this latest technology eco-vessel.

Moreover, as you already know, Star Bulk, in cooperation with four of the largest Capesize vessel owners, has founded Capesize Chartering Limited, an information-sharing platform that will improve the efficiency of our Capesize vessels trading on the spot market. We are seeking to create similar arrangements in other vessel categories as well in order to be able to provide competitive bids to a wider customer audience. We continue to explore all available options to better employ our vessels.

Now, in slide number 13, you can see our fleet will evolve over the next year and a half by number of ships and by deadweight tons. On December 31, 2014, our fleet was comprised of 62 vessels, while currently we have 66 vessels on the water and one more vessel from Excel expected to be delivered by the end of the month. By the fourth quarter of 2015, when we will have taken delivery of the majority of our eco newbuild orders, we will own and operate 90 vessels, followed by our fully-delivered fleet of 98 ships, which will be attained in September of 2016.

Having said that, let me now pass the floor back to Petros Pappas for a market update and his closing remarks.

Thank you, Hamish. Following a disappointing fourth quarter in terms of ton-mile generation and freight rate behavior, it was anticipated that we would experience a difficult first quarter during 2015.

The first quarter is the seasonally high point of the year in terms of vessel supply, due to high January vessel deliveries, and the low point in terms of demand or cargo availability as a result of poor weather conditions in the northern hemisphere, the Chinese New Year, and maintenance taking place in major ports and steel mills. The first quarter of 2015 has become even more challenging in terms of supply and demand fundamentals as the continuing fall of commodity prices affected buying activity.

Let's now turn to slide 15 for a brief update of supply. Ship owners have been very proactive in responding to negative demand developments. This year we are experiencing an encouraging strong response that has come in the form of vessel scrapping, converting, canceling, and curtailing of ordering.

During the first 2.5 months of 2015 we have identified almost 10 million deadweight that has already been scrapped and/or committed for demolition. This compares with 16.2 million deadweight demolished throughout 2014 and 3 million deadweight demolished during the first quarter of 2014.

Even more importantly, reported new drybulk orders for 2015 year-to-date currently stand at around 600,000 deadweight. This marks a 20-year historical low for drybulk orders. Placing of new orders is the most important future indicator and on this discipline during the next year will be key for a sustainable recovery to take place.

An important development that we are experiencing during 2015 is that of newbuilding conversions. A significant number of Capesize vessels is reported during the first months of 2015 to have been converted to crude and product tankers. Both supplier-related developments have led us to revise downwards our 2015 and 2016 drybulk fleet growth forecast. We believe that the significant share of the existing order book, currently standing at 20% of the current fleet, will never be delivered.

After adjusting for delivery slippage and cancellation in second- and third-tier Chinese shipyards, we expect drybulk fleet growth to remain below 4% and could even decrease below 3%. Furthermore, there is an increasing number of vessels that have been laid up during the last few months, and this development will bring the net growth figure of available vessels to lower levels than last year.

Let's now turn to slide 16 for a brief update of demand. We believe that the first quarter of 2015 will be recorded as the lowest quarter in the recent history of the drybulk industry. During 2014 a number of medium-term, negative drybulk fundamental -- phenomenal developments took place, such as the Indonesian bauxite and nickel ore export ban, China's coal import regulations and strong hydropower contribution to energy generation, reduced grain congestion in Brazil and iron ore congestion in China, acceleration of iron ore imports from Australia displacing long-haul iron ore from Brazil and reducing ton miles.

The combination of all these factors led to a previously unanticipated freight rate correction across all vessel sizes that began in early December and painted a negative picture for the short term and a collapse in sentiment, which, in our opinion, should not be extrapolated. We view the recent destocking of Chinese steel, iron ore, and coal to be unsustainable as we enter high consumption season, and a number of positive indicators are slowly emerging that could lead to a better drybulk market from the second half of 2015.

For example, Chinese officials during the early March annual parliamentary session announced that the government will invest in infrastructure projects and will support housing demand. Another key indicator is that both iron ore and coal domestic production are on a downward trend and point towards higher future substitutions with [inputs].

The fall of commodity prices, including oil, and a persistent low interest rate environment have the potential to stimulate growth around the globe, leading to upwards revisions of drybulk trade during the second half of 2015 onwards. According to Clarksons, during 2015 drybulk trade is estimated to grow at approximately 3.5% with an acceleration in ton miles towards the second half of the year. This is approximately in line with our supply growth estimate for full 2015.

Iron ore trade is projected to grow at approximately 6.5%, with Australia and Brazil leading export growth. Coal is projected to grow at approximately 2.5%, with India leading growth and offsetting any further decrease in Chinese coal imports. Chinese coal imports are expected to slowly stabilize towards the second half of the year and could even experience a rebound subject to hydropower performance. Grain trades are projected to remain flat year-over-year, while a rebound in minor bulk is expected to take place as the market recovers from the bauxite and nickel ore ban that affected trade during 2014.

Before we close this presentation and pass the floor back to you for any questions that you might have, let me walk you through our plan of action to tackle the current challenging market situation as presented on slide 17.

On the revenue side, we have been active and we have formed the Capesize Chartering information-sharing platform with four other partners to increase the efficiency of our Capesize vessels trading on the spot market. We continue to look out for profitable partnerships and remain alert for possible changes in the spot and period markets to be able to opportunistically employ our vessels with the best possible terms available.

We intend to employ our fleet in an active and sophisticated manner tailored to the fuel efficiency and other specific attributes of each vessel. We want to be well-positioned to capitalize on changes in the sentiment of the drybulk market in the short to medium term. Once we see the market sentiment improving, we will start fixing some of the vessels on longer term charters.

On the OpEx front, we will continue to focus our efforts on improving the efficiency of our platform and be one of the lowest-cost operators in the drybulk space. As we continue taking delivery of our newbuilding fleet, we will reduce our operating expenses and corporate overhead further. For 2014, we managed to decrease our OpEx by 14% year on year, while maintaining high levels of safety and quality with 85% of our vessels maintaining a five-star rating by Rightship.

Investments like the one we are making for our vessel performance monitoring department will help us have real-time feedback on various vital vessel parameters, including consumption of fuel, in order to be as efficient as possible and minimize the daily operating costs of our fleet. We continue our previously announced strategy of disposing of all the tonnage that does not fit our commercial profile. Over the past three months we have sold four Panamax and one Handymax vessels of average age of 21 years.

On the financing side we have committed debt in place for three out of 32 of our newbuilding vessels worth north of $900 million. We expect to finalize the debt commitments of $65 million for the remaining two vessels within the next two months. Throughout this tumultuous period we have found great support from new and existing lenders, leading to a banking group which will count at least 14 banks when all our vessels are delivered.

We have been in discussions with the shipyards in which we are building our vessels and have managed to agree on delays in payments and vessel deliveries for when the drybulk market will have hopefully improved from [scary] lows. Last, but not least, we proactively raised $245 million of equity in January 2015 to fully fund the equity portion of our newbuilding program. Through this transaction we were also able to strengthen our balance sheet as we raised more than $100 million of funds in addition to our CapEx needs to support the Company through in this low point of the cycle.

Our core set of institutional shareholders -- Oaktree, Monarch, Angelo Gordon, as well as my family and associates -- all invested in this equity raise as they all believe in the value of the platform and the prospect of Star Bulk. Overall, having the aforementioned plan of action in mind, we will all worked tirelessly through these volatile markets to ensure Star Bulk's long-term success.

In closing, I would like to take this opportunity to thank our shareholders for their ongoing support and reassure them that we will continue our efforts to enhance long-term shareholder value. On the supply side, the right moves are being made by ship owners: scrapping, converting cash, and [not diluting].

Without taking any more of your time, I will now pass the floor over to the operator to answer any questions you might have.

(Operator Instructions) Ben Nolan, Stifel.

Great. Thank you and I have several questions. The first has to do with the financing.

Obviously, you guys have been very active lately in terms of lining up in your financing, and it looks like, just doing my back-of-the-envelope math, that it was at really good loan-to-value ratios, anywhere from 60% to 70%, which seems like -- based on current asset prices and especially given this market is pretty good.

First of all, is that right? Is my math right? Then, secondly, is that the market or do you think you guys have some sort of an enhanced ability to line up that sort of financing?

Ben, this is Christos. Your math is correct. Basically, the latest facility that we closed with China EXIM, DNB, and SEB was 60%. The other big facility that we closed, and we have already drawn down part of it, with Sinosure, Deutsche Bank, and HSBC, had a 68% fair market value close.

That's pretty good. And I guess just associated with that, when I look at the little over $900 million of committed financing that you guys have in place, is that -- should I think of that as real dollars, or is there a certain degree of flexibility in that as it relates to the fair value of the assets? Could it potentially go lower? Could it potentially go higher, depending on where the market is for the assets?

That financing, for the most part, has fair market value clauses and, based on today's broker valuations, we would anticipate getting basically the full amount that you see in our slides. Obviously, if values drop, then it might be a lower dollar amount, but at the moment --.

The good thing with this debt figures is that 11 out of the effectively 32 vessels are bareboat hires, which means that financing is fixed because it's a percentage of the contract cost. So for the remaining 21, as Hamish said, based on today's value, we will probably draw the whole amount. And in fact, we are drawing the whole amount for a vessel that delivering in the next few weeks.

Okay, that's very helpful in (technical difficulty) to the extent that that number is accurate as of today, I think it's hard to imagine that asset values can go a whole lot further than they already have gone down.

Switching gears a bit, you guys -- the OpEx, the reduction in OpEx was pretty substantial, certainly relative to what I was thinking, but just even on a year-over-year basis a pretty meaningful reduction in daily OpEx. How much of that can you attribute to just the economies of scale of having a larger fleet versus is this something that's a little bit more proactive and over and above economies of scale?

And kind of along with that; the levels that you guys have been able to attain, is that a pretty good run rate or should we -- was it exceptionally low this particular quarter?

Ben, a lot of it has to do with the size and we can see that in our latest discussions with suppliers. We get major concessions from them and, of course, it's normal. When the market is tougher, then we get tougher as well.

Plus, I think that in a way the euro going down helps as well. So we are getting assistance from everywhere and we think we will do much better this year as well.

Okay, that's helpful. Then, I would ask about where the CapEx program falls out on a timeframe basis, but I know that you guys said that you were bound by some confidentiality agreements. So my last question I guess relates to the turn in the market, the potential turn in the market we've seen in the last few weeks, certainly for the smaller assets, and then within the last week or so in the Capesize vessels.

It seems as though maybe rates had found a floor and are starting to slowly creep back up. Is that a correct read on my part, from your perspective? Or are we just sort of coasting along the bottom here without really a clear sign of an improvement in rates?

Well, you know, usually there is two periods where the market is stronger. One is between mid-March and end of May and the other one is between mid-October and mid-December. This part of the year usually the market gets stronger because people are back from vacation and there's also the grain trade that increases; therefore, I don't think we are coasting down the bottom.

I think we might see a more meaningful upturn, but I think it's going to be cyclical. Potentially this summer will be a bit challenging again.

Okay, that's very helpful. Thanks a lot. That does it for my questions.

Doug Mavrinac, Jefferies.

Great. Thank you, operator. Good afternoon, guys. I just had a handful of follow-ups as well and my first question is related to the market.

Petros, I know that you guys are very involved, because of your size, your scale, and relationships, with some of the industrial end-users of some of these ships. So when you are having conversations with those guys, can you relate to us maybe their tone, their mood, their expectations of the market? Because, as you said in your prepared comments, because of how bad the market is right now, the order book is really getting decimated and ships are getting scrapped left and right. And so the outlook just doesn't seem that bad, not as bad as the current environment is.

But is that maybe our shipping market views, and is it shared with some of the industrial end-users? Can you just share with us kind of what their views of the market might be?

One thing I found out my 37-year career is that you cannot really foresee the market a lot of the time. And that doesn't happen just for ship owners. It also happens for charterers.

I think, however, that as of late and due to the supply-side forces on the one hand, and on the other hand on the macroeconomic things that are happening worldwide like cheaper raw materials, oil and interest rates, there is more hope. But also I think there is a realization that to be able to get there we need to act.

And looking at $600,000 -- 600,000 deadweight ordering for the first three months of this year is amazing. I have not seen this since 1990 happened, so it shows that this is a very important development. And on the other hand, I, and I think most players in the market, think that demand will continue to be okay for this year. 3.5% is not great, but we believe it's going to be potentially even a little bit above supply.

Don't forget that it will probably come from now on, because the first three months of this year were very challenging. We haven't been able to calculate what the demand increase was, but it might have been zero or even less than zero.

Right, yes, because it seems as though -- obviously the latter part of last year, as you correctly point out a couple of one-off events that occurred and then you had this normal seasonality and this is people are extrapolating this is going to be the demand environment forever, but -- which is actually maybe good, because it is having a positive effect on the order book such that it is getting work through.

So whenever we look at maybe asset values, some of the brokers have marked down assets 10%, 20% year-to-date. My question is how deep is that market right here? Are assets really come off that much or is there just a handful of assets that are being done at these levels?

Well, there is a point where the dip in assets prices is theoretical. Like you might have a vessel that you would be willing to sell, let's say, $15 million and somebody comes and offers you $10 million. You are not selling and he is not buying, so actually that's not a market. It is in between.

But what I see mostly is that owners of vessels actually are sticking to their prices, except if there is somebody who has lost all hope or is going bankrupt. I don't know, I haven't seen much of that yet. And also, I have seen that the newbuildings actually have lost less value than the secondhand vessels, at least since last year. And we are in the relatively fortunate position to have ordered end 2012; therefore, the fallout is very small comparatively, I would say.

Got you, got you, got you, perfect. And then just final question before turning it over.

If you have the ability to say if this one thing happens, then this market is going to turn on a dime or start getting better, of all the things that we know could be -- could help the market improve, in your view, what is the most important factor that if it takes place, then we should be in for better days in the not-too-distant future?

I think clearly it's on the supply side. Not ordering and scrapping. I think that is the most important part. If I had a second choice, would be that China actually does some infrastructure work, which we are looking at, and, therefore, needs iron ore. And we expect that there's going to be more iron ore up from Brazil, so China not slowing down on the iron ore front and taking part of it from Brazil.

I was going to say preferably Brazilian iron ore.

Brazilian iron ore is a good thing.

That's it. All right, great. Thank you so much.

Amit Mehrotra, Deutsche Bank.

Thank you. Good afternoon, Petros, Hamish, Christos, and Simos.

The first question is with respect to the comments on delays of deliveries. I understand what you can say is limited, but if I'm not mistaken, the original plan was to take delivery of 25 newbuildings this year. And slide 13 sort of implied that the Company is still taking delivery of most, if not all, of that by year-end. So could you just reconcile those two, or maybe correct me if I'm mistaken?

Amit, we have, unfortunately, some confidentiality restrictions with the yards that we are discussing and we cannot give any information on the deferrals. So basically what we have done is we moved some vessel deliveries from 2015 into the second and third quarter of 2016, but at this stage we cannot give any more information on that. Including, of course, the payment of the relative CapEx.

Okay. So slide 13, when you have the pro forma number of shifts (inaudible) that is not updated for the push-out deliveries?

Correct, it's not updated. It's the original deliveries.

Okay. Great, that's helpful. Then with respect to just the delay of CapEx payments -- and, listen, I completely understand the limitations, but maybe you can just confirm what the original payment plan was.

So if I am correct, I think it was somewhere around $950 million of newbuilding CapEx this year, and I assume that number will be reduced as a result of the push out to 2016. Can you at all just help us with the magnitude of that reduction? Are we talking about $50 million or something maybe more meaningful? Just so we get an understanding.

The Company already has a very good cash cushion. I'm just trying to get an understanding of how much more that may be enhanced as a result of some of the proactive moves that you guys have done.

Amit, unfortunately, the number is meaningful but we cannot give any further information on that. We will try, going forward, at some stage, if we get the agreement by the yards, to give some guidance during the first-quarter results or even later. But at this stage we cannot give anything more than that.

Okay, I understand. I just thought I would ask anyways.

Let me just ask one more follow-up, if I may, on scrappage, because clearly everyone is sort of speaking about this as maybe a potential prelude to a recovery in the market. And I totally agree that it's a good thing, but, Petros or Hamish, I would love to get sort of your thoughts on what level of scrappage do you think we need to see to sort of derive a meaningful impact?

Because historically, if we look, scrappage peaked in 1986 at 6.3% of the fleet. It peaked again in 2012 on a tonnage basis of 33 million tons, but at the same time we also had this historical increase in supply from 2008 to 2012.

So where do you think scrappage needs to be and how long does that take to get through the system? Because I assume that there's some level of scrappage capacity as well on the system, so maybe some thoughts on that would be helpful.

Amit, let me reverse this a little bit and do a quick calculation for you. What is on order for this year is about 75 million tons. What is expected to be -- what is the expected slippage, which has been the same for the last three years, is about 30%. 30% of 75 million is 22.5 million.

So we have -- let's say we will remain at the same slippage, although I think we will have bigger slippage this year for obvious reasons. But let's say we will stay at 22 million; that leaves us with 53 million for this year.

Now we have 10 million tons of scrap for the first quarter. That would indicate 40 million for the year. We don't calculate that. We calculate around 25 million to 35 million.

Let's take the 25 million, the low end, 53 million less 25 million is 28 million tons, which is about 3.7% of the existing fleet. So with conservative estimates of previous years' slippage and scrapping on the low end, because 25 million would mean there's going to be 15 million only for the next three quarters, we still get only 3.7%. We have a secret hope that we will go even below 3% on supply, but for now we are calculating around 3.5%, following the calculations I just went through with you.

Okay, that's great. And then one last housekeeping question. Christos or Simos, can you just provide me with the share count at the end of the year?

Amit, the share count with the delivery of the latest Excel vessel later this month is going to be 162.6 million shares.

Okay, great. Okay, thank you all so much. Have a great weekend. Thank you.

Spiro Dounis, UBS.

Good morning, gentlemen, and congrats on getting all that financing locked up. Certainly some positive developments today.

Just wondering if you can give us a sense, just kind of following up on one of Ben's questions, of what potential covenant issues might pop up on maybe some of the existing vessels; if there's any sort of coverage ratios we need to be thinking about. And it sounds like the market has kind of hit a bottom here, so maybe things should get better. But I just want to know if there should be anything on our radar.

Thanks, Spiro. On the basis of today's values, we don't have any breaches on the covenants. Given that the majority of our vessels were basically acquired in the last two years and were financed conservatively because high leverage financing was just nonexistent, therefore we don't expect any major issues with LTV covenants in our facilities, which range from 70% to 80%, 82.5% loan-to-value tests.

Perfect, perfect. And then with respect to the Capesize chartering co-op that you formed with the other owners, have you seen any clear benefit so far from this structure? And maybe could you give us a few examples of other tools at your disposal that might give you an edge in this market?

Well, this has only been a three-week arrangement. We haven't seen any tangible benefits right now, except from the fact that we have much more information than we used to have in the past.

But going forward, I think that this cooperation will strengthen. And in reality where it's going to assist a lot is when there is more demand of iron ore cargoes.

When there is very few cargoes, obviously there's not very much you can do about it, but the minute there's a few more cargoes, we will be able to perceive it much quicker than if we were on our own. And that is extremely important, as this is actually not a pull. It's a very loose relationship.

Now what else can we do? What else can we do? I think size is important in charterers wishing to talk to you instead of talking to a ship owner with very few vessels, because he can probably get what he needs from just one source. And if we are considered to be good operators, which I think we are, then a charter would be very happy to just not have to shop around but basically deal with one company.

Got it, that makes sense. Then just one follow-up on Capesize chartering as well. It sounds like that's something -- so even in a good market you would be open to kind of keeping that cooperation going. Would you be open to new members at one point or expanding it even further?

Yes, this is a decision that has been taken by the corporation.

Great, appreciate your help. Take care.

Fotis Giannakoulis, Morgan Stanley.

Most of my questions have been answered, but something very quick. If you can give us what is your estimate for your breakeven during 2015 and what is going to be your cash breakeven after the vessels have been delivered. And if there is any flexibility with your banks, this breakeven, at least for the near term, to be reduced even further.

We are estimating the breakeven for the 57 vessels that are spot today to be a little bit above $10,000 -- $10,300 per day. This is including the figure that -- of the revenues that we have for the nine vessels that are already long-term time chartered. Now going forward, this includes operating expenses, G&A expenses, principle -- debt principle and debt interest repayment.

Going forward with the delivery of the newbuilding vessels of our fleet, and basically with our projections and estimations that we are going to achieve further synergies and economies of scale for managing a larger fleet, we believe that will be able to reduce this figure even further.

Now on your final point about discussion and flexibility from the bank side to reduce this figure right now, obviously we do not have any discussions yet on these issues with the banks. But we believe that, in case needed in the future, we have the track record and the flexibility to discuss this and bring it even further down.

Thank you and one last question to Petros. Petros, you've been in this industry for quite a long time and, if I'm not mistaken, actually you started through a similar crisis back in the 1980s. What are the differences and what are the similarities between these two different periods? And what are the lessons that you learned through the 1980s that can be useful for investors right now?

First of all, this a point where I should start hiding my age.

Okay, similarities: oversupply. What happens in 1981, 1982 was that there was a big congestion in Nigeria and that congestion actually was keeping hundreds of vessels at the roads for months. And that was misperceived as -- and the market went up as a consequence and that was perceived as strong demand.

It wasn't strong demand. There was just a lot of congestion and, therefore, people ordered. People ordered again two years ago. We ordered as well along with them. I'm not going to deny that.

So the main -- usually the main problem in situations like that is oversupply, because most of the timing hasn't been -- it hasn't been that demand was the culprit, except for example in 2008, where we had other issues, the second part of 2008. Now, the solution to that is, first of all, you have to have a low cost structure. That's what we did then and that's basically what we are doing now.

You have to be decisive when the time comes, so when there are things you have to do, you have to do them. I'm not going to get into detail about that, but we did then -- and at that time it was like two out of three ship owners went bankrupt -- and we are doing now.

Of course, one thing that happened then that is not going to happen again I think is that banks panicked and they started selling vessels without regard to price. And that actually made prices of vessels go down the drain. This, however, has never happened again after 1985. The banks always kept their cool and this is what's happening now as well.

So I think that being frugal and looking forward and doing things early enough, we saw the problem on the first week of January and we raised $245 million. That was a good move and we did it first. I think that's it.

Thank you very much, Petros. Appreciate your answers.

Sal Vitale, Sterne Agee.

Good afternoon, gentlemen. Thank you for taking my question. Christos or [Spyros], I don't remember which of you provided some of that detail earlier; can you give a sense for how much you can borrow on your unencumbered vessels at this point? I think you mentioned that earlier.

We have three vessels effectively that are debt-free in our fleet and these are three 2004-built (inaudible) Panamaxes. Debt potential on these vessels is in the region of $20 million.

That's $20 million per ship, right?

No, no, no, for all three.

We wish. We wish.

Right, right, so they are 2004 vessels, got it. Okay, so that's $20 million of potential liquidity you can get there. And then the liquidity covenant you have, I think it's $500,000 per vessel. Is that correct?

That's correct.

That's per on-the-water vessel, correct?

Correct.

Then the last question really is I think in the past you've provided a real-time cash balance debt and payments you've made on your newbuildings. Is that something you can provide today?

Basically, we haven't put it in the slide deck, and I think given that it's not in the slide deck we probably don't want to be talking about it in the Q&A.

That's fair enough. I just thought it would ask. It's fine.

The last question really, and I think you answered this and I understand you can't be specific in terms of what deferrals you are expecting on your newbuildings, but can you give a sense like in aggregate maybe how many months of deferral you expect on average for the 15 vessels that will now be delivered in 2016?

Sal, let me add a point to your previous question. We are going to try to update our presentation and maybe include some of those numbers you wanted on the web perhaps next week.

That would be great, that would be great.

In terms of the deferrals at the yards, unfortunately we have really kind of gone to the edge of what we are able to say, given the confidentiality agreements we have. We would love to be able to say more and we will try to get permission to say more, but --.

Okay, that's fine. Maybe just the last question is so you've talked about maybe borrowing some capital on the unencumbered vessels. What else are you looking at in terms of options?

You've recently done a share offering. Would you consider doing any sale leasebacks? I think you said in the past that that's not one of your preferred options. What else are you looking at in terms of liquidity-enhancing measures, in the event that you don't see any significant recovery in the market near term?

We are looking at pretty much every reasonable measure that I'm sure you are aware of and I think it's probably not appropriate to discuss what we are actually doing. But you will see, as we take steps that we are taking, aggressive steps to make sure we are in good shape.

Okay, thank you. I look forward to the additional data next week. Thank you for your time.

Omar Nokta, Clarkson Capital.

Actually, my questions have pretty much all been answered. I forgot to press star 2. Thanks, guys.

Charles Rupinski, Global Hunter.

Good afternoon, everyone, and thank you for the really good insights on the industry. Appreciate it.

I just have one question. Most of my questions have been answered, but I just wanted to get your take on the issue of layups recently. We have heard of some warm layups and some fleets being idled and also some potentially cold layups.

Can you tell me what you are thinking about and how that might affect the dynamic near term? If we see a rate increase, how quickly vessels might come back in the market or how -- or your take on the fact that some of them might not come back in the market? Anything on that would be great, thanks.

First of all, to lay up you need -- laying up costs $1,500 per day. Let's say, you laid up for a year. It would cost you $1,500 per day to do the layup, the cost during layup, and then starting the vessel again.

So what that means is that if your OpEx, for example, is $5,000 you should start considering layups at $3,500 so to layup for a year from now you would need to think that you will be making $3,500 per day for the next 12 months.

Now I think your question also referred to how quickly some of the ships that are in warm layup will come back to the market.

Yes, I was just curious how quickly they might come back into the marketplace. In other words --.

Warm layup is 10 to 15 days. Cold layup would be up to a month perhaps depending. Because when you are in cold layup for a year the bottom of the vessel gets very dirty and you will probably need to do a dry dock.

Warm layup is going to cost you more, because you have to keep a certain number of crew members on the ship. So (multiple speakers).

I'm sorry, the $1,500 you mentioned, that's for cold layup, is that correct?

Yes. (multiple speakers)

And so warm layup would be that plus crew?

Warm layup would be -- I haven't calculated it, but I think it would probably be like $2,500 to $3,000, plus about [1.5] tons of fuel oil, another 500. So it would be between $3,000 and $3,500.

Okay, that's very helpful. Thank you very much.

Thank you. If there are no more questions, we now pass the floor back to Mr. Pappas for closing remarks.

Thank you, operator. Just three very quick ones.

On the supply side, I think that ship owners are making the right moves by scrapping, converting, canceling, and not ordering. And that is very important. On the demand side, I think that low oil and raw material prices and interest rates will boost the world economy as a whole, and demand in consequence.

And on the Star Bulk side, we are making sure we are extending our runway to be able to enjoy the good days that will follow this -- ultimately follow these presents tough times. Thank you very much.

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