Capital Product Partners L.P.
Q4 2019 Earnings Call Transcript

Published: 5 Feb 2020

[Operator:]

Thank you for standing by, and welcome to the Capital Product Partners Fourth Quarter 2019 Financial Results Conference Call. We have with us, Mr. Jerry Kalogiratos, Chief Executive Officer of the company. At this time, all participants are in a listen-only mode. There will be a presentation, followed by a question-and-answer session. [Operator Instructions]I must advise you this conference is being recorded today February 05, 2020. The statements in today’s conference call that are not historical facts, including our expectations regarding cash generation and future debt levels, our ability to pursue growth opportunities, our expectations or objectives regarding future distribution amounts, capital reserve amounts, distribution coverage, future earnings as well as our expectations regarding market fundamentals and the employment of our vessels including re-delivery dates and charter rates, may be forward-looking statements, as such as defined in Section 21E of the Securities Exchange Act of 1934, as amended.These forward looking statements involve risks and uncertainties that could cause the stated or forecasted results to be materially different from those anticipated. Unless required by law, we expressly disclaim any obligation to update or revise any of these forward-looking statements, whether because of future events, new information, a change in our views or expectations to conform to actual results or otherwise. We assume no responsibility for the accuracy and completeness of the forward-looking statements. We make sure no prediction or statement about the performance of our common units.I would now like to hand over to your speaker today, Mr. Kalogiratos. Please go ahead, sir.

[Jerry Kalogiratos:]

[technical difficulty] this earnings call by emphasizing the partnership’s common unit distribution track record. CPLP has a 12 years history of paying significant quarterly distributions and that’s returning value to its unit holders without they were having faced balance of this use and despite having to navigate multiple shipping cycles and the associated volatility [indiscernible].In particular partnership’s IPO in April 2007 CPLP has paid non-stop distribution to common and preferred unit holders for 51 consecutive quarters corresponding total payments of approximately $800 million.Adjusted for the recent reserve split this translates into distributions of $82.10 per common unit between March 2007 and February 2020 and $6.05 per class B preferred units from August 2012 through March 2019 when we redeemed the class B preferred unit series at par.Going forward the partnership has increased its common unit distribution by approximately 11% and set a new quarter distribution guidance of $0.35 per common unit compared to our previous distribution of $31.05 in view of the acquisition of the three Neopanamax containers and the partial refinancing of our 2017 credit facility.While the acquisition of three containers was completed in January 2020 and the refinancing is expected to be only completed later in the first quarter of 2020, the distribution increase becomes effective immediately for the fourth quarter 2019 distribution and the increased distribution will be paid on February 11 to common unit holder of record on February 3.In addition, our common unit distribution coverage for the last four quarters has amounted 1.7 times after setting aside the capital reserved determined by our board. As discussed previously our current annual capital reserve that has been set to equal or debt amortization is quite conservative as it represents approximately 6% of the charter free market value of our vessels as of yearend when our fleet is on an average less than 8 years old.Despite the conservative reserve and the increased common unit distribution we expect our common unit coverage to increase going forward due to the impact of the three new vessel acquisitions, the interior refinancing and the increase charter rates as some of our vessels will be earning in 2020 especially after their respective scrubber retrofits.Now turning to slide 3, the partnership net income from continued operations for the fourth quarter was $5.8 million compared to $3.4 million in the previous quarter. We are pleased that during the quarter we announced two major transactions as aforementioned we complete the acquisition of the three 10,000 TEU containers with long-term charter with Hapag-Lloyd and we had entered into term sheet to partially refinance the 2017 credit facility.Moreover, during the fourth quarter we successfully installed scrubbers on three 5,000 TEU container vessels. The partnership [indiscernible] for 2020 and 2021 including the new acquisitions corresponds to 92% and 73% respectively while the partnerships remaining charted duration stood at the end of the fourth quarter at 4.6 years.Moving to slide 4, reverence for the quarter were $27.7 million slightly above revenue of $27.6 million during the fourth quarter of ‘18.Total expense for the quarter were $18.2 million compared to $16.1 million in the fourth quarter of 2018. Voyage expenses increased to $1.1 million compared to $0.8 million in the respective period in 2018.Total vessel operating expenses amounted to $7.7 million compared to $6.9 million during the fourth quarter of ‘18. The increase in operating expenses was mainly due to costs incurred in connection with passing of special survey of four of our ships.Total expenses for the fourth quarter also include vessel depreciation and amortization of $7.5 million compared to $7.2 million in the fourth quarter of 2018. The increase in depreciation amortization during the fourth quarter of ‘19 was mainly attributable to the completion of the special surveys and installation of scrubber systems in three of our vessels during the second half of 2019.General and administrative expenses for the fourth quarter of ‘19 amounted 2 million as compared to 1.2 million in the fourth quarter of ‘18. The increase reflects costs incurred related with the acquisition of the three 10,000 TEU containers and certain non-cash expenses related to the equity incentive plan. The partnership recorded net income from continuing operations of $5.8 million for the fourth quarter 2019 compared to $3.4 million in the previous quarter and $6.9 million in the fourth quarter of 2018.On slide 5, you can see the details of our operating surplus calculations that determine a distribution to our unit holders compared to the previous quarter. Operating surplus is a non-GAAP financial measure which is defined fully in our press release. We have generated approximately $15 million in cash from operations for the quarter before accounting for the capital reserve. We allocated $7.7 million to the capital reserve in line with the previous quarter. After adjusting for the capital reserve we adjust operating surplus amount to $7.5 million which translates into approximately 1.1 common unit coverage for the increased common unit distribution.On slide 6 you can see the details of our balance sheet. As of the end of the fourth quarter the partners’ capital amounted to $406.7 million a decrease of $474.6 million compared to $881.3 million as of year-end 2018. The decrease was primarily due to the spin-off of a tanker business, the distribution is declared and paid in total amount of $28.8 million in 2019 and the total net loss of $122.5 million for the year including an impairment charge of $149.6 million related to the Diamond S transaction.Total debt decreased by $183.5 million to $262.4 million compared to the $445.9 million as of the end of 2019. The decrease is attributable to the prepayment of debt to the tune of $106.5 million in connection with Diamond S transaction and scheduled principal payments during the year.After the acquisition of the three 10,000 TEU container vessels and the quarterly debt repayment under 2017 credit facility at the beginning of the first quarter 2020 our current debt outstanding is $370.2 million and it's expected to increase to $405.6 after we complete the previously announced refinancing of three of our vessels. Finally total cash at year-end amounted to $63.5 including restricted cash of $5.5 million.Turning to slide 7 we're pleased that we completed last month the acquisition of three 10,000 TEU sister containers vessels with long term charters attached namely the Athos, Aristomenis and Athenian. All three vessels are built in 2011 at Samsung Heavy in Korea and they are high specification vessels. They're among the largest container vessels that are available in the charter market and hence quite popular with charters.All three vessels are fixed to Hapag Lloyd with charter firm period expiring in April 2024. The gross charter rate for each vessel currently amounts $27,000 per day increasing to $28,000 per day for the Aristomenis from October 2020 and from July 2021 onwards for the Athos and Athenian.The time charter includes two one year options and 32,500 and 33,500 gross per day respectively. We expect that these new charters would significantly increase the partnership cash flow visibility and distributable cash flow. With these transaction would have further diversified our customer base with the addition of Hapag Lloyd to our customer base, which is the fifth largest container operator globally controlling about 1.7 million TEU of capacity and is a member of the container operator alliance.The vessels were required for certain consideration of $162.6 million. The acquisition of the Athenian was founded with $38.5 million drawn under a term loan entered with Hamburg Commercial bank and $15.7 million of cash at hand.The acquisition of Aristomenis and Athos were funded through a sale and leaseback transaction entered into with the CMB Financial Leasing for an amount of $38.5 million [needs] and $31.4 million cash at hand. Both financial arrangements where cost of LIBOR plus 255 basis points and principal amortization under the Hamburg Commercial bank credit facility and the CMB Financial Lease amounts to $2.5 million per quarter in total.Moving to slide 8, the average remaining charter duration of our fleet is 4.6 years with 92% charter coverage for 2020 and 73% for 2021. Three of our ships will roll off air charters during 2020 namely the Cape Agamemnon, the CMA CGM Amazon and the CMA CGM Uruguay. We’ve discussed the market prospects for our 9,000 TEU container vessels in more detail in the next slide that is slide 9.During the fourth quarter Neo-Panamax Charter has remained remarkably stable despite additionally weaker demand towards the end of the year. Currently there are no idle 8000 TEU vessels or larger. The idle fleet is presently estimates at 6% of the total fleet but this includes a number of post-Panamax container vessels being retrofitted with scrubbers. The remaining idle vessels are below 8000 unit size mostly figures below Panamax size.Demolition for full year 2019 amounted to approximately 179,000 TEU compared to 119,000 TEU for the full year 2018. In terms of the order book at the beginning of January 2020 it stood at $2.4 million TEU equivalent to 10.6 percent of the total fleet.Looking ahead initial analysts forecast expect slightly improve demand growth of 2.8% for 2020 compared to 2019, but still below vessel capacity growth, which is estimated at 3.1%. These estimates however do not take into account vessels out of service for scrubber retrofit as it is estimated that on average approximately 1.9% of fleet capacity for the full year of 2020 will be offline for scrubber retrofits thus continuing to materially restrict vessel supply.It is currently too early to say what the impact of that corona virus is going to be on the global economy and in turn on container vessel demand, but it will almost certainly delay scrubber retrofits as CPRs are working at reduced capacity and service engineers have difficulty traveling in and out of China.In addition, the implementation of IMO 2020 at the beginning of the year so the price differential between compliant fuel and higher sulfur fuel widened significantly. If the spread continues to remain at or close to present levels it has a potential to further restrict vessels supply as operators and owners may decide to send more vessel for scrubber retrofits and reduce sailing speeds across their operating fleets. In this environment demand for post-Panamax vessels and especially wide beam Eco container vessels with high referring intake like are 9,000 TEU containers coming of charter this and next year remains robust.Over the coming months and as we enter the seasonally more active periods for operators we shall engage with potential charters for the employment of these vessels with the aim of striking the right mix between charter rate and charter duration.Now turning to slide 10, as previously discussed in our press release of December 18 we have entered into a term sheet with ICBC Financial Leasing for the sale and leaseback of three vessels currently mortgaged under 2017 credit facility for total amount of $155.4 million. The estimated repayment amount required to release the three vessels under the 2017 credit facility based on the current principal amount outstanding and vessels charter free fair market values as of year-end 2019 is $119.9 million.Principle payments under the ICBC Lease amount to $2.8 million per quarter. The lease bears the cost of LIBOR plus 260 basis points and has a duration of seven years after drawdown including a mandatory practice obligation for the partnership at the end of the lease and a predetermined price of $77.7 million in total. In addition the partnership has various purchase options commencing from the first year of the lease.Moving to slide 11, we expect this transaction to lower our debt amortization cost and increase the partnerships’ liquidity. In particular upon completion of the transaction debt amortization under the 2017 facility and the ICBC Lease will amount to $27.4 million per year. This compares to $30.8 million currently paid under our 2017 credit facility which results in $3.4 million in annual debt amortization savings.Moreover, the partial refinancing is also expect to generate approximately $35.4 million of additional liquidity as we expect to receive $155.4 million from ICBC and repay $119.9 million under the 2017 facility.On slide 12, we’ve outlined our fleet scrubber retrofit program. As previously highlighted during the fourth quarter we completed scrubber retrofits on three vessels increasing the number of ships in our fleet retrofitted to four as a scrubber installation of the Agamemnon was completed in the third quarter of 2019.Out of the remaining three vessels one of our 5000 TEU vessels has seen scrubber retrofit completed and is completing sea trials as we speak. The remaining two vessels currently at the shipyards are expected to complete the retrofit in late February or early March but they subject to delays associated with a corona virus outbreak. I would like here to remind you that for our 5,000 TEU container vessels maximum of higher is capped at 12 days.Moving to slide 13, I would like to conclude by saying that the partnership will continue to see growth opportunities across different shipping segments with the aim of increasing long term distributable cash flows. We will continue to seek opportunities at the container segment as a container industry offers longer period in employment that fits well with our business model. However, we remain open to other types of investments including LNG carriers and tankers vessels if there is suitable employment that fits our business model.On this slide you see a summary of certain assets that are currently controlled by our sponsor and depending on their employment profile could be vendors to CPLP. In addition to these assets we continue to seek opportunities in the second-hand market. Given our expected cash flow generation going forward and subject to our ability to raise additional capital, if required, we believe that we are well positioned to further grow the partnership in the coming quarters which in turn can help us deliver further common distribution growth along the lines of the recently announced common unit distribution increase.And with that I'm happy to answer any questions you may have.

[Operator:]

Thank you very much sir. [Operator Instructions] We will now take our first question. Caller please go ahead. Your line is now open.

[Ben Nolan:]

Hey Jerry this is Ben Nolan from Stifel.

[Jerry Kalogiratos:]

Hi Ben.

[Ben Nolan:]

Hey. You do a extremely thorough job makes it hard to ask more questions but I'll do my best. I was curious maybe you could talk a little bit about the thinking on the distribution increase appreciating that there was the what we think is a really nice vessel acquisition but at the same time there's four vessels that are coming off contract in the next year or so where at least for the container ships the market looks pretty promising but it's kind of unknown. So because you maybe talk through sort of how you're balancing that uncertainty against the decision to increase distributions.

[Jerry Kalogiratos:]

Thank you Ben and that gives me an opportunity I think to answer three questions firstly how we thought about the distribution. Secondly on the re-chartering of the Cape which is obviously going to be re-chartered at lower rates as well as what we see in terms of the 9,000 TEU containers. So bear with me. I will use your question to answer all those issues.So first starting with the increase in the distribution, I mean the accretion of the drop downs going forward as well as the refinancing is obviously higher than the [$3.5] quarterly increase but I think apart from the obvious that we wanted to share part of this accretion with our unit holders for us it's also effectively a signal for the following things.Firstly, I think it's a very strong signal that the current distribution is safe and sustainable given the long term employment profile of our vessels and that we also feel very comfortable in chartering prospects of the four vessels that come up for chartering [new vessels] next year and that will get back to this.Secondly, I think it's a signal that we can deliver substantial distribution growth as we complete acquisitions. In this case we grew the distribution by 11% and I think if we can make accretive transaction like the one who just completed we hope to be able to deliver similar annual distribution growth going forward.Thirdly, we still want to balance distribution growth and returning value to unit holders with growing the partnership and replenishing our fleet and achieving scale that we believe in turn will enhance our equity valuation.We are currently trading at a yield of excess 11% despite the strong distribution coverage we have delivered so far as well as the distribution increase and we expect that if anything distribution coverage is going to increase going forward.Hopefully, as we execute in our business plan we will be able to achieve a lower cost of capital that will allows us in turn to achieve more accretive transactions going forward.So that's the rationale only if you want on the distribution growth but to your question on the re-chartering risk if I may start with the Cape Agamemnon. The Cape Agamemnon charter expires in late June 2020. She is currently fixed at the legacy rate of 42,200 per day while market today for 12 months charters should be closer to $12,000 to $13,000 for a non-scrubber fitted ships.Expectations of course that also are partly reflected in that number is that the market will recover from the current sub-OpEx lows that we experience but if we assume for a moment that we will fix around those levels throughout $13,000 that's a loss of about $30,000 per day of EBITDA or annualized EBITDA less than $11 million but then if you just think about the uptick that we'll have from the HMM vessels which compared to last year's an uptick including the scrubber retrofit perceive of just sort of $11,000 per day for each ship this translates the approximately $54,000 per day across the five ships.So net positive compared to what we lose with the Cape Agamemnon is still $24,000 or approximately $8.6 million per year.So what I'm trying to say is that the effect of any charter renewal for the Cape Agamemnon will be more than offset from whatever is already locked in terms of higher rates.Now with regard to the Cape Agamemnon I'm not saying necessarily we're going to fix and keep the vessel as I have said in previous calls we will decide closer to its redelivery and be speculative about it whether we fixture on the long term or we sell and replace here with a more appropriate asset class.And now finally turning to our 9,000 TEU vessels which is the real elephant in the room if you want because I think that will determine up to a large extent not a distribution by any means but the distribution cover going forward for 2020 or 2021.When you look at the container industry container order book is very close to historical lows. It's less than 11% . You have an idol fleet of about 5.5% which really masks the fact that about 3% of this is really ships being retrofitted with scrubbers and the rest of 2.5% is mostly ships below Panamax size because we have a bifurcated market right now and any post-Panamax, Neo-Panamax vessels are doing very well while anything below Panamax or fitter sizes is doing very badly right now.Container vessel demolition is quite robust and really the scrubber retrofits having had a severe impact on the market I think analysts expect a fairly balanced market for 2020 say [Clarkson's] will tell you that they expect 2.8% demand growth versus 3.1 supply growth but at the same time we expect that about 2% of capacity will be of higher due to scrubber retrofit and this scrubber retrofits affect mostly the larger post-Panamax vessels. So from 195 scrubber retrofits in 2020, 114 of these are 6,000 TEU larger ships.Then you have the impact of the U.S.-China trade war. Last year I think the impact was in terms of demand growth was minus 0.7%. I think this year is expect to be more muted towards minus 0.5% that's partly because of the phase one trade deal that reduces tariffs on some import from China and also because there are substitution volumes coming into the U.S.The unknown if you want this the indirect impact of tariffs but also corona virus that might affect global GDP and trade but in this environment demand for our 9,000 TEU ships which are wide beam Eco ships very much sought-after with higher effort capacity is the prospects are quite good because such assets are very scarce.We have seen two recent data points. We have seen as I think mentioned on last call a vessel very similar to ours being fixed for one year in a very high 30s and we have seen also an older 8,000 TEU ship non-eco, non-wide beam being fixed in the high 20s recently when the previous data point a couple of months ago was the mid to low 20s, sorry as the vessel the 8,000 TEU was fixed in the high 20s when the previous November, October/November data point was around 23,000-25,000.So the market if anything has moved up over the last two or three months. The demand supply situation is not expected to change if anything supplies expect to be further restricted be it because delays at scrubber retrofits on the back of the corona virus which have been already quite long.There is the issue of more of ships going to scrubber retrofit given the spread between compliant fuel and [indiscernible] and potentially lower speed. So we feel quite comfortable with re-chartering risk but even if you assume let's say significantly lower rates than what we have previously seen again you will find that we will still be able to deliver on distribution and strong distribution coverage of the back of this. So this is why we felt comfortable to go ahead with distribution increase and quiet the significant one if you want. Sorry for the long answer.

[Jerry Kalogiratos:]

For my follow-up I'll try to give you something that is a little bit more quick to answer but by the way that was very thorough. I appreciate it, my follow-up is really to some of the scrubbers and maybe the out time associated with those. I know that HMM vessels only have 12 days associated with respect to Archimidis. Any idea how much time that will take to install the scrubber and also are there any other drydockings that are scheduled that we should think about in terms of modeling initiative.

[Jerry Kalogiratos:]

Not well. Well let me answer. With regard to the Archimidis, we were expecting a duration of around 65 days. But as I mentioned in my prepared remarks, the coronavirus impact is very difficult to quantify. CP yards are really working at half of their capacity in the best of cases.And very often our superintendent engineers or service engineers of the equipment manufacturers are not allowed to fly into China or from one place in China to another or they have or there are significant delays. So, I think it's difficult to predict at this stage the completion date I would expect it will be within let's say mid-March.But I think we will have to revisit, this one will have more information. We were very fortunate that the fourth Hyundai ship effectively left the shipyard, it's actually completed its scrubber sea trials today and is now being redelivered to its charters, so that leaves only two ships.One 5,000 TEU with the cap on a five days and the Archimidis. Now, all our 5,000 TEU ships are passing simultaneously special service for the so called extended special service, so that they have to again go into drydock after 7.5 years. Same for the Archimidis but it's a normal drydock, so it's five years drydock.And then, I think you also have the Agamemnon that will have to go into drydock after this is redelivered from its charters in July and also install a ballast water treatment system.

[Ben Nolan:]

Okay, very thorough again, I appreciate. Thank you, Jerry.

[Jerry Kalogiratos:]

Thanks, Ben.

[Operator:]

Thank you, very much. We will now take our next question. Caller please go ahead, your line is open.

[Liam Burke:]

Liam Burke, B. Riley FBR.

[Jerry Kalogiratos:]

Hi Liam, how are you?

[Liam Burke:]

I'm fine, thanks Jerry, how are you doing today?

[Jerry Kalogiratos:]

Not bad.

[Liam Burke:]

Jerry, on some of the acquisitions you're over on, the acquisitions you mentioned you saw the highlighted LNG carriers. That market seems to be a little more variable on a year-to-year basis based on LNG production versus the container market that has seen steady growth and is more open longer term charters.Why would an LNG carrier fit into how you lay out the longer term strategy for the MLP?

[Jerry Kalogiratos:]

Well, I will disagree with and only part of your statement that if anything LNG, the LNG industry tends to have longer term charters than the container market. Of course they have been shorter over the last few years but still I think it's more, it's more customary to find longer term charters in the LNG side than on the container side.And I think that would be if we were to look at the LNG acquisitions for example or tanker acquisitions for that matter. I think that would be the important differential factor. If there is a charter in place that will alleviate any volatility.So, what I think we are trying to say is that we are open to any type of shipping investments as long as the pictures in boxes, if we like the assets if they are long-term charters attached and we can put an accretive deal together. We tend to be a little agnostic on the segment as we have done in the past. But I think having cash flow visibility is important there I fully agree with you.

[Liam Burke:]

Great. And just on the overall macro market. If it's possible to look past the coronavirus, is there the container market in general has been typically a steady grower for the past 20 years 30 years except for one or two years. Do you see any change to that continued growth?

[Jerry Kalogiratos:]

I think containerized goods movement will continue to grow. The only think that we have seen over the last I think few years is a stepdown in terms of the rate of growth. And it tend to be almost double what it is today and but in terms but in the end it's also very much correlated to global GDP growth.But the trend as you say continues to be positive and it is interesting that despite the trade wars we have seen positive momentum. And at the same time, which is also very important, operators have been fairly disciplined for a change when it comes to and owners of course when it comes to ordering ships. So, we have a fairly reasonably demand supply balance.

[Liam Burke:]

Great. Thank you, Jerry.

[Jerry Kalogiratos:]

Thank you, Liam.

[Operator:]

[Operator Instructions] We will now take our next question. Caller please go ahead, your line is now open.

[Randy Giveans:]

Howdy Jerry, it's Randy Giveans from Jefferies.

[Jerry Kalogiratos:]

Hey Randy, how's it going?

[Randy Giveans:]

It is well. All right, a few quick just brief questions here. So, looking at your scrubber strategy, four installed I guess five now to be installed next month. The five HMM ships, those come with 5,000 a day rate step-ups, what about the 8,200 TEU container ships.Are those also including charter rate step-ups or does the charger will pay for those scrubbers?

[Jerry Kalogiratos:]

Well, they are the charter rate is blended, so I cannot tell you what the exact rate is. We have to disclose any bit that number because the charter wants to keep it confidential, unfortunately.But there once the scrubbers fitted, then the new charter begins you'll see that I think we have disclosed previously that during the duration of these charters, these vessels are expected to generate an EBITDA of $44.5 million.Again I'm sorry for not being able to disclose the exact rate but this was the charters sensitivity. But the answer is that the rate there is one and it takes into account the scrubber retrofit. It's not to gear the rate.

[Randy Giveans:]

That $44 million goes through, I guess February 2024 and as for both ships total?

[Jerry Kalogiratos:]

Yes, correct yes.

[Randy Giveans:]

All right, so the four years, 44 million EBITDA. Got it, all right. And then, the three recently acquired vessels, do those sell scrubbers, if not what is the kind of plan for those?

[Jerry Kalogiratos:]

So, for those it is since they have a charter already, we are not and for another four years, we are not really incentivized to install the scrubber unless the charter wants us to. If we enter into that discussion, we will have to negotiate a rate increase or potentially also and the duration increase or both for us to install the scrubber. Typically would prefer to install the scrubber ourselves so that we can also negotiate a better premium.

[Randy Giveans:]

Yes, okay. But that is outside from here they do not have scrubbers.

[Jerry Kalogiratos:]

Correct.

[Randy Giveans:]

All right. And then I guess, third part of the same question. Thoughts or negotiations on selling scrubbers on the CMA CGM ships. I know they're obviously out for re-chartering here pretty soon but there's one thought of maybe chartering or extending those charters with scrubbers?

[Jerry Kalogiratos:]

Well, that's absolutely right. These are eco ships on that side, so they tend to have a lower consumption profile compared to let's say they are to the 8,000 TEU container ships. But in the end given where the spread is today, it still makes sense to install scrubbers on the ships.I think we will follow the same policy that we have followed with the rest of our vessels. So, as we negotiate, we will see what the charter wants. If the charter wants us to install the scrubber, then we will. We don’t have any problem of doing it but we will need to get paid for it.

[Randy Giveans:]

Got it, all right. And then, I guess signaling last question, CMA CGM, there has been some concern around their balance sheet and liquidity situation, has there been discussions with obviously amendments to kind of the current charters, again I know they all expire in the next year or maybe plans for re-chartering those container ships.Would you expect those to stay with CMA CGM or third party? Kind of a two-part question there.

[Jerry Kalogiratos:]

No concerns whatsoever. I mean, CMA CGM I know what you referred to but I think as a charter even in, even if when in the Post Limon let's say crisis when they faced their worst financial difficulties, they have been always right by their owners.And definitely we haven’t heard anything from them and partly because also these vessels are currently chartered probably in the money. So, I don’t think CMA would want to renegotiate those ships; it will do as a favor actually.I think the idea is that they have been performing well with CMA and there is a potential for direct continuation. But in the end, we will have to do what's best for us in the sense that we will have to swoop around and see where we can get the best combination of charter rates and duration.

[Randy Giveans:]

Perfect. Well, that's it from me. Thanks so much for the robust call.

[Jerry Kalogiratos:]

Thanks, Randy.

[Operator:]

And there are no further questions waiting, sir.

[Jerry Kalogiratos:]

Thank you very much all for joining us today.

[Operator:]

Thank you very much, Sir. Ladies and gentlemen, that does conclude our call for today. Thank you all for your participation. You may now disconnect.