Global Ship Lease, Inc.
Q3 2013 Earnings Call Transcript

Published: 14 Nov 2013

[Operator:]

Good day, everyone, and welcome to the Global Ship Lease third quarter 2013 conference call. Joining us today are Ian Webber, Chief Executive Officer; and Susan Cook, Chief Financial Officer. (Operator Instructions) I will now turn the call over to Mr. Webber. Please go ahead, sir.

[Ian Webber:]

Thank you, very much. Good morning, everybody. Thanks for joining us today and I hope you've been able to find the earnings release and the presentation material, which we issued earlier today, the slides are on our website. So as normal, those slides on Pages 1 and 2, reminds you that the call may include forward-looking statements. These are based on current expectations and assumptions and are by their very nature, inherently uncertain and outside our control. Actual results may differ materially from these forward-looking statements due to many factors including those described in the Safe Harbor section of the slide presentation. We also draw your attention to the Risk Factors section on our Annual Report, the Form 20-F, which we filed in April this year. You can obtain this via our Investor Section of our website or through EDGAR and the SEC's website. All of our statements are qualified by these and other disclosures in our reports filed with the SEC. We don't undertake any duty to update forward-looking statements. For reconciliations of the non-GAAP financial measures, to which we will refer during this call, to the most directly comparable measures calculated and presented in accordance with GAAP, you should refer to the earnings release that we issued this morning, which is also available on our website. I'll start the call today by reviewing the third quarter highlights, and then provide an overview of our fleet. After that, I'll make some comments on the industry overall, including CMA CGM, our principal charter, our only charter. Susan will then comment on our financials. After brief concluding remarks, we are happy to take your questions. Turning to Slide 3. You can see our highlights for the third quarter. We generated strong and consistent cash flow, as our 17 vessel fleet continue to perform as expected. With fleet utilization at 100%, as there was no off-hire in the period at all, we earned a maximum possible revenue for the quarter of $36.1 million. This generated adjusted EBITDA of $23.5 million. We used this robust cash flow to delever the company, paying down an additional $15.8 million of debt in the quarter, increasing the total amount of debt we repaid since we started amortizing the credit facility in Q4 of 2009 to $215 million. As of September 30, our ratio of net bank debt to the last 12 months adjusted EBITDA continues to be less than 4x, at 3.9x. Based on our successful re-chartering of the two 4,100 TEU vessels in May 2013, our fleet has operated under fixed time charters for the entire nine month period year-to-date with no gaps and no repositioning costs. This has enabled us to generate $68.6 million of adjusted EBITDA, which were used to pay down $41.4 million of debt in that nine month period. Slide 4 summarizes our financial results, since we commenced operations in the first quarter of 2008. Our strategy of focusing on long-term fixed-rate charters has served us well, effectively insulating us from the volatile stock market in recent years. That allowed us to generate consistently strong results from quarter-to-quarter and year-to-year. The cyclical fluctuations that you can see reflected in the Time Charter Index at the top of the page, the wiggly red line, and are in sharp contrast to our predictable and consistently robust revenue, adjusted EBITDA, operating income and utilization, which are shown in the chart below. As we've said before, since we expanded our fleet to 17 vessels and until the two recently re-chartered 4,100 TEU vessels came off their initial charters at the end of 2011, the only quarterly fluctuations that we have experienced have been primarily due the days of off-hire, and are mostly for planned drydocking, which as you know, isn't unavoidable regulatory requirement. Even when those two vessels did come off their initial charters, we were able to seamlessly transition to two sequential new charters avoiding off-hire and repositioning costs, and thereby maintaining an uninterrupted revenue stream. There were no drydockings in the third quarter this year. We docked two vessels in the first quarter. And actually one further vessel was scheduled to be drydocked later on this year. But it just has first special survey, and this was conducted afloat and an underwater inspection was done in lieu of the drydocking. And based on the satisfactory result of that inspection, the next scheduled inspection of that vessel in a drydock has been postponed until late 2016. That's seven-and-a-half years after the build date. And so in the next couple of years, after the end of 2015, we've only got two vessels scheduled to be drydocked. Therefore increasing the opportunities to earn revenue and reducing outgoings for drydock costs. Moving on to Slide 5. A brief overview of our fleet and charter portfolio haven't changed since last quarter, as you'd expect, given our business model. The average age of our fleet is now approximately 9.5 years, out of an economic life of 30. Our time charter coverage has an average remaining term of 6.7 years, representing contracted revenue of approximately $950 million. Taken in conjunction, this strong revenue stream and our reasonably predictable stable cost base, provides us with long-term visibility and stable cash flows well into the future. Aside from the two vessels and as charters expire in the second quarter next year, currently they represent less than 4% of our total revenue, and given the relatively low charter rates contribute a little to EBITDA currently. And we have no charter expirations until late 2016, and we're effectively insulated from market fluctuations until then. Slide 6, highlights our continuing delevering of the balance sheet and outlines the principle terms of the credit facility. I wouldn't go through these, but I would like to draw your attention to the fact that we paid down over a-third of our paid debt, since the third quarter of 2009. Debt now around $400 million, peaking at $600 million, when we maximized drawings, when we purchased our 17th vessel. Further, we continue to benefit from a waiver from our loan-to-value covenant. That runs through until December of 2014. So we're insulated from asset value volatility as well as volatility in the spot markets on charters. And therefore, we were able to use our cash flow to continue to reduce debt. And this waiver gives us a generous window, in which to explore opportunities and to further enhanced our capital structure without pressure from covenants. I'll come back to this point later. Now, a few words on the market. We've included five slides on Pages 7 through 11, which similar to previous calls cover supply and demand dynamics. And provide a little insight into the freight rate environment, which continues to be capable of being decoupled from the underlying supply/demand fundamentals. The overall picture remains most of the same, as on previous calls, until they cover the ground quickly. That said, there is a degree of increased optimism for 2014, which we will refer to. Slide 7, shows the forecast supply growth for 2013 and we are now three quarters away through the year, more than that continues to exceed demand growth and consequently pressure continues to remain on short-term charter rates and asset values, given there is an excessive capacity. However, on Slide 8, we show IMF growth forecast for the rest of 2013 and for 2014, which as I have alluded to just now, encouraging particularly for the emerging markets, where the bulk of containerized trade is based 70% of global trades. And that trade is carried on mid-sized ships and smaller, although it's not directly relevant to us now, given that charter coverage. Our fleet is well-placed to serve these markets, because our fleet is on average mid-sized ships and smaller. After a couple of challenging years for the industry, the industry fundamentals forecast to improve in 2014, as we show on Slide 9, where you can see supply growth at a full cost of 5.6% for purely cellular capacity and a little less at 4.9% for all container capacity is less than forecast demand growth at 6.1%, this is encouraging. Slide 9, also shows what's happen to freight rates in the last two and half years compared to an index of charter rates in the spot markets, which has been sluggish, it's the same red line effectively, as we saw I think on Page 4. So charter rates have remained under pressure, given the excess of shipping capacity, but notwithstanding that and notably in 2012, but also to a degree in the middle of this year. The carriers have been able to pull-through price rises through general rate increases, particularly on the main east-west trades Asia-Europe, Asia-Med. And in large matter contributed to, while certainly acceptable on the satisfactory line of performance, potential performance in 2012 and has contributed to supporting line of companies results so far to date in 2013. Although, as you can see by inspection, because freight rates are sort of trended down a bit from the highs, at least as shown on this chart from 2012, overall financial performance in '13 is depressed compared to '12. We continue to be most interested, of course in CMAs performance and they continue to outperform most of their peers, if not all of them at the operating margin level for the first half of the year. We look forward to seeing that Q3 results, which I guess, we expect later this month. Slide 10, shows idle capacity and scrapping activity, both of which metrics perhaps as expected have risen ahead of the traditionally slack season after big picture being seasoned through Q3. Idle capacity on the left hand side of the page mostly focused on mid-size and smaller vessel. Vessels now stands at about 3%, which is a little off-on earlier in the year, but still well short of the record levels we saw at the end of the 2009, where some 12% of the fleet was idle. The reduction in absolute or in relative terms of idle capacity has been assisted by higher levels of scrapping, the right hand side of the page, which continues at relatively high rates. Year-to-date on an annualized basis of just under $0.5 million TEU would be the largest amount of tonnage scrapped in any one year. And again, as I guess you would expect, this activity is concentrated on the mid-size and smaller vessel segments. Finally, on Slide 11. We look at the orderbook, quick snapshot. And although it remains modest by historic standards at only 21% of standing capacity, it has actually stopped shrinking new orders replacing deliveries out of the yards. As before and it is logical with operators, the lines, chasing economies of scale and fuel efficiency, the orderbook is heavily skewed towards the largest vessels. And this will as they are delivered, and in the absence of decent growth in the main east-west trades put pressure on the cascade and displace smaller vessels until demand growth in the smaller trades soaks up that capacity. What's good to see is that the orderbook for smaller vessels is very modest and we would anticipate that with some decent continued demand growth in the smaller trades, a balance in the smaller-sized segments will be achieved earlier than what otherwise be the case. In the meantime, because the balance, although it's improving maybe through 2012, it's still in favor of excess supply. We think conditions will remain fragile and there likely be continuing pressure on freight rates and asset values. Owners without liquidity and adequate charter earnings will suffer. And as we've seen so far, year-to-date, is maybe forced to scrapple otherwise dispose the tonnage. That will help the recovery and along the way potentially present investment opportunities close to the bottom of the cycle for those with investment capacity. A couple of more words on CMA CGM. Following improvements in liquidity from the $250 million essentially new equity, they received from Yildirim and the FSI earlier in the year and the €400 million proceeds from sale of 49% of their terminal business, terminal link. Moody's followed Standard & Poor's, and they both now notched out for our CMA CGM corporate rating in the last two or three months. As a consequence or maybe as a coincidence, the publicly-traded bonds are now trading at close to par, which again will comeback to you. CMA CGM continue to pay charter hire in full and right now as we speak only one period of hire, which was due on the first of this months is outstanding. Now, before I turn the call over to Susan, I'd like to provide an update on our project to explore opportunities to increase the financial flexibility. The combination of the continuing very receptive credit markets, the further improved credit profile of CMA CGM reflected in a way that bonds are trading and continuing attractive vessel purchase opportunities as mid-size and smaller tonnages displaced continues to make a compelling case for the recapitalization of Global Ship Lease. We remain intensely focused on achieving enhanced financial flexibility and activity levels on this project within the company are high, including ongoing conversations with our bank group and also exploring various alternative sources of new finance. While it's taking longer to develop the project than any of us would have hoped or frankly wanted, they are partly due to the multiple constituencies involved and the need to agree on a solution that meets our sole objective of revitalizing the company. We are making progress. We remain focused on optimizing the capital structure for increased financial flexibility, plus keeping in mind about the overall cost of capital and our shareholder's concerns about dilution. The whole objective here is to establish a platform that positions us to be able to pay dividends and so add a growth component to our business model, thereby delivering increased value for all shareholders going forward. As we pursue this highly important objective, we continue to use our strong cash flow to aggressively delever our balance sheet and that therefore create near-term shareholder value. I'd like to turn the call over to Susan.

[Susan Cook:]

Please turn to Slide 13 for summary of our financial results for the three months ended September 30, 2013. We generated revenues of $36.1 million during the third quarter from our fully chartered fleet of vessels. This is down $3.4 million from revenue of $39.5 million for the comparative period in 2012. The decline in revenue is due mainly to reduce revenues for two vessels, following charter renewals at lower rate since the initial charters expired in September 2012. Offset by leveled off-hire with no dry-dockings or unscheduled off-hire in the 2013 quarter. This 100% utilization in Q3 2013 compares to 99.2% in the same period last year. Following completion on the float special survey on one vessel, there is now no dry-docking scheduled to take place in fourth quarter 2013 and only two are scheduled for all of 2014, and then none for 2015. Vessel operating expenses were $11.1 million in the quarter with average cost per ownership day being $7,127, down $32 per day or 9.4% on $7,159 for the comparative period. The change is mostly related to increased spend on crew costs, repairs, and maintenance offset by prior period adjustments to total cost. Interest expense, excluding the effect of interest rate derivatives, which do not qualify for hedge accounting, for the three months ended September 30, 2013, was $4.7 million and this is on average borrowing under our credit facility of $400.1 million as well as the $45 million of preferred share throughout the period. In prior period, the interest expense was $5.3 million, which was based on higher average credit facility borrowings of $459.8 million and weighted average preferred shares in the period of $45.7 million. Our derivative hedging instruments gave a realized loss of $2.9 million in the three months ended September 30, for settlement of swaps in the period, as current LIBOR rates are lower than the average fixed rates. This is lower than the $4.6 million realized loss in Q3 2012 following the exploration in March this year of $253 million of our floats. Further there was a $1.4 million unrealized gain through revaluation of the balance sheet position, given current LIBOR and movements in the forward curve for interest rates. And this compares to $1.5 million unrealized mark-to-market revaluation gain on the swap portfolio in the comparative period. Net income for the third quarter was $7.3 million including the $1.4 million non-cash interest rate derivative mark-to-market gain. For the prior year quarter, net income was $8.3 million up after the $1.5 million non-cash interest rate derivative mark-to-market gain. Normalized net income adjusted from non-cash items was $5.9 million for the three month ended September 30, 2013, and $6.9 million for comparable period last year. Slide 14 shows the balance sheet. Key items as of September 30, 2013, includes cash of $26.9 million, total assets of $868.4 million of which $828 million is vessels. The total debt was $429.3 million including the preferred and shareholders equity of $391.5 million. And in addition the balance sheet position of our interest rates swaps was a liability of $23.8 million. The next slide, Slide 15, shows our cash flows. The main items to mention here are net cash provided by operating activities of $15.6 million in the third quarter. Capitalized expenditure on drydockings in the quarter was $1 million and we repaid $15.8 million of our credit facility at the end of the quarter leaving us with an outstanding balance of $384.3 million. I would now like to turn the call back to Ian for closing remarks.

[Ian Webber:]

Thank you, Susan. Before we move on to your questions, I'd like to draw your attention to Slide 16, where we briefly summarized the company's core strengths and reiterate our strategy for creating value for all shareholders. Firstly, our fleet remains fully chartered through April next year 2014, with only two expirations of these two vessels before late 2016. With nearly $1 billion of contracted revenue, spread over an average remaining term of almost seven years and relatively stable on predictable costs. And we have significant visibility into our future cash flows and we're insulated from near-term market volatility. Second, the $253 million of swaps, which rolled off in mid-March and a reduced drydocking schedule all blended recently with the deferral of the [indiscernible] assets 2016 have enhanced our cash flow potential. We'll also experience further savings on derivative settlements as an additional $50 million of those derivatives to roll off at then end of this month. So we continue to see positive impact on our results and cash flow in the next couple of years. Just to remind you, only two drydockings are now scheduled before the end of 2015. Third, the loan-to-value waiver that we've secured from our bank group insulates us from assets volatility until December 2014, and gives us a good window with ways to explore alternate financing options. Fourth, our strong and predictable cash flow has allowed us and will enable us to continue to aggressively delever our balance sheet. Notably, we have no exposure to financing or refinancing risk until late 2016. Lastly, we continue to actively explore opportunities to increase our financial flexibility in a manner that best serves our shareholders. We can't predict the outcome or the timing, but I can assure you that the board and management remain committed to seeking a satisfactory solution, which we'd deliver as soon as possible that would allow us to use cash flow to take advantage of growth opportunities, and to allow for dividend relevant and simply using that cash flow to amortized debt. That concludes our prepared remarks. And I'd like to hand back to the operator, who can brief you on the Q&A session.

[Operator:]

(Operator Instructions) Now, your first question from Euro Pacific, comes from the line of Mark Suarez.

[Mark Suarez:]

Ian, just to go back on the two vessels that are about to renew I would say in 2014, Orion and Aquarius. Have spot rates improved at all since locking them in May, in terms of what sort of charters you think you can employ them, if you were to renew them at this point in the cycle?

[Ian Webber:]

The charter rate in the spot market today have hedged up slightly, it's not material, against the 7,000 that they are contracted at today. So our expectations based on toady's market would be about the same, as we're owning at the moment. I would say to caution however, firstly, that we're way off starting discussions about re-chartering the vessels. We wouldn't normally open those discussions until February or March next year. And secondly, right now, this got a lot of pressure on this size segment. There are, for example, if you go back to Page 10 of the slide presentation, 53 units of this sort of size saturated that are currently idle, out of the total of a 188. So there's a bit of pressure there. But as I say, we've got two or three months before we even think about discussing a renewal.

[Mark Suarez:]

And just to go back on what you alluded to currently exploring opportunities in the credit market. Since the last quarter, you still feel optimistic about the current state of the credit market? And how close do you think you can find a capital restructuring solution? Could this be a 2013 event or you think more likely will be a 2014 event, if you will?

[Ian Webber:]

Our comment sort of don't really put over the amount of effort that we are putting and are exploring opportunities, and we are doing an awful lot more than that. The capital markets are very supportive, the hire market, in particular in the U.S. is going gangbusters, we understand. We're aware that we've got thanksgiving coming up and we're aware that the second half of December is a tough time to raise capital particularly in the U.S. markets. Our thinking and process is informed by that. But we want to get it right. We also want to move as quickly as we can into the 2013 or 2014. As I said in the prepared remarks, we really can't speculate as to timing, I'm afraid.

[Mark Suarez:]

So just to go back to that point, in a situation for example, Ian, where covenants are no longer an issue and you'll have a more flexible balance sheet. Is paying dividend still the number one priority or could there be a situation where you can hold back that cash to go after assets and maybe at that growth component to the business that you alluded? And another was what's the pecking order if you were between dividends and acquisition growth, what's your think in that?

[Ian Webber:]

Well, it depends on the exact circumstances at the time. We think that there are some spectacular opportunities to invest in tonnage, right now. And that needs a huge quantity of capital to pickup ships at the bottom of the cycle. And if you believe in a cyclical recovery in the medium term, particularly for the mid-sized ships and smaller as we do, the asset level, you can make some serious returns. So we will be very focused on growth of our business by adding ships to the fleet. We also understand the importance of dividends to shareholders. And I know it's moved at the moment. But as with any other company, I would suggest the board, particularly if you're not paying a dividend at the moment, as we are not, the board will have to trade off the returns that we feel we can make by reinvesting cash in the business, against returning capital to shareholders for them to deploy as they choose.

[Operator:]

Now, from Sidoti & Co., you have a question from the line of Chris Snyder. Chris Snyder - Sidoti & Co. I guess my first question is, I know you said the rates you guys are seeing on the two spot vessels on spot contracts were kind of flat. But have you guys noticed any improvements or trends in asset value since the start of the year on these panamax ships?

[Ian Webber:]

They've not stopped actually. And so that's a possibly, I mean it's very difficult to be definitive about what's driving is, and it's not. I know it's not material. I mean a ship that was worth several million at the beginning of the year isn't worth $15 million now. But there has been some sale and purchase activity, mainly to tonnage, which we think is particularly attractive subset of the medium-size and smaller asset class. So, yes, our asset values have had not stopped driven by an increased level of opportunistic sale and purchase activity. Chris Snyder - Sidoti & Co. And my second question, so just to be clear on this, you guys don't expect to have any drydock survey capital expenditures in the fourth quarter that was all pushed into this quarter?

[Ian Webber:]

That's correct. And there'll be a trivial amount for the physical inspection of this one vessel, but that's not going to change very much.

[Operator:]

Now from DRZ, your next question comes from Zach Pancratz.

[Zach Pancratz:]

Last quarter, I believe you said the biggest hurdle was just getting all the banks in one room and talking with them. I'm curious, if you can give us any color on how those conversations went? And then a follow-up with that, what now, what you say is your biggest hurdle in getting this deal done?

[Ian Webber:]

It wasn't quite as definitive as that on the last call. And we undoubtedly have got a process to go through. It explains that we really have to sort of start with that bank group, and the discussions with them are repetitive and iterative. We have eight lenders now to who are sort of usually described as non-traditional, who bought positions from other banks. And as I said on the last call, we're a good borrower, in the absence of doing anything, and we are paying down $50 million or $60 million of debt every year. And I am sure the banks have got situations, which are much more urgent than us, that doesn't mean that they're not focused on us, but it does mean that that achieving consensus is a little bit and more difficult. We've been talking with our bank group for quite a while, but as I say, it's just taking much longer than we had anticipated or hoped to get to a sort of final position with them. And I can't really comment on exactly where we are and how far along the path we are. But as I said on the prepared remarks, we are making a progress. And I also referred last time to the need to engage with CMA CGM, as our largest shareholder and our sole customer, and that process is underway as well. And again, I can't comment on the detail of it, but all the irons are in the fire, et cetera, and we're putting a lot of evidence with.

[Zach Pancratz:]

And then can you just reassure us that any deal that does come, there will not be any new equity issue from your standpoint?

[Ian Webber:]

Well, I can't rule anything out at all at the moment. But what I can do is reiterate what we've said before, that I think it will be tough for us to look at issuing equity at these sort of price levels. And we did say in the prepared remarks about being aware of your concerns on the dilution. And the credit markets are gangbusters here. We with the relatively small float, we couldn't issue a huge amount of equity and we want to keep any capital restructuring as simple as possible. So I think we can be reasonably comfort in the equity of itself would not form part of the solution.

[Operator:]

Now from Elevated Capital, you have a question from the line of Michael Demaray.

[Michael Demaray:]

Ian, given that growth is one of the goals, is it likely that any refinancing will be simultaneous with the fleet expansion or are you likely to take the cash under your balance sheet and also hold it there for a while and wait for another deal?

[Ian Webber:]

Our experience is that particularly when you're looking to purchase what might loosely be described as distressed assets, i.e. small mid-sized ships that are being shaken lose, to say, the German KG environment, because that the German KG house is running out of money. You got to be out to move quickly and you need the cash sort of in your balance sheets to be able to pay away as purchase price up immediately. And it would be very difficult to structure potential purchase contingent on the capital raise. So it's a bit of a circumvallated way of saying, now I think we would want to get the capital raise down first and then have a bit of a war chest with which we wish to go out and cautiously providing the investments meet in the criteria and be able to respond quickly to add tonnage to our fleet.

[Michael Demaray:]

And then what kind of IRRs are you seeing on those very attractive deals that you mentioned, just the ballpark?

[Ian Webber:]

Mid-teens and higher, that's unlevered. These are likely older vessels, tough to put leverage on at the asset level, but we recommend you can generate, based on the multi-cyclical recovery mid-teens maybe higher.

[Michael Demaray:]

And I mean I would say as a shareholder, I know I'm going to be speak against the interest of some of my fellow shareholders, but if you're going to earn those IRRs internally, it probably makes more sense to hold the capital unallocated rather than paying it out.

[Ian Webber:]

We're not looking only and analyzing only to stress tonnage. I mean there are opportunities. There continues to be packaged deals, so released by transactions, all of the rest of it, with line of companies that are looking to improve their own liquidity. I think as we talked about that on the last call, we see good opportunities to invest the at other end of age spectrum, in brand new tonnage jumping on the unit costs efficiency, fuel efficiency, eco efficiency ships. But that requires significant amount of capital, that's probably beyond our reach in the near-term, so that's after some on how one would deploy capital if one had it.

[Operator:]

Now from Somerset Capital, we have a question from the lien of Ross Taylor.

[Ross Taylor:]

Looking forward over the next six, nine months, could you give us a idea of what kind of debt pay down do you expect? Should we continue to expect to see a $15-million plus of quarter pay-down from you guys?

[Ian Webber:]

Well, if you look in the financial statements we disclosed, I think for memory, actually it's more than memory and I've found it, that we sort of, we showed $60 million as due in less than one year. So that's management's best estimates of what we'd be paying down over the next 12 months, so divided by four. So there are fluctuations. This quarter we paid down around $15 million, the last quarter we paid down around $10 million. It depends on exactly what's happening with working capital and also dry-dockings, which is a separately line to feature over the next couple of years.

[Ross Taylor:]

Earlier this year CMA made a comment, filed a comment about their thought process on the board and like given that they own 43% of the company and have poor representation. I found that a little confusing to me. I know you've been reticent to talk to us about what their thought process is, but on one level to me, it seems that given what they own of you, given that their balance sheet has gotten a lot better, given that their bonds are trading pretty much at par and the like. The fact that they owe you guys a $1 billion over the next seven years, when they could literally step in and buy the percentage, as a part of the company, they don't own for a fraction of that amount, strikes me as a why wouldn't they do that type of situation. So can you give me a little bit more color on your thought process on what they are looking for and also why wouldn't they just step in one day and just take out the balance of the company?

[Ian Webber:]

I mean, it's actually very difficult for me to speculate on as to somebody else's thinking of what their motives are, whether it's CMA or anyone else frankly, so I can't comment directly on what you're suggestion is, other than say agree that we're a public company, there is price out there for our stock, et cetera, and it's open to anybody to have a run, if that's what they want to do. And the background to CMA's filing on mid-September is that the stockholder agreements that that we had in place for five years, which prevented them from among other things buying stockholders or suggesting changes to the Board of Directors that expired in August. And we don't know what they are thinking is, but I imagine that with that opportunities lease up down, they thought, well, we want to become more directly involved. We don't know exactly how, but becomes we've changed our intentions from being a passive investor we need to put a filing out. I'm not sure whether you said given that board representation or not, they currently don't have board representation.

[Ross Taylor:]

It would seem that they have obviously tremendous amount of influence being at 43% or 40% shareholder?

[Ian Webber:]

We clearly, we take the views into account. We always welcome input from them as we do from every shareholder. Our boards responsibility is to wide out shareholder group, not to have single shareholder or group of shareholders. And as Michael Gross said in our response to the 13D filing that we welcome our CMA's input as our largest shareholder and we look forward to continuing dialogue with them, whilst remaining focused on creating long-term value for all shareholders. But as I say, I really can't speculate as to what their intentions might be.

[Ross Taylor:]

It does seem mathematically that there was a point were it makes sense for them to actually acquire the balance that they do not own, hence they would therefore improve their income statement rather substantially, although I know they take a hit on the balance sheet side, but the income statement would make a rather substantial improvement I would think.

[Ian Webber:]

I really can't comment.

[Ross Taylor:]

I don't expect you to.

[Operator:]

We now have a question from Bridge Street Asset Management from the line of Steven Schuster.

[Steven Schuster:]

My comments are more comments not a question, I just wanted to respectfully weigh in on that dividend comment that prior shareholder made. And I would like to see Global Ship Lease shrink the value gap the stock is trading at a significant discount to its intrinsic value currently. And that I think that the company should pursue a tried-and-true roadmap of initiating a dividend, shrinking that value gap and turning your stock into a currency, so that we have an MLP model that we can grow from there. So it's more a matter of sequencing, where the dividend has to come back on to get the equity valued properly and then we go from there. So those are my comments.

[Ian Webber:]

Steve, thank you, plus as I say, it's good to hear from all our shareholders. Not everybody has the same view, and we take it all into accounts. It's mute at the moment, but rest assured the board, when the opportunity arises will have a robust and informed discussion about what they believe is in the best interest of the one of wider shareholder group. And we do trade it at a discount that could be for a number of reasons, including lack of dividends, it could be both, the fact that we haven't been able to grow. That could be that we got a single counterparty. We overtime want to address all of those and any other constraints that folk might see being out there.

[Operator:]

And if there are no further questions, we will now close the call. With many thanks to both our speakers today, that does conclude the conference. Thank you all for participating. You may now disconnect.

[Ian Webber:]

Thanks everybody.

[Operator:]

Thank you, Mr. Webber and thank you Cook.

[Ian Webber:]

Thank you.

[Susan Cook:]

Thank you.

[Operator:]

Thank you. All the best. Bye-bye.