Safe Bulkers' CEO Discusses Q4 2012 Results - Earnings Call Transcript

Feb.21.13 | About: Safe Bulkers (SB)

Safe Bulkers Inc. (NYSE:SB)

Q4 2012 Earnings Conference Call

February 21, 2013, 09:00 AM ET

Executives

Polys Hajioannou - Chairman and CEO

Loukas Barmparis - President

Konstantinos Adamopoulos - CFO

Ioannis Foteinos - COO

Analysts

Gregory Lewis - Credit Suisse

Fotis Giannakoulis – Morgan Stanley

Natasha Boyden - Global Hunter

Christian Wetherbee - Citi

Kenneth Hoexter - Bank of America

Operator

Thank you for standing by ladies and gentlemen, and welcome to the Safe Bulkers Conference Call to discuss Financial Results for the Fourth Quarter 2012. Today we have with us from Safe Bulkers, Chairman and Chief Executive Officer, Polys Hajioannou; President, Dr. Loukas Barmparis; Chief Financial Officer, Konstantinos Adamopoulos, and Chief Operating Officer, Ioannis Foteinos. At this time, all participants are in a listen-only mode.

There will be a presentation followed by a question-and-answer session. (Operator Instructions) Following this conference call, if you need any further information on the conference call or on the presentation, please contact Matthew Abenante at Capital Link at 212-661-7566. I must advise you that this conference is being recorded today, Thursday, February 21, 2013.

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

Although the Company believes that the expectations reflected in such forward-looking statements are reasonable, no assurance can be given that such expectations will prove to have been correct. These statements involve known and unknown risks and are based upon a number of assumptions and estimates which are inherently subject to significant uncertainties and contingencies, many of which are beyond the control of the Company. Actual results may differ materially from those expressed or implied by such forward-looking statements.

Factors that could cause actual results to differ materially include but not limited to changes in the demand for drybulk vessels, competitive factors in the market in which the company operates. Risks associated with operations outside the United States, and other factors listed from time to time in the Company’s filings with the Securities and Exchange Commission. The Company expressly disclaims any obligations or undertaking to release publicly any updates or revisions to any forward-looking statements contained herein to reflect any change in the Company’s expectations with respect thereto or any change in events, conditions or circumstances on which any statement is based.

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

Loukas Barmparis

Good morning. I’m Loukas Barmparis, President of Safe Bulkers. Welcome to our conference call and webcast. Let’s move on to discuss the financial results for the fourth quarter of 2012, which were announced yesterday after the close of the market in New York.

In slide 5, we present the average 4TC Baltic Cape and Baltic Panamax index. Capes and Panamaxes have been trading at very low levels through the past period within many cases are lower than operating expenses. We expect increased volume of grain cargos due to good harvest in South America to support Panamax market in the next quarter. In the lower part we present the value subsequent hand Capes and Panamaxes as published by Baltic Exchange. Such low asset prices have caused global shipping companies in relation to debt covenants and may lead to impairment losses. We expect that the second hand market has either have reached bottom or it will find it in the following period.

In slide 6, we see that there is still a substantial orderbook for 2013, going forward in 2014 and onwards the orderbook is substantially lower. The average age of the fleet is reduced due to numerous newbuild deliveries, but still some 18% of the drybulk fleet is currently above 20 years old and is expected to be scrapped in the following periods. Under the present current market conditions with very low charter markets and (indiscernible) values is expected those scrapping will accelerate even younger vessels in the range of 15 to 20 years old will be scrapped.

Delayed deliveries and cancellations affect the actual number of deliveries as shown in slide 7. Lack of financing is an additional factor contributing to cancellations or delays which amounted to about 30% of the total orderbook in 2012. We have seen through in the past quarter that ships has [considerable] delays not only because of (indiscernible) buyers to finance their projects, but also from the inability of shipyards to seek good finance for vehicles (indiscernible) to meet their contracted time schedule.

Furthermore, scrapping activity will contribute in lowering the net fleet increase. During 2012, scrapping activity reached record levels amounting to 34 million tons exceeding the scrapping activity of 2011 of 23.8 million tons. Same figure is noted for the first month of 2013. Net fleet in 2012 increased by 64.1 million deadweight tons or 10% versus increase by 76.7 million deadweight tons or 14% during 2011.

In slide number 8, we present the real world GDP on the left and the Chinese GDP on the right. After a very difficult period for the world economy, there are some signs of recovery. In case of China, the new government of (indiscernible) announced simulation of the economical organization in industrialization, expecting to boost the demand for the drybulk cargos set aside on ore, coal and grain. These has been shown in slide 9 figures, present in (indiscernible) ore and coal, which were top of the last month of 2012, partially counterbalancing the over supply of vessels.

In slide 11, we present our fleet and orderbook. Safe Bulkers owns a fleet of 25 high specification vessels with an average age of 4.8 years and a contracted orderbook of six newbuilds and one second hand vessel from top quality shipyards in Japan delivered through 2015.

Slide 12, we provide certain information about Safe Bulkers. We would like to reiterate that management is fully aligned with our public shareholders.

Let’s move to slide 13. Through these years in the shipping market, we have navigated through many shipping cycles, gaining experience and proven track record, maintaining hands-on approach, which resulted in low daily operating expenses and high utilization ratios.

We expand our business sensibly to create value for our shareholders with whom we’re fully aligned. In the present prolonged adverse charter market conditions, it is prudent to maintain a strong balance sheet, liquidity and comfortable debt in compliance with loan covenants while rewarding our investors with regular payments of dividends.

We have a substantial expansion through 2015 as presented in slide number 14. We invest mainly in newbuild shallow-drafted economical sister vessels in the low part of the shipping cycle. We manage actively our orderbook which have cancelled a newbuild Cape after contractual cancellation date for excessive construction delays where which we’re in ongoing arbitration. In these low priced [facet] environment, we decided opportunistically acquire three second hand vessels, the two – a 2003 Japanese build Panamax vessel, Paraskevi being delivered to us at $14.2 million $13.8 million, while the third 2008 Japanese build Kamsarmax at $19.4 million is expected to be delivered in March. We have rescheduled deliveries of three existing newbuilds, one for 2014 and two for 2015. Thus push the related cash outflows to the expected years.

Going to next to slide 15, we seek to employ our vessels in period time charters in order to have visibility of future cash flow, while maintaining certain vessels in the spot market to have the flexibility that the spot market offers in low charter periods and upside potential when the markets improves. We have reduced our counterparties by agreeing to early deliveries of three vessels for which we will receive compensation of $25.1 million in total. We reemployed all redelivered vessels in spot and period time charter market.

As presented in slide 16, we evaluate the performance of our chartering policy against the spot market, which we outperform most of the times. Over the years, we have established long-term relations with some of the most respected charters in the shipping industry. Presented in slide 17, all of our charters are performing. We maintain our cautious approach, monitoring closely charter market which currently is not (indiscernible) affecting most companies in the industry.

On Slide 18, we show our daily operating expenses and management fees compared to industry average reported at about 8,000, with our lean operations contributing to Safe Bulkers’ net income. On Slide 19, we present the net debt per vessel together with the fleet expansion. We maintain low interest expense, as evidenced by our debt per margin levels. We will retain more earnings in the company to further strengthen our balance sheet and our liquidity. We intend to finance our new build programs from equity and debt, while we maintain a comfortable debt to asset ratio and comply with our financial covenants.

On Slide 20, we present our liquidity and our ability to finance our capital expense requirements. As of February 15, 2013, our liquidity was 182.6 million, while our capital expenditure requirements were 193.5 million. I have not included our operational cash flows, which is supported by our contracted period of time charters. We also have the ability to raise additional indebtedness against two existing and seven unencumbered contracted vessels upon their delivery, providing us with further financial flexibility. The excess cash and low charter markets can be used either for debt repayments in order to deleverage our balance sheet or to be used as equity for further expansion.

On Slide 21, we present historically our quarterly earnings per share and our quarterly dividends. Our Board has declared a dividend in the amount of $0.05 per share payable on the 18th of March. At this point, I would like to point out that as presented in slide 22, we remain committed to returning cash to our stockholders. We continue to actively manage our orderbook to selective reductions in newbuild acquisition costs, prolonging existing newbuild deliveries and opportunistically acquiring newbuilds and second hand vessels at attractive prices.

We maintain our low financial costs by continuing to make [active] repayments to our banks in order to ensure compliance with our financial covenants. We have a lean and efficient cost structure in relation to operating expenses, management fees, and general and administrative expenses. We believe it is important to preserve liquidity in this environment as we aim to further strengthen our balance sheet and deleverage our Company while maintaining the ability to make additional acquisitions in the depressed asset market timely for the next upward shipping cycle.

Our Chief Financial Officer, Konstantinos Adamopoulos will now present in detail our financial results.

Konstantinos Adamopoulos

Thank you, Loukas, and good morning to you all. Moving on to slide 23, we present the operating highlights for the fourth quarter of 2012 and 2011. As of 31st December 2012, we owned and operated 24 vessels and we achieved the utilization rate of 99.2% compared to 18 vessels and the utilization rate of 99.1% during the same period of last year. The average daily time charter equivalent per vessel for 2012 was $22,979 compared to $27,932 for the same period of last year. For the fourth quarter of 2012, daily running expenses increased slightly by 0.5% to $4,511 compared to $4,487 in the same period of last year.

Slide 24, illustrates the comparison of selective three months financial key points of our performance. For the quarter ended 31st December 2012, and the respective figures of the last quarter of last year. For the fourth quarter of 2012 net revenues increased by 8% to $46.4 million from $42.9 million in the respective field of last year. Net income for the quarter of 2012 was $32.2 million, up 36% from net income of $23.6 million in the same period of 2011.

Adjusted net income for the same quarter of 2012 was $20.5 million compared to $24 million during the same period in 2011. The increase in net income is mainly attributed to the net effect of the following factors. Net revenue of $46.4 million compared to $42.9 million, vessel earning expenses of $9.8 million compared to $7.2 million; depreciation of $8.8 million compared to $6.6 million; adding delivery income of $11.7 million compared to $100,000; interest expense of $2.9 million compared to $1.5 million for the relevant quarters of 2012 and 2011 respectively.

EBITDA was $43.9 million for the fourth quarter of 2012, an increase of 39% from $21.7 million in the respective period in 2011. Adjusted EBITDA was $32.2 million for the fourth quarter of 2012, a change from $32.1 million in the same period in 2011. Earnings per share and adjusted earnings per share for the fourth quarter of 2012 were $0.42 and $0.27 respectively calculated on the weighted average number of 76.7 million shares compared to $0.33 and $0.24 respectively in the fourth quarter of 2011 calculated on the weighted average number of 70.9 million shares. For a definition and reconciliation of EBITDA and adjusted net income, EPS and EBITDA, please refer to Slide 26.

Slide 27 presents a summary of our key financial figures during the fourth quarter of 2012 compared to the same period in last year of 2011. Our net revenue increased by 8% to $46.4 million from $42.9 million. Our adjusted net income for the fourth quarter of 2012 decreased by 15% to $20.5 million from $24 million during the same period of 2011. Our adjusted EBITDA for the fourth quarter of 2012 increased marginally to $32.2 million from $32.1 million during the same period in 2011. Adjusted EPS for the fourth quarter of 2012 of $0.27 compared to $0.34 in the fourth quarter of 2011 calculated respectively on the weighted average number of shares of 76.7 million and 70.9 million.

In the second table in the bottom of slide 25, we see that the total debt as of 31st December 2012 increased by 27%, amounting to $616.7 million as compared to $484.3 million as of the end of 2011. The result of our financial performance is clearly demonstrated by the company consistency in its dividend policy, maintaining a prudent and meaningful dividend throughout the last crisis, comparing to the vast majority of our industry peers.

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

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

Summing up our presentation is slide 28. Although market conditions at the moment are not rosy, we stand prepared as a long-term oriented company. We have been in shipping for more than 50 years, we know the industry and we believe in this industry. We actively manage our orderbook and fleet. As a result of our track record and reputation in the industry, we have developed strong long-term relationships with key shipyards, charters and banks in China and Japan. We have a strong history and reputation of operating excellence as reflected in our utilization rates and lower operating expenses. We maintain low financial costs as a result of our low spreads and prudent levels in compliance with our financial covenants.

We actively manage our young shallow drafted fleet of 25 drybulk vessels, all of which are built 2003 onwards. Our extensive charter coverage with established performing customers supports our strong balance sheet and liquidity, providing financial flexibility. We remain committed to a prudent dividend policy to reward shareholders through payment of dividends and at the same time ensure future expansion and deleveraging.

Our contact details can be seen on slide 21 to 29. Thank you for – all for listening. We are now ready to accept and reply to your questions.

Question-and-Answer-Session

Operator

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

Gregory Lewis - Credit Suisse

Yes, thank you and good afternoon guys.

Loukas Barmparis

Good afternoon.

Polys Hajioannou

Good afternoon, Greg. (Indiscernible).

Gregory Lewis - Credit Suisse

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

Polys Hajioannou

Yes, so look there were some discussions with – as you know we build our charters, we enjoy long corporation and very close relationship. And we thought that it was good to move proactively ahead of others and ahead of things, getting worse or whatever and take some couple. And this money has been already collected, so $25 million have already been added in the accounts of the Company. And I think it was done on a very fair number for the Company. You have to remember that in the past two years many charters were delivering ships without paying anything. Here not only they paid, they paid the vast majority that of the money that we were due to earn in the next couple of years. In total, in the two out of the three occasions we have left all the upside open for the Company. So we’re (indiscernible) done with the rates around 8,000,000, 8,500,000 a day. So with the market improves in next year to higher levels in rich 12,000 or 15,000 that will be somehow it benefit from that part. So it was a very good move for the company to reduce its risk and collect substantial amount of money.

Gregory Lewis - Credit Suisse

Okay. Perfect. And then clearly there have been discussions over the – what last quarter or to about say focus decision that most likely terminate a new building contract. Clearly that happens due to the shipyards late delivery. Do you have any sense for, I mean, do you have any sense for how long an arbitration like that typically last’s? Is this something that we should expect to be resolved in the next quarter or two or is this something that could drag out years.

Polys Hajioannou

I would expect that this is something that should be sorted out in the next quarter or so. So, by the -- before the end of the first half we should have positive news. There is no dispute as such, it's the normal practice of the Chinese shipyards when they have messed around and they have not delivered the ship in time and in this case it's not only a matter of not delivering the ship in time. The ship also still at block construction phase so there’s no dispute as such. But despite of delaying tactics done by the yard in order to delay a little bit the unavoidable. So, I mean, the company is (indiscernible) interest at 5%, so from our point of view this is not that but in this market, and we hope that sometime in the next couple of months, three months, maximum there should be the money in the bank account.

Gregory Lewis - Credit Suisse

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

Polys Hajioannou

Yeah, Maritsa.

Gregory Lewis - Credit Suisse

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

Polys Hajioannou

Yes. We cannot do all the time what we want to do, is we have to do sometimes what the other side is dictating us to do. So, on the one vessel that charter – talked about the washout rate of, because we use this rate for washout the $8000, so then he realized his rate is far too low and but the market could well pickup in the second half of ’13 or in ’14, so you say is real, but I don’t want to lose the up sight and then I lose from both sides. So, I'll re-charter the ship back for two years at least so it was to see who had a silly conversation for what we couldn’t avoid it. I wish we could avoid it, but he had an argument that he would pay the money; so long he would keep the ship. So, I mean sometimes you have to give something to the other side.

Gregory Lewis - Credit Suisse

Okay. Perfect guys. Thank you for the time. It makes sense.

Polys Hajioannou

Thank you.

Operator

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

Fotis Giannakoulis - Morgan Stanley

Yes, good afternoon.

Loukas Barmparis

Hello.

Polys Hajioannou

Hi, good morning.

Fotis Giannakoulis - Morgan Stanley

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

Polys Hajioannou

They were from different customers.

Fotis Giannakoulis - Morgan Stanley

Can you identify how many?

Polys Hajioannou

We don’t identify in particular each which is a charter et cetera, but it was two charters for three ships.

Fotis Giannakoulis - Morgan Stanley

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

Polys Hajioannou

As you have seen in the presentation the company has substantial liquidity, so it's $182 million plus the expected $31.8 million from the refund guarantor of the other ships, so it's something like $215 million plus nine vessels without debt. So, we have substantial ability to move and to invest when the time is right. We think right now the time looks at the bottom or near the bottom for secondhand acquisitions. And despite we’re traditionally a company of being associated with new buildings we changed the policy for the last quarter and for the next one or two quarters to take advantage of the pressure that is in the market to buy attractive secondhand ships simply because we believe that this ships price will recover first when the freight market recovers.

So nobody knows exactly when the freight market will recover. It could be well end of this year or it will be next year, but when it recovers secondhand ships of five, ten years old immediately their price will jump 30%, 40% and the company tends to sell most of those ships, the secondhand acquisitions in the space over the next two to three years and take the profit. The new buildings, we believe that will take a bit longer to recover because the actual capacity of the shipyards will not allow them to raise prices up fast. So the market will improve – the freight market will improve and it will take at least three or four quarters before yards are able to pass this on higher prices. So, this is a short-term approach what they do with their secondhand ships.

Fotis Giannakoulis - Morgan Stanley

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

Polys Hajioannou

Yes, on the acquisitions we made, because we bought in from Japanese owners and they were the [more keen] sellers in the last two, three months. I expect to see some more from this part of the world, or other part of the world in the next six months especially with the softening of their currency especially after March with the New Year I expect to see more ships coming out from this country. And our company is very well known to Japanese market. I believe that they give us some sort of preference so long our price is fair. They give us some sort of preference, because they know that performance will be prompt and fast and quick. The problem is to identify good quality products because sometimes you inspect five ships to find one that is of the standards we find that suitable, but generally I think that our good reputation in the Japanese market helps us to have a good response from the sellers from that part of the world.

Fotis Giannakoulis - Morgan Stanley

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

Polys Hajioannou

No I think that it's approaching this number in the Atlantic, the South American business, they compare you around $10,000 at the moment for ships ballast (indiscernible) South America to the Far East. I am positive for the second quarter that we will reach this figure and we will maintain this figure of around $10,000 possibly $11,000. I am not very optimistic for the summer, I think right after the South American market passes there would be a bit of a quite summer like we had last year. And then, I mean so long there’s no surprise’s from financial markets. Hopefully we should start seeing better numbers from the end of the year maybe in the fourth quarter. Generally for’13 we're not very optimistic, so a couple of good pictures in the spring and one good picture in the winter is not enough, if the summer would be big. So, we cannot say will be a lost year, definitely will be little bit better than last year, it won't be anything great for this year, and I think that we should be more optimistic for 2014. So, long there is not over the action and new activity on the ordering, because there isn’t orders of Capesize bulk carriers reported in big numbers. The last two, three weeks from two, three players is very, very pessimistic and gives us very, very concern a big concern, but maybe the market will be killed before it starts revising again.

Fotis Giannakoulis – Morgan Stanley

Thank you very much for your time.

Polys Hajioannou

Thank you.

Operator

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

Natasha Boyden - Global Hunter

Thank you, operator. Good morning, gentlemen.

Polys Hajioannou

Good morning to you.

Natasha Boyden - Global Hunter

I just have a follow-up on Greg’s question regarding the arbitration. Very quickly, am just curious what ground does the shipyard claiming to keep in the progress very much?

Polys Hajioannou

There’s no grounds. They just say that, you have no right to cancel the contract and they go to arbitration for the arbitrator to decide who are right and who are not right. As far as we are concerned, the ship was not ready, it was not even launched, we let our loan be ready – anyone already for delivery, so we had the right to cancel and we cancelled as per contract and rightly and we’ve giving the proper notices and to our lawyers and doing everything correctly. The yard approached us a few days before the canceling to propose to substitute the ship with something else and to Kamsarmax and also offering us a new delivery date in the summer of 2013, so you understand that, I mean it's a crystal clear case here. But having said that, it's their normal practice, they’ve done it on – with previous owners to the fair markets arbitration in order to pay the cost of arbitration, because loosing party will pay for all cost. If they try to pay the cost and allow themselves the extra two, three months to see how they find the money and how they make some of the arrangement with their financing banks, the yards financing banks to see how they will keep the yard going. So, it's a normal practice, it's a little bit frustrating but it’s a normal practice in China, so long (indiscernible) is a big company and is a sound company. There should be nothing to worry about. We chose not to wait for this money for two, three months to go through the normal process.

Natasha Boyden - Global Hunter

Okay, all right. That’s very helpful. Thank you. And then just quickly, obviously you had the early redelivery of the [three charters], looking out to what's remaining on your fleet, how comfortable are you with your counter parties at present and have there been any issues or anything that would cause you to be concerned?

Polys Hajioannou

Yes, I'll be more concerned last summer, last summer when they were some strong rumors about Daiichi and which was a major charter for us. I think they’re in a much better shape now. They have the support from MOL and they have support from their financing banks, and they got also the support from the Japan Inc. So right now it looks like that this company will keep going and do well in the years to come. So, apart from this we have nothing else to worry and the other charters we have they’re all performing and Daiichi is performing 100%. They were never one day late on the hire payments, and we’re very confident that the company will collect what it has to collect in the next couple of years.

Natasha Boyden - Global Hunter

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

Polys Hajioannou

Yeah, we would not place on this lousy numbers. Its okay to fix a ship up to a year you may fix a date, $9000, $10,000 depending on to where the ships opens. But to fix two, or three years in this market and at this levels is I think its not clear because we will simply block the upside to protect very limited downside. So, we will not go for charter as long as on maximum a year because we believe next year we should see better market unless I say that we see unreasonable and speculative activity in the new building market, and recently there isn’t Cape orders and makes me wonder I mean, why people want to rush and destroy market when there are so many ships out there you can buy in the secondhand market.

Natasha Boyden - Global Hunter

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

Polys Hajioannou

Thank you.

Operator

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

Christian Wetherbee - Citi

Hi, guys. How are you?

Polys Hajioannou

Good morning.

Christian Wetherbee - Citi

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

Polys Hajioannou

I think the big owners generally take a very responsible approach to the new ordering, everybody still has ships to get delivered often, they are very skeptical and very conservative despite yards can do good prices at the moment. So you can catch the upside if you want by buying secondhand ships, then allow the market to do whatever move it does and then you could possibly order some more ships. And these orders came from overseas owners, from other nationalities, non BRICS I think it's too much, there’s too many ships order in a very short period of time. I transport around 20 Capesize order over the last two, three weeks. This is a warning sign I don’t like it because Capesize market is still up $6000 a day, the spot market. So, I mean it's too big a move to make in this environment. So, I mean it's, the Greek owners are more – take a more responsible approach I think on this front. Because what did the market tell us, yes it's not the lack of demand, it's the over supply and everybody knows this. So, why quad more ships before the market even starts recovering.

Christian Wetherbee - Citi

And what are the slots, what's the timing of the slots that are being sold, I mean are we talking about early ’14 delivery or something a little bit further than that or these kind of opens the slots that are popping up that your result of cancellation?

Polys Hajioannou

Yes, from what I see it's mainly second half of ’14 and ’15 the deliveries that’s why I say that there will come at a time when the market will start recovering and will possibly kill it off again. So if we see another 20 Capesize order in the next couple of months, because once owner start, the other owners by the bullet and they say that okay, we don’t want to miss out on the party. Even other owners follow this example and continue the ordering. This will make sure that 2015 will be not a good market for Capesize bulk carriers, if this situation continues. So, I think all owners should be more responsible and more lets say conservative on this approach.

Christian Wetherbee - Citi

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

Polys Hajioannou

Yes, we don’t have any discussions, all the charters are current and they pay on the due data. So, we’re well happy with that. And as I say, we do a lot of charter we have very close relationship and when there is opportunity to make discussion we will always sit down and find something that is fair to both sides and for us also is to our advantage to reduce our risk in the market. So, when there is a logical proposal that is good for all parties we will not be afraid of getting the money early and giving some discount. At the end of the day, I mean finance also is not so cheap out there, so I mean you're saving from that cost as well.

Christian Wetherbee - Citi

Sure.

Polys Hajioannou

So, I mean when there is a call and there is talk again we will reveal this issue; but at the moment there’s nothing ongoing, there’s no discussion as we talk of now.

Christian Wetherbee - Citi

Okay. That’s very helpful. Thanks very much for the time. I appreciate it.

Polys Hajioannou

Thank you.

Operator

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

Kenneth Hoexter - Bank of America

Hi, good afternoon. I just wanted to follow-up on the vessels that you purchased. Maybe I missed it, were these from distress sellers or could you kind of describe the mindset of where you’re buying the vessels from?

Polys Hajioannou

Yes, so all the three vessels bought were from Japanese owners, three different Japanese owners. You cannot call them distress sale. They wanted to sell ships that they had in their books and collect some cash. So, we have inspected almost every ship that there was in the market in the last five, six months. When we find the right vessels and the right quality in the right condition, of course as I say you inspect five ships to find one that is properly maintained and it has the specs that are similar to the specs of the fleet that we have in our company would like automated engine room and other features. We try to move as sharp as possible and as I said before that because we have good reputation in the local market in Japan, the owners they know Safe Bulkers. They know our performance and they are happy to fix the deal provided we’re at the same level with another buyer, generally they would prefer fixing it with us. So, it all comes from three different Japanese owners, they came with the ships.

Kenneth Hoexter - Bank of America

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

Polys Hajioannou

Now we will keep those vessels, (indiscernible) will have in the spot market, we will keep in the spot market. If we lock, we’ll lock up to maximum one year with no point to lock more than that. We will block $9000, $10,000 a day for about a year, because locking higher more than one year, we need hire rates. We cannot lock up $9000, $10,000 for two or three years because the market recovers in ’14 or ’15 we will loose the upside while as we protect the very limited downside. So, for us the policy is to fix the small ships on a tick basis up to short period or maximum a year, and wait for a better market possibly 2014 -- hopefully 2014.

Kenneth Hoexter - Bank of America

Great. I appreciate the fact. Thanks, Polys.

Polys Hajioannou

Thank you.

Operator

Thank you. There are no further questions. Please continue. We don’t have any questions left on the line, sir. Please continue.

Polys Hajioannou

Go on Loukas.

Loukas Barmparis

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

Operator

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

Copyright policy: All transcripts on this site are the copyright of Seeking Alpha. However, we view them as an important resource for bloggers and journalists, and are excited to contribute to the democratization of financial information on the Internet. (Until now investors have had to pay thousands of dollars in subscription fees for transcripts.) So our reproduction policy is as follows: You may quote up to 400 words of any transcript on the condition that you attribute the transcript to Seeking Alpha and either link to the original transcript or to www.SeekingAlpha.com. All other use is prohibited.

THE INFORMATION CONTAINED HERE IS A TEXTUAL REPRESENTATION OF THE APPLICABLE COMPANY'S CONFERENCE CALL, CONFERENCE PRESENTATION OR OTHER AUDIO PRESENTATION, AND WHILE EFFORTS ARE MADE TO PROVIDE AN ACCURATE TRANSCRIPTION, THERE MAY BE MATERIAL ERRORS, OMISSIONS, OR INACCURACIES IN THE REPORTING OF THE SUBSTANCE OF THE AUDIO PRESENTATIONS. IN NO WAY DOES SEEKING ALPHA ASSUME ANY RESPONSIBILITY FOR ANY INVESTMENT OR OTHER DECISIONS MADE BASED UPON THE INFORMATION PROVIDED ON THIS WEB SITE OR IN ANY TRANSCRIPT. USERS ARE ADVISED TO REVIEW THE APPLICABLE COMPANY'S AUDIO PRESENTATION ITSELF AND THE APPLICABLE COMPANY'S SEC FILINGS BEFORE MAKING ANY INVESTMENT OR OTHER DECISIONS.

If you have any additional questions about our online transcripts, please contact us at: transcripts@seekingalpha.com. Thank you!