Global Ship Lease's CEO Presents at New Capital Structure Discussion (Transcript)

Mar.18.14 | About: Global Ship (GSL)

Global Ship Lease, Inc. (NYSE:GSL)

New Capital Structure Discussion Conference Call

March 18, 2014 10:00 AM ET

Executives

Ian J. Webber – Chief Executive Officer

Thomas A. Lister – Chief Commercial Officer

Analysts

Chris M. Snyder – Sidoti & Co. LLC

Nathan LeFoone – Harbor Capital

Ross Taylor – Somerset Capital Advisers LLC

Mark Suarez – Euro Pacific Capital, Inc.

Steven Schuster – Bridge Street Asset Management

Jody Kane – Diamond Bridge Capital

Operator

Good day ladies and gentlemen, and welcome to the Global Ship Lease Conference Call. At this time, all participants are in listen-only mode. Later we will conduct a question-and-answer session and instructions will be given at that time.

I would now introduce your host for today’s call, Ian Webber, Chief Executive Officer of Global Ship Lease and Tom Lister, Chief Commercial Officer. You may now begin.

Ian J. Webber

Thank you very much and thanks everyone for joining us here today to discuss capital structure following the recently announced $420 million bond offering and the associated $40 million revolving credit facility.

The purpose of today’s call is to provide shareholders with specific information on the offering following yesterday’s filing of the description of notes and ahead of tomorrow’s expected closing.

On the call today, we’ll discuss the terms of the offering, the principal terms of the offering, its consequent benefits, and strategic rationale for issuing the notes and improved charter coverage and provide an overview of our strategy going forward. We’ll then provide some additional industry information for context and following that we’d be happy to take your questions.

The presentation accompanying these prepared remarks is available on our website and also through the webcast. Slides 1 and 2 of that presentation are the normal reminders that today’s call may include forward-looking statements based on current expectations and assumptions and are by their very nature inherently uncertain and outside of the company’s 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 factor section of our annual report on Form 20-F which was filed with the SEC last April. You can retain the 20-F on our website or via the SEC. All of our statements qualified by these and other disclosure in our reports on file with the SEC and we don’t undertake any duty or responsibility to update those forward-looking statements.

Let’s turn to Slide 3 of the presentation where we’ll start with an overview of the terms of the offering and its benefits in providing us with improved flexibility.

On the 12th March, a week ago, today we priced our transformative transaction, which was an offering of $420 million aggregate principle amount of 10% first priority secured notes, five years notes so due in April of 2019. The offering is scheduled to close tomorrow, March 19th.

We intent to use the proceeds of these notes, which are to be secured by our 17 vessels and will be guaranteed by our 17 ship-owning subsidiaries, as well as our service company Global Ship Lease Services Limited, pretty much in the same way as the security works under the existing credit facility to repay the entirety of our obligations under that facility, which amounts to approximately $366.4 million.

We will also settle our outstanding interest rate derivatives, the swaps which had a fair value at December 31, 2013 of $21.3 million. We expect the offering to result in some incremental cash to our balance sheet after giving effect to the issue discount and to expenses.

As we’ve stated on our conference calls for sometime now, it’s been our goal to refinance our existing, almost closely restricted credit facility in a manner that increases our financial flexibility and provides us with a platform to proactively create long-term shareholder value.

This notes offering and the associated $40 million revolving credit facility, we believe positions Global Ship Lease to unlock significant long-term value and is the culmination of that process enabling us to meet important objectives at a time when access to bank debt – private bank debt continues to be constraint and whether continue to attractive investment opportunities.

Upon closing, we will be in a position to capitalize on accretive acquisitions and to take advantage of cyclically low asset values. Additionally, we’ve taken the first important step to being able to pay a sustainable dividend.

Moving on to slide 4, we contrast our old credit facility and the new notes. Looking at the chart, I would like to draw your attention to a few crucial items. As mentioned a moment ago, whereas we were previously unable to grow the business through acquisitions, all pay a dividend to our shareholders we now have the flexibility to do both, being able to evaluate on a capital allocation strategy with much greater freedom.

This flexibility is as a maintenance covenant embedded in our credit facility, which as you know has forced us to seek waivers from our lenders for almost all of our existence and has led to all cash in excess of $20 million on the measurement dates being swept to a multi-credit facility, and always subject to a minimum payment of $40 million of debt per year. We’re also been unable to pay any dividends under the terms of the waivers.

For your information, the total prepayment amortization of debt in 2013 was a touch under $60 million at $59.3 million. This crucially important factor, the flexibility, the increased flexibility allows us to take control of the business and this together with analysis of future cash flows has played a significant part in our decision to issue the notes.

Notably with the issuance of the bond, our cash outlays including interest cost amortization of the settlements of the swaps will decrease from around $91 million in 2013 to between $43 million and $63 million a year under the notes, including cash interest on the bond and the preferred as well as the commitment fee for the revolver. And to explain the $43 million to $63 million up to $20 million of amortization of the bond based on participation by noteholders in a tender offer we’re required to make once a year out of the proceeds of excess cash flow that we generated.

Moreover, we would expect to increase cash flow from acquisitions that we’re now able to pursue. If we also take into account the opportunity cost associate with the almost total inflexibility of the credit facility, the improvement between the true cost of the old facility and that of the new notes becomes even more material.

Finally on this slide in addition to getting rid of the handcuffs associated whether old loans value covenant and incidentally all the other maintenance covenants have gone as well. This offering also pushes back refinancing from 2016 to 2019.

Let’s move on to Slide 5, to support the notes offering, as well as to improve forward contract cover for benefits of equity, we were pleased to have agreed with CMA CGM to extend by 3 years the charter contracts on full of allocated 2200 TEU vessels, which now expire subject to closing of the notes tomorrow and that now expire late 2019, they would otherwise have expired late 2016.

We appreciate CMA CGMs support in this development and based on the new rates of $15,300 per day effective from February 1 this year, we’ve added $54 million to our contracted revenue for total of approximately $965 million of contracted revenue as at December 31, 2013. By extending these four charters we’ve also increased weighted average remaining contract coverage to 7.8 years. This excludes the Orion and the Aquarius, which are the two spot vessels in our portfolio.

These expansions which we consider to be a significant and positive development for shareholders further demonstrates our strong relationship to CMA CGM and provides us with additional visibility into our future cash flows whilst protecting us from volatility and charter rates.

Other than the Orion and the Aquarius, which we talked about on our Q4 earnings call and were the charters remain work in progress, our earliest explorations on our late 2017 on the other four 2200 geared vessels.

Moving on to Slide 6, we provided on outline of our strategy going forward. Firstly we intent to maintain strong contract coverage for our fleets with high quality counterparties, primarily on long-term fix rates of charters. Secondly as we capitalize on attractive acquisition opportunities that exist in the current cyclically low asset value environment we will seek to diversify our charter portfolio to include other major liner operators, complementing our relationship with CMA CGM.

Third, we are in a strong position to take advantage of our strength and capital structure and a major liquidity which supports our grow strategy with an expanded maturity and in addition to cash on hands adds incremental liquidity from the new $40 million revolver.

Tom will discuss shortly some market dynamics, which we believe have created a particularly opportunity in midsize and small vessels and we’ve discussed these on our earnings call in the past, but first I’d like to give you a sense and the nature and the economics of acquisitions that we’re looking at.

Based on our analysis of transactions that have been consummated in the last couple of years, involving existing mid-size and smaller tonnage, we believe that unlevered IRRs for the types of transactions that we would target but is charted transactions such as certain lease backs or secondarily selective purchases of distressed assets on which we would arrange a charter.

These returns the IRRs have been in the double digits depending of course on vessel specification, charter duration, follow the charter and so on.

Structured charter attached transactions such as say in a lease back transactions would be immediately accretive to our cash flow. Alternately in a situation where we’re able to put an acceptable charter in place, a distressed deal purchasing of the bottom of the cycle for small premium over scrap would be expected to offer high unlevered IRRs, but would provide low or even cash neutral, cash-on-cash use in the near-term.

For this reason and our desire to add incrementally to cash flow and net earnings, our primary focus would be on charter attached deals. To give you an idea of our investment capacity, of the closing of the nodes including net cash from the offer existing cash on our balance sheet and taking account of the new revolver, we would expect to have around $70 million of dry powder which we can put to use in making attractive acquisitions.

Based on the returns we mentioned a moment ago, we believe that we now have a compelling opportunity to increase our cash flows for the benefit of the company and all of our shareholders.

Finally we intent to take a disciplined approach to capital allocation whilst the new notes gives us the flexibility to pay a modest dividend and contain a conventional high yield mechanism to grow that capacity over time. Board will be evaluating the timing of paying a dividend relative to the value that we can generate by entering into accretive acquisition opportunities in the near and mid-term.

We do understand the importance of providing a sustainable dividend to our shareholders and continue to believe that our business model supports this important objective, especially now that we are in a position to take advantage of compelling opportunities to grow our cash flow and to grow our dividend paying capability.

And now for some context on the market environment, I’ll turn the call over Tom.

Thomas A. Lister

Thanks Ian. Good morning everyone, please turn to Slide 7, where you can get a sense of the current cyclical pressure on vessel prices. Without getting too poked down in the detail, I think this chart makes two points really quite clearly. First with charter asset values close to historic lows and 80% off of that 2008 peaks, this is a bad time as we know too well to be subject to the continuing constraints of a maintenance covenant tied to LTV, as was the case under the old credit facility.

With asset values subject to market forces outside our control, there would always be a level of uncertainty as to when we might pass LTV on a sustainable basis under the new notes GSL is now essentially free of that restriction. Second, this cyclical trough is an ideal time for a vessel owner with immediate access to capital to make accretive acquisitions we’re now well positioned to do so.

Turning to Slide 8, here we show why our focus has been and continues to be on midsize and smaller vessels. As you can see on the pie-chart on the left, nearly 70% of global containerized trade takes place in the non-mainlane trades with over third of total container trade taking place in intra-Asia alone. Outside of the mainlanes container trade is carried predominately on midsize and smaller tonnage and it is in those areas where containerized trade continues to show healthy growth.

Meanwhile, and as you can see on the right hand side of the page, ordering activity continues to emphasize larger tonnage, while midsize and smaller vessels look under represented. Further, as we’ve said in previous conference calls, scrapping activity has accelerated with a record 440,000 plus of TEU all indecently comprising vessels below 5,200 TEU going to the break as in 2013.

Much of the scraping has been driven by continued financial stress in the German KG environment and is worth nothing that approximately 60% of all charter tonnage currently on the water is run by German owners funded by the KG system.

Given both the favorable vessel supply outlook and promising long-term demand prospects for the services that midsize and smaller vessels provide, we see a significant opportunity to make attractive acquisitions in that space in the near-term.

Ian, back to you.

Ian J. Webber

Thanks, Tom. So to conclude our prepared remarks, and summarize what we said, let’s look at Slide 9. We currently own a fleet of high quality vessels mostly in what we consider as Thomas explained to be an home under built size segment of midsized ships and smaller and particularly with our 8 geared tonnage – 8 geared units, on which we’ve been able to generate very high levels of utilization of over 99% ignoring the scheduled drydockings.

Additionally, all of our vessels other than Orion and Aquarius are on fixed rate time charters of at least three years remaining duration. Including that the four newly expanded charters, we have got a weighted average remaining charter term of 7.8 years and contracted revenues of $965 million as at December 31, 2013. This further improves the long-term visibility of our predictable and stable cash flows.

As evidenced by those expansions, the charter extensions we continue to have a strong relationship with CMA CGM, our sole customer and 45% shareholder of our common stock.

Furthermore, we believe the offering of the new notes enhances both our financial strength and more profoundly, our flexibility to allocate capital in such a way as most benefits our shareholders.

Following the offering, we are now able to pursue growth through accretive acquisitions at a time where asset values remain at cyclical blows. And now we’re rich of the covenant restrictions under the old credit facility that among other things precluded us from paying dividends for our common shareholders.

We’ve acknowledged for sometime that we consider the addition of the growth components to drive business and the ability that’s pay a dividend for our stockholders that to be highly important components of our strategy to deliver value to our shareholders and this offering is transformative transaction for us, has put us in a position where both are now possible.

In conclusion, we are pleased to have entered into this transaction by including increasing current contracted charter coverage, which we consider to be a major milestone for Global Ship Lease, significantly improving our ability to grow our fleet and our cash flow allowing us to diversify our charter portfolio and creating additional value for our shareholders including the opportunity for a dividend.

That concludes our prepared remarks and so we will be happy to take your questions, and I’ll hand the call back to the operator.

Question-and-Answer Session

Operator

Thank you. (Operator Instructions) We will now take the first question from Chris Snyder from Sidoti & Company. Please go ahead.

Chris M. Snyder – Sidoti & Co. LLC

Hey good morning.

Ian J. Webber

Hello, Chris.

Chris M. Snyder – Sidoti & Co. LLC

I guess my first question is on, give a scrap up, did I know you on the fourth quarter earnings how you gave an update on how many vessels were scrapped so far to date? Could you provide any more information on that?

Ian J. Webber

Yes. The leased information I’ve seen Chris is that – just under 200,000 TEU of capacity has been scrapped during the first well year-to-date in 2014 and that’s on top of the 440,000 TEU plus of capacity that went to the break of last year.

Chris M. Snyder – Sidoti & Co. LLC

And was that – is this like acceleration of scrapping or kind of made to guys through the deal where as in December you were uncomfortable that you sent that the window for these prices were closing?

Ian J. Webber

No, not really. We were unable to close the transaction in December because we simply ran out of time, there was nothing real complicated to it than next. The investment opportunities remained equally as attractive today as they did that time, so that wasn’t factoring up in our decision making.

Chris M. Snyder – Sidoti & Co. LLC

Okay. And I know you guys have said multiple times that you’ve committed to paying sustainable dividend. Is there any, can you give any color on where like a number of, a range where you would be looking for that to come in at?

Ian J. Webber

Yes. Well the – we can talk about the description of notes that allows us to pay a dividend. There is a thing called a restricted payments basket which we can use to fund the dividend, either that way. It’s capped at $7.5 million at the moment. So we would pay a dividend tomorrow of $7.5 million, but then we would have to build our capacity to pay a dividend from growth essentially and equity issuance in the near-term. So that gives you an idea of our ability to pay dividend out of the gate.

Chris M. Snyder – Sidoti & Co. LLC

Okay. Well, it’s helpful. And last question is just – has there any been – any progress on the 4100, have you surveying anything that you could update us on there?

Ian J. Webber

No, Chris, as I said in the prepared remarks, they’re still work in progress. We still have the four options agree something with CMA CGM, agree something with another charter idle the vessels, if we can’t find attractive employment for them in the near-term or dispose them.

Chris M. Snyder – Sidoti & Co. LLC

Okay, thank you. That’s it for me. Thanks for the time.

Operator

We’ll now take our next question from Nathan Laffoon from Harbor Capital.

Nathan Laffoon – Harbor Capital

Good morning.

Ian J. Webber

Hi, Nathan, how are you?

Nathan Laffoon – Harbor Capital

I am fine, thank you. Both you and Tom speak about acquisitions in the near-term, would you – does that mean that you are actively looking at things sort of on your radar in your cross heirs in other words you have details that you’re looking at currently?

Ian J. Webber

Yes.

Nathan Laffoon – Harbor Capital

I guess, define near-term?

Ian J. Webber

Yeah, we are looking at transactions And we’ve clearly are been keeping a very close eye on the market analyzing deals that have been done that we would love to have been able to participate in over the 18 months or so that have been unable to. So, we are very close to the market, we are very close to opportunities as to is the timing of us are announcing a vessel that’s just really difficult to forecast. I would hoping including a rather than later?

Thomas A. Lister

But to sort of address what may underlay your question Nathan, we are not fragment with the specific deal at this point and time.

Nathan Laffoon – Harbor Capital

I understand. These deals that distressed asset that you see out there predominately flooded by the disarray the KG market continues to rather than?

Thomas A. Lister

Yeah, by and large but that’s absolutely right as we’ve discussed previously German owners own the vast majority of at least container ships. And that they some of them are under significant financial pressure running out of cash from operating losses because the chartering vessels out of low rates and they made of special surveys drydocking coming up, which is a significant lump of capital expenditure. If they haven’t got liquidity and can get the liquidity from equity or from debt than they are pretty much applies to put the vessels up so.

Nathan Laffoon – Harbor Capital

And just one other thing following that, can you talk a little bit we’ve struggled, you have struggled to get out of the camera lock of the banks, what is the just restate again what it’s like for ship owner trying to find bank financing in this market?

Thomas A. Lister

Whether it’s incredibly tough, most of the traditional ship lending banks are European and many of those effectively shut the new business. A few is still open, but it’s very selective, lending that hence if it is available is that lower advance ratios at higher coupons and often for shorter durations then we were use to pretty 2008 that have been somewhat alternate sources of capital coming into replace the big hole that the European banks have lacked so that’s a combination of the Chinese money and increasingly U.S. hedge funds or private equity which I am sure you’ve read about, but really…

Nathan Laffoon – Harbor Capital

Right

Thomas A. Lister

They’re quite challenging to get conventional traditional ship mortgage debt financing close today not impossible of a challenge.

Nathan Laffoon – Harbor Capital

Will it be fair to say that private equity money is not really looking or doesn’t seem to be coming in to the smaller tonnage portion of the market that we operate in primarily?

Thomas A. Lister

That’s right Nathan. They are more interested in the larger modern cycle, the eco shifts, but they’re all pockets of private equity capital that are interested in the same sort of tonnages as us, but there is plenty we believe plenty of investment opportunity to go around.

Nathan Laffoon – Harbor Capital

All right, thank you, that’s it from me. Thank you very much.

Operator

(Operator Instructions) We’ll now take the next question from Ross Taylor from Somerset Capital.

Ross Taylor – Somerset Capital Advisers LLC

Yes, gentlemen thanks for the call on the information. Real quick, as we look at this, the call on your cash from this new debt structure should be sustainably reduced from where you’ve been previously. Looking at your slide you had last year $32 million in interest costs and nearly $60 million in amortization of the secured debt and looking at it, going forward you’re basically in about $42 million of interest cost plus $20 million potential call or buyback on the debt on an annual basis. Can you explain what you plan on doing like, how this structure works if you – with your free cash flow and what can you do with that $20 million if it turns out that bondholders choose not to put bonds back to one or two?

Ian J. Webber

Yes. Thanks Ross, good question. We can invest that $20 million in cash – in vessels I am sorry, we are free and clear to deal with it broadly as we will. We don’t have to keep it back and re-operate it on accumulative basis or like that the bondholders have one time opportunity to take the tender offer once a year if it’s not accepted the money comes back to us and can be reinvested.

Ross Taylor – Somerset Capital Advisers LLC

Okay and the kinds of return that you would expect to see on money that you reinvest if you’re putting it back in charter attached base right now?

Ian J. Webber

As we said in our prepared remarks, the analysis that we’ve done in transactions that have been completed in the markets and this industry has quite a lot of level of transparency, but our assessment is that for the types of deal that we are interested in structure transactions on a sort of say in a lease back basis then the returns in double-digits into teens on an IRR basis and they’re immediately accretive to cash flow.

And our second area of interest would be the stress tonnage as we were talking about with the last question likely coming out of Germany, we would only buyback if we could put a charter in place to cover operating costs. And then we ride the cycle up and our assessment is that the, IRR on those sorts of transactions will be a little higher, but there is no near-term cash flow benefit, so our focus would be on structured more than likely say the lease back transactions.

Ross Taylor – Somerset Capital Advisers LLC

So, if you’re able to put $70 million additional into ships, given those mathematics we should be looking at something in the way of EBITDA $8 million to $9 million - $10 million annually?

Thomas A. Lister

Yes. I’ll back over that. No commitments obviously, but there is all [indiscernible].

Ross Taylor – Somerset Capital Advisers LLC

Right, right, okay. Great, thank you very much. Thanks for the call.

Thomas A. Lister

Thank you.

Operator

We’ll take the next question from Mark Suarez from Euro Pacific Capital.

Mark Suarez – Euro Pacific Capital, Inc.

Good morning, Ian.

Ian J. Webber

Hello, Mark.

Mark Suarez – Euro Pacific Capital, Inc.

Just to piggyback on one of the prior questions, should we assume then that your debt repayment, your monetization is going to go down significant, in other words, should we be looking at something between 0 and 20 or you think maybe 20 will be a good run rate for the next two years in terms of paying down your debt, on the mean debt I mean?

Ian J. Webber

Well, the prudence assumption is to pay down $20 million a year. We won’t know until we get to the end of the year, how much exactly it’s wanting to be, the required tender offer, although we would expect it to be closer to twenty than to zero, just on the modeling that we’ve done. And clearly we can’t tell whether that tender offer would be accepted by bond holders, but in our mind it’s being prudent managers of the business. We would need to make sure that we have about $20 million in our back pocket to be able to offer to bondholders. I think it’s within a 120 days at the currently year end.

Mark Suarez – Euro Pacific Capital, Inc.

Okay. And you talked dry powder of about $70 million for our future acquisitions and also the possibility of reinstating dividends. I am wondering what the pecking order is between those two strategies, given that you have very cyclically low asset. What sort of catalyst that the board need to see before maybe thinking about reinstating dividends, in other words, I just want to get a sense of what the priorities are going over the next 12 months if you will?

Thomas A. Lister

Yes. Thanks Mark. I mean, the fantastic figures that we have this dilemma, we’re able to address this in real-time rather than hypothetically. Previously we had no opportunity of paying a dividend and no opportunity of growing the business. So this is hugely important to us. Hence we have to way up the opportunities to invest in tonnage of the bottom of the cycle generating what we consider to be superior returns, against the immediate payment of a modest dividend. Now we’ve made no decisions one way or the other at the moment, but our preference would be to stop building the business, building our capacity to pay dividend which could be higher and could be more sustainable, but no decisions at.

Mark Suarez – Euro Pacific Capital, Inc.

Okay. And just finally on your growth strategy you mentioned you might be looking towards the small to midsize segment that sort of your, I will say your focus here at least so far, we have seen basically thoroughly squeezing the panamax segment. Are you thinking of maybe looking towards the sub-panamax geared vessels as a potential focus here going forward. I know you mentioned charter attached, but I am just trying to get a sense of what vessel segments you will be looking at more closely?

Thomas A. Lister

Could I address that Mark. I mean, if you go back to Slide 8 of the presentation, where you see the composition of the order book, you will see that all vessels below around about 7500 TEU are very thinly represented in the order book and I think broadly speaking that’s where we see the opportunities lying essentially in the range of around about 2000 TEUs to 7500 TEU, 7600 TEU roughly speaking. However we will look at every perspective transaction on its merits and on its perspective returns.

Mark Suarez – Euro Pacific Capital, Inc.

Great, that’s what I have for now. Thanks guys, thanks for your time.

Thomas A. Lister

Thanks Mark. Thank you.

Operator

We’ll now take the next question from Steven Schuster from Bridge Street Asset Management.

Steven Schuster – Bridge Street Asset Management

Good morning guys. I wanted to discuss another aspect of this which is the CMA requests for two board seats. And I’m just wondering how CMA is going to be factoring into the GSLs growth plans going forward, so maybe if we can start with that?

Ian J. Webber

Sure. As you know they filed a 13D about 10 days ago indicating that they have requested us to consider having two seats to the board, increasing the board size to six and that they will be able to nominate two out of the six directors. We indicated now in a formal response that we welcome CMAs involvements on a more formal basis. We always talk to them about what we are doing and what our plans are at the strategic level as well as obviously the day-to-day commercial aspects of the operation of our business. And we think it’s really very helpful to have CMA formally involved in providing guidance and strategy helping us to formulate strategy on for example what we just been talking about, Tom was talking about where attractive investment opportunities might be with instrument knowledge from a liners perspective of how the world container fleet might be developing.

Steven Schuster – Bridge Street Asset Management

There was an article recently sort of steering up some controversy about the true intent of CMA and sort of the cost surrounding their renewed interest or involvement. And I am just sort of wondering is there a way that we could sort of put the controversy to debate primarily on whether CMA could tell us. What their intent is they’re probably on the call right now or some representatives where, that their intent is really to like all of us they want to see the value of GSL shares arise and typically in the U.S when shareholders switch from passive to active there is transparency into their agenda. And Carl Icahn for instance is never opaque on his platform or intent and even collaborative activists, the kind [indiscernible] are – they share an agenda. I think we would be really helpful or constructive if CMA could let everybody know that we are all rowing in the same direction so to speak.

Ian J. Webber

Thanks Stephen. I’ve said a number of times today and previously that we stay in function, there are 45 center of our only customer and we would be sort of crazy to do anything that they don’t support. They are and have been very supportive about our bond transaction to transform the prospects for GSL, which by any measure is quite an investment for them, 45% of the equity.

They’ve been supportive more than just saying yeah, okay go ahead by agreeing amended charters with us for those four units, which clearly enhance the credit story, but we also think after the benefits of equity providing much more visibility on our cash flows for another couple of years or so and sort of derisking the renewals at the end of 2016 and 2017. And we preserve optionality by virtue of the other four vessels still coming off charter at the end of 2017.

Every discussion that we’ve had with them supports what they have said in their public filing, which is two seats on the board out of six, and frankly I can’t say much more than that.

Steven Schuster – Bridge Street Asset Management

No, that’s fair enough. I was just would ask to that, if CMA is permitted to have two board seats whether or not maybe they could participate on the conference call that’s immediately following whenever it is that they’re added for the board, so that they could speak directly to shareholders and we could address them directly?

Ian J. Webber

Sure. I’ll take most of that statement.

Steven Schuster – Bridge Street Asset Management

Okay, thank you very much. I appreciate all the efforts trying to get us out of banks and look forward to seeing the transactions that you come up with.

Ian J. Webber

Thank you.

Operator

We’ll now take the next question from Jody Kane from Diamond Bridge Capital.

Jody Kane – Diamond Bridge Capital

Hi, guys thanks. In our presentation where you say, you want to selectively diversify with additional line operators, is this – are you in active discussions with some of them or is this sort of something that you hope to be able to do?

Ian J. Webber

Well, it’s part of our strategy going forward. We’ve created as a spin off from CMA CGM. So necessarily they’ve been – because we’ve been able to grow in the last few years because of the constraints of our credit facility, necessarily we continue to have them as a single customer. And whilst we’re certainly not unhappy with them as a counterparty, we understand that the benefits to customer diversification and therefore we would seek to when the charter is going forward with counterparties other than CMA CGM.

Jody Kane – Diamond Bridge Capital

Okay, yes. So I guess you’ve working on this deal for quite sometime and the intention has always been to raise the money and you’ll always know that you wanted to do it. While you’ve been waiting have you been able to engage some of the other liners or did you have to get the deals done before you can actually going to start talking today?

Ian J. Webber

It’s the second Jody. In this environment, sellers of vessels whether they’re liner companies or other owners won’t take you seriously, if you haven’t got access to ready our liquidity. We haven’t had access to ready liquidity. We do now have access to ready liquidity, so we can really get motoring.

Jody Kane – Diamond Bridge Capital

Okay. And then when you talked about strong relationships with CMA, is that strong, are you referring to in terms of the current environment of what you have with them or are you talking about possible future acquisitions with CMA saying. We would like you to go and get the ship to ship and then will charter it. Is that what you’re talking about when you mean strong or you just mean sort of past tense strong?

Ian J. Webber

It’s a color on the past, not future.

Jody Kane – Diamond Bridge Capital

So there is no sort of plan for you to actually throw out with the CMA right now to start giving new tonnage straight away and that’s the reason for the increased size of the deal or anything like that, it’s just nothing that followed?

Ian J. Webber

Right, you’re correct.

Jody Kane – Diamond Bridge Capital

Okay, all right thank you very much.

Ian J. Webber

Welcome, thank you.

Operator

Thank you. That will conclude today’s conference call. Thanks for participation. Ladies and gentlemen, you may now disconnect.

Ian J. Webber

Thanks to everybody. Thanks for your questions and your interest.

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