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Safe Bulkers Inc. (NYSE:SB)

Q1 2014 Earnings Conference Call

May 29, 2014 09:00 AM ET

Executives

Loukas Barmparis - President

Konstantinos Adamopoulos - CFO

Polys Hajioannou - Chairman and CEO

Analysts

Jon Chappell - Evercore

Fotis Giannakoulis - Morgan Stanley

Shawn Collins - Bank of America

Operator

Thank you for standing by, ladies and gentlemen, and welcome to the Safe Bulkers Conference Call to discuss First Quarter 2014 Financial Results.

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 Capital Link at 212-661-7566. I must advise you that this conference is being recorded today, Thursday, May 29, 2014.

Before we begin, please note that this presentation contains forward-looking statements as defined in section 27A of the Securities Act of 1933 as amended, and Section 21E 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 expects, 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 are not limited to, changes in the demand for dry bulk 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 first quarter of 2014 which were announced yesterday after the close of the market in New York.

We’re in Slide 3, where we present synopsis or main events on shipping industry. Supply of vessels is still the main driver of the shipping market. However the rate of good growth is declining, double-digit net flow increase in 2012 was followed by 5.5 increase for 2013. For the first months or for the first four months of 2014 the fleet [indiscernible] increased by 2.1% versus 2.5% in 2013.

As presented in the graph at the bottom right the order book as of the end of January 2014 is declining for the years until 2017, although we expect additional orders to be placed. The orders placed for Panamax represent about 5% of the total fleet for 2014, 7% for 2015 and 4% for 2016.

Same for Capes, the order book represents about 5% of the existing fleet for the remaining of 2014, 8% for 2015 and 7% for 2016. This illustrates a slowdown in the growth rate of the order book, which is expected to be less due to the scrapping activity. During 2013 about 21.7 million dwt tonnes were scrapped and during the first four months of 2014 about 4.9 million deadweight tonnes was scrapped.

On the demand side on Slide 4, the outlook of recent period was not positive. Market evidenced a significant slowdown since January especially on the Capes. Presently charter rates are in the region of 10,000 for Capes and 8,000 for Panamaxes, the slowdown and basically to produce reasons like seasonality, lunar year, spring festivals, bird flu et cetera, [and that entire] (ph) process are positive. Q4 2013 ended with a [rally] of Capes which reflected on the record high in terms of iron ore from China.

Year-on-year imports from China for 2013 have increased by 24%, similar reasons exist for the increased dropping iron ore prices, which recently got below this 100 tonne. Stimulus plans coming from China in relation to urbanization with recent announcement of more than 6,600 kilometers of new railway lines planned for 2014. Further our stable outlook for China’s growth in Q1 has reached 7.4% consists for the market is encouraging, estimate by the analysts and also from future markets, forecast that for the end of the year Kams will be trading at the region of about 20,000 and for Panamaxes at the range of mid to low 15s.

Moving on Slide 5, we are a company with long history with many shipping cycles. The interest of our management are fully aligned with the interest of our public shareholders as our CEO investing in shipping activities only through Safe Bulker and currently controls Hajioannou family about 57% of our company stock.

Moving to Slide 6, we have competitive substantial expansion for the next years with an order book of 13 new eco-design newbuild dry bulk vessels through 2017 with an average price of $31.1 million. We are a spot market player. Safe Bulkers has 64% of it [indiscernible] days open for remainder of 2014 offering substantial upside potential for revenue.

We have countable leverage, our net debt per vessel was at 12.5 million in Q1 2014 in compliance with our loan covenants. The average age of our fleet is 5.4 years while currently the value of a five year old Panamax is about 27.3 million as per the Baltic Exchange Sale & Purchase Assessment Index. We maintained lean operations with 5,825 per day per vessel for our operating expenses and G&A expenses in total for the first quarter of 2014 compared to 5,588 for the respective period of 2013, amongst the lowest in the industry.

In G&A, we include always public company and management fee expenses. We preserve our financial flexibility with low financing costs at an average interest rate of 1.695% including the margin for all bank loans and credit facilities during the first quarter of 2014. We seek to expand our business sensibly according to our risk assessment, create value and net reward at the same time our shareholders as we have done again for this quarter with declaration of a dividend of $0.06 per common share.

Turning to Slide 5, we present our recent activity during this quarter. We paid six additional new eco-design newbuild vessels on order. We did deliver our three Japanese newbuild vessels 1 Cape with a 10-year time charter contracted upon delivery; and two new eco-design Panamaxes class vessels which were employed in the spot market.

We collected $36.3 million arbitration awards proceeds in relation to a cancelled Capesize class vessel, the Hull No. J0131. The process represent the full amount of advantage paid recipient and the interest calculated at an annual rate of 5%. We concluded the Public Offering of 2.3 million Series C cumulative redeemable perpetual preferred shares of 8% coupon and collected $55.4 million in net operating proceeds.

Moving on Slide 8, we evaluate the performance of our chartering policy against the spot market, which we outperformed most of the times as presented at the bottom graph. The open days for our fleet including different fleet and newbuild were 64% of anticipated ownership days for the remainder of 2014, 85% in 2015 and 90% in 2016 offering substantial upside potential for revenue. We currently seek to employ our vessels mainly in the spot market to have the flexibility that this spot market offers in low charter periods and the upside potential with marketing groups.

On Slide 9 of the top graph, we observe the price increase of our four set of vessels since the acquisition at the bottom of the market. Currently, the 5 years old Panamax is valued $27.3 million as per the Baltic Exchange Sale & Purchase Assessment Index while at the bottom of the market it was 18.1 million. On the bottom graph, we present out fleet and order book. Currently, we own a fleet of H1 high specification vessels and the compact order book of 13 new eco-design vessels from top quality CPS in Japan mainly two are from China, one 2014, and six in 2015, five in 2016, and one in 2017. As a result of investing during the low possible shipping cycle. We’ve had a substantial cumulative annual growth rate since our IPO. We remained consistent to our asset management policy by investing mainly in newbuild shallow economical sister vessels.

Going to Slide 10, we present on the bottom graph our daily operating and general and administrative expenses. Our daily operating expenses were 4,707 for the first quarter of 2014, about daily general and administrative expenses were 1,118 consisting of 822 daily management fees and 296 fixed daily public company expenses.

In total, we’ve paid daily 5,825 to run our vessels in our company. This figure includes all cost depreciation financial costing and it is amongst the lowest in the industry and consistent with previous years and with our lean operations.

On the top graph, we present the average interest rate, of 1.695 including the margin for all bank loans and credit facilities during the first quarter of 2014, maintaining growing financing cost.

On slide 11, on the bottom graph, we represent our net debt per vessel ratio at 12.5 million in Q1, 2014 together with the fleet expansion. Our intention is to maintain comfortable leverage on net debt per vessel basis in compliable times with our financial covenants. On the top graph we present our liquidity and our ability to finance our capital expenditure requirements. As of May 22, 2014, our liquidity was 316 million while our capital expenditure requirements were 365.4 million. We have not included our contracted revenue.

As of May 22, 2014, we also have the ability to raise additional indebtedness against 12 unencumbered contracted new build vessels upon their delivery providing us with further financial flexibility.

Moving on slide 12, our Board has declared a dividend in the amount of $0.06 per share, payable on about the 17th of June. Safe Bulkers has paid over 200 million in [indiscernible] quarterly dividends since Company’s IPO back in 2008.

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

Konstantinos Adamopoulos

Thank you, Loukas and good morning to all. Slide 14, we present selected financial highlights for the first quarter of 2013 compared to the same period of 2012. Net revenue decreased by 7% to 41.3 million from 44.2 million.

Daily vessel operating expenses increased by 7% to $4,707 compared to $4,412 for the same period in 2013 mainly due to the increase of the growing spare, store and provision expenses as a result of three new build vessels that we took delivery during the first quarter of 2014.

Interest expense decreased to 2.2 million or 15% in the first quarter of 2014 from 2.6 million for the same period in 2013 as a result of the decrease in the average outstanding amount of loans and credit facilities and in the weighted average interest rate of such loans and credit facilities.

Net income decreased by 30% to $11.2 million from $16.1 million during the same period in 2013.

Adjusted net income decreased by 46% to $8.6 million from $16 million.

EBITDA decreased by 14% to $23.7 million from $27.5 million during the same period in 2013. Adjusted EBITDA decreased by 23% to $21.1 million from $27.4 million during the same period last year.

Earnings per share and adjusted earnings per share were $0.13 and $0.10 respectively compared to $0.21 and $0.21 in the first quarter of 2013, calculated on a weighted average number of shares of 83.4 million and 76.7 million respectively.

Moving onto slide 15, we present definitions and reconciliation of our financial fundamentals for the first quarter of 2014 compared to the same period of 2013.

Slide number 16, we present selected operational highlights for the first quarter of 2014, compared to the same period of last year. Ownership, available and operating days increased by approximately 20% for the first quarter of 2014.

During the first quarter of 2014, we owned and operated an average of 29.86 vessels and achieved a utilization rate of 98.8%, compared to an average of 24.97 vessels and the utilization rate of 98.5% during the same period of last year. The average daily time charter equivalent rate per vessel for the first quarter of this year was $13,921 compared to $18,113 during the same period of last year.

Moving onto slide 17, we present definitions and reconciliation of our operational fundamentals for the first quarter of 2014 compared to the same period of last year. The result of our financial performance is clearly demonstrated by the company’s consistency in its dividend policy, maintaining a prudent and meaningful dividend throughout the last crisis, contrary to the vast majority of industry peers, by increasing the dividend in third quarter of 2013.

As presented at slide 18, our Board declared for the first quarter of 2014, a cash dividend of $0.06 per common share, payable on June 17, 2014 to shareholders of record at the close of trading on June 10th.

We have declared and paid dividend consecutively in all 24 quarters since our Company’s IPO six years ago. Also last month, we paid a cash dividend of $0.50 per share on our 8% Series B cumulative redeemable perpetual preferred shares. This was the fourth quarter -- this was the fourth consecutive Series B preferred shares, cash dividends our company has declared and paid.

In April 30, 2014, [Technical Difficulty] 8% Series C cumulative redeemable perpetual preferred shares with par value $0.01 per share and its liquidation preference $25 per share and granting the underwriters’ an overallotment option for additional 300,000 shares.

The net proceeds from the public offering including the overallotment option after deducting underwriting discounts and the estimated expenses payable by us were approximately 55.4 million and the Company utilized the net proceeds for vessel acquisitions, capital expenditure and for other corporate purposes.

Summing up our presentation in slide 19, as the market outlook should improve we are prepared as a long-term oriented company. We have been in shipping for more than 50 years and if that we will know and we believe. We actively manage our order book and fleet. As a result of our track record and reputation in the industry, we have developed strong long-term relationships with shipyards, charters and banks in Japan, Europe and China.

We have a history and reputation of operating excellence as reflected in our utilization rates and operating expenses. We maintain low financial costs as a result of our loss base and our prudent levels in compliance with our financial covenants. We actively manage our young shallow drafted fleet of 31 dry vessels all of which are built 2003 onwards. Our substantial charter covenants which established performance, performing [indiscernible], supports our strong balance sheet and liquidity providing financial flexibility. We remain committed to a prudent dividend policy to reward shareholders to payment of dividends and the short future expansion and delivery.

You may find that our contact detail in Slide 20. Thank you for listening and we’re ready to accept questions.

Question-and-Answer Session

Operator

(Operator Instructions). Your first question is from the line of Jon Chappell from Evercore. Please go ahead.

Jon Chappell - Evercore

I want to ask about the chartering strategy. I know that you’re pretty optimistic about the second half of the year; however you have 22 ships that come of contract in the next three months. On the one hand it’s good to have the operating leverage to the market, on the other hand it seems that there is still a disconnect between spot rates and time charter rates. Have you thought about kind of staggering the employment of these vessels maybe putting some on one year contracts and keeping the majority of them on short-term?

Polys Hajioannou

Yes from time to time when the opportunity arises, we try to fix six months or one year charters, so we don’t have -- we reduce the number of ships on the spot market because there is a gap at the moment. We believe this gap would change in the next two to three months and the spot rates will become like the second half of last year, spot rates were above the one year period. At the moment you can fix one year period rates around maybe $12,500 to $13,000 a day, but you give away the possible upside after the first two months. So it’s a situation that you would have to -- if you have a pessimistic look on the market, one may go and fix more period, then the upside will not materialize.

Jon Chappell - Evercore

And then with the new, new buildings that you announced in this release, it’s the first time that I can remember where the liquidity bar is a little bit shorter than your capital commitments, and obviously there is a lot of leverage to pull there. When do you start thinking about taking on some debt associated with the 12 unencumbered ships or how else are you thinking about kind of bridging that smaller gap?

Polys Hajioannou

The Company is talking to the banks; we have very good relation with the financing banks. We have interest to finance at reasonable margins, not far away from what we believe is reasonable for the company to commit and slowly we will start doing some agreements with a few bunch on both vessels. There is not urgency as you see to do it immediately because almost the CapEx is there, it’s covered from the cash in hand and take into consideration that the revenue from operations is not including in this equation. So there are charter hires being paid on the ships, they are earning money.

So we will do some more and we will try do normal revolving basis so the company has the opportunity to utilize cash if one is needed and the one if doesn’t need to be able to pay them back and reduce the cost of finance. So there are (thoughts underway) [ph].

Jon Chappell - Evercore

Last one from me, now with 13 new buildings and your history of kind of modernizing the fleet as you go along. When you look at either to the 2003 or the 2004 built ships in your fleet or even maybe more specifically the assets that you bought in the second hand market late 2012 early 2013 which are very much in the money today. When you think about kind of getting rid of those assets and shortening up the balance sheet that way.

Polys Hajioannou

Yes, Jon, this is in mind, we try to do it earlier in the year because of the drop of the spot markets all the buyers are skeptical. They are trying to get a better price and they are trying to negotiate harder so as there is no point to change there. The buyers at this point we have to wait when we see a recovery of spot market and then the buyers will be coming along the lines they should come. But even those ships were sold at lower price than what we have three months ago may be a 1 million less or whatever, they are still very profitable ships. So, will come a time that these ships will be sold.

Operator

Question is from the line of Christian Wetherbee from Citi. Please go ahead.

Unidentified Analyst

Good morning. This is (Seth Larry) [ph] in for Chris. If I could start off around this time last year I think the Board decided to raise dividend marginally, so given where you are at on your CapEx program, how well are you sitting in sort of the constructive forward outlook for rates. Do you think at this point we could potentially expect another increase however marginal?

Polys Hajioannou

On what front? I didn’t catch this, on what front?

Unidentified Analyst

From a dividend perspective.

Polys Hajioannou

The dividend, yes the dividend, we said that repeatedly consistently I would say, it’s directly related to the freight market, so when we see better freight market of course we will be focused on dividend. At the moment, in this freight market we don't -- I don’t think that Board wants to discuss an increase in the dividend.

Unidentified Analyst

Is it fair to say that they are probably looking for a little bit of an extension on your charters before that may happen then like lengthening of the contracts?

Polys Hajioannou

The thing is that you have to realize what you are securing and what you are losing if you go for one year charter. Now you are securing a base of $12,500 a day but we believe that's possible upside if you go the spot market may be you have $9,000 of $10,000 a day on monthly basis and you have all in the upside. So, considering the second half of last year of 2013, this sort of vessels were earning $16,000, $17,000, $18,000 a day and one year age of the time were $15,000, $16,000, I think that we should not look many ships at $12,500 or $13,000 at certain point of time. If September comes and the market is still quiet then we will start considering certain alternatives.

Unidentified Analyst

Okay, that makes sense. And then can I just follow-up? Was the canceled vessel, the Capesize, can you remind us was that your initiative or did that come from the shipyard, or I guess what was driving the underlying cancellation of that vessel delivery?

Polys Hajioannou

Yes, that was all starting 2012, the ship was ordered in 2010 for delivery in 2012, so when the time came, the ship was still in the drybulk and have another seven or eight months to completion, so I think the company decided to cancel this vessel. We had a very lucrative charter on that vessel around $24,800 for 10 years. We agreed with the charterer with a small discount on the first 2.5 years, totaling $2.5 million. We agreed with them to build a better ship in Japan and ordered the ship at the lower price than the one we contracted in China and he was very happy to move the charter two years later to the new delivery position. So, we canceled the vessel. We applied to the bank for refund, the shipyard objective and made an approach to delay the process and went to arbitration. So, we have to go through the tribunal and get their vote and with their vote we went to the bank, collected our money, eventually we collected the money from the shipyard because just before the expiry of the time that the bank would pay, the shipyard came along and they paid the amount.

So they have the money from the start-up, they wanted to delay the process. Of course the company had some interest in the process and if I remember it was around $4.5 million. So, I mean 4.5 we have from the interest and we ordered a Japanese built vessel in place of the Chinese at a discounted price. I think we all ended up very well I think on this situation.

Unidentified Analyst

Sure, so I mean it’s usually driven I guess more by a customer specific issue rather than you trying to manage your exposure to the Cape market?

Polys Hajioannou

The Cape market, we say that the company is not comfortable with working the spot market on Cape. It's a very tight market, big players are involved in all the, on the cargo side, its big names are involved, they can easily control the game and on the earnings side also there are other names with the big number of ships 10, 15, 20 Capes play in the market. So if a Company with three Capes goes to play the spot market, it's very difficult to compete. So all I know we decided on our Cape business will go against long-term employment, so we avoid the volatility of the Cape market.

Operator

From the line of Fotis Giannakoulis from Morgan Stanley. Please go ahead.

Fotis Giannakoulis - Morgan Stanley

I want to ask about the new buildings that you recently ordered and whether the size of your fleet right now you think is sufficient, you’re going be at around the 45 vessels upon the delivery. Is this size that you feel comfortable and whether you are looking to add additional new buildings to your fleet?

Polys Hajioannou

Yes we have not been adding we have a program, we have 13 vessels now. They are all ordered at very reasonable prices on average costing at $31 million were below what Japanese built ships are worth today or what the yards are asking today. We think that we have a very good expansion on growth program. Of course we will send in the next two years few of our older ships if the market allow us to do. So I mean for the time being we are very well placed, we’re not in a hurry to do something immediately, I think this is 13 vessels is addition order.

Fotis Giannakoulis - Morgan Stanley

And also I see that out of the six new orders, two of them are from China. I know your preference for Japanese built vessels, most of almost all your existing vessels are Japanese and most of your order is Japanese built. Why these two vessels, were there any special deal, any special terms that made you look more favorable to Chinese new buildings.

Polys Hajioannou

Yes, we looked into a yard for two vessels, the yard in comparison at that time in the two or three months ago was giving us earlier delivery positions. You know about a year earlier, so it’s in 2015 these two deliveries. And at that time Japanese yards were offering late 60, so we thought we should go for the earlier deliveries, also the price was more attractive. So we made the exception, these two ships out of 13, in the past we’ve ordered as well Chinese ships when there was a material difference in the price and better delivery dates.

We believe also this yard after doing all the checks will deliver on time, and it’s an up and running yard with good track records. So we believe that we will not get any surprises there.

Fotis Giannakoulis - Morgan Stanley

And can you explain us the construction process? Are there any major differences in terms of supervision between Chinese and Japanese shipyards? Are you going to have people overlooking the construction in the Chinese shipyards?

Polys Hajioannou

Yes, this is also new [indiscernible] design built, design of course Chinese shipyard design. You always have a small question mark on the actual performance, but it won’t be miles away from what they say and of course you need a stronger team in supervision, so it’s going to cost the management a bigger amount of money but the company pays in fixed fee for supervision cost, so it will not be unduly sacrificed. So it’s a decision that was on our behavior and some of this is on the management front and not on the company front.

Fotis Giannakoulis - Morgan Stanley

I want to ask about your outlook for the market and if I remember at the previous call you mentioned that you wouldn’t be surprised to see Panamax rates reaching $20,000 by the end of this year. Is this position that you currently have or something has changed on your outlook given the weakness of the last three months?

Polys Hajioannou

Yes, I see the market will develop into a market like last year of two halves. It looks like the first half is loss and others have around $10,000 on Panamax on the spot market. The second half of last year there is as well $15,000 $16,000 a day. So I see absolutely no reason why this year we will look at the same result. We need the better Capesize market. This is definitely needed to push freight market of smaller ships higher.

Last year, if you remember, the term started slowly in beginning, in June beginning July and big improvement in September. So it will be the same story this year and with the iron ore price falling below $100 tonne, we believe the volume will be there and the Capesizes will move in the second half of the year and this will dictate the market for everybody.

Fotis Giannakoulis - Morgan Stanley

Can you explain us, given the fact that the iron ore price is already low, that steel production in China is already at high levels. Why the Capesize market is so weak and what is going to be the driver that we shall be expecting in the second half of the year to move the rates higher?

Polys Hajioannou

Look, I think there is always a lag of -- there is a lag between when price of iron ore comes down and when trade market score is higher. At the moment, they have big stocks in their ports, they 110 million of iron ore sitting in the Chinese ports according to the latest reports. So, I mean they have the Chinese, they can pull the game now and there wouldn’t be a point that they will come back massively in the market, start fixing ships again more actively and immediately this will effect freight rate. Now this is July or is in the summer in August or in September it remains to be same. But it will happen, like it happened last year.

Operator

From the line of Shawn Collins from Bank of America. Please go ahead.

Shawn Collins - Bank of America

Hey hi guys. Good afternoon. Can you, just following up on what Fotis said, can you just talk about what you observed in the first quarter and were you surprised by the first quarter market slowdown in rates especially given the large run-up in rates at the end of the fourth quarter?

Unidentified Company Representative

Yes, no, we were not surprised in the first quarter. Where we were a bit surprised was in net really and not in the finance market in the Atlantic market we were expecting a stronger Atlantic market April and May than what we have. At least in my career 28 years, it’s the first time, if not the first may be the second time I have seen Atlantic market in April and May in the spring to be lower than the Pacific market. I think this has a lot of do with the grain export and the cancellation of cargos by Chinese buyers because of certain events in China are related to the bird flu and other things and then the crash in margins being reduced to very small levels, so we decided to cancel on the cargos.

Also you know the problem in Argentina, the economic problems and the devaluation of their currencies, it pays them to keep the commodity in the silos and sell it later because of the devaluating peso. I think this factors, the crop is there, it will be moved, in fact that Argentina is 35% down on export on grains than it was at this stage last year. I think it’s fixed volume, also the fact that we less grain from South America, it means we have less congestion as well but we get always traditionally this time of the year in the South American ports and this keeps vessels’ turnaround time shorter and this has affected the market.

Now there is a good possibility in the second half of the year, this extra volume from South America comes to the market together with a good export season from U.S. cargo area and this should give double boost to freight rates. So, we are optimistic I would say but the surprise for us was not the first quarter, was of the last two months.

Shawn Collins - Bank of America

Okay, great. Thank you for that insight. I appreciate it. Just a second question, just turning to the preferred Series C raise that you did in the quarter around April 30th, can you just comment on how you think about the preferred and the rate on that of 8% and the fact that it’s perpetual versus lower cost bank financing and is that a trade-off because it’s fixed and it’s perpetual versus bank and would have to be paid sooner or what was the decision making process behind that?

Unidentified Company Representative

Okay. You know that we have the lowest -- we have a very reasonable date and the interest that we pay is very low. Now let’s say equity stock we will always consider that we need to have let`s say comfortable leverage and so when we do a move, we want to finance these moves from debt to equity. Many companies have already bounced off there with similarly already than more expensive cost and you know and both comparative debt while preferred is equity and always we maintained a very comfortable structure, it’s 8% but the amount is quite low, and we have the flexibility to repay after let`s say certain period of time. So we think that this policy of having let`s say very comfortable structure is based on our experience of let`s say historical experience that the market sometimes do well, sometimes to go down and the Company has survived with profits over many-many years. So we will -- our intention is to maintain low leverage and continue to have this profitable structure. For this occasion right now, we hope that it is very useful to -- I mean we had this expansion that is described in respective supplements 13 vessels and we felt that it’s very reasonable to fund it with a portion of equity.

Shawn Collins - Bank of America

Okay, that’s helpful. Great.

Unidentified Company Representative

Without diluting also -- in various quarters, we saw dilution of existing sale call it at this price.

Operator

(Operator Instructions) There are no more questions. Now I’ll pass the floor back to Dr. Barmparis for closing remarks.

Loukas Barmparis

Once more thank you very much for this Company’s call. We’re looking forward to discuss again with you in next quarter. See you in Posidonia if possible if you're traveling in Greece next week.

Operator

Thank you all for participating. You may now disconnect.

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