Diana Containerships' (DCIX) CEO Symeon Palios on Q2 2014 Results - Earnings Call Transcript

| About: Diana Containerships (DCIX)

Diana Containerships, Inc. (NASDAQ:DCIX)

Q2 2014 Earnings Conference Call

July 28, 2014 9:00 AM ET


Ed Nebb - IR Advisor

Symeon Palios - Chairman and CEO

Anastasios Margaronis - President

Andreas Michalopoulos - CFO and Treasurer

Ioannis Zafirakis - COO and Secretary

Eleni Leontari - CAO


Donald McLee - Wells Fargo Securities

Kevin Sterling - BB&T Capital Markets

Mark Suarez - Euro Pacific Capital


Greetings, and welcome to the Diana Containerships Inc. Second Quarter 2014 Earnings Conference Call. At this time, all participants are in a listen-only mode. A brief question-and-answer session will follow the formal presentation. (Operator Instructions) As a reminder, this conference is being recorded.

It is now my pleasure to introduce your host Ed Nebb, IR Advisor for Diana Containerships. Thank you sir, you may begin.

Ed Nebb

Well, thank you Christine, and thanks to all of you for joining us today for the Diana Containerships Inc. 2014 second quarter conference call. Members of the Diana Containerships’ management team who are with us today include Mr. Symeon Palios, Chairman and Chief Executive Officer; Mr. Anastasios Margaronis, President; Mr. Andreas Michalopoulos, Chief Financial Officer, Mr. Ioannis Zafirakis, Chief Operating Officer and Secretary and Ms. Eleni Leontari, Chief Accounting Officer.

Before management begins their remarks, let me briefly summarize the Safe Harbor notice. Certain statements made during this call which are not statements of historical fact are forward-looking statements under the Safe Harbor provisions of the Private Securities Litigation Reform Act. Such forward-looking statements are based on assumptions, expectations, projections, intentions and beliefs as to future events that may not prove to be accurate. For a description of the risks, uncertainties and other factors that may cause future results to differ from those statements, please refer to the Company's filings with the Securities and Exchange Commission.

And with that, let me turn the call over to Mr. Symeon Palios, Chairman and Chief Executive Officer.

Symeon Palios

Thank you, Ed. Good morning and thank you for joining us to discuss the results of Diana Containerships Inc. for the 2014 second quarter as well as the other markets we have just reported. The initiatives we are announcing today are designed to significantly strengthen the Company and to help ensure that we are well positioned for the next phase of the industry cycle. The Board of Directors believes that this is a strategic entrance formational for Diana Containerships. They will result in a Company with greater capital resources and expanded financial stability.

We intend to dedicate those resources to pursue the opportunities that should arise with the eventual recovery of the container market and to enhancing long-term shareholder value. Specifically the Company has agreed to sell 36,653,386 shares of common stock in a private placement to a group of investors at a purchase price of $2.51 per share, for expected proceeds of approximately $92 million. The investor group persists of Diana Shipping Inc., two unaffiliated institutional investors whose managers is based in the U.S. and members of Diana Containerships senior management. Of this group Diana Shipping will purchase $40 million of common shares and the two institutional investors will also purchase a total of $40 million of common shares. Additionally I along with members of my family and total members of the Company’s senior management will purchase an aggregate of $12 million of common share.

The transaction is subject to customary closing conditions and is expected to close on or prior to July 29, 2014. The transaction was approved by an independent committee of the Board of Directors, which obtained an opinion regarding the financial fairness to the Company of the aggregate purchase price in the transaction. In addition to strengthening the Company’s capital by $92 million, this transaction represents a substantial growth of providence in Diana Containerships and its long-term strategies.

We are pleased to note the strong showing of encouragement and support by the unaffiliated institutional investors, as well as by Diana Shipping and to our own senior management. In a related action we both have declared a cash division on the Company’s common stock of $0.25 per share with respect to the second quarter of 2014. This cash dividend will be payable on or about September 3, 2014 to all shareholders of record as at August 14, 2024.

As with private placement the decision as to the dividend reflects our strategy of positioning Diana Containerships to capitalize for the eventual recovery in the container market by providing the Company the flexibility to acquire additional containerships vessels when attractive opportunities arise.

We have been actively seeking such retrospections opportunities. We further announced today that the Company does not expect to sell additional shares under its existing At-the-Market-Offering with Deutsche Bank Securities Inc. as sales agent until the container market improves significant.

Now let me briefly review our financial results for the 2014 second quarter. Time charter revenues net of prepaid charter revenues amortization for the 2014 second quarter we are $12.5 million up slightly from $12.2 million for the 2013 second quarter. Diana Containerships recorded net income of $0.6 million for the 2014 second quarter. This compared to net loss of $5 million for the same period of 2013 which was mainly the result of charges associated with disposal of three vessels.

Our fleet’s time charter to some of the industry’s leading container lines for more than 92% of the days in 2014 and approximately 25% of the days in 2015, providing a stable revenue stream. The contracted gross revenue of the fleet including the first six months of 2014 is approximately $82.7 million. Our balance sheet remains solid with more than $58 million of available cash approximately $10 million more of restricted cash and $163 million in stockholders’ equity and will be further enhanced by the results of the private placement.

In summary today marks an important turning point for Diana Containerships. We hope to go forward as profitable Company with greater access to capital and we have a since of enthusiasm for the future that the share by both our own management term and independent investors.

Now let me go back to how many cents I said before we are going to pay as a dividend. The correct is $0.0025 per share sorry for that.

Now I will turn the call over to our President, Stacy Margaronis for a perspective on industry condition will then be followed by our Chief Financial Officer, Andreas Michalopoulos who will provide a more detailed financial overview. Thank you.

Anastasios Margaronis

Thank you Symeon and welcome to all the participants of the quarterly conference call. As usual we will start with some macroeconomic news and then continue with detailed analysis of the containership market to the extent that time allows. The U.S. Federal Reserve have cut its GDP growth forecast for 2014 to around 2.2% but the result of the effects on growth will be caused to winter weather experience mainly in the eastern states. The IMF have maintained its forecast for 2015 GDP growth at 3%. According to Maersk Broker the recovery in the United States which appeared to have stalled at the beginning of this year seems to have restarted. The manufacturing PMI in June has risen to 57.5 reached highest level since May 2010. At the same time, consumer confidence has risen, reached highest level in seven years.

China’s manufacturing PMI improved in June to 50.8 from 49.4 in May this year. Retail sales in China grew 12.5% year-on-year from January to May beating expectations. Foreign direct investments though slipped to 6.7% in May. The Chinese government has taken steps to boost economy by introducing a more rather in chances for growth, lower taxes for small businesses and will also encourage banks to lend more to exporters to boost shipments. Most of the shipments will be in the form of containerized cargos.

In Europe survey indicators show higher economic activity with improvement in consumer and business confidence, leading to higher growth in private consumption and investments. However, there are some signs that this recovery might be at worst losing momentum and at best becoming uneven with robust activity in Germany, but the worsening downturn in France. The periphery is certainly improving but the numbers are still relatively small to affect overall Eurozone GDP performance in a significant way.

Let’s look at the important latest developments in the containership market. The purposed P3 alliance between Maersk clients, MSC and CMA CGM has been abandoned after the Chinese Ministry of Commerce rejected the plan. The liner companies were unable to convince the Chinese authorities that the advantages of the tie-up would parkway the disadvantages to market competition. The affect of this decision to the demand for vessels by liner companies is not entirely clear. However, according to Braemar early consensus is that freight rates should remain more resilient in its absence and that without the potential mega cascade and increased utilization efficiencies of the P3, owners may have been spared a drop in demand.

We believe that on balance, the absence of this alliance should support the chartering prospects of medium sized ships, as liner companies set their strategy for providing an independent through transportation service to the final ports of destinations without depending on services offered by the other partners in the proposed alliance. On the other hand there might be static collision between these huge operators in which case the favorably affects mentioned above maybe weaker than anticipated.

Let’s turn to trade growth, according to Clarksons Global Container trade is projected to be 6% in the full year 2014 and acceleration from 4.9% growth seen in 2013. Far East to Europe and east bound transpacific volumes are projected to expand by around 5% this year. This should provide a slightly more balanced spread of global trade growth, with combined non-main lane trade expected to grow by 6.5% in 2014. For 2015 Clarksons predicted that the global container trade will increase by 6.8%, while the container capable fleet is expected to increase by 5.1% over the same period.

Turning to ideal tonnage, according to Alphaliner on 15th June, ideal capacity of ships over 500 Teu have come down to 121 vessels of 251,000 Teu carrying capacity, representing about 1.5% of the containership fleet. According to the Shanghai Shipping Exchange and Alphaliner, ideal capacity of ships up to 2,000 Teu is still relatively high but post-Panamax vessels are almost fully utilized. The number of mid-sized vessel between 3,000 Teu and 5,100 Teu remaining ideal, has fallen to a three year low with only 20 units currently ideal, due to a recent surge in demand mainly from West Africa. The average size of the ideal fleet has fallen from 3,300 at the beginning of the year, to 1,960 Teu currently.

Simulation now, according to Clarksons 15 containerships of the combined 47,760 Tue nominal capacity were sold to the Malaysian in May, bringing the total in the year-to-date to 87 ships with a combined capacity of 260,000 Teu. It is interesting to note that during the same period last year a similar number of ships were scraped, but their total Teu nominal capacity was only 198,000 Teu. The average age of ships demolished so far in 2014 is 21.1 years with an average capacity of 350 Teu. In 2013 the average age of units sold for the Malaysian was 22.7 years with an average size of only 2,300 Teu. Current projections suggest that 500,000 Teu of boxship capacity will be scraped this year with a further 370,000 Teu expected to be sold to the Malaysia in 2015.

Let’s look at charter market development now. The containership charter market according to Maersk Broker continues to witness a recovery in rate for larger and smaller vessels whilst the rates to a medium sized tonnage remain relatively stagnant in the light of faltering demand. Nevertheless, with the high level of activity experienced during the second quarter of 2014, the overall supply for Panamax ships has been reduced and ships which opened in July and August appear to be manageable this year. The question according to Maersk Broker is whether owners will exhibit the courage to demand further rate increases from charters.

In the meantime the capacity of the Panamax fleet contracted by 2.5% during the first quarter and according to Clarksons, with scraping expected to remain high and the order book negligible the shrinking will probably continue through the year. Overall, the capacity of the sub-4,000 Teu fleet has shrunk by 9.8% since its peak in December 2008. Charter rates for over-Panamax tonnage increased this year on the back of short vessel supply and firm demand. Pan charter rates have been hovering between $25,000 per day and $27,000 per day for between four and six months employing. The wide-beam 4,000 Teu to 5,000 Teu ships have been generating interest for a while now and rates have reached $17,000 per day for periods of up to 12 months.

Trade markets now development. According to the Shanghai Containerized Freight Index, freight rates from Shanghai to Europe have averaged $1,277 per Teu so far this year which is 17% higher than the full year 2013. Meanwhile, rates of boxes shipped from Shanghai to the U.S. West Coast have averaged $1,911 per 40-foot unit so far in 2014, which is 6% lower than the 2013 average of near 2028 FEU.

Cascade, at the beginning of the second quarter 2014, 49% of capacity for the Far East to Euro group was provided by vessels of 12,000 Teu plus while 35% was provided by ships of 8,000 Teu to 12,000 Teu carrying-capacities. In total the 83% share provided by 8,000 flat Teu ships has grown from 55% at the start of 2011. At the end of the first quarter of this year, 19% of capacity on North to South groups was provided by vessels of 8,000 plus Teu which is up from just 8% at the beginning of 2013.

Clarksons point out, that there is probably a limit to the cascade effect which has been decimating the earnings of medium sized containerships for a few years now. The ability to cascade will slow owing to the absorption of easily cascadable tonnage and the demand from accumulative trade growth. In the longer term the slowing cascade as in order book in small and medium sizes along with rapid demolition should tighten supply.

An example of the above mentioned developing trend is mentioned by Toepfer Transport in their latest monthly report. More specifically the switch in African trades to gearless Panamax tonnage is not progressing as smoothly as have been hoped for by shippers and liner operators. The tonnage upsizing is creating difficulties in most ports and some liner companies are considering switching some specific trades back to smaller geared and gearless tonnage. It’s certainly a development we intend to follow going forward. Therefore it is not unreasonable to expect that small and medium sized vessels may eventually see a supply deficit as demolition continues to a strict deliveries and the availability of flexible cascading opportunities gradually decline.

Let’s turn to supply now. The container capable fleet is according to Clarksons is expected to grow by 4.8% in 2014 to reach 19.6 million Teu with a further expansion expected in 2015 of 5.1%. Clarksons consider that the sector continuous to battle the overhang of surplus capacity created by the 99.2% trade contraction of 2009. The combinations of slow steaming and idling have been used to manage excess supply. According to Clarksons research study the adoption of slower speed has been encouraged by high bunker prices and is estimated to have absorbed cap to around 2 million Teu of nominal cargo carrying capacity.

If the above mentioned predictions come to pass overall global demand growth is expected to outpace global supply growth this year and next. However, a degree of structural oversupply persists as evidenced by the fact that there are still ships in layup albeit in fewer numbers than in previous quarters. That has also been pointed out in the past. There is a mismatch between the spectrum of demand growth and the order book which is dominated by large post-Panamax ships. This has led to the much discussed cascades which have had the significant impact on supply on the non-main lane trade, thus creating pressure on both freight rates and the charter markets.

As for new building deliveries now, according to Maersk Broker about 102 containerships of a combined 810,000 Teu carrying-capacity were delivered in the first half of this year. This includes 58 ships of 8,000 plus Teu carrying capacity, 78% of all deliveries in 2014 and 84% of all deliveries in 2015 are expected to be of ships larger than 10,000 Teu. The slippage of new building deliveries in 2013 has been calculated by average plateau to have been about 28% while so far in 2014 the calculated numbers have fallen to just 12%.

Turning to the order book, according to Clarksons the total containership fleet on order represents 18.6% of the existing tonnage by deadweight. Panamax ships on order in excess of 3,000 Teu are only in six number and 4.6% of the existing fleet. Post-Panamax ships of up to 8,000 Teu on order number 73 units and are 9.7% of the existing fleet. There are 248 vessels larger than 8,000 Teu on order and represent about 48% of the existing fleet. During 2014 about 71 net building contracts have been signed of a combined total of 510,000 Teu. In this total there are 20 ships larger than 12,000 Teu, 16 ships between 8,000 Teu and 12,000 Teu, 34 ships between 1,000 Teu and 3,000 Teu and no ships in the 3,000 Teu to 7,999 Teu size bracket. There have been orders in that type excess since November last year.

So let’s try and look forward. We agree with Maersk Broker that private consumption is the most important driver of the container trade. Without growth in consumer spending, there is little need for companies to expand manufacturing capacity. Lot-lot peer are expanding by western consumers has been the main problem for the global container trade in recent years. The rebound we are witnessing in consumption is similarly the primary explanation why the global recovery is now taking hold and why growth in container demand should improve accordingly.

Western consumption which as we have mentioned in the past has a very high multiplier effect on container demand has been supported by rising real wage growth, robust wealth increases in -- and improving job markets as unemployment is falling in most companies. Given the above mentioned macroeconomic development the Board of Directors of Diana Containerships Inc. have approved changes in the Company’s investment strategy and dividend policy which have already been adopted and announced.

Together with the significant strengthening of an already strong balance sheet, the Company is ready and more able than even to take advantage of available investment opportunities in modern tonnage in the middle size range of container vessels. These investments should produce a healthy cash flow in the medium and long-term, provided our assumptions regarding economic growth, scrapping and ordering are fulfilled.

I’ll now pass the call to our CFO Andreas Michalopoulos who will provide us with financial highlights of the second quarter and first half of this year. Thank you.

Andreas Michalopoulos

Thank you Stacy and good morning, I’m pleased to be discussing today with you Diana Containerships Inc. operational results for the second quarter of 2014 and six months ended June 30, 2014. Second quarter of 2014 net income of Diana Containerships Inc. amounted to $46 million and the earnings per share amounted to $0.02. Time charter revenues net of prepared charter revenue amortization amounted to $12.5 million compared to $12.2 million in 2013. The increase in time charter revenues was mainly due to increased average time charter rates achieved and was partially offset decreased ownership days in the second quarter of 2014 compared to the same period of 2013. Ownership days were 728 for the quarter compared to 906 in the same period of 2013.

Fleet utilization was 100% for the quarter compared to 92.5% for 2013 and the daily time charter equivalent rate was $17,114 compared to $13,381 in 2013. Voyage expenses were $0.1 million for the quarter, operating expenses decreased by $2.2 million or 26% to $6.2 million in 2014 compared to $8.4 million for the same quarter of 2013. Operating expenses in the second quarter of 2014 mainly decreased due to the 20% decrease in the ownership days compared to 2013. In addition average operating expenses decreased mainly due to decreased crew cost, stores and spares expenses and this decrease was partially offset by increased repair and maintenance cost.

Daily operating expenses were $8,521 for the second quarter of 2014 compared to $9,302 in 2013. Depreciation amounted to $2.5 million for the quarter. General and administrative expenses were $1.5 million compared to $1.4 million in the second quarter of 2013. The increase was mainly attributable to increased payroll costs of the all critical yield and was partially offset by decreased legal expenses. Interest and finance cost for the second quarter of 2014 amounted to $1.7 million compared to $0.8 million for the same quarter of 2013. The increase was a result of increased average debt after the drawdown of $50 million from our loan agreement with Diana Shipping Inc. and $6 million from our credit facility with RBS in August and September 2013 respectively and is also attributable to increased average interest rates.

Turning now to the six months ended June 30, 2014 net income of Diana Containerships Inc. amounted to $0.9 million and the earnings per share amounted to $0.03. Time charter revenues net of prepaid charter revenue amortization amounted to $26 million compared to $27.4 million in 2013. The time charter revenues decreased due to decreased ownership days in 2014 compared to the same period of 2013 and were partially offset by the increase in the average time charter rates achieved in 2014 compared to the same period of 2013. Ownership days were 1,499 in 2014 compared to 1,822 in 2013.

Fleet utilization was 99.5% compared to 96.3% in 2013 and the daily time charter equivalent rate was $17,229 for the period compared to $14,799 for the same period of 2013. Voyage expenses were $0.2 million, operating expenses for the period ended June 30, 2013 amounted to $12.8 million compared to $16.7 million for the same period of 2013. The decrease in operating expenses was due to the decrease in ownership days and also due the decreased crew costs, stores and spares. Daily operating expenses were $8,561 for the period compared to $9,144 in the prior period. Depreciation amounted to $4.9 million.

General and administrative expenses amounted to $3.1 million compared to $2.7 million for the same period in 2013. The increase was mainly attributable to the establishment of UOT, our wholly-owned subsidiary to act as our fleet manager effective March 1, 2013 and was partially offset by decreased compensation cost on restricted stock rewards. Loss on vessel sales amounted to $2.7 million and relates to the sale of the vessel Sardonyx in the first quarter of 2014. Interest and finance costs were $3.4 million for the period compared to $1.5 million for the same quarter of 2013. As mentioned earlier in 2014 we had increased average debt outstanding to 2013 as well as increased average interest rates.

Turning to dividend policy now for the second quarter of 2014, the Board of Directors have decided to declare a dividend of $0.25 per share.

Thank you for your attention. We would be pleased to respond to your questions and I will turn the call to the operator who will instruct you as to the procedure for asking questions. Thanks.

Question-and-Answer Session


Thank you. We will now be conducting a question-and-answer session. (Operator Instructions) Thank you. Our first question comes from the line of Michael Webber with Wells Fargo. Please proceed with your question.

Donald McLee - Wells Fargo Securities

Hey guys this Donald McLee on for Michael. Hi.

Ioannis Zafirakis


Donald McLee - Wells Fargo Securities

So first question is just around the dividend, this is the second quarter in a row where you have cut the dividend was kind of anxious how that is indicative of your longer term outlook for the container market?

Ioannis Zafirakis

This is indicative as regards to what we want to do with regards that we have available and it is a clear sign that we believe that there are plenty of opportunities out there that, they’re going to increase the shareholders’ value meaning that we think that they are nicely priced vessels, that they’re waiting for us to buy them. And more money we have available the better for our shareholders.

Donald McLee - Wells Fargo Securities

Got you and I guess that kind of brings to the pipe and what the primary use of proceeds would be?

Ioannis Zafirakis

Certainly, the primary use of the proceeds is going to be buying nicely priced vessels.

Donald McLee - Wells Fargo Securities

And is there specific asset size are you considering both charter free charter attached?

Ioannis Zafirakis

We prefer the charter free or with minimum period charter attached to get the benefit of the market turning positively as we expect and the size is in the vicinity of the 5,000 Teu vessels and above either post-Panamaxes or Panamaxes.

Donald McLee - Wells Fargo Securities

Got you. That’s all my questions. Thanks guys.


(Operator Instructions) Our next question comes from the line of Kevin Sterling with BB&T. Please proceed with your question.

Kevin Sterling - BB&T Capital Markets

You’ve taken several steps here to position yourself to be able to acquire new tonnage, get the private replacement, you’ve cut the dividend. You scrapped order vessels. And it sounds like you may have your eye on some vessels, are we getting closer, asset value seem to holding steady are we getting closer to guys pulling the trigger, and if we do see some vessel purchases will we see maybe more than just one or two, maybe a couple or would you just kind of, look to acquire may be an individual ship or two, how should we think about that?

Ioannis Zafirakis

This is Ioannis Zafirakis again there are not -- we think that there are not a lot of companies out there with available cash over $130 million to purchase containers today. And this is a very strong position to be at, since we have explained our expectations about the future on the medium sized vessels. So we think that we are very fortunate that we have this dry powder and we plan to spend this as soon as possible, since we expect the market to improve significantly soon.

Kevin Sterling - BB&T Capital Markets

Let me kind of touch based on your strategy with the charter market, you’ve got one vessel coming off charter in the next couple of months, I believe several more either later this year, or early 2015. A lot can happen over the next six months but given the current market environment, I think, I know you talked about, you see it straightening. So could we assume you will look it short-term charters here in the near-term for some of these vessels? And then we’ll obviously lock in a longer term charter a higher rate down the road?

Ioannis Zafirakis

Correct, that this is correct, we will play with the one year period for the vessels that we have, since as we told you, we expect the market to improve.

Kevin Sterling - BB&T Capital Markets

And last question here, you talked about the ability I think to have cash, to come to the market to look at second hand tonnage or look at new tonnage, how important is that? Are you guys seeing, as you look at acquisitions, people want you to shipyards or whoever you’re looking to buy the tonnage from, are -- is it -- how important is it to have that cash right there, so you can see, that you are serious buyer and is that I assume that gives you a position of strength or may a little bargaining power to able to have that cash and be able to share that cash, to show that you are serious?

Ioannis Zafirakis

This is very correct as well. Having cast aside and that makes you a serial buyer and the sellers they prepare quick transactions and they prepare doing business with very reputable companies like ours, and this is an advantage to have in today’s market and it gives you a nice bargaining power.

Kevin Sterling - BB&T Capital Markets

Got you, that makes sense. Gentlemen that is all I had, thanks for your time this morning and best luck to you to grow your fleet.


(Operator Instructions) Our next question comes from the line of Mark Suarez with Euro Pacific Capital. Please proceed with your question.

Mark Suarez - Euro Pacific Capital

Ioannis you talked about the macro environment and you guys went into some of the details in some of the containership side of things in both Panamaxes and in post-Panamaxes but just to go back to that some of the macro question, last quarter, I would say over the next three -- last three or five months, we have seen some good utilization per vessels in the sub-2,000 Teu range, and especially on the geared vessels, where demand has been relatively strong, do you still see that as being the case, and would that be a good opportunity for you to go up there and may be buy some of the assets in the 1,500 Teu-2,100 Teu range now with that -- with your common stock offering and cash in hand?

Ioannis Zafirakis

We don’t like the size that you have described for two reasons, the one of has to do with the fact that we expect the cascade effect to affect mostly the smaller vessels rather than anything else eventually. And secondly we don’t like new sectors simply because it does not have the necessary volatility for our model to create a shareholders’ value. The volatility the smaller the vessel the less the volatility on the charter rates and on the prices, what we want to do at this stage of the cycle is buy vessel that they will appreciate in a much bigger degree to see having the burden of operating a vessel, you may as well have it on a vessel that gives you the opportunity to make a lot of money when the market turns. If you look at the charter rates and the values of the smaller vessels the volatility is not comparable to the medium or even the very big vessels, you need that.

Mark Suarez - Euro Pacific Capital

Got you.

Symeon Palios

To reinforce what Ioannis just said so this is basically here the cascade that we tried to explain a bit more than usual in this presentation is going to start weakening from the larger size is downward it always does, and this will not be an exception which is the reason why as Ioannis explained is the displacement is going to go all the way down to the smaller sizes and it will eventually end there but is going to take longer than for the larger sizes where they will be basically replacing the immediately smaller ones you understand that the whole thing is based on the larger getting into the business of the smaller and eventually somebody takes the business of the very small ship and that’s why we are not interested in what used to be the feeders of the last decade which was a 1,500 Teu to 2,000 Teu to want to concentrate on the feeders of the larger category which will be 3,000 Teu, 3,500 Teu to 4,000 Teu ships which will feeder basically and transit the cargos that will be arriving at top ports from the 10,000 plus Teu vessels.

Mark Suarez - Euro Pacific Capital

Got it, and with that trend that you just mentioned, have you seen any increased selling activities from this stressed owners or maybe second hand tonnage and when you can get rid of it are you getting more calls now that they know you have the cash on hand, you have done the private placement but what sort of trends are you seeing in the market? Are you more seeing more distressed sellers out there or less just trying to get a sense?

Symeon Palios

Certainly there is an improvement in the psychology on the medium size vessels but still there not a lot of buyers out there. Before six months ago if you were trying to talk about the medium size vessels nobody would have listened to you. Now, the people we are studying about those, we explained the reasons why, certainly the fact that nobody wanted to talk about these medium size vessels that last four years which or even five it is a very good reason for someone to expect the market to improve significantly when the right time comes. So, to respond to your question directly is that, there are not a lot of buyers out there for these type of vessels but certainly the sellers rate, they have increased a little bit their expectations as regards to the price of the vessels that they are selling simply because receiving they see these good sentiments that we see as well.

Mark Suarez - Euro Pacific Capital

Got it, and in hypothetical situation let’s say you need more cash, you go ahead, you do your acquisitions would a preferred stock offering would now make more sense now that you have a more competitive dividend yield for the firm at a lower rate I mean would that then make more sense let’s say over the next two to three years or so?

Symeon Palios

This is too early to discuss and certainly let’s spend the money that we have aside and this is a scene of how we are doing. The main purpose of the exercise is to increase the value of our Company and the value of our surplus. We feel that we have indicated to everyone what we consider to be as a floor as regard to the price of our stock and certainly knowledgeable people in the industry have determined that the 2.51 price is something very attractive. So, let’s wait and see the result of how we are going to use the money and then we will talk about anything else.

Mark Suarez - Euro Pacific Capital

Great, okay, that’s all I have for now. Thanks for your time as always guys.

Symeon Palios

You are welcome.


It appears we have no further questions at this time. I would now like to turn the floor back over to management for closing comments.

Symeon Palios

Thank you again for your interest in and support of Diana Containerships. We look forward to speaking with you in the months ahead. Thank you.


Ladies and gentlemen, this does conclude today’s conference. You may disconnect your lines at this time. Thank you for your participation. And have a wonderful day.

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.


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