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Executives

Sai W. Chu – Chief Financial Officer

Gerry Wang – Chief Executive Officer, Co-Chairman and Co-Founder

Analysts

Joshua Katzeff – Deutsche Bank Securities

Urs Dur – Clarkson Capital Markets

Michael Webber – Wells Fargo Securities, LLC

Seaspan Corporation (SSW) Q1 2012 Earnings Call May 17, 2012 10:00 AM ET

Operator

Welcome to the Seaspan Corporation conference call to discuss the financial results for the quarter ended March 31, 2012. Hosting the call today is Gerry Wang, Chief Executive Officer, Co-Chairman and Co-Founder of Seaspan Corporation; and Sai Chu, Chief Financial Officer of Seaspan Corporation. Mr. Wang and Mr. Chu will be making some introductory comments. and then, we’ll open the call for questions.

I will now turn the call over to Sai Chu.

Sai W. Chu

Thank you, Operator. Good morning, everyone, and thank you for joining us today. Before we begin, please allow me to remind you that our discussion today contains forward-looking statements. Actual results may differ materially from results projected by those forward-looking statements.

Additional information concerning factors that could cause actual results to materially differ from those in the forward-looking statements this contained in the first quarter 2012 earnings release and earnings webcast presentation slides available on our website at www.seaspancorp.com as well as in our annual SEC report on Form 20-F for the year ended December 31, 2011.

I would also like to remind you that during this call, we will discuss certain non-GAAP financial measures including adjusted EBITDA, cash available for distribution to common shareholders, normalized net earnings, normalized earnings per share and normalized converted earnings per share. In regards to such financial measures and for reconciliation of such measures to the most closely comparable U.S. GAAP measures, please refer to our earnings release.

I will now pass the call over to Gerry who will discuss our first quarter highlights as well as some more recent developments.

Gerry Wang

Thank you, Sai. Good morning to everybody. Please turn to slide three of the webcast presentation. Turning to our first quarter results, I would like to highlight four points that speak to the ongoing stability and the growth of our business.

First, we continue to generate strong operational and financial results, as our operating fleet remains fully employed primarily on fixed-rate time charters without any major off-hire incidence. We achieved vessel utilization of 99.1% and we continue to grow revenue, cash development for distributors, EBITDA and the normalized net earnings.

Second, our newbuilding construction program progressed according to the schedule. In March and April, we took delivery of four 13 ton 100 TEU newbuilding vessels with all four ships commencing 12-year fixed-rate time charter with COSCO. We have now completed our eight ships here as of 13 ton 100 TEU vessel newbuilding program with Hyundai Heavy Industries. These vessels will be the largest in our fleet and they represent COSCO’s flagship operating vessels. Seaspan now has 69 vessels in operation and then three 10000 TEU newbuilding vessels on order scheduled to be delivered in 2014.

Third, our board declared dividend on our common stock in our Series C preferred share. Further to our announced in February, we’re pleased to increase our first quarter 2012 quarterly common share dividend by 33% to $0.25 per share, representing an expected annual dividend of $1 per share for the year 2012.

Fourth, we continue to demonstrate our focus on long-term shareholder value. We’ve repurchased 11.3 million shares of our Class A common stock through a fixed price tender offer at $15 per share. We acquired our Manager in our Class C common stock for $54 million in common shares, and we authorized a $50 million share repurchase program.

I would like now to turn the call over to Sai, to discuss our quarterly financial results. Sai, please.

Sai W. Chu

Thanks, Gerry. Please turn to slide four for a summary of our first quarter 2012 results, compared to our 2011 first quarter results. Revenue increased by over 25% due to the increased number of operating days and higher time charter rates attributed to deliver of our larger newbuild vessels. The increase in ship operating expense was also primarily due to an increase in the ownership days resulting from the two vessel deliveries in the first quarter of 2012, and a full period of expenses for the 10 vessel deliveries during 2011.

In addition, lubricant costs, spares and repairs and maintenance costs increased due to worldwide rise in the cost of lubricants, service and parts prices. Overall ship-operating expenses increased by a lower percentage than our revenue increase, this was consistent with the operating efficiencies achieved by our larger newbuild ships, which have a lower operating costs for TEU and the acquisitions of our Manager.

Prior to the acquisition of the Manager, the ship operating costs was comprised of fees paid to the Manager for technical services in exchange for a fixed fee per day per vessel, which was adjusted every three years. The fixed technical management fee was established based on cost expected to be incurred by the Manager in providing the technical services. As a result of the acquisition, Seaspan’s ship operating expense is now based on the direct operating costs of the vessels.

Going forward, the portion of general and administrative expenses of the Manager, previously included in the technical management fee, because they are not operating in nature will be reclassified as general and administrative expenses in 2012 and no longer included in ship operating expense. We expect our G&A expenses to increase by $8 million to $9 million for this year as a result of those new classification.

Our adjusted EBITDA increased by over 32% to the increased contribution margin of our larger newbuild vessels. Cash available for distribution to common shareholders increased by 29%, slightly less than the increase in adjusted EBITDA, primarily as a result of the dividends on our Series C preferred shares, and due to increased interest expense resulting from the additional debt related to our new vessel deliveries.

Please turn to slide five for our normalized per share metrics. Our normalized converted EPS for Q1 was $0.30 per share. For our dividend policy as Gerry mentioned, our board has declared a $0.25 per share, quarterly common dividend for Q1 2012, an increase of about 33%. This represents the third increase to our quarterly dividends in Q3 2010. Since going public, we’ve declared accumulative dividends of $7.72 per common share. Our board has also deferred and paid $0.59375 per share quarterly dividend for three months ended April 30 or 9.5% Series C preferred shares.

Please turn to slide six for our balance sheet information as of March 31, 2012 compared to December 31, 2011. In terms of liquidity as of the end of the quarter we had cash, cash equivalents and availability in our credit facility with approximately $500 million. We consider our strong liquidity and financial flexibility to be a key competitive advantage in the current market environment.

In terms of forward guidance, please refer to slide seven for the quarterly details of our vessel deliveries, drydocking, CapEx and converted share count guidance each of which maybe subject to adjustment due to customer scheduling requirements and other changes. Jerry mentioned we have taken delivery of our last four 13100 TEU new built vessels this year. Our main new built orders are three 10000 TEU SAVER cross ships to be delivered in 2014. In terms of anticipated and scheduled off-hire days we expect approximately 9 days of drydocking in Q2, 24 in Q3, 12 in Q4 with a total of 89 days for the full year of 2012. At this time we estimate about 100 days of scheduled off-hire for each of 2013 and ’14.

In terms of CapEx, we expect approximately $145 million in Q2 2012, $20 million in Q3, $60 million in 2013 and $193 million in 2014 representing total capital spending of approximately $418 million for which we have already secured all necessary funding.

Our expected converted share count is relevant for the accurate calculation of our normalized converted diluted EPS. Based on current shares of our common stock outstanding or which reflects 11.3 million shares repurchased through our tender offer approximately 4.2 million shares issued to-date on the (Inaudible) of our manager are seeing participation rates in a drift. A $0.25 quarterly common dividend assumed common share price and collusion price of $15 for our Series A preferred shares we currently expect 84.4, 85, 85.6 million shares for each quarter sequentially in 2012 87.1 million shares for 2013 and 89.1 for 2014.

On the capital structure side we believe that our increasing operating cash flows combined with our strong liquidity and access to capital markets will give us continued ability over the long-term to support increasing common share dividends, pay down debt and pursue growth in a balanced and controlled manner. It is important to note that we generated $240 million of cash from operations in 2011 this was the primary source of cash for paying dividends and financing the 11.3 million common share tender offer in January.

For the full year 2012, we expect to generate cash available for distribution of $260 million May 12 three of the Seaspan subsidiaries concluded documentation for $224 million loan facility with a leading Chinese bank related to the construction of our three 10000 TEU new built vessels. We expect to execute the agreement for early next month these vessels are scheduled to be delivered in 2014 when we commence our operations under charge with Hanjin for a period of 10 years plus some additional two years of the option of Hanjin.

Seaspan has agreed to conditional guarantee certain financial obligations for its subsidiaries to the Chinese bank under the loan facility. We intend to be optimistic in our approach to accessing the capital markets, raising capital and looking to diversify our capital structure and create additional capacity for growth.

I will now turn the call back over to Gerry.

Gerry Wang

Thanks Sai. Please turn to slide 8 of the webcast presentation. I’m going to discuss a little bit about the industry’s current fundamentals and the direction the industry is heading to. On the supply side, the order book currently stands at a little over 20% of the effective loading capacity or about 7% to 8% trailing on average. This will be further reduced by demolition, potential order consolidations, and the conversion so on and so forth. Our customers have continued to manage supply, through incremental and slow steaming and idling of ships.

On the demand side, we expect container cargo demand, which is a derivative of global economic growth to continue to grow at 7% to 8% per annum. So in general, we expect cargo demand and ship supply growth to balance out in the next three to four years and consistently we believe the ship charter rates will improve accordingly.

Freight rate have increased significantly since the beginning of this year with our customers successfully implementing a series of general rate increases on the main ship lanes. However, the increase in freight rates has not fully compensated the operators for the run up in the bunker fuel prices, and (inaudible) their need for larger modern fuel efficient ships that will drive economies scale and significantly lower their operating costs, once again this highlights the opportunity that exists for owners, strong balance sheets, and excessive capital like Seaspan.

Please turn to slide nine, slide nine shows the staggered maturity profile of our charter portfolio. The average remaining charter length for our fleet is about 7 years. We have very limited near-term re-charter exposure with four 4 ton 250 TEU ships up for re-charter in 2012, accounting for less than 1%, of our 2012 contracted revenue, and two 4250 TEU ships up for re-charter for the year 2013. We have no ships up for renewal for the 2014.

We have expanded the first open ships, the CSCL Ningbo to China Shipping, to set sail for six months at $8,450 per day, and option six months at $12,250 per day. Recurrent to the in the process of working on the charter for the next three openings ships this year.

Please turn to slide 10, where I’m going to reiterate our vision for the future. Our overall strategy will stay the same as we have always demonstrated to you our shareholders, is to continue to grow our fleet in a controlled and balanced manner. As we have discussed on our 2011 second quarter conference call, we enter into our next phase of growth by ordering three 10000 TEU fuel efficient vessels. The vessels are chartered to Hanjin Shipping on 10 years fixed rate contract with three options.

Due to the near-term uncertain outlook for the global economy and also for the industry, we intend to continue to be very patient and disciplined, using our financial strength and technical and operational leadership position to pursue select growth opportunities that would meet our strict criteria. We will continue to concentrate on designing, owning and chartering large, modern, fuel efficient container ships to creditworthy customers on a long-term basis.

We intend to continue to emphasize our SAVER vessel design, which we believe provides customers with improved efficiency and operational savings. Seaspan has a history of returning capital to shareholders and we remain committed to sustainably increase our common share dividend over the long-term, as we continue to opportunistically grow our business.

As the ships leasing franchise, it is critical to consistently maintain a strong balance sheet, diversifying our capital structure and enhancing our financial strength including conservative leverage has been a core differentiator for Seaspan and it will remain one of our top priorities. with proven business model that was just tested by the financial crisis of ‘08, ‘09, we believe Seaspan is well positioned to continue to be both enhance its leadership position and create shareholder value over the long-term.

And we would like to open the call for questions. Operator, please.

Question-and-Answer Session

Operator

(Operator Instructions) Our first question comes from Justin Yagerman of Deutsche Bank. Your line is open.

Joshua Katzeff – Deutsche Bank Securities

Hi, it’s Josh Katzeff on for Justin.

Gerry Wang

Hi, Josh.

Sai W. Chu

Hi, Josh.

Joshua Katzeff – Deutsche Bank Securities

Hi, I just wanted to start-off on, I guess you talk with your customers, the liners, I know Gerry that you’re always in talks with the planning departments. can you maybe update us on maybe their indications for fleet growth? has it been scaled back or now that the freight rates have picked up, have you got any indications that you should have thinking about placing orders once again?

Gerry Wang

Yeah. Basically, all this have been in close discussions with virtually all the leading Atlanta operators, and the situation is such the operators have had pretty bad Q1, even though the freight rates, the general freight rate increases are being quite substantial. But the increases have only started from April and May, and so the results haven’t been factor in or haven’t been taking advantage of.

So the operators under enormous pressure, typically when that uncertainty hangs on, the operators would talk; the action won’t be taking place. I think with the Q2 coming out with the important results, we believe some of the decision making process will be quite open. and we’ll see some actions taking place on the fleet modernization program, no body talking too much about expansion capacity, but everybody is talking about replacement program, refracting the fact that bunker fuel costs, is such a big item in the overall financial performance of the operators, fuel efficient that was our SAVER designs, would be the ideal vessels behalf and so people are really looking at those designs very closely. So I would expect some activities coming up during the course of the next three to six months and we are pretty ready to work with them and that we’re looking forward to hopefully reaching some good long-term contracts with them.

Joshua Katzeff – Deutsche Bank Securities

And that kind of brings me up into I guess the follow-on to that is, has there been a commitment to I guess both buying for their own account and leasing or is there a sense that they’re going to rely more on buying – more on one or the other?

Gerry Wang

I would sense at least more that 50% would be outsourced, why, given the challenging times that are still going on and typically the operators do not have strong financial positions and the market is just not open, equity market, which is now open for them in terms of their own capital replacement program. So we hope there would be more discussions with people like ourselves.

But at the same time, we have to be mindful of the fact that in the capital scarcity is affecting everybody and the competitive landscape has changed is not forever that the traditional KG system is not there anymore then we have a few other owners and ourselves pretty much dominating the picture right now. And then we will hope, we’re one of the stronger ones that are in place and I’m very confident in Seaspan we’ll get our at least fair share of the business and that’s where our mindset is and we’ll just have to be very patient and disciplined and working with our customers. Going forward, it’s the right timing.

The good thing is the ship price is continued to be under tremendous pressure. I don’t see any reason why the project would pickup. So in a sense, the longer we’ll wait the better for us and so we’re not pushing our customers to make decisions now. At the same time, we just want to get ourselves ready and for example, recently we’ve concluded financing for Hanjin charters, that three 10000 TEUs that is part of the program we look on to make sure we’re ready for the opportunities that we can take advantage of. So, we’re doing a lot of things just to condition ourselves and we are waiting for the right timing when our partners, charters are ready to make a good decision.

Joshua Katzeff – Deutsche Bank Securities

Got it. And then I guess following on with the recent financing. Are you guys able to provide anymore details on maybe loan tenure amortization or margin? Are you guys maybe with – was this I guess a set of large Chinese leading banker, was there any export credit involved in it or is this straight by that over loan?

Gerry Wang

Yeah, unfortunately we are not allowed to disclose because the financial has up, the transaction to be confidential, part of it because this the first time they entering to a very large ship finance, a transaction and also possibly the Chinese bank just want to make sure not everybody should expect such a financing to be available to them. I’m sorry, we’re not in a position to said more, except to say, we’re very, very pleased with the terms and conditions of the financing that is available to us.

Joshua Katzeff – Deutsche Bank Securities

Got it and then just one more question before I turn it over I guess this is the first quarter with the Manager in-house. Can you talk about I guess how the operating expenses trended versus I guess what you thought and how much volatility do you expect in OpEx kind of going forward?

Gerry Wang

On the OpEx side our sense is the operating cost will trend down. We are looking at every means to reduce our OpEx with the revenue fixed the only way to improve our bottom line is to the reduction of operating cost. The cooling costs are fairly stable right now the lubricating cost is under control, the insurance market is what it is with our near perfect operating record we enjoy very good insurance coverage. Then spares and maintenance all those things also getting cheaper because we are using our fleets terms and size and creditworthiness to talk with our vendors to get the discounts that we deserve. So overall speaking we think the OpEx will trend down and that’s really what we want to work very hard on as I said given the revenue is fixed that is the only way to improve the bottom line as to cost reduction. We are fairly optimistic in that action.

Joshua Katzeff – Deutsche Bank Securities

Okay, great. Thanks for the color and thanks for the time this morning.

Gerry Wang

Thank you.

Operator

Thank you. Our next question comes from Urs Dur of Clarkson Capital Markets. Your line is open.

Urs Dur – Clarkson Capital Markets

Guys, good morning.

Gerry Wang

Hi Urs, how are you?

Sai W. Chu

Hi Urs.

Urs Dur – Clarkson Capital Markets

I’m great, you really touched on the market activity of what you see in your markets and that’s really been answered that’s really what I wanted to know. But I guess can you give us possibly a picture of what you are seeing in the charter rate market of other sizes of ships. I know you have very, very little tonnage exposed it’s not an issue for you per say but you are watching it I’m sure closely. Can you give us an update of the new return chartering market for the re-charters?

Gerry Wang

With the demand and supply situation balancing out overtime as I said during the initial part of the call the supply stands at in terms of new building order book about 20% with a 7% annual increase matching the 7% to 8% of annual demand increase. So we are in pretty decent shape. As a result of that the charter market has improved quite a bit over last three to six months and first 4 ton 250 TEU was fixed recently at $8,450 for their net no commissions no nothing so there is 20, 30% improvement over the seventh (inaudible) beginning of the year. So we see continuous improvements in the charter rates. I won’t be surprised for Q2 when I was talking about the re-charter the rate would be over 10 times that was today. So that’s the pace right now and we see a healthier charter market the largest ships at state pretty much firm in terms of charter rate the smaller ones are recovering pretty fast and that’s a good thing for the charter owners.

Urs Dur – Clarkson Capital Markets

Excellent, yeah, let’s consistent with what we’re hearing, so again you just to reiterate you have very, very little exposure to the in that the re-charter market, now that even that market is improving and the order book is beginning to really fall especially next year correct.

Gerry Wang

Correct. And in between obviously we’ll focus on growth and with the liquidity we have in hand and with all the new ships already delivered, so we want you to make sure that we can take advantage of the slowdown the bottom of the cycle to expand our fleets and to take home ships whatever they like, our SAVER design and the customers that we want to do business with, to make sure our business model will continue for many years to go.

Urs Dur – Clarkson Capital Markets

Great. And then final question, I’m not sure if you’ve mentioned this elsewhere, so if you can’t, I understand, but can you remind us how much of the total equity of the JV has been committed so far and how much equity remained to be placed or possibly can be placed in this side of JV.

Gerry Wang

I’m sorry will take this question …

Sai W. Chu

Very little has been put into, we have worked our terms out we don’t have to advance much equity

Urs Dur – Clarkson Capital Markets

Right.

Sai W. Chu

Until the delivery of the ships. So I would say it’s less than $5 million.

Gerry Wang

And Urs just for guidance the – in today’s market condition when we go to the ship house, we order new ships. With Seaspan’s name probably only need to put up 5% to 10% down payment. And it’s going to be heavy sale that’s one of the reasons why we are sitting on a lot of cash a lot of liquidity and so we are taking advantage of that as well.

Urs Dur – Clarkson Capital Markets

Yeah, now I understand, I just wanted an update, and highly appreciate it guys, thanks for the call.

Gerry Wang

Thanks Urs.

Sai W. Chu

Thank you.

Operator

Thank you. (Operator Instructions) Our next question comes from Michael Webber of Wells Fargo. Your line is open.

Michael Webber – Wells Fargo Securities, LLC

Hi, good morning guys. How are you?

Gerry Wang

Good, Mike.

Sai W. Chu

Hi, Mike.

Michael Webber – Wells Fargo Securities, LLC

Hi, Gerry, I wanted to jump back your thoughts on the market and fleet growth you know it seems some deals we have done recently that looked relatively cheap on a dollar per TEU basis, and then on the larger side is that we just kind of taken fine to that larger asset class. Where do you think values are on a dollar per TEU basis, and do you think we are at a bottom, you mentioned charter rates heading higher, so I’d suspect we’re at least trending near the bottom on asset values here.

Gerry Wang

I wouldn’t say we are near the bottom, if not at the bottom, I think this bottom will be flat, is like a U versus a V, and so as I said in the opening remarks, I just don’t think the market the ship prices will move up over the next three to six months, and beyond that time horizon I don’t know. But at least I’m very confident within the next three to six months, the ship prices will not move up. You look at the order book situation, you look at the demand situation especially if you take into account the capital availability, only very creditworthy borrows can have the excessive capital at Seaspan. So those things we all point to in our tough situation for next six months in terms of new order book.

Michael Webber – Wells Fargo Securities, LLC

Fair enough. Some of the deals that got down recently they have been few and far between but kind of printed in 8500 per TEU range, is that where you think the market is here and did you guys participate in that process and if you did, what stopped you or what gotten away?

Gerry Wang

Can you make a specific reference which project should we think…?

Michael Webber – Wells Fargo Securities, LLC

Evergreen.

Gerry Wang

Okay. Yes, we participated and active related to Donna’s review. And at the end of day, the deal which is the one fit us. Let’s say, we want to make sure, we’re not doing deals for the sake of doing deals. We have certain criteria that we do not want to deviate from for example. The number one criteria is creditworthiness of counter party. The number two is the right designs and right ships. Number three, the charter has to be long-term at least for that five, for 14 ton TEU, or 10 ton TEU, or larger vessels they have to be long-term versus the three years, five years that kind of things.

And one thing that’s very important to us that we simply do not accept any purchase option for our contract, just for the information – also for the information of our shareholders, out of 69 ships we have in our fleet, in our operating fleet. We have never given purchase opportunity to any contract. And then we probably will stay that way and then for some strategical reasons. So that’s just where we are and obviously that time shaft wouldn’t fit with the things I’ve just all lines to you.

Michael Webber – Wells Fargo Securities, LLC

Fair enough. And then one more around growth and then I’ll move on, but you’ve got two designs out there. You guys have talked about recently around last year at 14,000 and 10,000 TEU and in those conversations, you’ve been relatively limited because we haven’t seen a whole lot of new capacity additions, but are you seeing more interest in one design versus the other here or is it too thin to really comment?

Gerry Wang

Well, I can comment and generally speaking as I said, we want to focus on larger vessels and then SAVER designs not limited to one size. It is really a concept, as the fuel efficiency, the laudability is the environmental improvements and we apply the concept to five ton TEU, 10 ton TEU, 14, 16. But we weren’t of the any ships in between five ton TEU and 10 ton TEU. We consider that as a more transitional price and there will be too big for certain smaller chase and too small for the east, west large chase. So we will stay away from that.

And we will see how things go obvious a lot of discussions have taken place. As I’ve said, at the beginning of the Q&A, our partners are charters, pretty much focus on in Q1 and Q2 situation right now. I expect Q2 to be an improvement and Q3 to be even better situation than the business you’re making process for the fleet renewal and the modernization will become an important part of the agenda in the decision making process.

Right now, the focus is we have to deal with the high fuel cost and the losses that are being incurred for Q1 and Q4 last year. So, everybody realizes they need modern fuel efficient fleet to deal with the rising fuel cost and to improve the competitiveness and the new designs are just so much better in that regard. So there is no question about the necessity. It’s just about timing for those modern ships and given the chance landscape in the competition we feel very confident at Seaspan we all have at least the fair share of the business opportunities.

but we have to be patient and disciplined and we do not want to get into any transactions that for the sake of doing the deals, when obviously we’re under pressure and there's no doubt about it. But we do not want that pressure to be the primary driver to get into a situation doing a deal that we would regret later on, and we have other deals that we look at and we have to compare different deals and do the best we can for our company.

Michael Webber – Wells Fargo Securities, LLC

That’s helpful, and I’ll open next one up to Sai as well. And Gerry you mentioned the timeframe for new capacity issues being pushed out into the back half of the year. and then so you guys have adopted a more progressive dividend policy, I know it just disrupted by 33%, but if you’re looking at a couple of quarters where your cash outlays on some of your current CapEx, I mean this might be relatively limited, how do you guys approach your dividend in that kind of the scenario?

Sai W. Chu

Well, Mike I think, to be clear that dividend is going to be $1 for this year, the Board will re-look at it, if there’s opportunities and I think that to maintain flexibility and orders can happen pretty quick. And so I think it’s important that we maintain that dividend, but...

Michael Webber – Wells Fargo Securities, LLC

Yeah.

Sai W. Chu

But this development that cause us to consider halt again, next time we will.

Michael Webber – Wells Fargo Securities, LLC

Okay, fair enough. And Sai, so to stay with you for a second, you mentioned in your prepared remarks, $8 million to $9 million increase in G&A, kind of moving from the management company from the OpEx line basically under the G&A line. Can you break out it, a little bit exactly what that is, what kind of services and then to Gerry’s commentary on the OpEx saving and certainly seem like you had more leverage in that line item this quarter. Are you talking, if we strip out that $2 million to $3 million per quarter that’s going to naturally transition to G&A. are you still going to see incremental savings on that OpEx line?

Sai W. Chu

Yeah, I mean. I think that we’re going to – again, we’re going to manage around the band on our operating expenses, and that was one of the benefits of acquiring Manager, so that we kept benefit from any cost reduction?

Michael Webber – Wells Fargo Securities, LLC

Yeah.

Sai W. Chu

That the G&A really was part of a 60. so once we have acquired its not necessarily direct operating expenses. So there really they corporate, the overhead for the Managers, staffs for the premises things like that.

Michael Webber – Wells Fargo Securities, LLC

Okay. So from a modeling perspective, we can strip base $9 million off from an OpEx perspective allocated for G&A, and then we should see some potential downside from the OpEx level, at that point, if you guys kind of leverage some more synergies associated to having the Manager in-house?

Gerry Wang

Mike, good summary.

Michael Webber – Wells Fargo Securities, LLC

Okay, fair enough. And then one more, I’ll turn it over, [Vinay] asked about the facility and the terms and now you guys can comment on that. But Sai, if you think about your effective interest rates and obviously the small component to the overall that pie here, but should we see any change in the effective interest rate based on this new deal?

Sai W. Chu

No.

Gerry Wang

No.

Sai W. Chu

It can be a good financing relative to our portfolio of debt. It’s not going to move to May, the wrong way, it’s certainly while within where we are and slightly below.

Michael Webber – Wells Fargo Securities, LLC

Right, okay. That’s the sort of thinking. All right, guys. Thanks for the time, I appreciate it.

Gerry Wang

Thanks Mike.

Operator

Thank you. I’m showing no further questions in the queue this time. I’ll hand the call back to Gerry Wang for concluding remarks.

Gerry Wang

Okay, thanks, operator. Thank you for participating in the call, as we all want to say thank you very much for supporting Seaspan and being with us as a long-term investors. And we’re looking forward to speaking to you again in the next quarter. In the mean time, have a great summer. Thank you very much.

Operator

Thank you. Ladies and gentlemen, this concludes the conference for today. You may all disconnect and have a wonderful day.

Gerry Wang

Thank you.

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