Q4 2020 Global Ship Lease Inc Earnings Call

Yeah.

Yeah.

Ladies and gentlemen, todays conference is scheduled to begin and a few minutes. Please continue to standby. Thank you for your patience, ladies and gentlemen, todays conference is scheduled to begin and a few minutes. Please continue to standby and thank you for your patience.

[music].

Ladies and gentlemen, thank you for standing by and welcome to the Global ship lease Q4 2020 earnings Conference call. At this time all participant lines are in a listen only mode. After the speaker's presentation. There will be a question and answer session to ask a question. During the session you will need to press star one on your telephone.

Please be advised that today's conference is being recorded if you require any further assistance. Please press star zero and I would now like to hand, the conference over to your speaker today, Ian Webber CEO. Thank you. Please go ahead Sir.

Oh, Thank you very much and good morning, good afternoon, everybody and welcome to the global ship lease fourth quarter 2020 earnings Conference call.

The slides that accompany today's presentation are available and our website www global ship lease dot com.

And those slides two and three as usual remind you that today's call may include forward looking statements that are based on current expectations and assumptions and are all by their nature inherently uncertain and outside of the company's control.

Actual results may differ materially from these forward looking statements see there's many factors, including those described and the safe Harbor section of the slide presentation.

We also draw your attention to the risk factors section of our most recent annual report on form 20-F, which is for 2019 and was filed with the SEC and like from a second our 2000 and 'twenty you can tell you this far and a website or via the SEC's.

All of our statements are qualified by these and other disclosures and our reports filed with the SEC.

We do not undertake any duty to update forward looking statements reconciliations of non non-GAAP financial measures to which we will refer to during this call from the most directly comparable measures calculated and presented in accordance with GAAP you should refer to the earnings release that we issued this morning, which is also available on our website.

As usual I'm joined by our Executive Chairman George you recast, our Chief Financial Officer console, so rough on us and our Chief commercial officer from Mr.

George will begin the call with some high level commentary and and updates on our current areas of focus and then Tassos, Tom and I will take you through our recent achievements.

And the results current market environment, and our financials after that we'll be pleased to take your questions sorry.

Turning now to slide four I'll pass the call over to Georgia.

Thank you Ian and good morning, and good afternoon to you all.

So the second half of 'twenty, and 'twenty and into 'twenty or 'twenty. One we have taken action to capitalize on the amazing Bull container market and ways that will benefit the company for years to come.

Our liner operator customers.

Others have shown impressive capacity discipline during 2020, which is a real game changer and has helped them to deliver incredible results. Despite the challenges from Covid.

From the third quarter 2020, the lines have increasingly found themselves short of containership capacity.

In the face of a rebound of containerized freight demand.

That shortage has been compounded by severe port congestion and.

Particularly on the U S West coast and and China.

And the already tight vessel supply that preceded the onset of Covid.

This combination of factors is live and up charter rates and has enabled us to lock in value by securing charters of course, a fleet of low slot cost high reefer capacity fuel and ambition and efficient container ships.

At rates and durations well beyond what has been available in recent years.

On the buckle, Bud and concert cover at higher rates and our ongoing focus on deleveraging, which the rating agencies have acknowledged with ratings upgrades.

We were able to achieve the major gold over at financing out 'twenty 'twenty two notes on significantly improved terms.

Having eliminated the restrictive covenants that had previously constrained our ability to pursue the full range of attractive market opportunities.

Or to share the prospects of those efforts without shareholders.

We moved quickly to initiate our sustainable quarterly dividend of 12 cents per quarter for our class a common shares and also announced an agreement to add a further seven vessels to our fleet and it transaction and that will immediately be accretive.

Our strong downside protection and is estimated to add approximately $19 million to annual net income.

Just on today's LIBOR, representing an increase of nearly 40% compared to normalized net income for the year ended December 2020.

As we know us for a period of the year that would typically see pronounced decision out of weakness post December holidays, and the Chinese new year. We are pleased to see almost unprecedented resilience and continue to see and highly supportive and vitamins.

This is driven by both a sustained high level of containership demand and they restricted and near term supply of ships.

And this.

Strength.

Further enforced by the midterm by negligible order book for midsize and smaller vessels, which is constrained and significant part by uncertainty over future field and propulsion technologies.

These factors point to highly supportive supply side fundamentals throw at the very least the medium term.

With the strength and financial Foundation and.

Highly in demand fleet and substantial momentum and a look and value for our shareholders. We believe that GSL is well placed to continue executing on accretive growth strategy digging.

Taking full advantage of the attractive opportunities.

Head of US, whilst also improving the resilience flexibility and cost effectiveness.

Although our balance sheet.

Yeah.

With that I'll turn the country and.

Thank you George and.

Before moving on from slide four I'd like to emphasize a couple of key numbers on the right hand side.

Firstly adjusted EBITDA for the year of 161 7 million is up.

And full point 7 million on 2019.

Secondly.

Earnings per share and for the year is $1 60 and.

And based upon which we will continue to build with accretive earnings from the southern ships, which will be delivered to us during the second and third quarters of this year and I'll come back to them later on.

The next slide slide five summarizes some of the key milestones we've hit since the beginning of 2020 and our continuing efforts to build value.

Commercially and operationally, we've kept our people safe and the ships running with negligible downtime despite the challenges of Covid.

We have secured 22, new charters for our existing fleet and a rising market since the first of July 2020, adding approximately $265 million of contracted revenue and some and $177 million of adjusted EBITDA.

And as you know we've agreed to purchase seven ships seven and 6000 Teu ships with a minimum of three and a maximum of five year charters attached.

Which added another 80, sorry, another $95 million of adjusted EBITDA over the phone and peronism those charters for three years.

All in all as of December 31, and 2000, and 'twenty, we have $893 million from contracted revenue spread out over two and a half year period.

And I'll come back onto this one to the next slide.

Financially, we strengthened our credit profile with a net debt to adjusted EBITDA at the end of $2024 three times move.

Moodys rate us be too positive and standard and poor's rates as B plus stable.

We've refinanced and January are expensive and inflexible nine and seven eights notes due 2022.

<unk>, allowing us much more freedom.

Using debt service by approximately $15 million, a year and extending maturity to 2020 six.

And our preferred and unsecured 2024 Atms at the market offerings have been active and opportunistic basis, allowing us to raise a total lifting and the $61 million of cheaper non dilutive unsecured capital since the beginning of 2020. We've used this to reduce our expensive debt.

Both now to fully refinance trying to strength, two nights and and February 'twenty 'twenty, one and so very recently, we repaid approximately $12 million about a third of one of our expensive pieces of junior debt, which cost us 10%.

Having eliminated these expensive and restrict to try and stretch do notes. We continue to work from addressing at June 2022 maturities of which around 134 million was outstanding at year end.

And further reducing the expense of 10% or so junior debt due in September 2024.

A few weeks ago, we raised over $72 million gross of common equity to fund accretive growth and are precisely the zone that we're already delivering.

We've also published our first ESG report, which has helped us to articulate a closer alignment between our ESG and commercial strategies.

We are expanding that sell side analyst coverage and announced as Joe said, a dividend of 12 cents per common share per quarter from the first quarter of this year 'twenty 'twenty, one which in addition to returning value to our existing shareholders. We anticipate would also help broaden our investor base.

Moving to slide six you can see a charter contract cover the principal driver of our day to day business.

The detail is broken out from our website and also included in our earnings release, but I'll make a few bigger picture points here.

The blue bars represent contract cover.

The dark blue bars to the right show, new charters, which have been agreed since June and July 2020.

And hopefully you can see that the chances agreed and the second quarter of 2020.

Low in terms of rates.

And it is not coincidental that we only fix those chances for short durations.

On the other hand, those chances degrees more recently have seen significant increases.

For example, thetis, the top 10, or so vessels and the table, we're fixing and the second quarter last year at between 6000 and $500 per day, and 8000, and almost a day, but they're now seeing market rates and the high teens and for longer periods.

From larger mid sized ships the improvement is even more dramatic.

Panamax ships, such as the dolphin to about a third of the way down the page.

And we're fixing earlier in 2020 at $7000, a day, Fannie covering opex and now fixing at rates and the high Twenty's.

And we've just fix one of our 5900 Teu post panamax vessels, the E and H for over three years, that's 32000 and $500 a day.

From a rate of $14500 a day substantial improvements.

The list goes on.

And as I mentioned earlier, we've taken advantage of these from markets to lock in 22, new charters or extensions.

Adding $265 million of contracted revenue.

These are all at increasingly attractive rates and durations and all over the last eight months or so.

And when you think about what these increase rates actually mean for GSL GSL.

Please bear in mind that operating costs.

And my instruments lubricating oil insurance those sorts of things is largely fixed and the fuel cost.

For a ship on time charter is borne by the charter so any increase and contracted charter rates flow straight to our bottom line improving both our financial results and cash flows.

I'm pleased to say that we have.

Have a round and it doesn't ships coming open within the balance of 2021 to take further advantage of this great market.

Complementing near term prospects and providing protection to the downside.

$819 million and contracted revenue for two and a half years of Teu weighted food cover this.

And this provides us with great visibility on cash flows and a strong base from which to further develop the company.

And which gives us the confidence to introduce them.

And a couple of common shareholders.

George could you mute.

This brings us to slide seven which provides more detail on the seven ships that we've contracted to purchase clearly illustrating value accretive growth strategy.

And shows.

Firstly, we focus on existing ships with charters attached or arranged in tandem with the purchase which are immediately accretive to cash flows rather than new buildings for where and when that could be a two to three year weights during which you have to finance the build.

Before they come online and generating any cash flows from charters.

We expect the seven ships to add approximately $29 million to annual adjusted EBITDA.

We are risk averse.

We look for good returns write down from the guys on assets with low economic depreciation limited residual value risk and the compelling upside potential.

The sudden shifts fit the bill perfectly.

They have at least three years and contract cover deliver a purchase price to adjusted EBITDA multiple of four times.

<unk> net income and earnings per share up significantly.

And have good downside cover with a scrap value equivalent to about 60% from the purchase price.

Thirdly, the ESG and economic strength of our strategy and one aligned I've.

And we used to take a full life cycle approach to the carbon footprint from ships. This means considering the footprints associated with building and relax and chips as well as operating.

We believe that it only makes sense to build new ships, when we and the industry and general know how the against and we powered on a sustainable basis.

Until then we believe it's better to optimize and where possible and expend and the economic life of existing ships such as the seven we've just purchased.

Fourthly, we look to stay flexible and agile we aim for attractive investment returns within five years or less allowing us to adjust our strategy to the evolving decarbonization environment.

Our aim is to position GSL to be legacy problem free and with a strong cash position to be able to capitalize on the next generation Green technologies as they crystallize over the coming decade.

Let's turn to slide eight which gives you a helicopter view of some of the key developments, we've seen and the last 12 14 months.

As you can see from the chart on the left container shipping has shown remarkable resilience to COVID-19.

The first half of 2020 was certainly challenging both in terms of a drop off and demands and a period of development and adoption of Covid safety related measures to the proven effective.

But the market rebound and the second half of the year, which is accelerating and 2021 has been immense.

And good volumes and 2020.

Down only about 2% versus 2019 for the full year and we've entered 2021 with a forecast volume growth of just under 7% six 8%.

Almost more significant is the capacity discipline and sharing by the liner operators customer.

Customers. This is a real game changer, we believe but its now and going forward, allowing the results.

And to deliver great results, even when volumes were heavily down in the second quarter of last year.

Okay.

Industry supply side fundamentals are highly supportive.

And we'll provide more detail in a moment, but both charter rates and asset values are on the shop upwards trajectory.

Feeding into the positive supply side fundamentals is the imperative for the industry each day compromise.

This is driven not only by our growing sensitivity to the ESG concerns of all stakeholders, but also by regulation.

With the international Maritime organization, and the IMF and the European Union to you taking the lead on forcing the reduction of emissions.

High level. This is expected to have two supply side benefits.

Firstly, the container fleet may be obliged to slow down as a result of regulatory required engine power reductions from January 2023.

Slowing down reduces effective global fleet capacity.

And secondly, and.

Until the industry has decided on the new generation and Greenfields and develop the new types of engines needed for propulsion and there is like.

Need to be a significant time and are on the order book.

Who wants to invest substantial capital and a 30 year life assets.

And when there is so much uncertainty over propulsion technology over the next 10 years.

Finally, after a challenging decade for and a fragmented industry, which is not very few containership owners with strong balance sheets and and appetite for growth. We believe that there is scope for consolidation and growth from <unk>, which presents growth growth opportunities for GSL.

Tom over to you.

Thanks, Ian Hello, everyone.

If you could all please turn now to slide nine.

As both George and Ian alluded to earlier, even during the depths of the downturn during the second quarter of 2020. The liner companies are customers, we're making good money. Thanks to a quick response and imposing strong capacity discipline.

So look 2019 was considered to be a pretty good year.

You can see from the boxes at bottom right that line is 2020 results are way up.

And those 2019 results as an illustration freight rates driving all customers revenue from China and the U S are at a 10 year record high so our counterparties are in good shape.

Turning to the next slide Slide 10, you can see that supply side trends all moving in the right direction.

Idle capacity is down sharply from around 12% during the worst of the second quarter of 2020 to one 1% and February of this year, which is pretty close to full employment. During what is traditionally the slack season around Chinese new year.

But let's why and things back the first part of the year when conditions were challenging here.

And the big takeaway is that since I, just mentioned liner operators have shown extraordinary capacity discipline and.

In fact, almost 70% of capacity held idle and the first eight months or so of 2020.

<unk> owned and controlled by the liner operators themselves and other woods.

The lines were idling their own ships roll and trying to keep them running and fill them at any cost.

This is unprecedented and I would say and crucially the lines have seen that it is a powerful moneymaking tool at their disposal. So a genuine game changer.

So the footnote this slides are the big ship recycling facilities, which were close to much of the second quarter and now open and active.

Having scrap prices to rebound or may be more accurate to say to normalize.

Accordingly.

And frankly with earnings where they are and the charter market very few people are currently scrapping container ships.

On slide 11, you can see that the supply side fundamentals are highly supportive for the ship sizes, we're focused on which of the science segment sitting within the red boxes from two charts net.

Net fleet growth over the last few years has been negligible and even negative and the order book pipeline is almost empty for the size as we focus on.

So the overall global order book to fleet ratio stands at a little over 10%, which is very low by historical standards and includes all of the ships coming onto the water over the next two to three years.

And the picture for the site is where we're interested in which is 2010 thousand Teu broadly.

And is even better but only one 4%.

First of all however is the order book for all call Midsized post Panamax segment, which is effectively zero. That's the area that is rings and red.

And uncertainty regarding the next generation of Greenfields and propulsion technology is putting a serious damper on ordering activity for these long lived assets as he and was already mentioned.

What's always done for earnings and the sector.

So the answer this please turn to slide 12.

And as you can see here the charter market is red horse with rates up anywhere from one eight times to almost three four times, where they were at <unk> 2020 loads.

<unk>, which shows how rates are developed for various key sizes and the liquid charter market intelligence and story with rates now above pre COVID-19 levels and has happened during 2019 the ways being led by the midsized post panamax ships with rate uplift then flowing down to the smaller sizes of each and largest.

<unk> segment, and the midsize and smaller peer group sells out.

With that I'll hand, the call over to tussle to discuss the financials tunnels.

Thank you Tim.

<unk> 13, and 14 and 15 show our unaudited pro forma consolidated balance sheet statement of operation and statement of cash flow based on the fourth quarter of 2020 'twenty.

And I'm going through every light diet, and let me point out a few key items.

We generated revenue of 70 million during the fourth quarter of 2020, 'twenty and 282 8 million for the full year.

Our adjusted EBITDA was 38, eight medium for the quarter and 106 to one seven and medium for the year.

Adjusted EBITDA for the quarter was down a little compared to the third quarter as we had to catch up on crew rotations and seep supplies delayed by Covid earlier and the year.

Opex for the year at 6000, and 410 per day as broadly as expected force reductions early in the year due to Covid, we're caught up in the later part of the year as mentioned before.

Adjusted EBITDA was up by $4 7 million for 2020 year on year.

Our finance expenses have reduced by approximately 13% due to amortization lower LIBOR and then overall cheaper blended cost of our debt.

And the refinance of our 2022 notes completed at the beginning of this current year will help to further compressed if service costs going forward.

And normalized net income was 11 3 million for the quarter and $49 1 million for the year.

Our liquidity is strong.

As of December 31, 2020, 'twenty, we had $92 3 million of gas on our balance sheet and that's before the submits to media and equity raised in January 2021, with some of the proceeds we're putting to work on the equity portion of the seven seats, we have contracted to purchase and we will also keep you posted.

And the financing of those ships and their delivery schedule as it serves ops in second quarter and third quarter of this year.

I won't go through them in detail and now but we have also included a zone because on slide 16, and 17 are adjusted to be die and operating cash flow calculated as well as detailed capex guidance to assist you with your modeling.

On slide 16, I would like to highlight that we have added some additional reference data and charter rates to the table on the right hand side and.

In the past, we have provided 10 year and 15 year historic average rates as useful bookends for modeling purposes. However, as you may imagine today's red Hot charter market has left these rates and long way behind so we have added the cold winter sowing current market rates for short term charters.

Re emphasize short term, which is up to 12 months I thought and fix it for longer periods, which are what we focus on tend to be low weighted on short term rates logically longer periods means lower risk and low risk usually risks means a lower rate.

On slide 18, I would like to highlight a couple of additional points are.

Our continued progress in diversifying our portfolio of high quality charterers and also the diversification of our lenders.

Some of you will know initially way back in 2007, and 2008 all of art and fleet was on longer on.

And long term charter to CMA CGM as we were created by them as a sale and leaseback spinoff.

Following some early steps to diversify the customer base and they'll GSL the merger between Poseidon and GSL in late 2018, and accomplish significant and immediate additional diversification which has continued.

Since that time, we have continued to sign charters with a diverse set of top tier counterparties. While also maintaining strong working relationship with CMA CGM and now accounts for approximately half of our 'twenty to 2020 charter revenue.

To the right you can see our diverse sources of debt capital.

I won't go through these one by one but you will recognize a wide range of leading banks and neither financing is from around the world.

And the longer the short of it is that our credit metrics continued to strengthen with net debt to EBITDA down to $4 three at year end.

Furthermore, on the far right of this slide we show the composition of our shareholder base as of December 31, 2000, and Twenty-twenty adjusted for the conversion of our series C preferred to common equity and four our recent equity raise both of which took place in January 2021.

The main takeaway here is that our free free float continues to grow both in absolute terms and propulsion.

With that I'll turn the call back to George for closing remarks.

Thank you Douglas.

He is a 32nd summary.

First with good grateful with contract cover $892 million spread out over an average of two and a half years generating cash, which gives us and resilient business, which has been successfully stress tested by the Covid crisis.

With a number of chartering and U S. Do you in the coming months, we have additional upside potential from the strong charter market and.

And now as we have already demonstrated it's a great platform to pursue growth.

Second our balance sheet is strong.

At December 31st 'twenty, and 'twenty, we had $92 3 million of cash and subsequent to the year and we raised approximately six to 7.8 million net of fresh equity, which provides us with resources for growth.

Both Moody's and S&P recently recognized our strengthening credit profile and the supportive market fundamentals upgrading our ratings accordingly.

We have no material debt maturities before mid 2022, and we have demonstrated access to multiple sources of capital always Brock.

Third we believe strongly and our fleet sits and the sweet spot by size and specification.

And it has high operational flexibility and high reefer capacity with low cost and low emissions per cargo slowed.

All of which generate increased demand from charters.

Fourth and maybe most importantly.

The supply side fundamentals for midsized and smaller ships are phenomenally attractive and we believe sustainable.

And I do capacity Sky and the show low that's effectively it is it presents full utilization.

And net growth of the global fleet is expected to be negligible or even negative for some time as the order book is so low.

The market has proven more resilient than many expected during the COVID-19 downturn.

Our customers are making money hand over fist and rates and charter market have rebounded to exceed pre COVID-19 the heights.

Against this backdrop.

Our strategic priorities are the following.

Continue to keep people safe, both up and see it and onshore.

Continue to optimize our balance sheet, while also providing value to shareholders and the form of a dividend Gen.

<unk> generate value accretive growth.

Thank you all for listening to our prepared remarks, which I hope I've given you a good feel for the opportunities, we see and how we plan to continue to build value going forward, we'll now turn the floor over to you for Q&A.

Thank you as a reminder to ask a question you will need to press star one on your telephone to withdraw your question press the pound key please standby, while we compile the Q&A roster.

Our first question comes from the line of Randy given from Jefferies. Your line is now open.

Howdy gentlemen are long time listener first time caller. So thanks for having me.

Good to have you.

Thanks, all right. So in terms of your chartering strategy looking at slide six shows you have a handful of vessels with charters expiring here in the coming months. So I guess two questions around that how soon and advance of these charter expertise, where you likely book you know the next charter and how will you balance kind of Maxim.

Amazing rate versus maximizing duration.

Tom do you want to talk price.

Sure.

Hi, Randy.

Okay, So our chartering strategy.

We've got roughly 12 ships coming open during the balance of 2021 and.

And in a more normal markets.

You would expect to start talking about.

Re chartering such shifts about a month or possibly two months in advance.

Day, however, such as the demand from the liners.

It's discussing charters, many months and advanced by which I mean.

Five six months in advance is not unusual and as you would imagine that those are those discussions are in progress today. So I think that was the first part of your question. The second part of your question was how do we balance.

Going forward for longer choices with potentially slightly lower rates.

This is short term exposure.

I don't I don't mean to Dodge the question, Randy, but I would say that it's it's actually quite challenging to deter.

Determined and the market today, although we have provided some benchmarks.

A clear picture of where short term by which I mean, 12 months or less charters and really all from most sizes and the reason for that is the most of the chartering activity and the market.

In recent weeks is actually tended to be focused upon.

Longer chances are.

For smaller tonnage I'm talking about two years or more and as the ships get bigger and so the durations get longer.

So I think the takeaway there is that both owners and liner operators are of a mind that now makes sense to fix longer and shorter on the whole so perhaps there isn't such a tradeoff.

As as your question might have anticipated.

Okay, That's fair and then.

And then turning over to the recent acquisition and obviously congrats on that deal seems pretty attractive and accretive as George was saying.

With that can you give some more color on maybe how you decided on that acquisition and then looking ahead of you.

We're going to remain focused on that 20 year asset or.

Or start looking at younger second hands and I agree with your strategy of staying away from new buildings.

If I may start on this.

Randy.

The deal and we looked at you know it was it was a day.

And that was up you know.

We usually do private deals we don't tend to go into the market and compete with others.

And he said deliver strategic transaction for us it and grows our relationship with the number one child there.

And we'll get in the assets that are very much in demand.

These assets have a useful life and our view of 30 years, given the developments from the new fuels et cetera. So there's plenty of years ahead of us too.

Let's call it and make them away.

And we're growing our fleet with with accretive and transactions.

Transaction that immediately brings down into our balance sheet the results without waiting for long amortization.

Now going forward, yes, we will look at more secondhand transactions, we do not we do not.

Wanted to look at new buildings for reasons that and.

Don't tell me and income.

And I believe anymore, but.

We feel that the business model of GSL, he's deals, which bring immediate cash to our balance sheet and to our shareholders and.

Well that means we will be focusing on middle mid size and making sure middle-aged.

Rather than young ships, especially and are in a market like this very young ships.

Becoming overly expensive and requiring a larger than <unk>.

Harper diet and residual value risk to be assumed at the end of the charters. So we prefer to stay focused on what we feel is.

And more balanced risk reward.

Equation, I don't know and if you want to add that.

On the new builds.

Sure Yeah, I mean all of us.

We agree with everything and the Georgia Citadel now our area of places let's maximize.

The utility of existing assets, Rah, rah, and adding to our containership capacity.

And do anything for.

Charles and Mark and mess up my knees etcetera. Furthermore, as we said in our prepared remarks.

No. That's if you would have a new building today, we wouldn't get it for three years, we would have to from the entire build program.

Our paying interest on taxes.

If we arrange that.

And have no income and that is inconsistent.

And consistent with.

Clear strategy, all making immediately accretive acquisitions.

If I may add that.

Sorry, sorry, yeah yeah.

And just to say something.

In in and and more of your style.

We are a.

Right here right now kind of company.

You know for the investors you know they they joined they they join GSL they become shareholders.

And they they see the results right here right now this is out.

Let's say model.

Yeah, No that's fair and.

And so I guess just finally.

And with your balance sheet being in United State and kind of the the best shape, it's been maybe ever.

Other acquisitions is that kind of the gameplay and here the focus and the coming months.

Strategic and that's why we say sorry.

Yeah, Yeah growth further growth further growth and continued deleveraging focusing particularly on seeing what we can do to reduce the cost of from.

Some of our more expensive debt.

And we've got a couple of pieces of junior debt.

It's not huge in terms of total is around $80 million I think appear and something like that but it's costing us 10% or more.

And I'm, sorry, if we can chip away at that.

That's helpful.

And focusing on our 'twenty 'twenty two maturities and.

Of course, those out and if we can.

Yep.

Well I'll turn it over from here. Thanks again.

Thank you thanks.

Thanks Randy.

Thank you. Our next question comes from the line of Liam Burke from B Riley. Your line is now and thank you George you're in.

20 year old vessels could you help us out where youre looking.

And I come with existing charters, but when you have older vessels how.

How do they compete vis vis what are perceived as newer more fuel efficient vessels.

And.

If I can start and then can join me in this market.

The difference with a pure price of 11 and say huh.

Immaterial the differences in fuel and of course, it always he's reflected for the charter rate, so probably $1000 from $2000 more if the ships were brand new very fuel efficient, but imagine what would be the residual value that we would have to amortize. So if you take that into account and also the.

Interest expense off the larger and larger loan that goes with brand new ships the advantage on.

The fuel efficiency and ease.

Hi.

$2000 Saturday and higher is diminished.

And a way by the additional interest expenses.

And in today's market and we see charterers.

Shay you know being away from shying away from you build orders for the various regions and we have explained and.

Environmental mainly.

And we see charters.

And I like being now you know.

Logistics companies and trying to hedge themselves.

And I strongly on capacity to show that charters are lot of companies and asked them as they're trying to secure.

Availability of Oh for Chicago space going forward.

For the next three years I would say three to five years. So that is another clear signal of the market.

That.

So going forward the perception of the market staying strong and it's all over.

And and if I may add to that.

A lot of people are thinking that what do we see as COVID-19, driven and a social force I would I'll just give you two important figures factual figures.

[noise] cargos for 2020.

Cargo volumes.

2% less.

Less than the card bullish of 2019.

So what is driven what do we see in 2020 is not driven by and excess demand.

It's driven by reduced supply and that's what you supply given the fact that if you order a ship today youre not getting it before the third to fourth quarter of 2020 three train two and.

And a half years, he's not going to change for the next at least two and a half years.

Say the list.

So these two numbers, it's not a matter of opinion is a function.

I think that.

People understand the sustainability of the current market.

Yeah.

Yeah.

Oh, no not much more from <unk>.

Fair enough and.

And the acquisition you that acquisition and seven vessels and was wildly accretive.

You highlighted the fact that the supply is going to be a driver of.

The value of the of the fleet.

What do you anticipate pricing would be on future acquisitions can you still.

Them and still create value for the shareholder there.

As we.

We always look at deals and actually we only do like I said before.

<unk>, we don't go into the market and by.

Competing with all of this you know what what is out there.

We have a very strong deal flow may be one of the strongest out there.

And that gives us a first look on many things. So we always try to create value to shareholders by doing the doing the special deal and this is the deal. We did in 2019 and this is similar deals with you just now and this is the kind of transactions and we'd look to do going forward.

We only do deals that we feel are.

Risk averse and.

Create a you know.

And immediate accretive and redemption to the shareholders without taking unnecessary risks.

But I'm just like we've always said that we didn't want to growth, but where we're not growing for growth's sake, we're not targeting a fleet of 100 ships just because people are hungry ships although.

We're very disciplined and rigorous and our approach to investment appraisal.

Which which we run.

The branch from investment appraisal and and also some technical due diligence on the vessels themselves and.

And we always have to have a charter.

As we keep saying these transactions have to be immediately accretive.

Great. Thank you George Thank you.

Thanks, Dan.

Thank you.

Thank you. Our next question comes from the line of Ward Blum from UBS. Your line is now open.

Hi, Good morning, Oh, and I congratulate you and another good quarter, you're a niche oriented and disciplined approach has certainly one the day and and finally the market is starting to appreciate what you've done.

And I had a specific question about.

The ATM program for the 8% senior notes.

And you raised additional funds last year, and and the first quarter, but with the liquidity on the balance sheet I Wonder if you plan at this point to continue.

Issuing those those notes.

And in the current and coming quarters.

And I'd also like to know what the current.

The amount outstanding under our of those 8% notes is at this point.

And.

Thanks.

Thanks, a lot.

Don't have the.

Is that number outstanding.

On the freight and so smart markdown and figure it out.

But we'll obviously reported and.

And the second and it's already in the first quarter.

Our balance sheet.

Awesome, one and.

In terms of a continuation of the ATM program.

And.

Program for <unk>.

Those 2024 and boats and also a perpetual preferred shares and that's been very successful.

It's raised substantial amounts of cash every year.

The last six seven months and kind of along those programs have been running which is contributors and.

And substantial measure to our ability to refinance.

Most of only the.

Trying to turn to two notes which has been.

And objective of ours for some quite some time, but but but also.

As I indicated in my prepared remarks, we've paid down some expensive junior debts, Kristine is 10% and the proceeds as well.

And to the extent that we're able to.

Continue to do that replace and you're expecting to get some money was with cheaper debt sent money. If we can't find a more holistic solution that will continue. These these programs are very much opportunistic return and the long term alone.

And you.

And we turn them on only if we can see.

And the appropriate use of proceeds.

That's a bit of a willy answer, but that's how it works I'm afraid.

And just one day figures if you soon and our press release are the figures for both Adm's preferred Cds.

Series B preferred share synthesis and 24 notes is there, let's say seen September which quarters that allows the previews we have raised something light.

And I remember correct.

Dean and point 5 million of preferred and something like 30 million of our 2024 notes.

Thank you very much.

Thank you as a reminder to ask a question you will need to press star one on your telephone.

Withdraw your question press the pound key.

Our next question comes from the line of Joe Kaplan from White Court capital. Your line is now open.

Yeah.

Thank you, hi, gentlemen, and.

There's been several comments on the call as well as questions with relation to our accretive growth and.

I thought it would be helpful to drill down into the math of the accretion specifically as relates to and to review and confirm.

The accretive growth from the purchase with Maersk.

And then late vintage post Panamax 6000 Teu ships.

And so I P J, but just bear with me, while I walk through the assumptions that you've publicly disclosed and and sort of how that.

Derive the level of accretion so and so you have 116 million purchase price.

Disclosed EBITDA of 95 to 126 million over.

Three to five year.

Fixed charters and based on the estimate scrap values at $400 per lightweight ton as you highlight in footnote three on page seven of your presentation is approximately $70 million, that's probably conservative since that's based on 10 year.

Average is versus the current steel prices.

Which are higher.

And then if I make an assumption on a dry docking capex using as a proxy your November 2020 presentation for similar size and similar age vessels, specifically I'm looking at the.

Dmitry <unk> why the GSL and many of the GSL.

Christabel Elizabeth.

On page 18 of your November 2020 presentation, which implies approximately one six to $1 9 million.

Per ship per dry dock and and if I look at those assumptions effectively what that.

Leads me to is one you've diversified your counterparty risk with Maersk, whose.

And you pointed out the number one trigger you have no residual value risks because by the end of year year, three fixed charter amortized down your purchase price below the residual scrap value of your ships.

And that implies and in Unlevered, IRR and call. It the low teens, but you've announced the financing for that transaction is only one third of equity two thirds bank debt, so and levered basis that implies and I.

And there are significantly in excess of 20%.

And those assumptions are only based on the five year and.

Actual life and as George pointed out.

And I need your 30 year useful life assets in the containership space when and grade type market in the sub 10000 Teu segment Theres almost no supply coming online.

And given the I M O.

Environmental regulation uncertainty, there's almost no new capex and therefore potentially.

Useful life of these ships me will be 30 years beyond the five year <unk>.

<unk> and options with Maersk, and so that 20% plus levered IRR.

And <unk>.

Any real option value for the useful life and those ships and.

And my thinking about that correctly, and my capturing and because I mean, frankly, I'm trying to reconcile that sort of the accretion and growth with the valuation of your stock.

I can give to try and the rest and moral and less over we when we're doing our model as you can understand where you get a more concerted and people through the approach to figure to syndicate regulations you have mentioned.

More or less correct on VAT case and of course from the assumption is that there is more while U a.

If everything goes well and we make full use of the useful life of the assets.

So at least in my view the basic assumptions that you will have done and are more or less and little bit on the positive side, but are in line of what we have also calculated.

Yeah Jeremy.

I think your summary was pretty good frankly.

<unk>.

Just just one point to say and.

And also the seven ships only four wouldn't have a dry dockings.

Okay.

Okay.

Got it well look I mean, if theres more transactions like that this one was quite.

Quite accretive and our view.

So congratulations on the solution.

Yeah and on.

And the conventional leverage basis.

On a net debt to EBITDA. This acquisition is sort of four times.

Against the corporate from from ratio of four and a half times, so it's delevering as well.

And it's even better than that and it's the purchase price to EBIT dollars sorry.

Sorry.

Oh, Yeah, yeah yeah.

So debt to EBITDA would be even lower than that so you're right. It's it's and actively delevering transaction.

Yep.

Thank you and Mike.

<unk> volume by executing on these sorts of deals ward.

And by the market understanding.

And the economics behind us and the consequences for the business and the upside that we have.

And that will be.

Be reflected and unimproved stock price.

Okay.

Thank you at this time I am showing no further questions I would like to turn the call back over to Ian Webber for closing remarks.

Thank you. Thank you all price or I'm sorry.

And can you feel questions. Thank you for listening to us or we look forward to providing you with a total of updates on the company.

When we issued our first quarter 2021.

<unk>, which according to our normal timetable will be late April early may.

Thank you very much.

Yeah.

Ladies and gentlemen, this concludes today's conference call. Thank you for participating you may now disconnect.

And.

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