Q2 2021 Eagle Bulk Shipping Inc Earnings Call
Today's conference is scheduled to begin shortly please continue to standby. Thank you for your patience.
[music].
Greetings and welcome to the Eagle bulk shipping second quarter 2021 results conference call.
At this time all participants are in a listen only mode.
Later, we will conduct a question and answer session and instructions will follow at that time, Inc.
If you require operator assistance. Please press Star then zero.
As a reminder, this conference call is being recorded.
I would now like to turn the call over to Gary Vogel, Chief Executive Officer, and Frank de Costanzo, Chief Financial Officer of Eagle bulk shipping Mr. Vogel you may begin.
Okay.
Thank you and good morning.
And I'd like to welcome everyone to Eagle bulk <unk> second quarter 2021 earnings call.
To supplement our remarks today I would encourage participants to access a slide presentation and is available on our website and eagle ships Dot com.
Please note that part of our discussion today will include forward looking statements. These statements are not guarantees of future performance and are inherently subject to risks and uncertainties you should not place undue reliance on these forward looking statements. Please refer to our filings with the Securities and Exchange Commission for more detailed discussion.
Of the risks and uncertainties that may have a direct bearing on our operating results our performance and our financial condition.
Our discussion today also includes certain non-GAAP financial measures, including adjusted net income EBITDA adjusted EBITDA and TCE. Please refer to the appendix and the presentation and our earnings release filed with the Securities and Exchange Commission for more information concerning non-GAAP financial measures and a reconciliation.
And to the most comparable GAAP financial measures.
The dry bulk market for the midsized segment continued to strengthen and the second quarter on the back of robust demand across the commodity spectrum, and especially for grain and infrastructure related cargoes, we carry such as cement manganese ore and steel.
Baltic Supermax index rose by almost 60% during the quarter to levels not seen and more than a decade.
Eagle generated a net TCE for the second quarter of 21580, a highest level and 11 years.
Given the rapidly rising market environment, we've been experiencing there is an inherent lag effect between our TCE performance and the BSI has we have existing commitments on the books and the majority of our fleet is employed on voyages lasting up to about 60 days.
The BSI is currently at its highest level of the year at around 33000.
Given our relatively short duration exposure and our active management approach to trading our ships. We continue to be successful capturing the majority of the move up on a real time basis as of today, we fixed around 75% of our available days for the third quarter and a net TCE of 28000 and $300 per day.
While we generally prefer to utilize <unk> as it means to hedge forward exposure due to the increased optionality. It provides us with we've elected to walk and some revenue and the form of time charters on a selective basis.
As an example earlier this week, we fixed 1 of our 58000 deadweight supermax vessels for minimum of 11 to 13 months at a rate of $27250 per day commencing in October.
Given the deferred delivery. This charter will extend at least until September of 2022.
Please turn to slide 6.
Yeah.
In terms of operating performance, we achieved our best ever quarterly results, producing $62.7 million and EBITDA for the 3 months ending June 30th.
This represents an increase of 100% compared to the prior quarter and as you can see from the chart hits the fourth sequential quarter of significant EBITDA growth.
Given the fixed cost nature of our business essentially all of the incremental net revenue flows to the bottom line.
We realized an adjusted net income of $40.3 million for the second quarter up 4 fold as compared to Q1, please turn to slide 7.
Okay.
Asset prices have also continued to increase in recent months with values for 10 year old supermaxilla up around 24% on the quarter and approximately 75% year to date. This represents the second highest percent 6 months increase over the last 20 years. The first 1 being in early 2004 at the beginning of the 2000 and Drybulk Super.
Recycle.
It's also noteworthy that the increase and values is occurring against a record pace of transactions year to date over 200 mid sized dry bulk vessels had been bought and sold implying an annual run rate of almost 400 ships.
Notwithstanding the dramatic increase and asset prices over the past 8 months. The chart on this slide would indicate there still remains significant potential upside spot.
Spot rates are at an 11 year high but asset prices remain well discounted so their levels in 2010, when charter rates were similar to today's levels.
Assuming a return to 2010 type levels, we could see upside and secondhand values of a further 30%, which would of course translate to increased NAV for the company.
Please turn to slide 8.
On the acquisition front is reported separately, we purchased 2.2015 built scrubber fitted out from axis and the early part of the second quarter for total consideration of $44 million to.
To help fund these acquisitions, we issued equity under our ATM program, raising about $27 million at a weighted average of $47.97 per share. We currently intend to fund the remaining balance with cash on hand.
In total we purchased 9 ships since November by our estimates the first 7 acquisitions are up and value by about 60%, while the value on the ships repurchase just 10 weeks ago are up by about 16% together. This represents a total increase and value of over $60 million.
To date, we've taken delivery of 6 of the acquired vessels with the remaining 3 expected to deliver between late August and mid September.
Separately and as part of our ongoing fleet renewal and we executed an agreement to sell the turn of 2003 built Super Max just ahead of a statutory dry dock and ballast water installation due date.
Pro forma for pending S&P deliveries our fleet now totals 53 ships, averaging 8.8 years of age with 89% being fitted with scrubbers.
With that I'd like to turn the call over to Frank who will review our financial performance.
Thank you Gary.
Please turn to slide 10 for a summary of our second quarter financial results.
The significant improvement and the charter rate environment drove our top line and Q2 with revenue net of both voyage and charter hire expenses totaling $99.2 million and increase of 61% from the prior quarter.
Net income came in at $9.2 million for the second quarter.
Earnings per share or EPS for the second quarter was 76 cents on a basic basis and 74 on a diluted basis.
Beginning this quarter, we have added additional non-GAAP measures.
Adjusted net income and adjusted EPS.
Which exclude non cash unrealized gains and losses on derivative instruments.
As we have discussed we charter in third party ships as part of our active management strategy.
The more we utilize forward freight agreements or <unk> to selectively hedged our exposure to the market for both owned and chartered and tonnage.
Although <unk> is a great tool to synthetically locking cash flows they do not qualify for hedge accounting.
As such all unrealized mark to market gains or losses on hedges for future periods impacted current quarter results on a non cash basis.
However, the associated revenues for the ships are only recognized in future periods, thereby causing a timing mismatch between revenue recognition and gains losses on hedging instruments.
We believe that the additional non-GAAP measures adjusted net income and adjusted EPS, which exclude the unrealized non cash derivative gains and losses will better reflect our operating performance and improve the comparability of the periods presented and the financial statements.
Adjusted net income, excluding noncash unrealized gains and losses on derivatives.
31 million came in at $40.3 million for the second quarter.
Adjusted basic EPS came in at $3.31.
For the second quarter.
Beginning this quarter and retroactively adjusted for prior year periods.
Adjusted EBITDA also excludes non cash unrealized gains and losses on derivative instruments.
As with the above we believe the change better reflects the operational cash flows generated within the respective reporting period.
Adjusted EBITDA doubled in Q2 coming in at $62.7 million.
Let's now turn to slide 11 for an overview of our balance sheet and liquidity.
Total cash was $83.8 million at the end of Q2, representing an increase of $3 million as compared to the end of the first quarter and a decrease of 5 million from year end.
The change and cash versus prior quarter and year and was driven by cash generated from our strong operating results equity proceeds of $27.4 million from our ATM program.
Offset by vessel acquisitions and debt service.
Cover the movements in greater detail.
On the cash walk slide.
Total liquidity improved by $20.1 million from the prior quarter to $139.8 million.
Total liquidity is comprised of total cash of $83.8 million and $56 million of Undrawn revolving credit facility.
Please note that subsequent to the quarter and we have repaid the remaining $25 million outstanding on the ultra co revolver, bringing our undrawn revolver availability to $81 million.
As previously reported we have funded the acquisition of 1 vessel with restricted cash.
In addition, we have secured new debt facilities totaling $51.5 million for 6 of our newly acquired vessels.
As of the date of this earnings call. We have taken delivery of 5 of these vessels and have drawn a total of $35 million.
We have chosen.
Do not complete the third drawdown on our Holdco Rcs, given our strong cash flows from operations.
Total gross debt excluding debt issuance costs at the end of Q2 was $500.7 million a decrease of $7.1 million from the prior quarter.
The decrease is due to the $30 million, we repaid on the ultra co debt facility revolver principal repayments of $8.1 million on the ultra code debt facility and.
And $4 million on the Norwegian bond debt offset by the $24 million, we drew from the Holdco Rcs and $11 million, we drew from the Ultra code debt facility third incremental borrowing.
Please now turn to slide 12 for an overview of our cash flow from operations for the second quarter.
Net cash provided by operating activities was $16.3 million and Q2.
The chart highlights the timing driven variability that working capital introduces to cash from operations as depicted by the differences between the dark blue.
Bars, which are the reported cash from ops numbers and the light blue bars, which strip out changes in operating assets and liabilities primarily working capital.
Although as the chart demonstrates the volatility caused by working capital largely even out over time.
The differences between the 2 bars this quarter can be explained by the timing of accounts receivables collections as we received $7.5 million and early July.
Please now turn to slide 13 for Q2.
2021 cash walk.
Let's focus on the top chart, which covers the cash movements between Q1 and Q2.
The revenue and operating expenditure bars are a simple look at the operations.
Moving to the right the $28 million bar, representing the cash used in the quarter on margin and collateral on our derivative instruments to $32 million bar for vessel S&P represents the acquisition of 3 vessels for so on a $7.2 million plus deposits paid of $4.4 million for <unk>.
2 vessels to be acquired and the third quarter of 2021.
The chart at the bottom covers cash movements year to date.
Let's now review slide 14 for our cash breakeven per ship per day.
Cash breakeven per ship per day came in at $11220 for the second quarter.
Vessel expenses or Opex came in at $5020 per ship per day, and Q2, excluding onetime nonrecurring expenses related to vessel acquisitions in sales.
Opex was negatively impacted by costs associated with the acquisition of 3 vessels during the quarter.
In addition, we continued to face higher operating expenses related to the COVID-19 pandemic across a number of areas, including higher lodging and transportation costs related to crew changes and costs related to stores and spares.
Drydocking came in at $357 per ship per day, and Q$2.791 lower than prior quarter as we had fewer vessels dry docking and then in Q1 it.
It is worth noting that there are significant challenges regarding COVID-19 protocols and quarantine requirements for ships going into facilities for drydocking and installation of ballast water systems and the like.
We do not see this abating at the moment and is likely to increase off hire times for these events.
Cash G&A came in at 1000 and $624 per ship per day, and Q2 flat as compared to Q1.
It is worth noting that our G&A per ship calculation is based on our own vessels, whereas we operate a larger fleet, including our chartered in tonnage.
If we were to include the chartered in days and our calculation G&A per ship per day would decrease by about $161 to 1004 hundred $63.
Cash interest expense came in at $1540 per ship per day, and Q2, which was marginally lower quarter over quarter, driven by an increase and ownership days.
Cash debt principal payments came in at 2000 and $679 per ship per day, and Q$2.819 higher than prior quarter.
The increase is attributable to amortization repayments on our Norwegian bond debt, which are paid semi annually and Q2 and Q4.
This concludes my comments I will now turn the call back to Gary.
Thank you Frank Please turn to slide 16.
And Q2, we saw array and strengthen and both the Atlantic and Pacific basins with the magnitude of the move up being much greater and the Pacific.
The Atlantic market average 22006 hundred for the quarter up 11% over the prior period, while the Pacific was up 74% averaging 26100.
As we've discussed previously specific outperformance occurs from time to time, but generally happens and weaker markets. Apart from the elevated trade flows we saw within the basin..1 of the primary reasons why the Pacific market outperformed was due to a significant increase and the backhaul trades, including cargoes that typically moving container.
We estimate up to 10% of all cargo moving on bulk carriers from the far East to places like West Coast, South America, Europe, and the U S was container cargo spilling into a conventional bulker market as a result of much higher container rates. These cargoes includes smaller semi finished steel parcels fertilizer and bags bag <unk>.
And dry chemicals and bags and lumber.
Given the ongoing strength and the container market, which is due in part to supply chain inefficiencies. We expect this dynamic to continue at least through the balance of the year.
As we look ahead into Q3, both basins have traded higher and the Atlantic is outperforming once again, driven by a pickup and grain exports from East Coast, South America as well as a strong Mediterranean market. In fact, the matter is now emerged as a primary source of exports on a number of minor bulks such as slag cement.
Gypsum salt and steel products.
Year to date, the BSI has averaged 22006 hundred with the forward curve currently averaging around 31000 and for the balance of the year. If the forward curve plays out 2021 would be the best year for the BSI since 2008.
Please turn to slide 17.
Fuel prices have continued to increase on the back of increased demand for oil products across the spectrum.
<unk> is now trading around $535 per ton up approximately 65% as compared to 12 months ago.
As we've talked about previously 89% of our fleet is fitted with scrubbers and those vessels are able to utilize lower priced <unk> as such the spread between <unk> and <unk> as an important value driver for eagle as underlying crude and fuel prices have increased so has the spread which currently sits at around 1.1.
Third $15 per tonne at this level, we generate around $4500 per day and incremental value across our fleet equating to about $27 million per annum.
Looking ahead, we expect fuel prices and spreads to continue to trend higher which should be beneficial for our business.
Please turn to slide 18.
Net fleet supply growth increased slightly in Q2, a total of 118 dry bulk new building vessels were delivered during the period down about 5% quarter on quarter and 28% year on year.
Partially offsetting this a total of 11 vessels were scrapped during the same period.
Scrapping figure was down significantly as compared to the prior quarter, which is not surprising given the strength and the underlying market.
In terms of forward supply growth. The overall Drybulk order book stands at a historic low of just 5.7%.
For 2021 dry bulk net fleet growth is expected to come in at 3.3%. This assumes scrapping of roughly $7.6 million deadweight tons down from previous guidance and about half of last year's amount again, primarily as a result of the stronger rate environment and <unk>.
<unk> of 55 dry bulk ships were ordered during Q2 down roughly 15% as compared to the previous period.
Although we expect some new ordering given the strength and the underlying spot and period markets. We still do not believe it will be material for a number of reasons. Firstly, new building prices are up significantly and now need to pay around $28 million for Chinese ultra Max which is about 25% higher as compared to just a couple of years ago.
In addition, new building slots are scarce with yards busy with orders and the container segment as well as with other vessel types as such a ship order today will likely only be delivered in late 2023, or even 2024 and finally, there is significant uncertainty around future regulations regarding image.
<unk> and de Carbonization and together, we believe all of these factors will keep watering fairly limited please turn to slide 19.
Global growth expectations for 2021 remain at 6% unchanged since our last earnings call for 2022. The IMF is estimating global GDP growth of 4.9%, which reflects a 50 basis point improvement over their previous projections.
Please turn to slide 20.
Dry bulk demand growth has been revised upwards since our last earnings call with 2021 growth now estimated at 4.2% up 40 basis points. This has been driven primarily by an increase and forecast to trade for grains fertilizer and steel.
Notwithstanding continued uncertainty around COVID-19, we remain optimistic about the prospects for continued global growth, which is being supported by massive amounts of stimulus as positive demand picture combined with record low order book, We discussed earlier supports our constructive view on market developments looking ahead with that.
I'd like now to turn the call over to the operator and answer any questions you may have.
Operator.
With the prepared remarks completed we will now open the line for questions.
And if you'd like to ask a question at this time. Please press. The Star then the number 1 key on your Touchtone telephone.
To withdraw your question press the pound key.
Okay.
Our first question comes from the line of Randy <unk> with Jefferies.
Yes.
Howdy gentlemen, how's it going.
Good morning, Hey, Randy Good morning, Hey, first clearly congrats on a good quarter I'll, probably say that again next quarter as well, but speaking of next quarter. You stated that 75% of <unk> 21 has booked at 28300 and today I guess if rates stay at these levels or are there.
Least above 28.3 and.
Any reasons your actual rates would come in below that for example balance being a repositioning or accounting variances. There and then second part of that question. You mentioned, 1 chartered out supermax for about a year at 27 and 5 I think you said a day quite the rate.
Is that the only Tcl do you currently have and any appetite for additional.
And so a fair amount on pack there and appreciate the words on the quarter.
So first of all if I, if we talk about Q3, and the 28 and 300, we have cargo on the books.
As an operator and various things, but directionally if the market is stronger you would expect.
To climb compared to when we're booking at previous day and of course, we're booking and advance being 75% covered and the quarter.
And as we're only in early August here, so, but directionally, you're correct, but but you can't just apply the current rate given that we do have business on the books and addition that we have to cover as we go forward and that's part of the lag that I spoke about but there's nothing you know like unexpected I guess you could say on account.
And why is our TCE calculation is straightforward and I guess, you're alluding to the derivatives and that's a separate separate thing here in terms of the actual TCE. The only the part of derivatives that go into TCE calculation is actual realized.
And bunker hedges and it's I think it's important as I will take the opportunity to say that 100% all of our derivatives, our hedges and Theres no speculating, we don't do any speculative and also anytime there is a cost on a derivative.
Its matched up notwithstanding basis risks, it's matched up to our physical asset on the other side.
Got it Okay, and then on the time charter outs.
Yes, so we do have other other charters out we don't disclose all of them.
And but it's the longest 1 that we have I'll say that but we do from time to time, we we look at things from a value standpoint, and its and its interesting at the moment, there's a big dislocation between the FFA curve for next year, which for the year stands and the low 18, thousands and the rate I mentioned and it's on.
Also worth noting that the ship we chartered out is it Chinese supermac scrubber fitted but still on Chinese Super Max compared to the index and it's a big day.
Location and and the FFA curve right now is trading at that discount. So we look for maximum value. So all things being equal we would prefer to use the FFA market to walk in and those cash flows for next year and typically do but when the value is not there we're willing to pivot we have different levers, we can pull and so.
We see that although we're losing that ship and quotes for the period that it is chartered out.
Premium value of it relative to the FFA curve at the moment for a number of reasons as compelling and Thats 1 of the reasons, we're doing that.
Got it Okay, and then I guess next question and last question for the balance sheet right.
You are in great shape here your net debt is continuing to fall Youre free.
<unk> has grown to pro forma around 54 ships acids delivery here.
With that kind of what do you do now with the free cash as it and share repurchases now that your shares are well below NAV or maybe a dividend policy that you would start after the <unk> earnings or what do you do going forward.
Yes, I mean first of all I appreciate the question and I'm not surprised.
I have a question on dividends and not surprised its first out of the box so to speak but.
Given the strong environment that we're in and I'll say it this way and are returning capital to shareholders has been a clear goal of mine of the company since we restructured the balance sheet and say early 2016, when I joined the company.
And I said this and I have also set a number of times that I think it's really important that when we do something.
Dividend policy, we have clear visibility and I think I think we are and if situation now where there is clear visibility, but it needs to be both meaningful and sustainable. So as you know as we talked about right. We've just acquired 9 ships. We still have 3 we're taking delivery of and when we're doing these with limited debt. So over the last few months and it.
We'll continue to do so we are taking them.
And the Super Max as an example, the 1 supermac still to be delivered we acquired for 99 plus million, we're putting $5 million of debt on it and that ship now is worth 17, plus so very limited debt. So we're delevering and in fact, some of the altra as we're taking delivery of we're not putting any financing on so.
We've been focused through these deliveries of strengthening the balance sheet and Delevering, having said that once once we finalize these deliveries I think we're given the what I think is clear visibility and strong cash flows.
I think we will be and are positioned to substantively address capital allocation, whether that share buyback or dividends, so I and all and a way to kind of watch this space, but but.
Think it's inappropriate.
And question and an important topic going forward.
First we will be watching cable and the great alright. Thank you.
Randy.
Our next question comes from Omar and Doctor with Clarksons <unk> Securities.
Thank you Hi, Gary Frank Good morning, good morning.
And just wanted maybe just to follow up and sorry to press a little bit on on Randy's question, but I guess as we do think about it. Obviously you guys have built eagle up into a much stronger company.
It's a very healthy place at this point.
And you mentioned the benign vessel acquisitions, taking them and you've got the 3 more.
Waiting to get those in house and then addressing.
The potential return on capital, whether its dividend per share buybacks I guess.
I guess should we should I take from that that maybe.
Once you take these next 3 shifts that youre done buying vessels and at the next thing is going to be returning capital or is it more of okay. We're going to take these 3 ships and then we're going to figure out what to do going forward either by more vessels or.
On dividends.
Yes, I mean, that's fair I would say it this way I think we're very comfortable with the 9 ships that we've acquired I would never want to say that we're done but we don't feel that we need to continue to acquire vessels at this point.
There's been a significant appreciation and value and I think there is more more potentially to go but but it's not a it's not really a focus of ours right now to add to that number.
This significant appreciation so.
Like I said I don't want to I don't want to exclude that if there is an opportunity then that we wouldn't of course pursue that but we feel quite comfortable with the pro forma 53 ships, including the 1 that we sold the older ship and need to deliver so.
Yes, I'll leave it at that.
But yes.
Stop there thanks.
No that does.
I appreciate that Gary.
And then just wanted to just follow up I noticed that 1 of the Super Max as you agreed to buy it back in February.
And I think the initial delivery window until may but that looks that slipped into the third quarter here any is there any read through into that and any concern or risks that debt deal.
It doesn't go through I know you guys got it on a very good price.
Relative to where things are today.
Yes.
No quite observe and and in fact, the ship got delayed because of operational delays at the load port.
But we actually are being compensated for that late delivery and we expect to deliver again take place within the next few weeks within August so.
And the answer is its debt.
And all the late but as I said, we're being compensated for that under the agreement.
Got it.
Hey, Thanks, Gary that's alright, thanks, Thank you.
Yeah.
Our next question comes from Greg Lewis with BTG.
Yeah.
Okay. Thank you and good morning, everyone.
Good morning, not going on.
Good morning, knock on dwell on capital allocation, but thanks for that.
And I guess, Gary I have a question and it kind of.
Piggy backs on Echo Mark's comments about the vessel being delayed and piggyback on some of Frank's comments about.
Vessels being stuck in dry dock and and I guess 1 on I'm wondering is is there any sense to figure out whether it's COVID-19 related or supply with just all the supplies Robin is there any way to kind of back into a rough number how much of the fleet is being artificially.
He underutilized because of all these ongoing global issues and have you guys spent any time thinking about that just whether it's and dry docks or port.
On the ports or any kind of any kind of thoughts around that.
Yes, it's a good question and an important point I mean, we don't have an aggregate number but we're definitely seeing.
Considerable.
Delays and China around constantly changing quarantine protocols from port to port and so that's having an impact and a positive impact in terms of fleet utilization of course, it's negative.
On when it affects your ship specifically and the ship is is delayed and not earning revenue and especially in a $30000 per day market, but but overall theres definitely delays there and then you overlay that with the fact that a significant portion of the fleet still needs to install ballast water treatment systems over the next year and a half I think.
As also bodes well.
Wow or negatively for the fact that youre going to have more and more ships backing up because that's that's a statutory requirement without really any flexibility so and same thing with drydocks right there can be.
Extenuating circumstance.
And extension, but it's not it can't just keep happening. So I think we're going to continue to see that until some of these protocols are are lifted and at the moment, we just don't see that and.
Theres also delays for bulk carriers, and the Panama Canal, and particularly the new Panama Canal, which is which is also having an impact but I don't have I don't have and aggregate number for you, but and I think they are they are impactful definitely.
Okay, Great and then and then just looking at it.
They curve and over and that the back half of the year on.
It looks like it's and contango and then I guess I guess really tails off.
As you guys think about your assets.
Youre trading and FSA portfolio.
How long.
Is there do you guys have a limit and how far out and youre thinking about going in and.
With that.
And how you manage that portfolio.
I guess I'm wondering like and I look at 'twenty, 2 and I see some healthy rates out on the curve is that something you think about taking advantage of or this is more we kind of operate more on that.
The shorter and up the curve.
Yes.
We usually have a very strictly as I said strictly as a hedge so if we charter and a ship for.
And for a year, let's say a good example would be 1.1 year with and optional year. If we can sell a derivative at the same level effectively locking in a breakeven for the first year, we've created what we call asymmetric optionality by having a free option right. We still trade the ship for the year and we can hopefully add incremental value around it but we're not exposed to the market.
So typically our effort phase go out about a year when we do a ship a 1 year charter and 1 option 1.
We could do longer if theres a longer charter, but its pretty backward dated down as I said 18000, and we don't think that's fair value at the moment, given given where physicals are so you couldnt charter in a ship today for a year and sell on FSA, because you'd be on the wrong side of $45000.
And given where we chartered out that supermac. So at the moment that that play doesn't work, but at times. It does so typically I would say a year, we're not limited to a year, but again that market is pretty backward dated and so for that reason, it's just not that attractive right. Now. So so that hopefully that gives you an answer but it is.
Strictly on our hedging basis, so theres got to be a reason and a physical asset why we want to enter into that FSA.
Okay, Great and then and then just on your comments, maybe now is not the best on the.
Acquiring vessels I mean at this point it seems like pretty much all of your.
Older vessels are kind of add on sleep.
Yeah.
And I guess.
Could there be opportunities on the.
As we look out on the older edge edge of your fleet and maybe continue to trim some of those vessels and take advantage of those higher ASP price market or at this point youre really likes on mix.
No we've had.
I believe we stated clearly theres 2 ships that we have that are <unk>.
17 years old and then.
On the spark and beyond those.
And I feel.
No beyond those 2 ships are next all the ships 12, and a half years old and we're very comfortable with that so I don't see us monetizing those assets because of age now if we get to a point and this cycle, where we feel asset values and by the way, although we're not out there and.
And need I think to continue to grow this fleet I believe there's we believe there's significant upside to asset values because of the strength and the market and also where we are relative to historic so that we talked about so I'm on.
I'm still a believer and asset value appreciation here, but we've got 53.
Ships already but but the answer is at some point and this cycle would we would we be willing to sell a number of ships and get smaller if we felt it was the right thing from a from a capital standpoint, and monetizing some of the value of course asset values are.
And are driven by future cash flow the answer is yes, but not not at this point and the cycle, we're quite constructive.
Perfect Super helpful. Thank you everybody alright, thank you.
Our next question comes from James <unk> with value Investor's edge.
Hi, Good morning, Gary Thanks for taking the questions good morning, Jay.
Yes, I think we covered if phase a little bit earlier on the line, but I noticed you mentioned the 2000 and 430 days at basically 16, thousands a day.
You mentioned second half of 'twenty, 1 and through 'twenty..2 do you have any sort of a breakdown of where those are going to layer and as a lot of that frontloaded or is it pretty even.
Yes.
Fair question, we're actually going to provide that in the queue.
And so when it gets filed youll see a breakdown of by quarter and into next year. So you'll have full clarity on that.
Okay outstanding and that'll be helpful. And then related to that you have a collateral post on your balance sheet is that just a accounting measure or is that actually required collateral due to the FSA counterparties.
Yes.
And real collateral.
And how that the banks and which we which we used to utilize that survey is everything's cleared.
So it's as actual real real cash.
Okay. Thanks, Gary and then final question you had this convertibles now that are clearly on the money.
It seems like Theres really no way to force those conversions.
And you can do with those because otherwise you just sit out there right you're paying 5% interest on them and they really kind of pull down year reported earnings is there anything you can do to incentivize that conversion or get those out of the way or are you just stuck with them for 3 more years.
Well I mean, potentially we can buy them and the open market, but as you said theres no ability to force a conversion.
But the calculation as you said they are and the mining side I think it's.
The general view is that there'll be converted at some point and the coupon on it is 5 and a quarter, but yes, they're there sorry 5.
And for a 5% sorry.
And anything else you want to answer that.
No.
Well Gary.
Thank you.
Alright, Thanks, Gary and then just 1 thing on dividends and real fast and so I think I'm the last person.
Thinking forward on that obviously, you got to wait and make sure things are sustainable but would that be maybe like a fixed sort of policy or do you think it would be more so variable based on cash flows and earnings and any sort of thoughts on how the dividend would theoretically.
Yes, I mean, ultimately the board will who will make a decision as to what it what it looks like.
If we implement a dividend policy, but what I've said from mice that my view is it needs to be sustainable so if theres going to be a fixed portion to it it needs to be relatively low given the volatile long term cyclical volatile nature and notwithstanding the strength and the market and our view on on the forward market I do believe.
This is still a cyclical business and so I think variability is an important part whether it's part of part or all I think that's really important because it needs to be sustainable and.
And as I've said before.
Strongly that.
And we get a lot of questions why we don't have a dividend, but it's better to not have won that to have 1 and then have to have to cut it or stop and completely. So that's really the I think the main driver is whatever we do we want it and we want it to be sustainable.
And certainly makes sense thanks, Gary.
Alright, thank you.
Our next question comes from Poe, <unk> with noble capital markets.
Great. Thanks, Thanks, recovering and asset base.
And a question about the timing too but.
Frank and Gary when you look at the.
The triggers are.
Catalysts for the second half of the year.
1 thing that you have is the Norwegian bonds that are still high constant men's shirts, you address those earlier wasn't on and.
And in the full presentation, but can you talk about.
Refinancing those bonds.
Sure Poe, it's Frank here I'll take that 1.
Yes were going to refinance and within this year 2021.
The market debt, we have available to us continue to improve the bank market. The bond market. So our options are wide open and getting better so we will.
Take that out and likely whatever replaces it will be very attractive.
Great and then Gary you talked about 6 and values moving up.
And that is attractive from an acquisition standpoint, when does when do new builds potentially get attractive for you.
Thanks, Paul.
I think the answer is I don't think they do.
And so I've been kind of on my Soapbox, saying, you know that we're not going to be ordering ships since I joined Eagle and the main driver of that was we had the world had enough dry bulk ships and clearly that was shown with the challenging market that we worked through for the first 5 years I was here haven't changed my view that.
We don't we don't need more ships first of all for a couple of reasons ships you order today won't come at least till the end of 'twenty 3 or 'twenty..4 so I think we have a nice window here before that happens, but ordering a ship today that ship will only be.
10, 11 years old in 2035.
The uncertainty around future fuel regulations, and carbon tax and de Carbonization is extraordinary I think the risk of a tail risk on an asset which historically is at 25.2006 year lifespan given that on on zero emission ships coming I, just I don't see eagle participating and new builds.
Really I can't see a scenario where that would make sense for us we feel really good about we've acquired 29 ships and except for the 3 Super Max as you know all <unk> between zero and 5 years old. So we think that's really a sweet spot for having ships that the ships were acquiring say on 2000 and <unk>.
<unk> adult share right is going to be 20 years old and 2035 and much better risk profile given given the changes that are of course coming so I just don't see a scenario, where eagle will be ordering ships and as and although.
Although.
As this market strengthens there is continue there will be pressure and there will be some ordering.
The people ordering those ships alright.
And you need to wait.
Now 2 to 3 years to get those ships. So you need to be pretty confident in this market sustaining and not just for the next year and a half 2 years, but beyond and into that delivery windows. So we feel we feel pretty good for those reasons that supply is going to stay relatively muted but of course, there will be some ordering.
That that I'm sharp.
Just.
Maybe semantics, but would you.
Zinc.
Would you.
Would you.
Would you consider buying.
Hey.
Ultra and added the order book.
Same is ordering the new 1 or would you consider that is just essentially.
And something out of the order book, and then doesn't actually incrementally add to what the visible supply is out there just the mandate.
No. It's an interesting question because we did take delivery of 1 resale, but that was actually a contract that was defaulted on back in 2016 at the bottom of the market and the ship was completed and I think thats, a little different than buying and buying a resale of a key all that was lady.
Let's say 6 months ago, and it's coming and a couple of years.
And I don't see us buying I think the sweet spot for US is still if we were to acquire ships is still that that 3 to 5 year old Ultra Max for the reasons I mentioned so.
I'll never say never because there is we don't know what the <unk>.
Environment and landscape might look like but I, just I, just don't really see that being a high probability for eagle bulk.
Yes.
Great. Thanks, Gary Thank.
Thank you.
And as a reminder, that is star then 1 if you'd like to ask a question at this time.
Our next question comes from Liam Burke with B Riley.
Thank you and good morning, Gary Good morning, Frank.
Morning, Liam.
Gary Your fleet is pretty versatile you can handle both major and minor bulks as you look and through the end of the year and into 2020..2 is there any particular area that makes you feel better about.
The demand side of the equation is going to be.
Yes, I mean, what makes me feel good about the demand side is how broad it comes across the commodities I mean, sometimes you'll see a disparity between major bulks and minor bulks right, but if we look at this year their boats.
434, 1% and if we look across there's a lot of cargo a lot of commodities that are growing and the.
3% to 5% range. So the fact that we're seeing it across the board is I think really.
Positive as opposed to being driven by let's say grain movement, because of because of drought somewhere or where rains and things like that so that's that's I think what's what's really key.
Compelling this time on the demand and of course, it's being supported by stimulus and so a lot of that stimulus, we're seeing infrastructure spend and infrastructure spend.
Takes it takes a long time, it doesn't just happen and 3 or 6 months. So cargoes that were moving like cement and clinker.
And manganese ore that I mentioned those are those are those are important and good products for for infrastructure build which typically has longer term.
Okay. So as you look through the end of the year, there seems to be a degree of sustainability and the demand for commodities and through the end of the year into 2022.
Yes.
And we see it that way, yes, great. Thank you Gary.
And you.
I'm showing no further questions in queue at this time I would like to turn the call back to Mr. Vogel for closing remarks.
Thank you operator, we have nothing further so I'd like to thank everybody for joining us today and wish everyone. A good day.
Ladies and gentlemen, this concludes today's conference call. Thank you for participating you may now.
Now disconnect.
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