Q2 2021 Atlas Corp Earnings Call
[music].
Yeah.
Welcome to the Atlas Corp, second quarter 2021 earnings conference call I would like to remind everyone. This conference call is being recorded today August 10, 2021, I would now like to turn the call over to Robert Wiener Head of Investor Relations of Atlas Corp. You may begin.
Thank you Catherine and good morning, everyone. Thank you for joining US today I just got the Atlas Corp, second quarter, 2021 and earnings.
We issued our earnings release last evening after market close.
Refer to our quarterly earnings release, and accompanying earnings presentation and earnings supplemental workbook today and this current rules, which all can be found on the Investor Relations tab on our website Atlas Corp, Dotcom, Sorry Atlas Corporation.
I would like to remind you that our discussion today contains forward looking statements and I draw your attention to the disclaimer on page 2 and the accompanying the earnings presentation.
With this quarterly report you will note that we continue to reported non-GAAP measures, which we believe provide investors a clearer understanding of the performance of our businesses.
The earnings release contains supplemental financial tables and information pertaining to our quarterly earnings report and includes definition of <unk>.
Non-GAAP financial measures and reconciliations of such non-GAAP measures to the most closely comparable U S GAAP measures.
These definitions may also be found on the appendices at the back of the earnings presentation, which we will refer to on our call discussion and can also be payable on our website.
In addition, we have provided historical financial information through 2018.
Which are available and the earnings supplemental workbook on our website.
Please turn to slide number 3.
On the call with me today of Bing Chen.
President and Chief Executive Officer of Atlas Corp, and Grant Talbot, Chief Financial Officer of Atlas Corp.
Joining us on the call during the Q&A session of <unk>, Chief Commercial Officer, Peter Curtis and Seaspan, Chief operational officer tourist and Peterson.
Following our prepared remarks, we will open up the forum to a question and answer session.
Please turn to slide number 4.
I am pleased to now turn the call over to Atlas Corp, CEO <unk> Chen.
Thank you Rob and good morning, everyone. Thank you for joining our call today.
I will present, our Q2.2021 results and share the key characteristics regarding our business model and the quality growth, which are central to our value proposition.
First let's look at all of Q2 results.
Please turn to slide 5.
I'm pleased to report a strong Q2 financial performance, which was at the high end of our expected range.
We are rising and.
Our 2021 financial guidance due to our strong first half performance and our exciting momentum for the rest of the year.
To date of 100% of our forecasted gross contract cash flows are secured for 2020.1.
Together with our relentless focus on operational excellence, we are confident in delivering our targets.
During Q2 Atlas achieved revenue growth of 8.3% to $393.9 million.
Adjusted EBITDA growth of 14, 1% to $272.5 million.
<unk> gross of 20% to $193.5 million and <unk> <unk> per share growth of <unk>.
<unk> thousand 14, 1% to <unk> 73 per share.
And we paid our 64th consecutive quarterly dividend.
We have also completed several major projects and achieved significant milestones within a very short time.
We continue delivering quality growth through Q2 with 18 additional new builds and 45 full what fixing charters and deliveries of 3 secondhand vessels.
And we secured additional funding for our new builds and restructured our Fairfax notes raised on unsecured capital secure.
The secured favorable credit ratings and simplifying our balance sheet, while lowering our cost of capital.
At <unk>, we successfully deployed 13 turbines across 2 key projects, we are excited to serve peaking power and grid stabilization to our customers.
I'm proud of our team's continued high performance and resiliency.
We are well positioned to finish 2020 was strong and already executing our growth in 2022.
Now I would like to explain how we create and deliver value through our differentiated and the resilient business model.
Our business model firmly sets us apart from our peers through our unique combination of attributes and it is important that this is well understood by the investment community.
Please turn to slide 6.
We are a global multi platform investment franchise, and we consistently generate value through our business model and quality growth.
Our resilient and differentiated business model sets us apart significantly from our peers.
While line is focused on flexibility and generally keep short term charters with our peers. We have been consistently winning our line of customers long term commitments and growing our long term cash flow through operational excellence and creative customer solutions.
These solutions are delivered through our scalable flexible and reliable integrated platform.
Through industry and the economic cycles, we generate predictable long term gross contracted cash flows with industry, leading customers. Currently we have $16.2 billion in gross contracted cash flow and and average charter duration of 7.2 years.
We do not focus on short term zero sum game relationships, rather we focus on long term win win partnership through our integrated platform and solutions we create.
Our revenues do not fluctuate with short term market movements, but provide stable returns through out the industry and economic cycles.
All of our new builds are fixed and costs and backed by long term fixed the charter with industry leaders, we do not speculate and we are not explosive to inflation risk on new builds.
Our business model differentiates us from our peers through our solutions platform and the ability to execute which cannot be easily replicated.
I would like to explain what quality growth means and why it is important to our stakeholders.
Over the past 8 months, we have dramatically enhanced our fleet composition and achieved the greater customer diversification through 55, new builds and the 4 secondhand acquisitions.
All with high single digits on <unk>.
Average returns and all are backed by long term fixed charter with leading line of customers.
No 1 else in the industry no in the container lessor of the history has achieved this before.
This is a testament of our world class execution, and deep partnerships with shipyard and liners.
No peers can match, our business of scale operational excellence customer flexibility.
Fleet versatility and financial strength and creative solutions.
We would have forward fixing and 45 operating vessels and Q2 and 58 year to date to meet our customers' demand and the growing our long term cash flows.
We built partnerships that are sustainable.
Meaning when times are good for liners, they do not take advantage of us and vice versa.
Our line of customers treat us as a long term preferred and trusted partner.
Now, let's look at our fully integrated platform and how it makes atlas differentiation possible.
Slide 7 the pick of the portfolio of integrated services, we provide for our customers.
Investors often ask how of the Seaspan consistently deliver of quarterly growth and continue its leadership in the market.
The assets that we always provide turnkey solutions to our customers by leveraging our integrated platform, which we have been investing in our people process and systems over the past 20 years.
Our full lifecycle expertise from initial design construction through operations commercial management environmental technology, all the way to the demolition enables us to develop of creative solutions.
We facilitate linus growth by delivering our solutions, which in turn facilitates greater scalability reliability and flexibility for our platform.
And in the win win outcomes for our customers through all market cycles.
Our integrated platform is underpinned by this management team and our people.
Our 5 core competencies determines how we create value and again, our customers trust and commitment.
We have and industry, leading safety records of zero point for LTI F and 98, 5% of utilization in Q2, which is a result of our committed team.
<unk> long term fleet utilization since our IPO in 2005 average above 98% the.
This is what we mean by operational excellence.
The focus on operational excellence extended through the entire organization.
Our business model integrated platform of teams focus on 5 core competencies and the value added services positions us for sustainable growth and shareholder value creation through all market cycles.
Please turn to slide 8.
While the container shipping market remains highly competitive for liner companies and owner operators.
<unk> has been a leader in transforming our sector through consistent advancing in our market, creating quality growth and delivering sustainable shareholder value.
We are acquiring and building strategic assets.
Focusing on our fleet optimization with the larger and more efficient vessels.
Our 10000 Teu and greater segment comprises 78% of our total Teu.
We are focused on clean of fuel and applying industry, leading technical solutions and designing building and modifying our fleet.
The additions of 7012 thousand and the larger Teu vessels to our fleet positions Seaspan competitively and strategically for the future of global feed evolution.
We have also diversified our customer base of the topline of companies with a 22% decrease in concentration of <unk> top 3 customers.
Despite the market challenges of the last few years, we have been continuously optimizing our assets and customer portfolio, while delivering creative solutions.
Please turn to slide 9.
Seaspan has been a market leader in vessel efficiency with our Hallmark of Saver program, which has produced 40 innovative newbuild vessels since the program's inception 10 years ago.
We make these investment based on customer driven demand and.
Leading the industry size category expansion through increased the Teu efficiencies.
Today LNG is the only commercially viable alternative to traditional bunk of fuel with no definitive single pass forward to the next generation of fuels.
We actively participate in and industry forums working on viable energy transition past ways for the future.
And ensure that we do not develop stranded assets.
Our orders for the <unk> dual fuel LNG newbuild place us at the leading edge of innovation building upon <unk> history of adopting greater efficiencies.
We have taken a prudent approach towards the type of fuel we're using for new builds with some dual fueled based and some conventional.
And this approach positions <unk> well for the future evolution of the fuels as both vessel types can be retrofitted to adapt to the new technologies.
We see the decarbonization of the shipping as an opportunity for <unk> to support our customers' decarbonization journey and to provide the leadership through this energy transition.
We are continuously focused on newbuild design improvements and environmental and enhancements as well as evaluating and modify and Seaspan and APR operating fleet to seek greater efficiencies.
And as an example of creative solutions, we recently partnered with Zim to install and innovative fuel tanks, except conversions to ammonia based of fuel for 5 of the Newbuild LNG vessels on order.
Slide 10 illustrates our commercial agility as well as our trusted and creative customer solutions.
We secured 58, 4 what fixed and charters year to date.
Forward fixing is entering into new charter agreements with customers well in advance of the current charter agreement expiring.
The new charters of full of fixing the agreements extend the terms, which begin after the current charter terms expires.
We now have no re deliveries in 2021.
6 in 2022 of 4.8% of our delivered fleet.
And 19 in 2023 of 13, 4% of our delivered fleet as measured by the number of vessels.
Our ability of forward fixed and 58 vessels is a testament to the trust that we have built with our customers, while we continuously focus on creative solutions to facilitate their success.
Not only does this provide our customer with reliability and certainty. It also strengthens our resilient business model by growing our contracted cash flow and average charter duration.
Seaspan and APR now both have 100% anticipated gross contracted cash flow secured for 2021.
Please turn to slide 11.
As we have mentioned previously we do not grow for the sake of growing.
The only interested in quality growth driven by our customers. We have a comprehensive set of quantitative and qualitative of criterias, which we implement to allocate capital.
This is embedded in our operating model and as a result, we do screening out many opportunities that do not meet our criteria.
This management team has been consistently executing quality growth in our strategic and daily business decisions.
And.
Please turn to slide 12.
Shareholders should be pleased that our strategies and execution have led to consistent quality growth through market cycles.
And has solidified seaspan as the leader in the containership owner and operator market.
We have strategically grown our business through a thoughtful and innovative approach.
Newbuild vessels has been the predominant focus throughout the C.
<unk> the history.
In the <unk> 20 years of history, we have built 109 vessels and now we've added 55, new builds for a total of 164, new builds which is nearly 90% of our fully delivered fleet.
By Teu and by a number of vessels. Our fleet is nearly 3 times the size of our nearest competitor on a fully delivered basis and we have consistently maintained 98% fleet utilization since our IPO in 2005, while at the same time, improving our safety records.
<unk>.
Over the past 3 years the industry has gone through challenging times with the trade War and global pandemic and we have still managed to consistently deliver quality growth and operational excellence through these market cycles.
Our expertise execution and solutions have attracted customers to see spend as their preferred long term partner.
Slide 13, and never gets old for me as these sets of metrics of self explanatory and it is the pay off for all of our stakeholders.
A quick review of our year to day progress as of Q2.
Gross contract the cash flow increased by 218% to $16.2 billion.
These are long term high visible cash flow of secured by high credit worthy counterparties.
Fully delivered fleet grew by 46%, adding 59, new build and secondhand vessels.
We increased teu capacity by 73% to nearly $1.9 million Teu and total for the fully delivered fleet.
Average fleet age decreased by $2.8 years to 4.8 years and the remaining lease term increased to 7.2 years from 3.8 years.
By all measures. These are the impressive results and viewed by many as industry record setting and achievements.
This significant progress did not happen by accident. It is our teams and thoughtful execution on and unwavering discipline and determination.
There are a direct reflection of our team's high performance execution analysis integrated platform and the resilient business model.
Please turn to slide 14.
I will conclude my formal remarks by summarizing my points today centered around our business model and quality growth.
Our business model is resilient and the differentiate it from peers and our industry.
We are proud of our broad and deep partnership with strategic customers, which are underpinned by long term contract cash flow.
The strength of our business model that the breadth of our integrated platform. The excellence of our operation results and the long term commitment by our customers.
The second our creative customer partnership drives our quarterly growth through all market cycles.
And for Seaspan, we deliver the right solution at the right time, no 1 can match our capabilities.
We have 55, new builds on the construction, which contributes $9.1 billion of gross contracted cash flow and we have the financial and operational capacity to continue our growth.
The strength of our service offering and operational excellence as demonstrated by our customers for fixed and charter for 58 vessels well ahead of the current charter explorations.
We took the same approach with APR customers as the current and Mexicali projects is our third consecutive annual contracts. While we are working to develop the opportunities in new markets.
Our partnership have resulted in total gross contracted cash flow.
Rising to $16.2 billion.
Along with consistent and increasing high single digit Unlevered returns.
And this is the quality growth.
Atlas long term financial guidance is based on our confidence in the team's ability to continue high performance execution.
Year to date, we have continued our drive record achievements for.
And for Atlas and particularly at Seaspan.
It has been a great first half for 2021.
We are confident to raise our 2021 financial guidance and provide a long term financial guidance that reflects the achievement that this team has accomplished to date.
In summary, Atlas is a dynamic market, leading and the quality growth oriented company determined to consistently create value for our shareholders.
Please turn to slide 15, and I will now turn the call over to our CFO Grand total.
Thank you Dan and good morning, everyone. Thanks for joining us today.
Could you please turn to slide 16.
As highlighted by being we've delivered a strong year to date performance and the outlook for the balance of the year has enabled us to increase our financial guidance, which I'll get to lighter and the presentation.
Because as already highlighted the key financial metrics for the second quarter. So I won't repeat them here, However, I would like to highlight that our quarter and our adjusted earnings per share excluding the noncash debt extinguishment charge, which I will detail later was 39 cents per diluted share compared to 26 and the second quarter of.
2020.
Closing liquidity was up 231% to $1.7 billion compared to the second quarter of 2021.
Which does not include the proceeds from our recent U S high yield rice.
The entire organization has been working hard on growth delivery capital structure optimization and of course continued operational excellence, resulting in our strong year to date performance.
Please turn to slide 17.
This page highlights this management team's relentless focus on continuous improvement.
Where we are today is the culmination of 20 years of operational excellence, coupled with strong execution and a resilient business model.
Management is pleased with these results but of course never satisfied we are.
Still got more work to do but we also recognize the significant achievements that have been delivered.
Atlas is being consistently growing its asset base, improving the quality of the Seaspan and fleet, increasing the duration of charters and improving the diversification of our customer base.
This results and improved service to our customers increased stability and profitability and our financial performance.
And increased competitive advantage and the market.
At the same time, delivering consistent quality growth of our key financial metrics with revenue growing over 80% and.
And adjusted EBITDA and cash flow from operations growing out of 100% since year end 2017.
Our credit metrics unencumbered assets and capital structure of all improved materially and we will continue to do so as we execute our plan to achieve and investment grade credit rating and improved capital efficiency.
Now I'd like to discuss our Newbuild program and greater detail.
Please turn to slide 18.
Yes.
It's been hard to Miss the news of our Newbuild program, which commenced last December.
While we are agnostic to the method of growth Newbuild secondhand or both.
And our strict financial discipline is 1 of the most prominent guidance and our decision making.
The Big mentioned, we partnered with our customers to optimize fleet capacity roll offs renewals forward fixing and the timing thereof to increase the amount and duration of our cash flows.
This slide outlines our Newbuild program with some vessels currently and the construction phase as we speak.
We will be providing regular updates on the status of this program as we progress through financing construction and deliveries.
This slide outlines details on the vessels gross contracted cash flows capital expenditure and charter durations by vessel package and by year 4 of 55 Newbuild vessels. You can also see the scheduled delivery times for each of the vessel packages.
The 55, new builds will generate gross contracted cash flows of $9.1 billion with.
And with fixed investments of $6.3 billion.
Now please turn to slide 19, and I'll update you on the financing status of the growth program.
The slide details funding progress for the 55 newbuild vessels under construction.
We're leveraging our extensive banking relationships to finance these vessels on the secured basis.
And we have identified specific financing sources for all of our needs all of which are progressing well and expect it to be finalized well in advance of delivery dates.
We've closed $1.9 billion of funding and additional $1.4 billion of funding commitments have been received.
And we have approximately $800 million of funding debt is progressing and on track to close in Q3.2021.
This funding covers 37 of the Newbuild vessels, and we and <unk>.
Actively assessing optimal financing avenues for the new builds that were announced in June and July of 2021.
This amounts to $1.7 billion of finance cash outlay shown and the chop.
We're very confident and our ability to complete financing for all of our new builds and as we have ample liquidity and have received strong interest from our financing partners and.
And as discussed previously the <unk>.
<unk> is not to obtain funding debt to secure the best funding for our portfolio and financial structure.
Please turn to slide 20.
We presented this slide and the past yet it's worth repeating this quarter as it highlights the power of long term charters.
And provides stability and independently dependability through industry and economic cycles.
This chart has been updated to reflect the gross contracted cash flows delivered from our current growth program layered on top of the cash flows we receive from our current operating fleet under existing charter and power agreements.
As of Q2.2021, this equates to $16.2 billion.
Of gross contracted cash flow with an average contract duration of 7.2 years.
Being and said this and I'll repeat it.
We purposely build this business to be of long term and predictable business. We are not driven by speculative short term growth.
And it is noteworthy that this slide does not include any future growth or re chartering activity to areas, where we have proven our expertise as evidenced by our consistent track record of delivering quality growth.
We're an active growth oriented company and I would expect that to continue as you're moving forward.
Now, let's move to the balance sheets as I'd like to highlight several initiatives. We have recently completed the <unk>.
And now isn't.
And this and simplify our capital structure.
Please turn to slide 21.
So during the second quarter, we completed several key initiatives that have significantly strengthened our balance sheet and.
Created increased financial flexibility to continue to pursue quality growth opportunities.
Also on to my comments around 3 key points on <unk>.
<unk> to investment grade credit.
The continuous improvement to our capital structure and finish with comments on the recent news surrounding our support of strategic Investor Fairfax financial.
The key elements to our progress and strengthening our relationships with the global base of institutional investors.
In this regard we closed 2 tranches of debt, including a $500 million U S. Sustainability linked the private placement of non amortizing notes with approximately 12 year weighted average maturity.
And of 4.1% weighted average fixed interest rate.
We recently closed on our initial entry into the U S high yield market.
With our senior unsecured 2029 blue transition sustainability linked notes.
The offering was oversubscribed by 5 times and as a result, we upsized from 500 millions of $750 million and closed at the towards the end of our price range of 5.5%.
During Q2, we further optimized our capital structure with the redemption of $335 million of 8.
8.2% average cost preferred shares.
And the early termination of several smaller higher cost debt facilities.
This has led to both the reduction in overall cost and simplification of the capital structure.
Atlas has been fortunate to enjoy the support of our strategic partner of Fairfax financial and recognizes the maturation of emphasis financial strength.
During the quarter, we entered into an agreement to restructure the 600 million of FX notes on our balance sheet.
$300 million of the notes were exchanged for series J preference shares at 7%.
And in conjunction with this transaction, we issued 1 million warrants to fair effects with the strike price of $13.71.
The remaining $300 million of notes were restructured to be parry pursue with our existing unsecured debt holders and are callable at any time and we.
We're planning to redeem these notes in Q3.2021.
At this time I would like to explain some specific accounting implications of these transactions.
When the FX notes were issued warrants will grant of concurrently.
Under accounting rules, we're required to recognize the difference the fair market value of these warrants on the balance sheet.
This results in a discount on debt issuance of $163 million being booked at the time of the original transaction.
The amount is and amortized over the term of the notes and has resulted in an annual charge to interest of approximately $20 million.
As highlighted during the quarter, we exchanged $300 million of the notes and therefore have written of the issuance discount associated with these notes of $51 million.
This is a noncash charge and represents the accelerated amortization of the debt discount and is reflected in our Q2 'twenty 1 financial statements.
As stated we do plan to redeem the remaining $300 million of FX notes in June of course. This will result, and the remaining discount to be charged to our P&L at the time of repayment.
And the remaining debt discount is approximately $69.5 million as of June 30 of 2021.
Once again this is a non cash amount and removes a significant overhang from our future capital cost.
Please turn to slide 22.
On the slide you see the ratings. We recently received from 3 of the top rating agencies standard and Poor's Fitch and Kroll.
We received the double B rating from both Fitch and Kroll and the double B minus rating from S&P.
This puts us ahead of our expected trajectory towards achieving investment grade corporate rating.
To get there we are focused on increasing our level of liquidity.
The proportion of unsecured debt.
Increasing our portfolio of unencumbered vessels and prudently managing our debt profile and leverage metrics and of course managing of growth and risk profile.
Now, let's turn to financial guidance, Please turn to slide 23.
Today, we're providing 1 time long term financial guidance for Atlas due to 3 primary reasons.
Firstly, the extraordinary market conditions and our industry.
Secondly, we're in a significant capital delivery phase and actively forward fixing existing contracts.
And last but certainly not least we have made significant progress on the execution of our capital plan and our journey to and investment grade credit rating.
The amount of progress and change that we have implemented has been unprecedented in our industry.
Therefore, we feel it's important to provide additional disclosures to the investment community to assist and understanding the accumulative impact of all of these elements.
Yeah.
Due to the rapidly changing energy environment, which continues to be impacted by the pandemic. We have chosen not to include any growth the IPR energy and the financial guidance.
We do not believe this will be what transpires over the period Ips business is contract driven and the visibility.
As to timing and size of expected new contract wins is and determinable.
And I would not be prudent for us to make commitments that we cannot credibly forecast.
Taking these assumptions into account Atlas is expected to increase adjusted net earnings from 311.002 million $20 million to $695 million and 2024.
Representing a compound annual growth rate of approximately 22% over the guidance period.
This forecast incorporates our existing fleet and all growth announced up until this point and time or put another way. It doesn't include any further other than what we've already announced of the market.
Therefore, this represents a relatively conservative forecast based on no and activities underpinned by a high proportion of contracted cash flows.
In addition, we have expanded our fleet disclosures this quarter to add detailed information for short term rates, which we previously classified as market rates and.
And we have also added data and visibility and our Q2 financial work surrounding forward fixed and contracts.
Providing greater transparency for our investors reflects confidence and are highly predictive of predictive predictable business model and our proven track record of execution.
This information provides investors with greater clarity and appreciation of the compelling investment Atlas represents.
Please turn to slide 24.
I'll wrap up my remarks by outlining why we believe Atlas represents an excellent investment.
After I joined earlier this year I closed my first conference call with investors with this slide and it remains as relevant today as then.
I hope investors will come to see the clear competitive differentiation of our model.
On the growth through cycles, and the ability for this team to consistently deliver performance.
These are key investment attributes, which are unique to atlas and offer investing significant confidence to partner with an industry leader.
Thank you for your interest operator, we would now like to open the lines of questions. Thank you.
Ladies and gentlemen, if you have a question of our comment at this time. Please press. The Star then the 1 key on your Touchtone telephone. If your question has been answered or you are seeing with yourself from the queue. Please press the pound key.
Our first question comes from Randy <unk> with Jefferies.
And John and has gone.
Good morning, Randy.
Good morning morning.
Couple of questions starting with those vessels slide you chartered out or you extended charters are you signed new charter sorry for the fixed 45 vessels during the second quarter.
On average what is the new duration and maybe rate of these charters.
Yes.
Randy I tried to answer that question the number of the vessels as you correctly point out the 45 for the Q2 and 58 per the year to date. The average the duration is about between the 3 to 5 years that is the duration and the rate is pretty much reflect of.
The respective.
The class of the asset divestitures at the market rate, we actually we'll disclose those rates.
In our 6K and.
For example of the 40 to 50 and I think it is on the.
3 years of 5 years, the range could be ranging from 28% to $34000 a day and.
And it's really pretty much reflective of the current spot market rate take into consideration of the longer term.
Got it.
Okay. I appreciate that color things that can only have a handful of vessels still to come in 2022, So I'm, assuming you're kind of look the $4.6 of those before this year and is that the strategy.
Yes, we have to be exact we have 6 vessels to be fixed in 2022.
We are actually right now evaluating the alternatives as these vessels are highly in demand and we are evaluating different alternatives to the customer needs. So we will be.
The evaluating as the as the situation and as the market continue to evolve.
But I think of at this point and really we want to.
Take the different request from the customer and make the final decision at the latest stage.
Okay Fair.
And then second question from me.
And just looking at your capital structure and capital allocation.
You've raised some very attractive debt here long term very low rates looking at debt unsecured debt 5.5% coupon through 2029 I believe.
You still have some more expensive.
Preferreds outstanding.
So any thoughts on kind of repurchasing or maybe calling and those higher priced preferreds and redeeming those and then maybe issuing cheaper ones and then second part of that question and then it comes to capital allocation for your dividend is the plan now to collect the vessels Delever and then start looking to.
To increase the common dividend or what is here from your plan for that.
Graham you on a comment on the on the on our preferred and I'll comment on the dividend.
Sure.
Zinc progressively of course, we're going to continue to optimize the structure and take out any higher cost of debt.
And that's going to be and ongoing process.
I think at the moment.
And as you're well aware of focuses to reduce the cost of capital simplify the balance sheet, but also to achieve and investment grade so that sort of comes into the second question around.
And how we allocate capital through the dividends obviously, it's key that we have to continue to grow the business. That's part of who we are but at the same time, we need to allocate funds back to the balance sheet to get to investment grade. So we still got quite a way to go in terms of delivering all of that I think we've made an excellent start.
Yes.
Over the last.
Couple of years with getting to where we are now, but you rightly pointed out we've still got some some more expensive tranches in there, which we can remove out of the time and.
And we've now demonstrated that we have good access to the liquidity and the right markets to do so.
Okay, Yes.
And with regard into the dividend.
The dividend distribution.
<unk> by us on a regular basis and determined by our board.
We.
View, the current dividend policy to be appropriate.
We are constantly evaluating our best use of capital. In addition to as you mentioned the increase the return of capital to our shareholders and with theirs.
And when that happened and there's no better opportunity.
Troy the capital as to what Graham just just mention debt.
Can have a variety of options to deploy these capital and the quality growth debt. We have highlighted today is a testament of this management team and this business platform that is able to create the value and we are confident to continue to identify and executing.
And on these capital allocation opportunities.
We we have always been thoughtful on how we allocate our capital our key focus is on preserve liquidity and also want to continue to delever the debt to facilitate our investment a great goal as Graeme and I just mentioned.
At the same time, we also want to be prepared for any <unk>.
Investment opportunities. Therefore, we are very carefully considering all options.
That being said.
We do believe that our share price has been undervalued.
And we're a long term oriented business business as we.
Shared with the with the with you today and I believe that as we continue to deliver results improve the transparency at the market will recognize the value.
For us today, the share price has not reflected our business for a variety of reasons.
Now with Graham as our CFO, we have started to better present, our business to improve the transparency and.
Better better present, our business.
And at the other reason is that we are likely still today of being compared with the cyclical and capital and incentives into intensive peers.
Looking at the for example of the container shipping space today.
Don't think that we really have the real comparables that to compare.
So as we continue to create long term value and we are confident debt long term investors will come to the conclusion and come to the fair value of the business.
But it is our fiduciary duty to evaluate the options and of tours that typically the available.
To make sure that we address the fair value of our business.
In the context of capital allocation, we want to make sure that.
We will take whatever is.
It's the necessary to make sure that.
Those options and tools and typically that is available for us to to make sure that the business is fairly valued.
So from that perspective.
Sure.
Our dividends to increase of the dividends at this point.
It is not debt is not the net.
In the game.
Okay.
That's fair well. Thank you so much for the the.
The color.
Thank you.
Our next question comes from Omar and Knoxville, the Clarkson.
Thank you Hey, guys good morning.
Hi.
Hi, there good early morning.
Thanks, Thanks for the detail on the supplemental pack, obviously very helpful and just shows really.
Just on I guess, how deep your market position really is and the shipping market and I guess now from your updated guidance you've got consistent earnings growth built in here for the next few years.
And with that <unk> got a pretty sizable cash flow stream that you can count on I guess I just wanted to ask and where do you see Atlas now investing free.
Free cash flow going forward here, and you still see opportunities and the containership of space on the new building front.
Are there any adjacent sectors youre looking at that are of interest and where do you focus a bit more pivot towards the APR and on the energy side any color you can give there.
Sure.
And container shipping space as we have demonstrated I think today as the market leader, we will continue to see the customer driven demand for us to provide the.
The support for the air business growth, which is why we were able to have this number of the newbuild in the short period of time.
Going forward of course, I think we continue to see the growth opportunities of course, we've been very selective and to make sure that any of those opportunities.
The meeting our investment criteria, but at the same time I think that we see there are other types of growth opportunities and particularly in areas. For example of environmental and also in areas of <unk>.
Cycling of the capital, which I think this is an area that we're looking at as the next opportunity for us too.
To support our business needs.
In terms of APR.
The business about a year ago is just a little bit over a year ago.
This is the business obviously, when we acquired we know what we bought and we know what we intend to transform that business going forward.
We have been spend and the last year in really realign the organization and really make sure of the business continue to focusing on doing what is the best which is the short term.
<unk> power solutions to our customers at the same time and we are also looking at adjacent opportunities and within the fast power space as you know that energy power value chain, it's quite long starting from energy production transportation.
And to application and today the Apis is only at the at the application and with a very specific segment, which is the fast power.
As we announced in Q1 that we have we.
We have formulated joint venture with the CE energy to look at jointly develop in both the maritime and also energy opportunities.
Recently about debt.
2 weeks ago, we also signed and more.
And with China, Kuan and energy in developing.
Solar opportunities in China, and this is an opportunity where.
1 and is 1 of the 5 top.
So E P.
Power groups in China. This is a solar project that is 25 years duration.
And that is in the northern part of the China were.
We were going to be joint investment with the strategic partner and Thats. The only the phase 1 and it is in the renewable space.
And this has both the commercial and also strategic value for us to.
Team up with such a state owned enterprise major energy power players in China.
And this is the different.
Our partners at the end of <unk>, which is a prevention.
Power and energy company. So in terms of the growth opportunities for APR I think we have we have we have a lot of exciting opportunities as our chairman.
And our stated in the previous.
The last quarter's earnings call that our ambition is to transform and build this business to the equal of vigor business as we have and Seaspan. So there are plenty of immediate.
On a capital allocation opportunities the key for this management team is to really focusing on the discipline to make sure that we consistently stick to those investment of capital allocation Criterias.
Half of the best allocation alternatives, we do not necessarily.
A description of prefer 1 business to the other rather we are very.
Agnostic in terms of.
The investment opportunities just the keys to looking at them from the customer perspective from the economic return perspective, and also from a business rationale standpoint.
Currently we have 2 platforms, which is the container shipping and energy, but as we also previously announced debt. We also within the shipping space within the container shipping space, there are vertical and along the value chain opportunities that we could also be potentially.
Looking at and in the energy space as I mentioned that is as of quite broader value chain and the industry itself currently is in trends.
And in transformation, so there's a lot of uncertainty which in the way also explains why.
Apr's transition will take some time and part of it because the current COVID-19, which slowed.
Slowdown that the demand from the market. The other part is this debt the industry itself is going through the transition, but we see this as an opportunity.
We can find those kind of creative solutions as we have done and <unk> spend so we are quite exciting.
To develop the both business and allocated laid the capitals.
Thanks Pete.
Very helpful and thorough so it definitely sounds like it's not just here just your eyes.
On different opportunities your hands or are there as well.
I wanted to maybe just follow up on sort of the conversation you had with Randy just about chartering some of the vessels and wanted to get a sense of line of appetite.
Clearly you've been able to fix ships that are rolling off contract out as far out of 'twenty 4.
We've seen a lot of chatter here recently, where there's been some interest on the part of ship owners and the.
Ill take the vessel and put it on a 1 or 2.
The spot voyage type charter of that pays astronomical rates relative to anything we've seen.
My question I guess is.
You mentioned being kind of looking at various opportunities.
1 is that and opportunity youre looking at.
And then 2 for.
And that dynamic do you think that that is something that the idea of putting the vessel on a very quick moneymaking voyage before deploying it on the contract longer term is that dynamic is something that is being pushed for by the ship owners, we think of the liners and really kind of pushing for that as well any color you can give on that.
Sure.
I don't know specifically I believe that each and every situation has its own context and background.
As we stated debt from <unk> perspective, we are focusing on long term because we don't believe in short term.
Opportunistic taking advantage of the market situation, because ultimately I think debt, we know that market will eventually sooner or later revert back to normality and it is important I think of today for the for the for the that the relationship between the.
And the owner and operator, and the liners to have that kind of sustainable long term trusted win win partnership and what you're referring to in the market. Yes, we have been.
We've been and.
Asked all been heard about these type of situation, but I think of that is really.
Sometimes is the line of customer decided to use for 1 voyage, sometimes because the.
And I think the owner would like to take advantage of debt situation, but.
I believe that the steel is is the minority, but I think from our perspective, we really believe in long term partnership and we believe and build and that kind of the trust and over the time and I think it's very important.
Industry actually has been characterized by the boom and bust.
Characteristics and this is exactly for situation and that's what you mentioned.
Which I call it a zero sum game, because sometimes you get me and then when times now good the Lynas, we'll get you and let's not forget for example, a year ago in March 2020 in the market there.
And the prevailing terms, which are 1 month's firm 12 months option.
So.
And I believe that if youre in the business for long run.
That you will average out and also I think for this kind of zero sum game relationship is not something that we would like to pursue and rather we believe and building sustainable win win situation and some of the <unk>.
Partnership.
And what we've been focusing on and this is why.
In the current market.
We actually take the benefit of.
The current market through.
Full of fixing.
Through the new built and also through the second hand, which is all driven by our customers because they come to us and asking for support and also 1 thing.
Even today I think of we've been asked by our customers and some third parties for potentially considering selling some of our assets and this is something we are also in consideration of evaluation.
All of that so for us it's very important that we are focusing on the specific market condition and how we can best support our customers needs long term and therefore building that kind of of trust preferred partnership and when times comps too.
The difficult times debt, we will be also the 1 debt will be there for our customer and this is a long term business model, which has been.
Purposely building and today I think we've seen the the benefit in a good time, we definitely will also see the benefit in the market when there is not too good.
Thanks, Dan.
Very very thorough again and really it sounds like a very sound strategy. Thank you I'll turn it over.
Thank you Mike.
Our next question comes from Liam Burke with B Riley.
Good morning, Dan Good morning Graham.
Good morning Liam.
Ben.
You've got the.
The vessel orders and <unk> been moving up on the capacity side of the individual vessels is there any thought as to looking at the fleet and is there any.
Are there any assets would you prefer to divest or are you happy with the makeup of your fleet right now.
Yes in general we are very proud of the fleet that we have and particularly with these new build as we highlighted and over 70% of our fleet.
And above 10000, Teu, which are the very versatile fleet and is highly in demand. So in general I think.
We are very we're very pleased with our fleet composition and this has also been built purposely.
Together with the demand of our customer and the 1 thing is important is that we worked we develop our fleet composition and based on our customers' needs and that that being said.
And as I mentioned earlier, we did and we have been received request interest from the line of companies and also of some third party financial institutions in.
Asking us if we were being opened and to sell some of assets because I think they have needs for their business off of their investments.
This is something that the currently our team are evaluating.
With the several considerations because on 1 hand.
We have such of composition for reason on the of.
Hence we would also be open minded and considering the request from the customers and from the financial institutions 1 of the potential areas of the fleet that we will be considering and for example is the 40 to 50.
And I think.
With the with our continued fleet optimization and I think we will have the.
Extra capacities that allows us to be able to.
Consider strategically divest some of these vessels at the Criterias, which we set up within ourselves so.
I would say the most likely will be the debt.
The below tank 10000 Teu category.
And specifically, maybe around 2000 and $502.40 to 50.
Segment.
Great.
And on.
Understanding that all of your vessels with long term charters associated with it so.
How do you look at.
Capacity rolling out over the next several years.
Yes, sure that's of Great question.
For our capacity rolling out, which we have shared in our presentation.
Most of our.
The new build is going to be delivered between 2020, 2.2020 3 and 2024 and this is also a corresponding to the industry's overall order book.
Please over that period of time today, we have about.
$4.9 million Teu of new built out of this $4.9 and about 45%.
The third party, meaning that 55% built by the line of themselves.
Out of this.
The 45% above our newbuild accounts for about 1 third and the other 1 third is about the leasing company and then the other 1 third is the other 1.
<unk> operators.
From the release perspective, we are very confident because.
As we shared earlier from our existing fleet.
Full of fixing majority of our capacity all the way up to 2023 and this is as of to date, which is.
<unk> 2021, and we believe that we will continue to fall of fixing these capacities on it.
Existing fleet side.
From these newbuild perspective, as we mentioned earlier all each and every of these new builds are backed by long term charter the shortest and.
It's 5 years and along the longest is 18 years majority of the majority of them.
Between I would say 10.2.
The 18 years. So therefore, these and newbuild actually they come each and every 1 of them.
Come with the long term charter attached to it and they also stacking out over the period from 2022.2023 2024. So overall I think of from our perspective, both the existing fleet and also the new built.
<unk> been fully fully chartered from the industry perspective, I think today of supply and demand in general are still fundamentally balanced even though we're looking at.
Let's say with this $4.9 million million Teu of of Newbuild that.
And that translates into the the supply side of.
Release of for example of 2021 is about 4.5% 2020..2 is the 3% 2023 is about 6.5%.
And that is assuming there is no scrapping and in the past year or 2 as we all know this year for example, and Theres no scrapping probably of minimal. So therefore, if you're taking out the scrapping you are taking about edition and also youre considering the growth in the marketplace to day the demand.
I think of steel according to the industry forecast is still very solid and it with growth in the coming years.
And on top of that we have this.
Pandemic, which adds to the burden of the logistics debt makes the situation even that make the demand is even stronger but the overall even without the COVID-19 I think demand continues to be strong and the supply continue to be measured the industry has consolidated on the line of sight, which we see the <unk>.
Efficiencies in both the Covid situation last year and also this year and I think the from the owner space today with our new build I think we are in a position to consolidate the market and we will continue to work with our customers to further.
Fulfill their needs at the same time I believe that we will continue to consolidate the market as well. So overall I think the market from a demand and supply perspective, it's fundamentally balanced.
Great.
Thank you Ben.
Youll come thank you.
Our next question comes from Ben Nolan with Stifel.
Hi, This is Frank galanti on for Ben.
I wanted the.
Second I think what Omar said on and regards to the increased disclosure very helpful. So thank you for that.
But I wanted to ask about the fixed forward and strategy.
Okay.
And in the presentation, you mentioned that there are 6 vessels coming off and 22, and 19 and 23 and if you see any incremental demand for.
For those types of contracts and putting them on.
And I'm on term contracts today.
Yes.
And this market at the reason, we have not fixed the <unk> because as I said earlier, we try to balance the different.
And request from the different customers in today's market. The 6 vessels could be very easily fixed rather we are right now at this point and try to balance and the different interest of the same thing with some of the 2023 vessels.
And the way, we working with our customers is obviously to take of strategic view and considering what the short term needs as well as of what their long term needs and that's how we allocating our fleet capacity similar to that in the way similar to that we allocating our capital because we all believe in.
Long term and also believe and optimizing our strategic.
<unk> with our customer so from from.
Full of fixed and perspective.
We continue working with our customer on.
And evaluating their business needs and also taking as I mentioned earlier, our creative solutions and so some other ways that we are considering in fulfilling our customers' needs.
For example in a couple of years ago, we developed those floating.
Floating rates, which today, we have about 15% of our fleet is on the floating rate, which has the exposure to the current high spot rate.
So even though our business model is the long term, but out of our long term committed capacity about 15% of our capacity is exposed to the short term current market high rate.
And looking at the.
And the future growth opportunities as I mentioned earlier, we continue to be ahead of the market anticipating our customer needs and develop the kind of solutions. In this case, specifically is the capacity how do we develop that kind of the capacity solutions to our customer and that is something we add.
<unk> working with our customer and these are the vessels, which is the base base material for us to working with our customers.
Okay.
That's helpful.
On the.
Floating rate the contracts I guess that kind of 2 parts, where any of the forward fixed.
On.
Contracts.
And do they have a component of floating and.
And.
And then I guess, how does that floating rate how is that calculated.
Yes, the majority of our forward fixing contracts on a fixed basis and some of them on the.
Forward the full.
The on the floating basis for example.
Have some vessels that will forward fixed and starting from 2023 of 2020 for going forward for another 5 years. So you are talking about $20.98 to 2000.2009 in those situations mutually that we have agreed with our customer to have 1 or 2.
2 years of those 5 year term on the floating basis. Those floating basis are basically based on that particular segments of market index. You can think about is likely and finances the LIBOR rate.
And whatever the prevailing market rate at that time and this is what I mean by today, we have roughly about 15% of our long term contract in our existing fleet of.
On.
Under these type of floating.
Floating rate structure, which in today's market, we actually enjoy this high spot rate, but just to clarify for all of our Newbuild. The 55 Newbuild zero non none of those vessels are on the float and Theyre all on the fixed.
Fixed charter rate and also the costs are fixed also we are not subject to any commodity of shipyard of price fluctuation.
Okay, great very helpful. Thank you very much.
Thank you Frank.
Our next question comes from Sanjay Ramaswamy with Bank of America.
Hey, guys and.
Really helpful. Thanks for taking my question and just a question being.
Can you give us any sense on potentially what the normalized slides its fleet could be maybe over the next 12 months.
And maybe some color and some knock on the split between where you see.
Kind of second hand vessel acquisitions, and it's kind of ahead of.
Newbuild and and divestments of kind of putting that altogether and what the number from a normalized guidance would potentially look like and 12 months.
Yes, that's a good question Sanjay Thank you.
We actually don't specifically set up a target as to how what our size should the rather we really working with our customer is our customer demand that drives our fleet composition and fleet growth.
And are currently I think the because of the MRO.
The environmental requirement and I think with the.
E D ex E X, which is energy efficiency.
Designed for the new vessel energy efficiency.
For the existing fleet. These requirements I think that our customer has the needs and also from our perspective I think the.
And we want to be in the forefront of the environmental and technology. That's why we have been able to capture such a great opportunity.
And these new built.
And if we're looking back about 2 years ago I believe I was asked the Y <unk> spent did not have any newbuild because of the back then we don't think the market is ready for that so this is just an example as to our our fleet composition of growth is really driven by our customer of course, we take.
Into consideration of our own views on what the segment is and what kind of return that we would require for example, if we're looking at the fleet composition of what we have built of the 55 of new builds.
Large portion of that is 12000 and above the reason being that the these are the most diverse of tile.
Assets and that could be used for a variety of trading routes versus those of the bigger ones that it's very limited for a specific routes. So these assets is a lot of value.
Versus the flexibility at the same time, we actually build these vessels.
Locked in the price and also the delivery slot and at the very favorable term and in todays market. For example, if you built rebuild these vessels the value wise for those conventional it'll be somewhere between $15 million to $20 million.
Mark to market gain on the on the no contract and attached basis. So.
This is on a newbuild side and also on the segment and side, we still believe in.
The.
And the above 10000 and segment is a is an area where from the global fleet perspective that has been under built.
For example, I believe that the.
The 15000 Teu settlement today, it's only represents about 7% of the global fleet. Meanwhile, looking at the.
From the efficiency standpoint, looking at from the infrastructure standpoint, I think 15000 Teu vessel is very well fit it for that purpose.
That being said for example, we also have built a 7 day Teu vessels and that is another segment, where today I think if you're looking at from 3000 to 7000.
4000 to 9000 Teu segment of day combined represents about 42% of the global capacity at the same time. This segment has very little.
New build over the past the years, so with the 7 K vessels, which is in that particular sub 10000 Teu segment.
Its very versatile could be useful of variety of trades that today has been serviced by the 3000 to 9000 Teu vessels. So in looking at these new builds as I mentioned that it really is looking at what customer needs and also what our views in terms of the market for the.
The second hand vessels, we have strategically at the same time very selectively.
Looking at the second of the vessels, particularly and the current market now in 2019 and 2020, we actually acquired 15 of.
Of those vessels.
Those are very strategically.
And our time in the way that those vessels was acquired at the good time with the very competitive value at the same time once again and they have been attached for the long term charter.
And those are the second vessels, we've been focusing on when the market at that time Laurence such a.
Our growth opportunity in todays market, we see the value has been quite.
<unk> in that sense that we've been very very selective and the 4 vessels. We have acquired are really again at requested by our customer and these vessels have been also attached with the long term contract and most of those investments actually been and could be returned within that charter period.
And of time and in looking at going forward I think of both in terms of.
Second hand on Newbuild I would think that.
From our perspective, we will be very selective and very disciplined and working with our customer.
And if those criterias from a market customer and our fleet composition perspective, they all meet meet our criteria and we will make those investments and continue to grow but we will never grow for the sake of growth and also speculatively.
Growing in thinking which segment is going to be so ultimately it's going to be customer driven.
Very helpful.
And that's great.
And maybe just 1 on just to follow up there just in terms of where steel prices are right now.
And just hypothetically and saying that steel prices.
All of the sustaining accurately and 20% from here.
And what kind of impact of the half on kind of the how you look at the return hurdles.
Some of these new builds and maybe just talk through.
How that would impact you and looking probably towards the secondary market the vessels.
Yes, the steel price actually has the zero again zero impact to our Newbuild because our price is already fixed has no impact to our new build as I as I said and now with the.
And I want to just to re highlight debt for all of our 55, new build and also potentially if and when we have some new builds going forward, we will not be exposed into that.
Building cost, we always have a fixed cost and thats the cost debt contractually the shipyard, it's binding to and we are not exposed to that the high steel price actually is beneficial for us should and if when we decide for example to sell the vessels.
<unk> of value will go up because of the scrap value will go up but other than that from our perspective, there's no exposure to any any commodity or equipment and price.
The volatility because thats all been fixed.
In other words, we have no inflation risk.
Right, Yes that makes sense and then just more sorry, when you decide to bend to them and build new builds maybe over the next 24 months does that then obviously factor into the price net that youre marking.
Yes, let's say, if we will be ability and new vessels going forward and I believe I would assume that shipyard will take that into consideration and price into the ship build and price and in turn when we taking on the ship Newbuild and price. We will have to also reflect that price.
Into the charter rate.
So effectively if and when there is such a adjustment that will be reflected in the charter rate yes.
Sure Okay, yeah. Thanks.
Got it great.
Thank you.
Our next question comes from Michael <unk> with BMO capital markets.
Hi, guys. Thank you for taking my question.
Hi, Mike and Michael.
So a large large large part of the Newbuild program and delivered through 2020.4 and won't be fully appreciated until 2025.
So how should we think about 2024 EBIT, the EBITDA guidance and how well the reflects that fully delivered fleet or rather how much upside and third to that 2025 run rate.
Yes, I think Mike.
We've touched on this briefly but.
We have provided the schedule of the timing.
Timing is coming to market of the new builds for each of the packages and so you can see and the.
The information that we've released that.
The window, which means the progressive delivery of all of those vessels flows through.
A big chunk about deliveries come through in 2023.
And then there's another 17 and 24.
But of course, there and not for the full year, but.
But we have disclosed all of that information and.
On.
And the available 40 to sort of model using those delivery dates.
Provided.
Okay, and then is it too early to be thinking about for and fixtures for 2024.
And I think it's too early but on sorry.
Alright, and I will let <unk> answer.
Yes.
As Graham said, it's not necessarily too early from the timing perspective, yes. It is about 3 years away from here. So it is it is that hot for.
Our line of customers to make that full anticipation, but I think the only possibility for the minus the considered is because of the value our services and it's a reliable service. They know they will always need certain capacity and therefore, they come to those kind of.
Owner operators to secure those type of the tonnage way ahead..3 years ahead, which is also explains why in today.
We were able to fix.
58 vessels, which is 50% roughly about 50% of our existing operating fleet.
This is because our customers really value the <unk> service and they want to lock in the base capacity from the operators like ourselves so.
And looking at 2024 of 2023, we continue to engage with our customers in exploring both using the conventional ways of 4 vaccine and also some other creative ways, which we are working with our customer.
So the long answer to your question is it is possible and we are working with our customers leveraging our platform our services and our flexibility to the.
To create those type of for fixing opportunities.
Perfect. Thank you very much guidance.
Yeah.
Thank you.
Thanks, Mark and the next question on the.
Next question comes from Jason and smarter with value Investor's edge.
Hi, Good morning, Ben Good morning, Graham Thanks for taking the questions.
Hi, Joe how are you.
Doing well, thanks, I would like to turn to slide 19, and and talk a little bit about the remaining Capex, you've mentioned $4.1 billion secured or in progress and it's about 1.7% that's on.
On finance.
Of the Asbury and I realize theres a couple of more years to go but what are the aspirations for that $1.7 billion of how much of that do you think it can be and some sort of debt and how much of that needs to be and either organic cash flow or new equity.
Yes, great Great question Jay.
At the moment. This 1.7 specifically refers to the 18, new builds that were announced in June July.
So the race and that's sort of the this chart is broken up that way is that we did make a commitment and the Q1.
Results around financing for the new builds and we announced at that time and we are ahead of that schedule in terms of the delivery of that financing.
This tranche that's come in.
June July and the $1.7 billion, yes, we're working through that at the moment and when I say working through we've got multiple different opportunities that we're discussing.
As to how the structure of that.
We've also got.
The material liquidity at the moment. So for example, a number of the financing structures that we have already locked in and do include the.
Pre delivery installments on the vessels, but given that we've got liquidity available with negotiating with some of the finances finance is to allow us to pay debt utilizing our cash and then on delivery.
You can type debt debt.
Debt back if we need it.
Yes.
At ways to optimize the utilization of our cash at the moment, but also retaining the secured facilities that we've agreed on my.
And my view is this $1.7 probably in the next month or so we'll have agreed what structures, we will use for it.
And like I said.
And we've discussed it before that.
There is a range of different opportunities we have.
Certain depths and different marketplaces, and whether it's and the lease co market, the Joel kind of market the ECA market and.
And we're actively working through all of those to work out the best deal the pits fits our structure. So that's sort of where we are on the 1.7.
Okay. That's helpful. Graham. Thank you it seems to me if I'm backing out the calculations correct that you're pushing nearly 90% leverage there on those do bill just is that fairly accurate and then second of all and it seems and judging by your stock price, which is down since March it seems like the market is bearing some sort of common equity.
The issuance can you confirm that you don't foresee the need for any common equity.
Yes, so certainly equity issuance is not on the table at the moment and I think we've made it very clear that and our current stock levels and Thats, just not something that we would consider.
2 valued decretive.
The issue stock when we're trading at these levels.
So I think what's more important force us to get our financing and locked in and.
And to demonstrate delivery against the Newbuild program and Derisk it.
And I think that is why we're so focused on getting the this financing structured correctly.
As to LTV.
Some of it's down around the 75% level and some of it's up around 100% level. So it's a real mix.
Yes.
Average, yes, you're looking at $85, 90% sort of range across the portfolio.
Wow, that's a phenomenal levels and congrats on getting that done on a final question related to all of this.
You have a significant newbuild program going through mid 2024, how much additional capacity do you have to grow if your clients come to you and didn't want to add more say 24 of $25.26 tonnage and how.
In terms of maybe billions and do you think you could grow from here.
Yes, that's a very good question and I think it does come down a bit to timing Jay because then I guess you do enter of point eventually where you do need to probably do an equity raise debt.
Yes, I think we've got to make sure that that's done at the right time.
And im not going back on my previous comment to say that it's not on the cards, but there will be of growth point.
And what happens.
I was just going to be careful balancing out of the profile because as you're well aware. We've got this delivery profile coming through 'twenty 3 'twenty 4 and then you have rapid cash flow coming and very quickly, which allows us to de lever and allocate capital back to where we wanted to on the balance sheet to get back to ambition around <unk>.
Great. So barring any other activity for me, that's the sort of timeframe might be looking at to get to investment grade based on the plans we have today.
Yes.
And what.
Just to add what the Graham says is that from the from a business perspective, I think we definitely have the capacity to continue to operate and continue to to grow our business from the from a fleet perspective.
As grant mentioned debt.
As our Newbuild comes to deliveries starting from for example of 2021, we have 1 vessel 2020 to 2020.3 all the way to 2024 of for example, we have the adjusted EBITDA of $1.5 billion and by then that you the <unk>.
This is actually generating sufficient.
The cash flows at the same time and I think of from.
From a business perspective, we got the scale, we've got the economies of scale of operations and also our customers will be able to.
Meet their business requirement through the kind of the partnership that they have with us and provide and those kind of solutions.
And particularly in this case.
And when they are.
The Newbuild request, but most importantly from our perspective the.
Evaluation or the criteria is the quality of growth the quality of growth as we said is the long term contract the attached to it is the good assets is coming from the customer and also the return of those investments that meet our requirement and as we said and.
Of these returns on the on.
These the new build to the matter of any investments that we make is at.
High single digit Unlevered return and that has been and will continue to be that so therefore I think.
And our cases, not so much of the constraints of the capital of the capacity of managing and operating these vessels rather is to have that kind of.
The opportunities that meet our investment and growth criteria, which is why we will.
We consistently highlight the quality growth and long term business model. That's the basically the the trademark of of Atlas.
Certainly makes sense. Thank you Ben and thank you Graeme and congrats again on a great quarter.
Thanks Jay.
And I'm not showing any further questions at this time.
Wow.
Thank you all very much for taking the time to join our call today and asking the great questions.
We are pleased to share our results and also very exciting.
<unk> with you and I hope, you're staying safe and healthy so have a great day and speak to you soon thank you all.
Thank you all very much.
Ladies and gentlemen, this does conclude today's presentation. You may now disconnect and have a wonderful day.
Thank you.
Youre welcome.
Yeah.
[music].
[music].
[music].