Thank you for standing by, and welcome to the Capital Product Partners Third Quarter 2020 Financial Results Conference Call. We have with us Mr. Jerry Kalogiratos, Chief Executive Officer of the company. [Operator Instructions] I must advise you that this conference is being recorded today, 2nd of November, 2020. The statements in today's conference call that are not historical facts, including our expectations regarding cash generation and future debt levels, our ability to pursue growth opportunities, our expectations or objectives regarding future distribution amounts, capital reserve amounts, distribution coverage, future earnings, capital allocation as well as our expectations regarding market fundamentals and the employment of our vessels, including redelivery dates and charter rates, may be forward-looking statements, as such as defined in Section 21A of the Securities Exchange Act of 1934 as amended. These forward-looking statements involve risks and uncertainties that could cause the stated or forecasted results to be materially different from those anticipated. Unless required by law, we expressly disclaim any obligation to update or revise any of these forward-looking statements, whether because of future events, new information, a change in our views or expectations to conform to actual results or otherwise. We assume no responsibility for the accuracy and completeness of the forward-looking statements. We make no prediction or statement about the performance of our common units. I would now hand the conference over to your speaker today, Mr. Kalogiratos. Please go ahead, sir.

Thank you, Heidi, and thank you all for joining us today. As a reminder, we will be referring to the supporting slides available on our website as we go through today's presentation. As previously announced, we concluded on March 27, 2019, the spin-off of the partnership's tanker fleet and subsequent merger with DSS Holdings, forming Diamond S Shipping. Accordingly, we present our financial results for the comparative periods on the continuing operations basis, except where references made to discontinued operations. The partnership's net income for the third quarter was $7.8 million compared with net income of $3.4 million for the third quarter of 2019. Our Board of Directors has declared a cash distribution of $0.10 per common unit for the third quarter of 2020. The third quarter cash distribution will be paid on November 10 to common unitholders of record on November 2. The partnership's operating surplus for the third quarter was $21 million or $11.7 million after the quarterly allocation to the capital reserve. We are pleased that during the quarter, we secured employment for the container vessel Adonis with ZIM for a period of 12 to 14 months. As a result, the partnership's charter coverage for the remainder of 2020 and for 2021 stands at 91% and 86%, respectively. Correspondingly, the partnership's remaining charter duration stood at the end of the third quarter at 4.5 years. During the quarter, CPLP's sponsor, Capital Maritime Trading Corp., purchased approximately 234,000 common units in the opening market, demonstrating our sponsor's continuous commitment to the partnership. Now turning to Slide 3. Revenues for the quarter were $35.5 million compared to $26.4 million during the third quarter of 2019. The increase in revenue was primarily attributable to the increase in the size of our fleet following the acquisition of 3 10,000 TEU containers…

[Operator Instructions] We will now take our first question.

This is Ben at Stifel. I want to start a little bit with a few things from a capital allocation perspective. You've mentioned that the sponsor have been buying shares of the partnership since the acquisitions in the first of the year isn't really -- the partnership hasn't acquired anything else. But it is, especially with the lower distributions, liquidity is improving and so forth. But the units are trading at, I don't know, 5x EBITDA. So pretty cheap, which I can guess is why the sponsor is buying. How do you think about what is the highest and best use of your cash as it continues to build from here over the course of, let's say, the next 6 to 12 months?

Well, until now, as we discussed last quarter, we have been retaining liquidity to make sure that we have maximum flexibility, I guess, in lieu of the uncertainty surrounding COVID-19. The next few months ahead of us remain critical. And I think we will better understand how this second wave of the pandemic is going to affect the global economy and containerized trade. And we also have our final 9,000 TEU container vessel coming out for charter renewal that's in a couple of months. As this next few critical months go by, I think we will have more visibility. And we can endeavor to deploy and increase liquidity to grow our asset base because, as we discussed, I think it's important for our business to replenish its fleet. We have assets with finite life. But I think also our Board will seek to balance these with returning capital to unitholders. And I do think that either increased distributions or unit buybacks would be a good way to do that depending on our equity valuation. Just to be clear, I don't think any decision has been made. And as I said, I think there's still a lot of uncertainty around how things are going to fare in the next few months. But you cannot ignore the fact that we have had a very strong rebound in the container market. I don't think anybody was expecting that. And right now, when you look at the demand supply balance, it looks pretty good. But we do live in a very fluid environment. So we have -- I think we will hold off taking any major decisions with regard to capital allocation for at least a couple of months.

Okay. No, that's helpful and clear. As it relates to recontracting with the Magdalena and I assume other ships at the sponsor level, you mentioned in the conversation there that -- or in your prepared remarks that you would -- rates at 1- to 2-year contracts or for 1 to 2 years. Is that sort of the tenet that you're looking at? Or is there a market for something longer? I mean we're getting pretty close. Probably it's not that far away. So do you think there's potential for 5 years or something a little bit longer?

That's a great question. The whole reason why liner companies were able to get where they are today was because, unlike 10 years ago, they had a portfolio of chartered [ endorsements ] on flexible periods or shorter terms than they had in the past. So at the moment that COVID hit, they redelivered vessels as much as they could, streamlined their operations, and then they were disciplined enough to take advantage of the hike in consumer demand as well as, of course, the lower bunker prices had helped. So I think -- at the same time, liners, obviously, they are enjoying a fantastic market in terms of profitability, and many have announced results that are record highs. But at the same time, they are also facing the same uncertainty. So I think they were, at the beginning, at least increasing unwilling to lock in longer charter rates. But given where rates have moved today, and I think we are probably seeing, in terms of charter rates, 10- to 12-year high, the owners, first of all, feel that these are good rates to lock in for longer period; and secondly, there is not enough tonnage out there for liners to get their hands on. So increasingly, and this is, let's say, over the last 2 to 4 weeks, we see owners pressing for longer periods, and increasingly, charter is willing to offer longer periods just to get their hands on tonnage. Then you look at the situation for post-Panamax vessels, especially 9,000 TEU vessels with high reefer capacity like ours. And we don't expect anything to open up until our vessel is up in January or February. So we should have a fairly good leverage as to what we can achieve in terms of rate and duration if this market persists. You will probably have noticed that we have staggered charter expirations of our previous 2 9,000 TEU ships. So we have 1 vessel coming up now in October 2021, another 1 in 2022. So if you ask me, I think, potentially at the rates that we're seeing today and to the extent that we can achieve it, we will probably try to go for longer than 2 years. But there's always this display between duration and rates. So I don't think we won't necessarily -- to kill the rate just in order to get to the tenor. But if you cannot really a achieve good balance, we will probably go for a longer tenor.

Okay. That's helpful, as always. And then lastly, for me, and I'll turn it over. Especially -- and I appreciate that you're probably not doing anything from a capital allocation perspective in the next few months. But now that you're building cash and the -- it seems like there is perhaps the liners beginning again to look at ordering new vessels, perhaps. And you now, without paying out everything that's distributed [Audio Gap] and maybe some of these new building contracts have done letting the sponsor do it and buy past the delivery. Is that a door that you could envision going down? Or do you think that you'll continue to do it as you have traditionally and wait until the vessels are actually operating and generating cash flow before doing something?

I definitely think we have more flexibility than before. So it was much more difficult for CPLP, for example, to look at new builds in the past and commit equity given the much higher distribution. I don't think we have spent, though, a lot of time thinking about new buildings as of late. The focus has been mostly on secondhand ships. And especially the post-Panamax segment, the market moved so fast that there wasn't enough of -- enough vessels out there or, let's say, enough sellers that were willing to part vessels at a decent price because charter rates moved. There is -- and today, there's very little that you can get your hands on in terms of post-Panamaxes. In terms of smaller ships, so Panamaxes and below, there is much more activity, especially over the last month, 45 days that we have seen a lot of transactions taking place at substantially increased prices compared to, let's say, 3, 4 months ago, in certain cases, more than 30% increases compared to, let's say, where you could get your -- those ships in June. Our sponsor has picked up -- or rather, an affiliate of our sponsor has picked up 3 vessels in that segment. It's a segment that CPLP would typically probably avoid because it's more volatile. There is more residual risk in the Panamax segment. But if there was a long-term charter like the one that our sponsor is trying to put together for those ships, then that will be also something that we can look at. So if you were able to get a good equity return and mitigate substantially the residual risk, we might look also at smaller sizes. But I think in terms of new builds, it's something that we haven't thought about much.

We will now take our next question.

Liam Burke. Let's, for a moment, think about tighter capacity and how it runs past this period of uncertainty. And obviously, there's a lag between new builds. With tighter capacity, secondhand market stays pretty rich. Are you content to continue to just allocate capital towards strengthening the balance sheet and buying back shares or potentially increasing the payout?

I think that even in a market like the one we are seeing today, there are opportunities. If you could -- especially, as liners are there to offer longer-term charters, then even if you pay a slightly higher price on an asset but you have the visibility and you know your return for the next 3, 5 years, then there are transactions that are attractive today. Still, many of those ships' vessel prices are still lagging below historical averages. So it's not that we are necessarily at the peak of the market today. But we are going to be selective. Customer visibility, accretion, all that is going to be very important. And I don't think you want to be allocating all your capital today given the prospects as well as the uncertainty. And as I said, over the next few months, depending on the kind of visibility that we can attain, we can also think about other ways of deploying our liquidity and returning capital to unitholders.

Great. And then on the sponsor side, the drop-down pipeline, is there anything potentially that is there or just price is just too high?

Well, I just mentioned the 3 Panamax vessels, our 3 2008 Panamax vessels. The sponsor has -- is in the process of actually of acquiring those vessels today. The acquisition has not been completed. They need to install ballast water treatment systems, pass special surveys. And then if a longer charter is put in place like -- and right now, this is under -- very much under discussion, then that's something that we can look at depending on the accretiveness of the deal. And as I said earlier on, as to how we treat the residual because the Panamax segment has been very volatile over the last few years, and you want to make sure that you have adequate visibility.

We will now take our next question.

Jerry, it's Randy Giveans at Jefferies. So you mentioned the Magdalena is on charter until February. When is the earliest you would be able to lock in terms for this new charter? Is that something we expect before year-end?

Yes. Probably -- if I had to guess, it will be some time before year-end. Again, as the market is changing, so is the appetite of liners. When the market is bad, you have to wait until the very last minute, and the liners are not willing to commit forward positions. Now obviously, given the dearth of available tonnage, there is -- it's much easier to fix forward positions even with dry docks and much wider laycans. So I think if I had to guess and given the strength of the market, we should know before year-end.

Got it. Okay. And then final question, for the Cape Agamemnon. Following the dry docking, do you expect to put that on time charter? Or do the opposite and kind of sell that vessel? How would you handicap it?

I think we are going to be very, very opportunistic. So if market picks up and we see a very good period and offer, it's not that you can fix those vessels for much longer than it will be, I guess, typically 12 to 24 months. We might look at it. Asset prices on the dry bulk side have been kind of subdued even when capesize spot rates were soaring above 30,000. We didn't see much of a movement. So we thought that it's not worth looking at divesting of the asset. So we will continue to play it by ear. Again, as for example, we decided to continue trading the vessel on the spot market because of the better rates instead of putting the vessel in the dry dock, the same way, I think we will decide depending on market developments. I know that doesn't help much, but given the volatility of the market, I think we should retain flexibility.

There are no further questions. I would now like to hand the conference back.

Great. Thank you, Heidi. Thank you all for joining us today.

That does conclude our conference for today. Thank you for participating. You may all disconnect.