Thank you for standing by, and welcome to the Capital Product Partners First Quarter 2021 Financial Results Conference Call. We have with us Mr. Jerry Kalogiratos, Chief Executive Officer of the company. [Operator Instructions] I must advise you this conference is being recorded today, 29th of April 2021. The statements in today's conference call that are not historical facts, including our expectations regarding cash generation, equity returns and future debt levels; our ability to pursue growth opportunities; our expectations or objectives regarding future distribution amounts, capital reserve amounts; employment of our vessels, including redelivery dates and charter rates, may be forward-looking statements as such as defined in Section 21E of the Securities Exchange Act of 1934 as amended. These forward-looking statements involve risks and uncertainties that could cause 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 like to hand over to your speaker today, Mr. Kalogiratos. Please go ahead, sir.

Thank you, Sarah. 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. The partnership's net income for the first quarter of 2021 was $10.9 million compared with net income of $6.7 million for the first quarter of 2020. Our Board of Directors has declared a cash distribution of $0.10 per common unit for the first quarter of 2021. The first quarter cash distribution will be paid on May 10 to common unitholders of record on May 3. The partnership's operating surplus for the first quarter was $24.5 million, or $14.4 million after the quarterly allocation to the capital reserve. During the quarter, we took delivery of the 3 5,000 TEU sister container vessels, with long-term employment to Hapag-Lloyd, which we agreed to acquire from our sponsor in January 2021. On April 7, we entered a memorandum of agreement for the sale of 2 9,300 TEU containers to an unaffiliated third party for a total consideration of $195 million. Moreover, since the launching of the unit repurchase plan on 17th of February, we repurchased approximately 168,000 common units. Finally, the partnership charter coverage for 2021 and for 2022 stands at 88% and 80%, respectively, while the remaining charter duration corresponds to 4.1 years. Turning to Slide 3. Revenues for the quarter were 31 -- $38.1 million compared to $33.7 million during the first quarter of 2020. The increase in revenue was primarily attributable to the increase in the size of our fleet; and the decrease in off-hire days, as none of our vessels underwent special surveys during the period compared to 3 vessels that incurred off-hire days in connection with installation of scrubber systems and passing of their special survey during…

[Operator Instructions] We'll now take the first question.

Jerry, it's Randy Giveans from Jefferies. All right, so looking at the asset sales, the $195 million, obviously very good price for those 2 vessels. Can you speak to just how strong those asset values are right now and your expectations for containership asset values throughout 2021?

Yes, that's, I guess, a very good and topical question. The container market is [ definitely ] on steroids right now. And then I think the issue for many liner companies is that there's simply not enough [ punnets ] out there. So especially when it comes to larger ships, let's say Panamax and above, you'll see that a lot of the buying interest, like in our case, comes from the liner companies themselves. I think what effectively we are doing is solving 2 problems, first of all, getting their hands on capacity, on vessels; and secondly, also deploying cash as they are generating record-high profitability. In our case, the -- I think the attraction of our ships was that they could -- at least one of them could give relatively prompt delivery. And really I think that's the one that the buyer wanted. We negotiated 2 ships despite the second ship having substantially below charter attached until November of later this year. And needless to say also the Magdalena will be delivered to the buyer without passing its special survey, which is a saving of $1 million-plus, and you save also 15 days off hire. But whenever you sell a vessel in the market like this -- and don't get me wrong. I think there is a lot of strength. Potentially we might see even higher prices. This price was agreed before the blockage in the Suez Canal, for what it's worth, but you have to think what you do with the money and whether there is any value arbitrage that you can take advantage of. And I think this is what I try to outline in my prepared remarks as to how you can deploy less than the money that you have freed up in a market by…

Okay. And then for the Cape Agamemnon, what are the plans on that? Is it a long-term charter? Is it selling it? What are your thoughts on that one?

I think there's plenty of momentum right now both in the charter market as well as in the SnP market. That vessel not too long ago, I will say maybe 4 or 5 months ago, was valued at around $18 million. Today, its value is probably in the high 20s, but given the strength of the charter market, I think that there is still more room on the asset price. And we will be opportunistic as we have been until now. And I think this has paid off, but I think, as we move into this kind of territory in terms of asset values, we will consider very seriously a sale, but if somebody came and said 5 years at a fantastic rate -- don't forget that ship came off a 10-year charter, 42,000. And we might look at that as well, but I think the preference would be to sell into the strength of this market.

Got it, all right. And then lastly, just looking at Slide 9 or Slide 10 even. You kind of talked about the comparison of replacing the 2 with the larger vessels. Obviously they're younger. They're larger. They might have long-term charters on them. What kind of price would that drop down be? Would it be an EBITDA multiple? Like how would you think about that in terms of taking these 3 vessels?

Well, there is no official discussion or proposal right now between CPLP and Capital Maritime. I did assume, when I was discussing my prepared remarks, that the acquisition of these vessels will be -- will take place probably around 10x EBITDA.

Okay, I guess that's the big question here. So you're buying ships at 10x EBITDA. Your shares are trading at less than 5x EBITDA and well below NAV, so why not just maximize share repurchases instead of vessel purchases?

I think we are actually buying units and which is something that we set out to do in -- we announced in the last quarter. And since we announced that, we commenced our unit buyback program on February 19, and we have acquired since 168,000 common units at an average cost of [ 10.6 ]. So we have spent approximately $1.8 million. Now the -- I think you understand that buying back units is not a panacea. There is definitely, as you say, a dislocation between our equity value and the underlying NAV, and by having a unit buyback program, as you said, we are taking also advantage of this discrepancy. It's also accretive to our EPU as well as to our NAV, but I think you also know that NAV discounts to different extents are quite widespread in the shipping industry. They're not only specific to us. And resolving them through unit buybacks or share buybacks, as you have seen, has proved to be of limited success. And importantly also, I think size and liquidity has been a better driver for closing this gap, as we have seen for larger-market-cap companies. Hence, I think, by growing the partnership with accretive transactions to earnings as well as distributable cash flow, we should be also getting this valuation gap closed. And finally, when we're thinking about the liquidity of the partnership: We have about $60 million of liquidity sitting on the balance sheet, and then we will have additional liquidity from the sale of the 2 ships. So in -- by the third quarter, when we deliver the second ship to their new buyers, an -- we could be sitting on something along the lines of $175 million of cash, when our market cap is approximately $230 million. So I think to -- the proposition that we will spend $175 million of cash in unit buybacks would effectively mean that we want to take the company private, and this is not a path that we have chosen, not at least at this point. I think we have plenty to do. We can grow the company and, together with the unit buyback program that we have, close the NAV gap in a different way. This argument, I think, has definitely value, but it's not, as I said, a panacea for all ills and problems.

We'll now take our next question.

Liam Burke, B. Riley. You talked about asset sales, age of the fleet -- age of specific vessels as being a potential motivator for selling. You've also talked about how the LNG market looks more attractive to you longer term vis-a-vis container vessels. Could you give us a sense as to how you would like to balance the fleet over time?

Yes, that's a good question. And then I don't necessarily have all the answers today. I think the point of today's presentation was to show the full range of options that we have, but it is important to note that through our relationship with Capital Maritime we have the unique vantage point, if you want, across all the main commercial shipping markets, including containers, tankers, bulkers and, of course, LNG carriers. Stating the obvious: Not all markets move together, and as a result, different opportunities may arise in different markets. Our -- this business model remains the same. So we concentrate on assets that have medium- to long-term charters in place. And we'll continue to pursue cash flow visibility and importantly tangible accretion which comes with long-term charters. You don't have to rely on what the spot market will do. So the point is that we do see the LNG market being at a turning point, as LNG carrier charter market has been improving over the last few months quite considerably. And I do think that the LNG industry enjoys strong prospects. Just touching upon the key highlights. LNG production is expected to double over the next 15 to 20 years. Demand comes predominantly from the Far East, where demand growth is quite strong, so this means that we will have increasing ton mile demand as a lot of the supply comes from the Atlantic. And when it comes to values, the LNG market saw low newbuilding prices and asset prices for a while, but now we have seen asset prices increasingly pick up. Shipyards are full with container orders, with very large LNG orders on the back of certain tenders. And we expect that asset values will start increasing in the medium to the long run, driven by both the charter market strength as well as the replacement costs. In addition, propulsion and cargo containment technology has been an investment deterrent in the past, but now technology has reached a plateau and there are no visible technological changes in the near future. And finally, and I think that's going to be an important pillar to our strategy going forward and be it containers or any other types of ships, LNGs or whatnot, LNGs do deliver improved -- an improved CO2 footprint. Their CO2 emissions per ton mile are significantly lower to our container vessels. And they could improve CPLP's emission profile. So when you look at the funding of these acquisitions, for example, if there was a larger transaction, you could also look at "green or sustainability bonds" or other forms of capital. So I do think that LNGs are probably in a better part of the cycle compared to containers, so there is more upside there, but of course, if we move on assets like this, it will be again with medium- to longer-term charters in place.

Just very quickly. You highlighted the benefits of your buyback program. And is there any -- what is the thought on the unit distribution? Are you just happy where it is? Or is there any consideration to balance buyback with looking at distribution?

I think we will focus on returning capital to unitholders through the unit buybacks at this juncture. As I said earlier on, effectively it's 2 birds with 1 stone. We are returning capital. And we are taking advantage of the dislocation between NAV and our equity valuation, but what I can say is that, if we do execute even partly on our growth program and given the accretion of the potential acquisitions, our distributable cash flow will grow dramatically in the future. And then we can also revisit the distribution.

We'll now take our next question.

Jerry, Ben Nolan from Stifel. So I wanted to come back to maybe Randy's last question a little bit. You talked about looking at those new containerships at maybe 10 -- a 10x EBITDA multiple -- well, actually, before I get there: Just going through the fleet list, it looks like there's a whole lot of additional containerships that the sponsor has on order. Is there anything that precludes those from being part of the pool of assets that might be available?

We are concentrating more on assets that we have good visibility with regard to employment. And other vessels that have not found employment or are simply not available to us, they're not mentioned here. The sponsor has -- also has newbuilds; has also older, secondhand ships in the water, but firstly, the older, secondhand ships, we won't look at. I think we have laid out the strategy. And these vessels that we do present then are vessels where we think that there will be long-term employment and fit the profile. If this change one way or another in the future, and then of course, we will consider, but I think these are the most suitable kind of candidates. And just to make clear, let's assume for a moment. And again as I said earlier on, there is no formal discussion right now between CMTC and CPLP in any form, but let's -- if we were to assume that the acquisition price of these 3 13,000 TEU vessels was $115 million, $116 million or in the mid $110 million, let's say just for the sake of argument, what I was trying to say, to illustrate on Page 10, it is that, irrespective of the fact that you are deploying less equity that you had in those, the 2 9,000 TEU ships, and you are generating more EBITDA and for 10 years, if you just look at the relative valuation proposition alone, even if there was no charter, if you are replacing a vessel that you sold for $97 million with a vessel that will cost you $115 million and it's larger -- importantly, it's 5 to 6 years younger. It has a scrubber. It is Tier 3 NOx compliant. This is -- I mean the reefer capacity is another 700 reefers. I mean that -- just the upgrades alone cost $10 million, so you are getting effectively the charter and the age differential for free. So I think it would be an extremely nice arbitrage if we were to achieve that. Obviously there is a gap in terms of earnings because those vessels are in the water today. They could have achieved high 40,000s to 50,000 for 5 years, but in the end and given also our long-term view of the container market, I think that, if we manage to somehow replace those 2 9,000s with 3 13,000s, that would be a great outcome.

Right, and I would agree, all else equal. The one pushback I was going to give is that most drop-downs -- and there has not been many, but most drop-downs have been sub 10x for a while. And especially, I would imagine, if you're a little bit less constructive on the container shipping market, you probably would not want to push the envelope with respect to the multiple that you're paying on the assets. So maybe 9x, 9.5x would -- is sort of -- would appear to me at least to be kind of the going multiple, which would put the price closer to $100 million, maybe $105 million. Is there any reason that you'd be thinking differently on that?

I think the main difference is that until now all these transactions that you're referring to were either for older ships or ships -- newbuild ships that had 5-year charters or 3-year charters or 4-year charters. This is 10-year charter effectively at 10x EBITDA means you have paid down the ship in 10 years. And the other reason -- and again this is a discussion that -- I think it's premature, but the other reason is that today, if you were to try to get that, say, from a shipyard, you would be quoted 120 million-plus for delivery at the end of 2023. So you wouldn't even be anywhere near this type of acquisition price, so -- but again this is very premature in the sense that, in the end, CMTC and CPLP might come to a completely other understanding of that. I'm just using the 10x EBITDA as a placeholder here, as it has been also -- as we have seen also many other companies recently acquire assets at these or higher multiples.

Right. So now taking sort of that conversation and flipping it over to the LNG ships that you have sort of laid out there on Page #11. I don't know where the charters are. Maybe actually, could you give any color as to sort of what the EBITDA would be on those? And is it -- relative to, I don't know, that 9 to 10x multiple, is that something that you can efficiently be able to do on those vessels as well?

Yes, because I think these -- there's a lot of confidentiality around the contracts at this point. Let us say that the EBITDA that we were -- I gave you an EBITDA kind of estimate for all 10 ships. And I would say that -- let's say it will be in the mid- to -- mid-60,000s to 70,000, that type of range. And over time, some have much higher charters. Some have slightly lower charters, but the important thing is that again the acquisitions will probably be in the same range that you described, 9 to 10x. And don't forget these are assets that have 35 years-plus of useful life.

Thank you. I will now hand back to Mr. Kalogiratos for any closing remarks.

Great. Thank you, Sarah. And thank you all for joining us today.

Thank you. That does conclude the conference for today. Thank you for participating, and you may now disconnect.