Ladies and gentlemen, thank you for standing by, and welcome to the Global Ship Lease Second Quarter 2020 Earnings Call. [Operator Instructions]. As a reminder, today's conference is being recorded. I would now like to introduce for this conference call, Mr. Ian Webber, Chief Executive Officer of Global Ship Lease. You may begin, sir.

Thank you very much. Good morning, good afternoon, everybody, and welcome to the Global Ship Lease Second Quarter 2020 Earnings Conference call. As normal, the slides that accompany today's presentation are available on our website, www.globalshiplease.com. Also, as normal, Slides 1 and 2 remind you that today's call may include forward-looking statements that are based on current expectations and assumptions and are, by their nature, inherently uncertain and outside of the company's control. Actual results may differ materially from these forward-looking statements due to many factors, including those described in the safe harbor section of the slide presentation. We also draw your attention to the Risk Factors section of our most recent annual report on Form 20-F, which is for 2019 and was filed with the SEC on April 2, 2020, and which you can obtain via our website or via the SEC's. All of our statements are qualified by these and other disclosures in our reports filed with the SEC. We do not undertake any duty to update forward-looking statements. For reconciliations of the non-GAAP financial measures to which we will refer during this call to the most directly comparable measures calculated and presented in accordance with GAAP, you should refer to the earnings release that we issued this morning, which is also available on our website. I'm joined today by our Executive Chairman, George Giouroukos; our Chief Financial Officer, Tassos Psaropoulos; and our Chief Commercial Officer, Tom Lister. George will begin the call with some high-level commentary and an update on our current areas of focus. And then Tassos, Tom and I will take you through the quarterly results, our financials and the current market environment, after which we'll be pleased to take your questions. So turning to Slide 3, I'll pass the call to George.

Thank you, Ian. Since our first quarter earnings call, a great deal has changed in the world in the container shipping industry. Economies are beginning to reopen in many countries. Containerized freight volumes are starting to improve. And importantly, policies have been put in place in many parts that make it possible for seafarers safely disembark and to reestablish more normal crew rotations. I am personally grateful to all of our crew who have continued to operate our ships to the highest standards throughout this difficult period. At the same time, COVID-19 continues to be a major factor in many areas, and much remains unknown moving forward. With that perspective, our top priority continues to be maintaining vigilance and resilience in this challenging environment in respect of our people, our ships and our commercial platform. Our specific areas of focus remain largely consistent with those we discussed last quarter. We're prioritizing the safety and welfare of our personnel at sea and onshore, and we're taking all appropriate steps to protect and support our colleagues. We're focused on maintaining strong liquidity and a healthy balance sheet in order to remain strong, flexible and resilient throughout all market conditions. Our strategy and charter portfolio put us in a good position here as we have $660 million of contracted revenue over an average of more than 2.3 years and only $5 million of debt maturities between now and late 2022. We continue to engage constructively with capital providers on the intended refinancing of our 2022 bond, ultimately due November 2022, and it remains our intention to pursue that refinancing on an opportunistic basis when market conditions are sufficiently supportive. In order to benefit fully from our extensive contract cover, we strive to maximize commercial and operational uptime of our ships. Further, we have…

Thank you, George. On Slide 4, you can see our charter portfolio, from which I'll highlight a few points. We have some $659 million of contracted revenue with a TEU weighted average remaining contract duration of 2.3 years. As George mentioned, all of our ships are employed on time charters. Indeed, other than the 2 21-year old feeder ships which we sold in July, we had only 33 days of idle time between charters during the quarter. Recently agreed charters are mainly short term, giving us coverage through the immediate future, but retaining the ability to refix in the medium term in a charter market that has already moved materially off its lows. Opportunism notwithstanding, it's important to keep in mind that 97% of our adjusted EBITDA for 2020 is already covered by contracts and 75% for next year, 2021, giving us a great deal of comfort and materially limiting our downside exposure. On Slide 5, I'll provide some color on reefer capacity, an area that we touched on last quarter, but which has become even more important as market conditions and high idle tonnage have drawn a stark contrast between the haves and the have-nots of the global container fleet. Reefer or temperature-controlled cargo, like foods, medicines and the like, is the fastest-growing element of containerized trade and a service for which the liner companies are able to charge a premium against the standard dry cargo. Hence, liner companies look for ships that can carry a significant proportion of reefer containers, which require the vessels to have incremental generating capacity and the appropriate wiring to allow the containers, which are effectively huge fridges, to be plugged in. Global Ship Lease has invested in high reefer capacity ships, including upgrading the reefer capacity of preexisting tonnage. As you can see…

Thanks, Ian. Let's turn to Slide 8. Now trying to call the shape and timing of the world's recovery from COVID-19 is challenging to say the least, especially when overlaid with the rumbling geopolitical and trade tensions. However, to at least provide a framework, in this slide, we present MSI's forecasts, which are heavily caveated and will change as conditions continue to evolve. So on this basis, we're looking potentially at cargo volumes shrinking by between 7% and 8% in 2020, which is more or less in line with what we saw in 2009 during the Global Financial Crisis, followed by a rebound of more than 10% in 2021. At top right, you can see that MSI reckons all trades will suffer in 2020, but the main lanes, that is the transpacific and Asia-Europe trades are likely to be hardest hit. At bottom right, you can see the anticipated demand impact in aggregate, set against a much higher conviction estimate of cellular capacity growth of only 2% or so, both this year and next. Turning to Slide 9. This slide shows what's happening in the freight and charter markets. Let's take the left-hand chart first, which provides freight rate indices for containerized cargo out of China. You can see that freight rates came under pressure as COVID-19 first hit China and then became a worldwide phenomenon. So there's nothing particularly surprising there. Much more interesting, however, is that, a, even when the impact of the virus was at its worst in the second quarter, freight rates were still up year-on-year. And b, rates are trending up. This is a testament to the capacity and pricing discipline exercised by the container shipping lines, which are expected to translate into positive financial results, further buoyed by low fuel prices. We've been looking…

Thank you, Tom. Slides 14, 15 and 16 show our unaudited pro forma consolidated balance sheet, statement of operations and statements of cash flow based on the second quarter of 2020. Rather than going through every line item, let me point out a few key items. We generated revenue of $71.4 million during the second quarter. The $8.3 million increase in revenue year-over-year was principally due to the acquisition of 7 vessels since previous year. For the 6 months of 2020, we generated revenue of $142.3 million, up $14.7 million comparing to $127.6 million in the comparative period 2019. We generated net income of $12.6 million for the second quarter of 2020 after a noncash impairment charge of $0.9 million for our 2 vessels held for sale. For the 6 months of 2020, we generated net income of $13.2 million after a noncash impairment charge of $8.5 million, all related to our 2 vessels held for sale and $2.3 million premium paid on the redemption of $46 million for 2022 notes compared to $18 million in the comparative period. We are still experiencing extended shipyard time due to the effects of the virus and congestion as well as extended idle time due to operational difficulties on executing the sale of our vessels. As a result, in the second quarter of 2020, there were 210 planned offhire days for 1 vessel for regulatory dry-docking and the scrubber installation of 2 other vessels, all in progress as of end of quarter. 20 days of unplanned offhire and 194 days of idle ballast time related mainly to our 2 vessels held for sale and delayed by COVID-19 port restrictions, giving utilization of 89.6%. The average operating expenses per ownership day, including management fees in the quarter, was $5,902, down $57 per day year-over-year despite the acquisition of the 7 vessels noted above, all of which are Post-Panamax with higher daily operating expenses. The average operating expenses for the 6 months ended June 30, 2020, was $6,125 per day compared to $6,042 per day in the comparative period. Now the general and administrative expenses were $2.3 million for second quarter of 2020 compared to $2.5 million in the same quarter in 2019. The average and administrative expenses per ownership day in the second quarter of 2020 went down to $567 from $720 in the same quarter in 2019, a decrease of $153. The total cash on hand as of end of the quarter of 2020 was $89.7 million after the redemption and purchase year-to-date for 2022 notes for about $57.8 million and $23 million for purchase of 2 vessels. I won't go through them in detail now. But as always, we have also included on Slides 17 and 18 our detailed CapEx guidance and adjusted EBITDA calculator to assist you with your modeling. I would now like to turn the call back to George for closing remarks.

Thank you, Tassos. I will briefly summarize on Slide 20 before moving to your questions. As we know, the global economy continues to be disrupted by COVID-19. However, Global Ship Lease has been well served by our extensive contract cover, fully employed fleet and our focus on business resilience. During the second quarter, our attractive fleet of low slot costs, high reefer capacity, midsized and smaller container ships, supported by our well-established relationships with lead liner operators, enabled us to maximize on hire time and secure strong stable cash flows despite a challenging market with an oversupply of ships in some size segments. The timing and shape of global economic recovery remains difficult to call, but we see a number of reasons for cautious optimism. Following the sharp declines over most of the first half of the year, freight rates and charter rates have both rebounded in the recent weeks with that recovery seen first in well-specified Post-Panamax vessels, particularly those with higher reefer capacity like those in our fleet just as we saw during the market recovery in 2019. Idle containership capacity has fallen significantly from a high of 11.7% in Q2 to 6.6% by the end of July. Further, the opening of shipside linked facilities is allowing marginal tonnage to be deleted from the global fleet. Our charters and liner companies have demonstrated impressive price and capacity discipline, maintaining and even expanding their margins against a challenging macroeconomic backdrop. Unlike prior downturns, the eventual post-COVID-19 demand recovery is set to take place against a supply side backdrop marked by a tiny orderbook, particularly in the size segments in which we operate. And this is a very important point, ladies and gentlemen. With well-specified low slot costs, high reefer capacity containerships in structurally undersupplied segments, Global Ship Lease should benefit from a tightening market in even a conservative recovery scenario. With that, we will be pleased to take your questions.

[Operator Instructions]. Our first question comes from Liam Burke with B. Riley.

Yes. Idle capacity, peak to 10%. It's coming down pretty steadily now. You mentioned, I believe, it was 6%. How do you view the short term - I mean, it's implying that the traffic volumes, container traffic volumes are increasing or improving? How do you view the second half of the year, early 2021 in terms of anticipated container volumes up or down?

Well, I will try to answer that, and Tom can also give you his view. It is quite difficult to predict. I mean, this is the million-dollar question for all liner companies. But the consensus is that all liner companies are gearing up, trying to secure tonnage for low slot cost tonnage, which seems to me that what the expectation is that trade volumes are going to pick up in the second half of the year. Otherwise, we wouldn't be seeing so much activity - chartering activity, so much liner companies trying to secure tonnage for the next 6 months or more. Tom, do you have something else to add?

No, I think that pretty much covers it. All I'd say, Liam, is the liner companies are much closer to the underlying demand for the cargo flows than we are. And as George says, and as the charter rates show on Slide 9, a number of lines have been going long on tonnage, and that would suggest that they at least see some sort of recovery in volumes. But yes, again, as George said, that's the multimillion-dollar question.

Fair enough. And then your OpEx per vessel per day dip below $6,000. How do you see directionally it going into the second half of the year?

Well, one aspect that we have seen that helped our OpEx go down a bit more than anticipated is the fact that we have not been able to exchange crews due to COVID. Was - they were not allowed to changes to happen. Now we are going to - we are doing, as we speak, more and more of these crew changes that were supposed to happen earlier, which we expect will increase a little bit, not materially, our OpEx for the second half of the year. Another item that might also increase a little bit the OpEx is the fact that the cost of tickets has increased about 100%. That is not a big number, of course, in our OpEx, but just to mention, since you asked the question, that's something that we expect that might increase in the second half. But all of that, nothing material really.

Our next question comes from J. Mintzmyer with Value Investor's Edge.

So first of all, looking at your presentation, I noticed that you have a majority of your debt on floating terms with LIBOR down to really near all-time lows. What are the prospects of fixing some of that? I know some of your peers have fixed 3 or 4 years of they're doing the fixed swaps at like 0.3% or 0.4%, just unbelievable levels. Do you have that potential to kind of freeze in these low interest costs?

Yes. We have looked at that in great detail, and we are in position to fix our interest rates. We have employed actually a specialist company for that. As you know, fixing interest rates, it's not that simple to time it at the best time and get the best out of it. We feel that as we see still, there is room for improvement, and we would like to do that, and we are going to do that, but probably in the foreseeable future. But as you said, this is a unique opportunity for us to grab very cheap rates, which we are enjoying anyway, as we speak.

Yes, it's a very interesting opportunity. One other question for you in regards to your first priority 2022 notes. I know we've talked about this for the last 1.5 years and COVID-19 clearly put a delay in your plans to refinance those, right? They're trading at a discount to par, last I checked. They seem to be trading a little bit under 100% there. And I noticed that you still have decent cash liquidity. Are there any opportunities to repurchase some of those notes in the open market at a discount? Or are you waiting to do a comprehensive refinancing?

Ian, you want to take this?

Sure. Yes, we are able to take advantage of the slight discount at which our notes are trading. That said, up to this point, our focus over the last 6 months or so has been on preserving cash liquidity. We have great contracted cover going forward, but nobody knew 3, 4 months ago how this virus was going to affect the global economy and for how long. And therefore, along with delaying dry-dockings and so on and so forth, reducing CapEx where we could and we've sort of shut down on repurchasing notes in the market. As conditions improve, as you've heard from George and from Tom from the market side, where charter rates, asset values, seem to be moving upwards and there seems to be some success in controlling the virus, although it's very, very early stages, we may look to buy notes in the market, but only if it doesn't prejudice our balance sheet and if it contributes, obviously, to the wider refinancing of the balance of the 2022 notes, which remains a strategic objective of ours.

Certainly makes sense. Looking at the latest charter you signed on the 9 K TEU vessels, it looks like you did one for about 2 years that you extended. And then the other one is only for one quarter, it looks like just a short-term extension. Can you talk about the timing of those 2 charters? Because the freight rates dropped right into April and May and sort of troughed, right? And then they've been recovering, as you mentioned even in your presentation, quite impressively lately. Were those terms conducted recently as in like the last couple of weeks? Or was this something you did more so in the start of the summer?

Well, the first picture, the short one, was done at the - say, at the eye of the storm when charters simply redelivered ships without thinking about any new charters, so any new ships to take. Because of that, we've made the decision to fix this ship very short as we expected the market was not going to stay in that state for too long. And it proved to be a very prudent decision as the next ship came open a bit later, roughly a month later or so, if I recall. And we were able to fix at more realistic market levels since these ships are so - have such a high-spec specification. So those were both pictures done some time ago, but with a distance of about a month or a bit more between them. So the first picture is showing you the bottom of all bottoms in the container market we have seen. And the other picture shows you a more normalized situation like we're now.

Certainly makes sense. So is it fair to say that as long as things are stabilized when the Anthea is up for a new charter, really just in a couple of months, if not weeks, correct, that it should be, hopefully, similar levels of the MIRA, if not stronger?

I wouldn't want to jinx it, but I'm keeping my fingers very tightly crossed.

Let's keep those fingers crossed. Final question. I really appreciate your time this morning. There was preferred - sort of a preferred class of equity that was issued along with the Poseidon merger. They're basically the same as common shares except for they trade at a - they stay as a preferred class until the 2022 notes are resolved. Is that the only other contingency there? So once the 2022 notes are resolved, that converts immediately? Or are there other sort of requirements as far as that conversion to common equity?

Yes.

No, Steve, it's the only driver.

Excellent. Definitely makes sense. In front of a merger, you do want to make sure those notes are taken care of. And congratulations on navigating this ship through the storm.

Our next question comes from Joseph Farricielli with Cantor Fitzgerald.

Two questions. One, on the book to build and when vessels are being scrapped, do you have the insight whether they're reefer or regular container? Do you have any insight into the difference?

Do you mean when we read and report a specific vessel or the scrap, whether we know if that ship has a high reefer capacity or not?

Right. Exactly. Yes.

Yes. Well, every ship has a registry and a description. So we can always check and view what types of ships are scrapped and what is this ship's reefer capacity and other characteristics. The answer is yes, we do know.

Okay. And then wondering, you have quite a few different facilities, could you give us some color on what assets are unencumbered and could be used for a potential refinancing of the '22s, of the notes that mature in '22?

Yes. I'll ask Tassos to come to this. And Tassos, can you please answer?

For the refinance, as you can understand, the current security package of the existing bond will be, let's say, the main pillar of our next refinance. Of course, we do have some - another 5 unencumbered vessels in our fleet that can assist. So it depends on the proposal of the refinance at that time and the amount, of course.

Okay.

I may add to that - I may add to that that the ships that we have free, we also have some Post-Panamaxes in this category. And those ships can get quite substantial charter rates and longer charter rates, which also helps us as we bring these ships into the refinance package because they offer longer employment and visibility of cash flows. And that's what we're trying also to use. That helps a lot the refinance.

And just once again, to add to that, the specific ships that are unencumbered are Tasman, Ian H, Dimitris Y. And then the GSL Kristina and the GSL Nicoletta, which as both George and Tassos says are all Post-Panamax ships.

All five of them, yes.

Excellent. And just wondering, is the Citi Super senior loan, I see it on Slide 24, it's about $4.7 million, has that been paid off since quarter-end? Because there's amortized...

No, it will be paid in October.

At maturity? Okay.

[Indiscernible] loan. Yes, yes.

Our next question comes from Mitchell Glynn with CVC.

Another resilient performance. Just one quick one from my side. The 2 investments that you've sold, I believe they back the bond that you have, if I'm like, you have to use those proceeds to pay the bond down, is that correct?

For a period of time, Mitch, yes. But in the meantime, we could use the proceeds to reinvest in ships that we would then put into the collateral package.

Right.

So there's some optionality, but ultimately, if we're unable to use the funds for anything else, then, yes, they would go to reduce the outstanding bond.

So is that a 12-month period you have to use that within or commit it within - is it commit it within [indiscernible]?

I don't know whether it's a commit within 12 months or an execute within 12 months, but it is a 12-month period that we have to use the bond.

Okay.

So till July next - July next year.

July next year. Okay. And you are going to hold on to those just into - you know you don't need it basically?

Yes, more than likely. It's just an optionality.

And I'm not showing any further questions at this time. I'd like to turn the call back over to Ian Webber for closing remarks.

Thank you very much. Thank you for listening. Thank you for your questions. We look forward to providing a further update for you at - on our Q3 earnings conference call in 3 months' time. Thank you.

Ladies and gentlemen, this does conclude today's presentation. You may now disconnect, and have a wonderful day.