Star Bulk Carriers Corp. (SBLK) Q2 2013 Earnings Report, Transcript and Summary

Thank you for standing by, ladies and gentlemen, and welcome to the Star Bulk conference call on the second quarter 2013 financial results. We have with us Mr. Spyros Capralos, President and Chief Executive Officer; and Mr. Simos Spyrou, Chief Financial Officer of the company. At this time, all participants are in a listen-only mode. There will be a presentation followed by a question-and-answer session. (Operator Instructions). I must advise you that this conference is being recorded today, Tuesday, August 27, 2013. We now pass the floor to one of your speakers today, Mr. Spyros Capralos. Please go ahead, sir.

Thank you, operator. Good morning and good afternoon to everybody listening. My name is Spyros Capralos, President and Chief Executive Officer of Star Bulk Carriers and I would like to welcome you to the Star Bulk Carriers' second quarter and first half 2013 financial results conference call. Along with me today to discuss our financial results is our CFO, Mr. Simos Spyrou. Before we begin, I kindly ask you to take a moment to read the Safe Harbor statement on slide number 2 of our presentation. While you read that Safe Harbor statement, I would like to remind you that last month we completed a previously announced 75 million equity rights offering. We are pleased that due to the level of participation of our shareholders, back stop providers were allocated the minimum amounts and the size of the equity raised was increased to approximately $80.1 million. The majority of these funds are being used to finance our recently announced agreements to construct two 180,000 deadweight ton Capesizes and two 60,000 deadweight ton Ultramax fuel-efficient newbuildings. We will touch upon this issue in more detail later in the presentation. However I would like to share my belief with these acquisitions and show Star Bulk's position among the healthiest and most promising companies in the dry bulk shipping industry. Let us now turn to slide number 3 of the presentation for a preview of our second quarter 2013 financial highlights in comparison to last year's. In the three months ended June 30, 2013, net revenues amounted to 17.1 million, representing a 6% reduction versus the same period of 2012. Our revenues were mainly affected by the low freight rate environment and the lower average number of vessels due to the sale of the Star Sigma. Net revenues represent our total revenues adjusted…

Thank you, Spyros. Please turn now to slide 12 for a brief review of our recent key financial developments. During July, we completed the fully backstopped equity rights offering we had announced earlier in the quarter. The company issued 15,338,861 new shares and raised 80.1 million of gross proceeds. I believe that through their participation, our shareholders have validated their confidence in the company's prospects and strategy. The majority of the funds raised are being used to finance the vessels Spyros described earlier. Currently, Star Bulk has 20,751,671 outstanding shares. According to the latest 13G filing, our two major backstoppers, Monarch Alternative Capital and Oaktree Capital Management, each owned 3,865,888 shares or 18.6% of the company respectively. Standstill provisions have been inserted in the agreement with two new investors who among others backstopped our equity rights offering. Additionally, pursuant to the terms of this agreement, Monarch and Oaktree each have the right to appoint one director to the Board of Directors of our company. Monarch has already exercised their right by appointing Mr. Roger Smith, while Oaktree has not yet exercised their right. Lastly, during the second quarter of 2013 and while the interest rate forward curve was near historically low levels, we entered into a swap agreement in order to partially hedge our forward interest rate exposure. Specifically, the swap agreement concerns one of our credit facilities for the period starting from the second half of 2014 up to the second half of 2018 and for a principal amount of $55.5 million, which represents approximately 30% of our current outstanding debt. The interest rate for this facility was fixed at approximately 1.7% and the mark-to-market of July 31st stood at a positive $450,000. Let us now move to slide 13 for an overview of our balance sheet as of…

Thank you, Simos. As you have heard during our presentation, Star Bulk is a completely different company this quarter. Our market capitalization has increased from around 30 million to over 150 million following the successful equity raise. We believe that Star Bulk is not only positioned to navigate safely through the current challenging environment but to expand further its operations through vessel acquisitions in low prices and at the same time through active management of third-party fleets. Going to slide 21, our in-house management has provided tangible results as it has led to a meaningful increase in our efficiency and transparency, a consistent decrease in operating costs and lastly, an increase in our revenues going forward due to the management of third-party vessels. We have an experienced and dedicated management team, a moderately leveraged balance sheet and a healthy liquidity profile compared to the industry. We have secured our lenders’ trust and support and we have $82.3 million of cash. On top of our quality modern fleet, Star Bulk also has a diverse group of quality charterers with long lasting relationships. Last, but not least, the four fuel-efficient newbuildings that will be financed through the $80 million we raised place Star Buck in an advantageous position in terms of our fleet's competitiveness. Not only these vessels will be performing better than the vast majority of their peers, but they will also do so in an environmentally friendly manners. We believe Star Bulk has a good set of characteristics that place the company among the most promising in the dry bulk industry. In closing, I would like to thank our shareholders for their support and loyalty and reassure them that we'll continue our efforts to ensure the company's long term viability and enhanced shareholder value. Without taking any more of your time, I will now pass the floor over to the operator. In case you have any questions, both Simos and myself will be happy to answer them.

(Operator Instructions) Now your first question from BC Capital comes from [Ronald Burkman].

I have a quick question. The vessels coming off charter, what are your chartering plans, if the market improves will you look to charter on a longer periods? And for third party managed vessels will you look outside of drybulk and product tanker?

First question first. We think that by keeping our fleet with short-term charters, we'll be able to benefit and maximize the revenues that we have going forward when the markets will start improving. Right now we have Capesize (inaudible) where it’s so volatile and I think that we have seen the last increases in rates and I think we'll benefit a lot with two of our newest vessels, the Star Polaris and Star Borealis. Borealis is not fixed and we will be looking to [terminate after] September and the Polaris will be off before the year end. Therefore I think that we managed to build more from the raising of the charter rates. Now regarding third-party managed fleet, we are only taking vessels on the dry bulk side, regarding the product tankers we are growing partial management services. Purchasing regarding insurance and [regarding tool].

And now your next question from Blue Shore Capital is from [Thomas Isenburger].

Hi. First of all we would like to congratulate you on such a strong product and the successful capital raising. And just a very quick question in terms of purchasing vessels, are you considering buying any second hand ships as we are seeing an increased volume of ships and fleets that are being offered for sale currently?

Thank you. That's a very good question and we had a long discussion today in our board today. Not only we are looking for acquiring additional newbuildings but I think we'll be also quite active in the market in the second hand especially if the prices versus the rates that you can get in the market make sense and bring accretiveness to the transactions. If we find accretive transactions in the second hand we'll also consider them.

(Operator Instructions). Gentlemen, there appear to be no further questions at this time. So I'll pass the floor back to you for closing remarks.

Thank you all for being present with us today for our earnings conference call. Our 2013 second quarter results, the third quarter results are scheduled for some time in November. Thank you all very much for your attention and have a good day. Goodbye.

Thank you gentlemen. Many thanks to both our speakers today. That does conclude our conference. Thank you for participating. You may now disconnect. Thank you Mr. Capralos. Thank you Mr. Spyrou.

Thank you very much.

All the very best to you gentlemen. Bye-bye.

Bye-bye.