Thank you for standing by and welcome to the Capital Product Partners Fourth Quarter 2015 Financial Results Conference Call. We have with us Mr. Jerry Kalogiratos, Chief Executive Officer and 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 the conference is being recorded today January, 29 2016. The statements in today's conference call that are not historical facts, including our expectations regarding developments in the markets, fleet developments, our ability to pursue growth opportunities, our expected charter coverage ratio for 2016 and 2017 and expectations or objectives regarding our quarterly distributions and annual distribution guidance maybe 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 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 like to hand the conference over to your speaker today, Mr. Kalogiratos. Please go ahead, sir.

Thank you, Jenny, 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. On January 20, 2016, our Board of Directors declared a cash distribution of $0.2385 per common unit and $0.21975 per Class B unit for the fourth quarter of 2015. The fourth quarter common unit cash distribution will be paid on February 12 to unit holders of record on February 5. The fourth quarter Class B unit cash distribution will be paid on February 10 to Class B Unitholders of record on February 3. The Partnership's net income for the fourth quarter stood at $15.4 million, a $1.7 million improvement on the $13.7 million net income recorded in the fourth quarter of 2014. The Partnership's operating surplus for the quarter amounted to $35.2 million, which is $3.1 million higher than the $32.1 million in the fourth quarter of 2014. Common unit coverage for the fourth quarter 2015 stood at 1.1 times. We recorded 0.3 million in profit share for the quarter generated by two of our product tankers, the Anemos I and the Amadeus as a result of the strong support environment for product tankers. During the fourth quarter of 2015 we drydocked an additional three vessels which brings the total number of drydock vessels for 2015 to 10. We are also pleased to announce that the Partnership has secured long-term employment for five of its products tankers all on increased rates compared to the previous employment, including three MR tankers fixed for three years. As a result of the new charters and as at the end of the fourth quarter 2015, the average remaining charter duration of our charters stood at 6.4 years with approximate charter coverage of…

Thank you very much indeed sir. [Operator instructions] Your first question from Evercore comes from the line of Jon Chappell. Your line is now open.

Thank you. Good afternoon, Jerry.

Hi Jon.

Just a couple of quick questions for you. First, on the container ships, obviously you are in discussions right now so I want to ask you about that specifically, but I’m just trying to figure out in a pretty opaque market, what the time charter and spot rate environment is like today and you have this little table on page 12, but there is no 8000 TEU line in there. So just generally speaking, where is the one to three-year time charter rates for those size ships and where would the spot market be roughly if you had to employ the ships there?

Right now Jon, there is very limited liquidity to the Post-Panamax container market. There are number of idle vessels. I think right now we count 12 vessel similar to ours as liners have taken a step back since the sharp drop in freight rates for containers a quarter or so ago. But there have been a limited number of fixtures for a shorter duration, let's call it six months to 12 months and most of them have been between the $7,000 to $10,000 range.

All right. And then hate to do the worst case scenario here, but assume that the negotiations fall through and they do not get chartered and you basically have the option of putting them on the spot market, which is probably does not have very good utilization right now. What’s the market like to potentially sell those ships and is that something you'd consider. I mean they are still relatively modern; the charter with Maersk, which is obviously a Blue Chip charter. So I’m sure they are in good shape. Do you think you could liquidate those if they didn't really kind of fit your strategy of being chartered on a medium-term basis?

There is no such thing as you know as a spot market, but we are quite confident that our discussions will be fruitful and we should be able to disclose more as soon as this are firm, but for the same reasons that the charter market is illiquid, it is exactly the same for the secondhand market. So there is very little interest as I think both liners as well as owners are trying to understand what the expectations are going forward and what would be the signs for market improvement. But as I said, I think we’re quite confident that we should be able to deliver on employment let's say from the second quarter onwards.

Great. Last one and then I’ll turn it over. I completely understand the decision to keep the distribution flat given the 20% plus yield right now. Is there a – like a target yield or something where you would revisit that kind of slow and steady growth that you were on the pace you were at before, like $0.002 a quarter. Yes, that’s basically – is there a certain level you would want to get to before you kind of revisit that or right now you are just not getting paid for the yield, so retain the excess cash?

Yes, you are right, Jon. I think our Board has decided to maintain the same distribution level for this quarter and we do believe that this distribution level is consistent with our coverage. Now, our cost of capital has been currently impacted by the negative sentiment affecting generally the MLP sector, but as you know our underlying business is sound. In our view the pricing dislocation affecting the MLP sector is primarily related to low and volatile oil prices, but low oil prices have generally benefited our business and especially the product and crude tanker segments. Now during the last few quarters, we have taken advantage of the improved tanker markets to re-charter our tanker fleet at higher rates as per the earlier announcements and now our charter duration stands at 90% for 2016 and 70% for 2017. And thus I think we’re providing long-term customer visibility. Now in addition, as you know CPLP does not have any unfunded CapEx. So we will be reaching out to our investors over the coming weeks and quarters to explain the distinctive nature of our operations. And we expect that these mispricing will reverse as markets stabilize in the future, we can then revisit the distribution.

Okay, great. Thanks for your time Jerry.

Thank you, Jon.

So your next question from Stifel comes from the line of Ben Nolan, and your line is now open.

Thank you. Hi Jerry. I have a couple of questions. First relates to the charters and the five new charters that you sign all of which are really good. The question there relates to the Sponsor chartering if you - I was just curious how you are thinking about, obviously you are able to get charters from other entities during the quarter and I would imagine there is a relatively fluid market. How do you think about incremental charters whether to do those internally or charter the amount to other unaffiliated third parties, what’s the thinking on that?

Hi Ben. I think the answer is that it depends on the opportunity at hand, but to the extent possible we have reduced our exposure to Capital Maritime as we discussed earlier. We expect by the time we deliver all the ships to their new charters we’ll have only five ships to Capital Maritime. This is I think very different compared to the employment of our vessels a year or so ago. But Capital Maritime remains very active in the spot market, it always gets a chance to bid when there is unemployment opportunity for one of our vessels and depending on the position and rate it has been at times a very competitive, more competitive than what we see on offer from third-parties. But I do remind you that all decisions when it comes to such transactions are taken by the independent Conflicts Committee.

And clearly the charter rates are fair to even better than that, but my next question sort of relates to the nine vessels that you show in terms of potential dropdowns there obviously nothing imminent, but as we get closer to the delivery of that first vessel in September. First of all I don’t know if there are any charters on those vessels, but just thinking through what you might do with those in the event that the capital markets are currently or unavailable as they currently would appear to be. I mean is that – is there any compulsion to need to feel like you do some dropdown or is it possible that just nothing happens with those?

Ben, at this point we are more focused on taking delivery of the last contracted dropdown vessel which we expect to take delivery of in towards the end of February. The additional dropdowns such as 8 MRs that you are referring to is only an option and of course Capital Maritime will needs to line up it employment for those and for us to consider. As you saw in our presentation Capital Maritime has secured the credit facility that can be used for this purpose and effectively the credit facility allows for a dropdown on 50% LTV for up to 5 of these MRs, but as you say we need to see our unit price appreciate considerably from current levels before we can contemplate growth and accretive transactions that would involve financing with common equity. The current dislocation of pricing in the wider MLP space means that their cost of capital has increased substantially with our common units yielding today close to 22%. So to answer your question Capital Maritime continue to trade the vessels; there is definitely no obligation from our part or we don't feel that there is an obligation from our part to drop down the vessels and definitely not at this valuation.

Got you. And then lastly and this hopefully will not be an important long-term issue but with respect to the two vessels, the two containerships that currently are unemployed and you hope to have employment for in the second quarter, which I think would be very important. How should I think about the operating expenses on those I mean or for the first quarter at least, are they still costing as much as they would otherwise if they were running?

There is a small reduction in the operating expenses because the number of crew - we have decreased the number of crew on board and of course as the vessels they are not trading and the main engine is not being utilized, the consumption of lubricants is lower. So there might be a saving of call it 20% to 30%, but we have not laid out the vessels because we have been seeing inquiries from liners limited inquiries and now as already discussed we think that we are very close to actually fixing something. So you should expect a small reduction but not a major one.

Okay. That's very helpful. Thanks Jerry and good luck getting those two last contracts.

Thank you, Ben.

Thank you very much, sir. And we do have Ken Hoexter back with us. So from Bank of America your next question comes from Ken Hoexter. Your line is open sir.

Great good morning sorry about that Jerry apologize. Thank you, operator for coming back. Jerry on the order book you mentioned the large slippage earlier, but given the oil pullback is there an even greater reluctance to take Eco ships, so could we see that do you see that slipping even further what you think the feel is in the industry and then and also within that. Can you talk about the new regulations that are coming up on the Tier-3 does that keep the orders going or does that only on new vessels and you don't have to upgrade the old ones may be you can just talk a little bit about the regulatory environment there?

Sure. Overall for - when it comes to tankers you’ll find that for product tankers the ordering was quite subdued compared to previous years with the order book looking a very reasonable 15% one of the lowest we have seen for some years. On the crude tanker side don’t forget that for many years until 2014 because of the depressed market there have been virtually no orders. So when the markets are top on the back of the lower oil prices, which generated incremental oil demand as well as because of the limited supply and we did see a number of orders being placed so over the last let's say 18 months. And this trend has definitely – is definitely weaker as we speak as I think we have seen the bulk of ordering, but at the same time this means that the for example when it comes to Suezmax the order book is around 20%. When it comes to the demand I think that it should be able to absorb the supply as Chinese demand continues to be robust and it's not just correlated to economic growth it's also correlated to exports coming out of China, when it comes to products as you might know. China has increased the quotas for Chinese refineries including teapot refineries. So China has been importing, consistently importing over the last few months. And the building of strategic reserves seems to continue. In addition the incremental oil demand that seems to be driving the crude oil demand going forward and the return of Iran to the market as well as the potential of U.S. exports could play very much in favor of crude vessels. But to return to your question the Tier-3 regulation is only for vessels that have been ordered from – I think actually [delayed] from January 2016 onwards. So it does not affect the older vessels. Of course demand for Eco vessels or rather the benefit of Eco vessels is less today with the bunker prices around $150, $160 per ton. But in the end there is – the economics are specific for each type of vessel and depending on the consumption of a ship you know your return. So Eco vessels, they still come under a premium, but it's simply much smaller.

I appreciate that answer and you kind of blended in there a little bit into my next question which on the export band. I mean I think the general thesis seems to be that hey it’s good for oil tankers; we’re going to get more stuff moving and same with Iran. But the theme seems to be – it’s bad for product tankers, because now you are going to have shorter hauls. What have you seen I mean obviously have you seen the pressure on rates I mean I know we’re just starting and what are your thoughts I guess generally as we move with that with the lifting of the band is, do you see that as a negative on the product side?

The product tanker market has been – the spot market has been a little softer in the first quarter of 2016 compared to last year, but don't forget that with the exception of the recent cold spell at your side of the wood say it has been a very warm winter. So demand for middle [dislets] has been weaker over the last few weeks. I think we need to be – we need to see how things develop going forward especially over the coming weeks with regard to product tanker demand. Now it is not clear how the U.S. crude oil exports will affect the demand for product tankers. But what I can say is that I do not foresee a very hot crude market without a very good product tanker market and vice versa. As you know they are vessels that can trade both sides of the trade. So if for example the crude tanker market on the back of the Iranian crude oil and the experts out of the U.S. out of the U.S. pickup and while the – for example the product tanker market is very subdued then you will see a lot of relatives moving into that market as we have seen already and vice versa. So I think it was going to be a net positive for tankers for these developments, but we just need to see how this will develop going forward.

Wonderful. Appreciate the answers and congrats on the nice uptick on the renewal rates. Thanks Jerry.

Thank you.

Thank you very much sir. Now from Deutsche Bank, your next question comes from the line of Amit Mehrotra and your line is now open sir.

Thank you. This is [indiscernible] in for Amit. I don't think you actually need to recharter those containerships to be able to maintain the coverage given the accretive tanker rechartering and dropdown. So if you could talk about this in terms of cash flow puts and takes even without any revenue contribution from the containerships and all the OpEx associated with those ships that would be great?

You are right. Actually, we don't need to employ these vessels at all for the full-year and still we can deliver let's say a coverage on the existing distribution north of one times. But as you say the – we have rechartered a number of our product tankers and increased rates and a number of our – actually these vessels were not the charters, we’re not expiring this year, but Capital Maritime was willing to let go and as such we managed to extend our remaining charter duration and increase our coverage and increase rates. And in the end depressed container market affects only two out of the 35 ships. So, yes, the answer is yes, we can still achieve one times coverage even without these vessels being employed, but we do feel quite confident that we will secure employment for both ships.

Great, thank you for that. You’ve also noticed that net debt to capital took down even further in the quarter and the Partner's distribution yield is significantly higher than cost of any debt financing. I know it's a long-shot, but any chance of putting on a little more debt in using the proceeds to repurchase shares?

I think for the moment it is important for us to take delivery of the last dropdown vessel and also fix the two container market to open container vessel, so that are currently idle. Capital markets normalize and then we will consider other transactions into the unit buybacks I think is still too early.

Okay, very good. And one last question. Just regarding the container ship side of the business, how many Post-Panamax ships are currently seeking an employment and in addition how many 8000 TEU vessels are coming up charter or being redelivered this coming year. We are just trying to get an understanding of challenging the market is getting on a prospective basis?

Currently, we have counted 12, 8000 TEUs vessels which are similar to ours being idle, but from shipping companies, companies like us and that's in addition to a number of similar vessels controlled by liners. But the market is quite opaque so it's difficult to give you the exact number of vessels especially those controlled by liners that are app for rechartering sooner or already idle. But it’s important to note that when a requirement arises it could well be that it will be for more than one vessel especially for liner decides to replace to service our smaller ships. For example, if the liner decides to replace a string of 6500 TEUs with a new string of 8000 TEUs you could see a number of these vessels finding employment. So it's not one by one kind of employment. And we have been seeing a few such inquiries coming to the market.

Very good. Thank you. That’s all from us. Definitely appreciate the time guys.

Thank you.

Thank you very much indeed. Your next question from UBS Securities comes from the line of Spiro Dounis. And you line is now open.

Hi Jerry, how it’s going.

Nice Spiro, [indiscernible].

Good, good not bad. So just wanted to go back to something you said just previously I mean you mentioned buybacks and it sounds like your coverage is going to be going up a little bit, the vessels coming online, the distribution flat lining for now. Just wondering how you are thinking about that use of cash if it’s going to unit buybacks, how big would you see something like that being?

I think at this point it’s very important for the partnership to be conservative with its cost especially we don’t have visibility on the container market and until the container market improves as well as to see capital markets normalize. So in addition to that we do have $15 million of debt amortization per year, so – and we're going to use the excess cash to repay that debt.

Okay. And I guess I realize some of this is sort of speculative, but if you were to build up a pretty nice cash balance over time just because the market is doing well and maybe don’t reinstate the growth as soon as you think. These dropdowns that you have in place, is there a way or would you be open to sell funding of those with cash on hand not having to that capital market and maybe one at a time as supposed to all eight?

Potentially yes, let us raise that point whereby we have visibility with the containers as well as with capital markets and then yes that could be a potential way of funding dropdowns.

Okay. And just to be clear is there an expiration on your options to take those?

No, there is none. I mean they weighted this works is that if Capital Maritime has been offered from a third-party to sell the vessels then we have right of first refusal [indiscernible].

Perfect. That’s from me. Thanks Jerry.

Thank you, Spiro.

Thank you very much indeed. So I’ll move to the next question from Seaport Global Securities your next question comes from the line of Sunil Sibal. And your line is now open.

Hi, Jerry congratulations on a good quarter.

Thanks.

Most of my questions actually been addressed just a couple of clarifications. So on the containership the two vessels that you are bidding on are the two bids or discussions the same charter or they are a bit different charter?

They will both go to the same charter.

Okay. That’s helpful. And then on in terms of the capital market have you seen some kind of Midstream MLP players come in and cap into alternate MLP currency, i.e. preferred lot. I was just kind of curious if you kind of explore that market or how do you see that market for yourself or in the broader space of shipping MLPs?

Well, we have issued preferred in the past and half of it has been converted to common if there is an opportunity and whereby we can put together an accretive transaction, yes we would look at that source of capital as well.

Is it fair to say that they are not there yet, right?

Sorry what’s that Sunil?

I was saying that it’s fair to assume that we are not there yet in terms of that market being deep enough for you guys to explore something in the near-term?

Not at this point as far as we know but it is something that we have used before and we bear in mind.

All right. That’s all I had. Thanks much guys.

Thank you, Sunil.

Thank you very much indeed sir. Now from the company name of Janney we have a question from the line of Michael Gyure. I hope I have said your name correctly Mike. Thank you.

Yes, that’s fine. Thank you. I wondered Jerry if you could talk a little bit what you are seeing on the operating cost side maybe talk a little about your utilization days trends kind of fourth quarter to first quarter. Anything you can give me there would be helpful thanks.

Well, our utilization was close to 100% for the vessels that did not have any drydocks or for that quarter. As discussed earlier, we did have a number of higher days for the vessels at the drydock throughout 2015, including for three of our vessels that drydocked in the fourth quarter of 2015. That was effectively for the Archimidis, the Agamemnon, and the Anemos I, but other than we had no other hire, OpEx is very much in line with the previous quarters. And if anything for the vessels that past drydock you should expect slightly lower OpEx.

Great, thank you.

Thank you very much indeed. And your next question from Raymond James comes from the line of Ben Brownlow. Your line is open sir.

Hey, thanks for taking the question and congratulations again on the renewed vessels. Jerry, I think you said earlier in the call on the containerships was it a one-year time charter that they were considering plus a one-year extension?

Yes, that’s correct Ben. So what we are discussing is one plus one in structural – in charters option, but you should expect that second year would be at an increased rate.

Is there any color you can provide on what the second-year rate would look like?

It would be let’s say closer to the average that these vessels have been earning compared to the first year, but it's important to note here that its charters option, so it is the first year that is firm. If market improves considerably then the charters will exercise that option, if it doesn't then you're left with one-year at the low rate.

That’s helpful. And then I just want to get your thoughts in terms of what you view as sort of what’s going to be the inflection point to a rate improvement in containership side or what do you see in the catalyst, I mean is it going to be a scrapping, is it going to be improved Chinese demand, just some color there?

See, I think the important things to look for when it comes to containers is an improvement in European demand and maybe to a lesser extent into Asia trade. The cascading of Post-Panamaxes into the sub 6500 TEU territory that’s as liners replace smaller containers with bigger ones, a trend that has been taking place now for a while. The demolition that you mentioned is very important and it has been picking up considerably as a percentage of the fleet is idle and we have seen 15-year old containers heading to the scrapyard. And of course I think a major catalyst for Post-Panamax is especially the opening of the new Panama Canal locks that would mean that number of operators would choose to replace [5000, 600,000] TEU vessels with large Post-Panamax vessels.

Great, thank you.

Thank you, Ben.

Thank you very much indeed. And there are no further questions I shall pass the floor back to you for closing remarks. Sorry to interrupt you. I seem Michael Webber has just rejoined the call would you like to take his questions sir.

Of course. Thank you.

Mr. Webber, would you please press star one again on your telephone keypad for me. Mr. Webber, your line is now open.

Hi, I’m sorry this is – I’m actually Hilary calling in for Mike.

Hi, Hillary.

Hi, how are you Jerry? I know you are not looking to acquire any of the optional vessels any time soon, but I was just wondering – I know they have a credit facility, but I was just wondering and your balance sheet looks really good, if you have any target leverage ratio if I guess so when you do decide to purchase those vessels?

The facility is with Capital Maritime, but it does provide the option for the vessels to be dropped down at the 50% maximum loan to value into capital products. We have I think communicated in the past that this is the ratio that we will be targeting for in the future and I think it's also very important for us to be able to secure non-amortizing debt.

Okay. If you have any expected timing as far as when the Sponsor will be getting charters for these vessels?

Well, the Sponsor has a large presence in the spot market, couple of those ships – actually one of the ships has longer-term employment, but no actually I don't have any color at this point.

Okay, that’s it from me. Thank you very much.

Thank you, Hillary. End of Q&A

And once again I’ll pass the floor back to you. Thank you very much.

Thank you all for listening in today.

Thank you Mr. Kalogiratos. And with many thanks to our speaker today that does conclude the conference. Thank you all for participating. You may now disconnect.

Thank you, Jenny. Have a good day.

All the very best. Thank you sir.

Thanks. Bye-bye.

Bye-bye.