Thank you for standing by, and welcome to the Capital Product Partners' Second Quarter 2017 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 this conference is being recorded today on the 28th of July 2017. The statements in today's conference call that are not historical facts, including our expectations regarding cash generation, our refinancing plans, future debt levels and repayment, assumed net book value, our ability to pursue growth opportunities, our expectations or objectives regarding future distribution amounts, future earnings, our expectations regarding employment of our vessels, redelivery dates and charter rates, fleet growth, market and charter rate expectations, may be forward-looking statements and 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 or 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 and we make no prediction or statement about the performance of our common units. And with that, I would now like to hand over to your speaker today, Mr. Kalogiratos. Please go ahead, sir.

Thank you, 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 July 20, our Board of Directors declared a cash distribution of $0.08 per common unit. The second quarter common unit cash distribution will be paid on August 11, 2017 to common unit holders of record on August 3rd. In addition, our Board of Directors declared a cash distribution of $0.21375 per Class B Units for the second quarter of 2017. The second quarter Class B cash distribution will be paid on August 10th to Unitholders of record on August 2nd. The Partnership's net income for the second quarter stood at $9.8 million, compared to $14.9 million in the second quarter of 2016. The Partnership’s operating surplus for the quarter prior to Class B Units distribution and the capital reserve amounted to $30.5 million, compared to $36.6 million for the second quarter of 2016 and $32.7 million for the first quarter of 2017. Common unit coverage for the second quarter of 2017 stood at 1.3 times. On May 22nd, we entered into a firm offer letter for a six year senior secured term loan facility for up to $460 million led by HSH Nordbank and ING Bank. The proceeds of the new facility will be used together with cash from our balance sheet for the refinancing of substantially all of our existing indebtedness thus addressing all near to medium-term amortization and bullet payments as the maturity of the new credit facility is expected in the second half of 2023. During the quarter, we also expanded the time charter employment for the 37,000 deadweight product tanker, 'Alkiviadis, with French oil major Total for an additional year. The remaining charter duration…

[Operator Instructions] And with that, your first question comes from Jon Chappell from Evercore. John, your line is open.

Thank you. Good afternoon, Jerry.

Hi, John.

So, just one quick clarification, very thorough detailed presentation on the new credit facility, but you’ve been – obviously been retaining more cash in the capital reserve perspective knowing that the amortization on the old facilities was coming up. Is the capital reserves that we think about in the distribution coverage ratio, is that’s strictly going to be the debt amortization going forward, or is there end of any overage?

You might recall that, when we set the capital reserve in April of last year, we put aside $14.6 million on a quarterly basis to fully provide for the debt repayments coming due until the end of 2018. So, in light of the new credit facility, we will definitely need to revisit the capital reserve, but we will do that upon the drawdown of the facility. We expect to draw the full amount under both tranches and we will give unit holders visibility with regard to the capital reserve after the refinancing transaction is complete.

Okay, all right. Thanks. And then, shifting gears then to the growth profile, keeping into our thought process, kind of how you are thinking about financing that. A couple of these shifts already have facilities associated with them. How much of the total cost of those ships, I guess, charters included was represented by the credit facilities with those that we were talking about and a 50-50 debt equity or is it 60, 65?

As we have communicated in the past, we will aim to do transactions on a 50-50 or so debt-to-equity ratio. Some of these facilities actually provide for even higher debt for even higher level let’s say that might or right now, that are now with Capital Maritime. But as we have done for example with the Amore, we took less debt. We reduced the debt down to 50% of the acquisition price and we also got the two for that specific case and for the Amore it’s also two year non-amortizing period.

Okay, final one and I’ll turn it over. Clearly there is only two – these two crude tankers that have five year charters. What’s your appetite for taking down drop down even if the financing is available without charters and taking that kind of market risk at today’s markets?

I think, for us, like in the past, it is important to have and to be able to give unit holders some visibility with regard to cash flow going forward. So, vessels like the two Aframaxes that have long charters are definitely preferable. But also, sectors like the product tanker sector, where we are quite constructive might be potential drop down opportunities as even shorter time charter, call it a year or two years might be attractive for us in the sense that it is a market where expect to see more upside.

And I am sorry. Just one more quick follow-up on that same point though. As you are looking at these five optional vessel drop downs are obviously very modern, but will you have some of your fleet renewal with your existing fleet that are maybe 10 years older so, is there a two-tiered market as far as kind of liquidity and price on the three plus year charters you could potentially get on those different ages of product tankers?

Sure, nowadays eco had a very modern eco vessels. They come under premium in the period market and today, I would call it anywhere between $500 to $750. But that’s more the, let’s say the eco, versus non-eco differential. And that of course, does very depending on fuel oil prices, but bunker prices. But at this point, there is a differential for sure.

Great. Okay, thanks, very much, Jerry.

Thank you very much. The next question comes from Ben Nolan from Stifel. Ben, your line is open.

Great, thanks. Yes, so, Jerry, I had just a couple of questions mostly related to the new credit facility. First of all, congratulations. I know you guys have been working on this for a while, but, the amount of repayment $120 million – little over $120 million, seems like a pretty high amount. It leaves you with a relatively thin cash balance I think. Although, what jumped out, I think there is still the restricted cash. Through this new credit facility, does it release that restricted cash for you guys?

No, you should expect that covenants for the new credit facility will be similar. So, about $0.5 million per vessel would remain restricted cash. But having – we’ve intend to complete the transaction over the coming months and of course, we will build up some additional cash cushion. That should leave us anywhere between $40 million to $50 million. But having done that, you will find that not only can we service our debt amortization very, very comfortably, but also the common unit coverage will increase on the back of the potentially lower capital reserve and that’s to be decided. But also because of the interest cost savings that are not insubstantial. I mean they are north of $5 million, just because of that repayment.

Right, okay. And then, sort of along those lines, in thinking about the capital necessary to execute on some of these drop downs. Obviously, there would probably need to be – you are reserving cash and some of that can go towards new acquisitions, but, it would seem like you probably need more than simply what’s available on the cash flow if you are going to execute on this drop down soon. How do you think through maybe the funding of that? Or you are utilizing your ATM and actually, maybe an update on sort of how active you’ve been on the ATM and if there is an update on the share count or the unit count as it stands today?

Sure. The – as you know, our ATM filing is for up to $50 million and allows us to sell incremental common units in the markets and it’s valid for three years. The ATM was launched back in September 2016. Now since the ATM was put in place on September 12 and until today, we have issued approximately 2.9 million units with the net proceeds being just sort of $10 million. So this translates into less than 2.2% of the average daily volume of the stock since inception of the ATM. We are going to continue to use the ATM opportunistically and in a prudent manner, and to your earlier point, potential net proceeds from the ATM could complement drop down transactions. But to this point, as you know, and as always been in the past, accretion is the main criterion when it comes to drop downs and that’s what is going to determine what additional capital if any we are going to raise. We are of course mindful that the unit price is not what it used to be and it makes more – accretive drop downs more difficult. But that’s the criterion.

Okay. Perfect, that was both a thorough and a very good answer. Appreciate it. I guess, I’ll turn it over to someone else now. Thanks, Jerry.

Thank you, Ben.

Thank you. And your next question comes from Spiro Dounis from UBS Securities. Spiro, your line is open.

Hey, Jerry, good morning and congrats on the transaction done.

Thanks, Spiro.

Just wanted to, just start off on recommencing growth here. Obviously, this is a big hurdle to get through and it sounds like maybe just some more big work to get through at this point. But once that’s done, how do you think about the timing of the drop down? I know you said maybe market dependent, but is that around the price – the unit price, interest levels, combination of both, how should we think about when the next drop down could occur?

Well, let us firstly, let us complete, as you say the paper work and the transaction. It’s important to have it behind us. And then, we can think about the drop downs. As I mentioned earlier, accretion is going to be the main criterion. But now that we have this behind us, this is what we are going to look for, growth and potential drop downs in an accretive manner. I am sorry, I cannot give you more in that respect in terms of timing, but you can rest assured that this is what’s going to be our focus going forward.

Okay. I thoroughly get that. Maybe, the different sort of similar question and maybe it’s tough to answer to, but I know historically, back in maybe, call it a normal environment, I think you guys had guided to 2% to 3% distribution growth. As you think about, your growth potential in a normal environment, and where you would like to get back to. Is that the bar, obviously that would imply some of that level of accretion, but just trying to get a sense of where your heads are on? What details it looks like in a normal environment?

Well, first - the financing transaction apart from the obvious advantages to us with regard to addressing the maturities, extending maturities we won to 2023 providing visibility deleveraging and all that it’s definitely accretive to our distributable – to our long-term distributable cash flow. But in the end, any accretion that will come from drop downs, we hope to be able to find their way to unit holders in the form of distribution growth.

Okay. Fair enough. Appreciated. Thanks, Jerry.

Thank you, Spiro.

Thank you. [Operator Instructions] And your next question comes from Mike Gyure from Janney. Mike, your line is open.

Hey, Jerry, can you talk a little bit about on – I guess, the operating fronts? Some of the expenses I thought were a little higher in the voyage and the vessel operating cost this quarter compared to let’s say last quarter. And you mentioned kind of the – some of the vessels that potentially were impacted by that, could you talk about I guess, the trend, as you look toward the back half of the year, do you expect the operating cost to remain sort of at the same level or increase or decrease?

Sure, that’s a fair question. The drop in operating surplus that you notice by almost $2.2 million compared to the previous quarter is mostly related as you to the increase in our operating expenses. So they are two sides of that. On the one hand, we had two vessels, the Aktoras and the Aiolos, which were redelivered to us after the respective 10 year bareboat employment at the end of the first quarter. These vessels were now incurring operating expenses during the second quarter and will incur operating expenses going forward, which was not previously the case. So that’s a recurring item. The operating expenses impact of these vessels was approximately $1.3 million. But note that included also certain one-off OpEx items. Importantly, you have to take into account that the time charter equivalent of the previous bareboat employment of these two vessels was higher than their earnings post redelivery due to the extending of hire of total of 62 days associated with the redelivery balancing and cleaning of these vessels, as well as the weak charter markets. And as a result, the net revenues for this quarter did not increase commensurately to make up for the increased operating expenses. And finally, there were some additional off-hire days and increased average OpEx for the rest of the fleet this quarter on the back of – if you won certain one-off maintenance items and unscheduled repairs, which we do not expect to be repeated in the coming quarters.

Great. Thanks that’s very helpful.

Thank you.

Thank you. And your next question comes from Ben Brownlow of Raymond James. Ben, your line is open.

Hey, good morning, and my congratulations on the refinancing.

Thank you.

Jerry, just to make sure, we are speaking about this or I am thinking about it in its entirety, when you – on the new amortization schedule, is it fair to say that’s basically going to be the replacement CapEx program? And is there any reason going forward why that capital raiser program would continue in any form?

As discussed, we are going to communicate more with regard to the capital reserve going forward after the transaction is complete. But, to your point, as in the past, effectively, we set a capital reserve which equaled our future debt amortization and in lieu of a replacement CapEx. So, it is very probable that we will continue along this way.

Okay, that’s helpful. And on the two crude tanker potential drop downs, is it fair to assume, I mean, just given when they were built early 2017, that those are on kind of a weaker rate backdrop?

These two vessels are fixed on a five year time charter employment at – let us – I mean, it has been also reported in the market that at substantial premium to the current markets. It has been reported a market that these vessels were fixed at the $26,400 per day which compares very favorable to current rates.

Okay, that’s helpful. And one more – one last one from me. On the product tanker side, I didn’t catch it if you said it. Any update on the actives?

No, the active is currently completing a short time charter with a trader. And then we fixed for another short time charter between which has, so-called, flexible period between 40 to 180 days with Cargill and escalating rates starting from 15.5 up to $15,000 per day.

Great, thank you again.

Thank you, Ben.

Thank you. [Operator Instructions] There are no further questions. Jerry, please you continue sir.

Thank you and thank you all for joining us today.