Thank you for standing by, and welcome to the Capital Product Partners on the Third Quarter 2019 Financial Results Conference Call. We have with us, Mr. Jerry Kalogiratos, Chief Executive 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 Thursday 31st of October, 2019. The statements in today’s conference call that are not historical facts, including our expectations regarding cash generation, future debt levels and repayments, our ability to pursue growth opportunities, our expectations or objectives regarding future distribution amounts, capital reserve amounts, distribution coverage, future earnings and our expectations regarding employment of our vessels, re-delivery dates and charter rates, fleet growth and market 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 can 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. Make sure no prediction or statement about the performance of our common units.I would now like to hand the call over to your speaker today, Mr. Kalogiratos. Please go ahead, sir.

Thank you, Joanne, and thank you all for joining us today. As a reminder, we'll be referring to the supporting slides available on our website as we go through today's presentation. As previously announced, we concluded on March 27th, the spin-off of the partnership's tanker fleet and subsequent merger with DSS Holdings, forming Diamond S Shipping. Accordingly, we present our financial results for the third quarter 2019, as well as comparative periods on a continuing operations basis except where reference is made to discontinued operations. The partnership's net income from continuing operations for the third quarter was $3.4 million. Our Board of Directors declared the cash distribution of $0.315 per common units for the quarter.The quarterly cash distribution will be paid on November 8 to common unitholders of record on November 1st. Common unit coverage for the third quarter, after adjusting for the capital reserve, was 0.9 times due to one-off expenses incurred this quarter, as well as loss of higher associated with the passing of special survey and discover retrofit of the Agamemnon. If we were to adjust for the aforementioned one-off expenses and the loss of higher, common unit coverage would have amounted to 1.6 times. The containership of Agamemnon commences its long-term time charter with MSC in September after successfully completing the installation of a scrubber system and ballast water treatment system and passing of a special survey. As a result, the partnership charter coverage for the fourth quarter of 2019 and for 2020 corresponds to 100% and 90%, respectively, while for 2021, the coverage stands at 67%. Correspondingly, the partnership’s remaining charter duration stood at the end of the third quarter at 4.8 years.Turning to Slide 3, revenue for the quarter decreased by 70% to $26.4 million compared to $31.8 million in the third quarter of…

[Operator Instructions] First question comes from the line of Jon Chappell from Evercore. Please go ahead, your line is now open.Jon ChappellHi, Jerry, it's Jon Chappell from Evercore. How are you?Jerry KalogiratosHi.Jon ChappellSo couple of things I wanted to ask about, first on the solution. So I think that's pretty clear. The timing and getting paid by HMM after 12 days, that's helpful. You'd mentioned $2.8 million of extra costs in the third quarter associated with the scrubber retrofitting of the first containership. And now you're looking at basically for 3.5 million in the fourth quarter alone. So what kind of costs in aggregate do you expect over the run rate from those four drydockings in 4Q?Jerry KalogiratosSo the $2.1 million additional cost that went through our P&L does not really relate to the scrubber retrofit of Agamemnon. As previously disclosed, in our six months financials filed on October 11, the vessel owning company of CMA CGM Amazon reads in September 2019, a settlement with the U.S. Department of Justice for an oil record for violation by the crew of the vessel, which was previously unknown to the company.Under the terms of this agreement, the vessel owning company accepted by carriage responsibility for this violation that will pay fine of about -- would pay a fine of up to $500,000. Well the vessel is based on probation and is required to implement an environmental compliance plan. So this fine of $500,000 has been expensive in the third quarter of 2019, probably, will be paid at the end of the fourth quarter. Together with an additional $1.6 million in other expenses related to the settlement such as legal fees, crew recommendation and travel expenses. Unfortunately, defending such charges in the U.S. is particularly costly as it requires a number of crew…

[Technical Difficulty] Please go ahead. Your line is now open.Ben NolanHey, Jerry. This is Ben Nolan from Stifel. How you’re doing?Jerry KalogiratosHi, Ben.Ben NolanSo I appreciate all the color that you gave on the settlement, and the oil book thing, and I also appreciate that you might be a little bit limited in what you can say about particular reasons. But I'm curious is this is something that I haven't come across before. Is this unusual or and is there any outside of the payments that you've outlined? There shouldn't be any other legacy costs associated with this, correct?Jerry KalogiratosNo, that's really the end of it. It's not unusual. It is actually quite common this type of cases in the US. As I said, this was really an oil record book violation that the crew did without the knowledge of the owners or the managers. In the end, given, 1I mean, there's a history of fines you’ll find that $0.5 million in fines that we paid as a settlement is definitely in the very low end of these outcomes, but given how the system works, it is very costly to monitor and defend those cases. But I think it should be all now behind us going forward. Really, the only thing that is going to affect our results is the off-hire associated with the scrubber retrofits, which is kept for the HMM ships and the Archimedes, and then, really it should be smooth sailing. But unfortunately, we had the effect of this one off expense related to the Amazon this quarter together with a fairly long drydock of Cape Agamemnon, so that all affected our bottom line. But I do expect that in the next quarter, we should see material improvement in our distribution coverage.Ben NolanGot you, and appreciate that.…

Yeah, definitely makes sense. Thank you. And you guys have just a fantastically strong balance sheet, and looking at these dropdowns, what sort of leverage would you be thinking about taking on those?Jerry KalogiratosLook, in the past, we have paid a very high percentage of our free cash flow out in distributions. Now, our coverage, under normal circumstances, is quite strong. We actually pay fraction of our net income. So I think under normal quarter that is without the one off expenses that we had in this quarter or the off-hires related to the scrubber retrofits, we would have strong coverage and cash would be less on the balance sheet. In addition to that, when you look at our amortization, $33 million per year that's quite steep, so we have been deleveraging quite fast. And I'm saying all these just to make a note that given the lower cash outlay when it comes to distributions given where we are starting in terms of leverage, I think, we can afford to go higher than in the past in terms of leverage, especially, so call it 65% to 70%, especially if there are long-term charters attached to those ships. If we were to add -- were to spend, let's say, $150 million in acquisitions with on 70% leverage, that would just -- that would take net leverage in the mid 50s, which again would be a reasonable leverage position for the company. So I think we have room to lever up a little, but, as you correctly say, throughout the years we have been always very careful when it comes to the balance sheet. So we're going to be conservative, but I think we cannot be little more leverage than before.

Yeah, thanks, Jerry. Definitely it makes sense. Looking at some of your dropdowns here and your little leverage on the legacy fleet, it looks like you could take at least, these vessels, if not more. Looking at your sources of funding, your common equity trades, it's just a fraction of NAV. It trades at a high yield. It's quite expensive for you guys right now. It's quite cheap for investors, right. But how do you think about the preferred markets, have you done any looking into those?Jerry KalogiratosWe have. And as you say given the evaluation of our common equity, it is common – it’s prohibitive at this point, but the preferred market is a market that could be a good source of off bridge finance, if you want, I mean, it could be the next step for growth after we exhaust our internally generating cash flows and the cash from the balance sheet, and hopefully by growing the company with what we have. And then if we were to top the end market like the preferred, and grow the company little more, so that with good transactions increase our distributable cash flow and so that the company can grow again. We can also get a bit of evaluation on the common.

Yeah, definitely it makes sense. And not to get too keen on it, want to kind of throw this out there for your thought, but have you considered looking into something like, perhaps doing for fair to say, 7.5%, 8%, and maybe using some of those proceeds first of all for dropdowns, I think that makes sense. But secondly, maybe looking at your common equity is doing some sort of arbitrage on that -- by our calculations, you common equity, DCF yield is for 2020 beyond is in the 20% range there that refers, probably around 8%. Have you looked into that at all?Jerry KalogiratosWe will -- let us get things done with -- on the growth from our balance sheet. Let us see if we do top any of these markets, excluding the preferred market, and then hopefully, we will look at our evaluation at the time and decide what to do next.

Thank you very much, Jerry. Just hoping you do look into maybe doing some of your purchases with your units with your [indiscernible]. And very last question for me, I appreciate your time today. Your name is Capital Product Partners. Now that makes sense for your legacy setup, but now we're all containerships, we might be diversified again in the future, but it looks like mostly containerships and the dropdowns as well, some of the best ones. Have you thought about maybe finding yourself, so maybe like capital maritime partners or something that's more communicate some more diversified picture to the market?Jerry KalogiratosI think that's an excellent question. We'll have to definitely find a more generic name, if you want. But again, I want to make sure that we deliver first on certain things, and then we can think about the rebranding. But you're right, I mean, this -- the name is a legacy name, at some point. We will have to think about what we will do with that.

[Technical Difficulty] Your line is now open.Unidentified AnalystSo looking first at the distribution, we're assuming a coverage ratio of 1.2 to 1.6 times maybe. 2020 units currently yield 11%. So going forward, what is your kind of distribution coverage target? And thoughts around either growing the distribution or there need to be future dropdowns to grow it from these levels?Jerry KalogiratosThat's a very good question Randy. I think we want to get transactions done that are accretive to long-term attributable cash flow. We are already yielding a very, I mean, our yield is already very high. So we have to -- and the board really has to decide whether it makes sense to increase the actual distribution going forward. I think once we are in a position to announce dropdowns and what they are and depending on what market reaction, we can think what to do next. There is a number of alternatives or options, as it was pointed out earlier, there could be a unit buybacks, there would be additional acquisitions or increasing the commonly given distributions. We have to think about what it is when we actually deliver that coverage, and of course, depending on the partnership evaluation going forward, but it is a good point. In a way, we have a luxury problem that could be a conduit to solve some of the evaluation issues that we have now.Unidentified AnalystAnd then looking at financing with dropdowns, you recently filed a $500 million shelf covering common unit prefers, debt securities, all these things. Then you said recently, your current yield is prohibitive for common units at these levels. So what is your expected yield on a preferred offering? Let's say it was $50 million to $100 million?Jerry KalogiratosWell, I don't think we dictate that. It's more of the market. What I think is relevant here is really where many of our peers stand, and there is quite mix. I mean you have anything between below 8% to 9%. So we’ll see if we do decide to tab that market, we will see where we price, but I think it is going to be very much anchored in terms of relative value and where our peers are trading.Unidentified AnalystGot it. I was just trying to arrange there, it’s seven to nine. Well thanks so much. That’s it from me.Jerry KalogiratosThanks, Randy.

No further questions. Please continue. No questions at this time. Please continue.

Thank you all for joining us today.

[Technical Difficulty] This does conclude our conference for today. Thank you for participating.