Diana Shipping Inc. (DSX) Q3 2015 Earnings Report, Transcript and Summary

Greetings and welcome to the Diana Shipping Third Quarter 2015 Conference Call. At this time, all participants are in a listen-only mode. A question-and-answer session will follow the formal presentation. [Operator Instructions] As a reminder, this conference is being recorded. It is now my pleasure to introduce your host Ed Nebb, Investor Relations Advisor for Diana Shipping. Please go ahead, sir.

Thanks, Kevin and thanks to all of you for joining us today. Members of the Diana Shipping management team who are with us are Mr. Simeon Palios, Chairman and Chief Executive Officer; Mr. Anastasios Margaronis, President; Mr. Andreas Michalopoulos, Chief Financial Officer; Mr. Ioannis Zafirakis, Chief Operating Officer and Secretary; and Ms. Maria Dede, Chief Accounting Officer. Before management begins their remarks, let me briefly remind you of the Safe Harbor notice. Certain statements made during this conference call which are not historical fact are forward-looking statements under the Safe Harbor provisions of the Private Securities Litigation Reform Act. Forward-looking statements are based on the assumptions, expectations, projections and beliefs as to future events that may not prove to be accurate. For a description of the risk, uncertainties and other factors that may cause future results to differ from the forward-looking statements please refer to the company’s filings with the Securities and Exchange Commission. And now with that, let me turn the call over to Mr. Simeon Palios, Chairman and CEO of Diana Shipping.

Thank you, Ed. Good morning and thanks for joining us today to discuss the results of Diana Shipping Inc. for the third quarter of 2015. [indiscernible] positions within the global drybulk shipping market remain challenging; we have continued to maintain a solid balance sheet to have made the company to stand around it. We also continue to pursue our fleet expansion strategy to position Diana Shipping for future opportunities. To review our financial results the company reported a net loss of $17.4 million and a net loss attributed to common stockholders of $18.8 million for the third quarter of 2015. In the comparable period of 2014 net income was $7.7 million and net income attributable to common stockholders was $6.3 million. Our time charter revenues were $38.9 million for the 2015 third quarter compared to $45.1 million a year ago. The change versus the year ago period was mainly due to decreased time charter rates, partly offset by revenues derived from the increase in our fleet. Diana Shipping continues to maintain a fortress balance sheet, reflecting cash and equivalent of nearly $243 million. Long-term debt including current portion was $576.6 million compared to stockholders equity of approximately $1.24 billion. Reflecting our strategy of maintaining the company’s financial flexibility last month we announced term loan facility of up to $39.7 million with ING Bank m/v London branch. The proceeds will be used to partially finance the acquisition cost of two vessels. In keeping with our sound strategy we have continue to expand our fleet. Today we announced that on November 10th, we took delivery of a newly built 180,960 deadweight capacity drybulk vessel renew or lease. Also we recently agree to acquire from an unaffiliated third party our fee the motor vessel Churchill Bulker a 2011 built capsize drybulk vessel of 179,362 tons deadweight. The vessel will be remain Seattle is expected to be delivered by mid-November 2015. Including renewal lease and the Seattle our fleet will consists of 43 drybulk vessels. In addition we have two new-building Newcastlemax dry bulk vessels and one new-building Kamsarmax dry bulk vessel expected to be delivered in 2016. We continue to manage the fleet in a prudent manner that promotes a balance of time charter maturities and produces a predictable revenue stream. Currently our fixed revenue days are 97% for 2015 and 33% for 2016. In summary, we will continue to take prudent action to enhance shareholder value by maintaining strong financial resources continuing to invest in the growth of our fleet and managing the business in a responsible manner throughout a challenging dry bulk market cycle. With that I will now turn the call over to our President, Stacy Margaronis, for a perspective on industry conditions. He will then be followed by our Chief Financial Officer, Andreas Michalopoulos, who will provide a financial overview. Thank you.

Thank you, Simeon and good morning to all. Third quarter of this year did not startup too badly but certainly fast especially towards the end of the quarter. In September alone the Baltic time charter averages for capes were down 27.3% and for Panamax was down by 10%. The Baltic Dry Index started the third quarter at 794 and closed yesterday at 599. The Baltic Panamax Index was at 858 on July 1st and closed at 555 yesterday. The Baltic Cape Index started the quarter at 1,251 and yesterday stood at 946. Turning to macroeconomic development. According to sources quoted by Clarkson China is expected to grow by 6.8% this year and around 6.3% in 2016. This has prompted the Chinese Central Bank to reduce interest rates by 0.25% six times in a row, this year alone. During the second week of September, 13 infrastructure projects were approved in China more than double the total number of projects approved in the previous two months combined. This can be seen by many as an indication of the government determination to support economic growth amidst concerns of an economic slowdown in the third quarter of this year. It is also expected by many that investments in the railway sector in China is likely to pick up in the second half of this year, which may support some additional fee demand. Furthermore the government has reduced the minimum capital ratio for investors in fixed assets from 30% to 25% in an obvious effort to encourage investment. Even more relevant for the shipment of commodity is the fact that growth of Chinese industrial output slowed from 6.1% a year ago to 5.7% thus far this year. The expectations of U.S. growth 2.3% for this year and 2.8% in 2016. As for the Euro area GDP is expected to grow by 1.5% this year and 1.6% in 2016. According to Braemar ACM, there is little appetite for ordering bulk carriers right now. This is enhanced even more by the fact that yards are adjusting their prices to accommodate the extra cost of enforcing the NOx Tier III regulation. Clarkson’s reported bulker contracting so far this year remains historically low, with a total 152 bulker of 10.2 million deadweight ton orders down 80% year-on-year in deadweight terms on an annualized basis. According to Clarkson Panamax contracting dropped 78% year-on-year in the first nine months with only 29 vessels of the combined 2.3 million deadweight reported ordered. During the same period in 2014 110 Panamaxes joined the fleet and 66 were scrapped. This led to an increase of the Panamax fleet by 3% year-on-year. The problem in the dry bulk order book lies with the Handymaxes where a massive 38.6 million deadweight tons are on order equivalent to 22% of the existing fleet. Most of the ships like the Panamaxes are scheduled for delivery in 2016, from 2017 onwards deliveries are significantly lower across the board. The Capesize sector has experienced the similar rates of increase in the fleet in service today has the Panamaxes have. On an overall basis Clarkson predict an increase of the bulk carrier fleet of 2.8% this year and 3.8% for next year. This year’s fleet growth will be largely driven by growth in the Handymax sector. Continue with supply according to Clarkson as of early October this year the new building order book for Cape stood at 53.4 million deadweight tons, representing 17.3% of the existing fleet. As for Panamaxes there are 27.3 million deadweight on order, which is equivalent to only 13.9% of the existing fleet. Kamsarmax vessels accounted for over 80% of the overall Panamax order book. This is equivalent to 35% of the existing Kamsarmax fleet. The good news according to AXIA Capital Markets is that vessel supply finally coming under control. They point out that since 2007 the dry bulk carrier fleet grew by an average of 9.8% per annum. This rate of growth fell to about 5.8% per annum from 2012 onwards, which was more or less equal to the average annual growth in demand. AXIA provide more optimistic supply growth estimates for 2015 and 2016 than Clarkson by estimating it as 2.3% increase this year and the only 2.4% in 2016, for 2017 the estimate growth in supply of about 2.3%. Turning to demand, according to Clarkson’s overall total seaborne dry bulk trade is projected to remain flat in 2015 compared to an average of 7% growth per annum in the preceding five years. Looking ahead initial projections suggest expansion of 2% in 2016. Consistent with the Clarkson data, Clarkson's [ph] also note that demand growth which was expected by many to remain strong has now collapsed and the market remains massively oversupply with relatively modern tonnage. Let’s look at scrapping now, according to Clarkson so far this year 325 bulkers or 23.8 million deadweight have been sold to-date. This is equivalent of 3% of the bulk carrier fleet at the beginning of this year. Estimates for scrapping over the entire year are just under 30 million ton or about 3.7% of the existing fleet. The average age of Panamax ships scrapped so far this year was 23.3 years while for capes the average was 20.8 years. On an overall basis the average age of bulk carrier scrap was 25.2 years. Scrapping prices have come down and vary depending on the type of ship. For bulk carriers they now stand around $285 per light ton displacement. For container vessels scrappers are usually willing to pay about 20% more per light deadweight count. It is worth noting that in two years just under 100 million deadweight work of dry bulk carriers will be 20 years around this could become a rather large pool of potential scrapping candidate. It’s about 50% of these ships schedule the scrapyards and the encouraging fleet growth figures mentioned above as forecast of AXIA Capital could be realized. Turning to steel now, according to Gibson the World Steel Association expects the global steel demand to shrink by 1.7% this year compared to 2014 and then grow by 0.7% in 2016. According to Russia and Brazil two countries experiencing a severe contraction in the demand for steel. Gibson’s also report that world steel production contracted in August this year by 3.1% to 132.2 million tons. In spite of lower raw material prices with demand flat, most steel mills are reporting losses and in some cases reducing capacity utilization. According to Commodore Research the last eight months have seen Chinese crude steel production for year-on-year by total of approximately 4.5 million tons, while crude steel production outside of China has fallen by a total of approximately 10.9 million tons over the same period. China is also the world’s largest consumer of steel. Banchero Costa reported at the time when steel consumption is slowing in China, India’s steel consumption continues to pick up pace. Steel consumption in India is forecast to rise 7% this year and by further 8% in 2016. This is not an insignificant statistic in view of the fact that India is the third largest consumer of steel after China and United States. As for iron ore, according to Clarkson’s global iron ore trade is expected to grow at only 1% in 2015 compared to more than 12% in 2014. For 2016 iron ore shipments are expected to grow by the same percentage as this year. According to Commodore Research as of the end of October approximately 84.5 million metric tons of iron ore was stockpiles at Chinese ports, even though this is about 20% lower than the record levels we saw a few quarters ago it is still significant in size especially if we take into account the issues surrounding the steel market preferred to elsewhere in this brief report. Brazilian and Australian iron ore export are expected according to Clarkson to displace exports from other smaller exporting nations. Shipments are currently expected to increase by 4% in the case of Brazil and by 5% for Australia on a year-on-year basis. Their combined share of total seaborne iron ore exports will likely exceed 85% this year. Coal now, according to Howe Robinson before major commodity companies that dominate the global coal trade BHP Billiton, Rio Tinto, Anglo American and Glencore have accelerated an unprecedented series of capital spending cuts in lieu of the steadily worsening market. According to Clarkson the collapse in seaborne coal trade this year has been accelerated by easing Indian imports in recent months. The forecast for seaborne coal trade has been revised down this year to a 4% decline in 2015 compared to 2014. If this materializes it will be the first annual decline in coal shipments in almost three decade. According again to Clarkson, both thermal and coking coal are expected to grow by 2% in 2016. In the case of thermal coal, Clarkson predict that in 2016 Indian import will increase by 5% year-on-year after increasing by only 3% in 2015 compared to 2014. As for Chinese coking coal imports, these are expected by Clarkson to increase by 1% year-on-year in 2016 after dropping by a massive 27% this year. On the grain trade now, according to Clarkson, in the 2015 to 2016 crop year global combined wheat and coarse grain trade is projected to drop 3% to a total of 317 million metric tons. The decline in global seaborne grain trade is expected to be partly driven by a 13% drop in imports to the Middle East. This will be largely due to Iran's introduction of tariffs in order to protect domestic output. Let’s look at what’s happening with predictions and the future. According to Gibson Shipping, if one takes into account the available information or future steel output in China and the rumors and comments about casting outlook, one could reach the conclusion that there could be shorter and upward movement in cape market only between now and the end of the year. Some of these rumors as of the Chairman of China Iron and Steel Association raising the prospect of Chinese steel output falling by 20% from here on. Therefore Gibson contends that fundamentally the cargo flows into China will not be sufficiently strong and expanding to drive rates up in the medium-term. We agree with current lease consultants in their assessment of the supply demand situation over the next year or so. They claim that there will be no rapid turnaround in iron ore shipments anytime soon and as such be passed towards sounder trade markets follows the supply side and the need to adjust the fleet to a market with negative to low growth in shipments of iron ore and coal. We also agree with the outlook assessment put forward by AXIA Capital, who believe that even though demand growth will outpace supply growth over the next two years, given the existing over supplier of tonnage rates will remain at depressed levels until the excess supply gets absorbed and hopefully demand growth accelerate. A gap between the pace of fleet expansion and fairly limited dry bulk trade growth is likely to exert continued pressure in the market in the coming year, making the outlook appear rather difficult. As for future capsize earnings Clarkson’s [indiscernible] securities are forecasting around $12,000 a day for 2015 and $17,500 a day in 2017. In several conference call and presentations the Diana Shipping team have been criticized of being too pessimistic. Furthermore, we have repeatedly explained in some detail why even with steadily growing demand for seaborne trade it will be difficult for the surplus tonnage to be absorbed in the short and medium term. Regrettably as explained earlier on demand growth did not stay at the level seen during the last few years. Therefore it did not come to any of us as a surprise that trades have more or less collapsed over the last few months together with the rate of demand growth. Now that at long last new-building ordering has subsided and scrapping [indiscernible] we see the light at the end of an unfortunately rather long tunnel. There is reason for hope in the long run provide that nothing happens in the interim to disrupt the beneficial effect we posted now at work to make the dry bulk shipping markets a profitable industry in which to invest. As for our investment strategy, as we have said in the past it has not changed and will continue with the acquisition of young, good quality tonnage that’s preparing the Diana fleet to take advantage of the better days which will eventually come. At that time the patient and resilient investors we will be rewarded with most of the returns occurring over a relatively short period of time. I will now pass the call over to our CFO, Andreas Michalopoulos who will provide the financial highlight of the third quarter and first nine months of this year.

Thank you and good morning. I am pleased to be discussing today with you Diana’s operational results for the third quarter and nine months ended September 30, 2015. For the third quarter 2015, net loss net loss amounted to $17.4 million, net loss attributed to common stockholders amounted to $18.8 million and loss per common share was $0.24. Time charter revenue decreased to $38.9 million compared to $45.1 million for the third quarter of 2014. The decrease was due to the decreased average time charter rate that we achieved for our vessels during the quarter and was partially offset by revenues derived from the addition to our fleet of the vessels G. P. Zafirakis delivered in August 2014, Santa Barbara delivered in January 2015, and Medusa delivered in June 2015. Ownership days were 3,772 for the third quarter 2015 compared to 3,537 for the same period of 2014. Fleet utilization was 99.9% compared to 99.7% for the same quarter of 2014. And the daily time charter equivalent rate was $9,688 compared to $12,295 for the same quarter of 2014. Voyage expenses were $3.1 million for the quarter compared to $2.6 million for the same quarter of 2014. The increase in voyage expenses was due to a $1.1 million loss from bunkers resulting from the redelivery of vessels compared $2.4 million for the same quarter of 2014. Vessel operating expenses amounted to $21.6 million compared to $22 million for the third quarter of 2014 and decreased by 2%. The decrease was due to decreased stores, sales we had and environmental costs. This decrease was partly offset by increased cost due to a 7% increase in ownership days resulting from the enlargement of the fleet. Daily operating expenses were $5,719 for the third quarter of 2015 compared to $6,219 for the same quarter of 2014, representing a decrease of 8%. Daily operating expenses decreased in all expense categories except on taxes. Depreciation and amortization of deferred charges amounted to $19.3 million. General and administrative expenses decreased to $6 million compared to $6.2 million for the third quarter of 2014. The decrease was mainly attributable to the change in the exchange rate of euro to US dollar. Management fleet related party were $0.1 million for the quarter and were the fees paid to Diane Williamson Management Limited after transferring the management of three vessels during the quarter from Diana Shipping Services SA. Interest and finance cost amounted to $4.8 million compared to $2.2 million in 2014. This increase was attributable to increased average debt, mainly due to the issuance of senior unsecured notes in the second quarter and average interest rates during the quarter compared to the same quarter of 2014. Interest and other income amounted to $0.8 million compared to $0.9 million and was decreased due to the decrease in the income earned from Diana Containerships that results of the amended loan agreement. Loss from equity method investments amounted to $2.4 million compared to income of $12.5 million for the same quarter of 2014. For the nine months ended September 30, 2015 net loss amounted to $42.2 million and net loss attributed to common stockholders amounted to $46.5 million and loss per share was $0.59. Time charter revenue decrease to $119.4 million compared to $129.4 million for 2014. The decrease was attributable to decrease average time charter rates and increase of higher days and was partly offset by increased revenues due to the enlargement of the fleet. Ownership days for the nine months ended September 30, 2015 were 11,030 compared to 10,234 for the same period of 2014. Fleet utilization was 99.1% compared to 99.4% for 2014 and the daily time charter equivalent rate was $9,939 compared to $12,079 for the nine months ended September 30, 2014. Voyage expenses were $12.1 million for 2015 and include $6.2 million of loss from bunkers from the redelivery of our vessels during the period. Vessel operating expenses amounted to $64.7 million compared to $64.6 million for 2014. There was an increase in operating expenses due to the 8% increase in ownership days resulting from the enlargement of the fleet, but this increase was partly effect by decreased crew cost, stores and spares. Daily operating expenses were $5,865 for 2015 compared to $6,311 for 2014 representing a 7% decrease. Daily operating expenses decreased due to the decreased average crew cost, insurances, stores and spares. Depreciation and amortization of deferred charges amounted to $56.5 million for 2015. General and administrative expenses amounted to $17.9 million compared to $18.7 million in 2014. The decrease was mainly attributable to the change in the exchange rate of the euro to US dollar and was partly offset mainly by increased legal fees and Board of Director fees. Interest and finance cost amounted to $10.7 million compared to $6.3 million in 2014, this increase was attributable to increase average debt and average interest rates during the nine month ended September 30, 2015 compared to the same period of 2014. Interest and other income amounted to $2.6 million compared to $2.7 million for the nine months ended September 30, 2014. Loss from investment in Diana Containerships, Inc. amounted to $2.9 million compared to income of $12.4 million for the same period of 2014. Thank you for your attention. We would now be pleased to respond to your questions and I will turn the call to the operator who will instruct you as to the procedure for asking questions. Thank you.

Thank you. [Operator Instructions]. Our first question today is from Amit Mehrotra from Deutsche Bank. Please proceed with your question.

Thank you. Good morning/afternoon gentlemen. Ioannis you’ve talked a lot in the past about the psychology of the market, characterized it before its getting weaker but not at the level that you and the rest of the management team sort of need to be convinced that the recovery is on the way, it certainly seems that the sentiments have taken another let down here in the last two months. I’d like to get your latest view on where you see it today? And also just with related to that if you can also talk about what you are seeing with respect to assets available for sale there has been some charter in the market recently, but there is a big owner vessels that’s dropping a number of vessels on the market and just want to see if that’s consistent with what you’ve seen and what that tells you about where we are in terms of psychology of the market? Thank you.

I think that we are in the right direction and things are moving forward the way we have described it should go. The sentiment is going further and further down and moves like the one you’ve described prove that point. What we keep saying is that people should realize that it has to take some time where you have people not believing that there is an end lies at the end of the tunnel. What we know based on past history and based on the cyclicality of our industry is there is a light at the end of the tunnel, but we cannot see. The people that will keep walking in that tunnel and they will be still alive they will reach that point.

Yeah, have you seen though just tangibly an increase in the number of vessels that owners are looking to sell even in a distress market have you seen that recently?

Yes indeed, there are a number of vessels that are potential candidates both on the Panamaxes and on the capes and on the Kamsarmaxes. And as we are going along more candidates are coming into the markets. The potential buyers are very few and of course as we are going along that process will accelerate.

Okay, that’s great thank you. One last question for Andreas, just financial question Andreas, can you just give us the remaining new building payments that are not included in the third quarter net debt balance, last time I checked I think it was around $132 million, $133 million if you can just update us on that that would be great? Thanks.

Basically I can tell you in detail what remains to be paid for the vessels that are to be built it’s $132.452 million.

Okay very good, thank you gentlemen appreciate it.

Thank you.

Thank you. Our next question is from Fotis Giannakoulis from Morgan Stanley. Please proceed with your question.

Yes, hello and thank you. I want to ask you about this light at the end of the tunnel that Ioannis mentioned about, what makes you believe that this is a cyclical downturn and there is going to be a light at the end of the tunnel compared to a structural problem that might exist in the underlying businesses of the dry bulk sector? In other words, I want to ask you do you think the problem is shifting or the problem might be the steel industry and the coal industry and what it will take in order for the market to recover?

Well first of all Fotis you have to bear in mind that we are in an industry where supply and demand plays a huge part. And the dry cargo industry in contrast with the container industry a mature industry so we have been watching the numbers very carefully since 1947. And the cyclicality is always there and whenever the market is down we are trying to find new words to describe the market. This time is different from the previous, but I can ensure you is not, is exactly the same the supply and demand. And it will never change. There is a light at the end of the tunnel the problem is as we said all along we don’t know when we will reach this light at the end of the tunnel, but rest assure that one day we will see the light at the end of the tunnel.

Thank you, Simeon. But just…

Fotis, sorry to interrupt the fact that people start talking like you about structural changes and things are different et cetera is a good starting point for the right forces to take effect and the market to turn. It goes with the psychology that we were saying earlier.

Absolutely and I appreciate that. What I want to ask is that you mentioned earlier that the fleet growth is going to continue growing by around 2% the next couple of years. And I am trying to understand your view on the timing of the recovery, can you tell us what is your demand growth prospect and where this demand is going to come from where do you see the iron ore imports and the steel demand in China going and is this one or two year cycle or is this longer it’s going to take longer time until we’ll see rates becoming profitable again.

Yeah Fotis I think that it’s long enough to understand that we don't give the predictions about rates or demand growth or even supply where the numbers are more precise and published and certain. What we do is that we quote what analyst say and as you got demand where you focus now your questioning on. We always take a view that demand is more or less what it is at the time that we make a presentation or a conference call. Up to now as you know we were assuming when we were giving out our analysis was that demand would remain strong. And we want that things would be rather grim if the rate of demand growth was not that people predicted and which people assumed would remain for the next few years. So what happened now as we said earlier was that demand and unfortunately did not grow as fast as people were expecting and as fast as we were seeing up to about two or three quarters ago. And now we adjust our views as for the balance I beg your pardon for the supply and demand balance based on the demand that we have now. If demand grows at a faster rate than we are seeing now and which Clarkson are predicting then the recovery will come sooner. If it remains as it is now, scrapping will be higher, new building ordering will be at the minimum if not disappear completely. And it will take that little bit longer because we will need longer to absorb for the market to absorb rather the tonnage, which is surplus tonnage today. So it’s not the matter what we think is going to happen in the future and how fast recovery will come it’s a matter of what assumptions we make about the growth in demand what assumptions we make for scrapping and what assumptions we make about the new building orders. And I think that we try to explain rather clearly in this short presentation as to what assumptions we feel are reasonable as we got supply as we got scrapping and new building orders. What we really have no idea at all is what demand is going to do. So we have to assume that demand growth remains as it today.

Fotis if I may add was people keep forgetting and we keep saying that what you should worry and what we should worry about is the imbalance between supply and demand. And many scenarios now they can decrease this imbalance that we have today and many scenarios that can keep the imbalance the same and many scenarios that can increase this imbalance, either at lower levels or at higher levels. You should not expect that to give you [indiscernible]. But I predict this time, but we can explain we can even explain a situation where is there is a big drop in the demand and a further drop bigger drop of the supply where it’s going to create an imbalance at lower level, but higher charter rates.

Thank you. One last question about your investment strategy, I remember in the past you have mentioned that you keep your acquisition pace steady, but at some point you will always want to have cash, you have a very, very large cash reserve I assume over $214 million. With these reserves and the way that the market is developing and your cash flow is developing, how much of this cash is available for acquisitions and has that pace of your acquisition changed at all or it’s the same as previously?

The pace is the same; we have explained that our retention is to spend $20 million to $15 million of cash every two to three months for the next year and half. That is the months are easy, we are talking about $80,000 of new investments from fresh cash, from existing cash.

Thank you, Ioannis that’s very clear. Appreciate your answers.

You’re welcome.

[Operator Instructions] Our next question is coming from Magnus Fyhr from GMP Securities. Please proceed with your question.

Sorry. My questions have been answered. Thanks for the presentation.

You’re welcome.

[Operator Instructions] Our next question is coming from Spiro Dounis from UBS. Please proceed with your question.

Hey, good morning gentlemen. Thanks for taking the question. Just one quick one from me, I guess in the past you have not been shy about I guess investing in Diana Containerships just as you looked at the market [indiscernible] some opportunities in the past and for period that did actually work out in your favor, just sort of wondering as you look at all your opportunities out there obviously vessel purchases little top of the list, but just wondering in terms of nothing more in DCIX or share buybacks how you’re looking at those two options right now?

We have not discussed and even of course decided on whether -- on how we want to proceed as regards to your questions. Of course we have matters that are of an interest to us and we have to see what we can do to enhance or to put in better position our investment in Diana Containers and at the same time the share buyback program that you refer to, we evaluate always and we see how we proceed. But for now there has been no discussion about that.

Okay, fair enough. Appreciate your color guys. Thank you.

Thank you. Our next question today is coming from Amit Mehrotra from Deutsche Bank. Please proceed with your question.

Yeah. Thanks. I just had a follow-up regarding Simeon your comments about the supply and demand and how it’s not different at all this time versus what you’ve seen in past cycles and I guess I agree with it just based on the fact that the market cannot remain uneconomical forever and clearly the market is severely uneconomical today. And just based on your decades of experience can you just offer some inside on past cycles in terms of how long can the markets remain this level of uneconomical before you see a more profound reaction in the supply? Basically I am just asking if how long can owners endure the current level of pain before they have to make a decision here on basically cashing out of the market.

You see for example the first response that you’re going to get to that question it has to do with the interest rate for example how expensive is the financing cost and at the moment everyone is telling you of course that the financing cost is very low, the interest rates are very low and the banks are nursing various problems that exist and therefore there is a bigger endurance of an uneconomical market as you described this. And certainly higher interest rate environment will move things faster, but at the same time what is very important together with various macro factors that exist around this period, it has to do with the psychology as well if people are still prepared to burn more and more money thinking that the recovery is eminent. From the moment they will see that the recovery is not eminent then you will have laid up vessel, you will have scrapping and you will have certainly no new building orders. And in the past we have seen periods of a bad market of seven years, we have seen two years, we have seen 10 years, but the question is together with the macro-environment you have to put there the anticipation and the psychology as regard to when they think the market is going to turn.

Just to give you a quantum of the interest rate in the 80s for example, the dollar interest rate was 23% almost 24% yearly. So that compare with the present interest rate has a difference bearing all together. So that will have a bearing in the nursing of the ships by the banks, but let us not somehow blur the whole situation of the forces try and bring the balance with this, I will call them small parameters effecting the forces to bring the indifferent equilibrium.

All right okay that’s good. One last question from me, it relates to the net debt of the company obviously you’re very conservative on relative to the book capitalization, but I’d like to sort of get your perspective on where you think the company’s net leverage is relative to the value of the assets, because we’ve seen basically the values come down quite significantly and so I would imagine the LTV of the company has increased pretty materially over the last year, year and a half, so can you just talk about where you think Diana Shipping’s LTV is today and based on my math it’s about close to 50%? And could we see a pause in your acquisition strategy until maybe you get a little bit more comfort that we’re not going to see another big letdown in asset values relative to your LTV? Thanks.

The numbers are more or less correct what I can say only is that indeed the market values have dropped significantly. The only comment that we can make though is that we have absolutely no issue with our covenants, with our bank covenants so although your numbers are pretty correct and we feel comfortable with those. I don’t think we need to comment further.

Okay, very good. Thank you very much.

Thank you.

Thank you. We’ve reached the end of our question-and-answer session. I would like to turn the call back over to management for any further or closing comments.

Thank you again for the interest and support of Diana Shipping. We look forward to speak with you in the months ahead. Thanks.

Thank you. This does conclude today’s teleconference. You may disconnect your lines at this time and have a wonderful day. We thank you for your participation today.