Greetings. Welcome to the Diana Shipping Inc. 2019 Second Quarter Earnings Conference Call and Webcast. At this time, all participants are in a listen-only mode. A question-and-answer session will follow the formal presentation. [Operator instructions] Please note, this conference is being recorded. I would now like to turn the conference over to your host, Mr. Ed Nebb, Investor Relations. Thank you. You may begin.

Thank you, Devin, and thanks to all of you for joining us today for the Diana Shipping Inc. second quarter conference call. Members of the management team who are with us today include Mr. Simeon Palios, Chairman and Chief Executive Officer; Mr. Anastasios Margaronis, President; Mr. Andreas Michalopoulos, Chief Financial Officer; Mr. Ioannis Zafirakis, Chief Strategy 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. Such forward-looking statements are based on assumptions and beliefs as to future events that may or may not prove to be accurate. And for a description of the risks 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 SEC. And now without further delay, let me turn the call over to Mr. Simeon Palios Chairman and CEO.

Thank you, Ed. Good morning and thank you for joining us today to discuss the results of Diana Shipping Inc. for the second quarter of 2019. Our financial performance during the recent quarter and year-to-date continue to reflect an increase in our time charter revenues and improved operating profitability before an impairment loss and loss from vessel sales. We continue to actively manage our fleet profile, announcing agreements to sell several vessels. Significantly we have returned a substantial amount of capital to our shareholders in the form of multiple self-tender offers. To summarize our financial results, Diana Shipping Inc. reported a net loss of US$1.3 million and net loss attributed to common stockholders of US$2.7 million for the second quarter of 2019. These results included a US$2.8 million impairment loss and a US$2.1 million loss on vessel sales. This compares to a net income of US$2 million and net income attributed to common stockholders of US$0.5 million reported in the second quarter of 2018. Time charter revenues rose to US$55.4 million for the second quarter of 2019 from US$53.4 million for the same period of 2019. Increasing time charter revenues was due to increased average time charter rates that the company achieved for its vessels during the quarter, which was partly offset by increased revenues due to the sale of two vessels in December, 2018 and three vessels in the first half of 2019. Turning to the balance sheet, cash, cash equivalents and restricted cash totaled US$144.5 million at June 30, 2019. Long-term debt, net of deferred financing fees including the current portion was $495 million compared to stockholders equity of approximately US$609.4 million. Reflecting our commitment to return value to shareholders, the company recently announced the preliminary results of our latest self-tender offer to purchase up to two million…

Thank you, Simeon and welcome to all of the participants in this mid-summer second quarter presentation of Diana Shipping Inc. Looking at the Baltic Exchange indices as we usually do, between the beginning of the year and July 26 provides us a good picture of the volatility prevailing in the bulk carrier market these days. On January 2, the Baltic Dry Index stood at 1,282 and on July 26, it closed at 1,937. The Baltic Panamax Index went from 1,391 to 2,109. And the Baltic Cape Index started the year at 1,987 and ended on July 26 at 3,647. Starting with macroeconomic developments. According to the IMF, the world GDP is expected to grow by 3.3% this year and 3.6% in 2020. U.S. GDP growth was estimated to be 2.3% this year and only 1.9% growth in 2020. Total Central and Eastern European growth is estimated at 0.8% this year and 2.8% next. On the supply side, according to Clarksons, the bulk carrier fleet capacity currently projected to grow by 2.5% in deadweight terms during 2019. Bulk carrier fleet growth in 2020 is currently projected to remain fairly steady at around 2.4%, potentially allowing for some gradually rebalancing with the effect of the implementation of the IMO 2020 sulfur cap potentially having a positive effect on the market. On the demand side, global seaborne dry bulk trade is currently projected to expand by only 1.3% this year to reach 5.3 billion tons with the iron ore trade projected to decline by around 3% in ton miles and 2% by volume due to disruption to Brazilian and Australian shipments in the year so far. Looking ahead to 2020, initial projections suggest that seaborne dry bulk trade volumes to grow by around 2.3% next year, around 3.1% in ton miles with uncertainty…

Thank you, Stasi and good morning. I'm pleased to be discussing today with you Diana's operational results for the second quarter and six months ended June 30th, 2019. Net loss and net loss attributed to common stockholders amounted to $1.3 million and $2.7 million respectively including $2.8 million of impairment. Loss to common shares was $0.03. Time charter revenues increased to $55.4 million compared to $53.4 million in the second quarter of 2018. The increase was due to the increased averaged time charter rate that we achieved for our vessels during the quarter and was partly offset mainly by a decrease in revenues due to the sale of two vessels in December 2018 and three vessels in the first half of 2019. Ownership days were 4,179 in the second quarter of 2019 compared to 4,550 in the same quarter of 2018. Fleet utilization was 98.4% compared to 97.9% for the same quarter of 2018. And the daily time charter equivalent rate was $12,717 compared to $11,773 for the same quarter of 2018. Voyage expenses were $3 million for the quarter compared to $0.8 million for the same quarter of 2018. The increase in voyage expenses was due to the gain in bunkers of $2.1 million in the second quarter of 2018 which did not exist in 2019 -- in the 2019 quarter. Vessel operating expenses amounted to $22.9 million compared to $24.6 million for the second quarter of 2018 and decreased by 7%. The decrease was due to the 8% decrease in ownership days, resulting from the sale of vessels and was partly offset by increases in fuel costs, insurances, and operating costs. Daily operating expenses were $5,478 for the second quarter of 2019 compared to $5,398 for the same quarter of 2018, representing an increase of 1%. Depreciation and…

Thank you. At this time, we will be conducting a question-and-answer session. [Operator Instructions] Our first question comes from the line of Amit Mehrotra with Deutsche Bank. Please state your question.

Thanks, operator. Good afternoon to everyone on the Diana Shipping team. Yeah, Ioannis, I wanted to start with you if I could, you and the team have a good way of assessing the sentiment, the psychology of the dry bulk shipping market. I think you look at the asset values relative to maybe what you'd be willing to pay for them in the context of the one-year time charter rate. Can you just talk about where those dots are in red or green territory? And maybe what current -- what that tells you, I guess, about the current values of dry bulk ships? And where you think the next move is either up or down? Thank you.

The rates are -- hi, this is Ioannis. The question that you have posed is very interesting one, because we are at the point where we are seeing the rates going up, and the values of the vessels not following in the same pace. Again, the sentiment looks as if people are prepared to pay less money based on the existing charter rates of the vessels' demand today. In other words, we read that as people being cautiously optimistic, which is a very good thing for our industry, because we're not -- we have not started destroying the market. In other words, we still believe that the fear meter is on the high side. People are still very skeptical as regards the trade war and the various problems existing in the dry bulk sector like the Vale issue, et cetera. And if you look at this from a distance, this is a good thing, because certainly the demand has some problems as regards the future. But at the same time, the supply of vessels has been kept in a very, very manageable level. And this is why we still believe that we're going to see much better rates till the end of the year, beginning of the next year. From the moment, everybody starts believe in what we are saying then problems are going to be happening. It's always like this when people do not believe us, things go the way we want, and when they start believing us then the opposite happens. You understand the reason?

Yes, no. I learned my lesson, I think back in 2013.

Yes, yes.

Just related to that, so I think maybe a good summary of what you said is you would maybe expect the fundamental underlying earnings power of the vessels, the rates of the vessels to improve over the next six to nine months and depending on various variables hopefully the asset values will follow suit, is that kind of a fair assessment of what you just said?

Certainly, certainly. If people suddenly realize that there is a lack of vessels or demand is higher than what they should have expected, then everybody is going to be doing the wrong things to destroy the market. We're going to have ordering. We're going to be having vessels going on the spot always there to charter the next charter et cetera. And slowly, it takes time the market is going to deteriorate. And especially, if we do not have other sectors in our industry being on the same pace, then that would happen faster. If we are lucky enough to have a thriving tanker market or a container market at the same time, it's going to take longer for the market to go down.

Right, okay. Thank you very much for that. And then one follow-up question, I guess maybe for Andreas with respect to the cash deployment strategy. I mean, the company has chosen the strategy of tender offers, which I think makes a lot of sense in terms of controlling the technical pressure either up or down on the stock based on your own capital deployment strategy. I believe the tenders have been basically prefunded with proceeds from asset sales. I just wanted to understand is that the strategy going forward i.e. have -- continue to buyback shares as long as they continue to be well below NAV, but do in the way that's effectively net debt neutral as you continue to renew the fleet? And then maybe Andreas talk about also your plans to renew the fleet and continue to do so as well?

You summarized very well what we have in mind. Indeed as long as -- first of all, as you know, we have quite a few vessels that are unencumbered and are candidates to be sold. This is for the shipping part and in order to renew the fleet. So those vessels are going to be sold in a scattered manner. As you know, we do things in a scattered manner in order to be able to get a good average on our sales. And this is what we have started to do. Now the proceeds of those vessels as long as our share price is below NAV as you very well pointed out, the best way to play the arbitrage that exist or the dislocation that exists between the share price in the market and the NAV is to tender offer and to buy back the shares with the exact amount of the proceeds of the sales. This is why in terms of cash we don't intend to diminish the cash on the balance sheet, which we wanted to remain at about $140 million to $150 million in cash and to increase it going forward. Now this strategy will remain as long as: one, the share price is at the level it is; two, we won't go too far, because we still want to have a nice float and liquidity in the market. But having said that, if the share price goes back to normal levels than we will stop that and we will deploy our strategy that is a different one.

Great. One quick one for me just if I could, just remind us Andreas what the high watermark is for you guys on the loan to value, because the way you're doing it now there's actually no change to the leverage profile of the company, which makes a lot of sense. But right now by our estimates, it's maybe around 45% to 50% of the gross asset value of the company.

Yes.

First, go ahead.

Yes. You are right. Loan to value is around 42% actually. Having said that, I want to say that we have repaid one loan at the beginning of the year. So the proceeds can also be used on an absolute basis to diminish the leverage. And the example of that is at the beginning of January 2019 where we paid the loan for motor vessel Maera in full. So it's a combination of what we said and what we're doing with the tender offers and what I just said now.

Yeah. But you don't want to go above the 50%, is that correct? As you renew the fleet going forward.

At this stage, it's all the question of where you are in the market. As Ioannis said, our views is that the market is going to go up. As long as you go -- as the market goes up, the goal is to deleverage the fleet and to arrive at a very manageable level lower than 40% at the peak of the market. If the market was to suddenly turn and go down, then the strategy would change and we'll be -- another strategy then what we do changes and we lever up and we apply vessels different tactics.

Correct.

Don't forget, I mean, that there is the -- also the amortization of the debt anyway. So the debt level is decreasing anyway. Probably you will have the vessels values going up. But we want to make clear to everybody that when we sell a vessel and we immediately invest in our own stock at a big discount to NAV is as if we immediately without taking an extra risk on anything we are improving the shareholder position. This is pure mathematics. You understand that there is an outflow money that comes in immediately as a better percentage and the dilutive percentage for the existing shareholders. And we do not understand why other companies they are not doing the same. I can understand why they're not doing it. First of all, they don't have the means. They don't have the necessary balance sheet to do that. And secondly, they're wasting their time, their money on scrubbers.

Okay. We’ll let somebody ask that question, but thank you for taking my question guys. I appreciate it.

Our next question comes from the line of Randy Giveans with Jefferies. Please proceed with your question.

Howdy gentlemen? How you are doing?

Hi. Very well. Thanks Randy.

Good. Yeah, a quick question, I guess, following up on these comments. Following that most recent tender, what is the current share count? And also I think you mentioned that it makes sense to use the cash proceeds from the vessel sales to buy stock at a steep discount using your words of NAV. So the most recent tender was $3.75 per share, give me a ballpark for what you're saying your steep discount to NAV is?

So listen the discount to NAV, we don't comment on. What I can tell you is that the share count, which is going to be after the tender offer 96,749,965 shares that's for your model. It's going to help you. But In terms of discount to NAV, I think you are very good at calculating that and certainly we never comment on the NAV.

Since November 2018, we have decreased the number of shares by 10.4%. There was an increase for restricted sales issued. The total effect is 12.2% and the net effect is 10.4%. This is very substantial. We have repurchased $44 million worth of shares since November 2018. And we will continue doing that. Don't forget also that by having less shares and your stock price being closer to $3.5 rather than $4.5, I'm saying just a number here, you understand that we will continue doing that.

Yeah. And I applaud the share repurchases in that regard. All right. I just wanted to take a stab at your -- if you could give me some NAV guidance. Secondly, let's move on to your most recently capesize charter, the Boston was signed last month for about two years in duration at $15,308. How much have the one or two-year capesize time charter rates improved as result of the recent spot rate rally we've seen this summer?

I think Stasi you have the number that.

Yeah. The numbers has been oscillating. If to give you an idea only about a week ago we had five TC Index on spot over $30,000 a day. And now we are back down to below $28,000. So on a time charter basis now, of course, the movements have not been so abrupt, but I would say that the movements has been on average depending on where the delivery of the ship Atlantic or Pacific gone up by about 15%.

Okay, so one year, maybe $18,000, $19,000 and in two year, maybe a $1,000 less than that?

Yes. $18,000, $19,000 if delivery is Pacific, about $22,000 if delivery is the Atlantic, a bit more difficult to get that. And you correctly said a bit less than two years.

Excellent, all right, that covers all for me. Thank you for the time.

Thanks, Randy.

You're welcome.

Thank you.

[Operator Instructions] Our next question comes from the line of Jon Chappell with Evercore. Please proceed with your question.

Yeah. Good afternoon, guys. I just have one follow-up from the tender question.

Hi Jon.

Andreas you mentioned, in your answer to one of the prior questions that you still have several unencumbered ships. And if I look at your fleet I think, there's one 2001-built left and a handful of 2004's, 2005's and 2006's. Can you tell us how many ships remain unencumbered? And maybe even put a range around the asset value of those as we think about the potential to continue the tender going forward?

The asset value because there are many, I'm going to list them. And the asset value you will go find it. It's kind of easy.

Okay.

So there are 13 ships unencumbered, so OCEANIS, THETIS, PROTEFS, CALIPSO, CLIO, TEMILIO, BOSTON, SALT LAKE CITY, NAIAS, SIDERIS GS, NORFOLK and MAERA and in these there's also the NIREFS that I didn't mention is in the 13 that I said.

Nirefs, has gone.

And Thetis has gone as well.

What was the one after Thetis the only one I missed?

Protess. P-R-O-T-E-S-S.

Protess, yeah.

So there are quite a few…

All right, you’re right.

…also the older vessels are going to go from those. If you understand, I mean first, we try, but they're quite a few.

The fact of the matter is we are not in a hurry.

Yes.

We have to follow what the market is doing. And because we are looking at opportunity, I can say close to $150 million.

That's a lot. So then, let me ask another follow-up then to another comment. Andreas, maybe you mentioned wanting to keep the proper liquidity or float. $150 million that could buy back half of your market cap right now essentially. So, what are you kind of gauging to be the appropriate float? And why wouldn't you just continue to execute this. I mean, I really think it's an underappreciated part of your recent strategy. It's closing in orbit it's quite obvious.

Before Andreas, answers can I intervene and say, that it is by no means certain that we will be selling $150 million worth of ships and buying back the company shares.

I understand.

Because we mentioned repeatedly that, we need a descent discount to net asset value to engage in such an activity.

And we do not plan to do that once find someone to sell it kind between and offer to buy back $150 million shares. But still the -- as necessary liquidity Jonathan, is relevant. We still have some major shareholders that, they are trusting us since -- I can say since 2005, they are with us or even a bit later but still they are with us because they understand completely what we are doing. And there are the others that they have a different profile. At the end of the day, to cut the long story short we are not in a position to say, what the absolute, best, liquidity the best number of shares sold every day is going to be. But certainly, this is something that we are considering all the time. And we are not there to miss the opportunity, to sell vessels and buy back the stock. But on the other front we are a publicly listed company. And we have to remain such. Don't forget that we use the "capital markets" to implement the strategy that has done so well up to now. And the best -- the most possible scenario that is going to happen is after few more tender offers we are going to end up in a better market. We're going to end up in a situation where we are trading above NAV. And from the moment, we do that dividends is going to be the name of the game, with the sales proceeds.

All right, thank you for your answers.

You're welcome.

As there are no further questions left in the queue, I would like to turn the call back over to management for any closing remarks.

Thank you, again for your interest in and support of Diana Shipping Inc. We look forward to speak with you in the future. Thank you.

This concludes today's teleconference. You may now disconnect your lines at this time. Thank you for your participation. And have a wonderful day.