Good morning. My name is Stephanie, and I will be your conference operator today. At this time, I would like to welcome everyone to the Pangaea Logistics Solutions Third Quarter 2020 Earnings Teleconference. Our host for today's call are Mr. Ed Coll, Chairman and Chief Executive Officer; and Mr. Gianni Del Signore, Chief Financial Officer. Today's call is being recorded and will be available for replay beginning at 11:00 a.m. Eastern Time. The recording can be accessed by dialing (855) 859-2056 domestic or (404) 537-3406 international and referencing ID number 5847439. All lines are currently muted and after the prepared remarks, there will be a live question-and-answer session. [Operator Instructions] It is now my pleasure to turn the floor over to Ms. Tiya Gulanikar with Prosek Partners. Please go ahead.

Thank you, Stephanie, and thank you for joining us for this morning's third quarter 2020 earnings conference call for Pangaea Logistics Solutions. With us today from the company are Chairman and CEO, Mr. Ed Coll; and Chief Financial Officer, Mr. Gianni Del Signore. Before I turn the call over to Ed, I'd like to read the safe harbor statement. This conference could contain forward-looking statements within the meaning of the Private Securities Relation Reform Act of 1995 about Pangaea Logistics Solutions. Forward-looking statements are statements that are not based on historical facts. Such forward-looking statements are based upon the current beliefs and expectations of Pangaea Logistics Solutions management and are subject to risks and uncertainties which could cause the actual results to differ from the forward-looking statements. Such risks are more fully discussed in Pangaea Logistics Solutions' filings with the Securities and Exchange Commission. The information set forth herein should be understood in light of such risks. Pangaea Logistics Solutions does not assume any obligation to update the information contained in this conference call. Also, please recall that a supplemental slide presentation will accompany this call. Those slides can be found attached to the 8-K that was filed with last evening's release, which is available on the Investors section of www.pangaeals.com under Company Filings or on the SEC's website at sec.gov. Now I would like to turn the call over to Pangaea Logistics Solutions' Chairman and CEO, Mr. Ed Coll. Ed?

Thanks, Tiya, and good morning to all of you, and thank you for joining us on the call. This morning, I'll provide you an update on our operations and the overall market before turning the call over to Gianni, our CFO, to provide a more detailed overview of the third quarter financials. We'll then open the line for questions. I'd like to begin by expressing well wishes to you and your families. I hope that you're all healthy and safe. Our thoughts are with all of those who have been impacted by COVID-19. We're especially grateful for our dedicated crew members working aboard our vessels as they support the global supply chain. Pangaea remains committed to the health and wellbeing of our employees. And as a company, we'll continue to follow all local and international regulatory guidance and best practices when it comes to operating our business safely. We hope you’ve had time to review our press release and the accompanying presentation, which were issued last evening. Our strong third quarter results reflected a continued turnaround from the first quarter of 2020. And it validates our business model as of long-term contracts of affreightment, specialized fleet and cargo focused strategy allowed us to maintain strong margins. During the quarter, which is seasonally one of our strongest, we benefited from both improved market conditions and the arrival of the summer ice season for a specialized fleet. Once again, we've deployed the full strength of our industry-leading ice class capabilities to provide our clients with specialized services required for demanding conditions. Our achieved TCE rate for the full fleet for the quarter, while lower year-over-year continued to outperform against the average of the Baltic panamax and supramax indexes. We exceeded the average market rates by $3,030 per day, a 29% premium to…

Thank you, Ed, and thank you all for joining us on today's call. Again we hope everyone remains healthy and safe as we continue to adjust to new restrictions or, in some cases, return to new normal work environments. We thank our employees and crew for their extra efforts during these unprecedented times. Before walking through our financials, I'd like to expand on our recent acquisition. As discussed on prior calls, we have been focused on effectively allocating our cash resources into operating initiatives and expansion opportunities. We are selectively deploying our capital in ways that complement our current business and secure our position for the future. As I’ve mentioned, we were excited to complete the acquisition of an additional one-third interest in our partially owned consolidated subsidiary, Nordic Bulk Holding Company, which owns six ice-class 1A panamax vessels, bringing our ownership interest from 33% to 67%. As you will see in our cash flow statement, $15 million of the total $22.5 million acquisition price was paid at closing and the balance will be paid in three annual installments of $2.5 million. Further, on November 3, we signed a nonbinding term sheet to refinance the Nordic Odyssey in Nordic Orion for up to $18 million with a seven year term at a fixed interest rate of 2.95%. We expect to close within December and use part of the proceeds to pay down the existing balloon installments, which come due on December 31, 2020. We have also taken additional steps to renew our fleet, reduce our average fleet age and strengthen our financial position. In January, we accelerated our purchase option on the Bulk Beothuk finance lease facility to pay off our most expensive debt facility. During the third quarter, we completed the sale, which generated $4.6 million of cash. With…

Thank you, Gianni. We thank our customers, our business partners and shareholders for their continued commitment and partnership, and we look forward to updating you further in the coming quarters. I'll now open the floor for questions.

[Operator Instructions] Your first question comes from the line of Poe Fratt with Noble Capital Market.

Good morning, Ed; good morning, Gianni.

Good morning, Poe.

Ed, if you wouldn't mind, I would like to ask you sort of how you're seeing the market and how – any changes in your customer activity and anything you'd like to highlight? And then also, if you could just expand a little bit on your comment that you're preparing for added volatility or potential volatility over the next quarter or so. If you could just maybe talk about what kind of measures you're taking to handle that potential volatility.

Okay. I think where we end up, and it's perhaps a bit lucky for us. But the third quarter is traditionally a good quarter for us. Fourth quarter is okay. But as you get into the first quarter, it's generally for the market, it's a slow quarter. And naturally, as we come out of the ice season and we deliver, especially the chartered ships, our fleet will naturally go down. But we we're very careful not to take on heavy commitments on the tonnage side for that period. So I suppose that's like what we're preparing for, I think that we have two big problems, and one is COVID, which is really out of control. We're very lucky here. We set policies and thank goodness, no one has gotten sick. And guys on board, we’ve been luck there. We haven't had real problems repatriating seamen. The people have had that. That's fortuitous for us. But now we're going to go through this period, and no one knows where it ends. The second problem is the political problem. And this has been this way for a while. And the instability in our political situation means that people can't make decisions, and they can't go forward. And that's not helpful, not just for our business but for any business until things stable. My view is that if it stabilizes and this carries through, there will be a lot more business that comes because people will feel that now they can invest and now they can do things and even regardless of the COVID, and you're going to – I think you're going to see a push in demand in the market for that once that's resolved. But at the same time, it's a seasonally poor situation. So – but if it can be balanced by some stability, I mean, we've been working on a lot of projects for quite some time, but they've installed. And part of it's COVID and part of it is really the instability of our government and hopefully, we can get through – I mean we can't control the COVID, but we can control getting some stability in the government. So I think on balance, what you end up with is the supply demand book looks pretty decent. We just need to have stability.

And Ed, if I could just expand on that. When you talk about potentially maybe just the question should be under Biden administration, would you – do you think that less adversarial trade discussions would be helpful. Is that the kind of change that you're talking about?

Yes. I think the confrontational – it's not just the confrontational style. It's just the fact that you wake up every morning and you don't know what the next thing is. And I think that's basic problem without getting political. If you don't have that stability. So you wake up every day and there's some other crazy things going on, and people just look at it and they is – how can we make capital decisions, let's say, the coal industry. I think people in the coal industry understand that, that field is not going to last forever regardless of what the government has done to start on. You don't see any of those guys making investments in new coal fired plants, that's for sure. The alternative energy market, which is a giant growth market if they let it happen, that's helpful for us in a lot of ways. Those are just two examples. And – but I think if you take out all of this trade stuff, then things will really start to flow smoothly. And so I think that's – I think we're hopeful that, that's going to be the case. So then at least for the first quarter, maybe that gets us over-the-top to being generally a bit more bullish, but going forward. But beyond the first quarter, I think the supply and demand is pretty good. And people aren't building ships different reasons. But also the same – in a way, the same thing, no stability. No one knows what's going on with trade and so that's a real issue. And our economy here, we haven't seen the worst of what's going to happen. That's for sure. I think we're cautiously optimistic, the thing in Washington will get settled, optimistic. The COVID, no one knows how that affects the economy. And so beyond that, I think it's okay for us. I mean we're pretty well balanced with our fleet and with what we're doing. And I think we're going to be in a situation where we've sold five ships in probably through the last year or so. And we'll continue – we will end up looking to renew the fleet, pick up a couple of modern ships along the way. And I think with the new buildings coming, starting to come next year, I think our average age of the fleet will fall from something like 13 down to something like 8. And I think that's a long-term goal for us. And you're in the ice ships are – it's a different way of looking at it, those ships, you need the ice ships to run the ice business. It's that simple. And the other ships tend to be more commodity-based but we need them to expand our business. And that's it.

Great. And I think you read my mind on sort of what you're doing on the asset side, Ed, because I was going to ask you that question about just how your overall fleet is contracted, but it has shifted a little more towards the – because of the Nordic Bulk acquisition and also just the selling of the older assets and the arrival of newbuilds, you will have a better fleet and then potentially it does expand next year if you do find the right opportunities?

I think so. And again, we're quite hopeful that some of the projects will come to fruition now. And we're doing other things in the logistics space. That will come – come out pretty soon, and they've added value things to our services. And I think we're spending a lot of time on doing that sort of stuff.

And when you talk about the logistics space, is that associated with the Fall River terminal? Or is there another element to that, Ed?

Well, we're already doing certain things. I don't know if I probably shouldn't talk about it yet, but we are already doing things in the Gulf and that will come out. We just have some paperwork there to finalize, but it's actually in place. It's already operating. And we're seeing a lot of opportunities around LNG terminals and to move things from Canada into there and working with partners. We're not experts at everything. So we know where we're not, and we like to have partners that are complementary to what we do. And that's worked out. We've done some good things. And yes, I think it's not stuff that really kind of protects the – contributes significantly to the bottom line. And that's really is helpful for us. And the more we do in that space, the more demand we have for our own ships or charter ships that we can place in those programs.

Yes. And I mean, on the risk spectrum, very low risk, right?

Very low risk. There is some capital, but it's not a lot.

Great. And then, Gianni, if you could talk about the newbuilds and you're going to have two that arrive sometime around the spring. I'm calling it April and then the other two later in the year. Can you talk about the capital – if my math is correct, that you had $15 million at the end of the quarter of the $76 million paid. Can you talk about the timing of the $60 million that's left and then how the financing works, when will it be upon delivery where you can close on the financing? Or will there be a little bit of a lag there?

Yes, no problem at all, Poe. So that one – we've actually – because we were doing it in a joint venture with a partner, Pangaea has already completed its capital contributions to that project. Going forward, our partners will come in with capital upon launching of the vessels. And then we're also getting pre-delivery financing. So the actual financing will kick in at launch as well. So from our perspective, I think we're in a good position. We get to take strategically important assets for the company. And as of today, we're in a comfortable position. We'll have some delivery costs that will be borne by Pangaea, but we're talking $2 million to $3 million of delivery cost. And then obviously, we'll be operating them. So it will be the commercial management and positioning of the vessels. But from a capital perspective, to complete the project, we're basically committed our capital fully.

Okay. And then when you look at how you're going to treat that from an accounting standpoint, it sounds like it may be consolidated? Or will that be reported as an equity and income?

So the SP is already consolidated. So it will be fully consolidated. We'll capture 100% of the assets and liabilities. And this will be back in – I think in Q2, for that actually. When we entered into the agreement with our partners, there's a new line item on our balance sheet, which is other long-term liabilities, which represents our view, the equity contribution of our partners. But for accounting purposes, it's recorded as liability due to purchase obligations in the outer years with that joint venture. So yes, we will consolidate it. It will be fully consolidated and the entity currently is, obviously, doesn't have much assets yet, but it will, towards the middle of next year.

Okay, great. And then can you give us an idea of sort of where you stand for current activity this quarter? Where we sit look at sort of your overall fleet or your shifting days? And then if you could comment on any changes on the cost structure, whether it's charter higher OpEx or drydocking activity in the quarter?

Yes. No problem. What I Ed said earlier, the ice season is a very busy season. We're fully deploying our assets plus chartering in additional vessels. So we will redeliver some. But I still expect we will average somewhere in the 50s for the quarter from a vessel fleet size. That composition is – obviously, there's going to be a few more chartered-in vessels due to sales of owned vessels. But we're still expecting about the same level of activity from a fleet perspective. And the market is what it is and what Ed has said earlier, and we're preparing, I think we basically do what we do in any other market cycle. We'll we have the flexibility to redeliver vessels and reduce our exposure to the market, and we can adjust our cost basis. So I still think our chartering fleet will remain slightly lower than it was for Q3, but I still expect around 50 for the quarter. And dry docking, we do have some dry docking in 2021, actually, two of our – two of our ice class vessels will complete towards the end of this year. But nothing that unusual, I would say, it's just normal dry docking. The two ice class vessels, actually the [indiscernible] treatment installations. But I think we're assuming around $5 million to $6 million next year to allocate to dry docking.

Okay. Great. And then maybe, Ed, if you could talk about the joint venture acquisitions and how that presented itself and it's obviously. You know the operating history there, no problem with due diligence. But – and then if you can just sort of describe that. And then maybe look at the potential to acquire the rest of the JV, is that something that is possible?

Are you talking about the logistics? Okay. That's basically came out the way it was structured was on [indiscernible], one of the partners wanted to get out. We spent the time setting the right pricing. And we were able to increase our stake substantially, right. And that because of the way the structure is we capture more of the upside because the Nordic guys captured as a matter, of course, 25% of it to begin with. So now we capture more. We have better control. And the people that last – they're getting out of drybulk business. So it suits us to do it. The other partner still – we ask them also do you want to go and they said, no, it's only shipping investment we make money with it. So we want to stay. And so I think it gives us more control. And I think it's always difficult when you – it's hard enough if you have one partner. If you get more than that, it's pretty difficult. I mean, in my early days in shipping, we ran a shipping pool, and that was like a nightmare, right. And you have to satisfy if you have 20 people and you have 20 opinions, you spend all your time managing the partners in it. So it's the same thing with the other projects we're doing that are logistics based. We've partnered with people that we know. We've done business with before, and we have a mutual trust. So that's – I think that's the way to go. You share your expertise.

Okay. Perfect. And Gianni, I'm not sure if you're hearing the same feedback as I am but I apologize. Gianni, on the refinancing, can you talk about the potential for refinancing the facilities on the four other ones that are due in late 2021 and then early 2022?

Sure. Actually, what we did on that facility with the existing lenders, what you've seen, I think, in our Q, we actually amended the repayment date of the Odyssey and Orion. So originally, the balloon payments were due in September, we moved them after negotiating with the lenders to end of December. Odyssey and Orion have done, we're happy to move forward what we think is a very attractive package for the company on those two vessels. We've developed a good relationship with the lenders and we're happy we have access to capital or financing in that range. The remaining four we're actively working on I expect we'll complete. We'll complete that financing as well in late 2020 or early 2021. We have not signed a term sheet, but we are very, very close, and we expect that we'll refinance those four ships as well early well before their balloon payments come due. As far as the leverage profile on the other four ships, it will probably be close to existing levels of debt. There's no intention to lever those ships up any further than they currently are. So we want to have a longer runway, reduce our quarterly amortization. They'll benefit the company in paying lower cash breakeven on our vessels. We'll have a longer runway and a little more stability in our financing for six and seven years.

Great, thank you so much.

[Operator Instructions] At this time, there are no further questions in queue. I'd like to turn it back over to management for closing remarks.

Thank you very much for joining us this morning, and stay safe you and your family.

Thank you. This concludes today's conference call. You may now disconnect.