Thank you for standing by, ladies and gentlemen, and welcome to the Star Bulk Carriers Conference Call on the Third Quarter and Nine Months 2020 Financial Results. We have with us, Mr. Petros Pappas, Chief Executive Officer; Mr. Hamish Norton, President; Mr. Rescos, Chief Operating Officer; Mr. Simos Spyrou, and Mr. Christos Begleris, Co-Chief Financial Officers 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 that this conference is being recorded today. We will now pass the floor to one of your speakers. Mr. Pappas. Please go ahead, sir.

Hi, everybody. Though, this is Simos Spyrou. Thank you. I am Simos Spyrou, Co-Chief Financial Official of Star Bulk Carriers Corp., and I would like to welcome all of you to the Star Bulk Carriers' conference call regarding our financial results for the third quarter of 2020. Before we begin, I kindly ask you to take a moment to read the Safe Harbor statement on slide number two of our presentation. Today's presentation will focus on an overview of our Q3 results, our cash evolution during the quarter, our operational performance, and the industry's fundamentals, before opening up to questions. Let us now turn to slide number three of the presentation for a summary of our third quarter 2020 financial highlights. In the three months ending September 30, 2020, TCE revenues amounted to $137.8 million, 4.9% higher than the $131.3 million for the same period in 2019. Adjusted EBITDA for the third quarter 2020 was $79.7 million, versus $72.2 million in the third quarter 2019, an increase of 10.4%. Adjusted net income for the third quarter amounted to $27.3 million or $0.28 per share, versus $17.3 million adjusted net income or $0.18 per share in the third quarter of 2019. Our time charter equivalent rate during the quarter was $13,083 per vessel per day. Total cash today stands at $225 million, with total debt at approximately $1.63 billion pro-forma for undrawn liquidity of our working capital facility. Our strong cash flow generation in the third quarter, in combination with our recent refinancings, have increased significantly our liquidity. Until today, we have completed eight refinancings for 30 vessels, increasing our liquidity by $107 million net of any financing fees. In addition, we have secured commitments, and we are in the process of drawing down funds from two financial institutions to refinance an additional five vessels, which after repaying outstanding debt are expected to release net proceeds of approximately $5 million, for a total combined of $113 million net of fees. Slide number four graphically illustrates the improvement in the company's cash balance during the third quarter. The company started the quarter with $107.6 million in cash, and generated positive cash flow from operating activities of $57 million. After including debt proceeds from refinancings and repayments, CapEx payment for scrubbers and ballast water treatment systems, we arrived at a healthy cash balance of $222.1 million at the end of the third quarter. I will now pass the floor to our COO, Nicos Rescos, for an update on our operational performance.

Thank you, Simos. Please turn to slide number five, where we summarize our operational performance. OpEx was at $4,244 per vessel per day for the third quarter of 2020. The increase was primarily due to increased forwarding logistic expenses during the quarter to service our fleet. However, we expect OpEx levels to normalize during the fourth quarter. Otherwise, our vessels have operated largely uninterrupted during the third quarter despite COVID-19 pandemic. For the nine month 2020 period, we continued having operating expenses 13% below our listed peer average. Net Cash G&A expenses were at $985 per vessel per day for the quarter. The combination of our in-house management and the [skill] [ph] of the group enables us to provide our services at a very competitive cost complemented by excellent ship management capabilities. Star Bulk is consistently ranked amongst the top five ship managers evaluated by Rightship and we're currently ranked as number one amongst our listed peers. As of today, we have no remaining drydockings pending for 2020. We are currently operating a fleet of 114 scrubber-fitted vessels at an aggregate of already operated consistently for more than 38,000 days. I will now pass the floor to our CEO Petros Pappas for a market update and his closing remarks.

Thank you, Nicos. Please turn to slide six for a brief update of supply. During the first 10 months of 2020, a total of 41.6 million deadweight was delivered, and 12.4 million deadweight was sent to demolition for a net fleet growth of 29.2 million deadweight or 3.3%. COVID-19 has created strong supply inefficiencies since April with quarantines and crew changes, inflating port congestion and creating short-term regional shortages of vessels. New environmental regulations concerning greenhouse gas emissions are expected to keep new building activity under control over the next few years. The orderbook has decreased to a record low of 6.3% of the fleet with just 9.1 million deadweight firm orders reported by Clarksons year-to-date. Furthermore, the return of Pakistani breakers after nearly two years of absence has inflated scrap prices and should make demolition of older tonnage more attractive for ship owners. As a result, we expect NET fleet growth to stay below 1.5% per annum during the next few years. Despite the strong correction in crude oil prices, the average steaming speed of the dry bulk fleet during the year was down 0.5% to approximately 11.5 knots as a result of the IMO Low Sulphur regulation and the switch to more expensive VLSFO. A recovery of crude oil prices in the medium term is expected to further incentivize slow steaming and will play a key role for freight rate levels of modern tonnage and may also increase scrubber savings. Let's now turn to slide 7 for a brief update of demand. 2020 has been challenging for trade as COVID-19 has affected consumption and the supply chain of all dry bulk cargos. According to Clarksons, total dry bulk trade during 2020 is estimated to decline by 2.7% in tons and 2.3% in ton-miles. China has been the driving…

Thank you very much. [Operator Instructions] Our first question for today is from Randy Giveans from Jefferies. Please go ahead.

Gentlemen, how is it going? A – Petros Pappas: Very well. A – Simos Spyrou: Good, Randy.

Excellent, excellent. Well, I guess first question along the sale leasebacks, and the all incremental liquidity from that, can you give us a weighted average interest rate for those deals, just kind of seeing what the cost of financing was? And then, secondly how does this affect the kind of dividend formula and calculation for your kind of cash balance? A – Christos Begleris: Hi, Randy, it's Christos. So, basically the average margin of those new financings is in the high twos, it's around 275, and that's the average for the $500 million of facilities, including the $60 million that we will be drawing in the next few weeks, and effectively these refinance debt of approximately $390 million, which was priced 20 basis points higher than the new financing. So the interest cost is down on a larger amount, and then the amortization is actually quite lower on the new debt, resulting in a new sort of interest cost for the $500 million that is $10 million per year lower than what we had on the $390 million that we refinanced.

Got it. Okay, thank you for that, and then for the dividend calculation now?

So the dividend calculation is based on, as you know, cash on the balance sheet relative to the number of ships we have, but a lot of the cash on the balance sheet now, and perhaps a bit more later, is going to be from refinancing existing ships at higher leverage.

Right.

Where, basically, we have the option of counting that cash from refinancing to count toward the dividend or not, and to this point, we have opted to basically not count that extra cash as counting toward the dividend. It's possible that management and the Board will change its mind at some point, but I think basically the intention of that dividend provision was to take into account cash generated from operations.

Got it. Yes, I would assume you weren't just borrowing it to pay it out in the dividend.

Right.

But just in -- I guess should we just net that off because going into it, fourth quarter you're supposed to earn or you're supposed to have $1.6 million per vessel, and then the incremental cash was to be paid out as a dividend.

Correct.

So now does that 1.6 number go up or do we just take your cash balance and reduce the excess liquidity you got from this refinancing, what's the best way to calculate it?

I think basically you should net off the extra cash that we've gotten from the refinancing.

Got it.

At least for the time being.

Yes, that's fair, and then I guess in terms of use of cash, is this just to build a fortress balance sheet in case there is a very soft market in '21? Are you looking at some fleet renewal, maybe some secondhand acquisitions? Like where do you see the use of cash in your fleet going forward?

Yes, I think for the near-term you should think about this cash as cash on hand in case we have a pandemic, and last I looked, we had a pandemic. So there's more risk in the world, and that was why we wanted to refinance some of our ships to generate some more cash. Obviously, our intention is not to keep large quantities of cash on the balance sheet indefinitely. So we will be using cash for productive purposes.

Noted. All right, well I have a few more questions, but I will hop off and let you all go. Thank you so much.

Thank you.

Our next question for today is from Ben Nolan from Stifel. Please go ahead.

Yes, thanks. Hey, guys. Maybe following up on that last one a little bit. Obviously one of your competitors has been really busy selling assets, and at least historically speaking, they're at pretty low prices relative to, say, average modern asset values. Is that at all interesting to you? Is that something that you're looking at or are you thinking of it pretty much as similar to what you've done in the past, if you can get a ship-for-shares type of a situation then maybe you'll look at it, otherwise not?

I think basically, given where our share price is at this point, a ship for shares transaction could be quite interesting, and basically ships for cash at this point probably less so.

Okay, and another thing, I know, and having looked through some of your previous presentations, you've been, it appears, to be pretty pleased with the CCL pool for the Capes, the Newcastlemaxes. I was curious, well first of all, assuming that that's correct, would you or how do you think about maybe deploying the Kamsarmaxes or Supramaxes or other parts of the portfolio into similar scaleable arrangements?

Hi, Ben. This is Petros. Do you mean whether we would form a pool or Capes -- on Kamsarmaxes or Supras?

Well, you tell me. I mean I -- it looks like the CCL pool is working out for you. I don't know, is that something that you would like to apply to the rest of the fleet in some form or fashion?

Actually, to be honest with you, I think that makes even more sense to be in a pool for smaller vessels. The reason is the following. When you have a big number of vessels you have them dispersed all over a certain ocean, and therefore when new business comes in you have a bigger probability that you're going to be closer to the loading ports, and that actually happens more with smaller vessels, meaning Supras and -- Supras, Ultras, and Panamax, Kamsarmax, than with Capes. Capes have set routes. So you cannot actually get as much of an advantage as you could on a smaller scale. So it's funny enough, we've been discussing this the last few days, that formation of a pool on those smaller sizes would be beneficial going forward.

Okay, interesting, and then lastly, I don't want to overdo it on the dividend question, but I do think it's important. So, should we, again the calculation has become a little bit more ambiguous?

Yes, I know.

Should we assume that until the market gets better you -- where there's probably not going to be a need of impairments. Is that sort of the read-through here?

That's probably the logical conclusion, yes. I mean…

Okay, all right.

A market at this level could lead to a dividend eventually, but a dividend in the near-term probably requires a better market.

Right, and as part of this new…

That being said, we wouldn't be shocked if we see a better market next year.

Sure, and as part of these new financings, there's no restrictions on your ability to pay or anything, that it's just a decision on your part?

Correct. That's correct.

All right, that does it for me. Thanks, guys.

Thank you, Ben.

Thank you very much. Our next question is from Amit Mehrotra from Deutsche Bank. Please go ahead.

Thanks, Operator. Hi, everybody. Sorry, I dialed in quite late actually. So the question, forgive if this has been answered, but did you guys provide a fourth quarter bookings percentage and rate? And Christos or Simos, I think with some of the refinancing gymnastics that you guys have done, I think your breakeven has actually come down from the $11,000-plus level. If you could just give us a finer point on what the breakeven is pro-forma for all that stuff that you guys have done.

Hi, Amit. This is Petros. We have booked about 65% of our Q4 at levels of about $13,500. Now, the 35% left is probably going to be lower because the market has gone down. Right now, I would say that, Ultras are at mid high nines, Panamax are around 10.5, and Capes around 13, 13.5. So I would expect that this 13,500 deadweight may go down to about what we've seen during Q3. Unless, of course, if the market moves up in the last 45 days over the quarter, which I would not rule out. As far as the breakeven I would…

Is that on a scrubbed or unscrubbed basis, the numbers that you're providing?

These are roughly on a scrubbed basis.

Scrubbed basis, okay, all right, go ahead, yes.

As for our breakeven, I will let the CFO to take this part of the question.

Hi, Amit. From my side, this is Chris Begleris. So, basically, our breakeven or cash breakeven as you correctly have pointed out has actually dropped to slightly below 11,000 per day. We are at around 10,900 on a cash basis.

Okay, great, and then, Hamish, I'm surprised that there's so many questions around dividends because the market is not that great right now, but I wanted to kind of use that as an opportunity to revisit the whole strategy behind the dividends. I mean, correct me if I'm wrong, but the whole kind of motive behind the dividend was to allow the equity value to trade above NAV, which will give you a currency to de-lever the balance sheet, and then you have basically a de-levered kind of dry bulk company, which obviously commensurate very low breakevens. I mean, the outlook for the market is incredibly different than when it was a year ago. It's not bad, but it's not the super cycle that we once predicted prior to the COVID crisis as it relates to IMO 2020. So in that context, I'm just wondering like does the dividend hold as much of a priority in your head or the company's mind that it did this time a year ago in the context of the outlook is better, but it's not necessarily the windfall opportunity that you guys thought it was a year ago, or all of us thought it was a year ago.

No, I think, the dividend is just as important as it was, and frankly, I think, the opportunity may be better than it was. The opportunity for 2020 was obviously that we were going to have a pretty good market without the pandemic, and we were going to have great returns on the scrubbers, which obviously was affected quite substantially by the pandemic, but going forward, we have a ridiculously low order book. We have a very tiny fleet growth expected next year well below what we expect to be the growth in the ton mile demand, and yet, who is going to be brave enough to order a ship next year, right? I mean, if you order a ship next year, you're making a bet on the political acceptability of your fueling choice, five years out from the date of order, and nobody knows there's tremendous uncertainty about what sort of ship you're supposed to order and how long that ship will be grandfathered in. So we expect frankly that the order book will remain very low, even in the face of a pretty good market, which could be a tremendous opportunity.

Okay, and then just related to this scrubber, I mean, the scrubber economics are not horrible. They're okay. I mean, there's still a spread in terms of high and low sulfur fuel. Can you just baseline, where is that spread today? I think it's like $60, $70.

That was about $70.

And obviously, all oil prices are coming back higher, jet fuel, diesel, gas, distillate demand in general should improve in a post vaccine world. Could it be possible that like the scrubber economics become more compelling, even though they're actually be pretty decent now, even at $70 spread…

Let's put it this way, at $70 it's a decent return on investment, at $150 or $200 or $250 it becomes better than a return on investment. What's crucial is demand for low sulfur refined products. Right now, basically since there is so little demand for jet fuel and diesel demand is somewhat suppressed, the most profitable low sulfur product of a refinery is low sulfur fuel for ships, which is very unfortunate from the point of view of the scrubber economic, but once jet fuel demand comes back and diesel demand comes back, it should be quite expensive for the refineries to produce a marginal barrel of low sulfur fuel for ships because the sulfur removal capacity at the refineries will be stretched, which is not today. So, the scrubber economics should come back faster than the increase in oil prices. Q – Amit Mehrotra: Okay, that's interesting, and then the last question I had if I could, I guess this is Christos and Simos, you guys decide to put a press release -- in the press release the fact that you are compliant with all your covenants which obviously you are given the fact that the net debt is coming down of the company, but obviously, like that begs the question of like what is the covenant and how quickly are asset values declining relative to your ability to lower the liabilities of the company? And so, last quarter you were very helpful in terms of providing where the growth in net LTVs were. I guess the banks maybe look at around assets value basis. I don't know how you look at it internally, but it would be really helpful if you just help to think about the pro forma value is on a net gross basis, especially…

Next up, we have some follow-up questions from Randy Giveans. Please go ahead. Q – Randy Giveans: Hey, guys, me again. Just quick questions following up on hedges, right, you have I think 8,000 metric tons remaining in November and December. You had 71,000 tons or so last quarter. So I guess for 2020, does that mean you haven't any added hedges recently? And then, your prior press release stated you had I think 24,000 tons in 2021, but your current press release doesn't mention '21. Did you sell those? Or, what is the status of those? A – Christos Begleris: Correct, we have liquidated those, Randy, when 2021 was at levels below $60 per ton, and this has proved so far at least to be a good move given that right now 2021 the spread trades at around $80 per ton given also the latest announcement about a vaccine and further progress on treatment for COVID. Q – Randy Giveans: Got it, and then, could you help with the -- going to the 266 per ton, that is sizeable. Were those just locked in at the beginning of the year and that's just kind of a remaining position? A – Christos Begleris: Yes. Those were essentially locked in December 2019 when it was a very different world to where we are today. Q – Randy Giveans: Makes sense, got it. Well, that's it from follow-up. So, I'll let you go. A – Petros Pappas: Thanks. A – Hamish Norton: Thank you. A – Christos Begleris: Bye Randy.

There are no further questions waiting. I'll now hand back to the speakers.

Thank you, Operator. No more comments from us. Good night and stay safe.

Thank you very much. Ladies and gentlemen, that does conclude the call. Thank you everyone for joining. You may now disconnect.