Global Ship Lease, Inc.

Ladies and gentlemen, thank you for standing by and welcome to the Global Ship Lease second quarter 2020 earnings call. At this time, all participants are on a listen-only mode. After the speaker's presentation, there will be a question and answer session. If you have a question during the session, you need to press star 1 on your telephone. If you require operator assistance during the program, please press star then 0. As a reminder, today's conference is being recorded. I would now like to do CO3's conference call. Mr. Ian Weber, Chief Executive Officer of Global Ship Lease. You may begin, sir. Thank you.

Thank you very much. Good morning, good afternoon, everybody, and welcome to the Global Ship Lease second quarter 2020 earnings conference call. As normal, the slides that accompany today's presentation are available on our website, www.globalshiplease.com. Also, as normal, slides one and two remind you that today's call may include forward-looking statements. that are based on current expectations and assumptions and are, by their nature, inherently uncertain and outside of the company's control. Actual results may differ materially from these forward-looking statements due to many factors, including those described in the Safe Hardware section of the slide presentation. We also draw your attention to the Risk Factor section of our most recent annual report on Form 20F, which is for 2019 and was filed with the SEC on April 2, 2020. and which you can obtain via our website or via the SECs. All of our statements are qualified by these and other disclosures in our reports filed with the SEC. We do not undertake any duty to update forward-looking statements. For reconciliations of the non-GAAP financial measures to which we will refer during this call, to the most directly comparable measures calculated and presented in accordance with GAAP, you should refer to the earnings release that we issued this morning, which is also available on our website. I'm joined today by our executive chairman, George Yurikos, our chief financial officer, Tasos Seropoulos, and our chief commercial officer, Tom Lister. George will begin the call with some high-level commentary and an update on our current areas of focus. And then Tasos, Tom, and I will take you through the quarterly results, our financials, and the current market environment, after which we'd be pleased to take your questions. So turning to slide three, I'll pass the call to George. Thank you, Ian.

Since our first quarter earnings call, a great deal has changed in the world and in the container shipping industry. Economies are beginning to reopen in many countries, containerized freight volumes are starting to improve, and importantly, policies have been put in place in many ports that make it possible for seafarers to safely disembark and to re-establish more normal crew rotations. I am personally grateful to all of our crew who have continued to operate our ships to the highest standards throughout this difficult period. At the same time, COVID-19 continues to be a major factor in many areas and much remains unknown moving forward. With that perspective, our top priority continues to be maintaining vigilance and resilience in this challenging environment in respect of our people, our ships and our commercial platforms. Our specific areas of focus remain largely consistent with those we discussed last quarter. We are prioritizing the safety and welfare of our personnel at sea and on shore, and we are taking all appropriate steps to protect and support our colleagues. We are focused on maintaining strong liquidity and a healthy balance sheet in order to remain strong, flexible, and resilient throughout all market conditions. Our strategy and charter portfolio put us in a good position here as we have $660 million of contracted revenue over an average of more than 2.3 years and only $5 million of debt maturities between now and late 2022. We continue to engage constructively with capital providers on the intended refinancing of our 2022 bond, ultimately due November 2022, and it remains our intention to pursue that refinancing on an opportunistic basis when market conditions are sufficiently supported. In order to benefit fully from our extensive contract cover, we strive to maximize commercial and operational uptime of our ships. We have remained active in chartering, and with our high-quality, well-specified fleet, I am pleased to say that we currently have our entire fleet employed on time charters. Despite the fact the global fleet saw idle tonnage spike into the double digits on a percentage basis in the second quarter, as the liner companies have managed capacity to meet reduced demand. This charter's success is closely related to our ability to offer consistently excellent service to our liner operator partners, providing them with reliability, operational flexibility, low slot costs, and high refer capacity that they rely upon every day. Tom will address this in more detail during his market overview, but it is worth noting that a number of the world's leading liner companies have customers amongst them, have now reported results for the first half of the year that have significantly exceeded expectations. Against what was widely expected to be a major test of their ability to operate in a challenging market, the liners overall have thrived, supported by a far higher degree of pricing and capacity discipline that has ever been seen in the past, as well as an increasing preference for not barely the largest ships for the trade, but those with a lower slot cost, flexibility, and appropriate reefer capacity to enable them to maximize their profitability in good times and bad. Finally, while we're primarily focused on vigilance and resilience, we also recognize that there are tentative signs of a potential economic recovery, of balance sheet and charter coverage being that we're not dependent upon the recovery being a near-term event, but we're making sure that GlobalShipLease is in a position to fully benefit from the recovery when it does take place. With that, I will turn the call to Ian for a review of our fleet and charter portfolio, as well as an overview of recent highlights.

Thank you, George. On slide four, you can see our charter portfolio, from which I'll highlight a few points. We have some $659 million of contracted revenue, with a TEU-weighted average remaining contract duration of 2.3 years. As George mentioned, all of our ships are employed on time charters. Indeed, other than the two 21-year-old feeder ships, which we sold in July, we had only 33 days of idle time between charters during the quarter. Recently agreed charters are mainly short-term, giving us coverage through the immediate future. but retaining the ability to refix in the medium term in a charter market that has already moved materially off its lows. Opportunism notwithstanding, it's important to keep in mind that 97% of our adjusted EBITDA for 2020 is already covered by contracts, and 75% for next year, 2021, giving us a great deal of comfort and materially limiting our downside exposure. On slide five, I'll provide some color on reefer capacity, an area that we touched on last quarter, but which has become even more important as market conditions and high idle tonnage have drawn a stark contrast between the haves and the have-nots of the global container fleet. Reefer, or temperature control cargo, like foods, medicines, and the like, is the fastest growing element of containerized trade and a service for which the liner companies are able to charge a premium against the standard dry cargo. Hence, liner companies look for ships that can carry a significant proportion of reefer containers, which require the vessels to have incremental generating capacity and the appropriate wiring to allow the containers, which are effectively huge fridges, to be plugged in. Global Ship Lease has invested in high reefer capacity ships, including upgrading the reefer capacity of pre-existing tonnage. As you can see on the left-hand side of this slide, slide five, our vessels have reefer capacity that is meaningfully above the medium for the vessel classes in which we operate. And in the case of some of our post-Panamax vessels, represents the gold standard in a global fleet where few mid-sized and smaller ships meaningfully exceed a minimal threshold for reefer capacity. And you can see from the hollow circles on the chart that we still have opportunities to further expand the reefer capacity of certain of our larger ships to best-in-class status. Just as with our low slot costs, which is a function mainly of fuel efficiency of our ships for their carrying capacity, the reason that we want to highlight this aspect of our fleet is that this is crucially important to our liner company customers. Primary for capacity ships receive preferential employment, even in weak charter markets, and they command premiums in both earnings and vessel valuations. Moving on to slide six, we've outlined our second quarter 2020 results and year-to-date highlights. We continue to generate strong, predictable cash flow in contracted charter cover, with $71.4 million of operating revenue, up 13% on the equivalent quarter in 2019, mainly as a result of additional ships in our fleet. We've added seven ships or so since then. That revenue generated $41.8 million of adjusted EBITDA, up 9% on 2019, and $13.5 million of normalized net income, which is adjusted for a non-cash impairment charge of $0.9 million related to the sale of the two feeder vessels which were completed in July. This normalized net income is up 62% on Q2 of 2019 and reported net income, so after that impairment charge of $12.6 million, is up 51% on 2019. Our operating performance for the quarter reflects certain COVID-19 related impacts with utilization of just under 90%, negatively affected by extended dry dockings and delays in the sales process for the divestment of the two oldest feed of vessels in our fleet. Our operating expenses of $24.2 million reflects the addition of several vessels, seven vessels in our fleet compared to 2019. At $5,902 per ownership day, These expenses are down some $57 per day or 1% compared to second quarter 2019 as a result of further improved ship management, partly offset by those additional vessels, the seven that we purchased, all being post-Panamax and thus slightly more expensive to run. Commercially, we've extended or secured new charters for 11 of our ships in the period, including five feeder ships for short periods at between $6,600 and $8,000 per day, and six non-feeder vessels, so larger vessels, at a wide range of rates over periods spanning from as little as two months to as much as almost two years. We've shown more detail in our press release this morning, but broadly speaking, charters skew towards being short in duration, particularly for the relatively lower rate charters, take opportunity of fixing in the upside going forward. And as Tom will illustrate, we're currently seeing meaningful improvements in day rates across these segments as market dynamics improve after the pronounced COVID-19 driven lull of recent months. We also recently completed the previously announced sale of our two largest, sorry, our two oldest ships, the 1999 built GSL Matisse and Utrillo, after some COVID-19 related delays in the process earlier in the year. We've also taken a number of steps to further strengthen and deliver our already solid balance sheet. And we're also benefiting from historically low LIBOR affecting our interest cost. Importantly, between now and late 2022, so two years out, we have only $4.7 million of debt maturities, $4.7 million of debt maturities, which is very well covered by extensive contracted cash flow. We're continuing to delever, having amortized $20.5 million in second quarter 2020. As I've commented, with the majority of our debt at floating rate and with LIBOR at historic lows, we're also benefiting from reduced debt service costs. We remain in discussions regarding the opportunistic refinancing of the $267 million of our 2022 notes that are still outstanding. With that, I'll turn the call over to Tom Lister to walk us through the market.

Thanks Ian. Let's turn to slide eight. Now, trying to call the shape and timing of the world's recovery from COVID-19 is challenging, to say the least, especially when overlaid with rumbling geopolitical and trade tensions. However, to at least provide a framework, in this slide, we present MSI's forecasts, which are heavily caveated and will change as conditions continue to evolve. So on this basis, we're looking potentially at cargo volumes shrinking by between 7% and 8% in 2020, which is more or less in line with what we saw in 2009 during the global financial crisis, followed by a rebound of more than 10% in 2021. Top right, you can see that MSI reckons all trades will suffer in 2020, but the main lanes, that is the Trans-Pacific and Asia-Europe trades, are likely to be hardest hit. At bottom right, you can see the anticipated demand impact in aggregate set against a much higher conviction estimate of cellular capacity growth of only 2% or so, both this year and next. Turning to slide nine, this slide shows what's happening in the freight and charter markets. Let's take the left-hand chart first, which provides freight rate indices for containerized cargo out of China. You can see that freight rates came under pressure as COVID-19 first hit China and then became a worldwide phenomenon. So there's nothing particularly surprising there. Much more interesting, however, is that A, even when the impact of the virus was at its worst in the second quarter, freight rates were still up year on year. And B, rates are trending up. This is a testament to the capacity and pricing discipline exercised by the container shipping lines, which are expected to translate into positive financial results, further buoyed by low fuel prices. We've been looking forward to seeing Lion Air Company's 2Q results, and we're encouraged by those we've seen to date. Turning to the right-hand chart, you can see how charter rates, so our industry, are behaving in the short-term charter market. Again, charter rates came under significant pressure as COVID began to take its toll on the global economy. Rates bottomed out in June and then, as economies started to reopen, began to firm again, led, as was the case during the strong market of 2019, by post-Panamax ships. Slide 10 puts current charter rates and asset values in a broader context. Charter rates, the red lines. even during 2019, were below the historic average for the last 21 years, so that implies there may be further upside. They're now more or less where they were at the beginning of 2019, but still above where they were during the global financial crisis. On the other hand, asset values, the dark blue line, have remained at or below levels seen during the depths of the global financial crisis. suggesting that, although there is some downward pressure on values, especially for older ships, there is no asset value bubble to burst this time around. It's worth remembering, and I'll come back to this later, that the order book to fleet ratio immediately before the global financial crisis was about six times higher on the percentage basis than it is today. The significantly lower order book we see today is a product of disciplined ordering in recent years, partly driven by constrained access to capital, partly by a more coordinated approach to capacity ordering and management by the line of mega-alliances, partly by yard consolidation, and partly by the retrenchment of the tax-advantaged German KG scheme, which had incentivized speculative ordering of ships in the years running up to 2008. Slide 11 emphasizes the operational and commercial flexibility of the midsize and smaller container ships we focus on at GSL, explaining why they form the backbone of global container trade. The deployment maps at the top of the slide contrast where sub-10,000 TU ships are operated, which is everywhere, versus where the big ships are deployed, which tends to be on the mainland east-west arterial trades, namely the Trans-Pacific and Asia-Europe. Meantime, the pie chart at bottom left shows the composition of global containerized trade, roughly 70% of which, by TEU volume, is in the non-mainline, intermediate, and regional trades, typically served by mid-sized and smaller ships like ours. Slide 12 wraps up this section by focusing, as promised earlier, on the supply side of the picture. As you can see at top left, idle capacity in the market reached north of 10%. the highest level, in fact, seen since the global financial crisis. However, and this is an important however, the chart only runs through to the end of the second quarter of 2020. And during the course of July, idle capacity has come down and is now around 6.6%. This has been helped not only by improving demand, but also by gradual reopening of the big ship recycling facilities, allowing for the deletion of marginal tonnage from the global fleet. And we expect this recycling activity to continue to accelerate. So while we fully acknowledge that the market remains fragile and unpredictable, there are also some encouraging signs. And as we've said before, we believe that the supply side fundamentals laid out at the bottom half of this slide, namely negligible or negative net fleet growth, combined with a minimal order book pipeline, provide the foundation for an earnings rebound for midsize and smaller container ships when the recovery takes hold. On that note, I'll hand the call over to Tassos to talk you through our financials.

Thank you, John. Slides 14, 15, and 16 show our unaudited pro forma consolidated balance sheet, statement of operations, and statements of cash flow based on the second quarter of 2020-20. Rather than going through every line item, let me point out a few key items. We generated revenue of $71.4 million during the second quarter. The $8.3 million increase in revenue year-over-year was principally due to the acquisition of 7 vessels since previous year. For the 6 months of 2020, we generated revenue of $142.3 million up $14.7 million comparing to $127.6 million in the comparative period in 2019. We generated net income of $12.6 million for the second quarter of 2020 after a non-cash impairment charge of $0.9 million for our two vessels held for sale. For the six months of 2020-20, we generated net income of $13.2 million after a non-cash impairment charge of $8.5 million, all related to our two vessels head for sale, and $2.3 million premium paid on the redemption of $46 million for our 2022 notes, compared to $18 million in the comparative period. We are still experiencing extended CPR time due to the effects of the virus and congestion, as well as extended idle time due to operational difficulties on executing the sale of our vessels. As a result, in the second quarter of 2020, there were 210 planned off-hire days for one vessel for regulatory dry docking and the scrub and installation of two other vessels, all in progress as of end of quarter. 20 days of unplanned of hire and 194 days of idle ballast time related mainly to our two vessels yet for sale and delayed by COVID-19 port restrictions, giving an utilization of 89.6%. The average operating expenses per ownership date is including management fees in the quarter, was $5,902, down $57 per day year-over-year, despite the acquisition of the seven vessels noted above, all of which are post-Panamax with higher daily operating expenses. The average operating expenses for the six months ending June 30, 2020, was $6,125 per day, compared to $6,042 per day in the comparative period. Now, the general administrative expenses were $2.3 million for second quarter of 2020-20 compared to $2.5 million the same quarter in 2019. The average administrative expenses per ownership day in the second quarter of 2020 went down to $567 from $710 in the same quarter in 2019, a decrease of $153.00. The total cash on hand as of end of the quarter of 2020-20 was 89.7 million after the redemption and purchase year-to-date for 2022 notes for about 57.8 million and 23 million for purchase of two vessels. I won't go through them in detail now, but as always we have also included on slides 17 and 18 our detailed CAPEX guidance and adjusted EBITDA calculator to assist you with your modeling. I would now like to turn the call back to George for closing remarks. Thank you, Tash.

I will briefly summarize on slide 20 before moving to your questions. As we know, the global economy continues to be disrupted by COVID-19. However, global surplus has been well served by our extensive contract cover, fully employed fleet, and our focus on business resilience. During the second quarter, our attractive fleet of low-slot cost, high reefer capacity, mid-sized and smaller container ships, supported by our well-established relationships with lead liner operators, enabled us to maximize on-hire time and secure strong, stable cash flows despite a challenging market with an oversupply of ships in some size segments. The timing and shape of global economic recovery remains difficult to call, but we see a number of reasons for cautious optimism. Following sharp declines over much of the first half of the year, freight rates and charter rates have both rebounded in recent weeks, with that recovery seen first in well-specified post-Panamax vessels, particularly those with higher effort capacity like those in our fleet. just as we saw during the market recovery in 2019. Agri-container ship capacity has fallen significantly from a high of 11.7% in Q2 to 6.6% by the end of July. Further, the reopening of ship recycling facilities is allowing marginal tonnage to be deleted from the global fleet. Our charters and other companies have demonstrated impressive price and capacity discipline, maintaining and even expanding their margins against a challenging microeconomic backdrop. Unlike prior downturns, the eventual post-COVID-19 demand recovery is set to take place against a supply-side backdrop marked by a tiny order book. particularly in the size segments in which we operate. And this is a very important point, ladies and gentlemen. We are well-specified low-slot cost, high-refer capacity container ships in structurally undersupplied segments. Global ship leaders should benefit from a tightening market in even a conservative recovery scenario. With that, we'll be pleased to take your questions.

Ladies and gentlemen, if you have a question or a comment at this time, please press the star and the one key on your touchtone telephone. If your question has been answered or you wish to introduce yourself from the queue, please press the pound key. Our first question comes from Liam Burke with V-Riley.

Yes, thank you. Idle capacity peaked at 10%. It's coming down pretty steadily now. You mentioned, I believe, it was 6%. How do you view the short term? I mean, it's implying that the traffic volume, container traffic volumes, are increasing or improving. How do you view the second half of the year, early 2021, in terms of anticipated container volumes up or down?

Well, I will try to answer that, and Tom can also give you his view. It is quite difficult to predict. I mean, this is the million-dollar question for all liner companies. But the consensus is that all liner companies are gearing up, trying to secure tonnage for low-slot-cost tonnage, which seems to me that what the expectation is that trade volumes are going to pick up in the second half of the year. Otherwise, we wouldn't be seeing so much activity, chartering activity, so much liner companies trying to secure tonnage for the next six months or more. Tom, do you have something else to add?

No, I think that pretty much covers it. All I'd say, Liam, is the liner companies are much closer to the underlying demand, so the cargo flows, than we are. And as George says, and as the charter rates show on slide nine, a number of lines have been going long on tonnage, and that would suggest that they at least see some sort of recovery in volumes. But, yeah, again, as George says, that's the multimillion-dollar question.

Fair enough. And then your OPEX per vessel per day dipped below 6,000. How do you see directionally it going into the second half of the year?

Well, one aspect that we have seen that helped our OPEX go down a bit more than anticipated is the fact that we have not been able to exchange crews due to COVID. They were not allowed to changes to happen. Now we are doing as we speak more and more of these good changes that were supposed to happen earlier which we expect will increase a little bit, not materially, our OPEX for the second half of the year. Another item that might also increase a little bit the OPEX is the fact that the cost of tickets has increased about 100%. That is not a big number, of course, in our OPEX, but just to mention, since you asked the question, that that's something that we expect that might increase in the second half. But all of that, nothing material, really. Great. Thank you.

Our next question comes from Jay Mintzmeyer with Value Investors Edge.

Good morning, good afternoon, gentlemen. Thanks for taking my question. First of all, looking at your presentation, I noticed that you have a majority of your debt on floating terms with LIBOR down to really near all-time lows. What are the prospects of fixing some of that? Some of your peers have fixed three or four years of their doing a fix to swaps at like 0.3 or 0.4%, just unbelievable levels. Do you have that potential to kind of freeze in these low interest costs?

Yes, we have looked at that in great detail and we are in position to fix our interest rates. We have employed actually a specialist company for that. As you know, fixing interest rates, it's not that simple to time it at the best time and get the best out of it. We feel that as we see still, there is room for improvement and we would like to do that and we are going to do that, but probably in the foreseeable future. But as you said, this is a unique opportunity for us to grab very cheap rates, which we are enjoying anyway, as we speak.

Yeah, it's a very interesting opportunity. One other question for you in regards to your first priority 2022 notes. I know we've talked about this for the last year and a half, and COVID-19 clearly put a delay in your plans to refinance those, right? They're trading at a discount to par. Last I checked, they seem to be trading a little bit under 100% there. and I notice that you still have decent cash liquidity. Are there any opportunities to repurchase some of those notes in the open market at a discount, or are you waiting to do a comprehensive refinancing?

And you want to take this? Sure. Jay, thanks. Yes, we are able to take advantage of the slight discount at which our notes are trading. That said, up to this point, our focus over the last six months or so has been on preserving cash liquidity. We have great contracted cover going forward, but nobody knew three, four months ago how this virus is going to affect the global economy and for how long. And therefore, along with delaying dry dockings and so on and so forth, reducing capex where we could, we've sort of shut down on repurchasing notes in the market. As As conditions improve, as you've heard from George and from Tom, from the market side, where charter rates, asset values seem to be moving upwards, and there seems to be some success in controlling the virus, although it's very, very early stages, we may look to buy notes from the market, but only if it doesn't prejudice our balance sheet. and if it contributes, obviously, to the wider refinancing of the balance of the 2022 notes, which remains a strategic objective of ours.

Certainly makes sense. Looking at the latest charter you signed on the nine KTU vessels, it looks like you did one for about two years that you extended, and then the other one's only for one quarter. It looks like just a short-term extension. Can you talk about the timing of those two charters? Because, you know, the freight rates, you know, dropped right into April and May and sort of troughed, right, and then they've been recovering, as you mentioned even in your presentation, quite impressively lately. Were those terms conducted recently, as in like the last couple weeks, or was this something you did more so in the start of the summer?

Well, the first picture, the short one, was done at the, say, at the eye of the storm. when charters simply delivered ships without thinking about any new charters or any new ships to take. Because of that, we made the decision to fix this ship very short. As we expected, the market was not going to stay in that state for too long. And it proved to be a very prudent decision. As the next ship came open a bit later, roughly a month later or so, if I recall, and we were able to fix her at more realistic market levels since these ships have such a high spec specification. So those were both fixtures done some time ago, but with a distance of about a month or a bit more between them. So the first picture is showing you the bottom of all bottoms in the container market we have seen. And the other picture shows you a more normalized situation like we're now.

Certainly makes sense. So is it fair to say that as long as things are stabilized when the Anthea is up for a new charter, really just in a couple months, if not weeks, correct, that it should be, hopefully, similar levels of the Myra, if not stronger?

I wouldn't want to jinx it, but I'm keeping my fingers very tightly crossed.

Let's keep those fingers crossed. Final question. I really appreciate your time this morning. There was sort of a preferred class of equity that was issued along with the Poseidon merger. They're basically the same as common shares except for they stay as a preferred class until the 2022 notes are resolved. Is that the only other contingency there? So once the 2022 notes are resolved, that converts immediately, or are there other sort of requirements as far as that conversion to common equity?

Yes. No, Steve, that's... It's the only driver.

Excellent. Definitely makes sense. In front of a merger, you want to make sure those notes are taken care of. Thank you, gentlemen, for your time, and congratulations on navigating the ship through the storm. Thank you. Thank you.

Our next question comes from Joseph Barcelli with Cater for Sterl's. Thanks, guys. Two questions. One, on the book to build and when vessels are being scrapped, do you have the insight whether they're reefer or regular container? Do you have any insight into the difference?

Do you mean when we read in a report a specific vessel that is scrapped, whether we know if that ship has a high reefer capacity or not? Right, exactly. Yes. Yes, we... Well, every ship has a registry and a description, so we can always check and view what types of ships are scrapped and what is this ship's reefer capacity and other characteristics. The answer is yes, we do know.

Okay. And then wondering, you have quite a few different facilities available. Could you give us some color on what assets are unencumbered and could be used for a potential refinancing of the 22s, of the notes that mature in 22?

Yes. I'll ask Tash to come to this. Tash, can you please answer?

Sure. For the refinance, as you can understand, the current security package of the existing bank will be, let's say, the main pillar of our next refinance. Of course, we do have another five unencumbered vessels in our fleet that can assist. So it depends on the proposal of the refinance at that time and the amount, of course.

Okay. I may add to that that the ships that we have free, we also have some post-Panamaxes in this category, and those ships can get quite substantial charter rates and longer charter rates, which also helps as we bring these ships into the refinance package because they offer longer employment and visibility of cash flows. And that's what we're trying also to use. That helps a lot the refinance.

And just once again to add to that, the specific ships that are unencumbered are Tasman, E&H, Demetrius Y, and then the GSL Kristen and the GSL Nicoletta, which, as both George and Tassos said, are all post-Panamax ships. All five of them, yeah.

Excellent. Thank you. And just wondering, is the city super senior loan, I see it on slide 24, it's about $4.7 million. Has that been paid off since quarter end? Because there's amortization on that.

No, it will be paid in October.

At maturity.

Okay.

Yeah, yeah. Okay, great. Thanks, guys.

Again, ladies and gentlemen, if you have a question or a comment at this time, please press the star then the one key on your touchtone telephone. Our next question comes from Mitchell Glenn with CBC.

Hi there, guys. Thanks for the call and other resilient performance. Just one quick one from my side. The two vessels that you sold, I believe they back the bond that you have. If I'm right, you have to use those proceeds to pay the bond down. Is that correct?

After a period of time, yes. But in the meantime, we could use the proceeds to reinvest in ships that we would then put into the collectible package. So there's some optionality, but ultimately, if we're unable to use the funds for anything else, then yes, they would go to reduce the outstanding bond.

Cool. Is that a 12-month period? Yes. Do you have to use that within or commit it within...

I don't know whether it's a commit within 12 months or an execute within 12 months, but it is a 12-month period. We have to use the funds until July next year. July next year.

Okay, and you are going to hold on to those just until you know you don't need it, basically.

Yeah, more than likely. It's just optionality.

Okay, understood. Thank you very much, and well done again.

And I'm not showing any further questions at this time. I'd like to turn the call back over to Ian Weber for closing remarks.

Thank you very much. Thank you for listening. Thank you for your questions. We look forward to providing a further update for you on our Q3 earnings conference call in three months' time. Thank you. Ladies and gentlemen, this concludes today's presentation. You may now disconnect and have a wonderful day.