May 3, 2016
Executives
Hugh Baker - Chief Financial Officer Emanuele Lauro - Chairman and Chief Executive Officer Robert Bugbee - President
Analysts
Operator
Hello and welcome to the Scorpio Bulkers Inc. First Quarter 2016 Conference Call.
Today’s conference is being recorded. I would now like to turn the call over to Hugh Baker, Chief Financial Officer.
Please go ahead sir.
Hugh Baker
Thank you, Operator. Thank you all for joining us today.
On the call with me are Emanuele Lauro, our Chairman and Chief Executive Officer; Robert Bugbee, our President; and Cameron Mackey, our Chief Operating Officer. The information discussed on this call is based on information as of today May the 3rd, 2016 and may contain forward-looking statements that involve risks and uncertainties.
Actual results may differ materially from those set forth in such statements. For discussion of these risks and uncertainties, you should review the forward-looking statements disclosure in the earnings press release that we issued today as well as Scorpio Bulkers SEC filings, which are available at www.scorpiobulkers.com.
Call participants are advised that the audio of this conference call is being broadcast live on the web and is also being recorded for playback purposes. An archive of the webcast will be made available on the Investor Relations page of our website for approximately 14 days.
Now, I would like to introduce Emanuele Lauro.
Emanuele Lauro
Thank you, Hugh. Good morning everyone and thank you for taking the time to join us today.
Firstly, I’d like to thank our shareholders for their continued support. As the market has deteriorated to unprecedented levels during the first quarter of 2016, we have continued to take actions required to ensure the durability of our company.
And although the dry market remains very weak, signs are showing that we might have passed the bottom, nothing to get too excited about but across the boards time charter rates, [freight] futures and most importantly vessel values have all strengthened in the last weeks. The fundamentals for the recovery I was talking about the fact that both time charters, freight futures and most importantly vessel values have strengthened in the recent past in the last month.
The fundamentals for the recovery are starting to shape up with the supply side helped by vessel demolitions and the lack of the orders which in the assets classes in which we operate mainly Ultramax and Kamsarmax has been close to zero. There is a strong buying interest from private cash owners which has provided a floor under the asset values and despite the improvement that we are experiencing and have experienced in the recent past will remain focused on proactively extending and securitizing our runway to just recovery which we are starting to see the fundamentals out.
As already stated in the past, we are not assuming or banking on a market recovery to happen in the next months. We remain of the idea that demand will continue to be the main driver for a market recovery coupled with the supply aspect which I’ve just mentioned and despite the recent rise in commodity prices and the Chinese economic situation which seems to have somewhat stabilized the real demand fundamentals remain difficult to read clearly and for this reason we remain cautious on the market outlook for the remainder of this year.
Following our equity raise, our March equity raise we are in discussions with our lenders to improve key covenants and we are quite optimistic that we will be able to achieve this within the end of the second quarter. In the meantime, I’d like to say that we remain compliant with all our covenants which we consider a good sign even the level of strike that the market have experienced in recent past.
And with this, I’d like to turn the call to Robert.
Robert Bugbee
Thank you very much, Emanuele. Yeah so I think that as Emanuele said we continue to make proactive steps to increase the runway of the company.
I think that the third time we are reasonably comfortable in saying that we have enough runway already to see us through to when we see the market recovery. We work of very low base cases and operating cash flow cost of market forecast and know without what we think the lenders will give us in the coming weeks we are pretty confident that just on the balance sheet where it stands at the moment allowing for a very weak market that we can get through to the end of 2017 without any further need to either raise equity or sell assets and we always have the ability now with a little bit more flexibility of sale of purchase market to sell assets and right now I think it’s very important what the manual says that we are in compliance with our LTV covenants when our LT covenants are pretty high.
So any reductions in those LTV covenants will give us further flexibility going forward as well. With that I think we’d like to turn it over to questions.
Emanuele Lauro
Robert, the operator said they had the fire alarm so the call was unattended, right.
Robert Bugbee
Yeah.
Emanuele Lauro
So I don’t think they can turn it to questions. You [Indiscernible].
Robert Bugbee
Well maybe I can ask you a question, Emanuele, what gives you confidence with regard to the sale in purchase market and that we found a bottom in that market?
Emanuele Lauro
That’s a difficult one. I did not expect that from you, but apart from jokes, I think in general terms we are seeing you know what I was referring to in my introductory comments, owners have been, private owners have been very resilient buying assets specially second hand assets and this has created some sort of [bottomed] and with the rates, this coupled with the rates improvement has given some enthusiasm which I don’t know whether that is justified or not time will tell, but [process] has improved quite substantially.
We’ve seen 10-year old [Indiscernible] spike up by 20% to 25% in the space of six to eight weeks. So the improvement is substantial, of course starting from very low levels.
So the activity is up there are more transactions than there has been you know -- there have been many more transactions in Q1 rather than in Q4 and last year and this wouldn’t be, this seems to be continuing. So that’s where we see the asset value going.
Emanuele Lauro
Okay, I sense that we should probably just end the call where it is at the moment. It’s unfortunate and that anyone is free to call, management obviously is available over the next coming days and today if anybody would like to ring up, please feel welcome.
Thank you very much. And unfortunately the call ends [Indiscernible] here you may have heard earlier is experiencing a fire alarm.
Thank you.
Hugh Baker
Thank you. Thank you everyone.
We look forward to speaking to you offline. Have a good day.
End of Q&A