Nov 3, 2015
Executives
Laura Yagerman - VP, Corporate Communications Angeliki Frangou - CEO Stratos Desypris - CFO George Achniotis - EVP, Business Development
Analysts
Michael Webber - Wells Fargo Chris Wetherbee - Citi Amit Mehrotra - Deutsche Bank Shawn Collins - Bank of America-Merrill Lynch Noah Parquette - JPMorgan Ben Nolan - Stifel Nicolaus
Laura Yagerman
Thank you for joining us for Navios Maritime Partners' Third Quarter 2015 Earnings Conference Call. With us today from the Company are Chairman and CEO, Mrs.
Angeliki Frangou, Chief Financial Officer, Mr. Stratos Desypris and EVP of Business Development, Mr.
George Achniotis. As a reminder, this conference call is also being webcast.
To access the webcast, please go to the Investor section of Navios Maritime Partners' website at www.navios-mlp.com. You'll see the webcasting link in the middle of the page and a copy of the presentation referenced in today's earnings conference call will also be there.
Now, let me read the Safe Harbor statement. This conference call could contain forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995 about Navios Partners.
Forward-looking statements are statements that are not historical fact. Such forward-looking statements are based upon the current beliefs and expectations of Navios Partners' management and are subject to numerous material risks and uncertainties which could cause actual results to differ materially from the forward-looking statements.
Such risks are more fully discussed in Navios Partners' filings with the Securities & Exchange Commission, including the Company's most recent 20-F. The information discussed in this call should be understood in mind of such risk.
Navios Partners does not assume any obligation to update the information contained in this conference call. The agenda for today's call is as follows.
First, Ms. Frangou will offer opening remarks.
Next, Mr. Desypris will give his overview of Navios Partners' financial results.
Finally, Mr. Achniotis will provide an operational update and an industry overview.
And lastly, we'll open for some questions. Now, I turn the call over to Navios Partners' Chairman and CEO, Mrs.
Angeliki Frangou. Angeliki?
Angeliki Frangou
Thank you, Laura and good morning to all of you join us on today's call. For the third quarter of 2015, we recorded revenue of $57.1 million, EBITDA of $40.9 million and net income of $11.8 million.
We also announced a quarterly distribution of $0.2125, representing an annual distribution of $0.85 per unit. This distribution represents a reduction from the previous quarterly distributions of $0.4425 based on only $1.77 on an annualized basis.
The decision to reset the distributions was a difficult one and is our only reduction in our eight years of operation. To date, we have paid out a total of about $714 million to our common unitholders.
Since our last quarterly report, a number of developments have affected the factors underlying our distribution. Among them were continued and significant uncertainty relating to global trade, deepening uncertainty about the pricing of most seaborne commodities and continued questions relating to the outlook of seaborne volumes and ton-miles.
We believe that these factors indicate the demand concerns and we're approaching the current environment consciously, particularly when coupled with the continued digestions of the oversupply of the dry bulk vessels and a difficult financing market. We believe that these factors can also [indiscernible] in a sale price and affected our ability to access the capital market.
The revised distribution policy will provide flexibility and strength to NMM's balance sheet by providing significant customer savings and an opportunity to redeploy the cash accretively. Moreover, we believe that, under current market conditions and given our current cost structures, we will have the ability to pay at least $0.85 in annual distribution per common unit for the next five years.
Navios Holdings, our sponsor, will forego $18 million in annual dividends made up of the investment in our common MVP unit and their incentive distribution rights. I'm personally a unitholder in Navios Partners and also sharing in the consequences of this decision.
Please turn to slide four which provides some of the Company highlights. Navios Partners is a container focused MLP.
Our container vessels are providing stable cash flows and our container vessels account for 41.6% of tangible assets and are expected to generate about $850 million of our contracted revenue, representing about 65% of our contracted revenue and 46% of our expected 2015 EBITDA. Overall, the average remaining charter duration of our container vessels is 7.3 years.
Due to the reduced distribution, the distribution coverage for the third quarter is 1.69 times and have net debt, further improving our strong credit metrics. Navios Partners also has 23 dry bulk vessels, of which only successes are in long-term charters.
While we're hopeful in the medium-term for this sector, we remain cautious about the short-term. The effective outlook [indiscernible] significant demand growth concerned is somewhat mitigated by scrapping 25 million metric tons or 342 vessels have been scrapped year-to-date 2015, representing about 2.4% of the global dry bulk fleet.
Slide five is our revised distribution policy. The new distribution amounts to $0.85 annually, was established as a result to protect our stakeholders and generate long-term value.
Multiple considerations led to the revised distribution. We'll review the [indiscernible] dry bulk industry fundamental, estimated cash flows from long-term charters in our container fleet and certain dry bulk vessels.
We'll consider the distribution policy of our peer company and will reflect the current [indiscernible] in the distribution will provide flexibility and strengthen our balance sheet. Because of the cash flow savings from a reduced distribution, we concluded we'll have an opportunity to redeploy cash accretively, whether in a fleet renewal program or otherwise, especially [indiscernible] during this period while access to the equity capital market is limited due to the distribution yield.
Slide six provides an insight into our container segment, stable cash flows since the end of 2013. We have acquired eight container vessels.
The vessels are expected to generate around 46% of our expected 2015 EBITDA. They have a remaining contract duration - per container is 7.3 years and for the entire fleet is three years.
Overall, NMM container sector exposure provide long-term charters, cash flow stability and market risk mitigation. We expect the dry bulk sector to provide material upside in an improving market.
Slide seven shows our liquidity. As of September 30, 2015, we had total cash of about $33 million and total debt of $603.3 million.
We have a loan debt to book capitalization ratio of 42.4% and no significant debt maturities until 2018. At this point, I would like to turn the call over to Mr.
Stratos Desypris, Navios Partners' CFO, who will us through the results of our third quarter of 2015. Stratos?
Stratos Desypris
Thank you, Angeliki and good morning, all. I will briefly review our unaudited financial results for the third quarter and nine months ended September 30, 2015.
The financial information is included in the press release and summarized in the slide presentation on the Company's website. Moving to the financial results as shown in slide eight, we accelerated the drydocking to the extent we could in this lower rate environment.
We drydocked seven of our vessels, following the eight vessels we did in the first half of 2015. By accelerating this drydocking, we reduced revenues by approximately $3 million, significantly less than what this would have been in a higher rate environment.
By accelerating drydocking, we also seeked compliance with a requirement for the [indiscernible] for the next five years without additional CapEx. Revenue for the Q3 of 2015 increased by 3.3% to $57.1 million compared to $55.3 million for Q3 of 2014.
This increase was mainly due to the addition of the [indiscernible] in our fleet in the second quarter of this year. This increase was partially mitigated by the decrease in revenues due to our accelerated drydocking program.
EBITDA for the third quarter of 2015 increased by 9.1% to $40.9 million, primarily because of the increase in the revenues discussed above, as well as a decrease in time charter and voyage expenses by $2.7 million due to the delivery of two charter vessels. These were mitigated by the $1.9 million increase in management fees due to a larger fleet.
Net income for the third quarter of 2015 decreased by $1.3 million compared to the same period last year. Operating surplus for the third quarter of 2015 amounted to $30.4 million.
The replacement and maintenance CapEx reserve was $3.5 million. Fleet utilization for the third quarter of 2015 was almost 100%.
Moving to the nine months operations, time charter and voyage revenue increased by 1.4% and amounted to $170.4 million. Revenue has been negatively affected by the approximately $5.6 million effect of the drydocks performed in the second and third quarter discussed above.
Adjusted EBITDA for 2015 increased by $4.4 million to $117.5 million. This increase was mainly due to the $2.4 million increase in revenue and $5.8 million decrease in time charter and voyage expenses due to the delivery of the two chartering vessels at the beginning of the year.
This increase was mitigated mainly by the increase in management fees of $5.2 million due to a larger fleet. Adjusted net income for the nine months of 2015 decreased by $1.8 million to $34 million compared to the same period of last year.
Operating surplus for the nine months ended September 30, 2015 was $87.6 million. Turning to slide nine, I will briefly discuss some key balance sheet data as of September 30, 2015.
Cash and cash equivalents was $32.9 million. We also maintained a $60 million liquidity line for most function.
Long-term debt, including the current portion, increased by $25.1 million. This increase is due to the $79.8 million debt incurred for the acquisition of the MSC Cristina and was mitigated by the $54.7 million debt repayments made during 2015.
Net debt to book capitalization was 42.4% at the end of the quarter. As shown in slide 10, we declared a distribution for the third quarter of $0.2125 per common unit.
Our current annual distribution of $0.85 provides for an efficient yield of 12% based on yesterday's closing price. The record date for distribution is November 12 and the payment date is November 13, 2015.
Our common unit coverage for the quarter is 1.69 times. I would like to remind you that, for U.S.
tax purposes, a portion of our distribution is treated as a return of capital. Also, we put the cumulative final distributions to common unitholders on Form 1099.
Slide 11 shows the details of our fleet. We have a large, modern, diverse fleet with a total capacity of 3.3 million dead-weight tons.
Our fleet is young, with an average age of 8.3 years, below the respective industry averages. Our fleet consists of 31 vessels, eight Capesizes, 12 Panamaxes, three Ultra-Handymax and eight container vessels.
Slide 12 demonstrates our strong relationship with key participants in our industry. Our charters have an average remaining contract duration of three years.
About 90% of our contract revenue is from charters longer than three years. Our charters are spread among a diverse group of counterparties.
In Slide 13, you can see the list of our fleet with the contracted rates and the expected expiration dates per vessel. Currently, we have fixed almost 100% of our available days for 2015 and we're 63.7% fixed for 2016.
We do not have charter rate exposure to the container sector, as our vessels are fixed for an average period of approximately 7.5 years. The expiration dates are staggered and the charter durations extend to 2027.
As shown in slide 14, we're an efficient, low-cost operator. We're benefiting from the economies of scale of our sponsor and we have fixed our operational costs at low levels.
Our OpEx is more than 20% below the industry average. I now pass the call to George Achniotis, our Executive Vice President of Business Development, to discuss the industry section.
George?
George Achniotis
Thank you, Stratos and good morning. Please turn to slide 16.
As you can see on the chart, there is a strong correlation between annual GDP growth and continued traffic in both the U.S. and Europe.
The IMF forecasts U.S. GDP growth to increase from 1.7% in 2015 to 3% in 2016 and Euro Zone GDP growth from 1.5% in 2015 to 2.5% in 2016.
So far in 2015, we have seen container trades into the U.S. increase by about 10% on both the Pacific and Atlantic imports, driven primarily by the stronger dollar and increased U.S.
housing starts. European growth is accelerating with Spain, [indiscernible] and Italy recovering faster than expected.
European exports to the U.S. are already rising on a weaker Euro.
However, trade on the important Asia-Europe route has been slower than last year because of the weaker euro. Moving to slide 17, over the past 18 years, container trade has expanded at a 7.5% CAGR.
Growth is expected to increase by 4.3% in 2015 and by 5.7% in 2016. The weakness in the euro has led to recent downward revisions in container trade flow.
The weakness in the Russian economy still has had a negative impact. NMM's container vessels are fixed on long-term charters, so are not affected by these short-term slide [indiscernible].
Turning to slide 18, at the beginning of October, the container fleet consisted of 5,213 vessels or almost 20 million TEU capacity. Vessels carrying 1.3 million TEU have delivered versus a projection of 1.5 million, giving a non-delivery date of 11%.
Scrapping of older vessels has continued. Through October, 61 vessels with a capacity of 118,000 TEU have been demolished.
The current market environment encourages further scrapping. Last year, TEU capacity increased by 6.4%.
Estimates are that TEU growth will be about 5% 2015. Fundamentals are expected to improve in 2016, where net fleet growth in TEU is forecast to remain close to 5%, lower than the 5.7% estimated increasing container demand.
Moving to slide 19, in the dry bulk market fundamentals, growth in world GDP generally coincides with growing raw material demand for steel and energy production, particularly as emerging markets urbanize and industrialize. According to the IMF, the rate of world GDP growth is expected to increase from 3.1% 2015 to 3.6% in 2016.
Emerging and developed markets are expected to grow by 4% in 2015 and 4.5% in 2016, which should support forecasts for 2016 dry bulk trade growth of about 2%. Turning to slide 20, low-cost Australian and Brazilian iron ore continues to displace more expensive, lower quality domestic Chinese ore.
So, for this year, Chinese domestic production has declined by about 9%. Steel production has remained almost flat, as have seaborne iron ore imports.
However, a lot of tonnage has traveled on short-haul Trans-Pacific routes. Steel production in China continues at high levels as Chinese steel exports reach new highs.
The Australians are taking advantage of their favorable geographic position in course of production and have increased exports this year. Estimates indicate that seaborne iron ore will expand about 1.3% in 2015 and once again 1.3% in 2016.
Please turn to slide 21. Coal is still the least expensive fuel for producing electricity, particularly important to the emerging markets region.
The coal market in China is the largest, consuming about four billion tons annually. With the collapse of commodity prices worldwide, we have seen the Chinese authorities protecting their domestic industries, particularly coal mining.
This has given India the opportunity to increase imports. So far this year, Indian imports have increased by 19%.
In doing so, they have become the world's largest coal importer, taking over from China. In spite of this changeover, total seaborne volumes of coal are expected to decline in 2015 before recovering in 2016.
Please turn now to slide 22. So far this year, 36% of the expected new business did not deliver, continuing the pattern of the last several years.
At the same time, scrapping volumes for older, less fuel efficient vessels have dramatically increased. Through October, 25 million deadweight ton was scrapped compared to 16 million in all of 2014.
This includes 86 Capesize vessels compared to 24 Capes in all of 2014. This has resulted in negative fleet growth in the Cape sector.
Current projections for the year for scrapping are about 31 million deadweight tons which would be equivalent to 4% of the current fleet, one of the highest levels ever. Net fleet growth for 2015 is projected at about 2.5% and about 2% for next year, the lowest growth rates we have seen in many years.
In summary, 2015 has negatively surprised us in terms of demand and, as a result, we do not see a positive environment for rates for the remainder of this year and the beginning of 2016. And this concludes my presentation.
I would now like to turn the call over to Angeliki for your final comments. Angeliki?
Angeliki Frangou
Thank you, George. This completes our formal presentation.
We'll open the call to questions.
Operator
[Operator Instructions]. Your next question comes from the line of Michael Webber of Wells Fargo.
Michael Webber
I just wanted to obviously start off around the dividend cut. And maybe if we just start from a high level, if you could maybe kind of walk through how we got to this point and then when you think about the long-term shift, what sort of systemic changes to the model, be it via reserves or future employment you guys are looking at to keep this from ever being on the table again?
Angeliki Frangou
Okay. Mike, one thing that we looked in essence is where we were in July, where we're today.
There is a lot of factors that have [indiscernible]. Number one, you see you have a lot - continued uncertainty on global trade, continued volatility on prices of seaborne commodities, on volumes, on ton mile and you have the digestion of the supply of the vessels which you have [indiscernible] you have a very uncertain environment.
You have to be very cautious and mindful of this environment. Together with a difficult access to credit and capital market, this make us to take a bottom-up approach and really come to - with our Board to a decision that we said a dividend policy that is for the longer term is based on our long-term cash flows from our container vessels and long-term dry bulk vessels and which can give us - we see that this provides a cover over the next five years and takes the spot market out of that equation.
Michael Webber
Okay. Within the deck and then you just mentioned it again, five years at $0.85.
Should we view that as forward guidance? And when you model it internally, what coverage ratio does that correspond to?
Angeliki Frangou
I mean, you can draw your own models. And when we did the analysis with the Board, we took a very hard approach of the spot market and [indiscernible] on the dry bulk, the consideration on demand and growth and economic environment overall.
We think that this kind of distribution, even though the cut was low, we were affected as Navios Holdings because we're aligned with that. But, we think that this will give us a long-term viability on the Company.
You strengthen your credit ratio. You strengthen your balance sheet.
You have cash in order to redeploy. So, for the long-term approach of all our stakeholders, that was more appropriate.
Michael Webber
Sure, okay. But, just to come back to that in terms of for us modeling it in, $0.85 should be - people should view that as kind of minimum basis for the next five years?
Angeliki Frangou
Assuming the current environment.
Michael Webber
Okay. And then, in terms of a coverage metric you guys would look at, too, if things improve in a couple years, what's the benchmark coverage ratio we should look at $0.85?
Is it kind of 1.1 and then moving significantly north of that, longer-term, would imply the healthier MLP and the ability to kind of restart growth?
Angeliki Frangou
I think the one thing we have to see, how the dry bulk and the economic environment is. Today, our coverage is 1.69, of course is very high.
But, we can say that we will be targeting at a 1.20 covered - times coverage. Of course, we have to see dry bulk, capital market and balance sheet of the Company in [indiscernible] on those.
Michael Webber
Okay, yes, was just looking for a benchmark and a coverage prospectus. Just one more from me and I'll probably hop back into the queue.
You mentioned within the slide on the distributions that there is no reset of the IDRs. We obviously - we've seen that once or twice in the past.
Was that a forward commitment not to reset the IDRs or is that just a statement that you are not resetting the IDRs?
Angeliki Frangou
It is a statement right now.
Operator
Your next question comes from the line of Chris Wetherbee of Citi.
Chris Wetherbee
Just wanted to think about sort of the next few years as the distributions reset down to the level that we're at now. Based on some of the longer-term charters you have, particularly on the container side, it seems like you can maintain a level of free cash flow that kind of is fairly stable.
When you think about proceeds above and beyond the distribution, what's the first use of capital? I mean, should we assume the next couple years it's just to delever and then maybe we see sort of where we go from there, depending on market conditions?
How should we think about that?
Angeliki Frangou
I think that the resetting of the distribution of $0.85 gives a lot of flexibility of the Company for - first of all of being able to have this distribution of accumulated cash and redeploying it accretively in vessels that will need replacement and also on strengthening the balance sheet situation. Don't forget that your debt to book capitalization is at 42%, so you're at a good leverage ratio considering this market and see how the capital market develops.
And here's how [indiscernible] this will give us this additional cash, will give us the ability to redeploy it in our Company.
Chris Wetherbee
Okay. And when you think about - I think you had mentioned either in the deck or the release container market.
I mean, is that right now what is - sort of would be potential targets for redeploying capital?
Angeliki Frangou
We have seen that the strategy of refocusing on the container has been a good one overall for the Company because it can provide us with long-term charters which we don't see it in the other dry bulk sector. So, I mean, if you see our long-term vessels and long-term cash flows, it comes from the containers and only six of the 23 dry bulk.
So, that gives you an indication that this is the area where you can really find the longer durations in cash flows.
Chris Wetherbee
So, those deals are still out there? There still are transactions for you that you can do on an accretive basis with term behind them?
Angeliki Frangou
Yes.
Chris Wetherbee
Okay. And then, last question, I just want to make sure I sort of understand your thought process here and going back to maybe one of the previous questions.
In terms of what you're factoring in particularly on the dry bulk side, as you think about sort of the next few years, is it basically the status quo that we're in right now is kind of how you've layered this out over the course of the next five years? I guess I just want to make sure I understand what are the assumptions behind your move to this distribution on the dry bulk side.
Angeliki Frangou
Yes. I mean, you are right.
I mean, what I mentioned previously, if you look at the economic conditions of today versus what was before, what is the spot market in dry bulk plus how is credit and everything and you show that you have to be cautious on the short-term. On the medium-term, we can say that we see we're hopeful.
We see [indiscernible]. We've seen scrapping.
You see over 25 million scrapped. You see 89 Cape being scrapped versus 78.
So, you have mitigants to that, but you have to be conservative and this is an important issue. So, taking the long-term cash flows that you have from your container vessels and long-term dry bulk vessels and seeing the spot market dry bulk, this is how - and the economic environment, that's how you set the strategy.
I mean, you have to - not taking a decision and remaining is also a decision. So, it will have to be mindful of where the environment is going.
Operator
Your next question comes from the line of Amit Mehrotra of Deutsche Bank.
Amit Mehrotra
Angeliki, I appreciate the distribution cut was a difficult decision and you cite mostly industrial-related headwinds in the reset. But, I just wanted to sort of ask you, because nothing's really changed if we look over the last three months with respect to the market and in fact we actually saw a spike for maybe a week or two in spot rates in August and NMM had already fixed all the dry bulk ships for the remainder of the year.
So, just with that in mind, I'm just trying to understand how much of the decision to cut the distribution was related to the market, what the market was pricing in in terms of yield rather than sort of any big inflection, in your view, in the market. And sort of the bigger picture here is, over the last six months, you know better than I do that the whole MLP yield complex has sort of gotten re-rated pretty significantly.
And so, I'm just trying to understand if this was a reaction more to the financial market reality as opposed to the industry fundamentals.
Angeliki Frangou
I mean, there is a lot of - there is not one reason that works on that. Of course, we're mindful of the dry bulk global trade considerations and also the capital markets, ability to access the markets for growth.
I mean, you have all these considerations together and you have to see it. After all, we're now at 680 of the BBI versus July that was over 1000.
So, there is not one reason, it's economic conditions, global trade conditions, demand concerns, capital market. There is a lot of factors that came in.
Also, as you very well heard, yes, we're covered until mid-next year, but you have to have a longer view and a longer outlook. So, if this weakness remains, you have to be concerned with it.
Not acting when you have the opportunity is a mistake, while providing your stakeholders over a longer-term view.
Amit Mehrotra
Just a couple more from me, in terms of the cash that you're saving, I think basically it's $12 million a quarter, almost $50 million a year. And you said in the release and in your comments that you're going to redeploy that potentially for full-year renewal.
I just wanted to ask on timing of that and how sort of quickly you guys want to move, because you did have sort of that option for the container ship that you didn't exercise. Just wondering that would this sort of prospective outlook on surplus cash flow, are you guys ready to move pretty quickly over the next few months here on trying to secure a container ship with sort of a long-term charter on the back of it?
Angeliki Frangou
In the current environment, I think somebody has to be very conservative and cautious. Of course, this additional cash provide us flexibility, improves our credit ratio and our balance sheet.
And we will review the conditions, review the market and act. I mean, there is always transactions to be done, but being conservative is the number one most important, in our view.
And we like to look at it on a longer [indiscernible].
Amit Mehrotra
Yes. And just one last question, because previously before, with this move to the container ship market, you're saying that NMM is a container ship MLP now.
Previously you said it's a container ship MLP with an optionality on the dry bulk market. Is your view at all changed in terms of what NMM can be over the next couple years?
Will the Company try to maybe just become a pure play container ship MLP and maybe sell dry bulk assets over time? Or will it still remain sort of that container ship MLP with the optionality in the dry bulk market?
Angeliki Frangou
Listen, I mean, on the dry bulk here, we made very cautious on the short-term. Medium-term, we see a lot of - we see potential and we're hopeful.
We have 23 dry bulk vessels, so this is not a - this isn't to be taken lightly. And you are looking on a market today that is very - at a very low level on the dry bulk.
So, we have to be mindful of this, so we will be watching this market and refocusing as appropriate. We will generate new cash from the - preserving from the new distribution and that gives us the ability to really grow in other areas that are interesting to us.
Operator
Your next question comes from the line of Shawn Collins of Bank of America.
Shawn Collins
I wanted to ask a question on bunker fuel. We have now settled into a relatively lower oil price environment where oil has been roughly $50 a barrel for almost a year now, resulting in bunker fuel at less than $300 which is a big change from just a year or two years ago.
This obviously results in lower operating cost for you and your customers, both dry bulk and container ship. Have you seen your customers operate any differently as a result of this or any change in attitude and talk around slow steaming?
Can you just comment on this? Thanks.
Angeliki Frangou
In our [indiscernible], I think just to correct one thing, that fuel is not part of the operating expenses of the vessels. It's a pass-through.
What it makes cost difference is on charters, how they will order the vessels to go out what speed. Even though we have not seen increased full speed model, we may have a knot increase from previous years.
That can be another way that increase the supply of vessels. So, this is the kind of things that create uncertainty until a new [indiscernible] settles in and creates a new level of supply and demand on seaborne commodities.
Shawn Collins
And then, just a second question on drydocking and the drydocking loss revenue in the third quarter. I know it's $2.8 million and I know you reference it as performed in advance.
Can you just talk about the performed in advance aspect and your decision-making around the timing of this versus doing it at a different time? Thank you.
Angeliki Frangou
Well, some of the vessels it made sense because they didn't have the particular employment, so it made sense to be - it was the loss that created, it was less. The second thing that was also very important is also regulatory considerations with a new balanced water treatment coming into effect in 2016.
So, in essence, that made sense and saved capital from the Company.
Operator
Your next question comes from the line of Ben Nolan of Stifel Nicolaus
Ben Nolan
Just one question and it's - relates to some of the chartering, specifically the dry bulk vessels. I believe it was last quarter you - or the parent, the sponsor, chartered a number of the dry bulk vessels for six months to a year.
And I think the thinking at the time was to help support the cash flows. With the distribution cut, is the motivation, do you think, to support higher cash flows in terms of above-market rates by the sponsor probably less severe?
In other words, should we sort of not think that that sort of thing is likely to continue?
Angeliki Frangou
It would be - the decision will be done at the time. Don't forget that the vessels are coming open somewhere Q2 or end of Q1.
So, decisions in the open market will be made at that point.
Ben Nolan
Okay. So, no clear pathway on that yet, I guess?
Angeliki Frangou
No, but you should be mindful on the reset of the distribution. We have taken consideration of the spot market and the environment, the economic environment that we operate in today.
Operator
Ladies and gentlemen, we have reached the allotted time for questions and answers. I will now return the call to Ms.
Angeliki Frangou for any additional or closing remarks.
Angeliki Frangou
Thank you for attending our Q3 results.
Operator
Thank you for participating in today's conference call. You may now disconnect.