Seaspan Corporation (SSW)

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Seaspan Corporation (SSW)

Q4 2009 Earnings Call

March 16, 2010 8:30 am ET


Sai Chu – CFO

Gerry Wang – CEO


Mike Webber – Deutsche Bank

Scott Weber – Bank of America

Bascome Majors – Citi Investment

Noah Parquette – Cantor Fitzgerald



Good day, ladies and gentlemen, and welcome to the Seaspan fourth quarter 2009 earnings conference call. At this time, all participants are in a listen-only mode. Later, we will conduct a question-and-answer session and instructions will be given at that time. (Operator instructions). As a reminder, today’s conference call is being recorded. I’d now like to turn the conference over to your host Mr. Sai Chu, CFO. Please go ahead.

Sai Chu

Good morning, everyone, and thank you for joining us today. Before we begin, please allow me to remind you that this presentation contains certain forward-looking statements as such term is defined in Section 21E of the Securities Exchange Act of 1934 as amended, concerning future events in our operations, performance and financial condition, including, in particular, the likelihood of our success in developing and expanding our business.

These forward-looking statements reflect management's current views only as of the date of this presentation and are not intended to give any assurance as to future results. As a result, you are cautioned not to rely on any forward-looking statements. Although these statements are based upon assumptions we believe to be reasonable based upon available information, they are subject to risks and uncertainties detailed from time to time in our periodic reports.

We expressly disclaim any obligation to update or revise any of these forward-looking statements whether because of future events, new information, a change in our views or our expectations or otherwise. We make no prediction or statement about the performance of our common shares.

I will now turn the call over to Gerry.

Gerry Wang

Good morning. Thank you for joining today’s conference call. We have some slides on the web site that goes with the presentation. During the fourth quarter and the full year 2009, Seaspan’s business continued to operate as expected. First, our fleet remains fully secured on fixed rate time charters and it would continue to achieve strong utilization. Second, all of our customers continued to perform in accordance with our charter agreement. Third, we remain in compliance with all covenants for all of our debt facilities with our banks. Finally, we took decisive steps to hand our capital structure and finance our flexibility while continuing to distribute dividends to our shareholders.

Please now turn to Slide #3. Here are the highlights on the operational side. We took delivery of the MOL Emissary on November 20, 2009 and MOL Empire on January 8, 2010 from Hyundai Heavy Industries, being the third and the last of our four 5100 TEU vessels on 12-year charters to MOL Japan. All four ships have been performing attractively so far.

We also took delivery of the Guayaquil Bridge on March the 5th 2010 from Jiangsu Yangzijiang shipyard, being the first of the two 2500 key vessels on ten-year charters to K-Line of Japan. Also on March the 5th 2010, we took delivery of COSCO Japan, the first of the eight units of 8,500 TEU vessels on 12-year charters to COSCO of China.

We expect to take delivery of another five sister vessels this year, with the next ship delivery to be to COSCO Korea in April of this year. It is our understanding that all the eight vessels of this 8,500 TEU series will be facing to COSCO’s Asia-Europe phase.

With the delivery of three vessels in the first quarter of 2010, we are now currently operating a fleet of 45 vessels. Going forward, we expect to receive delivery of 23 newbuilding vessels about mid 2012.

Specifically, and subject to further changes, we expect to receive 10 more vessels for the rest of this year, 10 next year and the remaining three in 2012.

For the quarter, our fleet continued to perform well and we have achieved 99.7% utilization compared with 99.3% since 2005. We have incurred 13 days of off-hire for the Q4 and 38 days for the year, which impacted revenue for about $400,000 to $800,000 respectively.

Please note that our utilization rates include planned off hire for the scheduled dry docking requirements. It was unfortunate that on December 31st 2009, MV CSCL Hamburg was grounded in Egypt. The vessel is currently under repair at Dubai [ph]. We expect the vessel will be off-hire for about 100 days which will impact our revenue by about $2 million.

In terms of the dry docking, we expect one ship to be dry docked for Q1 2010, three ships during Q2 2010, another two during Q3 and one final ship during Q4 for a total of seven ships this year.

Please now turn to Slide #4. Here are the highlights on the financial side. We remain in compliance with all of our debt covenants. We continue to enjoy good relationships with our diversified international portfolio of lenders.

During the quarter, we increased our financial strength and flexibility by closing the second and final $100 million tranche of the $200 million preferred share issuance with a group of funders, led by Dennis Washington.

Based on the transaction as well as cash return from operations and debt equity financing currently in place, we have now secured most of the capital needed to finance our constructive growth of additional 23 newbuilding vessels.

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