Edited Transcript of SALT earnings conference call or presentation 11-May-20 1:00pm GMT

Monaco May 25, 2020 (Thomson StreetEvents) — Edited Transcript of Scorpio Bulkers Inc earnings conference call or presentation Monday, May 11, 2020 at 1:00:00pm GMT

Scorpio Bulkers Inc. – COO

* Emanuele A. Lauro

Scorpio Bulkers Inc. – Co-Founder, Chairman & CEO

Scorpio Bulkers Inc. – CFO

* Robert L. Bugbee

Scorpio Bulkers Inc. – Co-Founder, President & Director

* J. Mintzmyer

* Jonathan B. Chappell

B. Riley FBR, Inc., Research Division – Analyst

Clarksons Platou Securities, Inc., Research Division – Head of Shipping Research & Analyst

Jefferies LLC, Research Division – VP,Senior Analyst & Group Head of Energy Maritime Shipping

Ladies and gentlemen, thank you for standing by, and welcome to the Scorpio Bulkers’ First Quarter 2020 Conference Call. (Operator Instructions) I would now like to hand the conference over to your speaker today, Chief Financial Officer, Hugh Baker. Sir, please go ahead.

Hugh Baker, Scorpio Bulkers Inc. – CFO [2]

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; Cameron Mackey, our Chief Operating Officer; and we have Michael Ferranti, our Chief Accounting Officer; David Morant, Managing Director; and James Doyle, our Senior Financial Analyst.

Earlier today, we issued our 2020 first quarter earnings press release, which is available on our website. The information discussed on this call is based on information as of today, May 11, 2020, and may contain forward-looking statements that involve risk and uncertainty. Actual results may differ materially from those set forth in such statements. For a discussion of these risks and uncertainties, you should review the forward-looking statement disclosure in the earnings press release that we issued today as well as Scorpio Bulkers’ SEC filings, which are available at www.scorpiobulkers.com and sec.gov. Call participants are advised that the audio of this conference call is being broadcast live on the Internet 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. There is also a short supplemental presentation with slides, which are available at www.scorpiobulkers.com on the Investor Relations page, under Reports & Presentations.

If you have any specific financial modeling questions, you can contact myself, James or Michael and discuss these off-line. Now I’d like to introduce Emanuele Lauro.

Emanuele A. Lauro, Scorpio Bulkers Inc. – Co-Founder, Chairman & CEO [3]

Thank you, Hugh. Welcome to all, and thank you for your time today. Before we start discussing and commenting our results, I wish to take the opportunity to convey to everyone on behalf of Scorpio Bulkers’ management, its directors and employees our deepest sympathies towards those who have lost loved ones or have been affected by the COVID-19. While we have been squarely focused on the health and safety of our staff both ashore and onboard, we feel tremendous gratitude towards the health care workers, first responders and others who are on the frontline of the response to this pandemic.

Getting to business. Scorpio Bulkers provides dry bulk spot market exposure of our — to our shareholders with a best-in-class fleet of modern Ultramax and Kamsarmax vessels. We have significant gearing to any improvement in the market, and we have made a conscious decision to keep our future days open and unhedged. We have taken proactive measures to strengthen the balance sheet, giving flexibility to the company with over $110 million in cash liquidity at this point.

Our performance year-to-date has been challenged by specific onetime reasons. First, we have had a surplus of vessels in the Far East as we look to reposition for dry-docks and scrubber retrofits during the traditionally weak Q1 market. The need to reposition tonnage to the premium Atlantic market using backhaul voyages created a further drag into Q2 as trade further slowed down with the pandemic.

Secondly, the rapid drop in fuel prices at the end of Q1 and early Q2 meant we were consuming expensive fuel for a good part of the period. With our spot strategy, we tend to have 30 to 60 days of fuel on board at any one time. Therefore, historical fuel prices were a substantial negative contributor in the quarter, particularly on our non-scrubber equipped fleet but also on the numerous vessels that have entered dry-dock between December and January this year, January — December ’19 and January this year with expensive fuel on board, which they had to burn upon reentry into service in March or April. Whilst we see already the reappearance of some positive momentum, we can see that still in — we can see that still in isolated pocket. April has been record levels — has seen record levels of Brazilian soybeans exports. Southeast Asia coal imports have increased, notably in Vietnam. April imports are up year-on-year more than 150%; in the Philippines, up more than 120% year-on-year. Thailand and Malaysia, respectively, are up 37% and 26%. Whilst our chartering strategy remains geared towards an improving market, management has taken several measures to strengthen the balance sheet. We have reduced our fleet size last year with well-timed sales. We’ve entered into several sale leasebacks on beneficial terms. We have reduced our discretionary CapEx by deferring further scrubber retrofits. We have reduced the current dividend by 75% to preserve further liquidity. And lastly, we have disposed of over half of our residual shareholding in Scorpio Tankers at a profit, providing cash liquidity of nearly $43 million. Our total return on the investment to date is around 30%. We are positive of future gains in this investment, so we expect to hold our residual 3.7% stake of STNG for the foreseeable future.

Taken together with the measures above, our balance sheet now has the liquidity to allow us substantial flexibility in our decision-making. We are positioned to withstand any weakness that may persist. And with our modern fleet, we are well set to capitalize on any upturn in the second quarter and beyond as the global economy reaccelerates and the effects of the pandemic start to resolve.

I am done with my initial remarks, and I would like to turn the call to Hugh Baker.

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Hugh Baker, Scorpio Bulkers Inc. – CFO [4]

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Thank you, Emanuele. I’ll briefly summarize certain recent significant events and significant events during the quarter. But for more detail, please refer to this morning’s earnings press release and supplemental earnings presentation. In March and April 2020, the company executed sale leasebacks for 2 Ultramax vessels and 1 Kamsarmax vessel for approximately $67.3 million in aggregate, increasing the company’s liquidity by $33.6 million. In March 2020, the company entered into agreements to sell the SBI Jaguar and SBI Taurus, which are 2014- and 2015-built Ultramax vessels; and the SBI Bolero, a 2015-built Kamsarmax vessel for approximately $53.5 million in aggregate. Delivery of the SBI Jaguar and the SBI Taurus to their buyers took place in April 2020, while the delivery of the SBI Bolero is expected to take place later this month. In aggregate, these 3 sales will have increased liquidity by approximately $18.3 million. In April 2020, the company reached an agreement with certain counterparties to postpone the delivery of Exhaust Gas Cleaning Systems, or scrubbers, on 13 of its vessels by at least 12 months at no additional cost to the company. This will delay the payment of between $20 million and $25 million of expenditures until 2021 at the earliest.

As of today’s date, 22 vessels have been installed with scrubbers. In May 2020, the company sold 2 million shares of Scorpio Tankers Inc. for approximately $42.7 million. Of this amount, we will receive approximately $9.8 million in proceeds for the sale of $500,000 shares on May 12, which is tomorrow. As of today, the company retains a holding of 2.16 million shares in Scorpio Tankers, which it expects to retain. In April, the company executed a 1-for-10 reverse stock split. And today, the company announced a dividend for the second quarter of $0.05 a share.

Finally, I’ll mention our cash position at March 31 was $100.8 million — sorry, at March 31, our cash position was $50.2 million, whereas today, March 8 — March 11, it is $100.8 million. Our cash position does not include net proceeds of $6.2 million from the previously mentioned sale of SBI Bolero expected within May and also excludes the $9.8 million of proceeds from the sale of STNG shares that I just mentioned.

With that, I’d like to turn the call over to Robert Bugbee.

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Emanuele A. Lauro, Scorpio Bulkers Inc. – Co-Founder, Chairman & CEO [5]

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Robert, are you in mute? Or have you dropped off the line?

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Robert L. Bugbee, Scorpio Bulkers Inc. – Co-Founder, President & Director [6]

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Sorry. Yes, sorry. Just want to add a couple of things to what Emanuele and Hugh are saying. First thing is that the fact that we can continue paying a dividend is a sign that we’re in good shape with the banks, that everything obviously is in covenants, that the relationships are strong as that commonly is one of the first things that go if somebody is not in good shape. Second thing is, it’s just an observation. The cash that STNG will — that Hugh was talking about, approximately $110 million, plus the outstanding value of the STNG shares itself, virtually cost the present market cap of the company. Secondly, we believe that, as Emanuele pointed out, that the spot fleet is ideally placed for a market that we expect to improve quite substantially. We also — by definition, also feel that selling of assets, it no longer provides value to the shareholder than it has done before as we would expect asset values to increase from their present real, sort of, rock-bottom levels.

And that concludes the comments I have to make. So we’d love to open it up for any questions, please.

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Questions and Answers

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Operator [1]

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(Operator Instructions) Our first question comes from the line of Omar Nokta of Clarksons Platou Securities.

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Omar Mostafa Nokta, Clarksons Platou Securities, Inc., Research Division – Head of Shipping Research & Analyst [2]

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You mentioned the — you built up a very nice cash position at the moment, plus a bit more coming with the sale of the vessel and the STNG settling tomorrow. You’ve also shifted $20 million, $25 million of scrubber payments into next year, at the earliest. You’ve done sale-leasebacks and you’ve sold ships. So you mentioned you see yourselves retaining the STNG position, and you don’t see any more asset sales for now, beyond just what’s held for sale. And just wanted to confirm on that front, the assets held for sale, are those still the 4 Ultramaxes that you had announced earlier this year?

And then just secondly, I wanted to also ask how to further, say, sale leasebacks fit into this? I know those are more of a financing as opposed to sale but just wanted to get clarity on that.

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Robert L. Bugbee, Scorpio Bulkers Inc. – Co-Founder, President & Director [3]

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Sure. I think that — look, I think we’re a pretty — a lot of things have happened in the last week. And I think that we’re indicating, very strongly, here that we don’t think that these prices, that one should be a seller of dry-dock vessels while also indicating that we don’t have to sell vessels no longer. And so you might very well get to a situation shortly where we may not feel that we will go ahead with those sales.

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Omar Mostafa Nokta, Clarksons Platou Securities, Inc., Research Division – Head of Shipping Research & Analyst [4]

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Okay. All right. And then I guess maybe, Robert, we had — over the past couple of months, the sale and purchase market had quieted down due to the COVID crisis and people being locked in. Have you seen that opening up? Obviously, you’re able to deliver those 2 ships. And…

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Robert L. Bugbee, Scorpio Bulkers Inc. – Co-Founder, President & Director [5]

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Yes. I think some of our confidence — or a large part of our confidence is the change. I mean you can see that we’ve been active sellers of dry cargo vessels now for pretty well on a year. I mean we have sold vessels regularly in virtually every quarter in one form or another through that period.

And — but none of those sales have really involved what I would call very strong cash-known buyers in the dry cargo market. And the irony is, is that over these last 5 or 6 weeks that we’ve seen a number of unsolicited offers from literally some of the all-stars of the private shipping world in dry cargo. These people are cash buyers. They see what happens in dry cargo in distress, such as what happened in 2015 or 2008, ’09, and that is that they have the wherewithal to go in, buy dry cargo vessels that are modern, hold them for whatever it takes, a year or — it doesn’t matter so much for what their return is. And wait for what they see has historically always been the inevitable recovery in a cyclical market. And they can read more than anybody that — you know they grow things that are going on so that’s been a big change. And that’s something that is — it’s for time immemorial in dry cargo, the markets have been — they’re really bellwether signs when the cash buyers start to look to buy vessels and this is what we’ve seen in the last 5 weeks.

So that is another reason why we are confident that we see — we’re seeing the bottom being made in values. The other thing is that compared to other times, the public companies themselves, our competitors are actually in much better shape than they’ve been traditionally. Nobody has long unfunded newbuilding order books. So the irony is that there may not be so many sellers of vessels. There may not be so many “bargains” to have because balance sheets are fundamentally better across the space.

Sorry, I forgot to answer the question on the leasing. That’s always an alternative. If we would see that as one of — as another tool that we could add going through time if we needed to.

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Omar Mostafa Nokta, Clarksons Platou Securities, Inc., Research Division – Head of Shipping Research & Analyst [6]

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Got it. That’s really good color on that and also the flavor of the S&P market. And then one also just…

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Robert L. Bugbee, Scorpio Bulkers Inc. – Co-Founder, President & Director [7]

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It’s a huge change. It’s a huge change that’s going on in the S&P market? Sorry, Omar.

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Omar Mostafa Nokta, Clarksons Platou Securities, Inc., Research Division – Head of Shipping Research & Analyst [8]

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Yes. No. Robert. I did want to ask just one more. Just on the scrubber investments, looking in the table, the outlay is about $46.7 million. And on the debt schedule, it shows you have $58 million untapped that’s committed from your lenders. I know that’s just down to $56-ish million after the Bolero, but that’s still well above the $46.7 million that’s due. Am I correct that basically all scrubber investments from here are 100% financed with the facilities?

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Robert L. Bugbee, Scorpio Bulkers Inc. – Co-Founder, President & Director [9]

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Hugh, would you like to take that?

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Hugh Baker, Scorpio Bulkers Inc. – CFO [10]

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Yes. You are correct in that. I think we will obviously be adjusting the scrubber financing going forward to reflect the new revised schedule for our scrubber program. But obviously, all the scrubbers were essentially financed. And so therefore, we are going to see the scrubber program essentially get — will — the scrubber financing will be amended to reflect the new dates.

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Omar Mostafa Nokta, Clarksons Platou Securities, Inc., Research Division – Head of Shipping Research & Analyst [11]

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Okay. And is the amount financed, are you able to give a percentage of — what percent of remaining payments are locked up by the size of debt?

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Hugh Baker, Scorpio Bulkers Inc. – CFO [12]

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I’d have to look and I’d have to take that question off-line.

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Operator [13]

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Our next question comes from the line of Randy Giveans, Jefferies.

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Randall Giveans, Jefferies LLC, Research Division – VP,Senior Analyst & Group Head of Energy Maritime Shipping [14]

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First question on the Scorpio Tankers share sales. On January 27, STNG sales around $27. You stated at the time, that STNG was significantly undervalued in terms of asking about selling STNG shares. That said, you sold about half of the STNG shares last week for, I guess, $19 a share. So a few questions. Why not sell those shares a few weeks ago? Or if that wasn’t an option, why not maybe sell in a few weeks, right? When STNG is expected to rally with the current record rate levels. And also why sell half the shares and not maybe a 1/4 of them or even all of them?

It’s just something…

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Robert L. Bugbee, Scorpio Bulkers Inc. – Co-Founder, President & Director [15]

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I’d say they are — I think they’re great questions. I think on January 27, even the United States’ President thought that coronavirus was going to go away. It didn’t even exist in January 27. And the markets themselves weren’t in the situation they are now. So that’s 2020 hindsight.

The question related to SALT, it’s preference would have been to, of course, to have held them. I mean SALT itself intends to hold the rest of the position because of things that — as we previously stated, that we think it’s a good investment. It’s been a great investment, already produced 30% return. But there’s also a very simple thing that had STNG, had SALT not sold those shares. Okay? And remember that SALT can’t choose 13 — SALT is a 13D affiliate owner, so it doesn’t have the luxury of selling shares whenever it may want to.

So you had a very tight schedule to take that opportunity to do that. And looking at SALT’s balance sheet, I think that the difference is very simple that today, we’re announcing a balance sheet that is very strong in its cash position, very strong in its liquidity. Very, very capable of dealing and keeping a fleet that we think should be kept on the spot market because we expect the market to improve. Keeping a fleet together that’s brand-new, best-in-class at the low point in the market, where we are saying there should be asset appreciation that the S&P market is changing as we speak. And that’s great. And we have no issues whatsoever.

Had we not sold the shares, of course, we hope and we may even expect that STNG shares go up in value. Obviously, we do, otherwise, we would have sold more. You still have to be cognizant that today, nothing is guaranteed. So here, STNG can make those sales. Every STNG shareholder/lender can sleep well at night, and we can focus on running the company again and looking forward. And that’s the very simple position. It is zero to do with what STNG may think — SALT may think about STNG. It’s quite opposite. And the STNG thought is all about SALT presenting a proper balance sheet to the market to be able to run its fleet spot in what they think is — what we think is going to be an improving market.

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Randall Giveans, Jefferies LLC, Research Division – VP,Senior Analyst & Group Head of Energy Maritime Shipping [16]

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Got it. Yes, I wasn’t asking why not sell in January. The world is certainly different in January and maybe a few weeks ago.

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Robert L. Bugbee, Scorpio Bulkers Inc. – Co-Founder, President & Director [17]

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Yes. But why not say in January, it was — no. I mean generally, that’s — January was an age way and January, that particular that nobody in the world was thinking relating to what could happen at the time, et cetera, et cetera. The market’s fickle. I mean STNG itself produced on Wednesday record earnings, record expectation for the second quarter. The rates are still incredibly strong in the product market, but look what the actual stock market did. So SALT must think independently. The Board is an independent Board. And it must think first on its own balance sheet and its own opportunity prior to maximizing any given value on one investment that it has.

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Randall Giveans, Jefferies LLC, Research Division – VP,Senior Analyst & Group Head of Energy Maritime Shipping [18]

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Yes. No. And again, I was saying, I understand the timing as to not sell in January. The world was different then.

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Robert L. Bugbee, Scorpio Bulkers Inc. – Co-Founder, President & Director [19]

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Yes. Exactly. I mean…

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Randall Giveans, Jefferies LLC, Research Division – VP,Senior Analyst & Group Head of Energy Maritime Shipping [20]

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The question is, was there something specific about the $43 million, Michael? Where did that number, say — all right, let’s say, $2.25 million? Like how did that number come about?

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Robert L. Bugbee, Scorpio Bulkers Inc. – Co-Founder, President & Director [21]

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There’s no real science to those perfect positions. But frankly, having $100 million, $100-plus million of cash right now felt good.

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Randall Giveans, Jefferies LLC, Research Division – VP,Senior Analyst & Group Head of Energy Maritime Shipping [22]

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Great answer. All right, last question. As you mentioned, I think Emanuele, your 2Q quarter-to-date rates, they kind of underperformed the benchmark for a few reasons, positioning, fuel expense, what have you. So I guess 2 questions on this. There’s a pretty big difference in Ultramax versus Kamsarmax. So is most of those, I guess, fuel charges or positioning for the Ultramax vessels? And then secondly, how have rates been in the last, I don’t know, a week or so compared to the quarter-to-date rates? Just trying to get a sense of kind of current and maybe rest-of-quarter performance.

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Emanuele A. Lauro, Scorpio Bulkers Inc. – Co-Founder, Chairman & CEO [23]

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The rates, Randy, on — have not really moved in any directional way in the last week, right? You still have the indices with the Supramaxes making $4,800 a day today. So — and it hovered around there for the past few weeks. So it had a low of, I think, $4,100 or something like that and then came back up a few hundred bucks but is nothing to write home about.

And yes, on the first part of the question in terms of Kamsarmaxes and Ultramaxes’ differential, I guess, it’s just down to the positioning and to the fuel element, which I was referring to in my opening remarks. And I’ll have to look into it into more details, but I attribute that to the fact that we have more Ultramaxes in that position compared to Kamsarmaxes.

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Randall Giveans, Jefferies LLC, Research Division – VP,Senior Analyst & Group Head of Energy Maritime Shipping [24]

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All right. So it sounds like Ultramax rates are a little better now than your quarter-to-date and maybe, Kamsar’s are a little lighter. Is that fair?

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Emanuele A. Lauro, Scorpio Bulkers Inc. – Co-Founder, Chairman & CEO [25]

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Yes. Probably that’s a fair reflection, yes. You have Kamsarmaxes, you have Panamax indices now at 6.2. Yes, that’s probably a fair reflection.

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Operator [26]

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Our next question comes from Greg Lewis of BTIG.

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Gregory Robert Lewis, BTIG, LLC, Research Division – MD and Energy & Shipping Analyst [27]

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I was just hoping you could give us some color — in the press release, you kind of detailed expected debt amortization over the next few quarters. Just kind of wondering, is there going to be — do you envision — you’re one of the hardest-working CFOs in shipping. Do you see any ability to maybe refinance any of this debt to kind of maybe change that amortization schedule as we think about 2020, maybe into the first half of 2021?

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Hugh Baker, Scorpio Bulkers Inc. – CFO [28]

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Yes. That’s — Greg, that’s a very good question. I think that the — we — obviously, if you go back sort of 3.5 years ago, we did successfully, in fact, twice, agree to defer our amortization with our lenders. I think that, that is something that is beginning to appear in the dry bulk sector. It sort of started. I think that most of the dry bulk companies, including Scorpio Bulkers, are better positioned to manage a downturn than they were 3.5 years ago.

But I think that the banks would be very supportive if we were to make a request. And clearly everyone, and the banks included, are fully aware that we’re in a different environment now than we were in January. And I can’t — I don’t want to create expectations. But I think that if we were to — if dry bulk companies were to have sensible conversations with their lenders, I’m sure that amortization relief can be provided. And certainly, if we were to go down that road, I think we would get a very good hearing from them.

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Robert L. Bugbee, Scorpio Bulkers Inc. – Co-Founder, President & Director [29]

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I think I’d like to add to that, Greg, just in general here is that the — as I said, in general, the public companies are in much better position than they were in 2’15 without these large sort of unfunded or undelivered built newbuilding books. The second is that there are companies like ourselves that have already proven to the banks that they can get through a crisis that — et cetera. And fourth, those have been proven — well-proven, well-trodden methods of doing that in terms of amortization, which has been traditionally whereby you’re willing to pay some cash in advance to your present amortization. And that’s met by a delay or moratorium on some of the future amortization.

And obviously, one of the moves that SALT has, one of the benefits that SALT now has with all the cash that it has on its balance sheet and its present liquidity is it would have the ability to sit in front of a lender and be flexible or — and say, “We are willing to do this for you if you were to willing to delay amortization for us,” for example. I think we’d just have to leave it at that for the moment.

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Operator [30]

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Our next question comes from John Chappell of Evercore.

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Jonathan B. Chappell, Evercore ISI Institutional Equities, Research Division – Senior MD [31]

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Guys I don’t want to belabor the STNG sale. But given everything you said about keeping the dividend, position strength, the balance sheet, it just seems like the timing and the price just doesn’t kind of match up with that position of strength. I get the uncertainty and preparing for the worst. But at a time when STNG was putting up tremendous results and the stock was getting punished, it seems like SALT kind of piled on a little bit with 1.5 million shares at $19. So I’m just trying to figure out the timing of that? And I understand you’re within the sales period, but why do you need…

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Robert L. Bugbee, Scorpio Bulkers Inc. – Co-Founder, President & Director [32]

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Sure, sure, sure. I think that’s very easy. You wanted to — you are limited. You are very severely limited in your — in the trading, okay? In trading both in time, time of calendar and time of dates. And the second aspect is, as I said before, is that we — it isn’t a question of necessarily the timing of the STNG position. And the company is liquid and has this balance sheet because it just sold $43 million worth of shares. Had we not sold those shares, I think the questions today would have been quite rightly something along the following lines. “You’ve only got about $60 million worth of liquidity. Your cash covenant is, whatever it is, $30 million. You — we understand that you’re optimistic for the future, but your fleet is spot. And rates at present are running below all in breakeven. How long can you last doing this? How are you able to create flexibility?”, et cetera.

So it is a much different position now that you’ve sold those shares. So the correct decision for SALT was to sell those shares. And stock prices are very fickle. They could — it’s a — yes, you could have hung out for $2 or $3 or $5 or $10 more, but it would have been delayed SALT making its progress and able to take its opportunity. And maybe we would have ended up, depending on what happens in the stock market, selling even more shares later, which we certainly wouldn’t have wanted to do.

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Jonathan B. Chappell, Evercore ISI Institutional Equities, Research Division – Senior MD [33]

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Okay. Can you just help us understand the quiet period then? Like when would the next restrictions — I understand you don’t want to sell anymore and you’re optimistic in what you have the balance sheet now. But it seems like the market is taking another turn for the worse in most asset classes. So in to that next level of worst-case scenario, when would the next quiet period kick in?

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Robert L. Bugbee, Scorpio Bulkers Inc. – Co-Founder, President & Director [34]

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Okay. Okay. Well, you got — that doesn’t matter when the next quiet period — you don’t know when the next quiet period — the next quiet period would be whenever STNG itself could be doing something.

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Emanuele A. Lauro, Scorpio Bulkers Inc. – Co-Founder, Chairman & CEO [35]

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Well at the moment, you have material nonpublic information, Jon. So the problem is that the Board of Scorpio Bulkers just did not — first of all, we’re selling at a 30% — making a 30% profit on the investment over the period. Yes, it’s not annualized. It’s over 18 months, not over 12. But still, psychologically, the Board felt very comfortable with the investment. It’s still holding half of its position.

We don’t want to run the risk of getting hold of — being locked out by material nonpublic informations that will force potentially us not to be able to sell the shares. The Board just decided very consciously of taking the position of “Just put that cash on the balance sheet, and let’s hope we are wrong selling here.” It’s as simple as that. But it was not a more difficult conversation at the Board level, and that’s about it really.

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Robert L. Bugbee, Scorpio Bulkers Inc. – Co-Founder, President & Director [36]

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Yes. I mean you have to really understand that, that is how literally SALT could get shut out today if there was anything that STNG management was doing that itself should need to be disclosed. And that’s not the right risk that SALT should take. SALT should not take that risk when effectively, it should do what it’s done, which is take the opportunity to move a mediocre balance sheet to a strong balance sheet. “Thank you. Move on.”

I mean, it sold 40 million shares in a week where there was $700 million, $800 million volume.

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Operator [37]

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Our next question comes from Liam Burke of B. Riley FBR.

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Liam Dalton Burke, B. Riley FBR, Inc., Research Division – Analyst [38]

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Robert, you talked about — there seems to be active buyers in the market for assets, for bulk assets, bulk vessel assets. Would you anticipate COVID-19 driving up scrap rates to further increase the value of these assets?

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Robert L. Bugbee, Scorpio Bulkers Inc. – Co-Founder, President & Director [39]

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Oh, I don’t think that — I think our ships are new enough that the scrap prices are not going to affect — aren’t going to affect in the short term, our prices. I think, where scrap prices does matter is as we move through this period, just act as a protection all the time in the sense that the — if you start getting more increase in fuel prices, you start — or you get a period of — that’s the positive way you put pressure on older ships.

And if you get weaker market, access a safety valve, whereby older ships get removed quicker from the market because, as you say, the scrap price goes up.

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Liam Dalton Burke, B. Riley FBR, Inc., Research Division – Analyst [40]

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Okay. And on the scrubber front, obviously, the spread between high-low Sulphur Fuel has been pretty tight. You’re still comfortable, a, with the investments you’ve made? And then continuing them through 2021?

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Robert L. Bugbee, Scorpio Bulkers Inc. – Co-Founder, President & Director [41]

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Yes. I think that in the long term, we will — we haven’t changed the thesis related to scrubbers. And in many ways, as the world has greater share going forward potentially of Middle Eastern or Russian crude, that spread could rewiden and rewiden to a very significant level.

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Operator [42]

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Our next question comes from Jay Mintzmyer of Value Investor’s Edge.

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J. Mintzmyer, Value Investor’s Edge – Lead Researcher [43]

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So apologies if it’s already covered. I noted you pushed some of your

(technical difficulty)

been saving some CapEx in this tough environment. Is there any firm cancellation penalties or requirements in ’21, if you wanted to push them back further? Is that just kind of a gentleman’s agreement? Or any other details on that?

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Robert L. Bugbee, Scorpio Bulkers Inc. – Co-Founder, President & Director [44]

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Cam, how would you like to answer that?

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Cameron Mackey, Scorpio Bulkers Inc. – COO [45]

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We just can’t comment on it right now. We’ve been very focused, and there’s been a lot of cooperation with the manufacturers, the yards to get these deferrals. And what happens from here, it will be up to further discussions. We just can’t provide you any more detail on that.

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J. Mintzmyer, Value Investor’s Edge – Lead Researcher [46]

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Understandable. I figured I’d try to ask.

Look, I mean, it’s a challenging market in dry bulk sector. You had to look around and raise some cash, so it made sense maybe to sell the STNG shares. What other sort of levers can you pull? I mean you have $100 million in cash that should get you through, I would imagine, most of this year. But if we wake up towards

(technical difficulty)

what are sort of the levers that you would pull?

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Robert L. Bugbee, Scorpio Bulkers Inc. – Co-Founder, President & Director [47]

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Well, I don’t think — I think to…

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J. Mintzmyer, Value Investor’s Edge – Lead Researcher [48]

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Can you hear me?

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Robert L. Bugbee, Scorpio Bulkers Inc. – Co-Founder, President & Director [49]

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Yes, I can. I think that you — as we’ve indicated earlier in the call — and that’s one of the beauties of taking the medicine and selling the part of the STNG share now is that you are sitting with a lot of cash on the balance sheet more than you need and with great proactive position with lenders and other finances, whether it’s sale leasebacks or whatever. So this is a dynamic target. I mean the — I think that it is dynamic and people looking at balance sheets in a static way normally don’t sort of appreciate that. And I think there are levers that we can pull. Some — couple, we’ve outlined on this call. Sale-leasebacks, perhaps amortization, other things, and that’s it.

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Operator [50]

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At this time, I’d like to turn the call back over to Hugh Baker for closing remarks. Sir?

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Hugh Baker, Scorpio Bulkers Inc. – CFO [51]

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Thank you, operator. We have no closing remarks. So we’d like to thank everyone on the call and look forward to speaking to you all soon.

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Operator [52]

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Ladies and gentlemen, this concludes today’s conference call. Thank you for participating. You may now disconnect.

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