Capital Clean Energy Carriers - Q2 2024

Transcript

Operator (participant)

Thank you for standing by, and welcome to the Capital Product Partners' Second Quarter 2024 Financial Results Conference Call. We have with us Mr. Gerasimos Kalogiratos, Chief Executive Officer, and Mr. Brian Gallagher, Executive Vice President of Investor Relations. At this time, all participants are in a listen-only mode. There will be a presentation followed by a question-and-answer session, at which time, if you wish to ask a question, you will need to press star one on your telephone and wait for your name to be announced. I must advise you this conference is being recorded today, August 2nd, 2024.

The statements in today's conference call that are not historical facts, including our expectations regarding acquisition transactions and their expected effect on us, cash generation, equity returns and future debt levels, our ability to pursue growth opportunities, our expectations or objectives regarding future distribution amounts or unit buyback amounts, capital reserve amounts, distribution coverage, future earnings, capital allocation, as well as our expectation regarding market fundamentals and employment of our vessels, including redelivery dates and charter rates, may be forward-looking statements as such as defined in Section 21E of the Securities Exchange Act of 1934, as amended. These forward-looking statements involve risks and uncertainties that could cause the stated or forecast results to be materially different from those anticipated.

Unless required by law, 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 expectations to conform to actual results or otherwise. We make no prediction or statement about the performance of our common units. I would now like to hand over to your speaker today, Mr. Kalogiratos. Please go ahead, sir.

Gerasimos Kalogiratos (CEO)

Thank you, Christine, and thank you all for joining us today. As a reminder, we will be referring to the supporting slides available on our website as we go through today's presentation. Today represents an important milestone and the start of a new chapter for the company. We have agreed to change the company's name to Capital Clean Energy Carriers Corp., reflecting our strategic pivot to the LNG and energy transition business, and to signify the conversion of the partnership to corporation with improved governance rights for unaffiliated shareholders, a transparent corporate structure, and alignment of shareholder interests. As a reminder, we announced in November 2023, together with a change of focus of the partnership on the LNG and gas business, that we intend to also change our corporate structure from a partnership to a corporation.

I'm very pleased to report that the general partner of CPLP and the special committee of our board, comprising independent directors, have agreed to the terms of the conversion, which entail the conversion of all common units to common shares and the elimination of the general partner units and its incentive distribution rights. This includes also the elimination of the GP's existing management and consent rights, including its right to appoint three directors to our board and its veto rights over approval of mergers, consolidations, and other significant corporate transactions. Following the conversion, the board will consist of eight directors, a majority of which will be independent in accordance with Nasdaq rules.

Until the holdings of Capital Maritime and its affiliates fall below 25% of the outstanding common shares, Capital Maritime will have the right to nominate three of the eight directors, two directors until its holdings fall below 15%, and thereafter one director until its holdings fall below 5%. In view of the above transaction, the GP units and associated incentive distribution rights outstanding immediately prior to the conversion will be converted to an aggregate 3.5 million common shares. We expect that the conversion to a corporation will allow the company to grow and broaden our investor appeal and investor base, and over time, enhance liquidity, including potential index participation. This is, of course, together with our unique business plan of putting together the largest U.S.-listed LNG and gas platform with an eye to energy transition, as better described on slide four of the presentation.

Once all our contracted vessels are delivered, our 36-vessel fleet will be among the youngest out there, with an average age of 2.3 years, and the ability to transport a number of different cargoes, including cleaner forms of hydrocarbons such as LNG and LPG, but also service emerging energy transition trades such as the transportation of liquid CO2 and low-carbon ammonia. Importantly, we have today 20 vessels in the water, including 12 latest generation LNG carriers and eight legacy container vessels, all under medium to long-term charters to first-class counterparties. Finally, our legacy container fleet provides excellent strategic and funding optionality, with eight vessels remaining and close to $180 million raised in net profits from sales in less than six months. On slide five, you can see an overview of our contracted cash flows.

Our 12 LNG carriers on the water revenue backlog is considerable, totaling $2.4 billion, backed by diverse range of blue-chip energy providers. This is complemented by an additional $400 million of contracted revenue from our container book. Overall, we have a remaining chartered duration of 7.2 years, providing cash flow visibility and stability during this growth phase for the company. Moving on to the second quarter of 2024 and recent developments on slide 7, we announced during the quarter an important strategic investment in 10 new gas carriers for $756 million, with expected deliveries between the first quarter of 2026 and the third quarter of 2027. 6 vessels are dual-fuel LPG medium gas carriers, and 4 are the first-ever built liquid CO2 handy gas carriers, which can also transport LPG, ammonia, and other conventional cargoes.

On the LNG side, we took delivery of the LNG carriers Assos, Apostolos, and Aktoras in accordance with the partnership's transformative agreement to acquire 11 latest generation two-stroke LNG carriers. On the container side, we delivered to their new owners during the quarter the five container vessels we sold, recognizing a gain of $15.2 million. Our fleet in the water now consists of eight containers and 12 LNG carriers. Importantly, during the second quarter of 2024, we refinanced the LNG carrier Aristidis I and released $54.8 million of additional liquidity, while we also approved the financing terms of the sale and leaseback for the LNG carriers Aristos I and Aristarchos. In addition, in the second quarter of 2024, we announced the appointment of Brian Gallagher as Executive Vice President for Investor Relations.

Brian previously held the position of head of Investor Relations at Euronav from 2014 until the end of 2023 and served on the Euronav Executive Management Board from 2016 onwards. Turning to the partnership's financial performance, net income for the second quarter of 2024 was $34.2 million. Our board of directors has declared a cash distribution of $0.15 per common unit for the second quarter of 2024. The second quarter cash distribution will be paid on August 12th to common unit holders of record on August 6th. Turning to slide 8, total revenue for the second quarter of 2024 was $97.7 million compared to $88.5 million during the second quarter of 2023. The increase in revenue was primarily attributable to the revenue contributed by the newbuilding vessels that joined our fleet, partly offset by the container vessels sold during this period.

Total expenses for the quarter were $48.3 million compared to $50.6 million the second quarter of 2023. Total vessel operating expenses amounted to $20.2 million compared to $23.5 million in the same quarter a year ago. The decrease was mainly due to the net decrease in the average number of vessels in our fleet. Total expenses for the quarter also include vessel depreciation and amortization of $22.6 million compared to $20.9 million the same quarter of last year. The increase was mainly attributable to the higher depreciation expense due to the change in the composition of our fleet, which now includes a higher number of LNG carriers. General and administrative expenses for the second quarter of this year increased to $3.3 million from $2.3 million the same quarter last year, mainly due to costs associated with the acquisition of the 11 LNG carriers.

Furthermore, during the second quarter of 2024, we concluded a sale of five container vessels. Interest expense and finance costs increased to $31.4 million for the second quarter of 2024 from $25.5 million for the second quarter of last year. The increase was mainly attributable to the increase in the partnership's average indebtedness and the increase in the weighted average interest rate to 6.63% compared to 6.28% in the second quarter of 2023. The partnership recorded net income of $34.2 million for the quarter compared to net income of $7.4 million the same quarter of last year. Net income per common unit for the quarter was $0.62 compared to $0.36 per common unit in the second quarter of last year. On slide nine, you can see the details of our balance sheet.

As of the end of the second quarter, the Partners' Capital amounted to $1.2 billion, an increase of $55.1 million compared to the end of 2023. The increase reflects net income of $68.1 million for the first six months of 2024, other comprehensive income of $0.2 million relating to the net effect of the cross-currency swap agreements we designated as an accounting hedges, and the amortization associated with the equity incentive plan of $3.5 million, partly offset by distributions declared and paid during the period in the total amount of $16.7 million. Total debt increased by $809 million to $2.6 billion compared to $1.8 billion as of year-end of 2023.

The increase was driven primarily by the acquisition and the resumption of related indebtedness of four new LNG carriers since the beginning of the year and the refinancing of the LNGC Aristidis I, partly offset by the decrease in the U.S. dollar equivalent of the euro-denominated bonds issued by CPLP Shipping Holdings, the scheduled principal payments for the period, and the early debt repayment relating to three containers sold during the period, as well as the full repayment of the seller's credit withdrawn to partly finance the acquisition of the LNG carrier Axios II. For more details relating to these transactions, please refer to our earnings release. Total cash as of the end of the quarter was $101.2 million, including restricted cash of $12.9 million, which represents the minimum liquidity requirement under our financing arrangements.

On slide 10, we take a look at where we stand on the vessel deliveries following our agreement to acquire 11 LNG carriers, which closed in December 2023. Since the closing of the agreement, we have taken delivery of 5 vessels, all of which are committed on term employment. The second quarter of 2024, we took delivery of 3 LNG carriers, the Assos, which commenced a 10-year time charter with Tokyo Gas, the Aktoras, which commenced a 7-year bareboat charter with Bonny Gas Transport, and who also maintain an option to extend by an additional 3 years, and the Apostolos, which commenced a 10.5-year charter with JERA, the Japanese utility, who also maintain an option to extend by an additional 3 years. Turning to slide 11, we summarize the results of the debt optimization exercise we undertook in the second quarter of 2024.

For two LNG carriers, the Aristos I and the Aristarchos, we agreed to extend their maturity and reduce the financing cost and the amortization from their previous levels. For the LNGC Aristidis I, we refinanced the debt outstanding by entering into a new senior secured loan facility, releasing additional liquidity of $54.8 million, reducing the financing cost, and pushing the maturity out by more than three years. Overall, our debt optimization efforts have resulted in longer amortization profiles, extended maturities, as well as in the reduction of our weighted average margin on our floating rate debt to 194 basis points as of June 30th from 236 basis points a year ago. Turning to the next slide, we review our container fleet and strategy. As we all know, the partnership has committed to divest from its remaining container vessels.

As already discussed, since the closing of the LNG transaction in December 2023, we have sold seven container vessels and have released around $180 million of liquidity. Of the remaining eight containers that are part of our fleet, five are debt-free and start to open for rechartering from the first quarter of 2025 onwards, while the remaining three have debt and the remaining chartered duration of 8.6 years. The current upturn in the container market, boosted by the trade disruption in the Red Sea, provides us with additional optionality as we continue to opportunistically evaluate the potential sale of its asset against its cash flow and residual value, compared also to other opportunities in the LNG and wider gas markets.

Today, the gross charter attached value of our container assets is estimated at approximately $630 million-$650 million, implying a net asset value of our container fleet of approximately $330 million-$350 million. Let us now turn to slide 13. As a result of our debt optimization efforts and recent container sales, we have improved significantly the debt maturity profile of the partnership, as shown by the blue circles, which signify our debt maturities as they stood at the end of the second half of 2023. Currently, our first material debt refinancing arises in October 2026, with a maturity of our EUR 150 million euro bond listed at the Athens Exchange.

Now, turning to slide 14 and the acquisition of the 10 gas carriers we announced in June, these vessels are latest generation assets which can trade in the traditional gas business, such as LPG and ammonia, which have strong fundamentals of their own going forward and an attractive supply-demand picture, but at the same time provide us with unique optionality to the emerging trades of energy transition, such as the carriage of liquid CO2 and low-carbon ammonia. We expect that at the initial stages of development of these emerging trades, we will see handy and medium-sized gas carriers service these cargoes, and gradually, as the trade expands and the infrastructure develops, we will see also larger vessels coming into play. Turning to slide 15, we review developments in the LNG charter market. Spot rates remained relatively steady from mid-January to the end of May.

Since then, there has been a continued improvement as shipping availability for loadings out of the U.S. Gulf in July dwindled, leading to an increase in spot rates. The first week of July, spot rates for two-stroke vessels reached $90,000 per day. So far, fixing activity is well above the fixing activity at the same time in 2022 and 2023, and in line with 2021 fixing levels. Multi-month to one-year periods have firmed up throughout the quarter as players seek to cover winter demand. Term charter rates for one to three-year periods are currently standing in the region of $85,000 per day. Longer-term charters are still priced at significant premium to shorter term as market tightening is expected from 2026 onwards. Global LNG imports continue to be robust across regions, with China maintaining near-seasonal record levels. Notably, imports to China have increased by approximately 24% year-over-year.

LNG carrier transits via the Suez Canal remain at a minimum. Panama Canal use is also limited, and less than 3% of voyages from the U.S. to Asia are utilizing the Panama Canal. Therefore, voyages are long, and while traded LNG levels are lower than previous years, the long distances have pushed ton miles to historical highs. Naturally, this has increased the fleet utilization from last year's levels, but the early fleet additions have ensured that there is enough tonnes to handle the ton mile. Starting in 2025, LNG capacity additions are expected to accelerate. From an average of 13 MTPA during 2020 to 2024, the capacity additions are projected to average 48 MTPA yearly during 2025-2028, reaching a peak of 70 MTPA in 2026. This accelerated growth underscores the strong demand and strategic importance of LNG.

The U.S. and Qatar are said to be the primary drivers of its capacity expansion. Together, they will account for approximately 60% of the total capacity additions between 2025 and 2028, with the U.S. contributing around 40% and Qatar around 20%. Focus remains on the U.S. pause in non-FTA approvals and recent judicial developments around this, as this is expected to affect liquefaction and shipping demand towards the end of the decade. More liquefaction project FIDs, both from the U.S. and other regions, mean that more LNGCs will be needed in 2028 onwards to cover demand from new projects and fleet replacement. The LNG fleet has expanded by 10 ships in the second quarter of 2024, with a total of 20 vessels delivered so far this year, with an order book to fleet ratio of close to 54% of the total fleet.

Newbuilding prices for LNG carriers remain steady, currently at $260 million per vessel for the basic specification. Shipyard capacity is also constrained, with no slots available for newbuilds in 2026 and limited availability in 2027. Overall, softer fundamentals for 2024 and seasonal trends have contributed to weaker charter rates, and generally, 2024 is expected to be a softer year for LNG carrier earnings. However, the medium-to-long-term outlook remains positive, with trade volumes set to pick up sharply from 2025 onwards as the next major wave of liquefaction capacity begins to come online. I now turn to the final slide in our presentation, slide 16. You have a number of supporting slides available containing detailed data in our appendix, which we may refer to in the Q&A to follow shortly. However, to conclude, this has been one of the most important quarters in the company's history.

The management and staff have worked hard in recent quarters to get us to this exciting position, and I thank them for their hard work. The conversion to C-Corp and the new name reflects the pivot towards gas and the development of an important and large-scale gas transportation growth platform. The new named company of Capital Clean Energy Carriers will be the youngest and get the largest energy transition gas shipping platform, supported by strong LNG market fundamentals, access to new technologies and opportunities from alternative gas carriers, and yet retaining optionality with the 8 vessels remaining in our container fleet. We look forward to marketing our new investment case in the coming months and quarters and engaging with old and new investors. With that, I would like to hand it back to the operator for any questions. Thank you. We will now be conducting a question-and-answer session.

Operator (participant)

If you would like to ask a question, please press Star 1 on your telephone keypad. A confirmation tone will indicate your lines in the question queue. You may press Star 2 if you would like to remove your question from the queue. For participants using speaker equipment, it may be necessary to pick up your handset before pressing the Star keys. One moment, please, while we poll for questions. Thank you. Our first question comes from the line of Liam Burke with B. Riley. Please proceed with your question.

Liam Burke (Managing Director)

Hi, Jerry. How are you doing today?

Gerasimos Kalogiratos (CEO)

Hi, Liam. I'm well. How are you?

Liam Burke (Managing Director)

Good. Thank you. Jerry, on the corporate conversion, right now the MLP is paying a unit payout. Are you just going to continue your current dividend policy? Correct. The intention at this point is to continue with the $0.15 per unit quarterly distribution.

Gerasimos Kalogiratos (CEO)

This is on the back of the fact that we are in growth mode as we take delivery of the 16 newbuilds that we have on order. I think at this point we want to maintain a more conservative stance. Having said that, we do expect that the earnings power and cash flow visibility of the company once the ships deliver is going to be pretty significant and will give us a lot of financial flexibility. I think the overall intention of the company and the board is that at some point we move to a floating dividend policy tied to a percentage of free cash flow or net income so that shareholders can participate in the potential upside as we fix our vessels going forward.

Liam Burke (Managing Director)

Great. Thank you.

Gerasimos Kalogiratos (CEO)

This is jumping way, way ahead, but you've got an order for the 10, we'll call it alternative fuel transport vessels. Have there been any interest in contracting those things long-term by any providers, or how are you looking at the potential earnings power of that part of your fleet? We do see some activity right now around the transportation of low-carbon ammonia, for example, for the MGCs on the back of certain tenders for the import of ammonia in order to produce power with hydrogen or blue and green ammonia. This, over time, could translate into multi-year charters for the right vessels. Overall, I would say it might be still early for this type of employment as most of these inquiries are for 2027, 2028 onwards as the infrastructure is being built and these tenders mature.

But in the meantime, I think, and this is where the value of the optionality comes in with these vessels, we can, of course, trade them in the normal LPG and ammonia market, and we will look at short to medium-term fixtures as they come closer to delivery. So we are working on two levels, really, at this point. I mean, we are engaging for the long-term, if you want, low-carbon trades on the MGCs for low-carbon ammonia, but at the same time, we have very much our mind that as these vessels deliver, they will be trading the traditional LPG market. Now, the story is quite similar for the liquid CO2 vessels. These are effectively handy LPG vessels, a vessel segment where there is minimal ordering and a lack of modern tonnage.

There, again, we see healthy inquiry from the more traditional trades, but at the same time, we have been actively engaging with the liquid CO2 market, be it emitters and sequestration providers, both in Europe and the Far East. Being the only available vessels of this size in the market gives us a considerable advantage when we are engaging with these players. And at this point, we expect the utilization of these vessels into the liquid CO2 transportation to start from kind of mid-late 2027 to 2028. But again, in the meantime, they can trade as normal LPG and ammonia carriers.

Liam Burke (Managing Director)

Great. Thank you, Jerry.

Gerasimos Kalogiratos (CEO)

Thank you, Liam.

Operator (participant)

Our next question comes from the line of Omar Nokta with Jefferies. Please proceed with your question.

Omar Nokta (Equity Analyst)

Thank you. Hi, Jerry. Good afternoon. Congrats on the official or the upcoming name change and reincorporation. I guess just a couple of questions.

I did want to follow up maybe just on your comments to Liam about the dividend and just to understand it's kind of the thought process that just sort of the intention is to maintain the current payout of that $0.15 quarterly, and then once those remaining LNG new buildings deliver over the next 2-3 years, then adopt a more payout structure that's based off of a variable dividend based off of earnings?

Gerasimos Kalogiratos (CEO)

The answer is let me formulate the answer as follows. First, the $0.15 is our set dividend for the moment. Between now and the deliveries, we will be looking for ways to increase that dividend to shareholders. It's not that this is it and wait for 2027 until you see an increased payout.

But I think what we need to put together is what is in the realm of being really practical about it and conservative at the same time. So given what we have set out to do, given our growth trajectory at this point and our liquidity position and cash flow generation, what is it we can do to increase that dividend? We haven't come down to a conclusion yet, so this is not a discussion that is finished, and we will be looking into this over the next quarter or two. But you can, for the moment, assume that the $0.15 is there, a floating payout once the growth vessels, the new vessels, start delivering from 2026, 2027 onwards. And in the meantime, we will see how we can return more capital to unit holders in a conservative way without risking the balance sheet.

Omar Nokta (Equity Analyst)

That's clear. Thanks, Jerry.

Appreciate that. And then just in terms of maybe just the bigger picture, as you move forward within the clean energy shipping, can you maybe just give a sense of what that encompasses? I know we've talked about this in the past when you first announced back in December this shift, but maybe you have the LNG new buildings, you've got the LPG and CO2 carriers. Can you maybe just give sort of a lay of the land or the addressable market of what you see as being clean energy shipping going forward?

Gerasimos Kalogiratos (CEO)

Yeah. Maybe the right phrase is clean air, right, given what technologies we have available at this point. So the idea is as follows, right? I mean, firstly, the LNG carriers, obviously, and there are two sides to this.

Firstly, the propulsion of our ships, because when you look at our core fleet, which is the LNG and gas carriers, all of them but four ships are dual fuel. All our LNG carriers are dual fuel LNG and fuel oil. In terms of our medium gas carriers, all six of them are dual fuel LPG and fuel oil. Already, I mean, when we talk about the propulsion of our vessels, these are very high-specification vessels with energy-saving devices that have dual fuel capabilities, which means that they have a reduced carbon footprint. I think increasingly, you will see it every year in our sustainability reports how the carbon footprint of the company is being reduced because of these very high-specification dual fuel vessels. This is not really the core of our trade and our business plan. The core is as follows.

In fact, with the 18 LNG carriers, the 12 in the water plus 6 to come, we already are probably the largest U.S.-listed company as far as latest generation LNG carriers are concerned. And we do consider LNG to be a prime energy source for the energy transition. So that's one part of our business plan. And the other part is where the MGCs and the liquid CO2 carriers come in. Now, there are two sides to this again. Firstly, the MGCs, they do carry traditionally, again, a kind of cleaner hydrocarbon in the form of LPG, but they are also prime for the transportation of low-carbon ammonia. Low-carbon ammonia, as you know, is a proxy for hydrogen.

We see a number of projects in Australia, in the U.S., in the Middle East for the production of blue and green ammonia, which is expected to be used in places like Korea, Japan, Europe, again, the U.S., or other places for the production of power with ammonia. In many cases, this will be co-firing. That means that many utilities intend to use both coal as well as blue and green ammonia for power production and to reduce their carbon footprint. So these vessels, and especially the first years and maybe the first decade, are going to be probably the ideal candidates for the transportation of blue and green ammonia because right now the infrastructure for larger vessels is still lacking behind.

So VLACs and other types of vessels will have a role in this for sure, potentially at the beginning as storage providers, but still, we don't have enough terminals where larger vessels can call for the transportation of low-carbon ammonia. So that's part of that trade. And of course, there is the other side of the trade that is the transportation of liquid CO2. Liquid CO2 transportation can take place for two reasons. One is obviously the carbon capture and storage industry in many places, including the U.S,. Europe, again, Japan, Korea, the Middle East. There are a number of such projects. And in places like especially Europe and the Asia-Pacific region, we expect to see a lot of maritime transportation. So the carbon capture is going to take place, for example, on the European continent, but the storage is going to take place in the North Sea.

Or in the Asia-Pacific region, we are seeing carbon capture in places like Korea and Japan, but then sequestration in places like Australia, Malaysia, or other places in the Asia-Pacific region, which means that we will need shipping. So that's where we come in with our liquid CO2 carriers. And these are the first vessels of this type and size in the world, which I think gives us a unique advantage in all these discussions. And then, of course, there's the other side of the transportation of liquid CO2. That is the use of biogenic liquid CO2 in order to produce e-fuels, which are going to be used potentially in transportation. And that needs the use of biogenic CO2. In many cases, it will be imported in liquid format with ships.

So this is how we cover, with our LNG carriers, MGCs, and Liquid CO2, handy LPG carriers, the majority of the energy transition trades, and hence, if you want the name. Sorry for the long kind of description, but this is where we see ourselves.

Omar Nokta (Equity Analyst)

No, thank you, Jerry. That's an incredibly good amount of detail and gives me a good sort of framework or gives us a good framework of seeing how deep this market really is and the opportunities. If I may just ask one quick one, in terms of just the containers, you mentioned keeping optionality open. Obviously, the market's heated up this year. How are you thinking about those remaining vessels, especially the mid-sized ones that perhaps have some opening up in 2025 coming? Do you intend to still monetize those, or do you think there's an opportunity to own these for a bit longer?

Gerasimos Kalogiratos (CEO)

I think we will be opportunistic about it. So having delivered now the 7 vessels that we agreed to sell, we are left with the 3 brand new 13,000 TEU container vessels. They have a remaining chartered duration of about 9 years, and then also the 5 5,000 TEU build 2013. These are actually wide beam eco container vessels, not very different from a newbuild that you would order today, so very attractive assets in this market. If you look at kind of the charter attached valuation of these vessels and in view of the debt that they have, you'll probably come up with an NAV of $330 million-$350 million. I think the way that we are going to approach this is that if we see a good opportunity to sell, to exit part or all of these assets, we will do it.

But then always you have to evaluate a potential sale proposition compared to the potential cash flow. Today, because these assets are quite attractive, you could potentially secure a minimum of three years of time charter on the back of their current deployment, somewhere in the $35,000-$40,000 per day range, maybe for longer. So we will always compare whatever we see in terms of a sale value to the NPV of these forward cash flows and residual value that we expect. So I don't think we are dogmatic about it. The idea is, as we have said, to rather divest from these assets, but I don't think you don't have to take forced exits in shipping.

Sometimes you have to think before you act, especially in markets like the one we're experiencing today, which is very volatile and with a series of geopolitical events affecting demand for container vessels.

Omar Nokta (Equity Analyst)

Yeah, definitely. Makes sense, Jerry. Appreciate it. I'll turn it over.

Gerasimos Kalogiratos (CEO)

Thank you, Omar.

Operator (participant)

As a reminder, if you would like to ask a question, press star one on your telephone keypad. Our next question comes from a line of Mike Webber with Webber Research and Advisory. Please proceed with your question.

Mike Webber (Managing Partner)

Hey, good morning, guys. How are you?

Gerasimos Kalogiratos (CEO)

Hi, Mike. We're well. How are you?

Mike Webber (Managing Partner)

I'm good. Good. Thanks for covering us in time. I just had a couple of follow-up questions. A couple of these points are touched on already, but I wanted to go back to the conversion, Jerry. You're right that this kind of thing is a pretty big deal.

It doesn't happen all that often. And then I just wanted to make sure we were looking at the details correctly. The last time we saw something like this was around some of the LNG LPs. It's not exactly apples to apples, but when they gave up control, the last deal saw Teekay LNG transition that control for $123 million from their LP holders. Was there any kind of control premium associated with Capital Maritime transitioning their controlling GP stake into common units?

Gerasimos Kalogiratos (CEO)

The exchange of the GP units with common units comes, as you point out, with the GP forgoing also existing management and consent rights as well as the IDRs. IDRs being out of the money, but still within reach if in the future we had a special dividend, for example. So there would be always an overhang. So there was a value to the IDRs.

But I think that the biggest part of this is, of course, the forfeiting of control that comes with the GP units, the appointment of the three directors, the veto rights on corporate transactions, mergers, and so on and so forth. So there was a premium in the exchange compared to other MLPs. And even more recent examples who have gone through the same kind of conversion, you'll find, and I'm not talking about distressed MLPs, right, but normal MLPs, you'll find that this is at the lower end of whatever we have seen in the market. I mean, we have seen premium vary from 5%-14%. So this is, I think, quite at the lower end of that.

We're backing into something relatively similar, and I just wanted to confirm that because the scenario where you weren't in the splits but you could have reached them was pretty identical to what we saw earlier. It did look like this was done at a fraction of the premium that we saw from other comps. So it was worth 1 checking and 2 calling out that you were able to make that conversion without that kind of dilution to common holders, which I think is probably appreciated. I should also add, of course, which is the usual thing, that this was exhaustively negotiated between the special committee of the board comprising independent directors, and this being supported by fairness opinion. So it has all been done after a lot of discussions and hence also the slight delay in getting it across. Yeah.

Mike Webber (Managing Partner)

Well, it looks like it came across in a much more seamless fashion and much more cost-effective than the comps that we've seen recently. So congrats on getting that done.