Capital Product Partners LP
NASDAQ:CPLP
If you don’t study any companies, you have the same success buying stocks as you do in a poker game if you bet without looking at your cards.
Utilize notes to systematically review your investment decisions. By reflecting on past outcomes, you can discern effective strategies and identify those that underperformed. This continuous feedback loop enables you to adapt and refine your approach, optimizing for future success.
Each note serves as a learning point, offering insights into your decision-making processes. Over time, you'll accumulate a personalized database of knowledge, enhancing your ability to make informed decisions quickly and effectively.
With a comprehensive record of your investment history at your fingertips, you can compare current opportunities against past experiences. This not only bolsters your confidence but also ensures that each decision is grounded in a well-documented rationale.
Do you really want to delete this note?
This action cannot be undone.
| 52 Week Range |
12.8054
18.4869
|
| Price Target |
|
We'll email you a reminder when the closing price reaches USD.
Choose the stock you wish to monitor with a price alert.
This alert will be permanently deleted.
Capital Product Partners LP
Earnings Call Analysis
Q3-2023 Analysis
Capital Product Partners LP
The company reported net income of $17 million for the third quarter of 2023. Highlighting a sign of strength and investor reward, a cash distribution of $0.15 per common unit was declared and paid in November 2023. A robust revenue increase to $95.5 million from the previous year's $71.9 million was driven by new vessel deliveries and improved charter rates. This uptick was, nonetheless, paired with higher expenses, particularly in vessel operation and interest expenditures as the company invested in expanding its fleet and faced a higher average interest rate (6.5% up from 4.4% year-on-year).
Cash flows from operations stood strong at $41.7 million, although a substantial $34.4 million was allocated to the capital reserve, demonstrating prudent financial management. Meanwhile, total debt increased significantly by $303.1 million, reaching $1.6 billion, due to vessel acquisition financing. This was somewhat mitigated by scheduled debt payments and early prepayments.
In a move reflecting a strategic pivot, the company will change its name to Capital New Energy Carriers, L.P. and adopt a new ticker, CNEC, by year-end. This rebranding indicates a fresh focus and direction for the company, underscoring its evolution and commitment to new energy trends.
A key strategic development is the $3.1 billion acquisition of 11 state-of-the-art LNG carriers, which will not only enhance its fleet but also secure substantial long-term charters worth over $1.4 billion in revenues. This acquisition is expected to be funded through a mix of a rights offering, commercial debt, and seller's credit from Capital Maritime, ensuring full capitalization. Significantly, the rights offering is backed by Capital Maritime at a 9.6% premium to the company's last closing price, which is a concrete vote of confidence in the company's future outlook.
With just 29 vessels open for order till 2028, the company strategically positions about a fifth of the market's uncommitted vessels, setting the stage for market dominance as demand for new vessels proliferates. Further, the transition to more eco-friendly 2 stroke vessels signals the company's preparedness for tighter emission regulations and increased charter rates and utilization.
The fleet's modernization with bigger and more fuel-efficient vessels, boasting advanced propulsion and containment systems, is likely to phase out older steam turbine fleets. The newer technology not only cuts down emissions, satisfying emerging environmental regulations, but also promises significant fuel savings and operational expenditure benefits. These innovations are expected to allow these vessels to demand premium charter rates due to their substantial efficiency gains, positioning the company favorably in a market increasingly concerned with environmental impact.
You don't have any saved screeners yet
Thank you for standing by and welcome to the Capital Product Partners Third Quarter 2023 Financial Results Conference Call. We have with us Mr. Jerry Kalogiratos, Chief Executive Officer; Mr. Spyros Leoussis, Chief Commercial Officer; and Mr. Nikolaos Kalapotharakos, Chief Financial Officer of the company.[Operator Instructions] This conference is being recorded today, November 13, 2023. The statements in today's conference call that are not historical facts, including our expectations regarding cash generation, equity returns and future debt levels, our ability to pursue growth opportunities, our expectations or objectives regarding future distribution amounts, capital reserve amounts, distribution coverage, future earnings, capital allocation as well as our expectations regarding market fundamentals and the 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 forecasted 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 assume no responsibility for the accuracy and completeness of the forward-looking statements. We make no prediction or statement about the performance of our common units.I would now like to hand the call over to your speaker today, Mr. Kalogiratos. Please go ahead, sir.
Thank you. And thank you all for joining us today. As a reminder, we'll be referring to the supporting slides available on our website as we go through today's presentation. In addition to our quarterly earnings, we announced today an important strategic transaction for the partnership. In the interest of time, we will go through a shorter-than-usual presentation of our quarterly earnings, and we'll then move on to the transaction and what it all means for Capital Product Partners.Starting with Slide 3 and the Partnership's financial performance. Net income for the third quarter of '23 was $17 million. Our Board of Directors has declared a cash distribution of $0.15 per common unit for the third quarter of '23. The third quarter cash distribution will be paid today, November 13, to common unitholders of record on November 6. Finally, following the Cape Agamemnon's delivery to her new owners last week, the Partnership's current fleet charter coverage for both 2023 and '24 stands at 100% with the remaining charter duration corresponding to 6.5 years and contracted revenue backlog of more than $1.7 billion.Now turning to Slide 4. Total revenue for the third quarter of 2023 was $95.5 million compared to $71.9 million during the third quarter of '22. The increase in revenue was primarily attributable to the revenue contributed by the 4 new building vessels delivered to the partnership between the fourth quarter of '22 and the second quarter '23 as well as the increase in the daily rate and by 2 of our LNG carriers since September 2022.Total expenses for the third quarter of '23 were $51 million compared to $40.4 million in the third quarter of '22. Total vessel operating expenses during the third quarter of '23 amounted to $22.3 million compared to $17 million during the third quarter of last year. The increase in vessel operating expenses was mainly due to the net increase in the average number of vessels in our fleet and costs incurred during the scheduled maintenance of certain of our ships. Total expenses for the third quarter of '23 also include vessel depreciation and amortization of $21.9 million compared to $16.2 million in the third quarter of last year. The increase in depreciation and amortization during the third quarter of '23 was mainly attributable to the net increase in the average size of our fleet.General and administrative expenses for the third quarter of '23 amounted to $2.6 million compared to $2.8 million in the third quarter of '22. Interest expense and finance costs increased to $27.8 million for the third quarter of '23 compared to $14.9 million for the third quarter of last year. The increase in interest expense and finance cost was mainly attributable to the increase in the partnership's average indebtedness and the increase in the weighted average interest rate to 6.5% from 4.4% in the third quarter of '22.The partnership recorded net income of $17 million for the quarter compared to net income of $11.5 million. That is excluding the gain on sale of vessels were recorded in the third quarter of last year. Net income per common unit for the quarter was $0.84 compared to $0.57 per common unit in the third quarter of last year, once again, excluding the gain on sale of vessels recorded a year ago.On Slide 5, you can see the details of our operating surplus calculations that determine the distributions to our unitholders compared to the previous quarter. Operating surplus is a non-GAAP financial measure, which is defined fully in our press release. We have generated approximately $41.7 million in cash from operations for the quarter before accounting for the capital reserve. We allocated $34.4 million to the capital reserve, a decrease of $0.6 million compared to the previous quarter due to the net decrease in the rate of amortization of our debt. After deducting to the capital reserve, the adjusted operating surplus amounted to $7.2 million.On Slide 6, you can see the details of our balance sheet. As of the end of the third quarter, the Partners' capital amounted to $664.5 million, an increase of $26.1 million compared to $638.4 million as of the end of last year. The increase reflects net income for the 9 months ended September 30, other comprehensive income of $2.1 million relating to the net effect of the cross-currency swap agreement we designated as an accounting hedge and the amortization associated with the equity incentive plan of $2.8 million, partly offset by distributions declared and paid during the period in a total amount of $9.2 million and the cost of repurchasing our common units under our unit repurchase program for an aggregate amount of $4.1 million.Total debt increased by $303.1 million to $1.6 billion compared to $1.3 billion as of year-end 2022. The increase is attributable primarily to the drawdown of a total of $392 million to finance new vessel acquisitions, partly offset by scheduled principal payments for the period of $64 million and the early prepayment in full of one of our facilities for an amount of $23.4 million.Total cash as of the end of the quarter amounted to $108.5 million, including restricted cash of $11.7 million, which represents the minimum liquidity requirements under our financing arrangements.At this point, I would like to move to the second part of the presentation and in particular, to Slide #8. I'm very pleased to talk about today what we consider a milestone transaction for the partnership and one that I believe will propel Capital Product Partners to a new chapter after 16 years of public presence as an MLP. I would like to start with the decision of the Board to change the partnership's name. The new name, which we expect to take effect by year-end, is Capital New Energy Carriers, L.P., and it will come with a new ticker symbol, CNEC. I'm starting with this symbolic move as it signifies that what we're aiming to do here is more than an asset transaction. It is the transformation of the partnership to reflect our new focus primarily on LNG shipping, but also the wider gas business related to the energy transition and the intention as part of this transaction to move away from the MLP model and convert into corporation.This strategic transformation will be underpinned by the acquisition of 11 latest generation 2 stroke LNG carriers in a $3.1 billion transaction with deliveries starting from later this quarter and up to March 2027. The first 5 vessels delivering this and next year have medium- to long-term charters in place with a revenue weighted average term period of 7.5 years to highly reputable counterparties with a total of over $1.4 billion in contracted revenues. Once all vessels have been delivered, we expect CPLP or CNEC, if you prefer, to transform to the largest U.S. listed operator of 2 stroke LNG carriers compared to the current fleet of other U.S. listed companies and one of the largest U.S. listed shipping companies by enterprise value.Importantly, together with the focus on the LNG business, CPLP has committed to the opportunistic divestment from its container vessels. While has secured the Right of First Refusal on 2 very large ammonia carriers and 2 liquid CO2 carriers, which are expected to play a significant role during the energy transition together with natural gas.Now turning to the next slide. You can see how we expect to fund this strategic acquisition. Total vessel acquisition cost is $3.1 billion, which translates roughly into 8.4x full year EBITDA for the 11 new LNG carriers. This estimate is based on the employment secured for the 5 vessels on the full-year basis and an assumption of $100,000 per day for the remainder 6 in line with the current medium- to long-term period market. We believe the acquisition to be attractively priced in view of the uniqueness and size of this fleet comprising only latest-generation mega LNG carriers, the tenor and the quality of the contracted cash flows, as well as the delivery dates of the vessels and in particular of the open vessels, which coincide very well with the next phase of significant liquefaction capacity coming online from 2026 onwards as we will discuss later.The acquisition will be funded by a rights offering of $500 million which is open to all our unitholders. In addition to commercial debt and an attractively priced $220 million unsecured seller's credit provided by Capital Maritime to ensure that the transaction is fully capitalized even without the sale of any container assets.Turning to the next slide, we describe in more detail, the $500 million rights issue and the seller's credit. We chose the rights issue path because we wanted to make sure that all existing unitholders have the right to participate in this transformative transaction. Capital Maritime is backstopping 100% of the transaction without any fee at an attractive price of a minimum of $14.25, which translates into a 9.6% premium to the last closing price. Holders of common units as of record date of November 24, will receive the right to acquire up to 1.7 units for each unit they hold. The closing of the rights offering is expected to take place on December 15.As far as the seller's credit is concerned, it is attractively priced at 7.5% [ on lien ], it is unsecured and has a maturity in June 2027. We believe that the Capital Maritime support is an important part of this transaction and demonstrates Capital Maritime's continued alignment with the long-term success of the partnership. In the appendix on Slide 24, you can find more details with regard to the deal structure and timing of payments.On the next slide, you will find the 11 vessels together with the breakdown of total contracted revenues and average day rate for each year as well as our deliveries. These are all sister vessels built or under construction at Hyundai shipyard in South Korea, the largest shipbuilder in the world. These [ truly ] very high-specification vessels represent the latest generation of propulsion, containment system, reliquefaction plant and energy-saving technologies in LNG shipping. Importantly, the propulsion arrangement with mega low-pressure engines and sub generators, ensures the reduction of methane slip by 50% even compared to first-generation low pressure 2 stroke vessels and close to 90% compared to TFDE vessels. The first vessel, which was delivered from Hyundai to Capital Maritime at the end of October is on a 3-year highly lucrative charter to Qatar Energy & Trading. The Axios II is expected to commence a bareboat charter to Bonny gas and trading in the first quarter of '25. And in the meantime, we expect here to be fixed for a 12 to 15 months time charter before year-end. The Assos, which delivers in May '24 is fixed on a 10-year chart to Tokyo Gas, a Japanese utility, similar to the Apostolos that follows thereafter, which is fixed to Jera. Finally, the Aktoras will also enter into a 7-year bareboat charter in July of '24 with Bonny gas and trading. The remaining 6 vessels are not yet committed and have highly attractive delivery dates as today's shipyards offer typically capacity in the second half of 2027 onwards.Turning to the next slide. As the delivery of only 11 additional LNG carriers, Capital will have a very modern fleet of 18, 2-stroke LNG vessels, the largest in the U.S. public markets as of this point, with 6.5 years of average firm charter duration that can extend to 9.6 years, including options.I will now hand over the floor to Spyros Leoussis, our Chief Commercial Officer, who will talk about the prospects of the LNG market and especially from 2026 onwards, where we have the most exposure.Importantly, Spyros will also explain why we believe that 2-stroke vessels like ours, we gave even more traction and value going forward as environmental regulations and market-based measures become more prevalent.
Thank you, Jerry, and good morning, everybody. This is indeed a very exciting transaction from where I'm sitting. As you know, and you can now see on Slide 13, LNG is prevailing as the main supply source of natural gas has the ability to move natural gas in the form of LNG beyond the constraints of the pipeline, not only gives producers and consumers more flexibility but has become increasingly more important due to geopolitical issues. Hence, LNG shipping is an integral of the value chain. And with this transaction, CPLP will become one of the largest owners worldwide of modern 2-stroke vessels. Turning to the next slide. The global liquefied natural gas market capacity is expected to increase in the coming years by 70% by 2030. The chart that you see on this slide refers to the global LNG production capacity, which is expected to exceed 750 million tons annually in 2030, up from 465 million tons in 2023. The increase in liquefaction involves projects under construction that have already received the final investment decision. A crucial element for the prospects of the LNG shipping market is that most of the new production will be installed in the U.S. Gulf with the main buyers located in the Far Eastern Europe, increasing the demand for LNG shipping due to higher ton mile.2023 so far has been another very strong year in terms of FIDs for new liquefaction projects, with next decade, Sempra [indiscernible] global projects taking FID amounting to additional 50 million tons per annum of LNG from 2026 and '27 onwards. We expect the trend for FIDs to continue as the number of projects in the U.S. are reaching maturity and government support around the world for new projects has been an important catalyst. We expect the new players and their offtakers to drive the demand for new vessels when our ships -- when our open ships will be delivering from the yard.On the next slide, Slide 15, we discuss the supply of LNG carriers. Here, you can see the composition of the global LNG fleet. [ Balancing ] fleet on the water stands at 736 vessels and the order book is around 300 vessels. The order book-to-fleet ratio is slightly lower than the peak of 52% of last January as newbuilds delivered under the [ slowdown ]. From the total of about 300 new vessels, only 29 vessels currently are open between now and 2028, equivalent to 10% of the existing order book once the vast majority of orders are committed to projects like the Qatar expansion, LNG Canada and others. Worth noting that the Capital open positions will represent around 1/5 of the market for uncommitted vessels, position us well -- positioning us very well at a time when we expect demand for new vessels to accelerate. Modern vessels, like the ones under the acquisition are larger and more economical, incorporating significant changes in propulsion technology and LNG tank construction. At the same time, as emission regulations tighten with EEXI, CII and other regulatory initiatives, and charters are placing an increased focus on ESG and specifically carbon dioxide emission equivalents; steam and TFDE vessels will become even less competitive going forward with 2 stroke vessels commanding a significant premium, both in terms of charter rates and utilization.The older, smaller steam turbine fleet is expected to be gradually phased out either through scrapping or repurposing installed and reclassification projects. We should point out that the new vessels are equipped with the mega propulsion arrangement, which allows for a low gas supply pressure and is better suited for use of fuel oil gas as a fuel, while at the same time, having lower capital expenditure, operational expenditure and NOx emissions [ non cate ] generation engines.The key driver behind the popularity of the new arrangement is the exhaust recycling system, which improves methane slip by up to 50% as Jerry mentioned previously, when combined with [indiscernible] generated. We discussed more on the benefits of the new vessels in the following slide, looking a bit more into the unit based cost calculations and the relevant differential between the different type of vessels. As we mentioned above, the key drivers for the differential are more efficient propulsion with savings up to 100 tons per day of fuel, the larger size of vessel, 174,000 cubic meters versus 145,000 or 160,000 cubic meters. The improved containment system resulting into lower boil-off; 0.03 versus 0.15 daily of operation of cargo. The lower long-term maintenance costs due to simpler propulsion arrangement. And from 2024, the tightening of emissions regulations with the monetization of carbon dioxide and methane.On the first graph on the right, we have calculated equivalent daily differential for a U.S. Japan round trip voyage between the 2 stroke vessel and a steam ship, or a TFDE. The main parameter is the commodity price. And as we can see in a $10 per MMBTU environment, a daily difference to a TFDE exceeds $30,000 per day, while to a steam ship is more than double to that exceeding $70,000 per day. Worth noting that today's LNG JKM price is around $17 per ton -- $70 per MMBTU.On the next graph, we have calculated the emission profile for each type of ship with the 2-stroke vessels having less than half of the emissions, reducing significantly the APS costs for the charter. For [indiscernible] post 2026, 100% of the emissions will need to be accounted for with emission allowances. A steamship will have to incur an additional cost versus our vessels of around $17,000 per day, assuming an $80 per ton of CO2. Based on the unit rate cost and the emission differential, we expect that new vessels will be in high demand for at least the next decade as fleet renewal processes, while at the same time, they will be able to command a significant premium corresponding to the efficiency gain the charter will record when utilizing them.This is already apparent today as we have a clear 3 tiered market, but with a gradual increase in pressure on all their vessels from EEXI and importantly from ETS, we expect to see even larger premium to be captured by 2 stroke vessels like ours.The next slide provides us with a snapshot of the market outlook. The main 2 drivers for a held LNG freight market and the shipping capacity required to transfer the new LNG that will come online and the need for fleet renewal. With a conservative assumption that only vessels above 30 years will head to scrap yard. The shipping balance for 2026 is in deficit by 7 vessels. While for 2027, this moves up to 57 in additional requirement. While we expect that part of this demand will be covered by new orders, the current shipyard capacity in both Korea and China cannot support the required growth, leaving the market short of vessels and adding significant value to our 2026 and 2027 open position. Overall, we will aim to be opportunistic in our approach as to when we will fix these vessels depending on what we see in terms of market dynamics.While in the past we have fixed vessels only a few months after contracted them from the shipyard, the majority of the vessels have been fixed closer to delivery in order to capitalize on the scarcity value. In addition, in our chartering strategy, we will make sure that we keep target expirations in order to maintain exposure to the market and reduce market cycle risk.This is all for me. I will now hand the floor over to Jerry. And be happy to answer your questions later.
Thank you, Spyros. Now turning to Slide #18 and the pro forma impact of the 11 fleet acquisition, it is clear that this is a transformative transaction across all metrics. Importantly, the LNG fleet contracted revenues for the partnership increased by 127% to $2.5 billion, providing strong cash flow visibility and secured income going forward. Taking into account also our container fleet, total pro forma contracted revenues would amount to $3.1 billion. Turning now to pro forma EBITDA. Assuming for the 11 LNG carriers full year employment under their firm charters and $100,000 per day for the 6 [indiscernible] vessels in line with the current period market. The estimated annual pro forma EBITDA would increase by 153% to $614 million when combined with the last 4 quarters' EBITDA of the existing fleet. In the same manner, taking the last 4 quarters' operating surplus of [ BRC ] CPLP and adding the incremental EBITDA from the 11 LNG carriers on a full-year basis, less debt amortization and interest cost generates a 206% increase in free cash flow generation of the partnership. And while we expect to have divested from a number of container vessels by the time our full LNG fleet delivers, these pro forma numbers give you a sense of magnitude with regard to the impact of the 11 LNG carrier acquisition on our future cash flow generating capacity. Please also refer to the presentation appendix on Slide #26, for the assumptions behind these numbers.Finally, our LNG fleet age is expected to decrease to 3.2 years with assets that have a 35-year useful life. Overall, we believe that this transaction builds further on our existing focus on long-term cash flow visibility but also provides attractive exposure to a strengthening LNG market with best-in-class modern vessels.Moving to the next slide. As we have discussed in previous calls, CPLP has been trading over the last few quarters at a large discount to NAV. Despite value-creating transactions such as the Diamond S spinoff and the very timely entry into the LNG market funded with no additional equity capital, this picture has not changed materially. We believe that moving away from the diversified fleet model and transforming the fleet into one of the largest, if not the largest pure-play LNG and energy transition gas company in U.S. public markets. And by converting the partnership into a corporation with customary corporate governance and a capital allocation policy, we should be able over time to trade in line with our peers, which could translate to substantial upside to our current unit price levels.This can be seen more clearly on the next slide, where we described the pro forma NAV for the acquisition on a per unit base after the equity offering, assuming an issue price of $14 in the quarter. This is based on recent charter-attached third-party appraisals that we received for our existing fleet as well as debt, cash and working capital as of the end of the third quarter of 2023. Adjusted for the charter attach value of the 11 LNG carriers fleet in line with third-party appraisals on a fully delivered basis and the estimated debt and cash adjustments required for their acquisitions. At the current unit price levels, CPLP is trading at 45% of its pro forma NAV compared to 100% of its closest peer Flex LNG. As we execute against our newly set out business model over the next few quarters, we believe that we should be able to increasingly close this gap, benefiting all our unitholders.Turning to the next slide. The partnership has, among others, committed to divest from its remaining container vessels, with chartered attached latest fleet appraisal is close to $900 million, which translates to an estimated net asset value north of $400 million. While we see the container charter market increasingly under pressure, which has and should also further affect asset values going forward, a large part of our container fleet valuation is protected as all of our container vessels have medium- to long-term charters in place with their value being underpinned by the cash flows of these charters. Hence, we will opportunistically evaluate the potential sale of its assets against its cash flow and our expectations with regard to residual value compared also to other opportunities in the LNG and wider gas markets.Finally, as we saw earlier, CPLP will have a significant cash flow generation potential after this transaction is completed. Despite the materially higher unit count after the rights issue is completed, the common unit distribution guidance of $0.15 per quarter remains unchanged. As the company, over the next few months, converge into a corporation, we intend to also communicate a new capital allocation strategy. Overall, and subject to the final decision of the Board, charter markets, financing and refinancing opportunities as well as the timing of the container sales and availability of other growth opportunities the expectation is to move to a floating distribution or dividend policy going forward, which is expected to be defined as a percentage of the income and cash flow generation of the company. This is to be balanced with allocating capital to growth opportunities in the LNG and energy transition markets as well as repaying debt.Overall, I should stress that I'm personally very pleased to announce today this transformative transaction, and I hope that our existing unitholders will take advantage of the rights issue to participate in this journey of taking the partnership to its next chapter with the aim of creating long-term shareholder value. I'm confident that our exceptional LNG fleet, our high-quality customer base, our contracted cash flows and are uniquely positioned LNG and energy transition shipping opportunities will make Capital New Energy Carriers a bellwether in the industry.And with that, I'm happy to answer any questions you may have. Thank you.
[Operator Instructions] Our first question comes from the line of Ben Nolan with Stifel.
Jerry, first of all, congratulations. I know this is -- you guys have been trying to do something transformative for a long time. This obviously is that. So I have a couple of questions. First of all, I'm curious on how you came to the valuation of the assets. And I ask because -- and I appreciate that there were third-party valuations. But it seems like relative to at least some of the market levels that we've seen for new builds, et cetera, it's a little elevated above that. Curious if you could just talk to that a little bit.
Thank you, Ben. The prices were -- and the valuation were, of course, negotiated on behalf of the partnership by the Compliance Committee, which comprises only Independent Directors and were advised by Evercore and Fried, Frank. The discussions and negotiations around the acquisition price were based on various metrics, but that includes third-party charter attach appraisals. And of course, cash flow multiples, cash flow valuation and other considerations and parameters around the transaction. But I think taking into account the contracted cash flows of the 5 vessels, the fact that 7 out of the 11 vessels are delivered ex yard. So CMPC is taking the carry cost of paying pre-delivery installments and whatnot. I think you'll find that the valuation is quite fair. I think the best indication of that is that the EBITDA multiple is around 8.4x. And that takes into account the locked-in charters and the $100,000 market for the remaining 6 ships. Even if you think it's 95 or 105, of course, this does not change materially, which I think as a multiple of cash flows, this is quite attractive, and we haven't seen many transactions around these levels. So I think you have today to get -- first of all, take into account that these are charter attached valuations. Many of the charters that are in place are highly lucrative. We cannot disclose the exact rates, but I think if you look at the revenues that we list on the relevant slide, you can understand that these are quite lucrative charters. You'll also see that 2 of them are bareboats, right? So they don't have OpEx. So looking at the cash flow, the fact that this -- that 7 out of the 11 vessels are being -- are delivered ex yard, I think that should make a big difference. Today, if you go to a shipyard, they will quote you for a second half 2027 vessel, $260 million with probably 20% upfront and then 10%, probably after 6 or 12 months. If you -- and then if you continue to look at this predelivery installments cost plus the supervision cost, a delivered cost vessel in 2027, '28 with a -- in the current interest rate environment is probably well north or close to $300 million.
As it relates to the cash flow side, I think $100,000, as you said, is certainly reasonable. How are you thinking about actually the timing of locking those in both for the new builds and then there's the one that has a little bit of a shorter contract. When do you anticipate being able to, again, have cash flow visibility or certainty associated with those charters?
Spyros, would you like to take this one?
Sure. Yes. Hi, Ben. Well, I think currently, we have discussion with charters regarding our vessels on a regular basis. I mean we see there are many -- there are a few tenders out there, which we participate. But I think as we mentioned earlier in the slides, I think the important part of our strategy so far has been to capitalize on the asset, let's say, of supply of vessels. And I think that's what we aim to do, to do this. We think that these vessels are higher desirable vessels and the delivered days line up for a very favorable LNG market aligned with the new projects out there. And as we said previously, I think there are 2 prospective charters. The one is the new projects and the cost and the offtake that we need to be coupled with new vessels. But we are also focusing on big replacement projects, where effectively the big charters out there who have a fleet of steam turbine vessels. And with the new EPS regulation coming into play, I think there will be a huge drive for replacing those vessels going forward.
And then lastly for me, just as it relates to financing and maybe broadly speaking, assuming the debt that you lay out here, it would seem as though the company at this point, soon to be no longer a partnership with the company, to me, it looks like it's relatively highly levered. Obviously, to the extent that there's a healthy component of equity in the container shipping business and that can be monetized to delever the balance sheet, then it gets there. But how are you thinking about leverage? Or how are you thinking maybe about the timing of the sale of the container shipping fleet in order to reduce some of that debt?
So in terms of financing, we are at various stages of commitment especially for the vessels that deliver next year. And overall, at fairly attractive terms, I mean you should expect somewhere between 70% to 75% of the acquisition price to be financed with a margin well below 200 basis points, probably closer to 190. Some of it might have some fixed debt component as we are looking at certain financing arrangements like CoCos. But I think we have a pretty good idea as to how we will finance these vessels. Most of them have either very advanced term sheets or commitments. And overall, I think as we have shown in the past, we have a long track record of using diversified sources of financing over the years. I mean, from European commercial debt, Chinese and Japanese [ shores ] the CoCos, Asia Pacific Bank. So I think we will make sure that we will take advantage of these long-tenure charters to push down cost of debt as much as possible. And there is also the attractive component for the financing, which is the $220 million unsecured credit facility, which is effectively, if you want an insurance provided by Capital Maritime to make sure that even if the container sales do not happen overnight, there is always liquidity to execute. But coming back to your point with regard to leverage, there is -- we have 9 unlevered container ships sitting on our balance sheet, and we are going to look at the market to start divesting from these assets. I think we're going to be opportunistic. We have a very good track record in the S&P market overall, and one does not want to rush this. But the fact that we also have mostly medium- to long-term charters on these container ships means that, that value is partly locked in. So I think it will be -- we will opportunistically approach the market. There is no hurry. I think hurried exits in shipping typically do not bode well. And we will compare what we can get in the S&P market compared to that cash flow. And of course, other opportunities or the opportunity cost for that cash in other segments, and we will take those decisions. But we have, I think, both in terms of LTV today -- our LTV stands just short of -- net LTV just short of 50%. And we have quite a bit of room as not only our container ships are underlevered, but also a lot of the original [ lending ] carriers have quite a bit of low levels of debt.
Our next question comes from the line of Omar Nokta with Jefferies.
Not much really for me. I think it was pretty much -- you spelled it out pretty clearly, I think, in the release and the presentation and just now in the Q&A with Ben. Maybe just a couple of follow-ups. Maybe perhaps on the sale of the container ships, I did want to ask, you said you'll take your time. There's no rush, which I agree with we've seen in the past, rushed deals don't typically work out or perhaps you'd put money on the table. When you think about the opportunity to sell the containers, how can you envision that as in, did you see -- could this be sort of like a -- could it be an M&A style transaction? Is there an interest do you think, on the part of, say, other container ship owners looking to acquire this type of fleet that comes with contracted cash flow? Could you see an M&A deal evolving? Or is it more you think just a sort of a drip feed kind of purchase market style series of sales?
I think we will definitely be open to all kinds of transactions. It could be vessel by vessel. And as we know very well to do or it could be a bigger transactions involving not just cash. We will definitely be open, but we will, of course, look at every transaction in its merits. Overall, what you see is that both liner companies as well as container ship owning companies have done obviously very well over the last couple of years. And as such, there is additional liquidity. Our assets are very attractive assets. I mean, our 15,000 TEU containers today, if you wanted to build them, probably the value could be closer to $150 million, $160 million. So there is the replacement cost of really latest-generation ships with 10-year charters to very good names. Our 5,000 wide beam ships are very much in demand. Our 10,000 TEU ships, which again have long-term charters. We have recently modified their bow and installed scrubbers and they have good cash flow. So there is quite -- there's quite -- a lot of quite attractive assets, and we think they are out a number of different players with different motives that might want to invest in those type of assets. But to your question, absolutely open as to how we will do it and when we will do it.
And then maybe just a follow-up on the LNG contract market and Spyros went over plans on being able to fix that. And obviously, they are good ships. But I just wanted to ask kind of in terms of liquidity in the term market as it is now, then you still have plenty of time until the delivery of these ships. But just kind of if you can give us a sense of what does the liquidity look like right now in the term charter market for LNG vessels, especially new buildings, it does sound like perhaps a year ago, there was a good amount of activity. It seems perhaps to have slowed, but just wanted to get your sense on what does the liquidity look like right now in the term market.
Spyros, do you want to take that?
Yes. So I think last year, we saw liquidity on the back of a number of spec open vessels that were hitting the market at the same time. Now I think the number of those open vessels, it's going down. And states, we are probably taking '26, '27. I think up to now, we're still competing against project ships, meaning vessels that we have placed in order specifically for the -- in the project that will look at shipping. I think we are, going forward, we expect to see increased liquidity. As I said, the main driver for that will probably be replacement -- full replacement projects. A lot of charters, especially in the Far East, which have the fleet is [indiscernible] from older generation ships. And I think these are probably the guys that would create a lot of demand for new vessels. The liquidity in the market in terms of supply, as we mentioned, there are not a lot of ships that are there to be chartered. I think there will be -- and we will probably have a spillover in the [ DSPs ], so affecting the 2 stroke markets taking into, let's say, pushing a bit the DSP market as well upward.
Thank you and congrats on the transaction.
Our next question comes from the line of Liam Burke with B. Riley Securities.
Jerry, how much do you -- do you anticipate any significant hurdles on converting from an MLP to a traditional corporate structure.
Not really. I think it's only a question of Capital Maritime, the GP and the Special Committee of the Board now sitting down to negotiate the terms and the form that the corporate governance will take going forward, both sides have committed to do this within 6 months. And I -- and personally, I think this is going to be an important step in this process as we will leave the MLP mantle behind us, if you want.
Does it affect any of your debt agreements when you make that conversion from an MLP to a corporate?
Well, we'll examine all this in more detail over the coming months, we do not expect to have any triggers, but of course, this will be part of the analysis, going forward.
[Operator Instructions] Mr. Kalogiratos, I don't see any other questions at this time. I'll turn the floor back to you for final comments.
Thank you all for joining us today on this slightly longer call than usual. We are always available. If there are additional questions, after this call, please don't hesitate to reach out. Thank you.
Thank you. This concludes today's conference call. You may disconnect your lines at this time. Thank you for your participation.