Star Bulk Carriers (SBLK)

Q3 2012 Conference Call

November 30, 2012, 11:00 am ET

Executives

Spyros Capralos – President, CEO

Simos Spyrou - CFO

Analysts

Natasha Boyden – Global Hunter

Presentation

Operator

Thank you for standing by, ladies and gentlemen, and welcome to the Star Bulk conference call on the third quarter 2012 financial results. We have with us Mr. Spyros Capralos, President and Chief Executive Officer, and Mr. Simos Spyrou, Chief Financial Officer of the company.

At this time, all participants are in a listen-only mode. There will be a presentation followed by a question-and-answer session. (Operator Instructions) I must advise you that this conference is being recorded today, Friday, November 30, 2012. We now pass the floor to one of your speakers today, Mr. Spyros Capralos. Please go ahead, sir.

Spyros Capralos

Thank you, Operator. I'm Spyros Capralos, President and Chief Executive Officer of Star Bulk Carriers and I would like to welcome you all to the Star Bulk Carriers third quarter and nine months 2012 financial results conference call. Along with me today to discuss our financial results is our CFO, Mr. Simos Spyrou.

Before we begin, I kindly ask you to take a moment to read the Safe Harbor statement on slide number 2 of our presentation. While you read it, I will take the opportunity to talk about some important highlights of this quarter's results.

First of all, I would like to underline that the $303.2 million of impairment loss you will see on our third quarter earnings results press release is a non-cash item. Our standard procedure whenever the current fair market value of an asset, in our case a vessel, is materially lower than its book value, it needs to be tested for impairments according to US GAAP.

Due to depressed market expectations for future REIDs and the low probability of a recurrence of the extreme highs of 2007 and 2008, the testing methodology we used determined that the book values of the total fleet of our super max vessels plus our oldest cape size vessel were not recoverable as of September 30, 2012 and, thus, a non-cash impairment loss of $303 million was recognized.

We believe that our current book values following the impairment provide a better estimation of the current market values of our assets and, thus, our financial statements are more accurate and consistent with current market conditions.

Our view is that the enhanced accuracy of our balance sheet is to the benefit of our shareholders as it reflects in a more appropriate and transparent manner Star Bulk's asset and equity value.

While this is a non-cash item, in reality, it is fully indicative of the deterioration of asset values over the last several quarters, in particular, within 2012. In our view, it has already been priced in by the market, something that is evident by the fact that so far and before the impairment our common stock was trading at a huge discount or book value per share while our current market cap is still lower than our current book value following the impairment loss we incurred.

This impairment loss will not affect our loan covenants as all financial covenants in the loan facilities are market adjusted and use the current market valuations rather than the book values of the vessels.

Indeed, as a result of the weak freight environment and the prevailing low asset values as of September 30, 2012, we are not in compliance with some of our covenants in our loan agreements.

We had proactively started discussing actively with our lenders before that date in order to address these issues promptly in a mutually beneficial way and our discussions are currently in an advanced stage.

While a mutually agreeable solution is being sought, our board of directors had decided to suspend the payment of dividend on the company's common stock. From our side, we believe that the preservation of the cash intended for the dividend payout will provide additional flexibility to the company during its discussions with the lenders.

Let us now turn to Slide number 3 of the presentation for a preview of our third quarter 2012 financial highlights in comparison to last year's.

In the three months ended September 30, 2012, gross revenues amounted to $18.4 million representing a 30% reduction versus the same period of 2011. Our revenues were mainly affected by the low freight rate environment and the off hire of the (Star Polaris).

For the third quarter, just the off hire of the (Star Polaris) has resulted in about $1.5 million of reduced revenues. We will try to recuperate the loss of hire from the claim to the shipyard, which constructed the vessel.

General and administrative expenses were reduced by 33% to $2 million in the third quarter of 2012 versus $3 million in the third quarter of 2011. Overall, during the third quarter of 2012, the company had a net loss of $308.7 million mainly due to the non-cash impairment loss of $303.2 million compared to a net loss of $3 million in the third quarter of 2011.

Excluding non-cash items, our net loss for the third quarter amounted to $3.8 million compared to an adjusted net loss of $1.5 million in the third quarter of 2011.

Adjusted EBITDA for the third quarter 2012 was $7.6 million compared to $11.9 million last year. Our time charter equivalent during this quarter was $15,200 per day compared to $18,817 last year representing mainly the loss of hire of the (Star Polaris) and the low freight rate environment.

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