Loukas Barmparis - President Polys Hajioannou - Chairman & Chief Executive Officer Konstantinos Adamopolous - Chief Financial Officer.

Alex Hahn - Citi Jon Chappell - Evercore Joe Nelson - Credit Suisse Fotis Giannakoulis - Morgan Stanley.

Ladies and gentlemen, thank you for standing by and welcome to the Safe Bulkers Conference Call to discuss the second quarter 2016 financial results. Today we have with us from Safe Bulkers Chairman and Chief Executive Officer Polys Hajioannou, President Dr.

Loukas Barmparis, Chief Financial Officer Konstantinos Adamopoulos, and Chief Operating Officer Iaonnis Foteinos. At this time, all participants are in a listen-only mode. There will be a presentation follow-up by question-and-answer session.

[Operator Instructions] Following this conference call, if you need any further information on the conference call or on the presentation, please contact Capital Link at 212-661-7566. I must advise you that this conference is being recorded today.

Before we begin, please note that this presentation contains forward-looking statements as defined in Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended, concerning future events, the company’s growth strategy and measures to implement such strategy, including expected vessel acquisitions and entering into further time charters.

Words such as expects, intends, plans, believes, anticipates, hopes, estimates, and variations of such words and similar expressions are intended to identify forward-looking statements.

Although the company believes that the expectations reflected in such forward-looking statements are reasonable, no assurance can be given that such expectations will prove to have been correct.

These statements involve known and unknown risks and are based upon a number of assumptions and estimates which are inherently subject to significant uncertainties and contingencies, many of which are beyond the control of the company. Actual results may differ materially from those expressed or implied by such forward-looking statements.

Factors that could cause actual results to differ materially include but are not limited to changes in the demand for dry bulk vessels, competitive factors in the market in which the Company operates, risks associated with operations outside the United States, and other factors listed from time to time in the company’s filings with the Securities and Exchange Commission.

The company expressly disclaims any obligations or undertaking to release publicly any updates or revisions to any forward-looking statements contained herein to reflect any change in the company’s expectations with respect thereto or any change in events, conditions or circumstances on which any statement is based. And I now pass the floor to Dr.

Barmparis. Please go ahead, sir..

Good morning. I’m Loukas Barmparis, President of Safe Bulkers. Welcome to our conference call and webcast to discuss the financial results for the second quarter of 2016. The market reached historically low levels in February and remains at low levels today, as shown in slide three. Assets have lost a large part of their values.

Recently Panamax values have recovered by 17% as shown in slide four. In slide five, the figures show the new deliveries and the scrapping, top for Capes and bottom for Panamaxes. Lower number of deliveries was confirmed.

Scrapping exceeded expectations, and for the first time in the last years we observed a net decrease of the fleet of Panamaxes where we mostly operate.

Although scrapping activity slows down in this type of market in groups, we expect that due to the limited financing and reduced liquidity of shipping companies, delayed deliveries and cancellations together with scrapping will result in extra decrease in the following years.

This decrease of fleet will further strengthen as order book is exhausted and new orders are placed. In slide six, we show the projections for iron ore and coal with one comment. Equilibrium of supply and demand will be answered by the demand side. Any spike in demand may trigger a positive response by the chartering market.

Currently, demand side has shown some strength which includes major commodities such as iron ore and coal. However, additional risks have been recently posed by Brexit and concerns over global trading due to political instability.

Of course shipping is a cyclical industry and increased liquidity and low operating expenses will determine the weakness of the next shipping cycle. We continue operating expenses reduction initiatives started a year ago as shown in slide seven.

We barely used cash from operating activities as our TCE rate, above 7,675 the last quarter, is substantially higher than the operating expenses of $3,814 which include also dry-docking and initial supply costs. And the G&A expenses were $1,115 which include management fees as shown in slide eight.

Our last quarter new initiative was to preserve liquidity by reducing financial outflows in cooperation with our lenders through prepayments and deferrals as shown in slide nine. We have come to agreement with all our lenders to new covenants for 2016 and 2017 and have deferred about $35 million for years after 2019.

Recent loan payments for 2017 are only $2.7 million. The amount of debt refinanced was $471.9 million. That does not include the debt to state institutions or sale and leaseback recorded as debt in our books.

Concluding this presentation in slide 10, we present our liquidity position against capital expense requirements, noting that there are no balloon payments until and inclusive 2020 for servicing our debt and that now liquidity would not include revenue from operations.

Our press release presents the detail of financial and operational results, which you have read but instead of repeating them, we would like to take your questions. Thank you..

[Operator Instructions] Your first question today comes from the line of Chris Wetherbee. Please go ahead. .

Hi guys, this is Alex Hahn in for Chris.

So just to start it off, can you give us a sense of how you’re thinking about the current rate environment and do you see any covers that could potentially bump it up in the near term or maybe in 2017?.

Yes, good morning first of all. The current environment is improved from the first quarter. We had a good improvement the second quarter as demonstrated by our time charter equivalent rate. Of course it’s nowhere near to be back in the past rates, we need another $2,000 improvement of the freight market before we can reach that level.

I think the worst, we have seen the worst in the first quarter of 2016. I don’t think the market will go back to those levels. Of course there’s a lot of volatility and a lot depends on the value of the dollar and commodity prices, especially oil.

Recently we’ve seen the market reaching, the spot market levels of $7,000 a day before bouncing back to $6,000 the last couple of weeks after the drop of the oil price. So it will be, the second half of the year should be better than the first half. But with a lot of volatility between different weeks..

Thank you, that’s helpful. And it seems like you locked in some charters that go through 2018.

Should we see any potential for more contracts like this? And would you consider locking in incremental longer term charters to alleviate some of the risk in rates?.

Yes. Look, the rates have to improve before we lock in charters. When there is a good opportunity to secure this at a level, we are looking in periods of 9 to 12 months. In the last quarter we did 6 such pictures ranging between low 6,000 and 6,750. But we need to see improvement in those rates in order to lock in more ships for one year charters.

I don’t expect that the company will be locking in longer than that simply because the levels are not a problem..

That’s helpful.

And one more, can you give us a bit more color on your vessel deliveries going forward? If you think maybe some of them will get delayed or cancelled or are you looking to just hire more vessels?.

Yes, we have no more deliveries for this year. We have taken the last delivery in the beginning of July and we have three deliveries planned for first half of 2017 and one delivery for first half of 2018.

As we stand of now, there are various talks taking place with the shipyards for possibly delaying a bit further some of those deliveries or possibly to find some other partners to participate in some new buildings. But at the moment we are complete and it's not expected the summer month of August to be able to have much development.

But the company is monitoring its CapEx and the long-term plan is to try and reduce those CapEx as much as possible..

As you have seen, we have worked very closely with all part of our cash outflows. So we started from operating expenses and we achieved good results. The second point is we worked very substantially with all our lenders in very good cooperation I should say, and we did very extensive work.

Also the department managed to improve TCE since last quarter, and so -- I mean we have dealt with the CapEx in the past, the previous year. We may repeat that in the following quarter..

Your next question today comes from the line of Jon Chappell. Please go ahead. .

Thank you. Good afternoon, guys. Loukas, first question, or Polys. I know I ask you guys this all the time, but just wondering with the perpetual preferreds, a little bit of expensive paper, you seem to have some access to liquidity right now. I know it’s good to keep cash on the balance sheet especially given the uncertainty in the market right now.

But any updated thoughts about the potential to pay down those preferreds?.

Look, we know that we have these preferreds, these are the [indiscernible] equity. I think that this is mainly retail, this preferreds are on retail so it’s quite difficult to do something. Although we have various thoughts about these preferreds, but I cannot say something more right now..

Understood. And then also, you’re quite clear in the press release that you’ve been able to refinance 100% of the debt, but excluding debt from state institutions. So I was just wondering a couple of things.

Number one, how much debt is still associated with state institutions? Is there a reason that those can’t or won’t be refinanced?.

We have finalized all the discussions with our lenders. State institution is one and it’s about $50 million, that size, and it’s a little bit slower, so we don’t have to….

The export credit. And of course you know governmental bodies, they are not that flexible on discussions on deferrals. But of course there are good thoughts in place to try and align covenants with those bodies as well..

Okay. And you’re very clear about the repayment schedule now from all of the refinanced.

Out of that $50 million with the state institutions, what’s the amortization schedule for that look like?.

Maybe it’s about 7.5 a year..

7.5 a year. Okay, great. Thanks, Loukas. Thanks, Konstantinos. Thanks, Polys..

Your next question today comes from the line of Gregory Lewis. Please go ahead. .

Thank you and good morning. This is Joe Nelson on for Greg today. Just maybe following up on a previous question, you guys have obviously had some great success in pushing out a lot of your debt maturities.

As we think about it, why do you, and without giving the secret away, why do you think you’ve been so successful where maybe some of your peers have struggled a little bit here doing it?.

Look, the company over the years and being in the shipping market, we have very close relationship with our banks. And we respect that a lot of their money has been provided to the company over the previous years.

But as value has gone up so much in the last three years, we have to consult our banks and we have to communicate with them and exchange ideas of how the company can be supported and can be given the support of the banks without putting the people in the offices of the banks in a difficult situation.

So we sit down, over the last 20 months we have been sitting down, and we have been always paying our installments and always providing the collateral required to meet our covenants.

From time-to-time these covenants have to be adjusted, in the last 12 months, and the banks, when they have a company that complies with the loan agreements and never break the covenants, they are more than willing to adjust those covenants as necessary to weather the storm.

When you have a company that’s hands-on and a major shareholder owns more than 50% of the stock, so it means he has his own money at stake in the company. And first he is putting down the collateral and then he is asking for a favor, of course the banks in this environment, they have to consider seriously this approach.

I’m pleased to say that we are dealing with only 6 commercial banks, we have this big advantage, we have reduced the number of our lenders to just 6 banks. We can reach agreement very quickly with all those banks.

And we managed in the last quarter alone to finalize the whole commercial debt of the company and bring it to an affordable now repayment schedule for the next 5 years. So there is no other secret behind it, it is the good communication that we have with our banks..

We are proactive, you know. We don't wait for the problem to develop. When we see that down the line there might be an issue, we are very open to discuss. So we don't give a surprise to the bank..

Okay. And then maybe just one kind of follow up on as you're thinking about financings.

Do you see any additional opportunities for maybe some more sale and leaseback transactions?.

Sale and leaseback?.

Yeah..

I think the drop of the asset prices make sale and leaseback transactions far less attractive at this point of time because sale and leaseback transactions are usually meaningful when you can draw more liquidity out of those transactions when the price of ships are still high enough.

Today price of ships are very, very low, so I don't think these sale and leaseback transactions gives any other advantage to the Company at this point of time. However we still have one additional sale and leaseback for the new build that will be delivered early in 2017..

Great. Thanks for taking my questions, guys, I'll turn it over..

[Operator Instructions] And your next question comes from Fotis Giannakoulis. Please go ahead..

Yes, hi, guys. And thank you.

I want to ask about the financing of the new buildings and if you can remind us how you financed the Kypros Spirit that you took delivery in July, how much debt did you put on these vessels? And what is your expectation on the debt of the remaining four new buildings they can get?.

Fotis, we did not put any debt on the vessel. It was used as a collateral vessel to secure a loan with one of the existing banks. More than likely it will release one of the other vessels that we have with that bank because now it is more than covered. The whole exercise here is we will try not to add debt on the company.

So, we will try to find metes and ways how we can take delivery of those ships without adding debt on the Company. This is our target. Now you probably mean further delays of deliveries that will mean finding some equity investors or some other thing. It remains to be seen.

We are working a lot of options where, as we said before, apart from our banks, we are highly rated and we enjoy very, very good understanding and cooperation by our shipyards because we've been doing business with them the last 70 years as a Company before we went public.

So I believe that we will find some solutions that we will not need to add debt on the Company for those new buildings. Of course just to clarify, when we say equity investors, we don't mean at the level of common equity. We mean at the level of let's say a particular ship on a joint venture..

So it's a clear decision of the management not to raise any equity at the Company level at this point, is that correct? You will try to exhaust any other solution before you will have to issue any equity?.

We don't want to raise anymore equity or any equity and we don't want to raise more debt either. So we have to find solutions within these two parameters and we are working on that. We are working on that front..

Okay, thank you. And I hate to be repetitive, I have asked the same question the last couple of calls, I want to ask about the charters that you have in place for the Capesize vessels which are well above the current market.

How do you view the performance of your charters and the securities, if you can repeat to us the securities that you have towards this performance?.

Yes, so all our current charters are up to date. All the charters are paying and we have no problem whatsoever in the securities we have from those people, we feel very confident that they will keep their promise..

Polys and Konstantinos, perhaps you can also comment, what is going on with the financing market out there? I mean the market has improved marginally, but still most of the companies, most of your peers are burning a lot of cash.

And I wonder whether the other companies they have the cash to sustain even this improved market? Do you expect it or do you fear that there might be some action from several banks since at some point they will have to come up with new capital since many companies they have negative operating cash flows and they see, the banks their collaterals are aging very rapidly?.

Look, in the second quarter of 2016 we managed to achieve a positive cash flow of $2,750 a day. I mean the time charter equivalent we receive over our running costs and G&A expenses. I think so long as the banks see that the company is generating cash and is not burning cash from operations, they will be supportive.

They will start, if they lose patience, they will start first with the companies that they burn cash and they don't have positive EBITDA. So, definitely there is a shortage of finance out there anyway, for our company this is not a problem because as we told you, we don't want to raise any more debt.

We actually want over time to reduce our debt as per the new schedule we have the payment schedule. But definitely for the market as a whole, less financing is available and maybe this is not necessarily a bad thing for this time. I know people who are doing business on the private side are doing business on a cash basis.

Vessels they have bought in the last 6 months for most of the private owners is on a cash basis..

So my question was not so much for your company, you obviously have much lower operating expenses and you have these three charters that they allow you to have positive operating cash flow. But I understand that most of the companies out there they have much higher costs and they even have much higher interest expense.

So most likely they are burning operating cash flow.

Is there a risk of some risk of some big scale liquidation of fleets that can disrupt the current market either in a positive or a negative way?.

I think the public companies, they will most of them if not all of them, they will manage to find a way around with their banks. I mean one way or the other. The banks I don't think they are, they have so many companies and so many ships that they would have to deal with if they start giving publicity to those endeavors.

You know? It would be a disaster for them. So I think the banks generally will and the public companies will be able to make agreements with their banks and continue to get support irrespective if they create cash from operations or if they are burning cash from operations..

Thank you, Polys. One last question trying to read your crystal ball.

If you would have to guess, at what point do you expect to see rates covering the breakeven over the other shipping company?.

Look, definitely we expect the second half of the year to be better than the first half and that will not be a major success of course because first half was so low. I think things should manage to start improving.

Of course there are certain risk factors and we want to see what is the effect of Brexit in the economies and if this will effect European economy or if it's just the British economy that will be affected. Then we have the American elections and thereafter we will have to wait and see and have clear a picture of what is happening.

We are not, we are monitoring commodity prices, we see oil price improving. On the other hand we see lately, in the last couple of weeks, three weeks, oil prices dropping. So, it's a never changing environment so nobody can say for sure if a meaningful recovery will be in 2017 or 2018.

But the fact we know is that there is no order in the last three years. The order book has been depleted. Most of it will be delivered this year and much less next year and almost nothing in 2018. So there will come a point from the supply side that we will stop hitting the wall.

And at that point you don't need a great increase of demand to push rates to meaningful numbers of $10,000 or $12,000 a day.

So it's a matter of time and I think this is what the management of public companies should concentrate is to have their companies in good shape and in good control and be there in one or two years' time when the supply will finish..

Thank you very much, everyone. Thank you..

We have no further questions. Please continue..

So thank you very much for attending this conference call and we're looking forward to discuss again with you in the next quarter. Thank you..

With thanks to all of our speakers, that does conclude today's conference. Thank you all for participating. You may all now disconnect..