Polys Hajioannou - Chairman and Chief Executive Officer Loukas Barmparis - President, Secretary and Director Konstantinos Adamopoulos - Chief Financial Officer and Director Ioannis Foteinos - Chief Operating Officer and Director.

John Chappell - from Evercore ISI Chris Weatherby - Citi Ben Nolan - Morgan Stanley.

Thanks for standing by, Ladies and gentlemen. And welcome to the Safe Bulkers' Conference Call to discuss the First Quarter 2016 Financial Results. Today we have with us from Safe Bulkers, Chairman and Chief Executive Officer, Polys Hajioannou; President, Dr.

Loukas Barmparis and Chief Financial Officer, Konstantinos Adamopoulos and Chief Operating Officer, Ioannis Foteinos. 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].

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 be 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 drybulk vessels, competitive factors in the market in which the Company operates, risks associated, limited to changes and 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 in 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 first quarter of 2016. We've announced yesterday that we have procured the notice of New York Stock Exchange in relation to listing required. This is very important for us.

As for the long-term strategy which was developed and presented in past period targeting to create value for all our shareholders in the long run and for the next shipping cycle. This historically a pure shipping company, we currently experience of shipping cyclicality which demonstrated through our proactive moves.

The market is historically low levels in February and still remains at low levels today as shown in Slide 3. Assets have lost a large part of fair values as shown in Slide 4. This has created big problems in financial covenance and financial out flows in this negative environment.

We are not poising for this year as market in the second quarter remains low. However, there is certain good news for the medium term In terms of order book in Slide 5, the top figure shows estimation as of beginning of February for the deliveries and the scrapping for Cape and Panamax.

The bottom figures show how the situation was developed during the first five months of this year by end of May. Lower number of deliveries was confirmed, scrapping exceeded expectations and we observe for the first time in the last year a net decrease of the fleet of Panamax where we mostly operate.

Many years have problems and may be second year yard will not survive and together with them the order book.

The cancellations especially for Panamax, the delayed deliveries, the lack of any substantial order book after 2017 and the limited liquidity as companies are loss making and banks provide restricted finance while some of them have withdrawn from ship financing is determining us outcome a net decrease of the drybulk fleet for the following three years.

The question for the charter market and the equilibrium of supply and demand will be answered by the demand side. In Slide 6, we show the projection for iron ore and coal with one comment. Any spike in demand may trigger a positive response by the charter market.

Concluding I would like to say that our management is cautious about charter market performance for 2016 and most part of 2017. However, we trust the cyclicality of shipping and expect recovery the following years. The question is who will survive. Our management has worked extensively with all components of cash out flows.

Financing out flows and investment out flows with full cooperation of our banks and now shipyard. But the winner we believe will be the company which will control the expenses. In Slide 7, we show the debt of OpEx reduction initiatives started a year ago.

I do not know many companies have lower OpEx than TCE in credit market conditions are shown in slide 8. I have not referred to any numbers in this presentation but I will mention only three.

In the last part of the cycle, in the lowest part of the cycle, in the lowest market over 30 years our company had a Time Charter Equivalent rate which is net revenues less voyage expense of $6,355 per day while we have reduced our daily operating expenses to $3,653 which together with daily general and administrative expenses to run the company as public and the management fees either get to $4,854.

Concluding this presentation with Slide 9, we saw our liquidity position and get capital expense requirement noting that there are no balloon payment until and exclusive 2020 for share reaching out debt that in the liquidity we do not include revenue from operations.

Our press release presenting detail our financial and operational results which you have read. But instead of repeating them we would like to take your questions. Thank you very much. .

[Operator Instructions] Your first question comes from John Chappell from Evercore ISI. Please go ahead. .

Thank you. Good afternoon, guys. Loukas, I appreciate the brevity of the presentation. I also appreciate everything you have done with your credit facilities and be able to push back the balloon payments on those. Just a couple questions on that.

First of all, were there any fees associated or significant down payments that required for you to change the amortization profile of your facilities?.

Look, we have not disclosed our actions because we are in this situation where we develop the whole strategy. It's -- we consider it's about banks a different case and we are in close cooperation with them. So we have agreed right now with two banks.

And we will continue to conclude all the remaining outstanding requirements with the others in the next let say -- with the next period. .

Okay. And in some of the press release you've noted that some of the near term covenance have been waived those associated with loan to value.

Are there any other covenance that are at risk right now maybe some as far as like debt to EBITDA or EBITDA and interest coverage, minimum liquidity, any covenance at risk today?.

Look, that's why I would like to clarify one point which I think we have not clarified fully, our changes of financial comp is proactive.

Whatever we have done with our banks is we always in compliance with the covenance and we do projections for the future and what we really seek is to be strong not today because as you have seen today the company is quite strong if we repeat it is the situation where will be trusted scenario into 2018.

And this is very important for us to go to the next shipping cycle strong. Whatever covenance now we have we present them in the global level and covenance you have seen, we don't have any other covenance on those presented..

And then also there is one other piece of debt the perpetual preferred are obviously little bit more expensive.

How are you thinking about those that something that just going to play out for now as you address the credit facilities or is that something you like to be proactive with as well?.

Look, the preferred has specific terms and what we are doing is we are complying with the terms of preferred. We are not considering -- I mean we cannot -- we haven't taking end decision about the preferred. .

Okay. And then the last things then I turn it over just OpEx reductions pretty impressive. You noted in the press release it was every basically component of that except for crew wages.

Just curious how sustainable are those reductions? Is this a new run rate that's really feasible going forward or there some kind of anomalous event or that you are able to bring it down to a lower level for a short period of time?.

[Foreign Language] Hello, John. This is Polys speaking. So because I am involved deeply in this scenario like Loukas and Konstantinos and the whole team. What we are doing it would be meaningless to do it for one quarter and then start increasing it then end up where we were last year.

While taking deep actions to ensure that this low OpEx is sustainable for a long period of time. And we are a company that one of the few companies that we are maintaining a strict policy of paying invoices to our suppliers on time. And on time means within 30 days of invoicing.

The industry as a general tend sometimes like this to expand their ability to extend credit from suppliers from people who cooperate with the company service providers, all these people usually call initially to 90 days then 120, 180 up to year.

So we decided that we will be paying everything on now 30 days, we have no trade debt with any counterparty, and working capital is being put up and paid all the invoices on time.

And like this -- at time like this you can utilize this trend for paying invoices on time to demand and to insist and to get discount of 35%-40% from suppliers because they have only 10% or 15% of their clients paying on time.

So this is a policy of a company and of course you know with the people we cooperate they are long-term operation, we are using the synergy of large fleet who are pulling, making pulling agreements with other ship owners we are running a company in pulling agreements with another 11 companies and having 200 ships under a same umbrella.

A lot of things, a lot of things are being done in order to achieve these results. We call underwriters, would be at night clubs, it is an ongoing process and we will keep trying to improve this number. I am not satisfied that this the best number we can achieve.

There is little bit more room to go and I think this will be sustainable number for a next period of time. .

Your next question comes from Chris Weatherby from Citi.

Hey, great. Thanks. Good afternoon, guys. Just a taking upon where you just left off Polys, I mean that's really helpful color and the sustainability is important.

You mentioned maybe a little bit further to go, anything specific you want to highlight in terms of where you might see some opportunities and then maybe what we can think that might – looks like in terms of daily OpEx number?.

Can you repeat that? I didn't understand the question. .

Sure. So in terms of the cost reductions strategy that you employed, you just mentioned that there might be another lag to go to get the rates down further. I was just wondering if you could highlight anything specific that you could do to get those costs down and maybe how much they could come down further. .

Yes. Look, I mean there are certain elements of the cost and they are inflexible like the crew wages. Okay and this we cannot influence too much. But all the other cost really press, and I think it's a very big asset what I just said about the timing of the company's payment.

Also the banks are closely monitoring the timing of payment of invoices by their clients because they don't want to -- they are not feeling comfortable when they have a client who is delaying payments to suppliers and increasing freight debt to their parts and people like their choice of double benefit.

You see your banks are more on helpful if you are paying on time and also the suppliers are more than happy to reduce the cost more and more. I don't think that we could achieve miracles and go another 15% or 20% lower than this level because already very, very low.

But I believe there are synergies and policies of the company can undertake because we have a fleet that is mostly build in Japan by high quality yards and we have most of our ships are sister ships so between sister ship you can make set and synergies on spare parts and another items that may require for the proper up keeping of those vessels.

So we are utilizing all the techniques the ship owners has and techniques that usually you forget about them and banks when profits are being made.

But at times like this that we have a longer or prolonged I would say low freight market which would go another year and year and half, two years, nobody knows how long we need further for the fleet to clear out and when demand will pick up and all these things, so the company will have to keep improving and even we don't manage to improve by another 15%, at least by trying to improve and achieve 10% or 15% lower running expenses we will ensure that we will not go higher than the number we achieve in the first quarter of this year.

So this is our effort, and we run the fleet out of two offices. Out of two offices now in Cyprus and Greece. And we are trying between the offices to compare numbers and to try and improve even further our numbers.

So this thing that we spend a lot of time every week and so we will keep doing so because it is critical I think for the long-term service of our company. .

That's very helpful. .

If I may add something, another view is if you consider I mean I would like to repeat this position, if you consider I think the worse quarter of the drybulk market in over 50 years. We manage to have a Time Charter Equivalent rate higher than the operating expenses which means that we don't bear cost for operations.

I mean operation of our vessel is making money to us, adding to our liquidity, this is extremely important.

And the second point is that if for example you consider that we have operating expenses of 3.7 and I don't know what will be in the market the average maybe 7, imagine in each year this company produces I mean for 15,000 days operating days above that we have, if you say $2,000 it is about $50 million of savings which in afterwards contribute to the wealth of all shareholders.

This is very important strategy for us and because we are a shipping company we know how to deal with such situations. We have done all this work very proactively and on time. .

Okay. Yes, that's very helpful. I appreciate the color.

I joined the call little late so I apologize if you cover this in terms of the remaining CapEx for the new build that are coming online, how do you think about the opportunities to renegotiate some of those agreement even further? Do you want to take delivery of those ships in the out years, do you still think that, that makes sense, if you wait and see depending on the market and then maybe you can make an adjustment? How should we think about that potential -- that the potential of new build pipeline beyond 2016?.

Yes. Look, once we will take delivery in the second half because it is ready and we will take at the certain point in the second half of the year.

So the four remaining ships which are in 2017 and 2018, there is an ongoing discussion with yards, there is an ongoing discussion with the yards, yards may be they cannot do exactly what we want them to do, to delay them further to [29] in or whatever but maybe they could get another thoughts, all these things, I mean we never act unilaterally, we never push things beyond where we can push them but we have to remember this, we are related with last seven years, they want us for as clients after five or six or seven years so whenever we would be in a position to order new ships again.

And of course they are interested to help the situation in one way or another. Now what form this operation will take place and how will be developed it will be unveiled as we -- as the talk progress for the last remaining four ships in the matter of the next six months.

So even me I don't know which way but I am -- especially from Japan is from -- I am receiving very, very good operation from long friendships I have in that country. .

Okay. Okay. So I guess in the next six months or so we will have more clarity on the new building pipeline beyond 2016 is what you are saying. .

Yes. I feel in the next six months we will know definitely what is going to happen with the last four ships and how they will coming to play and in what form and who will help and how will help. .

[Operator Instructions] Your next question comes from Fotis Giannakoulis from Morgan Stanley. Please go ahead..

Hi, guys. This is actually Ben stepping in for Fotis. I just had a couple of questions. So we've seen bulk rate improve somewhat into Q2, however, they still remain, still likely to remain under cash for given levels for the foreseeable future.

Just how do you expect managing liquidity moving forward and do you think you will get more aggressive through vessel sales or perhaps in equity infusion to fill the gap here?.

Look, we have to see how the market develops; the company has $120 million of liquidity. We want to have all our actions we have taken at the moment to ensure that we have sufficient liquidity after two years. Right now we have liquidity, we have managed 2016, and we have managed 2017.

In 2018, there will be liquidity but we don't want the company to stay with a very low liquidity because thereafter you will not be able to achieve the OpEx we are achieving and to do deals and agreements in the form that we are doing now with our service providers with our banks and with other people. So there are constant talks with all the people.

We are one of the companies that we don't impose to our banks our will and that we say that's it whether you like it or not. We sit down with all of them, we discuss, we find something that both sides get are happy with and then see the longer prospect. When they see a fleet that is average six years old is mostly build in Japan i.e.

higher value and the higher possibility at any given state to sell this ship because you have seen this in the second hand market of the Japanese big ships are the ones that are getting sold. And also the fact that they see reduced expenses by more than $1,000 improvement from last year.

I think the banks they have open ears and they want to cooperate with this management team. So our sales we are confident that our liquidity will be strong in two years time with the concentrate therefore from all involved parties.

Management, banks, shipyards, anyone who is involved with this company will do his part or the company to be strong in 2018. And this is our job to ensure. We've demonstrated the hands on management we don't leave things at whatever the market will bring and just play for a better market. And we will be doing the things that we need to do. .

Sure. I appreciate the color here. And then just one more question on the broader market.

So you mentioned a market rebalancing coming from the demand side of the equation but would you mind just touching upon the supply side of been your outlook for continued scrapping levels and new build cancellation?.

Yes. The scrap, the order book is $60 million. On paper it's they write $100 million but it is $60 million. We know at times like today only 50% or 60% of the order book is real or is delivered. If it was good market maybe 70% could be delivered. So we will assume we still have another $60 million to enter the fleet.

This year alone we believe with the freight market we have in the first half which is -- it was $3,000 a day in the first quarter and its $5000 per day in the second quarter. This number will simply ensure that around $40 million or $50 million will go to the scrap yard this year alone. So then we will have another $20 million to deal with it.

And on top of it because banks are shrinking, the number of banks are shrinking, the liquidity of the owner is shrinking because there was lot of equity lost and disappear and everybody have time to repair balance sheet and to fix their wounds. There is not going to be any order in the drybulk vessels in 2017 and 2018.

So if we have this and we assume that the market starts recovering meaningfully in 2018, we will have another two years in front of us without any new buildings being delivered. You don't need to demand to do a 7% or 5% when the fleet and the demand balance.

You need just a tall 3% in any given year time of the year for the market to go from $6,000 to $12,000 a day. Exactly the same story happens in the bankers. The banker improves when there was a little bit increase of demand. But after they have four years of no ordering and four years of no speculative ordering in the market.

So this would happen in the drybulk market and I think that the supply is getting very favorable now for ship owners. And the people say provided ship owners they don't know their entire guarantee you that this provide, this is a matter of fact is a reality because nobody can order today.

Nobody can order it, it is only matter of price, and there is no bunch to finance. You are building there is no way will be left to going to new ships. .

There are no further questions at this time. Please continue. .

Are there any more questions?.

There are no further questions. .

Okay. So thank you very much for being with us this morning. And attending our conference call and we are looking forward to discuss again with you the financial results of the next quarter. Thank you. .

Thank you. .

Thank you. That does conclude our conference for today. Thanks for participating. You may now disconnect..