Capital Product Partners LP (CPLP) Q3 2021 Earnings Call Transcript

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Capital Product Partners LP (CPLP -0.18%)
Q3 2021 Earnings Call
Nov 5, 2021, 9:00 a.m. ET

Contents:

• Prepared Remarks
• Questions and Answers
• Call Participants

Prepared Remarks:

Operator

Thank you for standing by and welcome to the Capital Product Partners' Third Quarter 2021 Financial Results Conference Call. We have with us Mr. Jerry Kalogiratos, Chief Executive Officer of the company.

[Operator Instructions] I must advise you this conference is being recorded today, November 5, 2021.

The statements in today's conference call 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 expectation 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 usual 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 statements about the performance of our common units.

I would now like to hand over to your speaker today, Mr. Kalogiratos. Please go ahead.

Jerry Kalogiratos -- Director and Chief Executive Officer

Thank you, Valerie, and thank you all for joining us today. As a reminder, we will be referring to the supporting slides available on our website as we go through today's presentation. We are very excited that during the past few months, we have managed to put together two strategic and highly transformative transactions for the partnership as we have agreed to acquire in total six, Latest Generation LNG Carriers with long-term employment in place, exceeding $1.2 billion in value. The first two LNG carriers joined our fleet in early September, and we expect the remaining four to be delivered within the fourth quarter of 2021. Underpinning this transaction and in particular, the acquisition of three additional LNG carriers to those announced earlier this year was the highly successful issuance of EUR150 million or approximately $173 million. Senior unsecured bond on the Athens exchange with a fixed coupon of 2.65% and a five-year tenure.

On the earnings front, we are pleased to see the continued strong financial performance of the partnership during the third quarter of 2021 compared to the same period last year, as the partnership's net income for the third quarter of 2021 was $11.9 million compared with net income of $7.8 million for the third quarter of 2020. Our Board of Directors has declared a cash distribution of $0.10 per common unit for the third quarter, which will be paid on November 12 to common unitholders of record on November 5. The partnership's operating surplus for the third quarter was $25.8 million or $11.3 million after the quarterly allocation to the capital reserve. Separately since the launching of the unit repurchase plan on February 19 and as of September 30, we repurchased 379,660 common units at an average cost of $11.73 per unit. Finally, the partnership's charter coverage for 2022, including the LNG fleet stands at 93%, while the remaining charter duration corresponds to 5.1 years.

Turning to Slide 3. Revenues for the quarter were $43.1 million compared to $35.5 million during the third quarter of 2020. The increase in revenue was primarily attributable to the net increase in the size of our fleet following the acquisition of two LNG carriers in early September and three Panamax containers in February and the decrease in the net amortization of time charters acquired together with certain of our vessels, partly offset by the sale of one of our container vessels in May. Total expenses for the quarter were $27.8 million compared to $23.8 million in the third quarter of 2020. Voyage expenses for the quarter increased to $3 million compared to $1.9 million in the third quarter of 2020 due to the increase in the number of days during which one of our vessels in our fleet was employed under voyage charters compared to the respective period last year.

Total vessel operating expenses during the third quarter of 2021 amounted to $11.3 million compared to $9.5 million during the third quarter of 2020. The increase was mainly due to the net increase in the size of our fleet. Total expenses for the third quarter of 2021 also included vessel depreciation and amortization of $11 million compared to $10.6 million in the third quarter of 2020. The increase in depreciation and amortization during the third quarter was mainly attributable to the amortization of deferred drydocking costs incurred during the fourth quarter of last year and the net increase in the size of our fleet, partly offset by the classification of the vessel Adonis as vessel held for sale.

G&A for the third quarter amounted to $2.6 million as compared to $1.8 million in third quarter of last year. The increase in general and administrative expenses was mainly attributable to fees and expenses incurred in connection to the acquisition of the three LNG carriers we announced in August 2021. Interest expense and finance costs increased marginally by $0.1 million to $3.6 million for the third quarter of 2021, as the increase in the partnership's total outstanding indebtedness offset the decrease in the LIBOR weighted average interest rate compared to the third quarter of 2020. The partnership recorded net income of $11.9 million for the third quarter compared with a net income of $7.8 million for the third quarter of 2020.

On Slide 4, you can see the details of our operating surplus calculations that determine the distributions to our unit holders 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 $25.8 million in cash from operations for the quarter before accounting for the capital reserve. We allocated $15.5 million to the capital reserve, an increase of $6.2 million compared to the previous quarter due to the increased debt amortization resulting from the acquisition of two LNG carriers in September 2021. After adjusting for the capital reserve, the adjusted operating surplus amounted to $11.3 million.

On Slide 5, you can see the details of our balance sheet. As of the end of the third quarter, the Partners' Capital amounted to $487 million, an increase of $64.8 million compared to $422.1 million as of year-end 2020. The increase reflects net income for the 9 months ended September 30, $15.3 million, representing the fair value of the common units issued as part of the consideration paid for the acquisition of the LNGs Aristos 1 and Aristarchos on September 3, and the amortization associated with the equity incentive plan, partly offset by distributions declared and paid during the period and the repurchase of the partnership's common units. Total debt increased by $271 million to $650.7 million compared to $379.7 million as of year-end 2020. The increase is attributable to the assumption of $304.4 million of total indebtedness in the form of sale and leaseback financing and $10 million in the form of sellers financing in connection with the acquisition of the two LNGs and an additional $36 million of debt in connection with the acquisition of the three Panamax container vessels back in February. The increase was partly offset by the sale of one of our container vessels in May and their respective debt repayment, the total amount of $49.6 million and scheduled principal payments of $29.8 million during the quarter. Total cash as of the end of the quarter amounted to $65.6 million, including restricted cash of $9 million, which represents the minimum liquidity requirement under our financing arrangements.

Turning to Slide 6. As announced in late August, we agreed to acquire three 2-stroke XDF Mark 3 FLEX LNG carriers with partial reliquefaction capacity and the high specification, including an air lubrication system, which among other energy saving devices increases the energy efficiency of the vessel. On September 3, we took delivery of two out of the three vessels, namely the Aristos 1 and the Aristarchos, while the Aristidis 1 is expected to be delivered within the fourth quarter of 2021 and once we deliver the container vessel, Adonis to its new owner. The vessels are under long-term time charters with BP and Cheniere, with average remaining charter duration of 5.4 years and an average day rate of approximately 68,150 per day.

Moving to Slide 7. As previously reported, the partnership successfully placed on October 20 through its own wholly owned subsidiary CPLP Shipping Holdings PCL, EUR150 million of senior unsecured bonds on the Athens exchange. The bonds, which are guaranteed by the partnership will mature in October 2026 and had a coupon of 2.65%. The coupon is payable semi-annually. The placement of the bond was highly successful as it was issued at the low end of the yield range based on exceptionally high demand as it was oversubscribed 5.3 times with a book exceeding EUR800 million. The use of proceeds from the bond has been identified for the acquisition of the additional three LNG carriers we secured as an option, when we agreed to acquire the first three vessels. Hence, the bond issuance not only further diversifies the Company's sources of financing, but it also allows us to execute on our business plan with an attractive overall cost of capital, and importantly, without raising any equity capital.

On Slide 8, you can see the key terms of the bond. Of note, the financial covenants are in line with the covenants under our current financing arrangements as the net debt-to-market value adjusted for total assets ratio should be less or equal to 75%, while the adjusted EBITDA to net interest expense ratio should be no less than 2 times.. Turning to Slide 9. We are pleased to announce that we have exercised the option to acquire three additional XDF LNG sister vessels granted in connection with the acquisition of the original three LNG carriers announced on August 31. All three vessels have been delivered from the shipyard in 2021 and are built to the same high-specification like the first three vessels. The three LNGs are expected to be acquired at an average price of $207.7 million per vessel, with aggregate contracted revenues of approximately $429 million and an average daily rate of approximately 71,650 per day. Charters are BP, Cheniere, and Engie, respectively, and the remaining charter duration is 6.2 years, which includes in the case of the BP time charter the first two optional periods.

Moving to Slide 10. We are delighted that through the strategic and highly transformative transactions, we are expanding our fleet with six brand new, high specification, latest generation two-stroke LNG carriers with medium to longer term employment in place and are expected to have a transformative impact on CPLP across all metrics. In particular, on the last 12 months pro forma basis for the acquisition of the six ships, we expect the partnership's revenue to increase by 93% to $300.8 million compared to $156.2 million generated from our existing fleet, while EBITDA is expected to increase by $116.9 to $221.4 million, representing a 112% increase. Please note that the impact has been estimated using the average charter rate over the remaining duration of the charters and not simply that over the next 12 months, as the BP charters have a structure whereby the initial period is at a much higher rate compared to the first two set of options. In other words, the impact is expected to be higher than illustrated here over the next two to three years and lower thereafter. Operating surplus after reserves, which can be used as a proxy distributable cash flow is expected to increase on a pro forma basis by 87% to $97.5 million or $2.30 per unit, that is after taking into account the debt service cost, including that of the newly issued bond. Again, I would like to stress that these estimates use average rates and average amortization figures and are based on pro forma numbers for the original fleet. You'll find a detailed disclosure in the footnote. Hence, actual results may differ materially from these numbers, but we wanted to highlight the magnitude of the impact of these acquisitions as we believe that will result in a step change to the partnership's valuation going forward.

On Slide 11, the book value of our fleet is expected to double. Importantly, the average age of the fleet will be reduced to 7.8 years from 10.8 as of September 30 and will be five years younger than the industry average. This brings us closer to accomplishing our goal of controlling an increasingly modern and energy-efficient fleet in view of the new regulatory framework with regard to greenhouse emissions. I should also note here that LNG carriers typically have a longer useful life compared to other vessel types. And as a result, we depreciate the book value over 35 years compared to 25 years for our container and dry bulk vessels.

Turning to Slide 12. The partnerships remaining charter duration increased by approximately 1.5 years to 5.1 years on the back of the six vessel acquisition, thus giving our unitholders increased cash flow visibility. The LNG carrier fleet addition also provides us with incremental contracted revenue from 2024 onwards, when many of our container vessels start coming off charter in what could be a more challenging container market to what we are experiencing today. Overall, our contracted revenue will charge to approximately $1.3 billion, an increase of 177% compared to our existing fleet.

On Slide 13, you can see a breakdown of our contracted revenue on a per-year basis as well as the contracted revenue contribution from each of our charters. Importantly, with the addition of the six LNGS, we have secured significant contracted revenue of close to $290 million for 2022 and 2023, while contracted revenue remains high at approximately $165 million for 2025, when certain of our container vessels are expected to roll off their charters. We are also pleased that our charter portfolio now consists of seven high-quality charters, having diversified our customer base with the addition of three investment-grade counterparties, namely BP, Cheniere and Engie. Importantly, BP now represents our largest customer and accounts for about 40% of our contracted revenues.

Last but not least, and turning to Slide 14. We're very pleased that we are able to execute against our plan of reducing the partnership's environmental footprint with the acquisition of these six latest generation energy-efficient LNG carriers in a very short time. The vessels are already compliant with high 2030 requirements, while they provide the lowest environmental footprint in LNG transportation. In terms of carbon dioxide emissions, natural gas as propulsion fuel delivers at least a 23% reduction, while it does not contain sulfur, so there are no sulfur oxide emissions. Low-pressure engines like the XDF engines that drive the six vessels, reduce the nitrous oxide or NOx emissions by 85%, while particular matter emissions fall by 95% to 100% compared to conventional fuel. Overall, we estimate that the average efficiency ratio or AER of the six vessels to be about 23% lower compared to the average of the CPLP fleet. And with the addition of these vessels, our average fleet AER is expected to drop by 8%.

Now turning to Slide 16 and the LNG charter market. During the third quarter of 2021, we saw a continuation of the trend that started during the second quarter with gas majors and energy companies securing shipping under medium to long-term contracts. The high LNG prices as well as the relative pricing between different geographical regions has been increasingly favorable for LNG shipping. With Europe finest arbitrage being sporadically opened during the third quarter, most cargos flowed primarily to the European market. As LNG price in the Far East increase, we expect LNG shipping demand to increase further as more cargoes are transported across longer distances. Currently, the one-year charter for 174,000 cubic 2-stroke LNG carriers is above $120,000 per day, increasing the spread with the previous generation of TFT vessels to almost 40,000 per day. Coming winter, we expect only a handful of vessels to remain available for spot trading, with charters competing to secure their requirements, which could be further exacerbated by heavy winter.

Turning to Slide 17 and the LNG period market, 21 modern vessels equipped with two-stroke engines were secured in the multiyear charters over the last few months, reducing substantially the number of available modern tonnage for the next year to less than 10 ships. The increased demand for period coverage has led also to an increase in the tender of the charters compared to last year as well as an increase in the charter rates for long-term business. The LNG fleet order book stands at 127 vessels or 22% of the current fleet, but with sea building prices now close to $210 million for 2025 deliveries, we expect on a limited ordering on speculation. It is worth noting that out of the 30 new orders placed year-to-date, 25 are against firm long-term commitments. Overall, large new liquefaction projects and new SPAs are continuing to cause new ordering, as, for example, with Qatar Energy placing the first vessel order to Hudong shipyard, while shipyards have now only limited capacity, mainly from 2025 onwards. The card new building upward price momentum very much supports our decision to enter the LNG market earlier this summer as our average acquisition price across all six vessels of less than $204 million compares very favorably with the implied delivery price of a new building, which is currently estimated in the $215 million to $220 million range.

On Slide 19, we review the container market. Momentum remained strong during the third quarter with charter rates reaching all-time highs across all segments. The limited supply of container tonnage is driving charter's interest for long-term charters and vessel acquisitions at record high levels as demand remains robust and supply chain issues remain unresolved. During the quarter, we saw vessels of around 4,250 TEU fixing short voyages up to $200,000 per day, while the SCFI index reached a new record level on October 21. Significant port congestion has continued to cause widespread disruption, while Seaborne Box trade has remained very strong, supported by [Indecipherable] demand, stimulus and improving global economic conditions. Against the very positive developments in the container market, the container vessel order book has continued to increase, standing at 23%, up from 20% in the previous quarter. Orders continue to come for small to very large vessels, including speculative ordering from tramp owners.

On the other hand, as of quarter end, slippage in TEU terms decreased to 13%, including cancellations, down from 22% in the previous quarter. Demolition year-to-date stands at 15 units of 10,000 TEU versus 79 units of 190,000 TEU in 2020 and 93 units of 180,000 TEU in 2019. Overall, analysts expect container vessel demand to grow by 6.2% and 3.9% in 2021 and 2022 respectively, while supply growth for 2021 is estimated at 4.5% and is expected to decrease to 3.4% in the next year. Turning to Slide 21. I would like to remind you that we have obtained as part of the negotiation for the acquisition of the LNG carriers, a right of first offer from our sponsor Capital Maritime on a number of additional vessels, including three 13,000 TEU container vessels with delivery at the end of 2022 and early 2023, which have a 10-year charter in place with Hapag-Lloyd, including options, as well as three additional LNG carriers with delivery in 2023. The right of first offer vessels amount total market value of approximately $1 billion, thus giving us further growth potential beyond the vessels we have agreed to acquire.

Finally, I would like to highlight that over the last few months, we put a lot of effort in funding the acquisition of the option of three LNG vessels without tapping the common equity market, taking into account the valuation dislocation of our equity. We believe that in view of the positive long-term fundamentals of the LNG market and the upward pressure in values and charter rates, it was a unique opportunity to grow in this segment in scale with great assets and good charters. The successful placement of the bond covered most of the funding gap required, and we intend to fund the rest with cash at hand. This means that in the short-term and until the transaction is concluded, we have a limited amount of additional cash we can return to shareholders on top of our existing common unit distribution. However, as this first growth phase for the partners accounts on end toward the end of the year with the delivery of all six LNG carriers, our Board intends to review again the capital allocation policy before our next quarterly earnings call in January. If not earlier. Given the strong free cash flow generation, we expect to have from our combined fleet of containers and LNG carriers. I believe that common in distribution is due for an upward revision, while we endeavor, at the same time, to balance and increases in the distribution with common unit buybacks and a further growth down the line.

And with that, I'm happy to answer any questions you may have.

Questions and Answers:

Operator

[Operator Instructions] And we will now take our first question.

Jerry Kalogiratos -- Director and Chief Executive Officer

Hi, how are you?

Liam Burke -- B. Riley -- Analyst

Good, thank you. Looking at the container market and with the order book, with a fair amount of deliveries in the 2023, 2024 timeframe, you have several vessels up for recharter at that point. Do you worry about the order book being a little heavy during that recharter period? And does it change your view of the container market?

Jerry Kalogiratos -- Director and Chief Executive Officer

I think we do -- the container book has -- the order book for containers has more than doubled since 2020. And we have, right now, a very nice picture, almost a perfect storm when it comes to demand and supply for containers. But one wonders as demand normalizes, supply also normalizes in terms of the logistical chain disruptions in -- over the medium to long run. And as this coincides with increased deliveries from the shipyards, how this will affect the market. I think we are not particularly concerned from the short to medium term, but the order book has increased quite a bit. Having said that, if one compares this market to and the order book of what we had back in 2008, 2009, back then, we saw the market crash, but the order book was more like 60% of the fleet in the water. So I think it will very much depend on demand. But all in all, I think the acquisition of the LNG carriers partly addresses this issue to a very large extent. And it does this because it diversifies our revenue stream away from containers with the addition of very repeatable counterparties. In addition to those we have on the container side, it increases the revenue backlog. And importantly, that revenue backlog continues well into 2024, 2025, when many of our charters expire. Again, having said that, our charters, as you know, are -- the charters that we have currently locked in are not at current market levels. So when you look at where we have fixed our 8,000 TEU ships and where we've fixed our 5,000 TEU ships, they're substantially below current levels and closer to mid-cycle or even below mid-cycle rates. So even unless we have a very bad market, one can safely assume that maybe we won't be able to recharter at such great rates as one sees today. But potentially, we can continue to generate the same revenues we are generating today, which, together with the acquisition of the LNG carriers, I think, bring on substantial free cash flow.

Liam Burke -- B. Riley -- Analyst

Fair enough. And looking at the drop-downs, you sort of have -- I mean, you're digesting the six LNG vessel acquisitions, but looking at the drop-downs in the future, you have three container vessels with long-term contracts with a strong counterparty and then you have the three LNG vessels that are, well, essentially with no contracts. How do you look at the drop-downs in terms of prioritizing? Would you be more inclined to take the existing contract? Or would you look at something and saying, OK, we'll just see how it shakes up?

Jerry Kalogiratos -- Director and Chief Executive Officer

I think we will continue to look at acquisitions where we have cash flow visibility. So the LNG vessels where we have a right of first [Indecipherable] or first offer. They don't have charters in place yet. So I think there will be secondary in our agenda. And the containers with a nice 10-year charters, obviously, they are easier to fit with their business model and easier to price in a way. But if the LNG carriers also obtain nice charters with good tender, I think we will definitely look at those LNG is a segment where we want to grow further.

Liam Burke -- B. Riley -- Analyst

Great. Thank you Jerry.

Ben Nolan -- Stifel -- Analyst

Hey Jerry, this is Ben Nolan, I work at Stifel. So I've got a couple. The first is, I'm just hoping that maybe you can walk me through the math of post options, which congratulations on being able to do that without equity, it's pretty impressive, especially in the terms of the bond are fantastic. But what's your current debt amortization? Or maybe another way to think about it is, how much cash flow and appreciating there's a few moving parts, but how much cash flow is sort of left over after your current commitments to repay debt and interest?

Jerry Kalogiratos -- Director and Chief Executive Officer

So we still have to acquire an additional four LNG carriers by the end of the year and deliver the Adonis to its buyer. This vessel was expected to be delivered back in the summer. But so far, the innovation of the charter was unsuccessful. So you should expect this vessel to be really delivered to the buyer toward at the end of the fourth quarter. So as soon as this happens, then we can get the fourth vessel in. So we can proceed fairly quickly. It's only a question of documentation for the innovation of the debt for the acquisition of the three optional ships. In fact, if this happens quickly, the equity component, as we have suggested, will be less than $20 million, closer to $15 million. So that's easy. But then from the sale of the Adonis, our proceeds will be approximately $48 million to $47 million. But then we will need for the Aristidis I approximately $70 million or so. So that -- I mean, if you do this math, plus the cash flow generation that we have from operations, you'll see that our cash balance drops closer to $20 million or so or just north of that toward the end of the quarter, but then it builds up very quickly again because of the cash generation of the combined fleet. So I think on Page 10 of the presentation, we have -- we attempted a pro forma estimation of what this would look like. If you look at the annual operating surplus, which could be a proxy for free cash flow, we end up with a number of $97.5 million. Of course, you have to deduct dividends and it's not going to be exactly the same fleet. But if you do the adjustment, you'll see that the cash flow generation is not very far from there. So there will be plenty of cash generation going forward. But that's what I meant also that in our attempt to minimize or actually have no need for an equity placement, we will draw on our liquidity in the short term, but we will build it up again very quickly.

Ben Nolan -- Stifel -- Analyst

Right. So what is the pro forma annual debt repayment?

Jerry Kalogiratos -- Director and Chief Executive Officer

Okay. That's about $100 million -- about $101 million, which is...

Ben Nolan -- Stifel -- Analyst

I'm sorry, could you say it again?

Jerry Kalogiratos -- Director and Chief Executive Officer

So the annual debt amortization for 2022, for example, including the sellers credit that we have to repay in 2022 is $100.7 million. So that's about 7.5% of debt outstanding -- the pro forma debt outstanding. So we will be generating significant free cash flow, but also repaying debt quite aggressively as well.

Ben Nolan -- Stifel -- Analyst

Okay. And then sort of following on to that. How -- pro forma subsequent to the finalization of the couple of deliveries and so forth, how do you view your ability to continue to borrow? How close to the ceiling do you think you are without sort of taking down some of that leverage over the course of next year?

Jerry Kalogiratos -- Director and Chief Executive Officer

Okay. I think it's a fair question. But if you look at the average leverage across the vessels what we have -- that we are acquiring now is just north of 70%. It was similar also with the first three vessels. And I think this is also quite reasonable given the age and useful life of these assets. Now you're right that our indebtedness in absolute numbers increases quite a bit from, let's say, $651 million at the end of the quarter, pro forma for the acquisition of the remaining ships, it will go to $1.3 billion, also adjusted for the sale of the Adonis. But if you look at the gross leverage on charter-free values, it will remain at very reasonable levels. It's actually below 50%. At the same time, as we discussed, we'll be repaying the debt incurred for the LNG carriers relatively faster over the next two, three years. This is because we're taking advantage of the front-loaded structure of the BP charters. So that will allow us to reduce the debt outstanding quickly. And the final point that I wanted to make here in terms of, I guess, which is close to your question, how close are we also to our financial covenants. I mean it's not just that we have currently a 50% leverage, which is 25% below any metrics. But importantly, the LNG carriers have less volatility in terms of their values. Their beta is smaller, if you want, which then will help decrease the beta of the overall fleet.

Ben Nolan -- Stifel -- Analyst

So in other words, even subsequent to the acquisition, there still might be some room to do a little bit more with that equity?

Jerry Kalogiratos -- Director and Chief Executive Officer

Yes. For sure, but I don't think the intention is to take on more leverage in the short-term until we repay some of the debt and we increase our liquidity position. So it's not that we intend to go out in January and acquire more ships. As we build up our liquidity, especially during the first half, and we repaid down debt, potentially, we can look again at the new acquisitions toward the third, fourth quarter of 2022, when also we have the first deliveries from the 13,000 TEU containers.

Ben Nolan -- Stifel -- Analyst

Okay. Perfect. That's it. And congratulations on really pretty transformative a few months here.

Jerry Kalogiratos -- Director and Chief Executive Officer

Thank you, Ben. Appreciate it.

Operator

We will now take our next question. Please go ahead.

Randy Givens -- Jefferies -- Analyst

Jerry, it's Randy Givens from Jefferies. First question on your fleet, can you discuss kind of just bigger picture, the reason for the exercise on the three additional LNG vessels as opposed to maybe further growth on container ships? And then also any appetite to sell that Akadimos that comes off a charter next year and/or the Cape Agamemnon?

Jerry Kalogiratos -- Director and Chief Executive Officer

I think that let me start with the sales. I think that this is going to be driven by opportunity. If we see a crazy number, as we saw back in May, we will definitely look at it, but it's not something that we are seeking to do proactively. As far as the older ships are concerned, Agamemnon, Archimidis, even the older Panamax vessels, by the way, acquired at the beginning of the year, if we see a good opportunity because of the overall momentum in the container market, despite their long-term charter coverage, we will again consider a sale because, as I said in my prepared remarks, I do not think that the impact of the environmental regulations with regard to greenhouse emissions has been fully reflected in the values of older second-hand ships. I think that's across the segment, but containers, probably more than others firstly, because the market is too hot for people to care right now. And secondly, because of their very high consumption profile due to their trades. So if we see opportunities in the secondhand market for the older ships, we'll be inclined to look at them. I'm not saying this is something that we will necessarily do, but we are open to considering such transactions. Now why we haven't invested in the container market, I think overall, one needs to be more cautious. Asset prices, as you know, have increased dramatically. So when you look at the deal, it has to make sense after taking into account a potential weaker market ahead and the environmental regulation that I was talking about earlier. So residual value is a big risk. As rates tend to be at sky-high levels, then you add on more counterparty risk as well. And then if you look at the container order book, it has effectively doubled. Some people will say it's more than that if you include options. But it's definitely a market where it looks great in the short-to-medium term. But in the long-term, one has to be cautious as to how one navigates, especially residual value risk. On the LNG side, I think it was very different. I mean, the values that we negotiated are ground level values. It's historically very close to the lowest entry point. They are good charters. So and A, you minimize residual value risk. Actually, these assets have a much longer useful life. Secondly, you have good charters to very good counterparties. And effectively, they also do something which is very important to us. They also help modernize our fleet. I mean, we dropped almost five years of average age within effectively six months. And we are also reducing our environmental footprint. And this is a market where we believe it has very long-term strong fundamental prospects. Container market is great. And as I said, short-to-medium run, it looks good, but there is a temporary element to it, especially with regard to the supply disruption side.

Randy Givens -- Jefferies -- Analyst

Got it. Okay. And then second question on capital allocation. Do you view unit repurchases as more attractive than increasing the distribution at these levels? Or does kind of the trade and liquidity come at a premium and the focus will be on distribution rates?

Jerry Kalogiratos -- Director and Chief Executive Officer

Yes. That's a great question. We have continued with unit buybacks into the third quarter, we have purchased approximately 48,500 units, obviously, at a slower pace than before. This is for the same reason that I mentioned before. I mean, we were looking to complete the additional three LNG carriers, and we were cautious with our liquidity position. And for this reason, we have also to pause the unit buyback plan for the moment. But as we build up again quickly our cash position, we intend to resume the unit buybacks. As we have discussed over the last few quarters, we continue to want to return capital to unitholders through both distributions and unit buybacks. And unit buybacks become increasingly attractive as long as the equity valuation and dislocation remains wide. So I think the answer is, yes. The distribution increase, if it comes, which is something that we -- that the Board wants to review in the coming board meeting is something more longer term. But I think the unit buybacks is a good and opportunistic way to return capital to unitholders and at the same time, deploy money accretively.

Randy Givens -- Jefferies -- Analyst

Got it, perfect. That's it for me. Thanks Jerry.

Operator

And we will take our next question. Your line is open

J. Mintzmyer -- Value Investor's Edge -- Analyst

Good morning, Jerry. It's J. Mintzmyer from Value Investor's Edge. Thanks for taking my questions. Congratulations, first of all, on that fantastic unsecured bond. That was very, very interesting. On a big picture, looking strategically at that bond. I mean, 2.65% unsecured. It was way oversubscribed. But in conversation with bankers and looking at the bigger picture, is that something that you think is repeatable because it would be very interesting if you do a similar bond next year and take some of those container ships. Is that something you think you could do? Or do you think we're going to have to shift back to a secured debt mix?

Jerry Kalogiratos -- Director and Chief Executive Officer

Look, I think if you look at the demand, it looks as if this is a very lively market, and there is more demand than supply. So it looks like a market which will remain active. But it's always, I guess, subject to market conditions, supply of other deals and so on and so forth. Investors here in Greece, I think they appreciated the opportunity to be able to invest in this bond, whereby the proceeds went to the acquisition of the three LNG carriers. It was very clearly defined. I think the story was also a good one because LNG, it's still going to play a very important role in the energy transition. And if you looked at the cash flows of the LNG carriers, the charters that is -- and together with a guarantee of CPLP, it made the bond a very high-quality proposition for bondholders. Now what the market holds. I mean, and overall, capital markets goal for the next few months, I don't know. But it seems that it is a market that is here to stay. As you know, we are not the first this year. There has been one before us, which was also very successful.

J. Mintzmyer -- Value Investor's Edge -- Analyst

Yes. It's very, very attractive for both companies to do that. You mentioned that the delivery of the Adnois was delayed for an issue with the charter innovation. Is there any cash penalty associated with that? Or are you still going to receive the full $97.5 million when you sell that ship?

Jerry Kalogiratos -- Director and Chief Executive Officer

No, There is no cash penalty. The reason that the vessel is being delayed was that the earlier delivery was subject to the innovation of the charter because the buyer is a liner company, the either liner -- the charter, the other liner company, it does not necessarily want to consent to renovation of the charter. When and if that happens, then the vessel will be delivered or if it doesn't, then the vessel will be delivered at the end of the charter, plus a buffer that it is provided by the contract. But for us, the sale price remains the same.

J. Mintzmyer -- Value Investor's Edge -- Analyst

Makes sense. So the sales price remains the same. Do you get to capture the additional cash flow from the additional few months of that charter? Or is that placed in some sort of transfer account to the buyer?

Jerry Kalogiratos -- Director and Chief Executive Officer

We do. We do. And it has been reflected in our quarterly earnings, and it will be reflected in our fourth quarter earnings as well.

J. Mintzmyer -- Value Investor's Edge -- Analyst

Thanks, Jerry. Definitely a luxury problem then, definitely something worth looking at. I wanted to turn to your distribution. You made a very interesting comment in the prepared remarks saying that you're going to look at this quarterly. You think it's due for an increase. You mentioned cash available for distribution in your slide presentation. It looks like if I'm doing my math correct, that it's about $5 per unit per year, about $1.25 per quarter. Now of course, that would be 100% payout. And I know you don't want to do that. But when you talk about an increase to the distribution, right now, it's $0.10, which is less than 10% payout, tiny payout going forward. When you talk about an increase, do you mean like a slight increase from $0.10 to $0.15 or $0.10 to $0.20? Or could we see a more significant payout? Like if you did 40% or 50% payout, would be at $0.50 a quarter. How can we think about the potential there for that increase?

Jerry Kalogiratos -- Director and Chief Executive Officer

I think your math sounds about right. That's, of course, pro forma numbers. Doesn't mean that they are -- if you do your numbers going forward, you'll see that -- and you make actual projections, you will see probably that, as I said in my prepared remarks, that the numbers might be slightly lower, but still a very material increase to our -- what we expect a very material increase compared to our existing free cash flow. With regard to how much we will increase the distribution, if we do so, I think I will leave this to the Board. But to your point, the new free cash flow per unit that the combined fleet allows is definitely substantial. As I said also in my prepared remarks, we have to balance this together with unit repurchases because this continues to be a very nice way of returning capital and deploying our equity in an accretive way. And finally, also continuing to grow the partnership. I think it has been a very good choice to have the liquidity that we have today. We have managed to transform the partnership. We have managed to give -- with the new additions and the lowering of the average fleet aids, effectively, we have replenished the fleet substantially. And we have increased the terminal value of the company. So I think growth has been definitely the right choice. And together, we're returning some capital unitholders through both distributions and unit buybacks. We expect to follow the same path in the future.

J. Mintzmyer -- Value Investor's Edge -- Analyst

Yes. It's certainly been transformative, Jerry. There's just -- I mean, there's something really crazy and weird going on with your unit price. I mean, right now, it's at $13.50. If you look at your cash available distribution, according to your own slide, that's like a 35% yield implied. If you look at the cash to the current market price. I know adjusted NAV is debatable with a fixed asset base, but I have your adjusted NAV in the 40s and your stocks at $13.50. So anything you can do to unlock that value, whether it's a repurchase or increasing that distribution will be very welcome. I mean, even at a $0.50 per quarter payout, $0.50 would be a 5 times increase. And even that would only be a 40% or 50% payout. So I urge you to consider that, and I look forward to next quarter.

Jerry Kalogiratos -- Director and Chief Executive Officer

I hear you, and I think also by -- companies are not only valued against dividends and distributions. So I think that also by running the -- by, as you say, looking at the underlying value of the company and for you as analysts to present it, it's going to be equally important. If we haven't done the transaction that we have done, the underlying value of the company would have been less compared to just having sustained our distribution. So I think it's also very much on you to showcase what we have done here. I think it's quite clear. It's a very simple company. Good assets, long-term charters, very easy capital structure. So we hope that we will also be able to unlock some of the value by showcasing what we have done, of course, with your help.

J. Mintzmyer -- Value Investor's Edge -- Analyst

Thanks Jerry.

Operator

Thank you. There are no further questions at this time. I would now like to hand the call back to Jerry Kalogiratos for closing remarks.

Jerry Kalogiratos -- Director and Chief Executive Officer

Thank you, Valerie, and thank you all for joining us today.

Operator

[Operator Closing Remarks]

Duration: 54 minutes

Call participants:

Jerry Kalogiratos -- Director and Chief Executive Officer

Liam Burke -- B. Riley -- Analyst

Ben Nolan -- Stifel -- Analyst

Randy Givens -- Jefferies -- Analyst

J. Mintzmyer -- Value Investor's Edge -- Analyst

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