Capital Product Partners L.P. (NASDAQ:CPLP) Q2 2020 Earnings Conference Call - Final Transcript
Jul 31, 2020 • 09:00 am ET
Thank you very much, sir. [Operator Instructions] Our first question is from the line of Ben Nolan from Stifel. Please go ahead.
Hi, good morning, good afternoon Jerry. I have a handful, but I'll try to limit that and leave some room for others. But my first is really a fundamental question about the distribution cut but, more importantly, sort of the implicit thinking of the whole structure now. I mean it's still -- CPLP is still an MLP, a limited partnership. Although now, retaining the majority of cash flow will grow while -- the issue I think here is that they're still the sponsor, and the sponsor is still, I presume, acquiring assets and now is in much more direct competition for potential assets from the partnership because you no longer -- the partnership no longer needs the sponsor to warehouse assets and wait until they get good contracts or whatever because there's no call for the cash flow distribution. Why does it even make sense for this to be an MLP anymore at all? How do you work through that potential conflict of interest?
So that's a great question. Firstly, the -- as you know, in terms of structure, CPLP is a C-Corp for tax purposes, and our unitholders file their 99s. So as you said, we have reset our distribution to only a fraction of our net income in view of the wider market uncertainty and be able to internally fund growth going forward. So effectively, what differentiates us from the other C-Corps is the CPLP [Phonetic] structure, which we will review if required, but at least in the short term, does not materially affect the strategy that the Board has determined for the future.
Now with regard to competition, I don't think there is really so much direct competition for the following reasons. First of all, Capital Maritime does not have any assets -- container assets of the kind that we are looking for. Secondly, I think that Capital Maritime, and I think it's good to recap certain things from time to time, has been -- first of all, it holds 18% of the partnership at this point. So it has fueled growth for CPLP for the last 13 years. But interestingly enough, because we went through the exercise, Capital Maritime has invested since 2007, $130 million in cash or in kind in CPLP common units. That includes around $25 million of units bought over the last decade in the market but excludes also $36 million that Capital Maritime has invested in Class B preferred units back in 2011 and '12. So Capital Maritime has invested a total of $136 million, again, in cash or in kind, over the years. So Capital Maritime, like in the past and today, is very much incentivized being the largest shareholder to see CPLP do well in the medium to long term.
So when it comes to opportunities in the container space, if CPLP is the one that is in the