Thank you for standing by, ladies and gentlemen, and welcome to the Dynagas LNG Partners conference call on the second quarter 2019 financial results. We have with us today Mr. Tony Lauritzen, Chief Executive Officer, and Mr. Michael Gregos, Chief Financial Officer of the company. At this time, all participants are under a listen-only mode. There will be a presentation followed by a question and answer session. At which time, if you'd like to ask a question, please press star then one on your telephone keypad and wait for your line to be opened. Must advise you that the conference call is being recorded today. At this time, I would like to read the Safe Harbor statement. This conference call and live presentation of the webcast contains certain forward-looking statements within the meaning of the Safe Harbor provision of the Private Securities Litigation Reform Act of 1995.
This as a caution that such forward-looking statements involve risks and uncertainties that may affect Dynagas LNG Partners business prospects and results of operations. Such risks are more fully disclosed in Dynagas LNG Partners filings with the Securities and Exchange Commission. Now, I would like to hand the floor over to Mr. Lauritzen. Please go ahead, sir.
Morning, everyone, and thank you for joining us in our second quarter and the third of June 2019 earnings conference call. I'm joined today by our CFO, Michael Gregos. We have issued a press release announcing our results for the said period. Certain non-GAAP measures will be discussed on this call. We have provided a description of those measures as well as a discussion of why we believe this information to be useful in our press release. Moving on to slide three. Net income for the quarter was reported at $0.9 million, and adjusted EBITDA was reported at $20.9 million. Free cash was reported at $112.9 million and available liquidity of $142.9 million each as of June 30, 2019. Subsequent to the quarter, on September 25, 2019, the partnership successfully closed and funded a syndicated five-year, $675 million senior secured term loan with leading international banks.
Borrowings under the senior secured loan have already been utilized to repay in full on September 25th, the partnership's outstanding $470 million senior secured term loan B, and together with cash on hand, will be utilized to repay in full the partnership's $250 million senior unsecured notes at their maturity dates on 30th of October 2019. Pursuant to the terms of the $675 million senior secured term loan, the partnership will not declare or pay distributions to common unit holders while borrowings are outstanding under the senior secured term loan. We paid in August a quarterly cash distribution of $0.5625 per Series A preferred unit for the period from May 12, 2019 to August 11, 2019. A quarterly cash distribution of $0.546875 per Series B preferred unit for the period from May 22, 2019 to August 21st, 2019.
Our vessel, the Lena River, commenced her employment under her long-term charter with Yamal LNG on 1st of July 2019. In order to deliver the Lena River into the new charter, the vessel incurred a repositioning voyage, which took about one month, which reduced the fleet's utilization, which ended up at 94% for the quarter. Our fleet of LNG carriers are now fully delivered into all of their respective long-term charters. I will now turn the presentation over to Michael, who will provide you with further comments to the financial results.
Thank you, Tony. Moving over to slide four of the presentations. Our results for the quarter were within our expectations with adjusted EBITDA coming in at $21 million and utilization at 94% due to the repositioning of the Lena River with respect to its transition from its previous short-term interim contract to its Yamal 15-year contract, which commenced on July 1st. Other than the Lena River repositioning, the partnership had no unscheduled off-hire days. The Lena River interim short-term contract, which was concluded on May 31st, was at a lower time charter rate than the present 15-year contract the Lena River is currently performing, resulting in an average daily hire per vessel gross of commissions of $55,100 per day for the quarter. Following the entry of the Lena River into our long-term contract, we expect our average daily time charter hire to increase to about $62,000 per day per vessel.
Going forward, we anticipate an uptick in our adjusted EBITDA to reflect this. The increase in operating expenses to $12,630 per day per vessel reflects primarily increased operating expenses on the Yenisei River. Please be reminded that the Yamal contracts are OpEx pass-through, meaning operating expenses are paid for by charters. Interest and finance costs for the quarter amounted to $13.1 million. Post-refinancing, we expect this cash interest expense to decrease considerably to around eight and a half million dollars per quarter in the near term with current LIBOR rates, resulting in significant cash savings. Moving on to slide five. On September 25th, we closed our syndicated $675 million senior secured term loan with major international shipping lenders.
This global refinancing facility will be secured by, among other things, first priority mortgages on the six LNG carriers in the partnership's fleet. Borrowings under the term loan, together with cash on hand, have repaid on September 25th in full our $470 million outstanding senior secured term loan B, and will be used to repay our $250 million six and a quarter senior unsecured notes at their maturity date of 30th of October 2019. The new term loan is repayable over five years in 20 consecutive quarterly payments, plus a balloon payment in year five, based on a 14-year amortization profile, and has a margin of LIBOR plus 300 basis points, significantly reducing our cash interest expense.
The terms of the term loan include financial covenants providing for the maintenance of maximum leverage ratios and minimum liquidity covenants, including the requirement for the partnership to maintain a minimum cash balance of $50 million throughout the life of the credit facility in a restricted collateral account. Under the terms of the term loan, the partnership will be prohibited from paying distributions to its common unit holders while borrowings are outstanding under the term loan. Scheduled distributions to preferred unit holders under the existing Series A preferred units and Series B preferred units will not be restricted, provided there is no event of default while the term loan remains outstanding.
This global refinancing streamlines our debt structure and significantly improves our financial profile as debt amortization increases from less than 1% of total debt outstanding to about 7% of total debt outstanding, resulting in a gradual de-leveraging of the business and allowing the partnership to build equity value over time. This concludes my part of the presentation. I will now pass the presentation on to Tony.
Thank you, Michael. Let's move on to slide six. Our fleet currently counts six LNG carriers with an average age of about 9.1 years. We have a diversified customer base with substantial energy companies, namely Equinor, Gazprom, and Yamal LNG, which the latter is a joint venture between Total, CNPC, Novatek, and the Silk Road Fund. Our contracted backlog is about $1.31 billion, equivalent to an average backlog of about $218 million per vessel. Our average remaining charter period is about nine years, which compares very well versus our peers. Moving on to slide seven. Our fleet of LNG carriers are fixed on term charters with key energy companies. We believe that drivers for our charters were the characteristics of the fleets, including their ice class notations and our organization's operational performance track record.
All of the vessels are employed on time charter contracts, under which the charter pays all major voyage-related variable costs such as fuel, canal fees, and terminal costs. Our counterparties are mainly asset-strong LNG producers that are typically able to forward-program the vessels for periods of time, which gives us a certain degree of planning ability and cost control. We estimate our fleet now to be 100% contracted in 2019, 100% in 2020, and 92% in 2021. With Lena River having been delivered into her long-term charter with Yamal LNG, our earliest potential rechartering availability is the Arctic Aurora, which will be free in 2021, provided that Equinor does not exercise their option to extend the contract. So far, the vessel has served Equinor with good feedback and results. Moving on to slide eight. We have a unique and versatile fleet.
Five out of the six vessels in our fleet are assigned with ice class 1A notation. Therefore, the fleet can handle conventional LNG shipping, as well as operate in ice-bound and subzero areas. The initial capital expenditure for an ice class vessel is more expensive than conventional carriers. However, we estimate the operating cost between our ice class-type carriers and conventional carriers to be very similar. To our knowledge, the company, together with our sponsor, has a market share of about 82% for vessels with Arc4 or equivalent ice class notation. To our knowledge, there are only two other LNG carriers in the world with equivalent notation, which are chartered out in the long term. We view the ability to trade in ice-bound areas as an important advantage due to an increased production of LNG in such areas, and in particular, along the Northern Sea Route.
Yamal LNG has commenced their production of their mega project, and we also expect further projects to be developed in that region. We view the ability to perform conventional and niche operations as an important driver in securing attractive long-term charters. Furthermore, our fleet is optimized for terminal compatibility, which we believe is of value to our charterers, and the fleet consists of groups of sister vessels that provides for overall better economics, operations, preventive maintenance, and redundancy. Moving on to slide nine. We believe our company has many attractive features. Our fleet is relatively young compared with the world average and provides for trading versatility. The new financial profile of the company is simple and provides us with a competitive cost of debt and with a clear path towards gradual de-leveraging through a significant annual debt amortization.
The partnership has in place long-term charter contracts with international energy companies, generating cash flows that will be channeled towards the amortization requirements of the financing facility, which we believe will result in building equity value over time, and beyond this position the company for future growth. We have now reached the end of the presentation, and I now open the floor for questions.
Thank you very much. We will now begin the question and answer session. As a reminder, if you wish to ask a question, please press star then one on your telephone keypad and wait for the automated message advising your line is open. Please then state your first and last name before you ask your question. If you wish to cancel the request, please press star then two. Once again, star then one if you wish to ask a question. Thank you. We will now begin with the first question. Your line is open. Please go ahead.
Hey, guys. This is Ben Nolan from Stifel. Can you hear me?
Yeah, hi there. Hi, Ben.
Hey. Hey, Tony, Michael. Hey, well first, congratulations on the financing. Took a while, but I would say successful certainly with respect to the terms. I did want to dig in a little bit on that, if I could. With respect to, clearly common dividends are restricted so long as there's a balance on the loan. Was curious if there's also restrictions on acquisitions, not that maybe you would do those right away, but are those also restricted under the terms of the loan?
No. Hi, Ben. No, acquisitions are not restricted, provided of course, that pro forma of the acquisitions we can meet the financial covenants, which are in the loan agreement.
Okay. Very helpful. Also, are there any restrictions on prepayment or early retirement or anything of that sort? You're free to do that?
No, no. No, we're free to pay at any time.
Good. Also, just curious, you didn't list it in there, could you maybe talk through maybe the profile of the lenders, maybe specifically who they are, at least maybe in general, the types of lenders that were part of the transaction?
We cannot mention the name specifically, but it's a large group of household name of banks. Huge banks, which are household names. It's a large number of banks involved in this syndicated facility. Unfortunately, I can't tell you specifically which banks they are other than their household names.
Okay. No, that's fine. I was just trying to get a sense. With all that said, the financing's out of the way, the groundwork and the rules of the game appear to sort of be now set. It seems like in the near term, cash flow has to go to repaying debt. In the longer term, just curious, how do you envision the partnership developing? What's the grand scheme or the hope of where you want to be and how long and how you intend to get there from sort of a broader strategic stance?
Thank you, Ben. As you mentioned, now that the overhand of the refinancing is lifted, we hope that the market will be able to better assess the quality and prospects of the partnership. Of course, the elimination of the distribution to common unit holders was a painful measure. However, looking ahead, it allows the partnership to build equity value over time, which we hope will be eventually reflected in our unit price. At that time, we will consider what are the best options for the partnership to finance further growth opportunities. Obviously, our common unit price makes it unattractive to issue equity to fund acquisitions. Although the decision at the end of the day depends on the use of capital and how value additive it is to the company.
Repeating myself, at present, we believe immediate value growth will come from an increase in equity value as a result of the amortization profile of the new term loan facility. I think that's what we can say for now.
Okay. In the long term, and maybe looking at some of the assets still held at the sponsor, you're not in a position to do anything about it now, but eventually, those are still potential acquisition targets or hopeful acquisition targets, I suppose. Yeah.
Listen, looking ahead further into the future, we can consider growth opportunities from drop-downs or third-party vessels. Following the completion of our refinancing and the elimination of our common distribution, we believe that whatever growth initiatives we undertake, they have to be financed in a way which can increase shareholder value. We have to see where our common unit price will settle over time in order to evaluate growth initiatives, whether they be from our sponsors' vessels or third-party vessels.
Okay. Understood. All right. Thanks a lot, guys.
Thank you.
Thank you.
Thank you very much. Once again, as a reminder, if you'd like to ask a question today, please press star then one on your telephone keypad. You can cancel the request by pressing star then two. Star then one if you'd like to ask a question today. Thank you very much. We'll now take our next question. The line is open. Please go ahead.
Howdy, gentlemen. It's Randy Giveans at Jefferies. How are you?
Hi.
We're good. Thank you.
Great. All right. I guess two quick questions for me. Obviously, there's no allowances for distributions here until, I guess, 2024 or as long as there's a balance on the loan. Any opportunities for unit repurchases, or are those also disallowed?
No. Unit repurchases are not disallowed, no. There are certain minimum liquidity covenants that we have. We have to have a certain level of minimum liquidity. As long as we meet those, they're not disallowed, no.
Is there any authorization for unit repurchases right now?
At this stage, no.
Okay. I guess, with 100% contracting, pretty fixed expenses, obviously the interest expense coming down, pretty straightforward model. I guess the only driver of changes would be off-hire expectations, either in the back half of this year, 2020. Can you give some updated kind of dry docking guidance around those vessels for the next maybe two years?
Well, the next two years, we don't have any scheduled dry dockings. Our first dry dockings commence 2022. Three vessels in 2022 and three vessels in 2023.
Perfect. Okay. I guess just last question. You mentioned some opportunities looking at further drop-downs, either from your sponsor or from a third party. Is there a preferred drop-down kind of candidate or term? Are you looking at maybe the larger 172,000 cubic meters or the smaller 162s, or is it completely just price dependent?
No. There's no preferred vessel at this stage. As we said earlier, we've just completed our refinancing. We're going to have to see where our market cap settles over time and evaluate growth initiatives from there. As we said, it can be the drop-downs from our sponsor, or it could be third-party vessels. We don't have any specific vessels in mind from our sponsors' fleet.
Sure. All right. Well, hey, that's it for me. Thanks again. Yeah, congrats on the refi.
Thank you.
Thank you.
Thank you very much. As a reminder, if you'd like to ask a question, please press star then one on your telephone keypad. We will now take our next question. Your line is open. Please go ahead.
Hi, this is Daniel Kelsh from UBS Wealth Management giving a call. Congrats again on the refinancing. I did want to ask if you guys had any plans about sustaining your rating with Moody's and S&P, or if your new lenders just don't require that, is this something you might move on from?
Yeah, no, that's being withdrawn.
Okay.
The ratings are being withdrawn. We no longer need those ratings, so they're being withdrawn, yeah.
Okay. As a separate follow-up question is, the person prior to me asked about kind of repurchasing common equity, but have you ever thought about repurchasing any of your preferred either? Just knowing that it's at a discount to face, is that something that could be as creative?
Well, right now we were really focused on our refinancing.
Sure.
At this stage, we have to think about all our options. We haven't really thought about it, to tell you the truth.
Okay. All right.
Yeah.
Well, thank you.
Okay. Thank you.
Thank you very much. There are no further questions. Please continue.
Thank you very much. We would like to thank you for your time and for listening in on our earnings call. We look forward to speaking with you again on our next call. Thank you very much.
Thank you very much. That does conclude the conference for today. Thanks for participating. You may all disconnect.