Good morning, ladies and gentlemen, and welcome to the Genco Shipping & Trading Limited First Quarter 2012 Earnings Conference Call and Presentation. Before we begin, please note that there will be a slide presentation accompanying today's conference call. That presentation can be obtained from Genco's website at www.gencoshipping.com. To inform everyone, today's conference is being recorded and is now being webcast at the company's website at www.gencoshipping.com. We will conduct a question-and-answer session after the opening remarks. Instructions will follow at that time. A replay of the conference will be accessible at any time during the next 2 weeks by dialing (888) 203-1112 or (719) 457-0820 and entering the passcode of 9694849. At this time, I'll turn the conference over to the company. Please go ahead.

Good morning. Before we begin our presentation, I note that in this conference call, we will be making certain forward-looking statements pursuant to the Safe Harbor provisions of the Private Securities Litigation Reform Act of 1995. Such forward-looking statements use words such as anticipate, budget, estimate, expect, project, intend, plan, believe, and other words in terms of similar meaning in connection with the discussion of potential future events, circumstances or future operating or financial performance. These forward-looking statements are based on management's current expectations and observations. For a discussion of factors that could cause results to differ, please see the company's press release that was issued yesterday, the materials relating to this call posted on the company's website and the company's filings with the Securities and Exchange Commission, including, without limitation, the company's annual report on Form 10-K for the year ended December 31, 2011 and the company's subsequent reports filed with the SEC. At this time, I would like to introduce Gerry Buchanan, the President of Genco Shipping & Trading.

Good morning, and welcome to Genco's First Quarter 2012 Conference Call. With me today is Peter Georgiopoulos, our Chairman; and John Wobensmith, our Chief Financial Officer. I will begin today's call by discussing our first quarter highlights as outlined on Slide 3 of the presentation. I will then turn the call over to John to review our financial results for the 3-month period ended March 31, 2012. Following this, I will discuss the industry's current fundamentals. John, Peter and I will then be happy to take your questions. During the first quarter, Genco maintained an opportunistic time charter approach while strengthening its capital structure in a challenging drybulk market. By taking proactive measures to increase our financial flexibility, combined with the ability to benefit from a rising freight rate environment, we have further enhanced our position to emerge from the current downturn as a stronger company. Turning to Slide 5, Genco recorded a net loss of $33.1 million or $0.87 basic and diluted loss per share for the 3 months ended March 31, 2012. Genco's cash position, excluding Baltic Trading Limited, was $251.2 million, which reflects the cash flows generated by our large and modern world-class fleet. During the first quarter, we increased our financial flexibility and strengthened our balance sheet by completing a $53 million common share offering and lowering the effective interest rate for our $1.4 billion revolving credit facility, which John will discuss more in detail later in the call. Additionally, we maintained our focus on signing vessels to short-term or spot market-related contracts with reputable multinational companies during the quarter, effectively preserving the ability to take advantage of future rate increases and generate significant operating leverage when market conditions improve. Moving to Slide 6, we provide a summary of our fleet. In 2011, we further strengthened Genco's leading brand as an owner and operator of modern tonnage by completing the acquisition of 13 Supramax vessels and 5 Handysize vessels. By integrating our newly acquired vessels into our existing infrastructure and increasing the scale and scope of our operations, we have enhanced Genco's future commercial prospects and strengthened the company's long-term earnings potential. Excluding Baltic Trading fleet, we currently own a fleet of 53 drybulk vessels consisting of 9 Capesize, 8 Panamax, 17 Supramax, 6 Handymax and 13 Handysize vessels, with a total carrying capacity of approximately 3,810,000 deadweight tons. Importantly, the average age of our fleet is 7 years, well below the industry average of approximately 11 years. Genco's diversified approach of operating a modern fleet across the entire drybulk sector strengthens the company's ability to deliver first-rate service to leading international charters and take advantage of the long-term demand for essential commodities in China, India and other developing countries. I will now turn the call over to John.

Thank you, Gerry. And I apologize in advance. I have a cold and some laryngitis. If we turn to Slide 8. I will begin by providing an overview of our financial results for the first quarter ended March 31, 2012. Please note that we're reporting our financials on a consolidated basis as a result of Baltic Trading IPO in March 2010 and our 25.1% equity ownership in Baltic Trading. For the 3 months ended March 31, 2012, we recorded total revenues of $59.8 million. This compares with revenues for the first quarter of 2011 of $101.4 million. The decrease in total revenues for the first quarter of 2012 compared to the prior year period is primarily due to lower charter rates achieved by the majority of our vessels, as well as a higher number of days that our vessels were on planned offhire to complete drydockings during the first quarter of 2012 compared to the first quarter of 2011. The decrease in revenues was partially offset by the increase in the size of our fleet. The operating loss for the first quarter ended March 31, 2012 was $12.5 million. This compares to the operating income for the first quarter ended March 31, 2011 of $33.7 million. The operating loss for the three months ended March 31, 2012 is attributable to higher expenses associated with the operation of a larger fleet and lower rates achieved for our fleet compared to the corresponding year earlier period. Interest expense for the first quarter of 2012 was $23.7 million. This compares to interest expense of $21.3 million for the first quarter of 2011. The company recorded a net loss for the first quarter of 2012 of $33.1 million or $0.87 basic and diluted loss per share. This compares to net income attributable to Genco…

Thank you, John. I will now take this opportunity to spend a few moments discussing the industry fundamentals. I'll start with Slide 15, which points to the drybulk indices. Represented on this slide is the overall Baltic Dry Index. The BDI has shown weakness since the beginning of the year, with freight rates under significant pressure through the first week of February. The primary factors contributing to the pressure in rates were order timing issues for the iron ore cargoes due to the celebration of Chinese New Year, a front-loaded 2012 order book and short-term weather-related issues in Brazil and Australia, temporarily reducing the iron ore and coal output. A marginal rebound has taken place after the index reached a low of 647 points on February 3 as BDI increased for 27 consecutive days in March. This was primarily due to a pickup in iron ore and coal fixtures as steel production rebounded and the South American grain season commenced. Overall, while we believe that demand-side fundamentals have rebounded to a certain extent on the back of enhanced signs for Chinese economic growth, supply-side fundamentals remain relatively weak as the drybulk fleet continues to grow, despite the increased scrapping activity observed. On Slide 16, we summarize the recent market developments in the drybulk freight market. As previously mentioned, one of the reasons behind the weakened freight rate environment through the beginning of the year was the early timing of the Chinese New Year, which led to a lower steel production and a record 101.5 million tons of iron ore inventories. As Chinese steel production rebounded in February and reached a high of 62.6 million tons in March, iron ore inventories have decreased for 5 of the last 7 weeks and currently stand at 97.1 million tons. Notably, while higher steel…

[Operator Instructions] And we'll go to Doug Mavrinac with Jefferies.

I just had a few follow-up questions, with the first related to idled capacity. I've seen, I guess, a couple of media reports recently talking about a fairly significant number of drybulk ships being idled, which isn't consistent with what we're seeing nor is it consistent with the economics of where charter rates are right now. My question to you guys is, do you have an estimate as far as how many or what percent of the Cape or Panamax fleet is sitting at anchor, doing nothing right now? I mean, is it a significant number? Is it a minimal number? Do you have an estimate?

I don't think it's a big number, Doug. It may be a little bit on the Capesize sector, on some of the old ships.

But they're probably going to be scrapped.

Yes, yes.

Yes, exactly.

I don't think anything that's operating is sitting.

Right. And that's kind of what I'm seeing as well, Peter. I was just trying to kind of reconcile some of the reports that are out there versus kind of what we're seeing. I just wanted to make sure that what we're seeing is consistent with what you guys are seeing.

And Doug, I'm pretty close to the managers in various other companies. And they operate big fleets, and nobody is talking about any lay-ups of Capesize or any other drybulk tonnage.

Okay. Perfect. Great. And then my second question relates to the developments on the supply side of the equation. I mean, obviously, China's at its slowest pace of growth right now in the past 3 years. We all know the impact that, that's had on the BDI and on charter rates. But it's kind of masking what's happening on the fleet growth side, I believe. And it relates to the level of non-deliveries. I mean, everybody talks about slippage. But in reality, it's really non-deliveries. My question for you guys is, when we consider the level of non-deliveries, and Gerry, you mentioned that the order book is 25% of the existing fleet, factoring in non-deliveries, what could the real order book as a percent of the existing fleet be? I mean, do you have an estimate as far as, if it's not 25%, is it 1/3 smaller? Or what is your estimate for the real order book?

The run for the last 4 years has been somewhere between 30% and 40%. And I would guess so -- 1/3 smaller is probably a good guess. Then you have to add scrapping on top of that, which is running at record levels. We're sort of getting to the end of this nightmare.

Right. That's -- exactly. So if you lop 1/3 off, you're talking about maybe a 16% order book before scrappings. With the front-end loaded delivery schedule, it seems like we're just about done.

Yes.

Okay, perfect. And then, you guys also mentioned as it relates to how that order book is building or how it's played out the level of -- or the lack of newbuilding orders placed over the last year or so. What impact are we seeing that, that's having on some of these shipyards that have aspirations of producing a lot? What sort of financial stresses are they under right now? And what impact could that have to the supply side of the equation?

Look, a lot of the marginal yards have shut down or are being shifted over to repair yards or scrapping yards. We think that's a great thing that there's more scrapping capacity being built in the world because we think we need it. If you look at this year -- last -- before last year, the biggest year was I think 5 million tons. Last year, it was about 20 million tons. It was over 20 million tons. And this year it's projected over 30 million tons. I mean, so last year we're 4x the biggest year. This year, we'll be 6x the biggest year prior to last year. So we think that's a good thing. But we think these marginal yards, the smaller yards, or these experimental yards, or the repair yards that try to jump up to be building yards are all being shut down or going back to what they were before. The ones that are staying in business are the bigger, stronger yards, the government-run yards in China and then the big Korean yards. But the Korean yards, the Samsungs and Hyundais of the world, sort of stopped building bulk carriers a long time ago. They're trying to build LNGs and drilling rigs and container ships. And the orders for those things are still going on. So you've got sort of the big Chinese yards which are really the ones building the bulk carriers.

Got you, guys, totally makes sense. And then just final question before I turn it over. We've seen a big emphasis on newbuilding orders being placed at yards that can build more fuel-efficient designs. How much of an impact is that potentially going to have in terms of kind of weeding out some of these yards that had aspirations of being big drybulk builders? I mean, will that be a factor in terms of the number of yards that can build drybulk ships going forward? Is there ability to build these more fuel-efficient ships?

Well, it's not played out yet. We have been hearing from people about the fuel-efficient ships. I mean, there have been some efficiencies in the last few years. We have -- I've asked people for sort of a side-by-side breakdown. I don't think -- which we haven't seen yet. I don't think that, that's going to be what makes those yards uncompetitive. I think they're going to be uncompetitive because they're small, the quality might not be there, they're not going to get the orders. I think, if there's a new design out there, I think pretty soon all ships will be able to figure it out and do it, all shipyards will do it themselves. We haven't seen that as a differentiator. We haven't seen that as a differentiator in the market yet.

We'll go next to Justin Yagerman with Deutsche Bank.

Wanted to address the debt side of things here and get a sense for as you look out, obviously, it's tough to know how fast rates recover as the supply side starts to inch to a better balance in the back half of this year or maybe into next year. So in the meantime, you guys do have a hefty amortization schedule. You have a nice amount of cash to cushion you for a bit. But are you looking at options and talking to the banks right now in terms of trying to reschedule some of that debt repayment that will be onerous in terms of drawing down the cash balances if we stay at today's rate? How do you think about that in terms of managing through the next, call it 6 to 8 quarters?

Justin, it's John. Yes, look, we obviously have a large cash balance. It does give us quite a bit of run room. Having said that, if you look at what we've done in the past, we've always tried to be ahead of potential situations. I don't think there's anything different. We have initiated discussions with the banks, but beyond that, I really can't comment. But like I said in the past, we've tried to stay ahead of things.

That's fair. Obviously, with the equity offering and all that other stuff, you guys have been doing that. So as I think about this situation right now in the market, are you getting any inquiries? You guys have a lot of ships that are on spot-related charters. Are you getting any inquiries for any longer periods as those ships start to come off-charter in the back half of this year and early part of next year? Are folks looking at the supply-demand dynamic and trying to lock up tonnage at fixed rates now? Is there any of that going on? Just curious.

No. No.

Okay, that's a simple answer. And if you could talk a little bit to the difference between the strength that we're seeing in the Atlantic versus the weakness in the Pacific and what you guys see as the major drivers of that. I'd be curious just to hear any commentary around your view of those 2 markets right now.

No, I mean, it's actually pretty simple, Justin. It's the South American grain season getting in full swing. We've seen a little bit of weakness in the iron ore markets over the last 1.5 weeks, but we expect that to come back, just looking at what China's doing on the steel side. And we've seen a real firmness on coal fixtures going into both India and China.

[Operator Instructions] Next we'll go to Fotis Giannakoulis with Morgan Stanley.

Justin has asked most of my questions. I just wanted to ask, since you just mentioned that you have initiated some discussions with your banks, whether in these discussions or in your thoughts to increase liquidity, Baltic could be potentially a part of this equation or if this is something that -- you wouldn't consider it at all.

We're not considering it.

And our next question comes from Ben Nolan with Knight Capital.

I had just a couple. The first one comes as sort of, as it relates to the debt side. I believe I saw on the presentation that you guys paid down $55 million or so in debt in the second quarter. That's a little bit more than the scheduled amortization, I think.

No.

Hold on a second. Hold on a second.

Ben, no, and it's a pro forma number. So that -- then the large number in that is the $48 million that is due on June 30. But we include it on a pro forma basis.

I see. So it's just as it was. Just -- I got you. Okay. So that sort of resolves that. The other question I was going to ask, sort of more business-related. With respect to some of your older ships, you've been able to get some contracts on those vessels that are spot-related and that's good, and it secures employment for those. But has there been any, whether it's in your own fleet or among some of the other players in the market, is there an increasing level of discrimination, I guess, against these older ships? Are they operating at meaningfully lower utilization levels? And obviously, you guys haven't had that problem. But is it getting to the point where a 15-year-old ship or an 18-year-old ship is just not working enough to make sense to keep in the market?

No, I don't agree with that. These ships are running very, very efficiently. We don't see any kind of discrimination related to the age profile at all.

Yes, I mean, I do -- Ben, once you get to 20 years, then you start to see that discrimination, because in the fuel efficiency and the lower utilization but --

We have a way to go for that, yes.

Yes, but we haven't seen anything from our side.

That's good. Okay, good. All right. And then I guess, the last question sort of I guess, related to one of Doug's questions earlier with respect to sort of the eco-ships and that kind of thing. I guess that if -- it doesn't seem as though people are convinced enough that those numbers are real, such that there's been a massive level of ordering. Do you think that that's a risk? Or at the end of the day the financing is just not there and...

There's been no ordering. I mean, it's not -- it's even simpler than that. At $5,000 a day, who's going to go order a brand-new ship? The charter doesn't care that you're more fuel-efficient. It's $5,000 a day. So the charter rates so.

It's just economics, right?

It's economics. And so I don't think you're going see these things being built until this fleet is way, way worn out and the market is chugging along at a very strong rate. But I mean who would go out today in this environment and order a fuel-efficient ship? To do what? To earn $5,000 a day?

And, Ben, the other part of that is the banking side. Banks are not lending to drybulk shipping. You look at -- you take a pool of banks, I would bet you maybe 25% are actually still lending and they're focusing on LNG and offshore.

And the next question comes from Michael Webber with Wells Fargo.

So I just wanted to, I guess, go over a couple of questions. A lot have already been asked. But with regards to equity, I mean, you guys already clearly came in and raised some earlier in the year, and some of that was just to lower your overall interest rate, but if I think about the next 3 to 6 months and just kind of given your outlook, would you guys say that you guys are pretty satiated right now from an equity perspective or would you still look to come out and do something opportunistic if the opportunity arise? And I guess -- over the next 3 or 6 months, or as much visibility as you have?

Mike, I think we're good for the time being.

Okay. That's helpful. John, you mentioned earlier some preliminary conversations with your lenders and we've kind of -- we've seen this with some other companies as well. And you mentioned having a pretty long lead time. I mean, are they willing to come in and have really concrete conversations with you guys right now? Or are you guys still kind of back burner considering your cash position and the fact that you do have a little bit of a window here?

No. Concrete conversations, but like I said, beyond that, I just can't comment.

Sure. All right. The next one, I guess, is actually for Peter and maybe just kind of an open-ended, kind of high-level question. You guys give a lot of detail in your deck and in your presentation, it's appreciated, and it clearly it's a pretty complex supply and demand balance. So I'll try to put this as simply as I can. Peter, when do you think we're going to see a turn in the drybulk market? And are you factoring in that turn when you think about managing your liquidity over the next [indiscernible] years?

Well, let me answer the first part first. I wish I knew when there's going to be a turn in the drybulk market. I mean, I think, all joking aside, because look, I obviously don't know and I'm not purporting to know. I think we're bouncing around the bottom here. I think we've definitely hit bottom and it's just a matter now of how long this bottom lasts. We're starting to see signs. We're going to see the fundamentals. You see orders not coming in. You see scrapping at just tremendous levels. And then you see what the need for iron ore and coal are. And especially, when you look towards the back end of this year, I mean, I'm not predicting a boom, but I think things will begin to get better in the back end, the third quarter of this year. We obviously look at that, but as you know, we're always trying to be ahead of the curve when it comes to whatever we do. And so we're obviously having discussions to try and preserve our liquidity as best we can.

Fair enough. I guess, the second part to that question, when you think about you've got an 18-month to 2-year window here, and obviously, you've got a lot of debt coming due in about 3 years on. Are you factoring in an improvement when you're thinking about managing that liquidity?

No. We're doing it -- we're managing it and having our discussions with the banks as if it's going to stay like this forever.

Okay. All right. That's helpful. And I guess, just finally, and maybe this is -- is one for Gerry. As you think about, I guess, your chartering strategy here and you're obviously getting more short term, which makes sense considering how well long term rates are here. But you've got a lot of vessels rolling off this year and into early 2013. Is there a baseline level of longer-term employment you guys would look at? I mean, it comes off pretty hard. I mean, can you envision a situation in which 80 to 85-plus of your fleet is trading in the spot market or more? I guess, how do you think about that over the next years?

No. I don't think so. I don't see that. John?

Well, no. I mean, that's, basically, what it is right now. You've got 80% trading in the spot market, and at these rates, we don't see why you would fix at these rates.

Right. Okay. So, take -- if you look at 2013, we've got 7% by charter coverage for you in 2013, I mean, could it get north of 90%? Or is there a baseline level at all from just a cash flow perspective you guys would want to keep or you don't look at it that way?

We don't look at it that way. If rates improve…

We'll put the whole fleet away.

Exactly.

And our next question comes from Chris Wetherbee with Citi.

Pretty much everything has been asked and answered, I guess. Just on the back of Mike's question there, when you think about the potential for an increase in rates, can you give us a sense of what kind of level you would look at before you started thinking about putting things away? Does it need to get to kind of that $22,000 a day level where you guys are free cash flow breakeven with the amortization schedule? I guess, how do you think about that?

We want to be above breakeven.

And ladies and gentlemen, that does conclude our conference for today. We thank you all for joining.