Good morning, ladies and gentlemen, and welcome to the Genco Shipping & Trading Limited Second Quarter 2013 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 3132802. At this time, I will turn the conference over to the company. Please go ahead.

Good morning. Before we begin our presentation, I'll 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 and terms of similar meaning in connection with a 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, 2012, 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 second quarter of 2013 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 second 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 months period ended June 30, 2013. Following this, I will discuss the industry's fundamentals. John, Peter and I will then be happy to take your questions. During the second quarter, Genco continued to operate a large and modern drybulk fleet and a cost effect of mining [ph] while preserving the ability to capitalize on positive long-term industry fundamentals on providing high-quality service for our leading customers. During the second quarter, we continued to employ a majority of our vessels on short term or spot market related contracts with credit-worthy counterparties. This opportunistic tank charter approach positions Genco to benefit from a rising freight rate environment and combined with our efficient cost structure, expand the company's future earnings potential when the market conditions improve. Moving to Slide 6. We provide a summary of our fleet. Genco's diversified approach of owning and operating a modern, high-quality fleet across the entire bulk sector strengthens the company's ability to deliver superior customer service to multi-national charters and take advantage of the long-term demand for essential commodities in China, India and other developing countries. 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. I will now call -- turn the call over to John.

Thank you, Gerry. Turning to Slide 8. I will begin by providing an overview of our financial results for the second quarter and 6 months ended June 30, 2013. Please note that we are reporting our financials on a consolidated basis as a result of our equity ownership in Baltic Trading. For the 3- and 6-month period ended June 30, 2013, we recorded total revenues of $45.8 million and $86.2 million, respectively. This compares to the revenues for the second quarter of 2012 and 6 months ended June 30, 2012, of $62.9 million and $122.8 million, respectively. The decrease in total revenues for the second quarter of 2013, compared to the prior year period is primarily due to lower charter rates achieved by the majority of our vessels. The net loss attributable to Genco for the second quarter of 2013 was $45.4 million or $1.05 basic and diluted loss per share. The net loss attributable to Genco for the 6 months ended June 30, 2013, was $93.5 million or $2.17 basic and diluted loss per share. This compares to a net loss attributable to Genco of $27.7 million or $0.65 basic and diluted loss per share for the second quarter of 2012 and a net loss attributable to Genco of $60.8 million or $1.50 basic and diluted loss per share for the 6-month period ended June 30, 2012. Next, on Slide 9. You will see the income statement effects of Baltic Trading's consolidation with Genco Shipping & Trading. This will provide you with a more detailed breakdown of the financial performance of the 2 separate companies. Key consolidated balance sheet and other items, as presented in Slide 10, include the following. Our cash position, including restricted cash, was $79.7 million as of June 30, 2013. Excluding that consolidation of Baltic…

Thank you, John. I'll start with Slide 14, which points to the drybulk indices. Represented on this slide is the overall drybulk index. During April and May, the BDI remained at similar levels to those experienced during the first quarter. We believe this was predominantly due to excess vessel supply exasperated by the front-loaded nature of the order book, lower iron ore output from Brazil and the winding down of the South American green season. As the second quarter progressed, the pace of newbuilding vessel deliveries continued on a downward trajectory. As fleet growth flowed and more fixture activity surfaced in the market, the BDI began to ascend. The index increased from June 6 through the end of the second quarter reaching a 213 [ph] -- a high of 1,179, a level not seen since January 2012. On Slide 15, we summarize some of the contributing factors to the rise in the BDI, as well as other recent developments in the drybulk freight market. Starting on the supply side, we have seen ongoing deceleration of newbuilding deliveries since the peak in June of 2012. For the first half of 2013, deliveries were 43% lower as compared to the same period last year. Partially offsetting vessel deliveries to date as being demolition, which although has not been as robust this period compared to the record-setting year of 2012, it still actively contributes to reducing vessel supply growth. 13.2 million deadweight were scrapped through the first half of 2013, helping to lower net additions by 50% as compared to the first half of 2012. Furthermore, although the number of newbuilding orders has increased since the beginning of the year, the overall drybulk order book as a percentage of the fleet remains at 18%, its lowest level in over 8 years. Slippage continues…

[Operator Instructions] Our first question will come from Doug Mavrinac of Jefferies.

I just had a handful of follow-up questions. First, as we've seen, the market has firmed up significantly since the second quarter. Capesize rates today are back above $12,000 per day. As you look at the state of the market, the drybulk shipping market right now, in the middle of the summer, what does it tell you about how it should respond to some of the upcoming events, like increasing iron ore production capacity, this seasonal grain trade? At $12,000 a day in the middle of the summer, does that tell you that the market is pretty tight and should react well? Or what's your take on the current state of the market?

Yes, I mean -- Doug, this is John. Yes, I mean, clearly, we usually have a lull during the summer. I think what's different this year is that, I think, one, you've had a very large tail off in newbuilding deliveries and net deliveries, that's one -- been one positive aspect. Also the inventory numbers at the port from China for iron ore are actually rather low. So you are seeing mining or fuel companies buying ahead of what would typically be a strong late third quarter, fourth quarter season, so that's going on as well. I think it actually bodes pretty well. I mean, if you look at what the FFA curve is showing for fourth quarter, I think it's around $17,000 today for Capesize rate, it's encouraging. I still think we have a little ways to go, but clearly, the dropoff in the number of deliveries that we've seen so far this year and then -- and project to going into next year is a big factor because demand growth continues to run at 6% to 7%.

Right. And actually, that's kind of the segue into my second question, is when we look at kind of some of the things that are being said about the market, kind of reading the tea leaves, obviously, rates are strengthening, showing some resiliency in the market, FFAs are in contango, showing that rates are going to be increasing into the end of the year, are you guys sensing any sentiment change on the part of some of the market participants like the charters, that for the last 4, 5 years, have been at this mindset that, "Hey, the drybulk market's going to continue to languish"? Now that we're starting to see signs of improvement not just in rates, but in other things, have you sense any sort of kind of getting over the hump sentiment change for some of the guys on the other side of the negotiating table, the charterers?

Yes, definitely. I mean, I think -- look, the interesting thing is that you've been seeing some 3-year charters being done and conclude in the market, which -- that part of the market has been absent for quite a while and I think we've seen 2 of those done over the last couple of months.

Got you. And then just one final question on this topic. As it relates to that sentiment change and although -- almost daily we're reading positive headlines about expectations for the Cape market recovering in 2014, you guys actively talked with a lot of commercial lenders, your own commercial lenders. Would you say that those guys too are seeing the headlines, reading the headlines? And are they kind of believing as well that the market is on the cusp of doing better?

I mean, I don't want to speak necessarily for banks. But what we have seen is certainly more appetite to look at drybulk again from some of the existing strong lenders, some of the larger banks. Clearly though, there is a -- there have been a lot of banks that have just exited shipping. But yes, I think the larger banks, it seems, are more positive on drybulk.

Got you. And then just a couple of questions on the supply side before I turn it over. First, people earlier in the year, were talking about all the increase in newbuilding order activity. But as you guys pointed out, the order book is still quite small. If you had to place -- so my question is if you had to place an order today for a new Capesize carrier at a reputable yard, one where you're going to get a refund guarantee and all that stuff, when would you expect to most likely see that delivery?

Yes. And you just hit on the key point, the reputable yard. Even in China, to be at a reputable yard, you're probably -- maybe end of 2015, you could get a slot. I think it's more likely early 2016. And listen, the guys on the product carrier side, the gas carrier side, container ships, even the crew tankers, have helped that out by filling up slots.

Got you. That's helpful. And then final question, Gerry talked about it in his industry comments. We have seen scrapping slowing this year just because the market outlook has gotten better. But the Chinese, a couple of weeks ago, introduced another initiative. Not only they're trying to stimulate their economy through rail spending, but they're also trying to support some of the domestic shipowners by requiring ships, Chinese flag ships that are 20 years of age or older to be scrapped, would that affect the global market? Or how would that affect the global market in your view if you see a lot of older Chinese ships leaving the trade?

Yes. I mean, Doug, first of all, I had -- I'm still a little fuzzy on the specifics of that, but I certainly have read the same news report, I think, that you're referring to. If it does -- in fact, there is a subsidy program for that. Keep in mind, a lot of those 20-year-old ships came from the international flag fleet to begin with. So as those ships leave, it stands to reason that more ships -- because obviously, the Chinese domestic trade is still thriving. It seems to reason that more ships can come out of the international trade and go in 15-year-old ships and go into that Chinese domestic trade, which would be helpful.

Our next question will come from Christian Wetherbee of Citi.

This is Seth in for Chris. If I could start out with the strength you've seen in the period markets, should we expect you to take a more proactive approach in chartering for the longer term going forward, or could you guys still make sense to keep things -- keep charters more short term duration and position yourselves for a potential further run up in rates, as mentioned previously, if we get a little bit of a seasonal uptake? Are you holding back or should we expect a bit more longer-term chartering going forward?

No, we're holding back. We still think there is room going -- certainly going into 2014.

Okay. I'll just switch to the supply side. I think that we have seen a fairly robust pace of newbuild orderings this year and it definitely seems like July was a bit of a stronger month, with some carriers taking a more speculative position in purchasing tonnage. Just curious to get your take, do you think that's sustainable or do you think it could give an increase with the uptick in rates? It just feels like the pace of new supply orders has increased and was wondering how you see that trended over the next -- through the back of the year.

Well, I mean, listen, you're right. I mean, obviously, going from a virtual standstill to some newbuilding orders is -- it makes people stand up and take notice. But if you look at Slide 19 in our presentation, in the lower left, the current newbuilding order book is in there, and it basically doesn't move the needle in terms of percentages of fleet growth in '15 and '16. As I said earlier, I don't think there's a lot of room to do much more until the end of '15. I obviously think it's positive that some people are ordering and obviously have some sort of support from banks to do this. But I still think, on the second hand side, there's plenty of tonnage to buy. And the nice thing about buying secondhand tonnage today is that you can capture the potential upside for '14 and '15, which you're not going to be able to do with new builds.

Maybe -- that's a good point, maybe you could comment on that. It seems like, at the beginning of the year, the incremental tonnage being ordered was a bit more consolidated amongst the smaller number of carriers. Now, the new orders are seemingly coming from a wider base of carriers. What is -- what do you think the compelling reason is for the wider number of industry participants to go into the newbuild, new tonnage market instead of the sale and purchase market?

I mean, look, it's hard to speak. I think everybody has their own rationale as to why to go into [ph] newbuildings. Newbuilding is just like the secondhand tonnage that are at historically lows from a value standpoint. On the Capesize sector, we're definitely seeing some ordering there. And I think that probably had to do with the fact that there aren't a lot of secondhand Capes that are available for sale. So the way to get exposure to that market today is to order new builds. But it's hard for me to speak individually on what people are -- what their agenda is.

Okay. And lastly, a follow-up. It seems like you had a bit of a boost from -- in financing cash flows during the quarter. Could you just remind us what that was? I think it was like $20 million.

Yes, I assume that you're referring to the offering from Baltic. I assume that's what that would be.

Yes. Okay. I just wanted to make sure I wasn't missing something within the cash flow statement.

[Operator Instructions] We'll go next to Justin Yagerman of Deutsche Bank.

It's actually Josh Katzeff on for Justin. I guess a lot has happened since last quarter's call. In the drybulk market, we saw one public company follow [ph] but investor sentiment in rates have certainly materially improved. We're seeing a lot more investment in this space. Can you maybe provide us an update with some of your conversations with your traditional or nontraditional lenders?

Well, I mean, at Genco, we've obviously been very straightforward that we need to sit down and speak to our lenders because we're going to have some issues in the first quarter, potentially, with covenants and amortization. As I said in the last call, those conversations are ongoing. I don't really have a specific update at this point. So that's how it is at Genco. And at Baltic, you saw that we raised additional bank debt that to fund 2 acquisitions that we have going on there.

Great. And just to clarify, the only covenant test that you currently have is just a minimum cash test, and you still have significant headroom there, right?

That is correct. We have a -- it's basically $39 million is the minimum cash requirement under that covenant, and we also have a debt to net worth test or debt to total capital test, which we're also inside of.

Got it. I guess, maybe switching to the broader market. I know this was at Baltic, but you guys acquired some Handysize ships. Can you maybe talk about the rationale with purchasing Handysizes versus the larger Capes?

I'm not going to say that it's necessarily a rationale. We're positive on Capesize as well. I think we're reasonably positive again, going into '14 and '15 on the overall market. That was a transaction that was done off market, privately. We're pleased with it. And at Baltic, we hopefully expect to take advantage of more of those types of transactions.

Got it. And just one question before I turn it over. You've mentioned that you've seen some pictures for some 3-year time charters, so maybe talk about what rates those were done at.

Yes, sure. Let me just -- give me one second here. Just one second, Josh. Capes, there were -- that was one done, I think, around 14.5 and there was another one done slightly higher than that, 14.750.

Great. Thank you. And that does conclude today's Genco Shipping & Trading Limited conference call. You all have a great day.