Good morning, ladies and gentlemen, and welcome to the Genco Shipping & Trading Limited Third Quarter Earnings 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, 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 anytime during the next two weeks by dialing 888-203-1112 or 719-457-0820 and entering the passcode 8299019. At this time, I will 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 Form 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 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, 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, 2016, and the company’s report subsequently filed with the SEC. At this time, I would like to introduce John Wobensmith, Chief Executive Officer of Genco Shipping & Trading Limited.

Good morning. Welcome to Genco’s third quarter 2017 conference call. I will begin today’s call by reviewing our third quarter 2017 and year-to-date highlights. We will then discuss our financial results for the quarter and the industry’s current fundamentals, and then open up the call for questions. Turning to Slide 5. We reviewed Genco’s third quarter highlights. During the third quarter, the drybulk market continue to come into balance, further strengthening as the quarter progressed. Demand for seaborne iron ore, coal and minor bulk cargoes remained firm, which combined with marginal net fleet growth, led to an improved freight rate environment. These market developments together with the successful implementation of our new commercial operating platform enabled Genco to achieve improved year-over-year results and grow our cash position to $185 million. For the third quarter, we recorded a net loss of $31.2 million, or $0.90 basic and diluted loss per share, or an adjusted net loss of $12.5 million, or $0.36 basic and diluted net loss per share, excluding the $18.7 million non-cash impairment charge. Following the steps we took earlier in the year to bolster our minor bulk operations, we recently established a Singapore presence, which will enable us to further expand our in-house commercial operating platform and grow our footprint globally, while strengthening relationships with leading iron ore producers and charters worldwide through our full-scale logistics solution. On Slide 6, we have outlined the progress we have made further enhancing our industry-leading operating platform. In addition to our strong balance sheet and our cost leadership, our success transforming Genco’s commercial platform to an active owner model offering a full-scale logistics solution to cargo owners has positioned us to more fully capitalize on a drybulk recovery. We are pleased with the progress we have made with our commercial initiatives, which…

Thank you, John. Turning to Slide 12, our financial results are presented. For the third quarter or nine months ended September 30, 2017, the company generated revenues of $51.2 million and $134.8 million, respectively. This compares with revenues for the third quarter of 2016 and the nine months ended September 30, 2016 of $38.9 million and $91.7 million, respectively. The increased revenues in both 2017 periods were primarily a result of higher spot market rates achieved by the majority of the vessels in our fleet versus the same periods last year. In the most recent quarter, increased revenue was partially offset by the operation of fewer vessels as compared to the 2016 third quarter. For the third quarter of 2017, the company recorded a net loss of $31.2 million, or $0.90 basic and diluted loss per share. Adjusted net loss is $12.5 million, or $0.36 basic and diluted loss per share, excluding $18.7 million of non-cash impairment charges. This compares to a net loss of $27.5 million, or $3.80 basic and diluted loss per share for the third quarter of 2016. For the first nine months of this year, the company recorded a net loss of $61.3 million, or $1.80 basic and diluted loss per share. This compares to a net loss of $192.7 million, or $26.65 basic and diluted loss per share for the first nine months of 2016. Turning to Slide 13, we present key balance sheet items as of September 30, 2017. Our cash position, including restricted cash was $185.1 million. Our total assets were $1.5 billion, which consists primarily of the vessels in our fleet and cash. Our total debt outstanding gross of $9.6 million of unamortized debt issuance costs was $526.6 million as of September 30, 2017. Moving to Slide 14. Our utilization rate was…

Thank you, Apostolos. I’ll begin with Slide 18, which represents the Baltic Dry Index. The BDI began the third quarter with marginal increases in July. However, as the quarter progressed, the BDI found meaningful support. After beginning the quarter at under 900 points, the BDI rose to over 1,500 by the end of September, representing the first time crossing this threshold since March of 2014. Turning to Slide 19, we outlined some of the key market developments influencing this increase in freight rates. Record steel production in China continues to be the preeminent driver of the drybulk market. Strong output has been incentivized by high steel mill margins, which has led to heightened demand for high-quality seaborne iron ore. A reduction of excess steel capacity among lower-quality producers has resulted in augmented output from larger steel mills. This has lead China’s steel production to divert from its traditional seasonality as production has continued at a strong pace without the lull typically seen during this period. Continued strong steel output has been met by all-time high Chinese iron ore imports. Specifically, China’s imports for the commodity have risen by 7% year-on-year during the first nine months of 2017, including a mark of 102.8 million tons in September, the first time that China’s iron ore imports exceeded the 100 million ton threshold. Ample supply of iron ore, particularly from Australia and Brazil has aided China’s appetite for seaborne cargoes. With Vale’s continued ramp up of their S11D mine, we anticipate cargo volume to rise through the end of the year and into 2018. Vale estimates 2018 iron ore production will hit 390 million tons, compared to their 2017 target of approximately 360 million tons, representing an incremental 30 million tons of iron ore that could hit the market from the long ton…

[Operator Instructions] And we’ll take our first question from Doug Mavrinac from Jefferies.

Great. Thank you. Good morning, guys. John, I just had a few follow-ups for you this morning, with the first one being one of the last points that you made in terms of industry supply growth and the outlook. You mentioned how newbuilding activity has picked up a bit here, and it’s not a surprise given how strong the market is. And so my question is, when we look at how activities picked up, which is really kind of backfilling deliveries when you look at how the order book itself hasn’t really changed. But can you give us an update as far as kind of things that affect the ability to place newbuilding orders, like are the yards changing their ability to provide refund guarantees? Does financing availability change in anyway, such that when you look at – you’ve been afraid to strengthen, could those types of factors continue to suppress what ordering would have otherwise been?

Yes. I mean, Doug, there are still, I would say, large issues in terms of being able to successfully order a vessel, which we think are beneficial and keeps a lid on newbuildings, particularly in China. There is still a real difficulty to get refund guarantees in place on the back of contracts. Bank financing, still a very, very tight market. And I think that – I don’t see that changing. I do think it’s interesting. A lot of the growth in the order book has actually come from the Vale front on the VLOCs. And we all know there is a significant number of these 46, 47 that are going to have to come out of the market over the next, whatever couple of years.

All right.

And then the only other thing I would note is, you’re really talking about 2020 at this point.

Right.

[Multiple Speakers] orders shipped. So I think you’ve got pretty clear visibility going into 2018 to 2019, and it is very possibly strategic [ph] growth of only really 1% to 2% in 2018 against the demand growth backdrop of, at least 3%. So I think…

Yes. And that’s what…

Yes, go ahead.

I was saying that’s what I was going to ask you is, when you look at your chart up on Page 22, you kind of see the uptick in Q4 of 2020. So is that whenever you should expect to see a delivery take place if an order were to be placed today? And that’s kind of almost even three years worth of runway, especially if you kind of consider that those could be some replacement types of orders for those Vale ships and whatnot. Is that a fair representation of kind of what the supply outlook is?

Yes. I think, yes, absolutely today. And if you just look at the order book of 66 million deadweight ton versus 56 million deadweight ton of a fleet that’s 20 years old, there is – this is more of a replacement than real growth.

Right. Gotcha. All right. Very helpful, John. Thank you. And then switching gears a bit, so obviously spot rates have been strong. We kind of see it in a variety of ways. One way I’m trying to figure out if we’ve seen it yet is, has that increase in spot charter activity and spot rates translate to an increase in the appetite from charters to secure time charters at reasonable rates? I’m sure you guys want to hawk in time charters at very depressed rates. But have we seen that materialize yet into more reasonable time charter rates?

Yes. I mean, look, I think recently a little bit of a pullback in the one-year market, particularly on the – in the Capesize sector in the sense that there aren’t as many one-year deals being done. But again, going into next year, the prospects look pretty favorable…

Right.

…particularly on the larger ships, but also the smaller ships. So I would expect that market to become more liquid again.

Right, right, right, gotcha. Helpful. And then just kind of as a follow-up to that, I mean, you guys have clearly been doing a lot of strategic things, one of which is your in-house management, which I’m going to get to in a second. But when you think about the strategy of employing your fleet, if time charter rates were to strengthen in 2018, would you entertain increasing your fixed rate time charter contract coverage? And if so, would it be more of an opportunistic thing, or would you say, okay, well, I want to keep Capesize spot exposure, but I’m okay locking in fixed rate time charters on some of the smaller ships. So would that be something you entertain? And how would you think about strategically employing your fleet in a strengthening time charter price environment?

I would say, it would be highly opportunistic. I think, we have a definite bias towards staying in the short-term market. We continue to see, as I’ve noted earlier, real growth prospects in the iron ore trade in particular, which will benefit our Capesize and growth side on demand side for the smaller ships. So I’m not sure, I think, next year is more of a – just a strengthening recovery, and then you start – you get into 2019 and depending where our rates are, maybe then you start to look at fixing something out longer-term. But for the time being, we are positive on the market. And so I don’t think you will see us putting things away at this point for longer-term.

Gotcha. Very helpful.

The other thing I would add is, just the platform that we’ve put in place on the minor bulk fleet, we are seeing real benefits in going directly with cargo rather than just being a tonnage provider. So to take that off the table and lock ships away right now or even 2018 doesn’t make any sense to us.

Gotcha. Very helpful, John. And then two more questions, one of which you just kind of answered. And that is, when you look at kind of some of your strategic decisions in terms of getting into the minor bulks and having someone head that up. And then you mentioned in your press release, the hiring of a Head of Major Bulks and then the opening of a Singapore office. It sounded like you already answered it. But are you already starting to see some tangible signs and benefits of some of those strategic moves?

Yes, for sure. So the Singapore office has just opened. So good stuff to come out of there.

Right.

On the minor bulk side, I mean, you can just see, if you look at our Q4 numbers on Page seven, we’ve got a substantial increase over the third quarter. We are still taking ships back from the pool and they are being redelivered in the Pacific. That should all be done by the middle of November. But we are still making investments to move, particularly those minor bulk ships from the Pacific into the Atlantic. But overall, we’re seeing very strong fixtures in the fourth quarter, particularly the ships that we’ve already moved into the Atlantic, it’s worked out very well.

Gotcha. Very good. And then final question for you before I turn it over. When we look at the market and we look at how the market has been impacting your cash position, cash has been building and we believe that the outlook is fairly attractive for 2018 and 2019. So given kind of what the rates have already done to your cash position and against the backdrop where you have really no real CapEx commitments to speak of other than maintenance, and then you also have a relatively strong balance sheet. So how do you think about – what are you going to do with some of that cash? And basically, capital allocation decision going forward, I mean, does M&A start to enter the equation? So how do you think about kind of how you’re going to position yourself kind of against that seemingly inevitable backdrop?

Look, I think that again, if you just go to what I’ve said in the beginning of this presentation and you look at what the company has been focused on, we started out in October of last year strengthening this balance sheet. We then focused more and more on the comp side of equation – on the comp side of the equation, which we’re very happy with at this point, and then we turned to the commercial platform, which over a period of six to eight months, we have completely hit the reset button on. It’s a brand-new commercial platform, a brand-new way of doing business for the company kind of in terms of moving from a tonnage provider to dealing directly with cargo and being an operator. And now, we are at the point where, as you said, is M&A and growing. So those are the opportunities that we are focused on right now. And we believe from an asset value standpoint, we are still at historical lows, and there – and it’s a very attractive time to grow, particularly because we are in the beginnings of the recovery for drybulk.

Gotcha. All very helpful, John. Thank you for the time.

Thank you, Doug.

We’ll take our next question from Magnus Fyhr with Seaport Global.

Hey, good morning. Just two questions.

Good morning, Magnus.

Good morning. Just first question on your commercial strategy. I mean, you’ve made some investments here. You mentioned that you’re seeing some early signs of the benefit of the strategy. Is there any way you can quantify the investments that you made? And also, what kind of returns do you plan to get from these investments? What kind of premium do you think you can get over the benchmarks?

So first of all, yes. I think these are – the investments that we’ve made, which from a G&A standpoint are actually not all that substantial. I think, what you need to keep in mind is, we were incurring about $3 million a year in fees that were being paid to pools, which we will not be incurring going forward. So that’s been a big benefit. The Singapore office is, maybe it’s another per year $500,000, so it’s not all that much. There’s – as I said, the $3 million in savings on the pool side has been a big benefit. We still have several vessels that, particularly in the Handysize that we are taking back from the pools. So I think, it’s tough to measure returns until we get all those vessels back, which as I said before will be mid-November. But if you look at what we’ve been doing in the fourth quarter and you look at some of the fixtures that are detailed in the back of the presentation, I think, you kind of – you already see the benefit. I mean, you look at some of these fixtures we’ve done out of the U.S. Gulf, it’s $24,000 a day, $20,000 a day on the Ultramax, Supramax. These are rates that are significantly above the index. And I think you really start to see the rubber hit the road, if you will, in the fourth quarter this year going into first quarter next year.

Okay, great. And are there any additional investments that you plan to make as far as new offices, other retail offices?

Not at the time being. We’ve got a full team in New York on the minor bulk side and we will be moving the Capesize operations out to Singapore.

All right, great. And just one last question. How does the new upcoming regulations play into your fleet renewal strategy? I’m sure, it’s hard to find new modern ships available in the S&P market. And how does that compare to buying older ships, maybe five-year-plus and upgrade them?

Yes. First of all, there actually is – there’s a pretty liquid S&P market right now and there are newer ships for sale. They don’t necessarily tend to be the transactions that you see from the broker that everybody looks at, the one ship here and the one ship there, and that’s not something we are interested in. There are larger fleets that are five years and newer, and I think you will see us concentrate on that. From – first, the standpoint of just fleet renewal for Genco. But as you said, the – as regulations come in, you certainly want to be more and more efficient on the fuel consumption side.

And how do you plan, I mean, with the fleet that’s a little bit older, I know, you’ve done a lot of upgrades to some of the vessels. But two, three years away, I guess, two years away to the new regulations, how do you plan to address that? Are you just going to burn the new fuel, or what’s the thoughts there?

Yes. I mean, at this point, we certainly plan on burning the ultra-low-sulfur fuel. We think that cost will be passed on to the cargo interest and will not be an increased cost to any shipping company in the drybulk space. It remains to be seen, but it’s obviously highly possible, particularly if the price of that fuel remains high that we do see a slowdown in the global fleet of drybulk shipping, which would obviously be helpful on the rate side.

Yes. I guess, I’m actually surprised that not – people talk more about the incremental environmental savings you can do by slowing down the global fleet. So anyway, that’s it for me. Thank you.

Okay. Thanks, Magnus.

[Operator Instructions] That concludes today’s conference. Thank you for your participation. You may now disconnect.