Good morning, ladies and gentlemen and welcome to the Genco Shipping & Trading Limited Third Quarter 2022 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 anytime during the next 2 weeks by dialing 888-583-1035 and entering the passcode 8740274. 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 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, 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, 2021 and the company’s reports on Form 10-Q and Form 8-K 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, everyone. Welcome to Genco’s third quarter 2022 conference call. I will begin today’s call by reviewing our Q3 2022 and year-to-date highlights, providing an update on our comprehensive value strategy, financial results for the quarter and the industry’s current fundamentals before opening the call up for questions. For additional information, please also refer to our earnings presentation posted on our website. During the third quarter of 2022, Genco continued to achieve strong financial results. Our earnings were supported by our sixth consecutive quarter of fleet TCE greater than $20,000 per day combined with a sequential decline in operating costs. Notably, we declared a dividend of $0.78 per share for the third quarter of 2022, representing an increase of 56% compared to Q2 and an annualized yield of 22% based on our current share price. We have now paid 13 consecutive quarterly dividends totaling $3.795 per share. Since implementing our value strategy, which is focused on paying meaningful and sustainable dividends throughout the cycles, deleveraging and positioning Genco to capitalize on compelling growth opportunities, we have declared four quarterly dividends totaling $2.74 per share per yield of 22%. During the quarter, we continue to successfully execute core pillars of our value strategy as we proactively paid down debt and further reduced our cash flow breakeven levels for the benefit of shareholders. Continuing to pay down debt during a time that we do not have any mandatory debt repayments is consistent with our medium-term goal to reduce our net debt position to zero and has enabled us to achieve significant balance sheet strength and industry low cash flow breakeven levels. We believe we have the most compelling risk reward model in the drybulk public markets. Irrespective of the broader macro environment, we remain in a strong position to pay sizeable…

Thank you, John. During the third quarter, we continue to record strong earnings and voluntarily paid down debt as we maintain a commitment to reducing financial leverage and our cash flow breakeven rates. On a cumulative basis since the start of 2021, we paid down $270 million of debt or 60% of our debt levels, enabling Genco to achieve a low net loan to value of 11%. Notably, the current scrap value of our fleet is over 2x our net outstanding. For the third quarter of 2022, we declared a $0.78 per share dividend, representing an annualized yield of 22%. While revenues remain firm that 56% increase in the quarterly dividend from Q2 to Q3 reflected lower operating expenses in the latter period. Specifically, drydocking CapEx declined to $7.8 million from $22.6 million in the second quarter. Furthermore, our vessel operating expenses decreased by 25% to $22.1 million in Q3. Despite the large quarter-over-quarter decline, we continue to invest in upgrading select vessels within our fleet. While the overall operating environment related to cost remains challenging and difficult to predict given various macroeconomic factors, our success in completing the transition of our fleet out of Chinese crews and the progress in upgrading select vessels following our Technical Manager transition will help in maintaining comparatively lower crude change expenses, including COVID-19 cost as well as spare and store expenses for the balance of the year. Four Q3 2022, the company recorded net income of $40.8 million or $0.96 basic and $0.95 diluted earnings per share. Adjusted net income for the quarter was $1 per share when excluding unrealized losses and fuel hedges of $1.9 million. Our third quarter EBITDA adjusted was $60.3 million, bringing our 9 months 2022 adjusted EBITDA to $181 million. As of September 30, 2022, our cash position…

Thank you, Apostolos. During the third quarter of 2022, Capesize and Supramax freight rates counter seasonally declined from Q2 levels, a development that hasn’t materialized since 2012. Despite the decline, freight rates remained at firm levels overall, with non-scrubber fitted Capesize and Supramax indices averaging nearly $14,000 and $20,000 per day respectively during Q3. We believe the primary drivers behind this freight rate development were restrictive COVID-related policies imposed in China, the lack of the usual Ukrainian grain export season, and unwinding of congestion in certain ports and underperforming Brazilian iron ore shipments. At the start of, Q4 we saw Capesize rates strengthened over $20,000 per day for the first time since July as inclement weather in China delayed vessel schedules, resulting in a shortage of tonnage availability. We believe this type of market reaction to seemingly minor weather-related events highlights the overall tightness in the supply and demand balance prevalent in the drybulk freight market. We expect this dynamic to persist in the years to come given the low level of capacity additions expected over the next 2 years. Regarding energy markets, we continue to see tightness globally as more regions turn towards coal imports. We have seen a rerouting of cargo flows as Russia exports more coal to China and India, while Europe has sourced more coal from the U.S., Colombia and Australia. Furthermore, after an expected contraction of steel demand in 2022, the World Steel Association forecasts a return to growth next year, which we believe will support demand for key commodities such as iron ore and coal. On the grain side, the third quarter typically represents a period in between the South and North American export seasons, in which the Black Sea regions augment its shipments. In July, UN brokered deals saw the establishment of a grain corridor to allow for grain shipments from the region, which has resulted in shipments of approximately 10 million tons to-date. However, at the end of October, Russia temporarily ceased their participation in the agreement only to rejoin days later. With the initial 120-day agreements set to expire on November 19, negotiations for an extension continuing, there remains uncertainty around exports from the Black Sea going forward. Regarding the supply side, net fleet growth in the year-to-date is approximately 2.4%. The historically low order book as a percentage of the fleet of just 7% as well as near-term and longer term environmental regulations are expected to keep net fleet growth low in the coming years. Additionally, high scrap prices continue to be attracted to owners of older tonnage, considering the increased level of investment these ships require in light of these upcoming regulations. Overall, we believe these positive supply and demand dynamics provide a solid foundation for the drybulk market and lead to a low threshold for demand growth back to exceed in order to improve fleet-wide utilization in freight rates. This concludes our presentation. We will now be happy to take your questions.

Thank you, sir. [Operator Instructions] Our first question comes from Omar Nokta from Jefferies. Please go ahead.

Hi, thank you. Hey, guys, good morning. Just a couple of questions. Maybe just first off, I did want to ask about the Ultra Supra performance during the quarter, I would say it’s pretty strong and comes without the benefit of having scrubbers. And so at first I thought it was maybe related to the time charters you guys had put in place, but it does feel like maybe you had a pretty solid spot performance. Can you maybe just kind of go over that and how you drove such upside in the quarter?

Yes, thanks, Omar. Good morning. So you are correct, our Ultra Supra sector did very well by about $7,000 a day over and above the industry rates for the BSI for the quarter. If you actually look at the numbers, I think our spot rates on our Ultras were $26,668 and the benchmark was somewhere around $19,000 a day. We did have some period coverage on the Ultra Supras but that was actually at a lower rate of $23,878. So what actually drove that particular spot rate outperformance was – and I believe we talked about this a little bit on the on the last call, but when we saw obviously the unfortunate situation happening in Ukraine, we were very skeptical as to what grain movements would be happening in the third quarter, which is typically a high season for the Black Sea. And so we purposely began taking forward coverage for the third and fourth quarter, because we didn’t really believe that there was going to be a lot of grain coming out. Unfortunately, for the grain side that has occurred fortunately for us, we saw it ahead of time and we took action on it. So, that’s really what led to led to that outperformance. And as you know, we have a very active commercial platform. So, we have the ability to take those forward cargo listings, which we obviously did this quarter and we’ve done in the past and we will continue to do when the opportunities arise.

Thanks, John. Okay. Yes, I recall that makes sense. And then maybe just more broadly wanted to ask about capital allocation as we go into next year, the past couple of years, you have been pretty diligent about paying down debt, reserving cash and also paying out a healthy dividend. In ‘23, the drydockings are supposed to come down I think you have in the release $5.7 million, which compares to I think $40 million for this year. Given that decline, do you see yourselves adjusting the reserve for ‘23, in terms of how much you hold back from the payout?

Yes, so a couple of things. There is – and maybe I will go into a little detail and let you know how the sausage is made so to speak. If we look at projections going into 2023, which is always a little bit of a dangerous thing to do to try to actually project freight rates. I think, we have a pretty good sense directionally where things will go. But trying to predict day to day rates can be difficult. So, we look at a variety of things as we look forward, we look at the SSA curve, we have a series of third-party data providers that we use. And right now, there is a big discrepancy between where the SSA curve is versus the data providers meaning the data providers are significantly higher. We tend to – well, we feel that FFA curve is too low at this point. And so what we are doing is towards the end of the year, as we get into December, we will have another board meeting to assess our views on 2023. And at that point, we will take a look at that reserve as well as what debt pre-payments we want to do, because keep in mind, we don’t have any mandatory debt repayments right now. So we will assess at the end of the year. And my goal is to let the market know where we come out really at the very beginning of next year. So we are not going to wait until we announce earnings sometime in late February. We will do it beforehand and let the market know both on what we plan on prepaying in 2023 as well as reserve.

Okay, great.

Hopefully that answers your question. But look, I agree with you on the CapEx, it’s a very light year for us. And interestingly enough ‘23, ‘24 and ‘25 for the overall Capesize fleet are actually very high drydocking years for the fleet overall, but not for us. That’s an industry stat. So that could actually be interesting and helping push rates up by having large percentage of the fleet in drydock for those years.

That’s interesting. Yes. Okay, great. Well, thanks, John. I’ll look forward to early next year and then I’ll turn it back into the queue.

Great. Thanks, Omar.

Greg Lewis, BTIG, please go ahead.

Hi, thank you and good morning, everybody and thanks for taking my question. John, I guess I will follow up a little bit on Omar’s question around capital allocation in a little different way. I think you guys have been pretty upfront about managing returning cash to shareholders, but also managing the fleet. And I guess what I am wondering is we have seen a little bit of a step down in asset prices here and clearly at least the sentiment around vessels in Q1 looks pretty challenging. We know FFAs can be – are wrong just as much as they are right. I guess what I am wondering as we kind of manage and good balance sheet still generating good cash flows based on as we look ahead and low breakeven could we see opportunities to kind of whether we call it renewal or expanding the fleet here, now that maybe some of the big strength and asset prices have pulled back a little bit?

The short answer is yes, Greg. We set this company up from a balance sheet standpoint to always play offense, which I think we have now put ourselves in that position pretty solidly. And we definitely have an overall goal of expanding the fleet, even beyond just normal fleet renewal. So, I think it’s a matter of finding the right transaction, and it’s a matter of the timing. You are correct, asset prices have come down a little bit. I still don’t think they actually match where freight rates are today. But I also believe that we are probably in a little different situation than maybe what we have seen in years past when that high new building prices still exist. And then I don’t think that’s going away. So, I think asset prices could be a little more sticky, and less correlated to direct freight rates for the next few years easily. But we think there are going to be opportunities, most likely in the first part of next year. My personal view is that, one of the things that’s holding freight rates back or is the zero COVID policy in China, I do believe that that is going to soften as we get into probably second quarter or so of next year. By the way, I don’t have any more information than anyone else. But that’s my personal view. And so I do think there could be some opportunities as we get into the early part of next year. We will just have to wait and see. I mean we are very focused on buying. At the right time, we are very focused on not buying in the very upper historical quartiles in terms of values. And you are correct, we have started to come off a little bit, which for us I think is healthy. And I think it will give us – I think it will give us some things to look at as we get into early next year.

Okay, great. Thank you for that. No, I mean it is interesting as you think about China potentially reopening at some point next year, it would seem like it’s a pretty opportunistic time. I did want to follow-up, because one of the things that we are wondering is, on the asset prices, realizing, hey, the spot market is down, but I was hoping you could maybe share some – a little bit of color and realizing you guys don’t have a lot of debt and don’t plan to have a lot of debt. But clearly, borrowing rates do impact asset prices as well. Any kind of sense for where for modern tonnage lending rates are now and maybe where they are today versus maybe where they were maybe 6 months, 9 months, 12 months ago before we started to see interest rates heading higher?

Yes. Apostolos, do you want to take that?

Yes. I think first of all, just to address our situation, as I mentioned on the call, we do have interest rate caps in place for various durations through 2024, for a weighted average rate of 94 basis points. So, in terms of the existing debt, we are pretty well hedged and covered. As far as the overall market is concerned, hope, I think that that LIBOR and SOFR rates have moved up quite significantly in terms of the margins that the banks were charging. I mean I think that largest could range anywhere from 2% to 4% and add another 4% for LIBOR or SOFR, and you are getting and – financing costs in the high-single digits. And then there is obviously the alternative financing providers space which has higher financing costs as well. For us, it’s also the ability to take advantage of the existing balance sheet in terms of how we can raise that we have a revolver in place. And when combined with our cash position, that is close to $290 million. And we do have 5 unencumbered vessels that we can utilize going forward opportunistically as well.

Okay. Super helpful guys. Thank you very much. Have a great day.

Thank you, Greg.

Thanks Greg.

[Operator Instructions] And our next question comes from Liam Burke from B. Riley. Please go ahead.

Yes. Thank you. Good morning John. Good morning Apostolos.

Good morning Liam.

John, a large percent of the fleet for the fourth quarter was fixed vis-à-vis the spot market. And you figure in a declining spot market environment, it was a good call. How do you look at the fleet management going forward as you balance between time charters and spot?

Yes. No, look, I think let’s take the two segments. So, let’s take the Minor Bulks segment and then talk about the Capesize segment. So, on the minor bulks, we obviously have a very robust commercial operating platform where we are doing 90% plus of our business direct with cargo owners. And we are able to book those cargoes and trade around those cargoes meaning using either our shift to let that cargo where if it makes sense, when we can make more money, we will use somebody else in shipping and chartered in short-term. So, I don’t think anything is going to change much there. It doesn’t mean from time-to-time that we won’t do some time charter coverage, whether it’s three months to five months or four months to six months, if it makes sense for where that vessel is positioned. But I would look at the minor bulks, it’s more of a shorter duration. Now, the capes, on the other hand, that’s a different animal. And what I mean by that is because of the volatility in the Capesize sector, we do from time-to-time, take time charter coverage on a longer term basis anywhere from 1 year to 3 years. Right now, we don’t think that’s the right thing to be doing. We think these rates are too low. We think, again, there is going to be a recovery that is going to come sometime next year on the Capesize front because of the low – very low supply situation, as well as the demand picking up once China reopen. When we do see the opportunity to take the exposure off the table at certain rates for capes, we do it. We have demonstrated that in the past with the longer term charters we have done. We have also done, which had been interesting, some index-related charters on the capes where we collect the spot rate on a daily basis. But we also have the ability to fix longer term within that index charter. And that has been – that’s been very successful as well, and very helpful, particularly with all the volatility that has existed this year, in particular, the Capesize sector. It’s – I think we have seen more volatility in capes this year than we have seen in the last 5 years, 6 years. We were looking at numbers the other day, and I think 54%, 55% of the day so far this year for capsize have moved plus or minus 5% on a daily basis. So, a lot of volatility this year and some of those spot index deals have been – have worked well and been able to play that.

Super. And on the DVOE, you had a lot of one-time expenses in the second quarter, we saw it down sequentially. Is there more to go there, or is it pretty much leveling off at where we are in the third quarter?

Yes. So, look, we are getting to more normalized. We guided for fourth quarter, a little bit lower $5,150 per day. So, we feel good about that number. And I would say that’s getting into a more normalized trend on OpEx. The reality is, inflation has certainly affected us just like everyone else. Our spare parts cost more. Our airfreight to get those parts around the world has cost more. So, there has been some inflation there. And we have also seen some inflation on the crew side, because we do want to make sure that we are maintaining the best crew that we can get. So, that means paying a little more than what we did last year. But I would say when we start to get into that fourth quarter number of $5,150 a day, you are starting to get into a more normalized level and our COVID-related expenses have come way down. So, that’s been a positive thing as well.

Great. Thank you, John.

Thanks Liam.

Thank you. Ladies and gentlemen, as there are no questions in the queue, I would like to hand the call back over to our speakers for any additional or closing remarks.

Now, thank you very much. We appreciate everyone joining. And I look forward to speaking to you soon. Thank you.

Thank you. This concludes today’s conference call. Thank you for your participation. Ladies and gentlemen, you may now disconnect.