Good morning, ladies and gentlemen, and welcome to the Genco Shipping & Trading Limited Third Quarter 2023 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’ll conduct a question-and-answer session after the opening remarks and instructions will follow at that time. A replay of the conference will be accessible at any time during the next two weeks by dialing in 1-877-674-7070 and entering the passcode 329256. At this time, I will now 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’ll 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 today, 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, 2022, 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 2023 conference call. I will begin today’s call by reviewing our Q3 2023 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, we continued to advance our value strategy providing shareholders with a sizable dividend while continuing to take steps to renew our fleet. For the quarter, we declared a dividend of $0.15 per share as we utilized the built-in optionality and flexibility within our dividend policy. This highlights Genco’s differentiated capital structure and industry low breakeven levels for providing sizable dividends to shareholders even during a lower freight rate environment. Notably, the third quarter represents our 17th consecutive quarterly dividend, highlighting our commitment and success, returning significant capital to shareholders. Over this time, we have declared dividends of $4.745 per share, or 36% of the current share price. While our stated formula did not produce a dividend for the quarter, the Board of Directors elected on management’s recommendation to declare the $0.15 per share dividend. Genco’s industry low cash flow breakeven rate and low financial leverage position, together with improved freight rates in Q4 to-date gave the company confidence to declare the $0.15 per share dividend. Regarding the dividend calculation, we have consolidated the previous voluntary quarterly reserve of $10.75 million and voluntary quarterly debt repayment of $8.75 million, which totaled $19.5 million in one line item. This voluntary quarterly reserve was reduced to $4.4 million for the purpose of the Q3 dividend. Given that both the reserve and debt repayments are fully in Genco’s discretion, we felt it was appropriate to consolidate them…

,: Adjusted EBITDA for Q3 totaled $14.6 million, bringing the nine-month 2023 total to $64.4 million. As of September 30, our cash position was $52 million and our debt outstanding was $144.8 million, bringing our net debt to $92.5 million and net loan to value to 10%. With $198.8 million of undrawn revolver availability, our total liquidity position at the end of the third quarter was $251 million. Subsequently, in Q4, we received commitments for a $500 million revolving credit facility, which can be utilized to support fleet growth as well as general corporate purposes. Key terms include an increase in borrowing capacity by nearly 50% or over $150 million, lower pricing on margin of 1.85% to 2.15% + SOFR compared to 2.15% to 2.75% + SOFR, previously. Extended maturity to the end of 2028 and 100% revolving credit facility structure providing further flexibility. We appreciate the continued support of our high quality lending group that participated in the revolving facility, including leading international shipping banks that are both existing and new lenders to Genco. The amended facility is subject to definitive documentation and fulfillment of customary closing conditions and is expected to close in Q4 2023. Upon closing, the amended facility and acquisition, we anticipate pro forma debt outstanding to be $179.8 million and undrawn revolver availability of $320.3 million. This includes a $35 million drawdown in Q4 to partially fund the acquisition of the Genco Ranger. Looking ahead to Q4 2023, we anticipate our cash flow breakeven rate to be $8,170 per vessel per day, well below our Q4 TCE estimates to-date of $16,665 for 69% fixed. After a slow start to the third quarter, freight rates began to rise in September, specifically, the Baltic Capesize Index rose from approximately $8,300 to end the quarter at $20,000. Rates…

Thank you. And ladies and gentlemen, we will now begin the question-and-answer session. [Operator Instructions] Your first question comes from the line of Omar Nokta from Jefferies. Your line is open.

Thank you. Hey, John and Peter, good morning.

Good morning.

First off, I guess, congrats on the $500 million revolver, obviously, not every day that you see a facility of that size, that’s fully revolving. So congrats on that. Wanted to just sort of ask about the Cape, you acquired 2016-built ship. Just in general, you also sort of signaled in the release being a bit more active on the sale and purchase front, and it sounds like it’s going to be both sale and purchase is the way I kind of read that. Could you give us maybe a bit more color or maybe expand a bit on that comment and how you’re thinking about Genco moving forward here in the near-term in the S&P market?

Yes. Thanks, Omar. So if you look at our fleet, we had some older Capes, some of the 170s. So our intention is to ultimately replace those with newer, high spec eco vessels. So we’re looking at that and working on a few things right now. And then also on the Supramax’s, we have the Genco Auvergne, the Ardennes, the Bourgogne, and the Aquitaine, which are older and are coming up for drydocking next year. So those vessels were also focused on replacing with higher spec Ultramax eco, better fuel efficiency type vessels. We have – all those vessels that I just mentioned are drydocking next year. So the intention would be to try to save on the CapEx numbers by disposing of those and deploying capital for newer vessels. And I think you have the CapEx side, we’re obviously also trying to reduce our carbon footprint, but we have the EU ETS coming into play starting next year. So particularly with the Ultras and Supras, we want to be as efficient as we can to keep those costs down and be in a better position to trade to Europe.

Thanks, John. That’s helpful. And maybe just was going to come back to the Ultras, Supras. Clearly, over the past several years, in terms of acquisitions, Genco has been more focused on the Ultras and it’s been some time since you’ve acquired a Cape. Is this a shift, perhaps, in thinking and wanting to lean a bit higher in sort of future investment? Or is it still kind of that barbell approach?

I would say, it’s still the Barbell approach. We like the Capesize exposure. It’s very difficult to get your hands on eco tonnage right now. And really over the last few years, we’ve only seen a few trade this year in 2023, including the Genco Ranger. So when they do come up, you want to move on them quickly and be very precise about it, which is what we did here. But again, with the focus on environmental regulations and reducing emissions, I think eco vessels are going to have more and more value and certainly more flexibility trading going forward than maybe some of the older ships.

Yes, definitely. Thanks, John. And maybe just – maybe one final one for me and I’ll turn it over. Clearly, the revolver gives you a lot more flexibility than you want and you pushed out the maturity by a couple of years plus. When we think about sort of the dividend policy and the ongoing reserve, which is obviously very conservative, giving you plenty of flexibility to toggle with it. But in general, is there any kind of shift or changes that you see happening with sort of the numbers that go into the reserve once the new facility is completed?

I don’t see any change at this point, though. So we’ve put out guidance for the fourth quarter, and when we get into announcing fourth quarter and we have our normal board meeting, there obviously will be discussion about how we want to set that for 2024. And as we did with 2022 and 2023, we announced that ahead of time. So I would say, stay tuned and we’ll see how the conversations go and our strategy session for 2024 plays out.

Okay. Very good. All right, well, thanks, John. And congrats again on the facility.

Great. Thanks, Omar. Appreciate it.

Your next question comes from the line of Liam Burke from B. Riley. Your line is open.

Yes. Thank you. Good morning, John. Good morning, Peter.

Good morning.

John, on the supply side, are you seeing any additional tightening either through congestion or slow steaming with the global fleet?

Look, I think the global fleet is actually going fairly slow as it is already. The congestion side of it, particularly in China, has started to move up again. Obviously, there’s a lot of flow of iron ore and coal that is driving that. I still think as we get into next year, there is positive – there’s upside risk on congestion winding back up again. Are we going to get to the levels of during COVID? Probably not. But certainly, we can get back to more historical averages, which should help take supply out of the market and push up rates as we get into next year.

You did mention in your prepared comments about the how you – the outlook for the Capesize market and mentioned the commodities that are halted. As we look down the road, do you still see them fitting in vis-à-vis at Newcastlemax, where there seems to be a larger percent of the order book there.

I – in terms of the Capesize fitting in with the Newcastlemax’s?

Yes.

Yes. I – so personally, we like the flexibility of the Capesize more so than the Newcastlemax’s. There are times where you’re still not filling up a Newcastlemax to its full capacity. So in terms of return on capital, we still like the Capesize sector, and – but we obviously like the modern ones that are more fuel efficient. But if you look at the trades, Liam, whether it’s iron ore, coal or the bauxite trade, which is growing quite significantly, Capes are extremely active in all three of those markets. And I think that it’s going to be the case for quite a while.

Great. Thank you, John.

Thanks, Liam.

Your next question comes from the line of Sherif Elmaghrabi from BTIG. Your line is open.

Hey, good morning. Thanks for taking my questions.

Good morning.

Good morning. So first charter-in days roughly doubled in – from Q2, but they’re still pretty far below what we’ve seen for the last couple of years. So rates have seen a pretty significant improvement from Q3 to Q4. So should we expect charter-in days to tick higher for the end of the year? I guess any general color on how you’re thinking about chartering in would be helpful.

Yes. So keep in mind the chartering and that we’re doing is very short-term. It is used to create arbitrage trades on our existing fleet on cargo that we have booked forward and used to create alpha over the indices, which we’ve obviously been very successful at, particularly in the mid-size sector. I would expect to see some higher charter-in days as we get into the fourth quarter, or I guess we’re really in the fourth quarter but as we get to the end. The market has moved up. We also have been fixing forward some for first quarter, which is what we typically do. So I think you’ll see more charter-in tonnage in the first quarter as well. But keep in mind that chartered-in tonnage again is not long-term. It’s usually for short-term cargo liftings, where we’ve identified an arbitrage opportunity to use somebody else’s ship and then take our ship and go perform another cargo.

That’s very helpful. And then maybe a bit more macro on the North and South American grain story, we’ve got a record grain season in Brazil, but then in the U.S., we have low inland water levels, kind of constraining exports. So I’m wondering how you see seaborne winter grain exports shaking out, especially given the low water levels on the Mississippi could persist kind of into Q1?

Yes. No, absolutely. Thanks for the question. Yes, look, it’s obviously been a terrific grain season out of South America. It’s extended, it’s been definitely supportive to the overall Atlantic market that we’ve seen, and it’s been good to offset some of the reduced volumes out of Ukraine in particular. In the fourth quarter, yes, wheat exports out of the U.S. likely to be lower. But again the – in the not too distant future, we’ll have South American grain season picking back up in towards the end of Q1, so should be relatively short lived. We are getting some help on the Panama Canal situation, which is extending ton miles and taking ships. Instead of going to the Panama Canal, they’re going through Suez. So it’s extending ton miles there. So there are some fleet inefficiencies that are supportive to the current market. And yes, like John mentioned in prepared remarks as well as during the Q&A, we do expect volatility in Q1, but we’re doing a good job of fixing over that. We have three period – short period deals on the Ultra/Supra at 15,000 to 16,000 that are fixed over through March, so pretty good job on that side.

Okay. Thanks for taking my questions.

Thank you.

And ladies and gentlemen, our Q&A session has ended. This concludes today’s conference call. Thank you all for participating. You may now disconnect.