Genco Shipping & Trading Ltd

Good morning, ladies and gentlemen, and welcome to the JNCO Shipping and Trading Limited First Quarter 2021 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 JNCO's website at www.jncoshipping.com. To inform everyone, today's conference is being recorded and is now being webcast at the company's website, www.jinkoshipping.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 two weeks by dialing 888-203-1112 or 719- 4570820 and entering the passcode 4187387. At this time, I will turn the conference over to the company. Please go ahead, gentlemen. 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, in other words, in 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 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, the year ended December 31, 2020, and the company's reports on Form 10-Q and Form 8-K, exceptionally filed with the SEC. At this time, I would like to introduce John Bobensmith, Chief Executive Officer of Genco Shipping and Trading Limited.

John Bobensmith, Chief Executive Officer of Genco Shipping and Trading Limited. Good morning, everyone. Welcome to Genco's first quarter 2021 conference call. I will begin today's call by reviewing our year-to-date highlights, providing an update on our new comprehensive value strategy, financial results for the first 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. The dry bulk market has experienced its best start to a year in over a decade, with capeside spot rates currently over $40,000 per day and supermaxes at over $20,000 per day. In addition to the current firm market conditions, we view the outlook favorably. The order book as a percentage of the fleet is at a historical low, limiting net fleet growth, while unprecedented stimulus, as well as the Brazilian iron ore export recovery, have combined to create improving supply and demand dynamics. Our positive market outlook, together with our robust balance sheet, has positioned Genco well to implement our new comprehensive value strategy. on low financial leverage and three key tenets attractive quarterly dividends throughout the shipping cycles based on cash flow after debt service less a reserve further debt reduction and growth of our asset base we believe that this strategy will enable the company to create significant shareholder value and be a key differentiator for genco over the long term As for our new dividend framework, we intend to pay a quarterly dividend based on operating cash flow, less debt repayments, capital expenditures for dry docking, and a reserve. The quarterly reserve is targeted to be based on future quarterly debt repayments and interest expense. However, the uses of the reserve remain in GENCO's option and include vessel acquisition, debt repayments, and general corporate purposes. Maintaining a quarterly reserve, as well as optionality for the uses of the reserve, are important elements of the corporate strategy as it enables Genco to be flexible, depending on market conditions, and provide a more tailored approach to Genco's overall business model. We also believe this approach provides more transparency to the market to assist in forecasting the dividend, along with our breakeven and time charter equivalent guidance that we already provide on a quarterly basis. We are targeting Q4 2021 results for the anticipated first dividend under the new corporate strategy, which would be payable in Q1 2022. During the first quarter of 2021, we began to execute this new corporate strategy as we reduced our debt balance by $48 million. Furthermore, in April, we agreed to purchase a modern fuel-efficient Ultramax vessel, marking the fourth Ultramax we have agreed to acquire since December of last year. We've also taken advantage of the strong market to book time charter coverage as part of our portfolio approach to revenue generation. We have fixed the Genco Liberty at 2016 built Cape size vessel for 10 to 13 months at $31,000 per day, while also booking a Supermax and Ultramax vessel for $23,000 and $25,000 per day, respectively for five to seven months. We are pleased to lock in these attractive rates while also maintaining significant operating leverage in a strengthening market. In addition to capitalizing on the firm market, we also intend to continue to opportunistically purchase assets on a low-levered basis as we further position the company to increase its dividends. These are key initial steps in executing our new strategy, and we look forward to making further progress as we advance towards our anticipated first dividend as part of this new approach. In the interim, for the first quarter of 2021, we have increased our quarterly dividend to $0.05 per share from $0.02 per share paid during each of the previous four quarters. In light of Genco's strong financial position, the current rate environment, as well as our go-forward market expectations. In executing our strategy over the balance of the year, we plan to draw on our robust balance sheet as well as cash flow generation in this strong market environment to pay down debt through regularly scheduled debt amortization and prepayments while opportunistically growing our fleet on a low leverage basis. Furthermore, we plan to refinance our credit facilities to increase flexibility, improve key terms, and lower cash flow breakeven rates. By the end of this year, we are targeting a net loan-to-value ratio of 20%, which we are currently on track towards achieving. Based on current fixtures, as well as the forward curve, we estimate a net loan-to-value position of approximately 11% based on the current market values and a fleet of 40 vessels. As detailed in our presentation, we highlight cash flow sensitivity regarding various scenarios for next year. For a frame of reference, current one-year time charter rates, as quoted by Clarkson, stand at approximately $30,000 and $19,000 per day for Cape size and supermax vessels, respectively. Based on the illustrative time charter equivalent rates shown and the potential cash flow generated, Genco expects to be well positioned from a net loan-to-value perspective resulting in potentially meaningful quarterly dividends in 2022. Furthermore, over the longer term, we plan to continue to reduce our debt balance with a goal of zero net debt. Importantly, Genco's barbell approach to fleet composition closely integrates with this low financial leverage model, given the large upside and operating leverage from the ownership of the Cape-sized vessels, together with the more stable cash flows from the minor bulk fleets. While we hedged a portion of our fleet wide available days in Q1 in anticipation of a seasonally softer first quarter, the market did experience a counter seasonal rise in freight rates. Going forward, we plan to maintain our opportunistic spot oriented chartering approach along with select longer term fixtures for our Cape size fleet. As such, we have started to see the impact of our fleet's operating leverage in the second quarter as estimated by our daily TCE based on current fixtures for the quarter of over $20,000 per day, which is nearly 70% greater than our Q1 daily TCE and would mark the company's highest daily TCE for a quarter since 2010. Importantly, we will have seven of our Cape size vessels open for fixing in the coming weeks to take advantage of the meaningful increase in rates we have recently seen. With respect to the market liquidity of our shares, since mid-December, ownership of large shareholders has been reduced from 58% down to 20% currently. While we believe these stock sales have contributed to Genco's trailing stock performance compared to a number of our peers in the short term, we view this as a positive in the long term due to increased overall liquidity and free flows. Specifically, our 30-day average trading volume has increased substantially to approximately 800,000 shares per day from approximately 200,000 shares per day prior to the recent large shareholder sales. At this point, I will turn the call over to Apostolos Sifolios, our Chief Financial Officer.