Good morning, ladies and gentlemen, and welcome to the Genco Shipping & Trading Limited Second Quarter 2018 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, 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 two weeks by dialing 1-888-203-1112 or 1-719-457-0820 and entering the passcode 4282601. 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 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. 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, 2017, 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, everyone. Welcome to the Genco's Second Quarter 2018 Conference Call. I will begin today's call by reviewing our second quarter highlights. We will then discuss our financial results for the quarter and the industry's current fundamentals and then finally open up the call for questions. Starting on Slide 5, we review Genco's second quarter highlights. Following our success and transforming Genco's commercial platform, we took important steps during the second quarter to implement our growth strategy and position Genco to more fully capitalize on a robust drybulk market. In June, we successfully completed a common stock offering for gross proceeds of $115.7 million. We issued 7,015,000 shares, which included the exercise info of the underwriter’s option to purchase up to 915,000 shares of common stock. We’re utilizing the proceeds from this successful offering to fund a portion of our fleet growth initiatives. We are pleased to have entered into agreements to acquire six high-specification, fuel-efficient Capesize and Ultramax Vessels, further enhancing our earnings power and strengthening our position to take advantage of a drybulk market that is exhibiting significantly improved supply and demand fundamentals. In June, we agree to acquire to two 2015 Chinese-built 180,000 deadweight ton Capesize vessels, one 2016 Japanese-built 60,000 deadweight ton Ultramax vessel and one 2014 Chinese-built 61,000 deadweight ton Ultramax vessels for en bloc purchase price approximately $141 million. We followed up these transactions in July by agreeing to acquire two 2016 South Korean-built 180,000 deadweight ton Capesize vessels for an en bloc purchase price are approximately $98 million. Of note, we have already taken delivery of one of these Ultramax vessels, the Genco Weatherly, and we expect to take delivery of the remaining five vessels by the first half of September, ahead of a seasonally stronger fourth quarter. We believe these acquisitions…

Thank you, John. Turning to Slide 10, our financial results are presented. For the second quarter and six months ended June 30, 2018, the company generated revenues of $86.2 million and $163.1 million, respectively. As compared with the revenue for the second quarter of 2017 and the six months ended June 30, 2017, were $45.4 million and $83.6 million respective. The increase in revenues were primarily due to the employment of vessels on spot market voyage charter beginning during the first half of 2018 and higher spot market rates achieved by the majority of our vessels. For the second quarter of 2018, the company recorded a net loss of $1.1 million or basic and diluted loss per share of $0.03. This compares to a net loss of $14.5 million or $0.42 basic and diluted loss per share for the second quarter of 2017. Adjusted net income for the second quarter of 2018 was $3.6 million or adjusted basic and diluted earnings per share of $0.10, marking our third consecutive quarter positive adjusted net income when excluding extraordinary items. The adjusted net income in the second quarter excludes $4.5 million of debt extinguishment losses associated with our recent refinancing and $0.2 million of non-cash impairment charges. For the first half of 2018, the company recorded a net loss of $56.9 million or $1.62 basic and diluted loss per share. This compares to a loss of $30.1 million or $0.89 basic and diluted loss per share for the first half of 2017. Net loss for the 6 months ended June 30, 2018 and 2017 include non-cash vessel impairment charges of $56.6 million and $3.3 million, respectively. Net loss for the 6 months ended June 30, 2018 also includes a loss of debt extinguishment in the amount of $4.5 million. Net loss for…

Thank you. Apostolos. I'll begin with Slide 17, which represents daily spot rates for the sub-indices of the Baltic Dry Index. During the second quarter, despite pockets of volatility, the BDI rose by 6% from the seasonally softer first quarter and 10% on a year-over-year basis. This was predominantly led by the Capesize and Supermax sectors, while the Panamax sector drifted lower. Subsequently, in the third quarter, the BDI strengthened further reaching as high as 1774 at the end of July, which is the highest point since January 2014. This was primarily driven by Capesizes that highlights the strength of the entire market. The July average Capesize spot rate was nearly $24,000 per day, the highest average for the month of July since 2009, while in August the $27,000 threshold just crossed the first time this year as we approach Q4, 2017 levels. Turning to Slide 18, we outline some of the key market developments influencing this increase in freight rates. Strong global growth in steel production has propelled demand for key drybulk commodities worldwide, which together with constrain vessel supply growth has improved overall drybulk supply and demand fundamentals. Steel output, particularly in China and India, during the first half of 2018 rose by 6% and 5.1%, respectively. Regarding iron ore shipments, from Brazil have improved by 8% year-over-year during the second quarter of 2018, following an 8% decline during the first quarter. Important to note is that Brazilian Minor Valley has reiterated its 2018 production guidance of 390 million tons. After producing just under 180 million tons of iron ore in the first half of 2018, this implies that Valley would have to produce over 30 million tons more in the second half as compared to the first half. This incremental output remains important to the Capesize sector…

Thank you very much. At this time, we would like to open the floor for questions. [Operator Instructions] Our first question will come from Randy Gibbons, Jefferies.

Looking at the 15 vessel disposals went seasonal for them, so you announced the sale of 3 vessels so far. Two questions on that. Were those sales for scrapping or continued trading? I mean then also, is it fair to assume that the dry docking in ballast water treatment system for just the standard 20-year-old Panamax and Handysize is about $1.5 million, $1.6 million? And then lastly, do you still tend to remain vessels sale will all be completed in 2018?

Okay. Yeah, Randy. It was a little touch to hear you. But in terms of the fleet renewal program, we still anticipate that being completed by the end of this year. Maybe you can repeat your other two questions. You were a little muffled when you were speaking?

Sorry about that. Is it fair to assume that dry docking in ballast water treatment system for 20-year-old Panamax or Handysize is about $1.5 million to $1.6 million? So the three totals about $4.7 million?

Yeah. I mean, if you look at the Genco's Surprise, for example, was a 1998-built Panamax and we were estimating just dry docking cost alone at that on that ship somewhere around $1.5 million. And then to put a ballast water treatment system on that vessel is at least another $500,000 to $750,000.

Okay. And then are those sales for scrapping or continued trading?

For continued trading.

Got it. Alright. And then for the 3Q quarter-to-date rate updates, there is a little weak in Q2 '18. Now I know much of that's due to either that timing of backhaul or repositioning in the fleet. With that do you assume that full quarter third quarter rates will be higher than second quarter rates? I was expecting a very strong back half of the third quarter?

Look, I think it all depends on rates. And keep in mind, we only have about 55% to 60% of our book covered for the third quarter and we have a lot of Capesize vessels that are coming up in the next two weeks that will be rolling off lower rates and most likely going on to higher rates. So -- and I think also making the decision to do some backhauls on not only the case but also in the minor bulks to position them favorably in the U.S. gulf area for late third quarter going in the fourth quarter, overall we'll still continue to show outperformance for definitely the second half. And those are decisions that were paid to take advantage of what we believe will be higher cargo flows. Really we've just started to see that happen in the minor bulk side, and we think that's going to continue ramp up as we get into September. And we started to see that in the Capesize sector three weeks ago or so.

Okay. Make sense. And then last question for me on the strategy to obviously the iron ore 2020 compliance, scrubbers for some of your Capesizes?

Yeah. No, look, we have just been very consistent in what we've been saying. This is something that we're close to making a decision on. So before the end of the year probably more in the middle of fourth quarter we will make a decision as to what our plan is.

Our next question will come from Jon Chappell, Evercore.

John, the first question on strategy. Obviously you guys have been incredibly aggressive the last couple months or so. And as we’ve seen just from your transactions alone, the asset values continue to move up, not surprisingly given the strength in the market and probably very few stallers. But do you think the windows essentially closed at this point? Are you happy what you have few more disposals to renew the fleet that way? Or do you think there are still opportunities for purchases before the end of the year?

Look, I think there are opportunities for purchases. It’s going to depend on what prices do you actually still think that towards the end of the year we could have another easy 10% to 15% rise on capes in particular because of where earning are going to go. The vessels that we bought, as you know, or very high spec, very fuel efficient with the focused on 2020 and outside earnings versus the index. Those were not the easiest transactions to shake out. But because of some relationships we have, we were able to get those done. But – and then on the minor bulk side, the fleet renewal program, as you said, is in place and we expect to have that completed by the end of the year. And part of that program is to sell some of the older less-efficient ships and redeploy the capital into newer more fuel-efficient tonnage.

So good problem to have obviously operating cash flow is accelerating with the rest of the year hopefully the stronger, still a bunch disposals yet to come. Balance sheet is already really strong. A lot of others have gone to the dividend model already, maybe just in small way. Do you view that as mutually exclusive with continued growth? I mean, do you want to have the fleet squared away? And then potential return of capital to shareholders, can they happen simultaneously?

I think, in theory it can happen simultaneously. We -- the Board has not taken a decision on a dividend yet. It clearly is in the tool belt. And I think you’ll see us looking at it pretty carefully as we get into the fourth quarter as to what we want to do.

And then just finally, speaking of the tool belt. I mean, your stock’s down 25%, maybe even higher from where it was earlier this year and all you’ve done since then is have a stronger market. You’ve improved your fleet, even pretty capital structure. I mean, I know there’s not a ton of shares outstanding and not a ton of liquidity. But would share buybacks be in the tool belt as well, just given kind of the disconnect between share pricing fundamentals?

Look, I think that it’s only something you’re going to look at and be mindful of. But I look at what all of these equities are doing right now, and I believe it is short term. I believe we’ll see strength as we get out of the summer. If you look at the volumes on any of these stocks, they’re very well. There’s obviously the tariff noise that I think is affecting not only the dry bulks but some of the other shipping segments and I think specifically to touch dry bulk that is way over done, way over blown. We don’t see any significant downside as it stands right now to tariffs. But I do think that is effecting the equity. So I think it short-term drawn. And if it’s a longer-term trend, then sure you have to look at everything. But right now, I wouldn’t -- but not in the cart.

Thank you. Our next question will come from Amit Mehrotra, Deutsche Bank.

[Indiscernible] on for Amit. So first question is on the S&P [ph] market. It sounds like you guys seen more opportunities there. If you combine the last two acquisitions, it seems like the 6 vessels were purchased at about 45% leverage. Is this the target level we should expect on any additional purchases?

Yeah. As I think -- again, this is something we've been fairly consistent on for at least the last 18 months where we were targeting leverage between 40% and 50%. So I would say, yeah, that's right down the fairway right now.

And then it sounds like the pace of vessel sale is going to pick up in the back half. Is this is a read through in just increased demand for these ships behind better sentiment? Or is there any particular reason for this?

No, I think it's a timing thing. I think we wanted to sale the Genco's Surprise because we got into dry docking, which was coming up very quickly. And I think that we want to maximize sales proceeds on these ships. And selling vessels in August in the date of summer is usually not the right move. So I think as we get into September-October, you will have a firmer market, more buyers, more liquidity and higher vessel values. So I think it makes sense to wait and that's what we're doing?

Okay, makes sense. And then just on the chartering strategy, I think you said you have a few cape vessels coming off over the next few weeks. Can you just talk about the chartering strategy there continue to play in the spot market or maybe just kind of with increase in rates lock in some more term coverage?

I think for the time being you're going to see us play in in the spot market. As we get more into the fourth quarter, we will decide do we want to fix some of these vessels longer term at least through the first quarter. And if there is a significant improvement in the one- and two-year rates and liquidity, then clearly we'll look at locking some ships away as well. But for the short term, we'll continue to remain spot where we're doing both West Africa, China trades that have been very healthy. And then particularly these higher-spec eco vessels, you'll see them moving more towards the Atlantic basin to take advantage of the front-haul cargos coming out of Brazil. Those are the best ships that are suited to do that trade for obvious reasons that it's a long-haul trade. So you can really get your bank for your buck on lower fuel consumption.

Okay, makes sense. And then just one quick on the grain soybean trade. Just from all market commentary, everyone, there should be a little impact in the Chinese tariffs just be sourced South America rather than North America. But recently the forecast for soybean trade for the year has come down. I think now you guys have it at flat year-on-year.

Correct.

I mean, is this just a result of weather patterns and the crop output? Or is there something kind of more structural going on?

Look, I think it's -- I think that there is a slightly lower forecast that has been put out. I would tell you, though, 2017 was a very healthy year for the soybean trade. And what we're basically trying to show is that we're going to be at least at 2017 levels, which were high in itself, and you're coming into the seasonal strong point for that crop. So we really should start to see particularly Atlantic rates move upwards as we get September, October, November. So I think – yes, I mean there was a slight revisement down, but again, I don’t look at it as material. I’m much more focused on coming into a seasonal high period.

Thank you very much. [Operator Instructions] Our next question will come from Magnus Fyhr, Seaport Global.

Just one question. On Slide 15, you gave some guidance on the dry-docking days for the remainder of 2018. Do you have any guidance for 2019, with you kind of ballast water treatment systems getting installed in, any kind of cost estimates?

So as far as cost estimates go, total dry docking would be $34 million for 2019. But that includes some of the sales candidates as part of the fleet renewal program, so which would amount $14 million. Adjusting for that total expenses that we expect in 2019 will be approximately $20 million. And as far as days go, we are estimating about 20 to 30 days -- for the most part 20 days per vessel for those for every one of these dry docks.

And how many vessels?

It is 9 ships after taking into consideration the fleet renewal program. Sorry, 14 ships after taking into consideration the fleet renewal program. By the way, this information is in the 10-Q as well, so the details could be found there.

Our next question will come from [ Paul Bret ], Noble Capital Markets.

Just a couple ones. One on the 12 remaining that you have to sell of the over tonnage. Do you have estimated scrap value of those?

Current scrap rates are about $410 per lightweight ton. So I guess with the Panamaxes, which are the oldest of these vessels, are about 10,000 tons each. So that will be $4.1 million per Panamax.

And I guess another way to ask you this. As far as -- with the 12 remaining, what’s the ballpark number as far as what you think you could raise? Or what the potential proceeds might be?

Paul, I think we’ll have to turn on that one. Again, as I said earlier, I think these prices are going to go up as we get into September and October and rather not put a benchmark out there since we’re going to be selling these.

And can you give us a flavor for where you think the next five acquisition targets will be delivered into. Are you -- will there be a little bit of a disruption looking at the end of the third quarter into the early fourth quarter just because where these potentially deliver? Or are you comfortable to deliver into decent markets?

I think the 5 will be coming in, as we said, before mid-September. So I think they’ll be perfectly positioned to benefit from seasonally strong rate environment. We'll back-haul some of these, and so the front haul you will pick up a significant bump in the fourth quarter.

Yeah, agreed on the timing. I was just worried about where they're actually going to get delivered into and whether that might just have an impact on the early fourth quarter, John.

Look, it's pretty normal to have them delivered in the Pacific. So some will trade in the Pacific in that West Africa-China trade, which is continues to be very strong. It's actually right at the index today. And then there will be a couple of that will also be back haul to Brazil, which should pick up the earnings probably mid-fourth quarter or thereabout.

Okay. And then looking IMO 2020, I know you've probably mid- -- or mid fourth quarter. Do you have a working estimate on scrubber for the capes right now?

In terms of installation costs.

Yeah, in terms of installation costs with the capital -- with the equipment cost?

Yeah, probably somewhere around $3 million a ship.

And then as far as the fuel efficiency, John, you talked about your acquisitions. Do you have a -- is it 5% to 7% what others have talked about for fuel efficiency? Or do you think that -- what's the ballpark number to use for fuel efficiency?

Well, look. I mean, basis a benchmark Capesize vessel, you're probably talking 15% to 20% higher in terms of rates.

And can you equate that to fuel efficiency? I guess I'm just looking for a little more color. And I know the rates remains there, but…

Yeah, it's probably 7 to 9 tons less in fuel on a say going 12, 12.5 knots.

Thank you very much. At this time, we have no further questions in the queue. Ladies and gentlemen, thank you for joining us today. This conference has now concluded. You may disconnect your phone lines and have a great rest of week. Thank you.