Good morning, ladies and gentlemen, and welcome to the Genco Shipping & Trading Limited Fourth Quarter 2019 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 Web site at www.gencoshipping.com. To inform everyone that today's conference is being recorded and is now being webcast on the company's Web site, www.gencoshipping.com.We will conduct a question-and-answer session after the opening remarks, and instructions will be given 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 719-457-0820 and entering the pass code 77743643. At this time, I would like to 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 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 yesterday, the materials relating to this call posted on the company's Web site 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, 2018, and the company's reports 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 fourth quarter 2019 conference call. I will begin today's call by reviewing our fourth quarter and full year highlights. We will then discuss our financial results for the quarter and the industry's current fundamentals and then open the call up for questions. For additional information, please also refer to our earnings presentation posted on our Web site this morning.2019 marks another important year for the company in which we executed several key initiatives to further strengthen Genco's overall platforms and enhanced our earnings power. The execution of these initiatives together with a stronger drybulk market in the second half of 2019 enabled Genco to return to profitability in the fourth quarter with adjusted net income of $3 million. During the year, we also demonstrated a commitment to advance our disciplined capital allocation strategy, which continues to remain an important focus of ours for creating shareholder value.Complementing our attractive acquisition of fuel efficient modern vessels in 2018 as well as our installation of scrubbers on our Capesize vessels in 2019, we drew upon our solid balance sheet and strong liquidity position to return capital to shareholders, marking an important milestone for the company. Last November, we implemented a regular quarterly dividend policy as part of our broader capital allocation strategy. We are pleased to have now declared our second consecutive regular quarterly cash dividend of $0.175 per share for the fourth quarter. Notably over the past two quarters, we have declared cumulative dividend of $0.675 per share, which includes a onetime special dividend.Regarding our success implementing Genco’s IMO 2020 strategy, we are pleased to have completed our scrubber installation program for our Capesize vessels, realizing a key objective in our comprehensive IMO 2020 compliance approach. While our ability to efficiently trade our Capesize vessels was…

Thank you, John. For the fourth quarter of 2019, the company reported net income of $0.9 million or $0.02 basic and diluted earnings per share, excluding $1.3 million in non-cash vessel impairment charges and $0.8 million loss in sale of vessels, adjusted net income for the quarter was $3 million.During the fourth quarter, we generated adjusted EBITDA of $27.9 million, enabling us to further solidify our already strong balance sheet. Specifically, cash including restricted cash, is $162.2 million as of December 31, 2019 despite it being our busiest drydocking year in the company history and a cumulative dividend of $0.50 per share paid in Q4 of 2019. Comparatively, our debt outstanding gross of deferred financing costs is $495.8 million as of the end of the year.Additional steps to further enhance our balance sheet and have been the opportunistic sale of five older less fuel efficient vessels during the second half of 2019 and early 2020 as we continue our fleet modernization efforts. Four of these vessels have been delivered to their new buyers to-date. The remaining vessels sale represents the sole Panamax currently in our feet and completing our exit from the sector as we continue to execute our barbell approach to fleet composition, creating a more focused asset base.Consistent with this approach, we're evaluating the sale of our 10 remaining handy-sized vessels, which we view as non-core assets within our fleet mix. For the first quarter of 2020, we anticipate non-cash impairment charge in the range of $79 million to $85 million associated with the adjustment of these vessels with the respective fair market values. Separately, as John mentioned earlier, we have fully executed our scrubber retrofit program. In 2020, we have approximately $10 million of remaining scrubber related expenses to pay, while we have approximately $11 million remaining under our scrubber tranche of our credit facility, which is available for us to drawdown.Our cash flow breakeven rate for the first quarter of this year is estimated to be approximately $11,780 per vessel per day, including our breakeven rates as our 2020 DVOE budget figure of $4,590 per vessel per day weighted across our current fleet. Furthermore, we anticipate approximately 136 days of estimated off hire time relating vessel drydocking during Q1 of 2020. Also, we’ll have 10 Capesized vessels with contracts expiring in the coming weeks. Depending on the market conditions, we may elect to ballast certain of those Capesize vessels to the Atlantic Basin in an effort to maximize our earnings over the long term.I will now turn the call over to Peter Allen, our Drybulk market analyst to discuss our industry fundamentals.

Thank you, Apostolos. Following a strong second half of 2019, freight rates have come under pressure so far at the beginning of 2020. Seasonal factors are currently at play, including increased newbuilding deliveries due to the frontloaded nature of the order book, weather related disruptions impacting cargo availability and the occurrence of the lunar New Year in China. Impact of these factors on the dry bulk market has been accentuated by the onset of the novel corona virus and its effect on industrial activity in China. Specifically, various high-frequency indicators, such as daily coal consumption, as well as road traffic point to meaningful year-over-year decline in activity levels in China, which has impacted demand for some of the commodities that we carry. We point out that the duration of impact of the corona virus remains uncertain at the current time and is challenging to predict.Focusing specifically on near term drybulk demand drivers, we note that the start of the South American grain season should begin to see Brazilian soybean exports ramp up meaningfully in March. On the major bulks, particularly in iron ore, although, Vale revised down its first quarter output guidance, the company's expectation for the full year remained unchanged implying a high concentration of iron ore production in the second half of the year, which coincides with historical peak Brazilian iron ore shipments.On the supply side as the global maritime industry has shifted to comply with IMO 2020 regulations, higher fuel costs, particularly for larger vessels consuming compliance fuel, have made trading these vessels challenging. We believe that older non-scrubber fitted Capesize vessels are becoming uncompetitive in this costly fuel environment given current market conditions and the regulatory landscape, we anticipate a supply side reaction through increased vessel demolitions, particularly for these vessel types. While we saw firm newbuilding deliveries in January, which led to annualized net fleet growth of approximately 7% during the month, we expect supply to normalize over the course of the year reacting to market conditions, as well as the heightened regulatory environment.We note that the order book as a percentage of the fleet remains low at approximately 9%, which compares to 7% of the fleet that is greater than or equal to 20 years. We believe these positive supply side dynamics provide a solid foundation for drybulk market fundamentals going forward. This concludes our presentation and we would not be happy to take the questions.

[Operator Instructions] Our first question will come from Randy Giveans with Jefferies.

Two quick questions for me, so your 1Q ‘20 quarter date rates quite impressive, especially I guess 78% at 17,000 a day for your Capesizes. Now looking specifically at that kind of asset class, how much of this is outperformance due to maybe your early bookings versus scrubber premiums? And also kind of looking at current Capesize rates of 3,000 a day and using a spread of maybe 200 a ton. What are you currently earning on one of your scrubber fitted Capesizes?

So the Q1 fixtures I would say was impacted by three of them in terms of being strong. One was forward booking ahead of time as clearly we were not let’s say predicting corona virus, but we were predicting a seasonally slow first quarter. So we did forward bookings and took advantage of that, both physically with the Capesize fleet, as well as we took some Capesize cargos forward as well for cover. The second thing is we also bought quite a bit of fuel towards the end of December. And again, that was beneficial, because it was a fairly low price on high sulfur fuel oil. And then the third is the scrubber related spread, which is probably somewhere around $6,000 to $7,000 a day as part of that. And then your next question was on the $200 spread?

Yes, kind of current rate environment on a scrubber fitted Cape?

Yes, so the spread today I think is about $155, $160. So that has certainly weakened. We did all of our bookings. But having said that, I think again a seasonal slow period for shipping but also the slowdown from the corona virus as that starts to, when that starts to get in our rearview mirror, I expect more demand for very low sulfur fuel oil. So I expect those spreads to push back up towards $200. And I would also expect that as the price of oil, I should say if the price of oil, because I'm certainly not only analyst, but if the price of oil moves up that spread will move up as well. So currently, I would say probably around $5,000 a day premium that we're earning basis having our scrubbers on board and burning high sulfur fuel oil versus low sulfur fuel oil.

And then second question, as it pertains to the ongoing asset sales, especially with the 10 Handysize vessels that are now for sale. How have asset values been impacted by the current weaknesses if there's still a liquid market in the S&P side? And then as it pertains to the use of the cash, which is a top priority for accretive NAV transactions is selling the vessels at NAV and buying them at -- buying shares at a discount of 30%, 35% to NAV. Or are you looking to further repay debt or kind of what are you going to do with the incremental cash?

Well, let's talk about the S&P market first. So the S&P market is slow. And again that is typical this time of year from a seasonal standpoint but clearly, amplified by the realities, as well as the negative sentiment due to the corona virus situation. I think you need to just take a step back with these 10 ships. We identified this fleet as non-core when we did our strategic plan back in early 2017. They were not part of our fleet renewal program. What management and the board has decided to do was make these part of our fleet renewal program at our last, when we had our last board meeting.So we're not necessarily looking to sell these next week, so just to be very clear on that. This is going to be an opportunistic approach to make sure that we're getting the best value. And I would say right now it’s probably not the ideal time to be selling ships. We're making good money on these ships. We're beating our indices, our benchmarks for these vessels. So it's a matter of finding the right opportunity. I expect it to be this year, to be very clear, but then we will look for firmer prices.

And then use of that cash?

So use of that cash, again, we have this capital allocation strategy, and I think that we have to look at it at the time that we've sold probably a majority of those ships. Does it make sense at the time to buy back stock, does it make sense to do a dividend there, or does it make sense to buy assets and that's what we'll look at it at the time.

Our next question comes from Omar Nokta with Clarksons Platou Securities.

Just wanted to maybe follow-up on Randy's question regarding the Handys, and you've outlined that you're not selling them this week, you do expect it to be this year. I can't recall if the vessels are sister ships or not, but do you think there's appetite to just sell them and sort of one on block deal, or would it be more of a dribble out you think?

So there are two sets of sister ships. There are the eight 34s and then there are the two 32 [Hakadadee] types. I think there's an opportunity to do an on block sale somewhere down the road. But again Omar, I'm being a little [cagey] about it, because there is not a situation where there's an immediate need to sell vessels. So we want to do it in a way that really maximizes shareholder value and proceeds. So I will look at both, on block as well as maybe it's one or two at a time but getting it done. But the idea here is to maximize proceeds for the company.

That makes sense. And there clearly with $162 million of cash you’ve got time to wait and get the right deal…

That's exactly correct.

And then just as we think about the potential free cash that can get unlocked for new sales. Have you given, I'm not sure if it's filed or if you're able to stay, but how much that is currently outstanding against those 10 ships?

We've not filed that number specifically, but it would be paid down on a pro rata basis.

We can give you that number, Omar, hold on one second we'll get it. While Apostolos is retrieving that, do you have any other follow-up, Omar?

Just maybe one more and it was sort of when we think about let's for the proceeds or as you think about putting them to work and we're in a different environment, hopefully a few quarters down the line and if we're in a balanced market where it makes sense to buy ships. How do you gauge whether you buy a Cape, you buy an Ultramax or Supramax? And how does buying a Cape with a scrubber, how does that thought process come together? If you could just give us some color on how you're thinking about it.

So again, the strategy of the company is the barbell approach where we're focused on the Capesize, as well as Ultramax tonnage in terms of any growth that we do going forward. And so the way we will assess that, again, it's always at the time in terms of what we feel for commodity demand, return on capital potentials, which obviously has to do with the pricing of vessels at the time and future earnings. So those are the two asset classes that we'll focus on. In terms of scrubbers, I would say I still think Capes, there's a good opportunity to earn good excess cash flows and good returns on a scrubber investment. So if I had my druthers, I would take a Cape with a scrubber installed but again, it depends on when we're redeploying the capital but if it's something this year or even next year, I think it's a worthwhile investment.

And then just maybe following up on that, clearly the Ultramaxes for the past couple of quarters at least have been outperforming the Supras, at least in your operating results. Do you think about deploying capital in that segment that from here on out, it's most likely going to Ultras that you go after versus the Supras?

Yes, and actually the Supras, I mean, there's a cost of capital for every ship. So the Ultramaxes are obviously more than the Supras but we've been outperforming our benchmarks on the Supras and earning good return on capital on those ships. But if you ask me specifically the Ultramaxes are obviously a newer design and so yes, we would focus on Ultras more so than the Supras for any fleet renewal.

So Omar, just getting back to you, the way that that works, those are part of a pool of vessels that collateralize at $460 million credit facility. So it's paid pro rata based on the market value at the times. But based on current market value, it’d be about $15 million of debt paid on in relation to those 10 ships.

Thank you. Our next question comes from Liam Burke with B. Riley FBR.

John, you spoke about pre buying high sulfur fuel coming into 2020. Do you anticipate any supply problems as we go through the year or possibly in the next year?

For the high sulfur fuel oil?

Yes.

So most of the -- we're really fueling up almost exclusively in Singapore with our Capes. And we don't see any supply disruptions or issues in Singapore with high sulfur fuel oil. I do think and you can certainly see it, there are issues in some of the smaller ports in terms of having inventory but that that doesn't affect us. Like I said, we're doing the majority of our bunkering in Singapore on our Capes.

Thank you [Operator Instructions]. Our next question comes from Amit Mehrotra with Deutsche Bank.

This is Chris on for Amit. I hopped in the call a bit late, so apologies if you touched on this in the prepared remarks, but the spot market has stabilized over the last couple of weeks. Are you seeing increased activity into China over the span? And if so, is it really just markets reopening post lunar New Year, or do you think the situation is starting to stabilize with the corona virus?

I would say things are starting to stabilize. I think it's still a little early to tell as to when the Capes start to really move on in a significant way. Our belief is when things do -- when the corona virus is contained and things are stable, we do expect that the Chinese government will do a large stimulus package. It could be even one of these level three packages, which will be geared towards infrastructure and the steel industry. So I think the Capes will certainly benefit from what happens on the infrastructure side. On the minor bulk, we've actually seen some strength. We're definitely seeing soybean shipments move up off the East Coast to South America. Brazil has had a record soybean crop this year and that has really just started to ramp up and we've seen that in the Ultra rates moving from the sort of low 5s to low 6s and we think that's going to continue.And then we've also seen, in the Atlantic, we've seen some strength in the black sea from a leftover high corn crop that's still continuing to move out of the black sea. All of these commodities on the soybean and corn side are going out to Asia, including China. And then we've also seen coal start to pick up out of Indonesia going into India and China as well. So I think stabilized is the right term. I would say on the minor bulks, we're starting to see some strength and the Capes, we expect once things get back to a little more normal situation.

Yes, it is a bit interesting, because it does feel like, as you said, things in China are stabilizing and at least by my math trying to account for 35% of drybulk imports. But over the last few days, the entire equity market is sold off quite significantly on reports that the virus is spreading internationally. And you keep seeing Iran and Italy as like the two biggest countries. How do you think about that trade off in terms of drybulk demand? Like China is clearly most important and I'd imagine far more important than Southern Europe and Iran. How do you just kind of think about that trade off as it relates to drybulk demand maybe over the next month?

We're not doing a lot of drybulk business. In fact, I don't think we're doing anything with Iran, just to be clear and we’re not doing a lot with Italy. So I wouldn't look at those two as big drivers in the drybulk market. But I think in general people are obviously concerned about Europe overall and if the virus spreads in Europe and then obviously the U. S., but we'll see how that goes. Obviously, the cases are very low.I think as you pointed out, China is the major driver to the drybulk industry, whether it's major or minor bulks. And I think China is really the one to watch. It is interesting President did reiterate that he needs to deliver the GDP target this year, both from an economic and social target standpoint. So I feel they're very focused on it. And again, once things get back to normal, I do expect some significant stimulus and help from the Chinese government for their economy. And the best way to do that and the quickest is infrastructure spending, which goes directly to the steel industry and clearly iron ore.

Yes, certainly feels that that'd be the case. And then just one more, so we’ve heard rumblings about potential scrapping of some of the older VLOCs in the market. Certainly, it’d be helpful to the Cape fundamentals. Do you have any insights there?

Yes, we're definitely seeing VLOC scrapped, we're seeing Capes scrapped. And from what we have seen, it does look like that there is at least another eight to 10 VLOCs that are marked for scrap this year. And I think it's interesting, because it's earlier than what we even thought. So there is definitely deliveries of VLOCs this year but there seems to be there is going to be more of an offset than maybe what we had thought a few months ago, and offset in a positive manner with higher scrapping levels.And the other thing I'll add is this, while nobody likes to see freight rates were where they are today, there's no doubt that that drybulk shipping is reacting on the scrapping side, like it has in the past. I think we've got, well, I think we've had 13 Capes scrapped already today. And you've got -- right now, you've got about 100 Capesize vessels that are 18 years old and older. So I still think there's a real opportunity for the Capesize fleet to slim down due to scrapping.

And then one more if I could. So we've seen decent amount of time charters for scrubber equipped vessels on the tanker side and I know you guys are in the spot market. But the question is, have you seen any scrubber fixtures on the drybulk side, particularly Capes? Just want to see if the premiums are coming in at a similar level, like that 6,000-ish range to what we're seeing in the spot market?

There's really not much going on in the fixed rate time charter market right now, which I think is a normal response to when you have rates where they are today. The only thing we've seen are our index deals. There's been a couple those that have been done with on paper a decent looking percentage premium. But when you actually -- where rates are today, that percentage premium for scrubber means pennies. So clearly, that's not something we're interested in.

Thank you. We have no further questions at this time. This concludes today's call. Thank you for your participation. You may now disconnect.