Genco Shipping & Trading Ltd (GNK) 2008 Q3 法說會逐字稿

Good morning, ladies and gentlemen, and welcome to the Genco Shipping and Trading Limited Third Quarter 2008 Earnings Conference Call and Presentation. Before we begin, please note there will be slide presentation accompanying on today's conference call, and that presentation can be accessed 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 today's opening remarks, and instructions will follow at that time. A replay of today's conference will be accessible at any time during the next two weeks through November 13, 2008, by dialing 888-203-1112 or 719-457-0820, and entering the passcode 4899540.

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 that discuss future events and performance. These statements are subject to risks and uncertainties that could cause actual results to differ from the forward-looking statements. 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, 2007, and the Company's subsequent reports filed with the SEC.

At this time, I would like to introduce Mr. Gerry Buchanan, the President of Genco Shipping and Trading.

Good morning, and welcome to Genco's third quarter 2008 conference call. With me today is Peter Georgiopoulos, our Chairman, and John Wobensmith, our Chief Financial Officer. I will begin today's call by discussing our third quarter and year-to-date highlights as outlined on slide 5 of the presentation. I will then turn the call over to John to review our financial results for the three- and nine-month period ended September 30, 2008. Following this, I will discuss the industry's current fundamentals. John, Peter, and I will then be happy to take your questions.

During the third quarter, all of Genco's vessels were secured in favorable contracts, which enabled the Company to once again pull strong results for shareholders. For the third quarter, excluding the $4.4 million of dividends we received from our investment in Jinhui Shipping and Transportation, shares net income was $58.6 million, or $1.86 basic on $1.85 diluted earnings per share. John will discuss the quarterly results in more detail later in the call.

Genco declared a $1 per share quarterly dividend for the third quarter, which represents the Company's 13th consecutive quarterly dividend since going public in July 2005. In total, the Company has declared cumulative dividends of $9.49 per share since going public.

During the third quarter, Genco continued to receive support from the banking markets and entered into a new $320 million term loan facility including the most recent financing. Genco has a total of $1.7 billion in aggregate credit facilities in place, which John will discuss in more detail later in the call.

In terms of fleet growth, we took delivery of Genco Thunder, a 2007 built Panamax vessel, and the Genco Cavalier, a 2007 built Supermax vessel, which were the two remaining vessels from our agreement to acquire three more than drybulk vessels from Bocimar International and Delphis NV.

Finally, during the quarter, we continued the same time charters and entered into agreements for three vessels including two from the Bocimar transaction.

Moving to slide 6, I will now discuss our time charter coverage in more detail. The majority of the vessels in our current fleet are currently on long-term time charters with an average remaining life of approximately 18 months as of October 29, 2008. We currently have approximately 93% of our fleet's available base secured in our contracts for the remainder of 2008 and 60% in 2009.

As we have in the past, we will continue to look for opportunities to increase our future time charter coverage.

On slide 8 we detail the remaining vessels to be delivered from agreements we entered into in 2007 and 2008. As noted on the slide, we expect to take delivery of 10 vessels -- seven Capesize, three Handysize vessels from the first quarter of 2009 through the fourth quarter of 2009. Upon completing these acquisitions, our fleet will consist of 41 drybulk vessels consistenting of 12 Capesize, eight Panamax, four Supermax, six Handymax, and 11 Handysize vessels with an average age of approximately 6.4 years, well below the industry average of approximately 15 years.

I will now turn the call over to John to review our financial situation for the three months and nine-month period ended September 30, 2008.

Thank you, Gerry. I will begin my remarks by directing you to slide 10, which presents our financial results for the third quarter and nine months ended September 30, 2008.

For the three- and nine-month period ended September 30, 2008, we recorded revenues of $107.6 million and $303.8 million, respectively. This compares with the revenues for the third quarter of 2007 and nine months ended September 30, 2007, of $45.6 million and $119.7 million, respectively.

The year-over-year increases were due to the operation of a larger fleet as well as a renewal of time charters at higher rates from those contracted previously.

Operating income for the third quarter and nine-month period ended September 30, 2008, was $70.6 million and $226.7 million, respectively. This compares to the operating income for the third quarter and nine-month period ended September 30, 2007, of $25.1 million and $65.9 million, respectively.

The third quarter and year-to-date increases in operating income are attributable to higher revenues partially offset by increased vessel operating expenses, general and administrative expenses, management fees, as well as depreciation and amortization associated with the operation of a larger fleet.

Interest expense for the third quarter of 2008 was $12 million and $35.4 million for the nine-month period ended September 30, 2008. This compares to interest expense of $10.1 million for the third quarter 2007 and $17.7 million for the first nine months of last year.

Excluding the $4.4 million of dividends received from our investment in Jinhui Shipping and Transportation shares, net income was $58.6 million or $1.86 basic and $1.85 diluted earnings per share for the third quarter of 2008.

Including these dividends, net income for the third quarter of 2008 was $63 million, or $2 basic and $1.99 diluted earnings per share.

Net income was $197.9 million, or $6.60 basic and $6.56 diluted earnings per share for the nine months ended September 30, 2008. This compares to net income of $16.3 million, or $0.64 basic and $0.64 diluted earnings per share for the third quarter of 2007 and net income of $49.9 million, or $1.97 basic and a $1.96 diluted earnings per share for the first nine months of 2007.

Key balance sheet and other items as presented in slide 11 include the following -- our cash position was $142.5 million as of September 30, 2008, and our debt-to-capital ratio was 58.1%. Our total assets as of September 30, 2008, were $2 billion consisting primarily of our current fleet, deposits on vessels to be acquired, and cash.

Our EBITDA for the three-month period ended September 30, 2008, was $89.8 million, and our EBITDA margin now represents 83.5% of revenue.

Moving to slide 12, our utilization rate was 98.8% for the third quarter of 2008 compared to 99.7% in the year-earlier period. In the first nine months of 2008, our utilization rate was 99.1% compared to 98.7% in the year-earlier period.

Our time charter equivalent rates for the third quarter of 2008 increased 61.5% to $39,349 per day from $24,362 per day recorded in the third quarter of 2007.

The increase in time charter equivalent rates was due to higher charter rates achieved in the third quarter of 2008 versus the third quarter of 2007 for three of the Panamax vessels, six of the Handymax vessels, and five of the Handysize vessels in our current fleet.

Further, higher time charter equivalent rates were achieved in the third quarter of 2008 versus the same period last year due to the operation of the five Capesize vessels that were part of the Metrostar acquisition.

In the first nine months of 2008, time charter equivalent rates attained by the Company increased 75.6% to $38,742 per day from $22,065 per day in the same year-ago period.

For the third quarter of 2008, our daily vessel operating expenses were $4,187 per day versus $3,665 per day for the third quarter of 2007. Daily vessel operating expenses for the first nine months of 2008, or $4,279 per day versus $3,673 per day, for the year-earlier period.

These quarterly year and year-over-year increases are due to higher crew and insurance expenses as well as costs associated with the operations of the five Capesize vessels.

For the third quarter, daily vessel operating expenses were once again below budget. That being said, we continue to believe daily vessel operating expenses are best measured for comparative purposes over a 12-month period in order to take into account all of the expenses that each vessel in our fleet will incur over a full year of operations.

Based on estimates provided by our technical managers and management's expectations, our full year 2008 daily vessel operating expense budget is $4,700 per vessel per day on a weighted basis.

On slide 13 we present a pro forma balance sheet that reflects the Company's declaration of its third quarter 2008 dividend of $1 per share and its effect on both our cash position and shareholder equity. As you can see, our pro forma cash position for the quarter is $110.9 million. As of September 30, 2008, our pro forma liquidity totaled $678.4 million, and our pro forma net debt to total capital ratio was 59%.

On slide 14 we present our anticipated breakeven level. As we mentioned a moment ago, we expect our fourth quarter 2008 daily vessel operating expense budget to be $4,700 per vessel per day on a weighted basis of an average number of 31 vessels for the fourth quarter of 2008. We expect our daily free cash flow breakeven to be $12,295 per day per vessel, and our daily net income breakeven rate to be $18,215 per day per vessel.

Next I will discuss our dividend policy, which is highlighted on slide 15. During the quarter, Genco declared a dividend of $1 per share, which is based on the strong cash flow the Company generated in the third quarter. The $1 per share quarterly dividend for the quarter represents an approximate 51.5% increase over our third quarter 2007 dividend and a 66.7% increase over our 2006 third quarter dividend.

Given the current market, our board gave particular consideration to continue payment of the $1 target dividend this quarter. The Board determined to pay the target dividend based on the Company's cash flow for the quarter. If market weakness and uncertainties persist, the Board will continue to take a particularly close look at our dividend policy and target. In making future dividend decisions, the Board will review such factors as market condition, Genco's upcoming cash needs, and potential opportunities, which may arise given the current market.

In order to best serve shareholders, the Board and management will actively monitor industry developments to ensure that its dividend level continues to be prudent.

Before I turn the call over to Gerry, I would like to take a brief moment to discuss the progress of our share repurchase program. During the third quarter, the Company bought back 278,300 shares at an average price of $41.32 per share for a total of $11.5 million. As a reminder, Genco previously announced that its Board of Directors has approved a share repurchase program for up to a total of $50 million of the Company's common stock. Under the $50 million program, the Company still has approximately $38.5 million in availability. As of October 29, 2008, Genco had 31,517,678 shares of common stock outstanding.

I will now turn the call back to Gerry.

Thanks, John. I'll now take this opportunity to spend a few moments discussing the industry fundamentals. I'll start with slide 17, which points to the drybulk indices.

Represented on this slide are the overall Baltic Dry Index, the Baltic Capesize Index, and the Baltic Panamax Index. As can be seen when looking at the first nine months of 2008, the rate environment displays giving strength through May of this year, and has since experienced a substantial decline fueled by a sequence of events that I will explain.

Turning to slide 18, it's our opinion that the significant increase in freight rates during the first half of 2008 was primarily a result of intense stocking of Chinese iron ore in anticipation of increased contract prices for the upcoming year.

After the BDI reached a high of 11,600 points, the freight rate environment experienced a decline mainly due to weakening demand as a result of the following factors -- first, steel mills in Beijing and other Chinese cities where the 2008 Olympics were held, were asked to stop operations for 60 days beginning the end of July in order to reduce pollution during the Olympic Games. Concurrently, some of the smaller-size mills were forced to halt production due to increasing prices of raw materials; namely, coking coal and iron ore, which limited their ability to continue profitable operations in the short term.

Following the completion of the Olympics and further extended Paralympics cutbacks, Vale's efforts to impose a 10% to 12% incremental increase to the already-negotiated ore prices resulted in reduced shipments of Brazilian ore to China during September and October of 2008.

As a result of these events as well as an announcement from certain Chinese steel mills regarding a 15% to 20% production cut, we saw an increase in iron ore inventories at the Chinese ports.

Finally, the current global credit crisis has significantly affected the drybulk industry in two ways. First, companies are finding it increasingly difficult to obtain trade credit in order to deliver cargoes, thereby reducing the short-term demand for vessels.

Second, it is our belief that financial institutions that had previously open contracts in the freight forward market were forced into liquidating their positions thereby imposing intense downward pressure negatively affecting forward sentiment and, by extension, influencing the physical market.

Moving to slide 19, we summarized the current demand site fundamentals. As indicated on the graph at the bottom right, Chinese steel production grew to 390 million tons showing a 7.8% year-over-year increase for the nine months ending September 30, 2008, while 346 million tons of iron ore were imported into China showing a 22% year-over-year increase for the same period.

It is important to note that although a slight decrease in steel production was expected during the August Olympic events, the most significant deceleration occurred in September, which we believe was due to the first signs of the credit crisis.

As evidenced on the graph at the bottom left of the page, iron ore inventories peaked in September and have shown a slight pullback during October. We believe that the main reasons behind the recent increasing ore inventories have been the following -- first, the announcement by steel mills to reduce production and, second, the delay in orders for replenishment within China and speculation of even lower commodity prices following the current downward price trend.

As of the week ending October 24, 2008, iron ore inventories at the 20 major Chinese ports were reported at 67.6 million tons, marginally lower than the levels experienced through the end of September 2008.

At the same time, slower iron ore imports from India were observed due to not only higher taxes but also to the monsoon season. On the grains front, we believe the commencement of the North American grain season during September, which peaks towards the end of the year, should bode well for the drybulk market during the fourth quarter, especially considering the fact that the lack of trade credit have pushed potential cargoes towards the end of the year.

Lastly, based on historical trends, we anticipate demand for the shipment of coal to increase as we head into the winter months, which could potentially result in higher port congestion at the Australian [load ports].

Turning to slide 20, we know that, as visually illustrated on the graph at the bottom of the page, the main engine of growth for Chinese economy has been fixed asset investment as opposed to consumer spending. Although industrial production growth slowed down to 11.4% through September 2008 as opposed to 16.3% through June 2008, we believe that part of the holdback has been due to the Olympics as well as to the current financial crisis and its effect on working capital.

Fixed asset investment increased by 27% year-over-year for the nine-month period ending September 30, 2008. The country's commitment to drive growth through infrastructure is evident by its allocation of $555 billion in its 11th five-year plan towards transportation infrastructure.

Last week the government approved $292 billion in spending towards railway construction, aiming to double its existing railway network from approximately 48,000 miles to 75,000 miles by 2010. Although half of the funds have already been committed we believe that the overall plan provides some support to continue growth through infrastructure investments in China.

We believe there are indications the Chinese government may implement additional fiscal and monetary quality measures in order to stabilize the current economic environment. The government has announced a 27-basis-point interest rate cut for the third quarter -- sorry -- for the third time in two months and may increase investment in infrastructure and focus on providing stimulus for the property market.

Finally, on slide 21, we present our view for the supply side of the equation. Looking at the graph at the bottom of the slide, we can see the drybulk order book by quarter through 2013. Although the projected drybulk order book has increased over 70% of the existing fleets, it is questionable whether it will be delivered in its entirety.

It is important to note that 23% of Capesize orders scheduled to deliver in 2009 on 33% of Capesize orders for 2010 are contracted at greenfield yards. Established yards that have, in the past, enjoyed steady growth, might also encounter financial difficulties mainly due to restricted financing as well as substantial profit squeezes.

Lastly, we believe the effect of the credit crisis is already being felt by shipyards, and large cancellations have placed pressure on completing orders for 2009 and 2010. Anecdotal evidence of constraints such as financing for shipyards and owners as well as machinery and equipment shortages could pose additional difficulties in delivering the current order book in its entirety.

Lastly, over 30% of the world fleet is 20 years or older. As we have indicated on past calls, unlike tankers, bulk carrier scrapping is not mandated. It is more of an economical equation and the cost of repairs to comply with the requirements of a fifth or sixth special survey. However, charters do become more selective in robust markets, and many of them will not take vessels, which are in excess of 20 years for long-term time charters.

We are already starting to see signs of that and further believe that scrapping will become an increasing factor in the future, especially in prolonged periods of a weak spot freight environment.

This concludes our presentation, and we will now be happy to take your questions.

(Operator Instructions) Doug Mavrinac, Jefferies & Company.

Thank you, good morning, guys. I just had a handful of questions for you all. First, Gerry, in your comments you mentioned about the lack of trade finance. Can you add some color as far as the impact that that has had on the market? And have you see or heard of any improvement in the commercial paper market as it relates to trade finance?

I haven't heard of any improvement in the paper market related to trade finance, but where it's actually affecting the physical market is that carriers are just not moving, which is compounding the whole problem we have in the drybulk market today.

You know, the ships are running at slower speeds. What else can I say? I mean, John, do you have anything to add to this?

I mean, Doug, I think you're seeing it quite a big in the grain and the coal markets, in particular, and, you know, I think our belief is that the trade credit will come back within the short term. It's hard to say whether that's a matter of weeks or a matter of a couple of months, but we do believe it's going to come back.

And what I think the effect is that it's pushing, at least on the grain side, that US grain season a little farther out towards the end of the year. But we are going to be coming into the high season for coal, and people still need to generate electricity and heat their homes.

Right, right, and eat, as well, when it comes to the grain trade, I would imagine.

A couple of other questions -- one topic that's kind of been talked about out there is the topic of contract-to-contract and how stable those are and counterparties potentially renegotiating. As it relates to your counterparties with your time charter contracts, have you -- or do you get the sense that some of these guys are wanting out or do you have any sense that any are in danger of defaulting on their contracts -- at least the contracts that relates to -- for you guys?

I mean, so far, I think there is only one charterer that we've heard of that has asked for, you know, if there is some way that we can give them a little room, but everyone else has been paying right on schedule, and so for every other charterer we have, and that's actually one that's not very long, and it wasn't one that we -- you know, it's one that we sort of inherited. It wasn't one -- because, you know, we do a lot of credit work (inaudible) charter on it so.

And it's one ship.

I was going to say, and you guys have a bunch of ships and a bunch of charters with multiple charters on, you know, as well, the Cargills and the large [bulkers] and whatnot.

Okay, so very, very limited as far as you can tell at this point.

Yes.

Okay, actually -- and then another kind of hot topic out there has been the banks and, you know, people talking about net asset values potentially being marked down and, you know, I know there's a big difference in who some of the commercial banks are out there, you know, banks that have been around a very, very long time. Of the banks that have been around a long time and better, generally, shipping lenders, how would you describe their attitude right how as it relates to the drybulk shipping market? I mean, are they panicked, or do they understand that right now everything is kind of in a wait-and-see mode, and they're not prone to necessarily making irrational decisions?

No, Doug, I don't think you're seeing any panic on the bank side. I think, yeah, sure, I think people are focused on collateral maintenance coverage, but the fact is there haven't been any vessel sales that have been done. There are actually a couple of the major brokering houses that are just not even providing valuations at this point because there haven't been any sales done.

The banks are not looking to do new transactions, for the most part, right now, so that's (inaudible) comes back, but "panic" is definitely not a word I would use with the banks. I think they're being rational.

Right, right, excellent, excellent, okay, and then just two final questions -- one relates to your dividend. You guys paid another $1 per share dividend. That's a 27% dividend yield based on where your shares closed yesterday. I mean, is there a point where you say, "Look, the market just doesn't get it," and you decide to maybe divert your cash towards other things? Or how do you think about continuing to pay 27% dividend yields versus maybe paying down debt or something like that to where you think you may get rewarded a little bit more for it?

I think that's the kind of stuff that the Board is looking at. I mean, to be honest with you, we feel that we sort of made the deal with the market, we're going to pay you guys big dividends, and we always felt that paying those dividends would create some kind of floor on the stock and would sort of help us in times like this. And the market has turned its back on us, to be honest with you.

That being said, you know, we've said we're going to pay them. We've paid them this quarter, we're going to continue to monitor it, and, as you said, we're going to see what opportunities there are. We think -- one of the things we think is that we are potentially in one of the greatest periods of opportunity that I have ever seen in over 20 years in the shipping business, because I think what's happened right now is irrational, and we're in a period of panic, and people aren't behaving rationally, and so -- and these stock prices are not rational, and so what we think is this might, for a group like us, create a tremendous opportunity that we can take advantage of.

So, no, have we all gone punished by this? Have we all lost, on paper, significant portions of our net worth? Absolutely. Do we see tremendous opportunities to try and make a lot more money for ourselves and our shareholders? Absolutely. Is there anyone better to do that? No, I mean, is anyone better than us to do that.

You'll hear the same little speech on the Genmar call later.

Jon Chappell, J.P. Morgan.

I wanted to talk about the short-term chartering strategy. You obviously put a couple of ships that were rolling off contracts on very short-term or even in the case of the Predator spot contract. The early '09 ships rolloff, assuming the market is in the same ballpark as we are today, would you continue to do shorter-term three- to six-month contracts and kind of wait out the market before going back to the one three-year type timeframe?

I think the short answer for that is yes.

Yeah, and the Predator, specifically, Jon, we actually put into a pool.

Okay, and as it relates to the Capes that are unchartered for next year -- I know you've had a history of doing longer-term charters with those as well. First of all, are there long-term charters available right now? Is there anything past three years? Is there even three-year charters today?

And, second of all, would you take a shorter-term perspective with the Capes as well, once again, if we were in the same type of ballpark?

I think the answer is yes. At these rates, we're certainly not going to be putting things away for a long period of time.

Sorry to interrupt, John, but it ties in with what I just said, you know, we're in a panic situation now, so putting a ship away for five years at these kind of rates is a sign of accepting that panic. If you look at our projections for next year and our cash flow, even at these reduced rates and even if we had to put those ships on the spot market at these terrible rates, the Company still generates positive cash flow and positive net income. So I think it's not time to panic, I think it's time for us just to roll with this market.

Okay. One last question on chartering -- have you had any discussions with Carghill regarding the Hadrian -- it looks like from your footnotes here, that you already may have pushed this delivery back to January, and Cargill may have the opportunity to cancel the contract on that? Any update on either from the shipyard side or from the costs of Cargill on that?

No, there is no update at this time.

There's been no discussion with Cargill. It is what it is, for the time being.

All right. Final thing on the asset prices -- John, you mentioned brokers aren't even publishing asset prices anymore. Is there any timeframe, like, year-end or something for the banks where people have to just take a leap of faith and put some type of price on the secondhand market so people can kind of shore up where their exposure may be?

Look, most of these loan documents, the companies are required to provide valuations twice a year, usually the middle and the end of the year. But if there aren't valuations, you can't really do that, right?

Can you remind us what your debt covenants are and how comfortable you feel with them given today's markets?

Both credit facilities are out there in the public domain, and the covenants are pretty much identical. There is an average net debt to EBITDA covenant of 5.5 times. There is a collateral maintenance clause, which is valued alone of 130%. There is an interest coverage ratio of 2:1, and we have a minimum equity requirement.

I'm happy to tell you that third quarter we were in compliance of everything -- well in compliance. Thank you.

The other thing, Jon, just to add -- as I said earlier, we've got plenty of charter coverage, going forward. So we feel very comfortable with the position we're in right now.

Omar Nokta, Dahlman Rose.

Just keeping with the debt side of things, looking at 2009, I think you have -- is it $32 million is what you have in amortization on the new facility? Is that all the debt that's required to be paid down?

Yes. The first -- it begins June 30 of next year, $16 million, and then December 31st of next year, $16 million, and that's it.

And with the use of cash next year and talking with Doug about the dividend, do you see yourselves taking a more aggressive approach in paying down debt further than that $32 million or are you seeing any pressure from the banks to have to do that?

Omar, you've got to speak louder.

Sorry. Do you intend to pay down more than $32 million in this market and take a more aggressive approach, or are you -- in that case -- or, without that, are you seeing any pressure from banks to have to pay down more?

We are not having any pressure from banks to pay down more and, as we said earlier, we're just going to monitor as time goes on.

Okay. And then just -- I know, with that 320 facility, that LIBOR + 125 basis points that just closed last month, where do you see the market now, going forward with new credit facilities? Is that 125 doable, have you gone up to 200 or is it beyond that, do you think?

Again, Omar, there aren't any transactions that are really being done. I think the pricing is higher than the 125 today, but I don't have a solid data point for you just because of the lack of transactions.

And then, just, finally, with the three Capes that you acquired this past summer there at Daehan Shipyard, and they've been rumored to be having some financing issues. Can you give an update on where you stand with those?

There's no change in those at the present time. We hear, the same as you, that the shipyard is in trouble, but I don't have any more information than that. We just have to see how things develop as we go forward.

Yeah, and keep in mind, Omar, the way that those transactions are structured for us, we have a 10% deposit that's placed in an escrow account. We don't have direct shipyard risk when it comes to the deposits.

Okay, so you'd be getting that 10% back if there's any issues.

If there's an issue with delivery, that's correct. We don't have to deal with refund guarantees of the yard at all.

Chris Wetherbee, Merrill Lynch.

Just on the deliveries -- a couple of the vessels, it looks like, are going to be coming in the first quarter of '09 relative -- as opposed to the fourth quarter of '08, which I think, as the last quarter, was the schedule there.

Do you guys have more flexibility there, I mean, is there any ability to move around deliveries a bit, or is it just kind of within a couple of week window?

The deliveries are out of our control. We cannot control when the deliveries are going to take place. You're right, these are vessels were scheduled for the last quarter of '08, and they've been pushed into the first quarter of '09, but that's due to shipyard issues, and there is nothing we can do about that.

Okay, and then when you think about just -- jumping back to asset prices, when you think about asset prices, I mean, have you guys had any discussions with the brokers yet? They're going to be going through the process of trying to put values -- I mean -- I'm assuming they're going to have to put some sort of value on fleets as they go forward towards the end of the year here. Have you had any discussions? Are they in contact with the companies about how they're going to look at that in the absence of a sale-and-purchase market?

No.

We generally don't have discussions with the brokers over that. They just do that themselves.

So there's no real color as to how they're going to approach that valuation?

No.

Just jumping back to the credit markets and where we stand right now -- you've commented on it, I guess, just to kind of follow up -- have you -- is there anything more that you're hearing as far as -- or seeing anything incremental as far as loosening in the markets? I mean, letters of credit, I think you said that pretty much you haven't seen anything, but it's a short-term deal. What makes you feel like it's going to be short term in nature? Is there anything that you're seeing that would lead you to believe that things will ease a bit there?

I hate to be a smart guy but, you know, people have to eat, people have to heat their houses, you know, people need coal, people need grain. You know, I've got to believe, at some point, it's going to loosen up. I mean, I just can't imagine a world where there's no more world trade. So -- not to give a flip answer, but -- John, do you have anything more to --?

You look at the financial markets, in general, and the credit markets -- we're definitely seeing an easing. Look at what's happened to one- and three-month LIBOR, overnight LIBOR -- all of that has come down significantly from where we were a few weeks ago. The two-year swap spreads are about 80% down from the high and getting very close to more normalized numbers. I mean, all of that indicates a loosening up of credit.

The natural step is that trade credit would follow that because that is a problem of business for banks, and, you know, banks need to make money as well, and, as Peter said, the goods eventually have to start moving. So, again, we think it's more short term in nature.

Yeah, and I certainly can appreciate the succession of easing through the credit picture. Just curious if you guys have actually seen anything going on there.

And then, I guess, just, finally, just -- I think I might have missed it -- did you mention that there was just one charter, right, one charter that may have approached you as opposed to talking about your agreements -- time charter agreements and any flexibility there. Is that correct?

That's correct.

Okay, and nothing was done there, though?

No, no.

Gregory Lewis, Credit Suisse.

Thank you and good morning. My first question is regarding the newbuildings. You mentioned that Hadrian is probably going to be delivered not until 2009. Is there any recourse you can take with the shipbuilders to potentially collect sort of a late penalty thing?

No.

Okay, then, looking at Jinse, where the three Handysizes are being built -- you know, in discussions I've had with a few people, there have been some cancellations at that yard. What sort of status of those -- do you expect those to be delivered in Q1?

Yes, at the moment, we do. The cancellations you are referring to were, I think, with Metrostar, and we have the resale through [Actif] and as far as we know, those vessels will still be delivered on the first quarter.

Okay, great, and then just shifting gears a little bit -- Peter, you mentioned that these are -- you know, there's probably some interesting opportunities to be pursued in the drybulk market. Given that, clearly I would read through in that, and thinking that you think asset prices have probably fallen off pretty sharply. Could you sort of put on, like, a rough percentage range in what sort of decreases we've seen in asset prices?

No, I have no idea, and when I say opportunities will arise, you know, we haven't seen anything yet that we think is interesting but, you know, if you think about this kind of panic and look what's happened in terms of the share prices, you know, you can just take the next logical step. You think that -- you say, "Okay, well, then, there should be opportunities," but it's not as if we've seen anything that enticing presented to us today, and I won't even venture a guess. I think it would be irresponsible for me to venture a guess on asset prices right now.

Okay, great, fair enough. And then just to follow up on that, I mean, clearly, you know, your stock is yielding 27%, and there might be better uses of your cash. When we think about Genco, is there sort of a target dividend we should be thinking about? Is it 10% at these levels? Is it 15%? And then just, also, to expand on that, you know, you mentioned market uncertainties -- could we potentially be looking at a BDI level that would make us more comfortable in seeing that $1 dividend, going forward?

Look, we're going to look at this quarter-by-quarter, Greg, and there are a lot of factors that go into it.

Okay, great, and then just one quick follow-up -- you mentioned that the value to loan covenant is about 130%. Do you sort of have a rough estimate where you stand on the value to loan today?

No, that ties back into your question about where our values are.

Scott Burk, Oppenheimer.

Just a few more questions here -- first of all, if, on the free market value to loan covenants, if you were to go below that ratio, would the banks still be required to fully fund the current credit facilities that you have or what would be the process there?

I think we'd have to wait and see. I don't have a good answer for you, Scott.

Okay. And then, Peter, you mentioned that this is the opportunity of a lifetime. You know, if you look back at the last few downturns that you've been active in the shipping sector, how does it compare to -- you know, we saw in, say, 2001, 2002 or if you go back to '97, '98, how does it compare?

I've never -- I mean, it doesn't even compare. I mean, I've never seen anything like it. I've never seen -- you know, usually, in those markets you saw a gradual deterioration where, you know, the spot market went down a little bit and a little bit and a little bit and a little bit and then it finally hit bottom. This just went almost a straight line-- you know, look at our company -- right after Labor Day, I think, Genco was trading at $65 a share, and we closed at $321 million loan facility that John Wobensmith indicated himself -- you didn't even need a bank to indicate it. You usually have got a bank, then they give you a commitment, then you syndicate it, and then they go syndicate it out. He wouldn't syndicate it himself.

And then a month later, we were priced as if we were going bankrupt -- us and everyone else in the world. So it's like nothing I've ever seen before, and I honestly believe that it's overdone.

So when do you guys -- you mentioned opportunities to buy. It sounds like you might be looking at -- you referenced share prices several times -- are you looking to do more acquisitions like you've done with Jinhui, where you actually buy into the shares of other companies or were you more looking at additional physical vessels. And then when would you just have the confidence to actually start putting capital to work like that?

Again, I think it's a ways off, and I think, since we haven't seen any opportunities, I can't tell you what's going to present itself.

Okay. So it's not like you're going to use some of this excess cash in your balance sheet and start making bids on vessels?

No, no, we're not going to do that right now. We want the situation to stabilize before we would do anything like that. So don't read into the fact that we're going to go out there and start buying all kinds of things. As you know, we're always pretty prudent.

Okay. And then going back to the bank question -- is there any pressure from your lenders to do these long-term charters despite the fact that they are historically low? Just from their perspective to try to ensure that you've got something locked in to pay interest costs?

No.

No.

So there's no pushback on trying to go with short charters, okay.

We still have 60% of next year covered.

Yeah, and it be more worried for, say, 2010, I would think. And then, finally, I just wanted to ask a few more questions about Jinhui. Could you remind me what the basis is for that share price and would there be any risk of having to mark that down at year-end or next quarter?

The basis is 45 kroner a share, 45, 45 kroner, and keep in mind the adjustments to the share price carry through to our equity. So our equity is adjusted every quarter for whatever the value of those shares are, and we look at it each quarter to determine if it's impaired, and we didn't think it was impaired this quarter, and I think it would have to be -- you know, it would have to stay depressed for quite a while before it was deemed impaired. (inaudible) run through the income statement and just to be very clear on it, again, the value is already adjusted in the equity, so if it did become an impairment, yeah, it would have to run through the income statement, but the equity numbers on the balance sheet wouldn't change. It's carried at current value.

Michael Pak, Bank of America.

A lot of my questions have been answered, but just a couple here -- on the vessel renewals for next year, would you consider laying any of these ships up if rates continue at these depressed levels?

No.

Okay, and given where the market conditions are and understanding that a lot of this is -- with the drying up of trade financing, would you expect more bankruptcies in the sector to be forthcoming before any kind of settling-out period were to take place?

I don't know, I don't know. The one thing that I'd like to sort of touch on, just shifting gears for a second, you know, if you look at the tanker market, the tanker market is operated -- has continued to be pretty strong, and that market has been -- you know, they have not had the same trade credit issues that we have had.

So I believe that once this trade issue gets resolved, this market should be operating at far better numbers than it's operating at today.

Justin Yagerman, Wachovia.

Do you have a sense for how much capacity is currently anchored right now and what kind of pressure you think that will put on any type of rise that you could get from the demand environment?

What do you mean by "anchored?" Laid up?

In our conversations with brokers, there is a difference between laying up ships and stopping them. Not necessarily mothballed or having only partial crew, but just kind of not trading because they're not making their opex right now.

You know what? I wouldn't believe those brokers.

Really?

Yup.

When you look at ships that are just not trading right now, do you think that there is a decent percentage of ships in the market that aren't or is that just a false statement right now?

If I said to you, "I'll give you $5,000 a day or I'll give you nothing," what would you take?

Well, if it cost me $6,000 to run my ship, I might not want to do that.

Well, then, no. Then you lose either $1,000 a day or you lose $6,000 a day.

Even if you stop the ship, it's still going to cost you money. You've got crew costs, fuel costs, whatever insurance costs -- everything keeps going.

Fair enough. If you're thinking about short-term charters in the near term, obviously, as you look at current rates, are you guys going to be doing any kind of hedging on your fuel exposure, on any voyage or spot charters that you'll be doing?

We don't have any fuel exposure. It's covered in our charters by the charterer.

Justin, even the short-term spot deals that we do are time charter arrangements, so the fuel is not an issue.

Okay, all right, that's helpful. And then, lastly, you touched on some counterparty stuff that you were talking about, but in just looking at your counterparty list, there is a decent amount of other shipping companies that have chartered in your ships. When you think about those counterparties, do you have any particular concerns around their either FFA exposure or coverage on their chartered in fleets? You know, we recently had a public company that obviously had a pretty material blowup as a result of those kinds of activities.

Yeah, but that company was blocked from the beginning, to be honest with you. It was a bad business model. Even if you look at the other shipping companies that we have our ships onto, they come with very big balance sheet, companies that have a lot of cargo exposure.

Okay. So even without proprietary cargoes, you're okay with those counterparties as of now?

Yeah, because most of them have contracts of affreightment to move cargo.

[Tom Bushy], Decade Capital.

It's actually David Mack, I hope all is well. Peter, can you explain a little bit to the history of this level of panic? I mean, is this, in your mind, similar to what we saw in the '70s and the '80s or is it completely unprecedented? And there are some people out there that are saying that we could just have a reversion back to what the market was like back in the '70s and '80s, and I just want to get your color as to why we won't see a sustained level of depressed rates and vessel values as opposed to some type of rebound back to what we've all been accustomed to in the last few years?

No, this compares to nothing I've ever seen before. And even in the mid-'80s when the market -- you know, in the late '70s and into the '80s when the market went down, it was more of what I described earlier where you watched the deterioration, over time, as opposed to, I mean, literally, an overnight collapse of a market. And so I think that's one big difference.

The second big difference is if you look at -- you know, since we're talking about history, if you look at the point in time where we are versus where we were -- the late '70s, early '80s, was at the end of what I have called many times -- for those of you who have listened on roadshows or calls -- the "post World War II boom" that really created a huge force into the shipping business, post World War II up into the '70s as the West, or America, basically, rebuilds Europe after the Second World War and rebuilt Japan. And that boom lasted not for a couple of years but lasted for over 30 years. As you just watched Europe and Japan be rebuilt.

Then what happened was you also had, on the tanker side, increase in the need for imported oil around the world, and tanker sizes started to increase. And not only did you have more ships but ships got bigger and bigger. So that's what -- and, again, this is a quick little history lesson -- that's what created that collapse in the mid-'80s. So the end of that boom -- and then ships getting bigger and bigger and bigger so that you not only had more ships coming but more bigger ships coming.

What we've seen today is this collapse not caused by -- it wasn't demand-driven, and most people, for 2009, we're concerned about supply concerns not demand concerns caused by the credit collapse, which is something that is completely out of our hands.

That being said, we're not at the end of a 30-year boom, we're at the beginning, in my opinion, of a long-term boom in rebuilding -- not rebuilding, in developing an industrialization of places like China, India, Brazil, places around the world. So I think we're at the beginning end of that boom not at the tail end of that boom.

So I think this has been a collapse, and I think this is what we all have to keep in mind -- not shipping fundamentals. For those of us in the shipping business, it's not our fault, it's other people's fault that this happened. You know, it didn't happen because demand -- we didn't see demand stop or it didn't happen because we didn't, you know, we thought it was going to happen because we were building too many ships, but that looks like that's going to be solved, to some extent, by a lot of these shipyards going bankrupt and orders being canceled.

So I think that's my brief history lesson, and I hope it helps.

Yeah, it's very helpful, thanks a lot.

Robert Spivey, Abernathy Group.

The question I have is with the value of Genco, as cheap as it is, it's going to be a lot cheaper than, to your point, anything that you could find in the private market. And the always argument is when you're going to acquire something, you want to acquire something, you know the best. You guys have a phenomenal deal here of something that's trading at two times the cash flows for this year, maybe two or three times cash flows next year. Why not just take your own company private?

I mean, I don't want to say that's what we're going to do, but is that the kind of stuff the way our brains work? We do believe it's very cheap, and it's the kind of thing that we might potentially do.

And I guess if the problem is capital or something like that, then you guys have an excellent vehicle in, really, in General Maritime that you could use as basically your investment bank and have an incredibly accretive acquisition, couldn't you?

We haven't looked at it as a deal between General Maritime and Genco, but to answer what you said previously, we do think the stock is incredibly cheap, and we do think it's -- that's why we have a share repurchase program in place. And might we take that to a further extent? Who knows? We think there are all kinds of options on the table right now and nothing is off the table.

That does conclude our conference for today. I'd like to thank everyone for joining us and wish you a good day.