Genco Shipping & Trading Ltd (GNK) 2010 Q2 法說會逐字稿

Good morning, ladies and gentlemen and welcome to the Genco Shipping & Trading 2010 earnings 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 not 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 719-457-0820 and entering the passcode 3721646. 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 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 are 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, 2009. And the Company's subsequent reports filed with the SEC.

At this time, I would like to introduce Mr. John Wobensmith, the Chief Financial Officer of Genco Shipping & Trading.

Thank you, Joe. Welcome to Genco's second quarter 2010 conference call. With me today is Peter Georgiopoulos our Chairman.

I will begin today's call by discussing our second quarter and year-to-date highlights as outlined on slide three of the presentation. I will then review our financial results for the three month period ended June 30, 2010. Following this I will discuss the industry's current fundamentals. Peter and I will then be happy to take your questions. During the second quarter, Genco posted strong results for shareholders, by drawing upon the Company's significant time charter coverage while further expanding its modern fleet.

In acting decisively to capitalize on an attractive acquisition environment, management entered into two transactions to acquire 18 vessels, at compelling valuations. Considerably strengthening the Company's position for future growth. Turning to slide five, net income attributable to Genco for the three months ended June 30, 2010, was $36.8 million or $1.17 basic and $1.16 diluted earnings per share.

Turning to second quarter, we solidified our position as an industry bellwether by entering into two strategic acquisition that we believe will strengthen our future commercial prospects to capitalize the positive long-term demand for essential drive out commodities in China, India and other developing countries.

Also enhance the age profile and our modern fleet and our ability to achieve the highest operational standards for our leading customers and increase the Company's earnings power for the benefit of shareholders. First on June 9, we agreed to acquire five Handysize vessels including three new buildings from companies within the Metrostar Group of companies for approximately $166.3 million. Building upon this success we further expanded our fleet by agreeing to acquire 13 Supramax vessels including one new building from Setaf SAS, a wholly owned subsidiary of Bourbon SA for $439.5 million. The 18 vessels that we agreed to acquire during the second quarter combined to expand our fleet by 31% on a dead weight tonnage basis. We are pleased to have already received delivery of the Genco Ocean from the Metrostar acquisition as well as the Genco Lorraine and the Genco Rhone from the Bourbon acquisition.

In support of our significant growth, we entered into a commitment letter for $100 million senior secured term facility, to finance a portion of the Metrostar acquisition as well as a $253 million senior secured term loan facility to finance a portion of the Bourbon acquisition.

In addition to the ongoing support Genco has received from the commercial banking markets, we completed a concurrent $125 million convertible notes offerings and a $57.5 million follow on common stock offering. Further enhancing our financial flexibility. Finally, during the second quarter, we secured four of our vessels in our existing fleet on long-term time charter contracts at rates ranging between $20,000 per day and $27,000 per day.

Most recently we locked away three Supramax vessels from the Bourbon acquisition on favorable longer term time charters at rates ranging from $18,500 per day and $19,900 per day. Moving to slide six we display a summary our fleet pro forma for our recent acquisitions.

As we have in the past, we will maintain our focus on employing a large portion of our fleet on contracts, with high credit quality counterparties and delivering first rate service to top international charters. Our world class customer base, which includes reputable multinational companies, such as, Cargill International, Lauritzen Bulkers, Louis Dreyfus Corporation and others serves as a core differentiator for our Company as we continue to grow our fleet. On the right side of the slide, we provide an overview of our newly acquired vessels.

Last week we reached agreements to sign time charters for the Genco Bourgogne and the Genco Pyrenees, two of the Supramax vessels from the Bourbon acquisition with Setaf SAS. The time charter for the Genco Bourgogne is for approximately 15 to 17.5 months at a rate of [$19,900] per day and the time charter for the Genco Pyrenees is for approximately 11 to 13.5 months at a rate of $19,000 per day. In terms of the Metrostar acquisition, four of the remaining Handysize vessels to be delivered to Genco, are secured on long-term time charters, three of which include a minimum and maximum base rate of $8,500 and $13,500, respectively per day, as well as a 50% profit sharing component with Cargill International.

The other Handysize vessels, secured on a spot-market related time charter with Cargill International at a rate based on 115% of the average of the daily rates of the Baltic Handysize Index. Going forward, we will continue to seek opportunities to lock away our newly acquired vessels on attractive time charters prior to their delivery. Upon completing both the Bourbon and Metrostar acquisitions and excluding Baltic Trading Limited Suite, we will own a versatile fleet of 53 dry bulk vessels consisting of 9 Capesize, 8 Panamax, 17 Supramax, 6 Handymax and 13 Handysize vessels. With a total carrying capacity of approximately 3.8 million dead weight tons.

At that time the average age of our fleet will be 6.4 years. Well below the industry average of approximately 15 years. By increasing the size of our fleet with first in class vessels, Genco has further strengthened its leading brand as an owner and operator of modern tonnage.

Turning to slide eight, I will provide an overview of our financial results for the second quarter and six months ended June 30, 2010. Please note that we are reporting our financials on a consolidated basis as a result of the Baltic Trading IPO in March of 2010 and our 25% equity ownership in the Company.

For the three and six month period ended June 30, 2010, we recorded revenues of $105.3 million and $200 million respectively. This compares with revenues for the second quarter of 2009 and six months ended June 30, 2009, of $93.7 million and $190.4 million respectively. The year-over-year increase was mainly due to the increase in the size of our fleet.

Operating income for the second quarter and six month period ended June 30, 2010, was $54.9 million and $103.4 million respectively. This compares with operating income for the second quarter and six month period ended June 30, 2009, of $53.3 million and $108.4 million respectively. The increase in operating income for the second quarter of 2010, compared to the year earlier period is attributable to higher revenues offset by higher expenses, both of which are associated with the operation of a larger fleet.

The decrease in operating income for the six month period ended June 30, 2010, is attributable to increased vessel operating expenses, general, administrative and management fees and depreciation and amortization, associated with the operation of a larger fleet partially offset by higher revenues. Interest expense for the second quarter of 2010 was $15.8 million and $31.2 million for the six month period ended June 30, 2010. This compares to interest expense of $15.4 million for the second quarter of 2009 and $29.3 million for the six month period ended June 30, 2009.

The Company recorded net income attributable to Genco shareholders for the second quarter of 2010 of $36.8 million or $1.17 basic and $1.16 diluted earnings per share. Net income attributable to Genco shareholders for the six months, ended June 30, 2010, with $70.2 million or $2.24 basic and $2.23 diluted earnings per share. This compares to net income attributable to Genco of $37.6 million or $1.20 basic and diluted earnings per share for the second quarter of 2009. And net income attributable to Genco of $78.9 million or $2.52 basic and $2.51 diluted earnings per share for the six month period ended June 30, 2009.

Genco also recorded $719,000 of income tax expense for the second quarter of 2010. This income tax expense includes federal, state and local income taxes on net income earned by Genco Management USA Limited. One of our wholly owned subsidiaries, and relates to income generated from technical and commercial management of the vessels for Baltic Trading Limited, sale and purchase fees payable to us by Baltic Trading Limited and the technical management of vessels for Maritime Equity Partners.

Next on slide nine you will see the income statement effects of Baltic Trading consolidation with Genco Shipping & Trading Limited. This will provide you with a more detailed breakdown of the financial performance of the two separate companies. Key consolidated balance sheet and other items as presented in slide 10 include the following. Our cash position was $208.1 million as of June 30, 2010. Excluding the consolidation of Baltic Trading, Genco's cash position was $148.9 million. Our total assets as of June 30, 2010, were $2.6 billion, consisting primarily of our current fleet, cash and cash equivalents, deposits on vessels and our investment in Genuity Shipping and Transportation.

Our EBITDA for the three months ended June 30, 2010, was $79.3 million, which represents an EBITDA margin of 75.3% of revenues. Moving to slide 11 our utilization rate was 99.4% for the second quarter of 2010 compared to 99.3% in the year earlier period. Our time charter equivalent rate for the second quarter of 2010 was $30,405. This compares to $32,245 recorded in the second quarter of 2009. The decrease in TCE rates resulted from lower charter rates in the second quarter of 2010 versus the second quarter of 2009 for 17 of the vessels in our fleet.

This was partially offset by higher charter rates for 14 of the vessels in our fleet. For the second quarter of 2010, our daily vessel operating expenses were $4,671 per day versus $4,556 per day for the second quarter of 2009. Daily vessel operating expenses for the six months ended June 30, 2010, were $4,697 per day versus $4,743 per day for the six months ended June 30, 2009.

The increase in daily vessel operating expenses for the second quarter of 2010, compared to the prior year period is due to the timing of repair costs, as well as higher stores and spare costs, partially offset by lower costs associated with insurance. While daily vessel operating expenses year-to-date have been below budget due to the timing of purchases of spare parts, as well as lower than anticipated crew, lubricants and insurance costs. We 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 operation.

Based on estimates provided by our technical managers and management's expectations, we expect our daily vessel operating expenses to be $5,100 per vessel per day for the second half of 2010 on a weighted average basis. On slide 12 we present our pro forma balance sheet, which shows our pro forma cash position of $173.6 million, which includes $176.5 million of proceeds after underwriting commissions from our convertible senior notes and common stock offerings. $151.8 million of cash payments for the deliveries of the Metrostar and Bourbon vessels, delivering in 2010 and $4.4 million of sale and purchase fees payable under the Bourbon acquisition. Pro forma cash excludes Baltic Trading Limiteds cash balances the $59.3 million.

Our pro forma net debt to total capital ratio was 62% as of June 30, 2010. On slide 13, we outline our acquisition financing commitments. We are pleased to continue to successfully consolidate the dry bulk shipping industry in a disciplined matter that meets the strict return criteria related to earnings and cash flow creation, as well as return on capital hurdles. By acquiring five Handysize vessels and 13 Supramax vessels at attractive prices near historic lows, we have furthered the leading reputation in the dry bulk industry.

As previously discussed we utilized out sizable cash position, to pay the 10% deposits of $16.3 million for the five Handysize vessels and an additional $44 million for the 13 Supramax vessels. The remaining balance is to be paid upon delivery of each vessel, scheduled between the third quarter of 2010 to the third quarter of 2011. Of note, a detailed payment and delivery schedule is included in the appendix of our presentation.

Drawing upon our strong history of entering the financing transactions. We entered in a commitment letter for a $253 million senior secured term loan facility to fund a portion of the Bourbon acquisition. We also entered into a commitment letter for $100 million secured term loan facility to fund or refund to us a portion of the Metrostar acquisition.

Under the terms of the five year $253 million, senior secured credit facility, amounts borrowed will bear interests at LIBOR plus a margin of 3%. Borrowings are to be repaid quarterly with the outstanding principle amortized on a 14 year profile, depending on the age of the vessel and any outstanding amount under the credit facility is to be paid in full on the final maturity date. Under the terms of the seven year, $100 million secured credit facility, amounts borrowed will bear interests at LIBOR plus a margin of 3%. Borrowings are to be repaid quarterly with the outstanding principle amortized on a 13 year profile, with any outstanding amount under the facility to be paid in full on the final maturity date.

In addition to raising bank financing during a challenging credit environment we completed our concurrent public offerings of $125 million of senior secured convertible notes and $57.5 million, in newly issued common stock. Gross proceeds of approximately $182.5 million from these offerings will be used to fund a portion of both the Bourbon acquisition and the Metrostar acquisition, as well as for general corporate purposes.

On slide 14, we present our anticipated expense levels for the third quarter. We expect our Q3 2010, daily vessel operating expense budget to be $5,100 per vessel, per day on a weighted basis, of an average number of 41.75 vessels. We expect our daily free cash flow expense rate to be $15,349 per day and our daily net income expense rate for Genco consolidated, to be $18,757 per day, per ship.

On Slide 15, we provide the convertible debt terms and accounting treatment. Since Genco was founded in 2004, the Company has maintained an intense focus on preserving a strong financial foundation. Consistent with this critical objective we completed an offering of $125 million in convertible senior notes due August 15, 2015.

The convertible securities will carry an annual interest rate of 5% and will be convertible into shares of Genco common stock at a strike price of $19.60 per share, representing a 22.5% conversion premium. On the bottom of the slide we have presented a summary of the accounting treatment for both basic and diluted earnings per share. I will now take this opportunity to spend a few minutes discussing the industry fundamentals. I will start with slide 17, which points to the dry bulk indices.

Represented on this slide, is the overall Baltic Dry Index, as can be seen when looking at the Baltic Dry Index it has shown relative weakness, beginning in the second quarter of 2010, which we believe is mainly due to reduced iron ore demand from China as with well as seasonal effects, which I will explain later on the call. The Capesize sector was affected the most during the slowdown, mainly due to the vessels dependence on iron ore and coal cargos.

Supramax and Panamax vessels, on the contrary maintained a more stable earnings profile through the cycle, as a result of the broad cargo versatility of the vessels and demand strength of the minor bulks and coal. Moving onto slide 18 we summarize the current demand side fundamentals. As indicated on the graph at the bottom right, Chinese steel production reached 323 million tons for the first six months of 2010, showing a21% increase over last years production figures. Over 309 million tons of iron ore were imported into China for the same period, showing a 4% increase on a year-over-year basis.

We believe that the relatively weaker iron ore market, was due to the following reasons, first lower overall commodity demand, was a result of concerns about overall economic growth, coupled with the Chinese governments efforts to cool down their economy. Second, seasonally weaker demand for iron ore imports during the summer months had an incremental effect, as well as a shift towards quarterly iron ore pricing system, postponed potential iron ore fixtures. We believe that the long term fundamentals for the iron ore trade remain intact and expect to see an increase in demand for the commodity, following the conclusion of next quarters price setting.

If addition, we believe that extended fears of a slowing economy could potentially lead to increased infrastructure spending which will bode well for the dry bulk market. Lastly, and to a lesser extent, while the wind down of the South American grain season increased vessel availability during the last month and a half we expect that the beginning of the northern hemisphere grain season will increase demand for sub Capesize vessels going forward especially considering the recent announcement that Russia will ban weed exports after a recent drought in the country. Moreover the importance of coal for the dry bulk market was once again evident this quarter as unusually warm weather in China increased thermal coal imports. India will play a significant role in the dry bulk trade in the long run with a similar growth profile to that of China. We expect trade into India to be mainly driven by demand for coal to fuel domestic electricity consumption and steel demand. We can already see a growth trend for thermal and coking coal imports into India. We expect this trend to continue as India's economic development should spur infrastructure development and increased steel production.

Additional support lies by the fact that plans to build large coal power electricity plants are already in place. On the bottom left of the slide, we note that since the beginning of 2010, we have seen moderate increases in iron ore imports into both Japan and South Korea and believe that this trend will continue as the rest of the world enters a recovery stage. At the same time, the IMF recently revised its forecast for the global economy increasing its forecast from 4.2% to 4.6% and indicating China's expected economic growth at 10.5%.

Moving to slide 19 we show the expansion plans of key iron ore producers coupled with an increase in apparent steel usage. On the top left of the slide, you can see the combined iron ore expansion plans for BHP, (inaudible) Rio Tinto Valley and MMX through 2012. Which accumulate to 331 million tons or 36% of 2009 seaborne iron ore trade. Of note here is Rio Tinto's recent approval of a $1 billion investment to increase its Pilbara iron ore operations to 330 million tons through 2016.

Furthermore, we believe that recently revised forecast for 2010 apparent steel usage give an indication that additional demand for iron ore will come not only from increased steel production in China but also rebounding steel production in the rest of the world. Namely forecast for overall steel demand were revised upwards to 11% from 9%, while growth in China's steel usage was also increased to 7% from the previous forecast of 5%.

On slide 20 we present our view for the supply side of the equation. Looking at the graph on the bottom left of the slide we can see the dry bulk order book through 2013. Although the projected dry bulk order book still represents approximately 60% of the existing fleet it is questionable whether it will be delivered in its entirety. The main factors behind potential delays and cancellations of new building deliveries surround scarcity of capital and depressed vessel values. Although commercial banks have increased availability of debt capital in the shipping sector, it is still limited to first in class companies and we continue to believe that financing for smaller private owners is very limited at best. Furthermore, depressed vessel values imply loan covenant renegotiations for existing new building orders, and higher equity installments from illiquid owners. Slippage also continues to be a major factor on the supply side, and it is estimated that slippage continued at approximately 40% for the first six months of 2010.

Approximately 33% of the world fleet is 20 years or older. As we have indicated on past calls fault carrier scrapping is not mandated, it is more of an economic equation. As illustrated on the graph at the bottom right of the page, 56 vessels have been scrapped year to date in 2010, showing a slight increase in spite of the lower freight rate environment, while 260 vessels were scrapped in 2009.

Before opening up the call for questions, we note that as you may know, Genco's subsidiary Baltic Trading Limited announced a follow on offering for up to $110 million in common stock plus a customary overallotment option for the underwriters. Baltic Trading intends to use the offerings net proceeds to repay borrowings under its credit facility used to finance three vessels purchased from Metrostar as well as for working capital purposes. Baltic Trading is currently in a lock up period under the underwriting agreement, it entered into in connection with its IPO, which is expected to expire after September 5, 2010. Baltic Trading will therefore consider the commencement of any marketing for this marketing only after the expiration of the lock up period and under favorable market conditions. As Baltic Trading is currently in registration we cannot take questions on the proposed offering during this call. I would, however, note that our view today is that the market conditions are not favorable. This concludes our presentation and we would now be happy to take your questions.

Thank you. (Operator Instructions). We will take our first question from Doug Mavrinac with Jefferies and Company. Please go ahead.

Thank you, operator. Good morning, guys.

Hey, Doug.

I had a few follow up questions for you, John, in your overview of the market you briefly touched on the Russian wheat harvest ban. My question is, is it too early to have seen an impact from that ban yet in the dry bulk shipping market? And if it is too early, what sort of impact do you think it could have on the market over the next few months?

Hi, Doug. I think it is a little too early. I think probably over the next 30 days is when you will start to see the impact of that. I think it is a little bit too early to the tell the exact impact and from our estimates, we think that wheat exports out of the US in particular will be up close to 25%. You will also most likely see wheat exports rise in Australia. The real benefit of that is the expansion of ton mile, and -- because most of those wheat exports from Russia go down in the Mediterranean regions so they will have to pull from the US and Australia which are clearly longer haul trades.

Thank you very much. Second question, kind of more bigger picture but still on supply and demand and it relates to the order book. We have seen obviously significant slippage in the order book, but yet people are still concerned about the number of ships to be delivered. My question pertains to the effective employment of those ships. I mean how will the lack of available port infrastructure handle all of those ships next year? I mean, is it conceivable that, yes, we have a lot of ships being delivered but, no, they may not be efficiently employed and just sitting in the back of the line at some port in Australia and same with the discharge in China?

The important thing is that the demand side of the equation is very much intact and in a growth mode both in terms of volume and ton mile expansion. I think you're correct, there haven't been any large port infrastructure projects that have been completed. There are definitely some on the drawing board. But yes, I mean we have seen it this year. Poor congestion has wound up to historic numbers earlier in the year. It has come off a little bit. But we expect going into the fourth quarter you will see congestion move back up again.

Great. Great. Thank you. Final question, and it relates to the impact of the Metrostar and Bourbon acquisitions, and just, the addition of those asset values, how did those affect your previously waived covenants in terms of those ratios? I mean, positively, negatively, neutral.

Neutral because, there are separate collateral pools. There's a pool for the D&B facility, that D&B facility financed I think 35 ships, 36 ships, and then you've got the two separate loan facilities that each have their collateral. So it is neutral.

Thank you very much. Congratulations on a very strong quarter.

Thank you, Doug.

Thank you. And our next question will come from John Chappell with JPMorgan. Please go ahead.

Thank you. Good morning. John, you gave an update on some of the charters from the Bourbon ships last week, you have a few more that are still unchartered. What's your thought process on those and given the concensus outlook on a fourth quarter recovery in the market, do you employee them on spot for a short period of time, do you put them on short term charters or are you just trying to stagger the expiration of those ships as you look at one-year charters?

It is a little bit of both, John. We have fixed a couple of ships. Well, we fixed one on a one year charter. We did one at 1.5 years and we did one at 2 years.The 2 years was done at 18.5, the one year was done at 19 and the 19.9 for the 1.5 years. We have also done -- we just fixed yesterday a ship for a short period of time, 2 to 4 months at $22,000 a day. So, it is a little bit of both but look we definitely agree that the fourth quarter is going to be stronger, and so we are saving some of these ships for that period.

Okay. Was that the same line of thinking with the Maximus charter, noticed a pretty low rate for that one with the September expiry, when did that one start? Is September the earliest date or is that drop dead date and what was your line of thinking of taking that rate for the Maximus at the time?

That's a real easy one. The case size rates were just not attractive when we did that. That was maybe a 40 day trip charter, so very short. Because we wanted that ship to be open again, in what we believe is going to be a strong fourth quarter.

Okay. Then finally, just on your capital structure you've obviously had a lot going on and assuming that you are going to focus on integrating these recent acquisitions rather than going to the market aggressively in the very near term, would it be safe to assume that most of the cash flow you will be generating from your ships will be used to delever the balance sheet?

I think that is a fair assumption right now. I mean we definitely have amortization in both of the new credit facilities which we are obviously going to honor. We have got the 12.5 per quarter on the D&B credit facility. But, yes, look the plan right now is we have just done a large acquisition between Metrostar and Borbon. We want to absorb that in and delever.

That 62% pro forma, is that a level you feel comfortable with, you targeting something, 50%, 55% or is 60% good?

I think we want to get down into the mid-50s again.

Okay. Thanks a lot, John.

You're welcome.

Thank you. (Operator Instructions). Our next question is from Justin Yagerman with Deutsche Bank. Please go ahead.

Good morning, guys. I wanted to ask on China imports, I mean obviously things have been down, but we are starting to see cape rates moving off the bottom a little bit here. I wanted to get a sense in your guys view, what's driving the move off of the bottom? Are we seeing improved rates because owners are employing tonnage out of position lists or are we seeing improved rates because there's actually an uptick in demand that is starting this summer?

No. It is very clearly the Chinese coming back into the markets to purchase iron ore. I wouldn't say they're doing it necessarily on a large scale yet. But it just goes to show you how much leverage is in that Capesize market. So, yes, I would definitely say it is the Chinese coming back into the market. We have seen some positive things. Go ahead, Peter.

I am just saying it never works when people pull their ships off tonnage lists, that never works to push the market up.

Okay. When you look down are you seeing sequential build in that John or Peter? Is -- and how far in advance are you going to have a view? I mean is it 30 days, 60 days that you guys get visibility into the activity that we should see ghitting import numbers in the next month or two?

Well, look, Justin, there are two things to focus on right now. One, we have definitely seen a firming trend in Chinese steel prices which is positive. Obviously expanding the margins and two, we've started to see Chinese iron ore stockpiles and the inventory numbers start to decline. So you start, you look at those events, and then coming into a seasonally strong steel production time period and that's why we are optimistic. Okay.

Just thinking about the latest acquisitions that you guys have made, have been on the smaller spectrum in terms of the vessel sizes relative to what you guys have bought in the past, I wanted to get a sense. Obviously debt pay down is probably priority number one, but if acquisitions were coming along in the next year or so, how do you think about where you would want to make those purchases in your fleet? It just opportunistic or do you start to go upsize now that you've kind of filled our a bit on the lower size spectrum in terms of vessel classes?

I would say it's opportunistic. That has always been our history. That's where we would focus. Okay.

There was an article in The Times recently, a day or two ago about a considerable amount of China plant closures in order to meet efficiency goals from an energy standpoint as we close out this latest five year plan in China. Is that something you guys have heard about having any impact on demand?

Yes, Justin, I know the article. There were a few of the what I will call very low quality, low grade steel plants that were closed. I think there were a few cement plants as well. We don't see it as having much of an impact. You got to go back to the big picture. The Chinese government is very much incentivized to keep the China economy moving. They still have a ton of infrastructure to build out in the country for many years. So, while certainly they have their goals, one I don't think they are going to meet them and two, I don't think it is going to have much of an impact on the dry bulk side.

No, it sounded more like rhetoric. I appreciate the time, guys. Thanks a lot.

Thanks, Justin.

Thank you. Our next question comes from Gregory Lewis with Credit Suisse. Please go ahead.

Thank you. Good morning. John, just following up on the Maximus, what base is that going to end up in? Is that going to be in the Atlantic or the Pacific when it comes off contract?

Greg, I'm not sure.

I will try to get back to you on that. When I look at the 12 vessels from Bourbon, it looks like you've taken delivery of two of them already in the third quarter and yet the other ten ready to go. When we think about vessel revenue days for the quarter, should we think of it in terms of maybe having five to six vessels, full vessels for the quarter or do you think it would probably be lower?

I think that most of the vessels will be delivered before the end of August.

Okay.

So, there are probably two or three that may slip into the first part of September, but most of them will be delivered before the end of August.

Okay. Perfect. Then just really quick lastly when I was going through the press release matching up some of the Bourbon legacy charters with the new charters that are on -- in the press release, it looked like there were some changes to some of the legacy contracts, what -- I guess what drove that?

Look. As we stated a couple times, the charters that are above market today most likely will not transfer or novate. So specifically the two charters with Korea line that are on five years, while we have no information I highly doubt those will transfer or novate.

Okay. Perfect. Thanks for the time.

Thanks, Greg.

Thank you. There are no further questions at this time. That does conclude today's conference. Thank you for your participation.