GNK Genco Shipping and Trading Limited

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

FORM 8-K

 

CURRENT REPORT

 Pursuant to Section 13 OR 15(d) of The Securities Exchange Act of 1934

 

Date of Report (Date of earliest event reported):  November 8, 2023

 

GENCO SHIPPING & TRADING LIMITED

(Exact name of registrant as specified in its charter)

Registrant’s telephone number, including area code:  (646) 443-8550

 

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Indicate by check mark whether the registrant is an emerging growth company as defined in Rule 405 of the Securities Act of 1933 (§230.405 of this chapter) or Rule 12b-2 of the Securities Exchange Act of 1934 (§240.12b-2 of this chapter).

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.       ☐

 

Securities registered pursuant to Section 12(b) of the Act:

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Attached and incorporated herein by reference as Exhibit 99.1 is a copy of a press release of Genco Shipping & Trading Limited (the “Company”), dated November 8, 2023, reporting the Company’s financial results for the third quarter ended September 30, 2023.

The information set forth under “Item 2.02 Results of Operations and Financial Condition,” including Exhibit 99.1 attached hereto, shall not be deemed “filed” for purposes of Section 18 of the Securities Act of 1934, as amended, nor shall such information be deemed incorporated by reference in any filing under the Securities Act of 1933, as amended, except as shall be expressly set forth by specific reference in such filing.

SIGNATURE

 

Pursuant to the requirements of the Securities Exchange Act of 1934, Genco Shipping & Trading Limited has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.

 

EXHIBIT INDEX

 

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GENCO SHIPPING & TRADING LIMITED ANNOUNCES

Q3 2023 FINANCIAL RESULTS

Declares Dividend of $0.15 per share for Q3 2023, Genco’s 17^th Consecutive Quarterly Dividend

$500 Million Revolving Credit Facility Expected to Significantly Increase Borrowing Capacity & Enhance Financial Flexibility

Agrees to Acquire High Specification Scrubber-Fitted Capesize Vessel

New York, New York, November 8, 2023 – Genco Shipping & Trading Limited (NYSE:GNK) (“Genco” or the “Company”), the largest U.S. headquartered drybulk shipowner focused on the global transportation of commodities, today reported its financial results for the three months and nine months ended September 30, 2023.

 

 

 

 

 

Mr. Wobensmith continued, “We expect our refinancing to further enhance Genco’s capital structure and support both the continued execution of our value strategy and our ability to take advantage of favorable long-term industry fundamentals. Beginning in September, we have seen a significant uplift in drybulk freight rates, led by firm iron ore, coal and bauxite shipments, which is reflected in our solid Q4 TCE to date. Moving forward, while we expect volatility to persist, we view commodity demand growth from China and developing Asia, coupled with capacity constraints that have resulted in a historically low orderbook, to be supportive for the drybulk market.”

¹ Genco share price as of November 7, 2023.

 

² We believe the non-GAAP measure presented provides investors with a means of better evaluating and understanding the Company’s operating performance. Please see Summary Consolidated Financial and Other Data below for further reconciliation. Regarding Q4 2023 TCE, actual results will vary from current estimates. Net revenue is defined as voyage revenues minus voyage expenses, charter hire expenses and realized gains or losses on fuel hedges.

 

In Q4 2023, Genco received commitments for a $500 million revolving credit facility, which can be utilized to support growth of the Company’s asset base as well as general corporate purposes.

Key terms of the amended $500 million revolving credit facility include:

 

 

Lenders of the revolving credit facility include reputable international shipping banks that are both existing and new lenders to Genco. The amended facility is subject to definitive documentation and fulfillment of customary conditions precedent. The amended facility is expected to close in Q4 2023.

Upon closing the amended credit facility and acquisition, we anticipate pro forma debt outstanding to be $179.8 million and undrawn revolver availability to be $320.3 million. Given the 100% revolver structure, we plan to actively manage our debt outstanding to reduce interest expense while also planning to utilize the revolver a source of funds to opportunistically acquire tonnage.

Genco’s comprehensive value strategy is centered on three pillars:

Key characteristics of our unique platform include:

Genco paid down $304.5 million or 68% of our debt from Q1 2021 to Q3 2023

 

 

 

 

 

Under the quarterly dividend policy adopted by our Board of Directors, the amount available for quarterly dividends is to be calculated based on the formula in the table below. The table includes the calculation of the actual Q3 2023 dividend and estimated amounts for the calculation of the dividend for Q4 2023:

Numbers in millions except per share amounts

*We have consolidated the previous voluntary quarterly reserve of $10.75m and voluntary debt repayments of $8.75m (total of $19.5m). This consolidated Q3 2023 voluntary quarterly reserve was reduced from $19.5m to $4.4m for the purposes of the dividend calculation.

We have consolidated our voluntary quarterly debt repayments and voluntary quarterly reserve for the purposes of our dividend calculation as shown in the table above. With our new 100% revolving credit facility structure, we intend to actively manage our debt outstanding to reduce interest expense while also planning to opportunistically draw down to partially fund future acquisitions or for general corporate purposes while remaining committed to our medium-term goal of net debt zero. Furthermore, given that both the reserve and debt repayments are fully in our discretion, we felt it was appropriate to consolidate into one voluntary quarterly reserve.

The Board expects to reassess the payment of dividends as appropriate from time to time. Our quarterly dividend policy and declaration and payment of dividends are subject to legally available funds, compliance with applicable law and contractual obligations (including our credit facility) and the Board of Directors’ determination that each declaration and payment is at the time in the best interests of the Company and its shareholders after its review of our financial performance.

 

Our fleet deployment strategy currently remains weighted towards short-term fixtures, which provide us with optionality on our sizeable fleet.

Based on current fixtures to date, our estimated TCE to date for the fourth quarter of 2023 on a load-to-discharge basis is presented below. Actual rates for the fourth quarter will vary based upon future fixtures. These estimates are based on time charter contracts entered by the Company as well as current spot fixtures on the load-to-discharge method, whereby revenue is recognized ratably over the voyage from the commencement of loading to the completion of discharge. The

actual TCE rates to be earned will depend on the number of contracted days and the number of ballast days at the end of the period. According to the load-to-discharge accounting method, the Company does not recognize revenue for any ballast days or uncontracted days at the end of the fourth quarter of 2023. At the same time, expenses for uncontracted days will be recognized.

Our index-linked and short-period time charters are listed below.

 

The Company recorded net loss for the third quarter of 2023 of $32.0 million, or $0.75 basic and diluted loss per share. Adjusted net loss is $3.9 million or $0.09 basic and diluted loss per share excluding a non-cash vessel impairment charge of $28.1 million. This non-cash vessel impairment charge was recorded as the estimated future undiscounted cash flows for three of our 170,000 dwt Capesize vessels, that we are evaluating divesting as part of fleet renewal with third special surveys scheduled in 2024, did not exceed their net book values, and we therefore adjusted their values to fair market value during the third quarter of 2023. Comparatively, for the three months ended September 30, 2022, the Company recorded net income of $40.8 million, or $0.96 and $0.95 basic and diluted earnings per share, respectively.

Revenue / TCE

The Company’s revenues decreased to $83.4 million for the three months ended September 30, 2023, as compared to $136.0 million recorded for the three months ended September 30, 2022, primarily due to lower rates earned by our minor and major bulk vessels. The average daily time charter equivalent, or TCE, rates obtained by the Company’s fleet was $12,082 per day for the three months ended September 30, 2023 as compared to $23,624 per day for the three months ended September 30, 2022.

 

Voyage expenses

Voyage expenses were $34.3 million for the three months ended September 30, 2023 compared to $39.5 million during the prior year period, primarily due to lower bunker consumption for our minor bulk vessels and third-party chartered-in vessels, as well as decreased fuel prices during the third quarter of 2023 as compared to the same period during 2022.

Vessel operating expenses

Vessel operating expenses increased to $24.7 million for the three months ended September 30, 2023 from $22.1 million for the three months ended September 30, 2022. Daily vessel operating expenses, or DVOE, amounted to $6,113 per vessel per day for the third quarter of 2023 compared to $5,457 per vessel per day for the third quarter of 2022. The increase was primarily due to the timing of the purchase of stores and spare parts, higher insurance costs and higher crew costs due to the timing of crew changes. These increases were partially offset by the absence of COVID-19 related expenses in Q3 2023.

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 manager, our DVOE budget for Q4 2023 is $6,000 per vessel per day on a fleet-wide basis.

General and administrative expenses

General and administrative expenses increased to $6.6 million for the third quarter of 2023 compared to $5.9 million for the third quarter of 2022, primarily due to an increase in non-cash stock amortization expenses.

Depreciation and amortization expenses

Depreciation and amortization expenses increased to $17.0 million for the three months ended September 30, 2023 from $15.6 million for the three months ended September 30, 2022, primarily due to an increase in drydocking amortization expense for certain vessels that completed their respective drydockings during the third quarter of 2022 through the second quarter of 2023.

Drybulk market update

During the first two months of the third quarter, spot freight rates came under pressure primarily due to an unwinding in port congestion which offset firm iron ore and coal volumes into China. During September and into Q4 2023 to date, freight rates have improved meaningfully due to:

 

The Company recorded net loss of $17.8 million or $0.42 basic and diluted loss per share for the nine months ended September 30, 2023. Adjusted net income is $10.3 million or $0.24 basic and diluted earnings per share excluding a non-cash vessel impairment charge of $28.1 million. This

compares to net income of $129.9 million or $3.07 and $3.03 basic and diluted earnings per share, respectively, for the nine months ended September 30, 2022.

Revenue / TCE

The Company’s revenues decreased to $268.3 million for the nine months ended September 30, 2023 compared to $410.0 million for the nine months ended September 30, 2022, primarily due to lower rates achieved by our minor and major bulk vessels. TCE rates obtained by the Company decreased to $13,855 per day for the nine months ended September 30, 2023 from $25,425 per day for the nine months ended September 30, 2022.

 

Voyage expenses

Voyage expenses decreased to $100.5 million for the nine months ended September 30, 2023 from $110.4 million for the same period in 2022, primarily due to lower bunker consumption for our minor bulk vessels and third-party chartered-in vessels, as well as decreased fuel prices during the nine months ended September 30, 2023 as compared to the same period during 2022.

Vessel operating expenses

Vessel operating expenses decreased to $71.7 million for the nine months ended September 30, 2023 from $78.6 million for the nine months ended September 30, 2022. DVOE was $5,971 for the year-to-date period in 2023 versus $6,545 in 2022. The decrease was primarily due to the absence of COVID-19 related expenses in 2023 over the same period last year, a decrease in the purchase of stores and spare parts, as well as reduced repair and maintenance costs. These decreases were partially offset by higher crew costs due to the timing of crew changes.

General and administrative expenses

General and administrative expenses for the nine months ended September 30, 2023 increased to $21.3 million as compared to $18.3 million in the same period of 2022 primarily due to an increase in non-cash stock amortization expense as well as higher legal and professional fees.

EBITDA

EBITDA for the nine months ended September 30, 2023 amounted to $36.2 million compared to $180.6 million during the prior period. During the nine months of 2023 and 2022, EBITDA included non-cash impairment charges as well as losses on fuel hedges. Excluding these items, our adjusted EBITDA would have amounted to $64.4 million and $180.7 million, for the respective periods.

Genco’s fleet of 44 vessels as of November 8, 2023, consists of:

The fleet’s average age is 11.7 years and has an aggregate capacity of approximately 4,635,000 dwt. We plan to take delivery of the Genco Ranger, a 181,000 dwt scrubber-fitted Capesize vessel in mid-November 2023.

In addition to acquisitions that we may undertake, we will incur additional capital expenditures due to special surveys and drydockings. Furthermore, we plan to upgrade a portion of our fleet with energy saving devices and apply high performance paint systems to our vessels in order to reduce fuel consumption and emissions.

We estimate our capital expenditures related to drydocking, including capitalized costs incurred during drydocking related to vessel assets and vessel equipment, ballast water treatment system costs, fuel efficiency upgrades and scheduled off-hire days for our fleet for the balance of 2023 and 2024 to be:

(1) Estimates are based on our budgeted cost of drydocking our vessels in China. Actual costs will vary based on various factors, including where the drydockings are actually performed. We expect to fund these costs with cash on hand. These costs do not include drydock expense items that are reflected in vessel operating expenses.

 

(2) Estimated costs associated with the installation of ballast water treatment systems are expected to be funded with cash on hand.

 

(3) Estimated costs associated with the installation of fuel efficiency upgrades are expected to be funded with cash on hand.

 

(4) Actual length will vary based on the condition of the vessel, yard schedules and other factors.

 

The following table summarizes Genco Shipping & Trading Limited’s selected consolidated financial and other data for the periods indicated below.

 

Genco Shipping & Trading Limited is a U.S. based drybulk ship owning company focused on the seaborne transportation of commodities globally. We provide a full-service logistics solution to our customers utilizing our in-house commercial operating platform, as we transport key cargoes such as iron ore, grain, steel products, bauxite, cement, nickel ore among other commodities along worldwide shipping routes. Our wholly owned high quality, modern fleet of dry cargo vessels consists of the larger Capesize (major bulk) and the medium-sized Ultramax and Supramax vessels (minor bulk) enabling us to carry a wide range of cargoes. We make capital expenditures from time to time in connection with vessel acquisitions. As of November 8, 2023, Genco Shipping & Trading Limited’s fleet consists of 17 Capesize, 15 Ultramax and 12 Supramax vessels with an aggregate capacity of approximately 4,635,000 dwt and an average age of 11.7 years.

 

Genco Shipping & Trading Limited will hold a conference call on Thursday,

 

November 9, 2023 at 8:30 a.m. Eastern Time to discuss its 2023 third quarter financial results. The conference call and a presentation will be simultaneously webcast and will be available on the Company’s website, www.GencoShipping.com. To access the conference call, dial (416) 764-8624 or (888) 259-6580 and enter passcode 329256. A replay of the conference call can also be accessed for two weeks by dialing (416) 764-8692 or (877) 674-7070 and entering the passcode 329256. The Company intends to place additional materials related to the earnings announcement, including a slide presentation, on its website prior to the conference call.

 

 

We intend to use our website, www.GencoShipping.com, as a means of disclosing material non-public information and for complying with our disclosure obligations under Regulation FD. Such disclosures will be included in our website’s Investor Relations section. Accordingly, investors should monitor the Investor Relations portion of our website, in addition to following our press releases, SEC filings, public conference calls, and webcasts. To subscribe to our e-mail alert service, please click the “Receive E-mail Alerts” link in the Investor Relations section of our website and submit your email address.  The information contained in, or that may be accessed through, our website is not incorporated by reference into or a part of this document or any other report or document we file with or furnish to the SEC, and any references to our website are intended to be inactive textual references only.

 

 

This release contains forward-looking statements made pursuant to the safe harbor provisions of the Private Securities Litigation Reform Act of 1995.  Such forward-looking statements use words such as “anticipate,” “budget,” “estimate,” “expect,” “project,” “intend,” “plan,” “believe,” and other words and terms of similar meaning in connection with a discussion of potential future events, circumstances or future operating or financial performance.  These forward-looking statements are based on our management’s current expectations and observations.  Included among the factors that, in our view, could cause actual results to differ materially from the forward looking statements contained in this release are the following: (i) declines or sustained weakness in demand in the drybulk shipping industry; (ii) weakness or declines in drybulk shipping rates; (iii) changes in the supply of or demand for drybulk products, generally or in particular regions; (iv) changes in the supply of drybulk carriers including newbuilding of vessels or lower than anticipated scrapping of older vessels; (v) changes in rules and regulations applicable to the cargo industry, including, without limitation, legislation adopted by international organizations or by individual countries and actions taken by regulatory authorities; (vi) increases in costs and expenses including but not limited to: crew wages, insurance, provisions, lube oil, bunkers, repairs, maintenance, general and administrative expenses, and management fee expenses; (vii) whether our insurance arrangements are adequate; (viii) changes in general domestic and international political conditions; (ix) acts of war, terrorism, or piracy, including without limitation the ongoing war in Ukraine; (x) changes in the condition of the Company’s vessels or applicable maintenance or regulatory standards (which may affect, among other things, our anticipated drydocking or maintenance and repair costs) and unanticipated drydock expenditures; (xi) the Company’s acquisition or disposition of vessels;

(xii) the amount of offhire time needed to complete maintenance, repairs, and installation of equipment to comply with applicable regulations on vessels and the timing and amount of any reimbursement by our insurance carriers for insurance claims, including offhire days; (xiii) the completion of definitive documentation with respect to charters; (xiv) charterers’ compliance with the terms of their charters in the current market environment; (xv) the extent to which our operating results are affected by weakness in market conditions and freight and charter rates; (xvi) our ability to maintain contracts that are critical to our operation, to obtain and maintain acceptable terms with our vendors, customers and service providers and to retain key executives, managers and employees; (xvii) completion of documentation for vessel transactions and the performance of the terms thereof by buyers or sellers of vessels and us; (xviii) the relative cost and availability of low sulfur and high sulfur fuel, worldwide compliance with sulfur emissions regulations that took effect on January 1, 2020 and our ability to  realize the economic benefits or recover the cost of the scrubbers we have installed; (xix) our financial results for the year ending December 31, 2023 and other factors relating to determination of the tax treatment of dividends we have declared; (xx) the financial results we achieve for each quarter that apply to the formula under our new dividend policy, including without limitation the actual amounts earned by our vessels and the amounts of various expenses we incur, as a significant decrease in such earnings or a significant increase in such expenses may affect our ability to carry out our new value strategy; (xxi) the exercise of the discretion of our Board regarding the declaration of dividends, including without limitation the amount that our Board determines to set aside for reserves under our dividend policy; (xxii) the duration and impact of the COVID-19 novel coronavirus epidemic, which may negatively affect general global and regional economic conditions, our ability to charter our vessels at all and the rates at which are able to do so; our ability to call on or depart from ports on a timely basis or at all; our ability to crew, maintain, and repair our vessels, including without limitation the impact diversion of our vessels to perform crew rotations may have on our revenues, expenses, and ability to consummate vessel sales, expense and disruption to our operations that may arise from the inability to rotate crews on schedule, and delay and added expense we may incur in rotating crews in the current environment; our ability to staff and maintain our headquarters and administrative operations; sources of cash and liquidity; our ability to sell vessels in the secondary market, including without limitation the compliance of purchasers and us with the terms of vessel sale contracts, and the prices at which vessels are sold; and other factors relevant to our business described from time to time in our filings with the Securities and Exchange Commission; (xxiii) the completion of definitive documentation for, potential changes in terms to, our entry into, and fulfillment of conditions precedent under our proposed $500 million credit facility, and (xxiv) other factors listed from time to time in our filings with the Securities and Exchange Commission, including, without limitation, our Annual Report on Form 10-K for the year ended December 31, 2022 and subsequent reports on Form 8-K and Form 10-Q).  Our ability to pay dividends in any period will depend upon various factors, including the limitations under any credit agreements to which we may be a party, applicable provisions of Marshall Islands law and the final determination by the Board of Directors each quarter after its review of our financial performance, market developments, and the best interests of the Company and its shareholders. The timing and amount of dividends, if any, could also be affected by factors affecting cash flows, results of operations, required capital expenditures, or reserves.  As a result, the amount of dividends actually paid may vary.  We do not undertake any obligation to update or revise any forward-looking statements, whether as a result of new information, future events or otherwise.

CONTACT:

Peter Allen

Chief Financial Officer

Genco Shipping & Trading Limited

(646) 443-8550

 

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