Genco Shipping & Trading Ltd. Q4 2007 Earnings Call Transcript

Feb.14.08 | About: Genco Shipping (GNK)

Genco Shipping & Trading Ltd.(NYSE:GNK)

Q4 2007 Earnings Call

February 14, 2008 08:30 am

Executives

Robert Gerald Buchanan - Principal Exec Officer and Pres.

John C. Wobensmith - CEO, Principal Accounting Officer, Sec. and Treasurer

Peter Georgiopoulos - Chairman

Analysts

Douglas Mavrinac - Jeffries & Co.

Scott Burk - Bear Streams

Jonathan Chappell - J.P. Morgan

Natasha Boyden - Cantor Fitzgerald

Omar Nokta - Dahlman Rose & Co.

Urs Dur - Lazard Capital Markets

Gregg Louis – Credit Suisse

Charles Rupinski - Maxim Group

Operator

Welcome to the Genco Shipping & Trading Ltd. Fourth Quarter and Full Year 2007 Earnings conference call and presentation. Before we begin, please note that there will be a slide presentation accompanying today's conference call. That presentation can be obtained from Genco's website at www.gencoshipping.com. To inform everyone, today's conference is being recorded and now being webcast at the Company's website, www.gencoshipping.com. We will conduct the question and answer session after the opening remarks. Instructions will follow at that time.

A replay of the conference will be accessible anytime during the next two weeks through Thursday, February 28, 2008 by dialing 888-203-1112 for U.S. callers, and 719-457-0820 for those outside of the U.S. To access the replay, please enter the passcode 4694857.

Now, at this time, I am happy to turn the conference over to the Company. Please go ahead gentlemen.

Peter Georgiopoulos

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, 2006, and the Company's subsequent Reports on Form 10-Q and Form 8-K filed with the SEC.

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

Gerry Buchanan

Thank you and welcome to Genco's Fourth quarter and full year 2007 conference call. With me today are Peter Georgiopoulos, our Chairman, and John Wobensmith, our Chief Financial Officer.

As outlined on slide 3 of the presentation, I will begin today's call by discussing the highlights of the fourth quarter and full year 2007, followed by John's review of our financial results for the quarter and 12-month period ended December 31, 2007. Following this, I will discuss the industry's current fundamentals. John, Peter and I will then be happy to take your questions.

2007 was a year of significant success with Genco and we continued to differentiate the company in three main areas. First we followed our leadership by continuing to consolidate the industry in a disciplined manner that met strict accretion and return on capital requirements. Second, we advanced our commercial position by signing long-term contracts at favorable risks with leading charters and third we declare the sizable and growing dividends to shareholders during the time in which we are seeking big, we expanded or more fully.

For the year, we recorded net income, which reflects the earnings power of our more than fleet and the success at taking advantage of the robust dry bolt market in 2007. Net income was $106.8 million or $4.08 basic and $4.06 diluted earnings per share, which John will discuss in more detail later in the call.

For the three months ended December 31, 2007, excluding the 423.5 million gain on the sale of the Genco Commander, we recorded net income of $33.5 million or $1.17 basic and $1.16 diluted earnings per share, including the sale of the Genco Commander, the company recorded net income of $56.9 million or $1.99 basic and $1.98 diluted earning per share.

For the fourth quarter of 2007, we are pleased to have taken advantage of our fleet’s earnings’ power to declare an increased dividend of $0.85, which also represents our new quarterly target dividend for 2008, including the $0.85 dividend per share for the fourth quarter, we have declared dividends totaling $2.83 per share for 2007 and $6.49 per share on cumulative basis since going public in July of 2005.

As I mentioned earlier during the year, we continued to successfully grow of the company to our acquisitions, which is directly related to the company’s strong industry relationships and its consolidation expertise. Consistent with our goal of becoming the industry bellwether, we entered into two transactions in 2007 to acquire 15 modern vessels that set forth to expand our world class sweep by 173% on a tonnage basis as well as improve the average age of our fleet and diversify to include Capesize vessels, the largest class of drybulk vessel.

We are pleased to have successfully completed the acquisition of the six drybulk vessels from companies within the Evaland Shipping Company I see during the fourth quarter for an aggregate purchase price of $336 million. We are also pleased to have taken delivery of the Genco Titus, one of the remaining six vessels from the $1.1 billion Metrostar transaction.

I also highlight for additional accomplishment in the fourth quarter, that will be discussed later in the call. First, we reached agreements to sell two of our older vessels, second, we completed the sale of the Genco Commander, realizing a gain for our shareholders of $23.5 million, third, we acted opportunistically to increase our ownership decision and engine - shipping and transportation limited and finally, we completed the closing of our $225 million follow on offering to reduce debt and ready the company for future growth.

Moving to Slide 6, I will now discuss our continued success in the execution of our chartering strategy. During the year, we signed time-charter contracts for 19 vessels at attractive rates as long as we continued to take advantage of the robust market environment for the benefit of the company and shareholders.

In addition to already signing four of our newly acquired vessels on time charters, we are also pleased of signing the existing vessels to charters at significantly higher rates than the previous charter levels. As a result of our considerable success in the supporting area, approximately 80% of our current fleet’s available days are secured or in contracts for 2008.

With the combination of having significant time charter coverage for 2008 and having two vessels with profit sharing agreements, we are in a strong position to provide shareholders with the higher degree of earnings visibility, while maintaining the ability t benefit from future increases. After the sale of the Genco Trader as well as the delivery of the remaining 5 or 15 drybulk vessels that we agreed to acquire in the third quarter, Genco will own a fleet of 32 drybulk vessels consisting of nine Capesize, six Panamax, three Supermax, six Handymax and eight Handysize vessels with an average age of approximately seven years, well below the industry average of approximately 16 years.

On Slide 8, we detailed the remaining vessels to take delivery from our acquisitions in 2007. We expect to take delivery of the five remaining Capesize new buildings between the first quarter of 2008 and the third quarter of 2009. The six – will grow our fleet to a total of approximately 2,700,000 deadwieght as well as increase or your exposure to the largest class of drybulk vessel, which we believe, enhances our position to benefit from the strong demand for iron ore and coal from China and other developing countries.

At this time, I would like to turn the call over to John.

John Wobensmith

I will begin my remarks by directing you to Slide 10, which presents our fourth quarter and 12 months ended December 31, 2007 and actual results. For the fourth quarter and 12 month period ended December 31, 2007, we recorded revenues of $65.7 million and $185.4 million respectively. This compares with revenues for the fourth quarter and 12 month period ended December 31, 2006 of $35.7 million and $133.2 million respectively.

The increase was due to the operation of a larger fleet. Operating income for the fourth quarter and 12 month period was $65.2 million and $131.1 million respectively. This compares of operating income for the fourth quarter and 12-month period ended December 31, 2006 of $18.5 million and $70.3 million respectively.

The increase in operating income is attributable to higher revenues and gains from sales of vessels which were partially offset by higher vessel operating expenses as well as higher general and administrative expenses. Interest expense for the fourth quarter 2007 was $8.8 million and $26.5 million for the 12-month period ended December 31, 2007, which compares to $3.2 million for the fourth quarter of 2006 and $10 million for the full year 2006. Net income was $56.9 million for $1.99 basic and $1.98 diluted earnings per share for the fourth quarter of 2007 and $106.8 million or $4.08 basic and $4.06 diluted earnings per share for the 12-month period ended December 31, 2007. Excluding the $23.5 million gain on the sale of the Genco Commander, net income totaled $33.5 million or $1.17 basic and $1.16 diluted earnings per share for the three months ended December 31, 2007.

Included in net income for the 12-month ended December 31, 2007 is a $27 million gain on the sale of the Genco Commander and the Genco Glory and a $3.6 million one-time non-cash deferred financing charge as a result of the retirement of our previous credit facilities. Before moving on to Slide 11, I would like to highlight 2 members in our fleet section from yesterday’s press release, due to an error by the newswire that we used. The Genco Marine and the Genco Muse charter rate should read $24,000.00 per day and $58,000.00 a day respectively.

Moving to slide 11, you will see that we continued to maintain a strong balance sheet as we successfully expanded our fleet and distributed sizable dividends. Our cash position was $71.5 million as of December 31, 2007 and our debt to capital ratio is 60%. Our total assets as of December 31, 2007 were $1.7 billion consisting primarily of our current fleet deposits on vessels to be acquired Jinhui common stock and cash.

Our EBITDA for the three-month period ended December 31, 2007 was $72.2 million excluding the gain on sale the Genco Commander, our EBITDA margin represents 74% of revenues.

Moving to Slide 12, our utilization rate was 98.6% for the fourth quarter of 2007 and 98.7% for the period ended December 31, 2007. Our time charter equivalent rate for the fourth quarter of 2007 increased 52.4% to 31,140 hours, versus $20,435.00 recorded in the fourth quarter of 2006. the increase in TCE rates was due to higher charter rate achieved in the fourth quarter of 2007 versus the fourth quarter of 2006 for five of the Handy sized vessels, four of the Panamax vessels, and three in the Handymax vessels in our current fleet.

Furthermore, higher TCE rates were achieved in the fourth quarter of 2007, versus the same period last year due to the operation of four Capesize vessels that were part of the Metrostar acquisition. For the full year of 2007, TCE rates obtained by the company increased 20.5% to $24,650.00 per day. For the fourth quarter of 2007, our daily vessel operating expenses were $3,824.00 per day versus $3,415.00 for the fourth quarter of 2006.

Daily vessel operating expenses for the full year, 2007, were $3,716.00 per day versus $3,285.00 per day for the year earlier period. The increase is due to higher crew and lube expenses. We believe daily vessel operating expenses are best measure for comparative purposes over a 12-month period in order to take into account all 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 2008 daily vessel operating expense budget to be 4,700 hours per vessel per day on a weighted basis across the fleet. As previously announced the increased budget reflects the anticipated increased cost for crewing and lubes as well as the operation of our Capesize vessels.

On slide 13, we presented a pro forma balance sheet that reflects the company’s payment of its fourth quarter 2007 dividend of $0.85 per share, the anticipated draw down of $109.65 million for the payment of 85% of the purchased price of the Genco Constantine. The drew down of $41.85 million for the payment of 90% of the purchased price for the Genco Champion and the anticipated repayment of debt in the amount of $43 million connected to the anticipated sale of the Genco Trader for a net sale price of 443.1 million.

As you can see our pro forma cash position for the quarter is $46.8 million, as of December 31, 2007 our pro forma liquidity totaled $379,279,000.00 and our pro forma net debt’s total capital ratio was 63%. It should be noted that while the pro forma balance sheet includes $77 million in debt associated with the purchases of Jinhui common stock. It does not include the approximately $148 million of proceeds based on yesterday’s close of 53.5 kroner.

Turing to Slide 14 of the presentation, we outlined our payment schedule for the remaining 5 of our newly acquired vessels to be delivered. I would like to note that the deposit payments have already been made in the amount of $115.8 million dollars, the remaining balance that we made upon the delivery of each vessel. As a result, we expect to make final payments to only 109.65 million for the delivery of the Genco Constantine due to be delivered on/or about February 22, 2008. before moving on to our dividend policy I will now briefly discuss our anticipated break-even levels detailed on Slide 15 that are based on an average number of 28.27 vessels for the year.

As we mentioned a moment ago, based on estimates provided by our technical managers and management’s expectations, we expect a 2008 daily vessel operating expense budget to be 4,700 hours per vessel per day on a weighted basis. Furthermore, we expect our daily free cash to break even to be $11,809.00 per day per vessel and our daily net income break-even rate to be $18,056 per vessel per day.

This takes into account the completion of the acquisition of the six vessels from Evelyn(ph). The anticipated delivery of the Genco Constantine on or about February 22, 2008, the anticipated delivery of the Genco Hadrian within the fourth quarter of 2008 and the anticipated sale the Genco Trader within the first quarter of 2008. As we have done in the past, we plan to provide breakeven levels on a quarterly basis.

Next, I will discuss our dividend policy and the board’s decision to increase our quarterly dividend and target rate for the 2008, which is highlighted on Slide 16. As Gerry stated earlier we increased our quarterly dividend for the fourth quarter of 2007 and our 2008 quarterly dividend target rate for the year $0.85 per share, which reflects both the company’s significant earnings power and its objective to consistently grow the dividend over the long term. Based on our closing price yesterday of $55.09 plus the cumulative dividends of $5.64 per share that we have paid today. We have provided shareholders to invest in our IPO in July of 2005, a total return of approximately 189%. Our dividend policy which is determined by our board of directors and calculated based on free cash flow, less cash reserves for fleet maintenance, renewal and growth as well as debt amortization, provides important benefits to shareholders.

Since our IPO in July of 2005, we have continued to grow our dividend without expanding our fleet. This success is a testimony to the sizable cash flows we generate and retain, due to our disciplined acquisitions strategy as well as the ongoing support we received from the banking and capital markets.

As part of this support during 2007, we entered into a favorable ten-year term, $1.4 billion revolving credit facility, led by led by DnB NOR Bank. Also we completed an approximate $225 million equity offering that we used to pay down debt and prepare the company for future growth.

Building on our past success consolidating the industry, we intend to continue to see growth opportunities that meet our strict earnings and cash flow accretion criteria as well as a return on capital hurdles. We also intend to look for opportunities under our new share repurchase program, which our board authorized yesterday to create additional shareholder value.

Before I turn the call back over to Gerry to discuss the industry fundamentals, I will now provide an update on our ownership position in Jinhui Shipping and Transportation Limited, a drybulk shipping owner and operator focused on the Supermax segment of drybulk shipping. Following the announcement of our initial position in the Company in May of 2007, our current position in Jinhui is 16,335,100 shares, representing 19.4% of the outstanding shares in votes of Jinhui's capital stock as of December 31, 2007. The total debt level related to the Company's purchase of Jinhui's capital stock is currently $77 million and the carrying value is approximately $148 million based on yesterday’s close of 53.5 kroner.

Genco may purchase additional shares of Jinhui’s capital stock or dispose of any and all shares that Jinhui’s capital stock that Genco holds whether to reopen market transactions privately negotiated transactions or otherwise.

I will now turn the call back to Gerry

Gerry Buchanan

Thanks, John. I would like to take this opportunity to spend a few moments discussing the industry fundamentals. I will start with Slide 18, 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 2007 as a whole, the rate environment has displayed a significant increase since the beginning of the year, reaching record levels of over 10,000 points through October followed by some softening towards the end of the year on January of 2008. Even with the recent volatility, the index is still moving approximately 42% over the corresponding level last year.

Moving on to Slide 19, we will discuss the drivers behind the overall strong rate environment as well as the main reasons behind the recent softening and freight rates, which we believe is temporary.

As indicated in the graph of the bottom left, Chinese steel production grew to 486 million tons for the year ending December 31st, 2007, while 384 million tones of iron ore were imported into China for the same period. For the 12-month period Chinese steel production grew by 15% and iron ore imports grew by 18% year-over-year.

As previously mentioned, what we believe to be temporary volatility, evidence still in the last few months of 2007 and beginning on 2008, was caused primarily by the following factors:

First, shipment disruptions, reported both and Brazil and this failure reduced, available cargos in both the iron ore and coal side. Specifically, the iron ore report of the tax rate, stopped operations due to repair as caused by an accident, due to repairs caused by an accident in December and resulted in nearly shipment loss or 60,000 tons of iron ore.

At the same time, flooding in Australia created coal supply disruptions and the cancellation of cargo, while poor weather and snow storms, delayed steel production in China, coal and power shortages. And lastly, the conclusion of the iron ore price negotiations resulted in a slowdown of pain charter activity during December 2007 and January of 2008.

In a moment, I will provide an update on each of these events, but first we will highlight the strong demand that we continue to see from China. China’s continued demand for steel, as evidenced by increasing steel prices, went to a 26% increase in iron ore imports for the fourth quarter of 2007, over the same period last year, with a non characteristic reliance on the Indian exports as supposed to Brazilian. The Indian government is said to be considering high export taxes on iron ore, in order to maintain adequate for domestic demand. And the Brazilian iron ore port is scheduled to return its operation.

We expect both of these events to increase activity from Brazil, thereby creating longer tone miles. Looking at the graph at the bottom right-hand side, we can see the drybulk orderbook by quarter through 2012. A fairly defined orderbook over the next two years provides for good visibility over the medium-term charter market. Furthermore, albeit a 7% increase in the drive out fleet for 2007 as well as an easing in fourth congestion, freight rates shows significant strands through the year with the DDI closing the year 71% higher than at the same point in December of 2006. Some freight rates through the fourth quarter, helped maintain scrapping levels at a minimum, with only 18 drybulk vessels reported to be strapped for 2007.

On Slide 20, we detailed a long term drybulk demand fundamentals, which we believe remained strong for the following reasons. Increases in China’s GDP continue at strong rates reaching an annual growth rate of 11.2% for the fourth quarter and estimated to have grown 11.4% for the entire year of 2007. NDS GDP is forecasted to grow by 8.7% year-over-year for the fiscal year ending March 31, 2008 and world GDP for 2006 came in at 5.4% while gross was forecasted at 4.7% for 2007. a major driver of this growth is the Asian economies.

Finally, if we look at the graph on the slide we can see that China has overtaken Europe and Japan as the largest importer of major bulks, tending for approximately, 21% of the world’s imports. When looking at the same data for 1998, Chinese imports accounted only for 50% of the world trade. As China continues to rely on long hold trade roots from Brazil and Australia, for its iron ore needs, ton-mile demand is expected to continue the growth. What was high at the market going forward? With iron ore terminals scheduled to return to operation by February 2008, we expect to see increased ton-miles as a result of more cargos coming out of Brazil.

Preliminary indications that communication between the Chinese fuels and the iron ore supply access commands are evident by a recent agreement on a multi year contract between bulk steel and VHP. Although iron ore prices have not been set, we expect that anticipated conclusion of the iron ore negotiation will stimulate both and same charter activity. Well, recent weather related shut downs in Chinese steel mills have created some steel production hold up. They also indicate the lack of adequate infrastructure within the country. Increased fixed asset investment, especially towards the end of 2007, point to the country’s efforts to improve their infrastructure platform going forwards. Furthermore, the fact that Chinese companies have been actively investing in Brazilian and Australian mining companies, in order to access mining rights to the much needed iron ore, is a good indication of long-term fundamentals.

India’s economic growth in serving the drybulk industry by adding further pressure to the coal trades in two ways. First way, is increase steel production is forcing the country to become a major importer of coking coal. Secondly, its increased energy demand will result in higher thermal coal imports.

Our last quarter – is the fact that China’s increased consumption of coal and supply shortfalls, would well for China becoming a long term net importer of coal. On the supply side of things, it has increased to 58% of the existing fleet. It is questionable whether it will be delivered in its entirety. It is important to note that 23% of the Capesize orders scheduled to deliver in 2009 and 33% of the Capesize orders for 2010 are signed Greenfield jobs. Moreover, anecdotal evidence that constrains such as financing for shipyards and smaller rollers as well as machinery and equipment shortages to cause additional deterrence in delivering the current – in its entirety.

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

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

Question and Answer Session

Operator

(Operator Instructions)

We will go first today with Douglas Mavrinac with Jeffries & Co.

Douglas Mavrinac - Jeffries & Co.

I just have a few questions for you all, first, during your comments you talked about why the recent weakness and or what is the recent weakness in charterers attributable to but we have seen a significant rebound in chartering activity in the recent days, is there something specific that you guys point to as far as to why we have seen the switch turned on or is there an overall view that these factors that cause the weakness are temporary and that there is growing confidence that demand will rebound in the coming months?

Gerry Buchanan

I think that is exactly it, I think there is a growing confidence that it was all temporary that we are now starting to rebound.

Yeah, I mean Doug, keep in mind there has been a press release being put up by the court in Brazil that it should be up and going by February 19 and February 20. So the people see that coming on and what is interesting is you are now seeing a lot more activity as far as inquiring the time-charter long-term for vessels anywhere from one to even 10 years again.

Douglas Mavrinac - Jeffries & Co.

And that I was going to ask John is that I see that you guys have I guess, by cutting our accounts, seven vessels will expire in the next couple of months, would you describe the interest level on those vessels as having accelerated and over the past several days?

John Wobensmith

Yes, definitely.

Douglas Mavrinac - Jeffries & Co.

Okay, and also you mentioned the Brazilian cargos, getting back online in mid-February, so you know, I would take it that the demand increase that we have seen is not necessarily because of this, but that could potentially still be around the corner.

John Wobensmith

Yes, I mean I mean I am sure that they have started booking some of those cargos already, they obviously have those gains but if you kind of look at, what is going on, China is obviously going to have to start importing a lot more coal because of their issues. We are seeing a lot more coalers in general from the US gulf going into Europe and you are seeing a lot more coal imports going into India. I know upfront, we believe that Brazil to Chinese route is going to continue to add the tone miles. Once the terminal comes back on, but just in general, particularly if the Indians are successful in putting export access on their iron ore, it is just going to be more competitive for the Chinese team or from Brazil.

Douglas Mavrinac - Jeffries & Co.

Great, and actually touches on one of my final two questions. What changes have you all seen in trading patterns as a result of the Chinese basically saying that they are going to quite exporting coal because of their shortages right now and when do you expect them to be, I guess return to normal, as for Australian loadings and South African loadings.

John Wobensmith

Big changes and trading problems, to be honest with you, you know, it is the same roots that our ships are trading and that we see in the market in general.

Gerry Buchanan

Yes, and on the Australian side Doug, I think that could take a few months to work itself out, just because of the flooding issues in the mines it does take a long time to get those mines dry and get things going back up and going.

Douglas Mavrinac - Jeffries & Co.

Okay, good. And then one final question, so you guys increased it, what are your current thoughts in that particular investment, that is all I have.

Gerry Buchanan

We still love to see and like the position, obviously because we have added to it. We think it trades at a significant discount to the value of steel on the water today.

Operator

So next is Scott Burk with Bear Streams.

Scott Burk - Bear Streams

Hi good morning guys, I want to follow up with more questions or another question about your chartering strategy for the next six months, you have 700,000 rolling off, like I have mentioned. What are your strategies, do we expect to see more shorter charges like you have done with the creditor or will you be looking for longer charges like on the Genco success?

Gerry Buchanan

Our charting strategy overall has not changed, we are going to continue to focus on the one to three year markets for the Panamaxe, Panamaxe is on down, and probably the three to five year market for the cage. But we have over the last couple of months done, a few short term turns as you correctly pointed out and the reason for that is because we did not look of the long-term charter market a month ago. Things are starting to strengthen so, you know I think you will see a start to fix longer – on some of these ships but we were able to get very good rates on these three to five month charteres so we are pretty happy.

Scott Burk - Bear Streams

Could you kind of describe what you guys are hearing about the iron ore negotiations, we saw the VHP news as well, does that mean they are still talking? Do you have anymore sense about what might be the result?

Gerry Buchanan

Honestly Scott, no. I think the only people that really know what are going on or the guys setting it out on a negotiating table.

Operator

We will take our next question from Jonathan Chappell with J.P. Morgan

Jonathan Chappell - J.P. Morgan

Just two quick questions, first to Gerry, regarding that long period activity, it seemed like there had been a wall in some of the longer-term contracts, through the end of the last year and the beginning of this year, have you seen a pickup in interest, from charters to do the three and even like the five-year contracts that we have been seeing, a few most of ’07.

Gerry Buchanan

I think John will touch on that on the last question. Yes, I mean, the market is getting harder and harder everyday at the moment and that we see a big interest in the longer term.

John Wobensmith

There are some good data points that were out there, there have been a couple of Capesize ships recently that have been fixed for five years. Access is $70,000.00, and if you think about it towards the height, I think that number was just above 75, so things are definitely looking pretty good right now.

Jonathan Chappell - J.P. Morgan

Modeling question for John, is there any required department in 2008 or 2009, above what you need to pay back on the Trader after you finish to sell that?

John Wobensmith

No, it is a non-advertising facility and quite frankly we do not actually have to pay that amount back on the trader, but that is something that we are anticipating doing.

Jonathan Chappell - J.P. Morgan

Okay, so you expect to take them on the Trader but other than that, we would expect no significant debt reduction this year.

John Wobensmith

Well, I would not know, I would not say that, I think your question was do we have to. I would say, first of all on the Trader, we plan on paying back of approximately $43 million when that closes and that will be our first quarter event and then, you know, as cash flow provides we plan on reducing debt during 2008.

Operator

We will take our next question from Natasha Boyden with Cantor Fitzgerald.

Natasha Boyden - Cantor Fitzgerald

Regarding the $50 million dollar share, you mentioned that the board reviewed that further after 12 months. – of how the company wants to provide returns to the shareholders or is this just a matter of believing that the stock in value at present.

John Wobensmith

I think, any share repurchase program that we have in place now and going forward is obviously can be done on an opportunistic basis and it is a great tool that we have now in our disposal.

Natasha Boyden - Cantor Fitzgerald

Okay, so it is really a question of believing that you think the stock is undervalued here?

John Wobensmith

I think that again, not going into specifics on how the stock is right, obviously, the board wants to take a look at the potential device shares back, which is what we put in place, and we also had our banks agreed to allowing us to do that.

Natasha Boyden - Cantor Fitzgerald

And some of the dividend, you have raised the dividend here almost 30% at the same time, implementing the shares about this program, can we look at this as perhaps you filling the asset prizes, or too high to provide to track the returns or you are still actively looking at growing the fleet?

John Wobensmith

No, we are still actively looking at growing the fleet, I think the cash on cash numbers still make sense of these levels but as you are well aware, we are very patient and we wait to find the right transaction.

Operator

We will go next to Omar Nokta with Dahlman Rose & Co.

Omar Nokta - Dahlman Rose & Co.

With the buyback, you have mentioned that it would be subject to some restrictions on your credit facility, could you expand on that a little bit?

John Wobensmith

There are really, two things, one , we obviously cannot be in the fall under the credit facility which we clearly are not. And two, we have a basket that we can use to purchase shares back.

Omar Nokta - Dahlman Rose & Co.

Now that you have got the higher dividend, it still looks like you are going to be generating a lot more in cash flow this year; do you still plan on using your credit facility to fund your commitments for this year? Or would you rather use more catch?

John Wobensmith

You will see it is drawn out of the credit facility for both of those transactions, the majority of it. I answered to John’s question, we clearly also, plan on repaying debt during 2008.

Operator

We will go next to Urs Dur with Lazard

Urs Dur - Lazard Capital Markets

I guess you guys have already commented fully on your Jinhui’s position, you are obviously very satisfied with that, but maybe can you give a little color or comment on the liquidity of budget and shares and have you seen improvement in Jinhui share liquidity over the last 6 to 8 months?

John Wobensmith

Yes, I mean as you look at the share volume numbers they are definitely up. No doubt about that. We still think that it is at least right now priced at a good discount to its net asset value, so we are happy.

Operator

We will go now to Gregg Louis with Credit Suisse

Gregg Louis – Credit Suisse

I just want to talk about the slowdown in coal exports out of Australia, our miners, initially – at the ports were ample to supply near term coal exports so I guess the bigger question is you know, over the next few weeks, numbers sort of comes down, what areas do you expect to be the primary beneficiary of coal export, over the next few weeks into Southeast Asia?

John Wobensmith

South Africa would be a beneficiary, you see more coal coming from South Africa to Southeast Asia.

Gregg Louis – Credit Suisse

Given your close relationship with Jinhui? Did Jinhui consider shopping around this two new building very large or carrier contracts that they just simply terminated.

John Wobensmith

I do not know, you’ll have to ask them.

Gregg Louis – Credit Suisse

In other words, they did not offer you to buy them?

John Wobensmith

No.

Operator

We will go next to Charles Rupinski with Maxim Group.

Charles Rupinski - Maxim Group

Just one quick question on other bolt trades, as it relates to Panamax market in general, do your have a view on sort of the great market as it goes forward to spring, and any other –bulks, that might be sort of a kicker to the market place that people are not talking about as much as they should?

John Wobensmith

Green market, we are seeing Soya bean, going trans Atlantic and also at Southeast

Asia, the green market seems to be following the same, as Thailand has had in previous years. And the other minor bulks, nothing much of change, I have to be honest with you. They do not affect the Panamax market very much, it is mainly in the Handymax, and the Supramax as well but certainly not the Panamax.

Operator

Having no other questions in queue, this does conclude the Genco Shipping and Trading Ltd. Conference Call., we thank you for your participation. Have a nice day.

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