Genco Shipping & Trading Limited (NYSE:GNK) (“Genco” or the “Company”), announced a new comprehensive value strategy centered on paying quarterly cash dividends to shareholders based on cash ows after debt

service less a reserve for the growth of the Company’s asset base, further debt reduction and general corporate purposes.

Genco believes that a strategy based on low leverage and an attractive dividend yield that includes a growth and deleveraging component will enable the Company to create signicant shareholder value and be a key dierentiator for Genco over the long-term.

Drawing on one of the strongest balance sheets in the industry, Genco intends to use a phased in approach to further reduce its debt and renance its current credit facilities in order to lower its cash ow breakeven levels and position the Company to pay a sizeable quarterly dividend across diverse market environments. We maintain signicant exibility to grow the eet through accretive vessel acquisitions. Genco is targeting Q4 2021 results for its anticipated rst dividend under its new corporate strategy, which would be payable in Q1 2022.

In implementing this strategy, the Company will focus on the following specic priorities for the remainder of 2021:

Continue to pay down debt through regularly scheduled quarterly repayments and prepayments from a combination of cash ow generation and cash on the balance sheet,

Opportunistically grow the eet on a low levered basis utilizing proceeds from previous vessel sales, and

Renance credit facilities to increase exibility, improve key terms and lower cash ow breakeven rates

Given the above action items, Genco’s year-end targets for implementation of the strategy based on management’s current estimates are:

Net loan-to-value of 20% based on current market values

Cash balance of approximately $75 million, with cash above this level used to pay down debt

For quarterly dividends to be meaningful and sustainable in what has been a historically cyclical business, low to no leverage is paramount in maintaining a low cash ow breakeven rate in order to provide visibility and sustainability.

John C. Wobensmith, Chief Executive Ocer, commented, “Over the last four years we have implemented signicant change at Genco, with this new capital allocation strategy being the latest milestone in the evolution of the Company. With one of the strongest balance sheets in the drybulk industry, highlighted by a robust cash position and low leverage, Genco is uniquely positioned to transition to a company with even lower nancial leverage and create lasting value through the return of cash throughout shipping cycles. At the core of our new capital allocation strategy, we are positioning Genco to become a company that pays a compelling dividend yield with low leverage and a low cash ow breakeven rate, distributing sizeable quarterly dividends while maintaining the nancial strength to further de-lever and renew and grow our eet. Our unrelenting focus for the remainder of 2021 will be to further strengthen our robust nancial foundation, continuing to reduce leverage and lower our cash ow breakeven levels, which we believe will uniquely position us to provide shareholders with a meaningful
and sustainable quarterly dividend. This strategy also ideally integrates with our barbell approach to eet composition in which our minor bulk eet provides stable cash ows while our Capesize vessel provide meaningful upside and operating leverage.”

The implementation of our new corporate strategy also aligns with our favorable view of drybulk supply and demand fundamentals in both the short and long term. The foundation of our outlook is based on the record low orderbook as a percentage of the eet which will limit net eet growth through the balance of 2021 and at least into 2022. We also believe that newbuilding ordering will be constrained despite the strong freight rate environment due to the lack of clarity with regards to future vessel propulsion and reduced availability of newbuilding yard space due to ordering in other sectors. Low net eet growth in the coming years, provides a low threshold for demand growth to have to exceed in order to improve eet-wide utilization. Demand catalysts include the unprecedented level of scal and monetary stimulus which the IMF anticipates resulting in global GDP growth of 6.0% in 2021 and 4.4% in 2022. Furthermore, we anticipate a continued improvement in global economic activity following the
COVID-related lows of 2020 leading to increased steel production as well as augmented demand for iron ore and minor bulk commodities. Lastly, we anticipate growth in Brazilian iron ore exports to provide support to a key longhaul trade which we expect to be supportive for Capesize vessels. These catalysts coincide well with Genco’s barbell approach to eet composition which consists of the ownership of both Capesize and minor bulks vessels as well as with our new value strategy.

Apostolos Zafolias, Chief Financial Ocer, commented, “Genco’s nancial strength places the Company in a unique position relative to its public drybulk peer group to accomplish this strategy which will serve as a key dierentiator. Importantly, during the rst quarter of 2021, as a key initial step towards the execution of this strategy, the Company reduced its debt balance by $48 million or 11%, through a combination of scheduled debt repayments as well as the prepayment of its revolving credit facility. As of March 31, 2021, Genco’s cash position is approximately $164 million while debt outstanding is approximately $401 million. We are pleased with our ongoing progress reducing our debt position and look forward to making further progress as we approach our anticipated first dividend under our new strategy.”

New dividend policy

As part of Genco’s new corporate strategy, the Board of Directors adopted a new quarterly dividend policy for dividends payable commencing in the rst quarter of 2022 in respect to the Company’s nancial results for the fourth quarter of 2021. Under the new quarterly dividend policy, the amount available for quarterly dividends is to be calculated based on the following formula:

Operating cash ow
Less: Debt repayments
Less: Capital expenditures for drydocking
Less: Reserve
Cash ow distributable as dividends

For purposes of the foregoing calculation, operating cash ow is dened as voyage revenue less voyage expenses, charter hire expenses, vessel operating expenses, general and administrative expenses other than non-cash restricted stock expenses, technical management fees, and interest expense other than non-cash deferred nancing costs. Anticipated uses for the reserve include, but are not limited to, vessel acquisitions, debt
repayments, and general corporate purposes. In order to set aside funds for these purposes, the reserve will be set on a quarterly basis in advance of the subsequent quarter at the discretion of our Board of Directors and is anticipated to be based on future quarterly debt repayments and interest expense. Maintaining a quarterly reserve as well as optionality for the uses of the reserve are important factors of the corporate strategy as it enables Genco
to be exible depending on market conditions and provide a more tailored approach to Genco’s overall business model. 

The Board expects to reassess the payment of dividends as appropriate from time to time. Until the rst payment of dividends under the new quarterly dividend policy, the Company anticipates that its current policy of paying a quarterly dividend at the rate of $0.02 per share will remain in eect. The quarterly dividend policy and declaration
and payment of dividends are subject to legally available funds, compliance with law and contractual obligations 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.

About Genco Shipping & Trading Limited

Genco Shipping & Trading Limited transports iron ore, coal, grain, steel products and other drybulk cargoes along worldwide shipping routes. Capesize vessels represent our major bulk vessel category and the other vessel classes, including Ultramax and Supramax vessels, represent our minor bulk vessel category. Our major bulk vessels are primarily used to transport iron ore and coal, while our minor bulk vessels are primarily used to transport grains, steel products and other drybulk cargoes such as cement, scrap, fertilizer, bauxite, nickel ore, salt and sugar. This approach of owning ships that transport both major and minor bulk commodities provide us with exposure to a wide range of drybulk trade ows. As of April 19, 2021, Genco Shipping & Trading Limited’s eet consists of 17 Capesize, nine Ultramax and 14 Supramax vessels with an aggregate capacity of approximately 4,368,000 dwt and an average age of 10.3 years.

Source: Genco Shipping & Trading Limited