U.S. headquartered drybulk shipowner Genco Shipping & Trading Limited is planning to sell ten Handysize vessels as part of its fleet renewal scheme.
The sale is being pursued in addition to the fifteen original vessels designated to be sold under the company’s fleet modernization efforts.
“This is consistent with our focus on implementing our barbell approach towards fleet composition primarily weighted towards Capesize and Ultramax/Supramax vessels,” Genco said.
“As the estimated future undiscounted cash flows for each of these vessels did not exceed their net book values, we will be adjusting the values of these vessels to their respective fair market values during the first quarter of 2020.”
The company expects a non-cash impairment charge in the range of USD 79 million to USD 85 million in the first quarter of 2020 in relation to the vessel sale.
The shipowner said that the proceeds from the sale are likely to be used for debt repayment and the purchase of modern, high specification vessels.
During the fourth quarter of 2019, the company sold three oldest Handysize vessels, as well as one of its two remaining Panamaxes.
Genco also agreed to sell the Genco Thunder, 2007-built Panamax, which is expected to be delivered to buyers in Q1 2020.
The sale is being announced as Genco reports a net income of USD 0.9 million for the fourth quarter of 2019, against a net income of USD 18.3 million recorded in the same quarter in 2018.
The company’s revenues decreased to USD 108.7 million for the quarter, as compared to the USD 112.2 million recorded for the three months ended December 31, 2018.
Lower revenues were primarily ascribed to the effect of trading of the company’s Capesize vessels primarily in the Pacific basin and off-hire related to scrubber installations, ballast water treatment system installations and special surveys.
In January 2020, Genco completed its scrubbers installation program covering 17 Capesize vessels as part of its mission to meet the IMO 2020 sulphur limit. The remainder of the company’s fleet consisting of smaller bulk vessels is consuming ultra-low sulfur compliant fuel.
“Given the timely nature of our scrubber retrofits on our Capesize vessels, we have been able to capture the differentials between compliant and high sulfur fuel so far in the early stages of compliance, significantly de-risking the initial investment,” Genco said.
“With no scheduled drydockings for our Capesize vessels for the balance of 2020, we plan to maximize utilization for these vessels while re-implementing our active chartering approach. As such, we strategically repositioned select Capesize vessels after the completion of their scrubber installations towards the Atlantic Basin during the end of 2019 and the beginning of 2020 to better capture market fundamentals.”
2019 was the busiest year of drydocking in Genco’s history, with 30 vessels entering the shipyard for scrubber installations, ballast water treatment system installations, scheduled special surveys and other repairs. Of these vessels, 29 vessels completed their respective drydockings in 2019.
“One vessel began its drydocking during the fourth quarter and did not complete until the first quarter of 2020. In addition to this vessel, we estimate that 16 additional vessels will be drydocked during the 2020,” Genco said.
As of February 25, 2020, Genco’s fleet consists of 17 Capesize, one Panamax, six Ultramax, 20 Supramax and 10 Handysize vessels with an aggregate capacity of approximately 4.9 million dwt and an average age of 9.7 years.
For the full year, Genco recorded a net loss of USD 56, increasing its net loss of USD 32.9 million reported for 2018.
Net loss for 2019 was partly due to USD 27.4 million in non-cash vessel impairment charges, a USD 0.2 million non-cash impairment of the operating lease right-of-use asset, as well as a loss on the sale of vessels totaling USD 0.2 million.
“We are currently experiencing a short-term, seasonal decline in overall drybulk freight rates, which has been further impacted by the onset of the Covid-19 novel coronavirus. In anticipation of the seasonal freight rate pullback in the first quarter, we have fixed vessel revenues for a portion of the quarter, providing Genco with a degree of insulation from current market conditions. As the year progresses, we expect our strong liquidity position and industry leading balance sheet will continue to serve us well,” John C. Wobensmith, Chief Executive Officer, commented.
“With a sizeable, diverse fleet and leading drybulk platform, we believe we are well positioned to take advantage of an expected increase in demand for both major and minor bulk commodities once current market pressures subside, against a backdrop of low net fleet growth.”