Genco Shipping & Trading Limited · NYSE:GNK
Genco Shipping & Trading — Proxy Contest (May 2024)
74 slides from Genco Shipping & Trading's proxy contest presentation, May 2, 2024
Slide 1: Creating Value for All Genco Shareholders
GENCO SHIPPING & TRADING LIMITED CREATING VALUE FOR ALL GENCO SHAREHOLDERS May 2, 2024
Slide 2: Safe Harbor Statement
2 “Safe Harbor” Statement under the Private Securities Litigation Reform Act of 1995 This communication material contains certain forward-looking statements pursuant to the safe harbor provisions of the Private Securities Litigation Reform Act of 1995. Such forward-looking statements use words such
Slide 3: Speakers
Speakers 3 Paramita Das Independent Director Jim Dolphin Chairman & Independent Director Chairman of the Board since May 2021 Director since July 2014 John Wobensmith CEO & Director Kathleen C. Haines Independent Director CEO since March 2017 Director since May 2021 Chairwoman of the Audit Committee
Slide 4: Executive summary
Executive summary 4 Genco is poised to drive sustainable long-term value Genco Is Executing its Clear Strategy Designed to Drive Value Through Volatile Drybulk Cycles Genco Has Made Significant Progress on its Comprehensive Value Strategy, Outperforming the Market and Peers Genco Has a Highly Qualif
Slide 5: Table of contents
Table of contents 5 About Genco Shipping Is a Highly Cyclical Industry Genco’s Comprehensive Value Strategy Genco’s Strategy is Creating Value for Shareholders Genco’s Board Has Long Prioritized Strong Corporate Governance Practices Economou’s Unclear Agenda for Genco & His Track Record The Board Be
Slide 6: About Genco
ABOUT GENCO 6
Slide 7: Genco Shipping & Trading overview
Genco Shipping & Trading overview 7 The largest U.S. based drybulk shipowner, with 43 modern, high-quality vessels(1) Headquartered in New York with global offices in Singapore and Copenhagen Transport both major (iron ore & coal) and minor (grains, cement, fertilizers, etc.) bulk across all key wor
Slide 8: Global Seaborne Trade and commodities carried
Global Seaborne Trade (% of 2023 total) Drybulk trade constitutes approximately half of all seaborne trade volume Commodity % of drybulk trade Primary use Iron ore 28% Steel production Met / thermal coal 24% Steel production + power generation Grain 10% Human consumption + feed livestock Minor bulks
Slide 9: Fleet composition: the barbell approach
16 Vessels Higher industry beta leading to greater upside potential Focused on iron ore trade Driven by world-wide steel production More stable earnings Diverse trade routes Linked to global GDP Cargo arbitrage opportunities These two sectors provide complementary characteristics for Genco’s value s
Slide 10: Shipping Is a Highly Cyclical Industry
Shipping Is a Highly Cyclical Industry 10
Slide 11: Active capital allocation management is critical in dynamic drybulk markets
Active capital allocation management is critical in dynamic drybulk shipping markets 11 The drybulk sector is a cyclical sector prone to volatilityDemand growth provides long-term value-creation opportunity for companies that can navigate the volatility Capital intensive business that operates asset
Slide 12: The drybulk sector is cyclical and prone to volatility
The drybulk sector is a cyclical sector prone to volatility 12 Capital risk management is critical for sustainability and long-term profitability Drybulk index volatility the highest when compared to key commodity prices Monthly Volatility over the Last 10 Years Index Index An industry with rapid sw
Slide 13: Volatility driven by vessel supply and commodity demand
Volatility in the drybulk market is driven by vessel supply and commodity demand 13 A long-term value-creation opportunity for companies that can navigate a volatile and cyclical market environment Historically, periods with strong earnings have been followed by periods of vessel ordering as owners
Slide 14: Genco's Comprehensive Value Strategy
Genco’s Comprehensive Value Strategy 14
Slide 15: Comprehensive Value Strategy
Comprehensive Value Strategy 15 Positioning Genco to generate returns through volatile drybulk market cycles Implemented strategy in 2021 following thorough Board and management review and discussion process Executing across three key pillars: compelling dividends, reducing debt, and investing in th
Slide 16: Implementing a strategy to create value through cycles
Implementing a strategy to create value through cycles 16 Genco implemented the Comprehensive Value Strategy in 2021 Strategy developed by Board and management team through a comprehensive review and open debate As part of the discussion, the Board and management team considered a range of options a
Slide 17: Strategy driven by sustained dividends with low to no debt
Genco’s strategy is driven by a desire to deliver value to its shareholders through sustained dividends – but this is only possible with low to no debt 17 Industry leading breakeven costs covered in nearly every rate environment over the last 2 decades Every $1,000 increase in TCE(1) equates to ~$15
Slide 18: Well-balanced capital allocation across dividends, deleveraging and growth
WELL-BALANCED CAPITAL ALLOCATION ACROSS 3 PILLARSOF DIVIDENDS, DELEVERAGING AND GROWTH Continued progress over the last 3 years executing on our value strategy 18 Successful progression of the value strategy allowed Genco to shift focus from repaying debt to paying dividends What we said April 2021…
Slide 19: Capital allocation shifting toward dividend payouts
Our comprehensive value strategy is enabling Genco to allocate capital more towards dividend payouts over the years 19 Prioritizing debt repayments at the onset of the strong drybulk market and as the value strategy was being implemented Increased focus on dividends while continuing to voluntarily p
Slide 20: Capesize sale & purchase activity
Capesize sale & purchase activity:Modernizing the fleet + increasing earnings capacity ~$10m OR~$0.24/sh Drydocking capex savings due to well-timed fleet renewal Executed the next leg of our fleet renewal strategy 20 Bought: 2016-built high specification vessels Selling: 2009-2010 built vessels due
Slide 21: Asset values rising; flexibility to capture growth opportunities
Asset values rising due to firm freight rates and supported by limited supply and strong newbuild prices SIGNIFICANToperating leverage COUNTERCYCLICALOPPORTUNITIESto buy vessels from a position of strength ENHANCES POSITION in up or down markets Financial flexibility in various market conditions 21
Slide 22: Genco's Strategy is Creating Value for Shareholders
Genco’s Strategy is Creating Value for Shareholders 22
Slide 23: The Value Strategy is working
We believe our comprehensive Value Strategy is working 23 Genco is performing well and capturing opportunities As evidenced by our recent quarterly results Strong TSR performance over short, medium and long-term Combination of share price performance and high distributions drives Genco’s outperforma
Slide 24: Genco is performing well today: Q4 2023 highlights
Genco is performing well today 24 Q4 2023 highlights + financial performance FINANCIAL PERFORMANCE VALUE STRATEGY Dividends Q4 2023 dividend: $0.41/sh,18th consecutive quarterly dividend totaling 24% ofthe share price as of April 26, 2024 Deleveraging >$300m repaid pro forma since Q4 2020 8% net loa
Slide 25: Genco has outperformed its peers and the market
Genco has outperformed its peers and the market 25 Source: FactSet as of 4/30/2024. Proxy performance peers consist of Eagle Bulk Shipping Inc., Star Bulk Carriers Corp., Diana Shipping Inc., Golden Ocean Group Limited, Safe Bulkers, Inc., Pacific Basin Shipping Limited, Pangaea Logistics Solutions
Slide 26: P/NAV valuation above U.S.-listed peer average
Genco’s P/NAV valuation above U.S.-listed peer group average 26 Many shipping companies trade at a discount to NAV Genco is relentlessly focused on executing our Comprehensive Value Strategy, which we believe will mitigate the discount in the eyes of investors given that Genco has outperformed its p
Slide 27: Strong Corporate Governance Practices
Genco’s Board Has Long Prioritized Strong Corporate Governance Practices 27
Slide 28: Board has long prioritized strong corporate governance
Genco’s board has long prioritized strong corporate governance practices 28 Genco has a strong and highly qualified board Directors bring significant experience, skills and diversity that is relevant to Genco’s business and to create shareholder value Genco’s Board has been open-minded and responsiv
Slide 29: Strong, independent and experienced Board
Genco has a strong, independent and experienced Board 29 Genco prioritizes a Board filled with new perspectives and diverse backgrounds, as demonstrated through its thorough search process which resulted in the appointment of Independent Director Paramita Das Each director is highly qualified, activ
Slide 30: Strong, independent and experienced Board (con't)
Genco has a strong, independent and experienced Board (con’t) 30 Ms. Das’ appointment follows a comprehensive search process with the assistance of a leading executive search firm that began months before Economou took a stake, from a pool of more than 20 candidates Paramita Das Independent Director
Slide 31: Genco is the shipping industry leader in ESG
Genco is the shipping industry leader in ESG 31 Implementing well-planned and well-executed corporate governance and sustainability initiatives, in responsive to shareholders and ISS feedback Further strengthened corporate governance based on shareholder engagement + in response to ISS recommendatio
Slide 32: Economou's Unclear Agenda & His Track Record
Economou’s Unclear Agenda for Genco & His Track Record 32
Slide 33: Economou's track record and unclear agenda
Economou’s track record and unclear agenda 33 The board has evaluated and believes Economou’s suggestions do not create value We believe Economou’s agenda is NOT in the best interest of our shareholders We believe Genco shareholders should be concerned with Economou’s record Genco has tried to engag
Slide 34: Economou demonstrated no willingness for meaningful engagement
We believe Economou demonstrated NO willingness for meaningful engagement 34 He did not begin interacting with Genco through any constructive dialogue regarding any proposal(1) Instead, he first requested a director questionnaire through counsel without revealing his identity, only revealed himself
Slide 35: Genco evaluated Economou's suggestions and concluded they are not in shareholders' interest
Genco evaluated Economou’s suggestions and concluded they are not in the best interest of shareholders 35 The Board and management team with an external financial advisor reviewed Economou’s suggestions to repurchase shares, sell vessels and pursue a $100 million tender offer at a significant premiu
Slide 36: Evaluation of buyback and tender offer impact on share price
Evaluation of buyback and tender offer impact on share price Historical share buyback program and tender offer analysis does not establish that buybacks or tender offers lead to long term share price performance improvement Share Price Performance Post-Tender Announcement Tender offer premium not su
Slide 37: Economou's proposal can hinder Genco's value proposition
We believe Economou’s proposal can materially hinder Genco’s value proposition 37 Units Genco Status Quo Genco Post Economou’s $100m Tender Offer at $23/share Genco Post $100m Share Buyback Program at $21/share Significantly increases Genco’s net debt Net Debt(1) $m $87 $187 $187 Net Loan-to-Value(1
Slide 38: Economou is a competitor and not a typical investor
Economou is a competitor and we believe he is NOT a typical investor 38 George Economou is a drybulk competitor of the Company(1) and we believe he brings with him a record of related party transactions and poor corporate governance that benefitted him at the expense of other shareholders About the
Slide 39: Alpha Shipping track record
ALPHA SHIPPING PLC We believe Economou’s track record shows related party transactions, sharp declines in investor value, and a disregard of good governance 39 VALUE OF A $100 INVESTMENT IN ALPHA SHIPPING Decrease of 63% in <1 year Lost Bondholder Value A month after Economou established Alpha Shipp
Slide 40: DryShips Inc. track record
DRYSHIPS INC. IPO in 2005, taken private by Economou in 2019 We believe Economou’s track record shows related party transactions, sharp declines in investor value, and a disregard of good governance (cont’d) 40 Economou took his ownership stake in DryShips from 0.01% in March 2017 to 83% of the stoc
Slide 41: Share price performance – GNK vs DRYS
Share price performance – GNK vs DRYS 41 +124% -100% DRYS $/share, reflective of impact of reverse stock splits and offerings GNK $/share GNK VS DRYS PERFORMANCE – OCT 2016 TO OCT 2019 (DRYS TAKEN PRIVATE)
Slide 42: Ocean Rig UDW
OCEAN RIG UDW DryShips acquired 98% in 2008, taken public through partial spin off in 2011 Loss of Shareholder Value in Ocean Rig When Economou was Chairman and CEO of DryShips, the company acquired a controlling interest in Ocean Rig, an offshore deepwater drilling services company unrelated to Dry
Slide 43: Example of related party transaction at the expense of shareholders
Example of related party transaction at the expense of shareholders 43 Siphoning millions of dollars from the public vehicle of DryShips to Economou controlled private entities through the following related party arrangements Key Terms from DryShips Management Agreement with TMS Bulkers and TMS Offs
Slide 44: Pons Would Not Be Additive to Our Board
The Board Believes Pons Would Not Be Additive to Our Already Strong, Focused And Experienced Board 44
Slide 45: Board concluded Pons is not additive to Genco Board
Board concluded Pons is not additive to Genco Board 45 See facts on the following slides that support the view of Genco’s Board We believe Pons has shown poor judgment in his associations We believe Pons’ history on boards is one of related party transactions and missteps Companies underperformed du
Slide 46: Pons is not additive to Genco's board
We believe Pons is not additive to Genco’s board 46 Pons has mainly served on the boards of micro or nano-cap companies in the technology sector Most companies whose boards Pons has served on declined in value or underperformed the S&P 500 during his tenure Pons has no experience at companies in: Sh
Slide 47: Pons has demonstrated poor judgement in his associations
We believe Pons has demonstrated poor judgement in his associations 47 GARY SINGER Charged with racketeering, conspiracy, money laundering, and fraud related to insider trading in junk bonds in 1992(1) Convicted on 21 felony counts; sentenced to 28 months in prison(2) Permanently banned by the SEC f
Slide 48: Pons' history on boards: related party transactions and missteps
We believe Pons’ history on boards is one of related party transactions and missteps 48 Related Party transactions (Arbinet Corporation, Concurrent Computer(1)) Transactions benefiting Singers while serving as their board designee or otherwise when they held substantial stock Companies delisted or s
Slide 49: Companies underperformed during Pons' tenure
Companies where Pons served as a director underperformed or declined in value during his tenure Source: FactSet. Note: Certain companies on whose Boards Pons was a director were renamed or otherwise are successors to other companies. These consists of Primus Telecommunications Group, Inc., PTGI Hold
Slide 50: Setting the Record Straight
SETTING THE RECORDSTRAIGHT 50
Slide 51: Do not let Economou's claims mislead you
Do NOT let Economou’s claims mislead you 51 Jim Dolphin has little alignment with shareholders Genco has instituted stock ownership guidelines to align all director interests with shareholders Mr. Dolphin holds restricted stock units worth more than $2 million Genco is undervalued Our good faith eff
Slide 52: Do not let Economou's claims mislead you (cont'd)
Do NOT let Economou’s claims mislead you (cont’d) 52 A new independent voice is imperative, and Pons would be additive The Board already appointed a new independent voice with its addition of Paramita Das in March 2024 Ms. Das brings deep commodities industry experience and a new perspective to the
Slide 53: Do not let Economou's claims mislead you (cont'd)
Do NOT let Economou’s claims mislead you (cont’d) 53 Ms. Das’ appointment follows a comprehensive search process with the assistance of a leading executive search firm that began mid-last year, well before Economou’s involvement No member of the board had ever known of Ms. Das before her name surfac
Slide 54: Vote FOR Genco
VOTE FOR GENCO 54
Slide 55: Vote FOR Genco
Vote FOR Genco 55 Genco Is Executing its Clear Strategy Designed to Drive Value Through Volatile Drybulk Cycles Genco Has Made Significant Progress on its Comprehensive Value Strategy, Outperforming the Market and Peers Genco Has a Highly Qualified and Engaged Board Overseeing Sustainable, Long-Term
Slide 56: Appendix
APPENDIX 56
Slide 57: Global drybulk trade and key routes
Source: Clarksons Research Services Limited 2024 Iron Ore Coal Grain Minor Bulks U.S. Headquarters Corporate strategy Finance/accounting Commercial Technical Operations Copenhagen Commercial Operations Minor Bulk focus Singapore Commercial Operations Capesize focus Global drybulk trade and key route
Slide 58: Thoughtful asset acquisition is critical to long-term sustainability
Thoughtful asset acquisition is critical to long-term sustainability 58 Capital intensive industry with a need for fleet renewal requires prudent stewardship Capesize Bulkers Ultramax Bulkers Asset Values Day Rates (Spot / 1YR Timecharter) Asset Values Day Rates (Spot / 1YR Timecharter) Last 10 Yrs
Slide 59: Low financial leverage through voluntary debt repayments
Low financial leverage through voluntary debt repayments 59 Paid down>$300m to Q3 2023 New $500m revolving credit facility increases flexibility to: Continue to voluntarily repay debt Opportunistically drawing down capital w/o losing borrowing capacity Draw for 2 xCapesize acquisitions
Slide 60: Evaluation of buyback program impact on share price
Evaluation of buyback program impact on share price 60 Share price performance of shipping equities is strongly correlated to underlying shipping markets with no definitive evidence that buyback programs are an effective tool for long-term shareholder value creation Impact on Share Price Over the la
Slide 61: Dry bulk asset values are currently in the 4th quartile
Dry bulk asset values are currently in the 4th quartile 61 Given the narrow P/NAV discount, share repurchases would imply acquiring Genco’s ships are at a historically high price Index Drybulk values are currently in the 4th quartile, making share repurchases and fleet acquisitions less desirable Se
Slide 62: Net Asset Value accretion / dilution
Net Asset Value accretion / dilution 62 George Economou’s $100m tender offer proposal at $23.00 per share would only add 0.3% in NAV accretion while doubling net debt Genco’s NAV Build Balance Sheet As of 12/31/23 Genco Impact of Repurchases (at $23/share) Genco Pro Forma Assets Cash $46.9 $46.5 Fle
Slide 63: DryShips share count and Economou ownership evolution
Share Price ($) Source: Company filings. Capital IQ. Figure represents equity value at 100%. Non-affiliated shareholders received ~$76m for their ~17% stake. DRYS share count and George Economou’s ownership evolution since August 2017 Date Event Event Description $ Amount Issued / Repurchased Share
Slide 64: DryShips Inc. case study (cont'd)
DryShips Inc. case study (cont’d) 64 Share Price ($) Source: Company filings. Capital IQ. Figure represents equity value at 100%. Non-affiliated shareholders received ~$76m for their ~17% stake. Feb 2018: DRYS announces a $50 million share repurchase program Aug 2017: Following a series of dilutive
Slide 65: Pons' history on boards (cont'd)
We believe Pons’ history on boards is one of related party transactions and missteps (cont’d) 65 LiveWire Mobile, Inc. (renamed Live Microsystems, Inc.) – 2008 to 2014 Designee of Singer and its related investment entities (“Singers”) with ~25% stake through a settlement (Dec ’08)(1,2) Company delis
Slide 66: Pons' history on boards (cont'd)
We believe Pons’ history on boards is one of related party transactions and missteps (cont’d) 66 MRV Communications, Inc. – 2011 to 2017 Singers (5.3% stake) called for a payment of a special dividend up to $120mm (Jun ‘11)(17,18) Pons joined the Board upon the recommendation of the Singers (Oct ‘11
Slide 67: Pons' history on boards (cont'd)
We believe Pons’ history on boards is one of related party transactions and missteps (cont’d) 67 SeaChange International, Inc. – 2019 – 2022 Joined under a cooperation agreement between a Singer family entity (20% stake) and the company (Feb ’19)(30) Then-CEO abruptly resigned protesting the unfair
Slide 68: Pons has mostly served on boards of nano-cap technology companies
Pons has mostly served on the boards of nano-cap technology companies, representing the Singers in many of them 68 Source: FactSet, SEC. See Reference C on slide 74 for notation of sources. Note: Certain companies on whose Boards Pons was a director were renamed or otherwise are successors to other
Slide 69: Pons board service (cont'd)
Pons has mostly served on the boards of nano-cap technology companies, representing the Singers in many of them (cont’d) 69 Source: FactSet, SEC. See Reference C on slide 74 for notation of sources. Note: Certain companies on whose Boards Pons was a director were renamed or otherwise are successors
Slide 70: Time charter equivalent reconciliation
Time charter equivalent reconciliation(1) 70 We define TCE rates as our voyage revenues less voyage expenses, charter-hire expenses, and realized gains or losses on fuel hedges divided by the number of the available days of our owned fleet during the period. TCE rate is a common shipping industry pe
Slide 71: Reference A
Reference A 71 “Cooper Companies and former head are indicted,” The New York Times, November 11, 1992 at https://www.nytimes.com/1992/11/11/business/cooper-companies-and-former-head-are-indicted.html “Former official of Cooper gets prison term,” The New York Times, August 10, 1995 at https://www.nyt
Slide 72: Reference B
Reference B 72 LiveWire Mobile Inc., 8-K filed December 11, 2008 at https://www.sec.gov/Archives/edgar/data/915866/000104746908013103/a2189552z8-k.htm LiveWire Mobile Inc., 2009 definitive proxy statement filed April 24, 2009, page 10, at https://www.sec.gov/Archives/edgar/data/915866/00010474690900
Slide 73: Reference B (cont'd)
Reference B (cont’d) 73 “Concurrent’s appointment of directors,” Concurrent press release, July 23, 2012 at https://www.prnewswire.com/news-releases/concurrents-appointment-of-directors-163397036.html Concurrent Computer Corp., Form 8-K, filed July 23, 2012 at https://www.sec.gov/Archives/edgar/data
Slide 74: Reference C
Reference C 74 SmartServ 8-K filed August 29, 2003 at https://www.sec.gov/Archives/edgar/data/1005698/000091068003000792/0000910680-03-000792-index.htm SmartServ 8-K filed May 7, 2007 at https://www.sec.gov/Archives/edgar/data/1005698/000114420407022985/v073741_8ka.htm Network-1 Security Solutions,