UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
 
FORM 10-Q
 
[X]	QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934	

For the quarterly period ended June 30, 2008
 
OR
 
[  ]	TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934	

For the transition period from _________________________ to _________________________
 
Commission file number 000-51442
 
GENCO SHIPPING & TRADING LIMITED
(Exact name of registrant as specified in its charter)
 
Republic of the Marshall Islands
(State or other jurisdiction
incorporation or organization)	 	98-043-9758
(I.R.S. Employer
Identification No.)	
 	 	 	
299 Park Avenue, 20 th Floor, New York, New York 10171
(Address of principal executive offices)           (Zip Code)	
 	
(646) 443-8550
(Registrant’s telephone number, including area code)	
                           
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities and Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.
 
Yes      X           No           
 
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, or a non-accelerated filer.  See definition of “accelerated filer and large accelerated filer” in Rule 12b-2 of the Exchange Act.
 
Large accelerated filer ý         Accelerated filer        Non-accelerated filer  

Indicate by checkmark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).
 
Yes                 No        X   
 
APPLICABLE ONLY TO CORPORATE ISSUERS:
 
The number of shares outstanding of each of the issuer’s classes of common stock, as of August 8, 2008:
Common stock, $0.01 per share 31,795,978 shares .

 

 

Genco Shipping & Trading Limited
 
Form 10-Q for the three and six months ended June 30, 2008 and 2007
                                                                                                                                         Page
 
PART I.       FINANCIAL INFORMATION
 
 	Item 1.	Financial Statements	
 
 	a)	Consolidated Balance Sheets -
June 30, 2008 and December 31, 2007                                                                                     3	

 	b)	Consolidated Statements of Operations -
For the three and six months ended June 30, 2008 and 2007                                                                4	

 
 	c)	Consolidated Statements of Shareholders’ Equity and Comprehensive Income -
For the six months ended June 30, 2008 and 2007                                                                        5	

 
 	d)	Consolidated Statements of Cash Flows -
For the six months ended June 30, 2008 and 2007                                                                        6	

 
 	e)	Notes to Consolidated Financial Statements
For the three and six months ended June 30, 2008 and 2007                                                                 7	

 	Item 2.	Management’s Discussion and Analysis of
Financial Position and Results of Operations                                                                                  32	
 
             Item 3. Quantitative and Qualitative Disclosures about Market Risk                                                                           56
 
             Item 4. Controls and Procedures                                                                                                           59
 
PART II         OTHER INFORMATION
 
             Item 1. Legal Proceedings                                                                                                             59

             Item 2. Purchases of Equity Securities by the Issuer                                                                                   59

             Item 4. Submission of Matters to a Vote of Security Holders                                                                               59
 
           Item 5. Other Information                                                                                                                60
 
             Item 6. Exhibits                                                                                                                        61

2

 
Genco Shipping & Trading Limited
Consolidated Balance Sheets as of June 30, 2008
and December 31, 2007
(U.S. Dollars in thousands, except for share data)
 
 	 	June 30, 2008	 	 	December 31,2007	 	
Assets	 	(unaudited)	 	 	 	 	
Current assets:	 	 	 	 	 	 	
Cash and cash equivalents	 	$	95,964	 	 	$	71,496	 	
Short-term investments	 	 	158,952	 	 	 	167,524	 	
Vessel held for sale	 	 	-	 	 	 	16,857	 	
Due from charterers, net	 	 	3,900	 	 	 	2,343	 	
Prepaid expenses and other current assets	 	 	12,079	 	 	 	9,374	 	
Total current assets	 	 	270,895	 	 	 	267,594	 	
 	 	 	 	 	 	 	 	 	
Noncurrent assets:	 	 	 	 	 	 	 	 	
Vessels, net of accumulated depreciation of $103,156 and $71,341, respectively	 	 	1,468,943	 	 	 	1,224,040	 	
Deposits on vessels	 	 	197,666	 	 	 	149,017	 	
Deferred drydock, net of accumulated depreciation of $1,535 and $941, respectively	 	 	5,152	 	 	 	4,552	 	
Other assets, net  of accumulated amortization of $630 and $288, respectively	 	 	6,230	 	 	 	6,130	 	
Fixed assets, net of accumulated depreciation and amortization of $925 and $722, respectively	 	 	1,813	 	 	 	1,939	 	
Fair value of derivative instrument	 	 	997	 	 	 	-	 	
Total noncurrent assets	 	 	1,680,801	 	 	 	1,385,678	 	
 	 	 	 	 	 	 	 	 	
Total assets	 	$	1,951,696	 	 	$	1,653,272	 	
 	 	 	 	 	 	 	 	 	
Liabilities and Shareholders’ Equity	 	 	 	 	 	 	 	 	
Current liabilities:	 	 	 	 	 	 	 	 	
Accounts payable and accrued expenses	 	$	16,617	 	 	$	17,514	 	
Current portion of long term debt	 	 	-	 	 	 	 43,000	 	
Deferred revenue	 	 	10,062	 	 	 	8,402	 	
Fair value of derivative instruments	 	 	3,063	 	 	 	1,448	 	
Total current liabilities	 	 	29,742	 	 	 	70,364	 	
 	 	 	 	 	 	 	 	 	
Noncurrent liabilities:	 	 	 	 	 	 	 	 	
Deferred revenue	 	 	1,776	 	 	 	968	 	
Deferred rent credit	 	 	715	 	 	 	725	 	
Fair market value of time charters acquired	 	 	33,212	 	 	 	44,991	 	
Fair value of derivative instruments	 	 	19,719	 	 	 	21,039	 	
Long term debt	 	 	989,250	 	 	 	893,000	 	
Total noncurrent liabilities	 	 	1,044,672	 	 	 	960,723	 	
 	 	 	 	 	 	 	 	 	
Total liabilities	 	 	1,074,414	 	 	 	1,031,087	 	
 	 	 	 	 	 	 	 	 	
Commitments and contingencies	 	 	 	 	 	 	 	 	
 	 	 	 	 	 	 	 	 	
Shareholders’ equity:	 	 	 	 	 	 	 	 	
Common stock, par value $0.01; 100,000,000 shares authorized; issued and	 	 	 	 	 	 	 	 	
outstanding 31,780,978 and 28,965,809 shares at June 30, 2008 and December 31, 2007, respectively	 	 	318	 	 	 	290	 	
Paid in capital	 	 	721,648	 	 	 	523,002	 	
Accumulated other comprehensive (deficit) income	 	 	(5,651	)	 	 	19,017	 	
Retained earnings	 	 	160,967	 	 	 	79,876	 	
Total shareholders’ equity	 	 	877,282	 	 	 	622,185	 	
 	 	 	 	 	 	 	 	 	
Total liabilities and shareholders’ equity	 	$	1,951,696	 	 	$	1,653,272	 	
 	 	 	 	 	 	 	 	 	
See accompanying notes to consolidated financial statements.	 	

 

3

 
Genco Shipping & Trading Limited
Consolidated Statements of Operations for the Three and Six Months Ended June 30, 2008 and 2007
(U.S. Dollars in Thousands, Except for Earnings per Share and Share Data)
(Unaudited)

 	 	For the Three Months
Ended June 30,	 	 	For the Six Months
Ended June 30,	 	
 	 	2008	 	 	2007	 	 	2008	 	 	2007	 	
 	 	 	 	 	 	 	 	 	 	 	 	 	
Revenues	 	$	104,572	 	 	$	36,847	 	 	$	196,242	 	 	$	74,067	 	
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Operating expenses:	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Voyage expenses	 	 	724	 	 	 	1,017	 	 	 	1,468	 	 	 	2,430	 	
Vessel operating expenses	 	 	11,187	 	 	 	6,445	 	 	 	22,106	 	 	 	12,834	 	
General and administrative expenses	 	 	4,431	 	 	 	3,052	 	 	 	8,842	 	 	 	6,247	 	
Management fees	 	 	665	 	 	 	393	 	 	 	1,338	 	 	 	744	 	
Depreciation and amortization	 	 	16,748	 	 	 	7,433	 	 	 	32,612	 	 	 	14,619	 	
Gain on sale of vessel	 	 	-	 	 	 	-	 	 	 	(26,227	)	 	 	(3,575	)	
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Total operating expenses	 	 	33,755	 	 	 	18,340	 	 	 	40,139	 	 	 	33,299	 	
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Operating income	 	 	70,817	 	 	 	18,507	 	 	 	156,103	 	 	 	40,768	 	
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Other (expense) income:	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
(Loss) income from derivative instruments	 	 	(1,315	)	 	 	(1,594	)	 	 	(1,380	)	 	 	(1,594	)	
Interest income	 	 	422	 	 	 	888	 	 	 	975	 	 	 	1,954	 	
Interest expense	 	 	(11,615	)	 	 	(4,080	)	 	 	(23,402	)	 	 	(7,570	)	
Income from short-term investments	 	 	2,590	 	 	 	-	 	 	 	2,590	 	 	 	-	 	
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Other (expense) income	 	 	(9,918	)	 	 	(4,786	)	 	 	(21,217	)	 	 	(7,210	)	
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Net income	 	$	60,899	 	 	$	13,721	 	 	$	134,886	 	 	$	33,558	 	
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Earnings per share-basic	 	$	2.05	 	 	$	0.54	 	 	$	4.61	 	 	$	1.33	 	
Earnings per share-diluted	 	$	2.03	 	 	$	0.54	 	 	$	4.58	 	 	$	1.32	 	
Weighted average common shares outstanding-basic	 	 	29,750,309	 	 	 	25,312,593	 	 	 	29,242,118	 	 	 	25,310,783	 	
Weighted average common shares outstanding-diluted	 	 	29,957,698	 	 	 	25,456,413	 	 	 	29,436,024	 	 	 	25,439,043	 	
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
See accompanying notes to consolidated financial statements.	 	

 
4

 
Genco Shipping & Trading Limited
Consolidated Statement of Shareholders’ Equity and Comprehensive Income (Unaudited)
For the Six Months Ended June 30, 2008
(U.S. Dollars in Thousands Except for Per Share and Share Data)

 	 	Common
Stock	 	 	Paid in
Capital	 	 	Retained
Earnings	 	 	Accumulated Other Comprehensive Income	 	 	Comprehensive Income	 	 	Total	 	
Balance – January 1, 2008	 	$	290	 	 	$	523,002	 	 	$	79,876	 	 	$	19,017	 	 	 	 	 	$	622,185	 	
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Net income	 	 	 	 	 	 	 	 	 	 	134,886	 	 	 	 	 	 	$	134,886	 	 	 	134,886	 	
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Unrealized loss on short-term investments	 	 	 	 	 	 	 	 	 	 	 	 	 	 	(28,135	)	 	 	(28,135	)	 	 	(28,135	)	
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Unrealized gain on currency translation on short-term investments, net	 	 	 	 	 	 	 	 	 	 	 	 	 	 	1,082	 	 	 	1,082	 	 	 	1,082	 	
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Unrealized derivative gain on cash flow hedges	 	 	 	 	 	 	 	 	 	 	 	 	 	 	2,385	 	 	 	2,385	 	 	 	2,385	 	
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Comprehensive income	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	$	110,218	 	 	 	 	 	
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Cash dividends paid ($1.85 per share)	 	 	 	 	 	 	 	 	 	 	(53,795	)	 	 	 	 	 	 	 	 	 	 	(53,795	)	
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Issuance of common stock 2,702,669 shares	 	 	27	 	 	 	195,452	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	195,479	 	
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Issuance of 112,500 shares of nonvested stock	 	 	1	 	 	 	(1	)	 	 	 	 	 	 	 	 	 	 	 	 	 	 	-	 	
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Nonvested stock amortization	 	 	 	 	 	 	3,195	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	3,195	 	
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Balance – June 30, 2008	 	$	318	 	 	$	721,648	 	 	$	160,967	 	 	$	(5,651	)	 	 	 	 	 	$	877,282	 	

See accompanying notes to consolidated financial statements.

 
5

Genco Shipping & Trading Limited
Consolidated Statement of Cash Flows for the Six Months Ended June 30, 2008 and 2007
(U.S. Dollars in Thousands)
(Unaudited)

 	 	For the Six Months
Ended June 30,	 	
 	 	2008	 	 	2007	 	
Cash flows from operating activities:	 	 	 	 	 	 	
Net income	 	$	134,886	 	 	$	33,558	 	
Adjustments to reconcile net income to net cash provided by operating activities:	 	 	 	 	 	 	 	 	
Depreciation and amortization	 	 	32,612	 	 	 	14,619	 	
Amortization of deferred financing costs	 	 	342	 	 	 	272	 	
Amortization of value of time charters acquired	 	 	(11,610	)	 	 	917	 	
Realized losses on forward currency contracts	 	 	9,607	 	 	 	-	 	
Unrealized loss on derivative instruments	 	 	68	 	 	 	2,910	 	
Unrealized gain on hedged short-term investment	 	 	(9,894	)	 	 	-	 	
Unrealized loss on forward currency contract	 	 	1,615	 	 	 	-	 	
Realized income on short-term investments	 	 	(2,590	)	 	 	-	 	
Amortization of nonvested stock compensation expense	 	 	3,195	 	 	 	1,171	 	
Gain on sale of vessel	 	 	(26,227	)	 	 	(3,575	)	
Change in assets and liabilities:	 	 	 	 	 	 	 	 	
Increase in due from charterers	 	 	(1,557	)	 	 	(1,410	)	
Increase in prepaid expenses and other current assets	 	 	(1,683	)	 	 	(1,842	)	
Increase in accounts payable and accrued expenses	 	 	1,600	 	 	 	1,212	 	
Increase in deferred revenue	 	 	2,467	 	 	 	1,565	 	
Decrease in deferred rent credit	 	 	(9	)	 	 	(10	)	
Deferred drydock costs incurred	 	 	(1,195	)	 	 	(1,847	)	
Net cash provided by operating activities	 	 	131,627	 	 	 	47,540	 	
 	 	 	 	 	 	 	 	 	
Cash flows from investing activities:	 	 	 	 	 	 	 	 	
Purchase of vessels	 	 	(247,140	)	 	 	(43	)	
Deposits on vessels	 	 	(80,641	)	 	 	-	 	
Purchase of short-term investments	 	 	(10,250	)	 	 	(103,082	)	
Payments on forward currency contracts, net	 	 	(9,562	)	 	 	-	 	
Realized income on short-term investments	 	 	2,590	 	 	 	-	 	
Proceeds from sale of vessel	 	 	43,080	 	 	 	13,004	 	
Purchase of other fixed assets	 	 	(77	)	 	 	(280	)	
Net cash used in investing activities	 	 	(302,000	)	 	 	(90,401	)	
 	 	 	 	 	 	 	 	 	
Cash flows from financing activities:	 	 	 	 	 	 	 	 	
Proceeds from the 2007 Credit Facility	 	 	321,250	 	 	 	-	 	
Repayments on the 2007 Credit Facility	 	 	(268,000	)	 	 	-	 	
Proceeds from the 2005 Credit Facility and Short-term Line	 	 	-	 	 	 	77,000	 	
Repayments on the 2005 Credit Facility and Short-term Line	 	 	-	 	 	 	(5,700	)	
Cash dividends paid	 	 	(53,795	)	 	 	(33,682	)	
Net proceeds from issuance of common stock	 	 	195,730	 	 	 	-	 	
Payment of deferred financing costs	 	 	(344	)	 	 	(513	)	
Net cash provided by financing activities	 	 	194,841	 	 	 	37,105	 	
Net increase (decrease) in cash	 	 	24,468	 	 	 	(5,756	)	
Cash and cash equivalents   at beginning of period	 	 	71,496	 	 	 	73,554	 	
Cash and cash equivalents   at end of period	 	$	95,964	 	 	$	67,798	 	
 	 	 	 	 	 	 	 	 	
See accompanying notes to consolidated financial statements.	 	

 
 
6

Genco Shipping & Trading Limited
 (U.S. Dollars in Thousands Except Per Share and Share Data)
 
Notes to Consolidated Financial Statements for the Three and Six Months Ended June 30, 2008 and 2007(unaudited)
 
1 - GENERAL INFORMATION
 
The accompanying consolidated financial statements include the accounts of Genco Shipping & Trading Limited (“GS&T”) and its wholly owned subsidiaries (collectively, the “Company,” “we” or “us”). The Company is engaged in the ocean transportation of drybulk cargoes worldwide through the ownership and operation of drybulk carrier vessels. GS&T was incorporated on September 27, 2004 under the laws of the Marshall Islands and is the sole owner of all of the outstanding shares of the following subsidiaries: Genco Ship Management LLC; Genco Investments LLC; and the ship-owning subsidiaries as set forth below.
 
The Company began operations on December 6, 2004 with the delivery of its first vessel.  The Company agreed to acquire a fleet of 16 drybulk carriers from an unaffiliated third party on November 19, 2004 for approximately $421,900; these vessels were delivered during 2004 and 2005.
 
 On October 14, 2005, the Company acquired the Genco Muse, a 2001 Handymax vessel, and time charter contract for a total of $34,450, which was funded entirely by the Company’s credit facility entered into on July 29, 2005 (the “2005 Credit Facility”).  On July 10, 2006, the Company acquired the Genco Acheron, the Genco Commander, and the Genco Surprise for a total purchase price of $81,250, all of which were delivered in the fourth quarter of 2006.  During February 2007, the Company completed the sale of the Genco Glory to Cloud Maritime S.A. for $13,004, net of commission.  On July 18, 2007, the Company entered into an agreement to acquire nine Capesize vessels from companies within the Metrostar Management Corporation group for a net purchase price of $1,111,000, consisting of the value of the vessels and the liability for the below market time charter contracts acquired.  On August 10 and August 13, 2007, the Company also agreed to acquire six drybulk vessels (three Supramax and three Handysize) from affiliates of Evalend Shipping Co. S.A. for a net purchase price of $336,000, consisting of the value of the vessels and the liability for the below market time charter contract acquired.
 
On August 15, 2007, the Company decided to sell the two oldest vessels in its fleet, the Genco Commander and the Genco Trader.  On September 3, 2007, the Company reached an agreement to sell the Genco Commander, a 1994-built Handymax vessel, to Dan Sung Shipping Co. Ltd. for $44,450 less a 2% brokerage commission payable to a third party.  On December 3, 2007, the Company realized a net gain of $23,472 from the sale of the vessel and received net proceeds of $43,532.  Lastly, on October 2, 2007, the Company reached an agreement to sell the Genco Trader, a 1990-built Panamax vessel, to SW Shipping Co., Ltd for $44,000 less a 2% brokerage commission payable to a third party. On February 26, 2008, the Company realized a net gain of $26,227 from the sale of the vessel and received net proceeds of $43,080.  The Genco Trader was classified as held for sale at December 31, 2007.
 
On May 9, 2008, the Company agreed to acquire three 2007 built vessels, consisting of two Panamax vessels and one Supramax vessel, from Bocimar International N.V. and Delphis N.V. for an aggregate purchase price of approximately $257,000. Additionally, on June 16, 2008 the Company agreed to acquire six drybulk newbuildings from Lambert Navigation Ltd., Northville Navigation Ltd., Providence Navigation Ltd., and Prime Bulk Navigation Ltd., for an aggregate purchase price of $530 million. Upon completion of these acquisitions and the acquisition of the remaining four Capesize vessels from companies within the Metrostar Management Corporation group, Genco's fleet will consist of 41 drybulk vessels, consisting of twelve Capesize, eight Panamax, four Supramax, six Handymax and eleven Handysize vessels, with an aggregate carrying capacity of approximately 3,516,000 dwt and an average age of 5.8 years.

 

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Below is the list of the Company’s wholly owned ship-owning subsidiaries as of June 30, 2008:
 
Wholly Owned
Subsidiaries	Vessels
Acquired	dwt	Date
Delivered	Year
Built	Date Sold	
 	 	 	 	 	 	
Genco Reliance Limited	Genco Reliance	29,952	12/6/04	1999	—	
Genco Glory Limited	Genco Glory	41,061	12/8/04	1984	2/21/07	
Genco Vigour Limited	Genco Vigour	73,941	12/15/04	1999	—	
Genco Explorer Limited	Genco Explorer	29,952	12/17/04	1999	—	
Genco Carrier Limited	Genco Carrier	47,180	12/28/04	1998	—	
Genco Sugar Limited	Genco Sugar	29,952	12/30/04	1998	—	
Genco Pioneer Limited	Genco Pioneer	29,952	1/4/05	1999	—	
Genco Progress Limited	Genco Progress	29,952	1/12/05	1999	—	
Genco Wisdom Limited	Genco Wisdom	47,180	1/13/05	1997	—	
Genco Success Limited	Genco Success	47,186	1/31/05	1997	—	
Genco Beauty Limited	Genco Beauty	73,941	2/7/05	1999	—	
Genco Knight Limited	Genco Knight	73,941	2/16/05	1999	—	
Genco Leader Limited	Genco Leader	73,941	2/16/05	1999	—	
Genco Marine Limited	Genco Marine	45,222	3/29/05	1996	—	
Genco Prosperity Limited	Genco Prosperity	47,180	4/4/05	1997	—	
Genco Trader Limited	Genco Trader	69,338	6/7/05	1990	2/26/08	
Genco Muse Limited	Genco Muse	48,913	10/14/05	2001	—	
Genco Commander Limited	Genco Commander	45,518	11/2/06	1994	12/3/07	
Genco Acheron Limited	Genco Acheron	72,495	11/7/06	1999	—	
Genco Surprise Limited	Genco Surprise	72,495	11/17/06	1998	—	
Genco Augustus Limited	Genco Augustus	180,151	8/17/07	2007	—	
Genco Tiberius Limited	Genco Tiberius	175,874	8/28/07	2007	—	
Genco London Limited	Genco London	177,833	9/28/07	2007	—	
Genco Titus Limited	Genco Titus	177,729	11/15/07	2007	—	
Genco Challenger Limited	Genco Challenger	28,428	12/14/07	2003	—	
Genco Charger Limited	Genco Charger	28,398	12/14/07	2005	—	
Genco Warrior Limited	Genco Warrior	55,435	12/17/07	2005	—	
Genco Predator Limited	Genco Predator	55,407	12/20/07	2005	—	
Genco Hunter Limited	Genco Hunter	58,729	12/20/07	2007	—	
Genco Champion Limited	Genco Champion	28,445	1/2/08	2006	—	
Genco Constantine Limited	Genco Constantine	180,183	2/21/08	2008	—	
Genco Raptor LLC	Genco Raptor	76,499	6/23/08	2007	—	
Genco Cavalier LLC	Genco Cavalier	53,617	7/17/08	2007	—	
Genco Thunder LLC	Genco Thunder	76,499	Q4 2008 (1)	2007	—	
Genco Hadrian Limited	Genco Hadrian	170,500	Q4 2008 (1)	2008 (2)	—	
Genco Commodus Limited	Genco Commodus	170,500	Q2 2009 (1)	2009 (2)	—	
Genco Maximus Limited	Genco Maximus	170,500	Q2 2009 (1)	2009 (2)	—	
Genco Claudius Limited	Genco Claudius	170,500	Q3 2009 (1)	2009 (2)	—	
Genco Aurelius Limited	Genco Aurelius	170,500	Q2 2009 (1)	2009 (2)	—	
Genco Julian Limited	Genco Julian	170,500	Q3 2009 (1)	2009 (2)	—	
Genco Valerian Limited	Genco Valerian	170,500	Q4 2009 (1)	2009 (2)	—	
Genco Eagle Limited	Genco Eagle	32,000	Q4 2008 (1)	2008 (2)	—	
Genco Falcon Limited	Genco Falcon	32,000	Q4 2008 (1)	2008 (2)	—	
Genco Hawk Limited	Genco Hawk	32,000	Q1 2009 (1)	2009 (2)	—	
 	 	 	 	 	 	
(1) Dates for vessels being delivered in the future are estimates based on guidance received from the sellers and/or the respective shipyards.	
 	
(2) Built dates for vessels delivering in the future are estimates based on guidance received from the sellers and respective shipyards.	

 

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Prior to its initial public offering, GS&T was 100% owned by Fleet Acquisition LLC, a limited liability company organized on November 3, 2004 under the laws of the Marshall Islands.  Fleet Acquisition LLC was owned approximately 65.65% by OCM Principal Opportunities III Fund, L.P. and OCM Principal Opportunities Fund IIIA, L.P., collectively, (“Oaktree”) of which Oaktree Management LLC is the General Partner, approximately 26.57% by Peter Georgiopoulos, and 7.78% by others.  On April 14, 2006, Fleet Acquisition LLC distributed 1,050,210 shares to certain of its members, and on December 15, 2006, Fleet Acquisition LLC distributed 3,587,361 shares to Peter Georgiopoulos, our Chairman.  As a result, at December 31, 2006, Oaktree beneficially owned approximately 34.75% of the Company through Fleet Acquisition, LLC and Peter Georgiopoulos beneficially owned approximately 14.08%.

              In January 2007, we filed a registration statement on Form S-3 with the Securities and Exchange Commission (the "SEC") to register possible future offerings, including possible resales by Fleet Acquisition LLC. That registration statement, as amended, was declared effective by the SEC on February 7, 2007.  Fleet Acquisition LLC utilized that registration statement to conduct an underwritten offering of 4,830,000 shares it owned, including an over-allotment option granted to underwriters for 630,000 shares which the underwriters exercised in full.  Following completion of that offering, Fleet Acquisition LLC owned 15.80% of our common stock.   During October 2007, the Company closed on an equity offering of 3,358,209 shares of Genco common stock (with the exercise of the underwriters' over-allotment option) at an offering price of $67 per share.  The Company received net proceeds of $213,871 after deducting underwriters' fees and expenses.  On October 5, 2007, the Company utilized $214,000 including these proceeds to repay outstanding borrowings under the 2007 Credit Facility.  Additionally, in the same offering, Fleet Acquisition LLC sold 1,076,291 shares (with the exercise of the underwriters' over-allotment option) at the same offering price of $67 per share.  The Company did not receive any proceeds from the common stock sold by Fleet Acquisition LLC.

On January 10, 2008, the Board of Directors approved a grant of 100,000 nonvested common stock to Peter Georgiopoulos, Chairman of the Board. This grant vests ratably on each of the ten anniversaries of the determined vesting date beginning with November 15, 2008.  On March 10, 2008, Fleet Acquisition LLC distributed 2,512,532 shares of the Company's common stock to OCM Fleet Acquisition LLC, as a member thereof, pursuant to an agreement among Fleet Acquisition LLC's members. In connection with this distribution, Mr. Georgiopoulos became the sole member of the Management Committee of Fleet Acquisition LLC, which currently retains 443,606 shares of the Company's common stock of which Mr. Georgiopoulos may be deemed to be the beneficial owner.

Lastly, during May 2008, the Company closed on an equity offering of 2,702,669 shares of Genco common stock at an offering price of $75.47 per share.  The Company received net proceeds of $195,479 after deducting underwriters' fees and expenses.  On May 28, 2008, the Company utilized $195,000 of these proceeds to repay outstanding borrowings under the 2007 Credit Facility.  Additionally, in the same offering, OCM Fleet Acquisition LLC sold 1,000,000 shares at the same offering price of $75.47 per share.  The Company did not receive any proceeds from the common stock sold by OCM Fleet Acquisition LLC. As a result of the foregoing transactions, Mr. Georgiopoulos may be deemed to beneficially own 13.01% of our common stock (including shares held through Fleet Acquisition LLC), and OCM Fleet Acquisition LLC may be deemed to beneficially own 4.76% of our common stock.

2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
 
Principles of consolidation
 
The accompanying financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America (“U.S. GAAP”), which include the accounts of Genco Shipping & Trading Limited and its wholly owned subsidiaries. All intercompany accounts and transactions have been eliminated in consolidation.
 
Basis of Presentation

The accompanying unaudited consolidated financial statements have been prepared in accordance with the instructions to Form 10-Q and, therefore, do not include all information and footnotes necessary for a fair presentation of financial position, results of operations and cash flows in conformity with accounting principles generally accepted in the United States of America. However, in the opinion of the management of the Company, all

 

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adjustments necessary for a fair presentation of financial position and operating results have been included in the statements. Interim results are not necessarily indicative of results for a full year. Reference is made to the December 31, 2007 consolidated financial statements of Genco Shipping & Trading Ltd. contained in its Annual Report on Form 10-K for the year ended December 31, 2007.

Business geographics
 
The Company’s vessels regularly move between countries in international waters, over hundreds of trade routes and, as a result, the disclosure of geographic information is impracticable.
 
Vessel acquisitions
 
When the Company enters into an acquisition transaction, it determines whether the acquisition transaction was the purchase of an asset or a business based on the facts and circumstances of the transaction.  As is customary in the shipping industry, the purchase of a vessel is normally treated as a purchase of an asset as the historical operating data for the vessel is not reviewed nor is material to our decision to make such acquisition.
 
When a vessel is acquired with an existing time charter, the Company allocates the purchase price of the vessel and the time charter based on, among other things, vessel market valuations and the present value (using an interest rate which reflects the risks associated with the acquired charters) of the difference between (i) the contractual amounts to be paid pursuant to the charter terms and (ii) management's estimate of the fair market charter rate, measured over a period equal to the remaining term of the charter.  The capitalized above-market (assets) and below-market (liabilities) charters are amortized as a reduction or increase, respectively, to voyage revenues over the remaining term of the charter.

Segment reporting
 
The Company reports financial information and evaluates its operations by charter revenues and not by the length of ship employment for its customers, i.e., spot or time charters. The Company does not use discrete financial information to evaluate the operating results for different types of charters. Although revenue can be identified for these types of charters, management cannot and does not separately identify expenses, profitability or other financial information for these charters. As a result, management, including the chief operating decision maker, reviews operating results solely by revenue per day and operating results of the fleet and thus, the Company has determined that it operates under one reportable segment. Furthermore, when the Company charters a vessel to a charterer, the charterer is free to trade the vessel worldwide and, as a result, the disclosure of geographic information is impracticable.
 
Revenue and voyage expense recognition
 
Revenues are generated from time charters. A time charter involves placing a vessel at the charterer’s disposal for a set period of time during which the charterer may use the vessel in return for the payment by the charterer of a specified daily hire rate. In time charters, operating costs including crews, maintenance and insurance are typically paid by the owner of the vessel and specified voyage costs such as fuel and port charges are paid by the charterer. There are certain other non-specified voyage expenses such as commissions which are borne by the Company.
 
The Company records time charter revenues over the term of the charter as service is provided. Revenues are recognized on a straight-line basis as the average revenue over the term of the respective time charter agreement.  The Company recognizes vessel operating expenses when incurred.
 
Due from charterers, net
 
Due from charterers, net includes accounts receivable from charters net of the provision for doubtful accounts. At each balance sheet date, the Company provides for the provision based on a review of all outstanding charter receivables. Included in the standard time charter contracts with our customers are certain performance parameters, which if not met can result in customer claims.  As of June 30, 2008, we had a reserve of $160 against

 

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due from charterers balance, and at December 31, 2007, we had no reserve against due from charterers balance. As of June 30, 2008 and December 31, 2007, the Company had a reserve of $935 and $734, respectively in deferred revenue, each of which is associated with estimated customer claims against the Company including time charter performance issues.

Revenue is based on contracted charterparties and, although the Company's business is with customers whom the Company believes to be of the highest standard, there is always the possibility of dispute over terms and payment of hires and freights. In particular, disagreements may arise as to the responsibility for lost time and revenue due to the Company as a result. Accordingly, the Company periodically assesses the recoverability of amounts outstanding and estimates a provision if there is a possibility of non-recoverability. Although the Company believes its provisions to be reasonable at the time they are made, it is possible that an amount under dispute is not ultimately recovered and the estimated provision for doubtful accounts is inadequate.

Vessel operating expenses
 
Vessel operating expenses include crew wages and related costs, the cost of insurance, expenses relating to repairs and maintenance, the cost of spares and consumable stores, and other miscellaneous expenses. Vessel operating expenses are recognized when incurred.
 
Vessels, net
 
Vessels, net are stated at cost less accumulated depreciation. Included in vessel costs are acquisition costs directly attributable to the acquisition of a vessel and expenditures made to prepare the vessel for its initial voyage.  The Company also considers interest costs for a vessel under construction as a cost which is directly attributable to the acquisition of a vessel.  Vessels are depreciated on a straight-line basis over their estimated useful lives, determined to be 25 years from the date of initial delivery from the shipyard.  Depreciation expense for vessels for the three months ended June 30, 2008 and 2007 was $16,339, and $6,988, respectively.  Depreciation expense for vessels for the six months ended June 30, 2008 and 2007 was $31,815, and $13,900 respectively.
 
Depreciation expense is calculated based on cost less the estimated residual scrap value. The costs of significant replacements, renewals and betterments are capitalized and depreciated over the shorter of the vessel’s remaining estimated useful life or the estimated life of the renewal or betterment. Undepreciated cost of any asset component being replaced that was acquired after the initial vessel purchase is written off as a component of vessel operating expense. Expenditures for routine maintenance and repairs are expensed as incurred. Scrap value is estimated by the Company by taking the cost of steel times the weight of the ship noted in lightweight tons (lwt). At June 30, 2008 and 2007, the Company estimated the residual value of vessels to be $175/lwt.
 
Fixed assets, net
 
Fixed assets, net are stated at cost less accumulated depreciation and amortization.  Depreciation and amortization are based on a straight-line basis over the estimated useful life of the specific asset placed in service.  The following table is used in determining the estimated useful lives:
 
Description                                                                 Useful lives
 
Leasehold improvements                                                            15 years
Furniture, fixtures & other equipment                                        5 years
Vessel equipment                                                                       2-5 years
Computer equipment                                                                     3 years

Depreciation expense for fixed assets for the three months ended June 30, 2008 and 2007 was $101, and $99, respectively.  Depreciation expense for fixed assets for the six months ended June 30, 2008 and 2007 was $203, and $190, respectively.

 

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Deferred drydocking costs
 
The Company’s vessels are required to be drydocked approximately every 30 to 60 months for major repairs and maintenance that cannot be performed while the vessels are operating. The Company capitalizes the costs associated with the drydockings as they occur and depreciates these costs on a straight-line basis over the period between drydockings. Costs capitalized as part of a vessel’s drydocking include actual costs incurred at the drydocking yard; cost of parts that are reasonably made in anticipation of reducing the duration or cost of the drydocking; cost of travel, lodging and subsistence of personnel sent to the drydocking site to supervise; and the cost of hiring a third party to oversee the drydocking.  Depreciation expense for drydocking for the three months ended June 30, 2008 and 2007 was $309, and $345, respectively.  Depreciation expense for drydocking for the six months ended June 30, 2008 and 2007 was $594, and $528, respectively.
 
Inventory
 
Inventory consists of lubricants and bunkers (fuel) which are stated at the lower of cost or market. Cost is determined by the first-in, first-out method.
 
Impairment of long-lived assets
 
The Company follows the Financial Accounting Standards Board (“FASB”) Statement of Financial Accounting Standards (“SFAS”) No. 144, Accounting for the Impairment or Disposal of Long-Lived Assets, which requires impairment losses to be recorded on long-lived assets used in operations when indicators of impairment are present and the undiscounted cash flows estimated to be generated by those assets are less than their carrying amounts. In the evaluation of the fair value and future benefits of long-lived assets, the Company performs an analysis of the anticipated undiscounted future net cash flows of the related long-lived assets. If the carrying value of the related asset exceeds the undiscounted cash flows, the carrying value is reduced to its fair value. Various factors including anticipated future charter rates, estimated scrap values, future drydocking costs and estimated vessel operating costs, are included in this analysis.
 
For the three and six months ended June 30, 2008 and 2007, no impairment charges were recorded, based on the analysis described above.
 
Deferred financing costs
 
Deferred financing costs, included in other assets, consist of fees, commissions and legal expenses associated with obtaining loan facilities. These costs are amortized over the life of the related debt, and are included in interest expense.
 
Cash and cash equivalents
 
The Company considers highly liquid investments such as time deposits and certificates of deposit with an original maturity of three months or less to be cash equivalents.
 
Short-term investments
 
 The Company holds an investment in the capital stock of Jinhui Shipping and Transportation Limited (“Jinhui”).  Jinhui is a drybulk shipping owner and operator focused on the Supramax segment of drybulk shipping.  This investment is designated as Available For Sale (“AFS”) and is reported at fair value, with unrealized gains and losses recorded in shareholders’ equity as a component of other comprehensive income (“OCI”).  Effective August 16, 2007, the Company has elected hedge accounting for forward currency contracts in place associated with the cost basis of the Jinhui shares.  However, the hedge is limited to the lower of the cost basis or the market value at time of designation.  Therefore, the unrealized currency gain or loss associated with the hedged portion or the cost basis in the Jinhui shares is now reflected in the income statement as income or (loss) from derivative instruments to offset the gain or loss associated with these forward currency contracts.  The cost of securities when sold is based on the specific identification method.  Realized gains and losses on the sale of these securities will be reflected in the consolidated statement of operations in other (expense) income.  Additionally, the realized gain or loss on the

 

12

 
forward currency contracts is reflected in the Consolidated Statement of Cash Flows as an investing activity and is reflected in the caption Payments on forward currency contracts, net.

Short-term investments are reviewed periodically to identify possible other-than-temporary impairment.  When evaluating the investments, the Company reviews factors such as the length of time and extent to which fair value has been below the cost basis, the financial condition of the issuer, the underlying net asset value of the issuers assets and liabilities, and the Company’s ability and intent to hold the investment for a period of time which may be sufficient for anticipated recovery in market value.  Should the decline in the value of any investment be deemed to be other-than-temporary, the investment basis would be written down to fair market value, and the write-down would be recorded to earnings as a loss.
 
Income taxes
 
Pursuant to Section 883 of the U.S. Internal Revenue Code of 1986, as amended (the “Code”), qualified income derived from the international operations of ships is excluded from gross income and exempt from U.S. federal income tax if a company engaged in the international operation of ships meets certain requirements. Among other things, in order to qualify, the company must be incorporated in a country which grants an equivalent exemption to U.S. corporations and must satisfy certain qualified ownership requirements.

The Company is incorporated in the Marshall Islands. Pursuant to the income tax laws of the Marshall Islands, the Company is not subject to Marshall Islands income tax. The Marshall Islands has been officially recognized by the Internal Revenue Service as a qualified foreign country that currently grants the requisite equivalent exemption from tax.

Based on the publicly traded requirement of the Section 883 regulations as described in the next paragraph, we believe that the Company qualified for exemption from income tax for 2007.

In order to meet the publicly traded requirement, our stock must be treated as being primarily and regularly traded for more than half the days of any such year. Under the Section 883 regulations, our qualification for the publicly traded requirement may be jeopardized if shareholders of our common stock that own five percent or more of our stock (“5% shareholders”) own, in the aggregate, 50% or more of our common stock for more than half the days of the year.   We believe that during 2007, the combined ownership of our 5% shareholders did not equal 50% or more of our common stock for more than half the days of 2007. However if our 5% shareholders were to increase their ownership to 50% or more of our common stock for more than half the days of 2008 or any future taxable year, we would not be eligible to claim exemption from tax under Section 883 for that taxable year. We can therefore give no assurance that changes and shifts in the ownership of our stock by 5% shareholders will not preclude us from qualifying for exemption from tax in 2008 or in future years.

If the Company does not qualify for the exemption from tax under Section 883, it would be subject to a 4% tax on the gross “shipping income” (without the allowance for any deductions) that is treated as derived from sources within the United States or “United States source shipping income.” For these purposes, “shipping income” means any income that is derived from the use of vessels, from the hiring or leasing of vessels for use, or from the performance of services directly related to those uses; and “United States source shipping income” includes 50% of shipping income that is attributable to transportation that begins or ends, but that does not both begin and end, in the United States.
 
Deferred revenue
 
Deferred revenue primarily relates to cash received from charterers prior to it being earned. These amounts are recognized as income when earned.  Additionally, deferred revenue includes estimated customer claims mainly due to time charter performance issues.

Comprehensive income
 
The Company follows SFAS No. 130 “Reporting Comprehensive Income,” which establishes standards for reporting and displaying comprehensive income and its components in financial statements.  Comprehensive income

 

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is comprised of net income and amounts related to the adoption of SFAS No. 133 “Accounting for Derivative Instruments and Hedging Activities” as well as unrealized gains or losses associated with the Company’s short-term investments.
 
Nonvested stock awards
 
In 2006, the Company adopted SFAS No. 123R, Share-Based Payment, for nonvested stock issued under its equity incentive plan.  Adoption of this new accounting policy did not change the method of accounting for nonvested stock awards.  However, deferred compensation costs from nonvested stock have been classified as a component of paid-in capital as required by SFAS No. 123R.
 
Accounting estimates
 
The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosures of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Significant estimates include vessel and drydock valuations, the valuation of amounts due from charterers, performance claims, and fair value of derivative instruments. Actual results could differ from those estimates.
 
Concentration of credit risk
 
Financial instruments that potentially subject the Company to concentrations of credit risk are amounts due from charterers. With respect to amounts due from charterers, the Company attempts to limit its credit risk by performing ongoing credit evaluations and, when deemed necessary, requiring letters of credit, guarantees or collateral.  Although the Company earned 100% of revenues from fifteen and thirteen customers, for the three months ended June 30, 2008 and 2007, respectively, and 100% of revenues from seventeen and sixteen customers, respectively, for the six months ended June 30, 2008 and 2007, management does not believe significant risk exists in connection with the Company’s concentrations of credit at June 30, 2008 and December 31, 2007.
 
For the three months ended June 30, 2008 there are two customers that individually accounted for more than 10% of revenue, which represented 32.80% and 14.30% of revenue, respectively.   For the three months ended June 30, 2007 there are four customers that individually accounted for more than 10% of revenue, which represented 16.31%, 11.67%, 10.97% and 10.09% of revenue, respectively.
 
For the six months ended June 30, 2008 there are two customers that individually accounted for more than 10% of revenue, which represented 30.36%, and 15.58% of revenue, respectively.  The six months ended June 30, 2007 there are three customers that individually accounted for more than 10% of revenue, which represented 16.04%, 11.97%, and 10.41% of revenue, respectively.
 
Fair value of financial instruments
 
The estimated fair values of the Company’s financial instruments such as amounts due to / due from charterers, and accounts payable approximate their individual carrying amounts as of June 30, 2008 and December 31, 2007 due to their short-term maturity or the variable-rate nature of the respective borrowings under the credit facility.

The fair value of the interest rate swaps and forward currency contracts (used for purposes other than trading) is the estimated amount the Company would receive to terminate these agreements at the reporting date, taking into account current interest rates and the creditworthiness of the counterparty for assets and creditworthiness of the Company for liabilities.  See Note 10 - Fair Value of Financial Instruments for additional disclosure on the fair values of long term debt, derivative instruments, and available-for-sale securities.

The Company adopted SFAS No. 157, Fair Value Measurements (“SFAS No. 157”) in the first quarter of 2007, which did not have a material impact on the financial statements of the Company.

 

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Derivative financial instruments
 
Interest rate risk management
 
The Company is exposed to the impact of interest rate changes.  The Company’s objective is to manage the impact of interest rate changes on its earnings and cash flow in relation to borrowings primarily for the purpose of acquiring drybulk vessels.  These borrowings are subject to a variable borrowing rate. The Company uses pay-fixed receive-variable interest rate swaps to manage future interest costs and the risk associated with changing interest rate obligations.  These swaps are designated as cash flow hedges of future variable rate interest payments and are tested for effectiveness on a quarterly basis.
 
 The differential to be paid or received for the effectively hedged portion of any swap agreement is recognized as an adjustment to interest expense as incurred.  Additionally, the changes in value for the portion of the swaps that are effectively hedging future interest payments are reflected as a component of OCI.

For the portion of the forward interest rate swaps that are not effectively hedged, the change in the value and the rate differential to be paid or received is recognized as income or (expense) from derivative instruments and is listed as a component of other (expense) income until such time the Company has obligations against which the swap is designated and is an effective hedge.

Currency risk management

The Company currently holds an investment in Jinhui shares that are traded on the Oslo Stock Exchange located in Norway, and as such, the Company is exposed to the impact of exchange rate changes on this available-for-sale security denominated in Norwegian Kroner.  The Company’s objective is to manage the impact of exchange rate changes on its earnings and cash flows in relation to its cost basis associated with its short-term investments. The Company uses foreign currency forward contracts to protect its original investment from changing exchange rates.

The change in the value of the forward currency contracts is recognized as income or (expense) from derivative instruments and is listed as a component of other (expense) income.  Effective August 16, 2007, the Company elected to utilize fair value hedge accounting for these instruments whereby the change in the value in the forward contracts continues to be recognized as income or (expense) from derivative instruments and is listed as a component of other (expense) income.  Fair value hedge accounting then accelerates the recognition of the effective portion of the currency translation gain or (loss) on the Available for Sale Security from August 16, 2007 from OCI into income or (expense) from derivative instruments and is listed as a component of other (expense) income.  Time value of the forward contracts are excluded from effectiveness testing and recognized currently in income.

New accounting pronouncements
 
 In September 2006, FASB issued SFAS No.157, “Fair Value Measurements” which enhances existing guidance for measuring assets and liabilities using fair value. Previously, guidance for applying fair value was incorporated in several accounting pronouncements.  The new statement provides a single definition of fair value, together with a framework for measuring it, and requires additional disclosure about the use of fair value to measure assets and liabilities.  While the statement does not add any new fair value measurements, it does change current practice. One such change is a requirement to adjust the value of nonvested stock for the effect of the restriction even if the restriction lapses within one year.

Additionally, in February 2008, the FASB issued FASB Staff Position (“FSP”) 157-2, which delays the effective date of SFAS No. 157 to fiscal years beginning after November 15, 2008 and interim periods with those fiscal years for all nonfinancial assets and liabilities, except those that are recognized or disclosed at fair value in the financial statements on a recurring basis (at least annually) until January 1, 2009 for calendar year end entities. The Company has already adopted this Statement except as it applies to nonfinancial assets and liabilities as noted in FSP 157-2. The partial adoption of SFAS No. 157 did not have a significant impact on its consolidated results of operations or financial position. The Company is currently evaluating the effect that the adoption of SFAS No. 157, as it relates to nonfinancial assets and liabilities, will have on its consolidated results of operations or financial position.

 

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 In February 2007, the FASB issued SFAS No. 159, “The Fair Value Option for Financial Assets and Financial Liabilities” (“SFAS No. 159”).  Under this statement, the Company may elect to report financial instruments and certain other items at fair value on a contract-by-contract basis with changes in value reported in earnings.  This election is irrevocable.  SFAS No. 159 is effective for the Company commencing in 2008.  Early adoption within 120 days of the beginning of the year was permissible, provided the Company had adopted SFAS No. 157.  The Company adopted SFAS 159 on January 1, 2008 and elected not to report financial instruments and certain other items at fair value on a contract-by-contract basis with changes in value reported in earnings.

In December 2007, the FASB issued SFAS No. 141 (Revised 2007), “Business Combinations” (“SFAS No. 141R”). SFAS No. 141R will significantly change the accounting for business combinations. Under SFAS No. 141R, an acquiring entity will be required to recognize all the assets acquired and liabilities assumed in a transaction at the acquisition-date fair value, with limited exceptions. SFAS No. 141R also includes a substantial number of new disclosure requirements and applies prospectively to business combinations for which the acquisition date is on or after the beginning of the first annual reporting period beginning on or after December 15, 2008. As the provisions of SFAS No. 141R are applied prospectively, the impact to the Company cannot be determined until any such transactions occur.

In March 2008, the FASB issued SFAS No. 161, “Disclosures about Derivative Instruments and Hedging Activities, an amendment of FASB statement 133” (“SFAS No. 161”). The new standard is intended to improve financial reporting about derivative instruments and hedging activities by requiring enhanced disclosures to enable investors to better understand their effects on an entity’s financial position, results of operations and cash flows. The new standard also improves transparency about how and why a company uses derivative instruments and how derivative instruments and related hedged items are accounted for under SFAS No. 133. It is effective for financial statements issued for fiscal years and interim periods beginning after November 15, 2008, with early application encouraged.  The Company’s management is currently assessing the new disclosure requirements required by SFAS 161 .

3 - CASH FLOW IN FORMATION
 
The Company currently has nine interest rate swaps, and these swaps are described and discussed in Note 8. The fair value of eight of the swaps is in a liability position of $19,719 and one of the swaps is in an asset position of $997 as of June 30, 2008.  At December 31, 2007, the swaps were in a liability position of $21,039.

For the six months ended June 30, 2008, the Company had non-cash investing activities not included in the Consolidated Statement of Cash Flows for items included in accounts payable and accrued expenses consisting of $92 for the purchase of vessels, $491 associated with deposits on vessels, $51 for the purchase of short-term investments, $98 associated with deferred financing costs, and $251 for expenses associated with issuance of common stock in May 2008, which are not reflected in net proceeds of such issuance at June 30, 2008.  Additionally, for the six months ended June 30, 2008, the Company had items in prepaid expenses and other current assets consisting of $1,460 which reduced the deposits on vessels. The Company had non-cash investing activities not included in the Consolidated Statement of Cash Flows for items included in accounts payable and accrued expenses for the purchase of fixed assets of approximately $14 for the six months ended June 30, 2007.
 
For the six months ended June 30, 2008, the Company made a non-cash reclassification of $30,335 from deposits on vessels to vessels net of accumulated depreciation due to the completion of the purchase of the Genco Champion and Genco Constantine.

During the six months ended June 30, 2008, the cash paid for interest, including interest amounts capitalized was $26,733.  During the six months ended June 30, 2007, the cash paid for interest was $6,302 and no interest costs were capitalized.

 On January 10, 2008 the Board of Directors approved a grant of 100,000 shares of nonvested common stock to Peter Georgiopoulos, Chairman of the Board.  The fair value of such nonvested stock was $4,191 on the grant date and was recorded in equity.  Additionally, on February 13, 2008, the Company made grants of nonvested common stock under the Plan in the amount of 12,500 shares to directors of the Company. The fair value of such nonvested

 

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stock was $689 on the grant date and was recorded in equity.

On February 8, 2007 the Company granted nonvested stock to certain directors and employees. The fair value of such nonvested stock was $494 on the grant date and was recorded in equity.  Additionally, during January 2007, nonvested stock forfeited amounted to $54 for shares granted in 2005 and is recorded in equity.  Lastly, during May 2007, nonvested stock forfeited amounted to $88 for shares granted in 2006 and 2005 and is recorded in equity.

4 - VESSEL ACQUISITION S AND DISPOSIT IONS
 
On June 16, 2008 the Company agreed to acquire six drybulk newbuildings from Lambert Navigation Ltd., Northville Navigation Ltd., Providence Navigation Ltd., and Prime Bulk Navigation Ltd., for an aggregate purchase price of $530,000.  Additionally, on May 9, 2008, the Company agreed to acquire three 2007 built vessels, consisting of two Panamax vessels and one Supramax vessel, from Bocimar International N.V. and Delphis N.V for an aggregate purchase price of approximately $257,000.  Upon completion of these  acquisitions and the acquisition of the remaining four Capesize vessels from companies within the Metrostar Management Corporation group, Genco's fleet will consist of 41 drybulk vessels, consisting of twelve Capesize, eight Panamax, four Supramax, six Handymax and eleven Handysize vessels, with an aggregate carrying capacity of approximately 3,516,000 dwt and an average age of  5.8 years.

On February 26, 2008, the Company completed the sale of the Genco Trader.  The Company realized a net gain of approximately $26,227 and had net proceeds of $43,080 from the sale of the vessel in the first quarter of 2008.  The Company had previously reached an agreement, on October 2, 2007, to sell the Genco Trader, a 1990-built Panamax vessel, to SW Shipping Co., Ltd for $44,000 less a 2% brokerage commission payable to a third party.  The Genco Trader was classified as held for sale at December 31, 2007 in the amount of $16,857.

On February 21, 2008, the Company completed the acquisition of the Genco Constantine, a 2008 built Capesize vessel from companies within the Metrostar Management Corporation group.  The remaining four Capesize vessels are expected to be built, and subsequently delivered to Genco, between the fourth quarter of 2008 and the third quarter of 2009.  In July 2007, the Company entered into an agreement to acquire nine Capesize vessels from companies within the Metrostar Management Corporation group for a net purchase price of $1,111,000, consisting of the value of the vessels and the liability for the below market time charter contracts acquired.  As of December 31, 2007, four of the nine Capesize vessels, the Genco Augustus, Genco Tiberius, Genco London, and Genco Titus, all 2007 built vessels, had been delivered to Genco.

On January 2, 2008, the Company completed the acquisition of the Genco Champion, the last vessel acquired from affiliates of Evalend Shipping Co. S.A. On August 10 and August 13, 2007, the Company had agreed to acquire six drybulk vessels (three Supramax and three Handysize) from affiliates of Evalend Shipping Co. S.A. for a net purchase price of $336,000, consisting of the value of the vessels and the liability for the below market time charter contract acquired.  As of December 31, 2007, the Company had completed the acquisition of five of the vessels, the Genco Predator, Genco Warrior, Genco Hunter, Genco Charger, and Genco Challenger.

On February 21, 2007, the Genco Glory was sold to Cloud Maritime S.A. for $13,004 net of a brokerage commission paid to WeberCompass (Hellas) S.A.  Based on the selling price and the net book value of the vessel, the Company recorded a gain of $3,575 during the quarter ended March 31, 2007.

On October 14, 2005, the Company took delivery of the Genco Muse, a 48,913 dwt Handymax drybulk carrier and the results of its operations is included in the consolidated results of the Company after that date. The vessel is a 2001 Japanese-built vessel. The total purchase price of the vessel was $34,450. The purchase price included the assumption of an existing time charter with Qatar Navigation QSC at a rate of $26.5 per day. Due to the above market rate of the existing time charter at the time of the acquisition, the Company capitalized $3,492 of the purchase price as an asset which was amortized as a reduction of voyage revenues through September 2007 (the remaining term of the charter).

Below and above market time charters acquired were amortized as an (increase) or decrease to revenue in the amounts of ($4,761) and $461, respectively, for the three months ended June 30, 2008 and June 30, 2007.  

 

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Below and above market time charters acquired were amortized as an (increase) or decrease to revenue in the amounts of ($11,610) and $917, respectively, for the six months ended June 30, 2008 and June 30, 2007.

Capitalized interest associated with the new building contracts acquired for the three months ended June 30, 2008 and 2007 were $492 and $0, respectively.   Capitalized interest associated with the new building contracts acquired for the six months ended June 30, 2008 and 2007 were $1,249 and $0, respectively.

See Note 1 for discussion on the initial acquisition of our initial 16 drybulk carriers and details of other acquisitions.

The purchase and sale of the aforementioned vessels is consistent with the Company's strategy of selectively expanding the number and maintaining the high-quality vessels in the fleet.

5 – SHORT-TERM INVESTMENTS

At June 30, 2008 and December 31, 2007, the Company holds an investment of 16,335,100 and 15,439,800 shares of Jinhui capital stock, respectively, which is recorded at the fair value of $158,952 and $167,524, respectively based on the closing price on June 30, 2008 and December 28, 2007 (the last trading date on the Oslo exchange in 2007) of 49.50 NOK and 59.00 NOK, respectively.  The unrealized gain due to the appreciation of stock and currency translation gain at June 30, 2008 is $10,404 and $22,681; respectively.  The unrealized gain due to the appreciation of stock and currency translation gain December 31, 2007 was $38,540 and $11,705, respectively.   The unrealized currency translation gain for any unhedged portion at June 30, 2008 and December 31, 2007 is $2,627 and $1,545, respectively and is recorded as a component of OCI since this investment is designated as an AFS security.  Effective on August 16, 2007, the Company elected to utilize hedge accounting for forward contracts hedging the currency risk associated with the Norwegian Kroner cost basis in the Jinhui stock.  The hedge is limited to the lower of the cost basis or the market value at time of the designation.  For the three months ended June 30, 2008, fair value hedge accounting resulted in recognizing both an unrealized currency translation gain of $1,962 on the stock basis and offsetting losses on the hedged forward contracts.  For the three months ended June 30, 2007, the Company did not utilize fair value hedge accounting.  For the six months ended June 30, 2008, fair value hedge accounting resulted in recognizing both an unrealized currency translation gain of $10,976 on the stock basis and offsetting losses on the hedged forward contracts.  For the six months ended June 30, 2007, the Company did not utilize fair value hedge accounting. The unrealized appreciation in the stock and the currency translation gain above the cost basis are recorded as a component of OCI.  Realized gains and losses on the sale of these securities will be reflected in the consolidated statement of operations in other (expense) or income once sold.  Time value of the forward contracts are excluded from effectiveness testing and recognized currently in income.  For the six months ended  June 30, 2008 and June 30, 2007, an immaterial amount was recognized in income or (expense) from derivative instruments associated with excluded time value and ineffectiveness.
 
At June 30, 2008, the Company had one short-term forward currency contract to hedge the Company’s exposure to the Norwegian Kroner related to the cost basis of Jinhui stock as described above.  The forward currency contract for a notional amount of 739.2 million NOK (Norwegian Kroner) or $142,378, matured on July 21, 2008. At December 31, 2007, the Company had one short-term forward currency contract to hedge the Company’s exposure to the Norwegian Kroner related to the cost basis of Jinhui stock as described above.  The forward currency contract for a notional amount of 685.1 million NOK (Norwegian Kroner) or $124,557, matured on January 17, 2008. As forward contracts expire, the Company continues to enter into new forward currency contracts for the cost basis of the Short-term investment, excluding commissions.  However, the hedge is limited to the lower of the cost basis or the market value at time of designation.  As of July 17, 2008, the Company has a forward currency contract for the notional amount of 739.2 million NOK for $144,947.  For the three months ended June 30, 2008 and June 30, 2007, the net losses (realized and unrealized) of $1,200 and $1,910, respectively, related to the forward currency contracts and to the hedged translations gain on the cost basis of the Jinhui stock are reflected as (loss) income from derivative instruments and are included as a component of other expense.  For the six months ended June 30, 2008 and June 30, 2007, the net losses (realized and unrealized) of $1,283 and $1,910, respectively,  related to the forward currency contracts and to the hedged translations gain on the cost basis of the Jinhui stock are reflected as (loss) income from derivative instruments and are included as a component of other expense. The short-term liability associated with the forward currency contract at June 30, 2008 and December 31, 2007 is $3,063, and $1,448, respectively, and is presented as the fair value of derivatives on the balance sheet.  The loss associated with these respective liabilities is included as a component of (loss) income from derivative

 

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instruments and is offset by a reclassification from OCI for the hedged portion of the currency gain (loss) on short-term investments.

6 - EARN INGS PER COMMON SHARE
 
The computation of basic earnings (loss) per share is based on the weighted average number of common shares outstanding during the year. The computation of diluted earnings (loss) per share assumes the vesting of nonvested stock awards (see Note 18), for which the assumed proceeds upon grant are deemed to be the amount of compensation cost attributable to future services and not yet recognized using the treasury stock method, to the extent dilutive. For the three and six months ended June 30, 2008 and 2007, the restricted stock grants are dilutive. 
 
The components of the denominator for the calculation of basic earnings per share and diluted earnings per share are as follows:
 
 	 	Three Months Ended
June 30,	 	 	Six Months Ended
June 30,	 	
 	 	2008	 	 	2007	 	 	2008	 	 	2007	 	
 	 	 	 	 	 	 	 	 	 	 	 	 	
Common shares outstanding, basic:	 	 	 	 	 	 	 	 	 	 	 	 	
Weighted average common shares outstanding, basic	 	 	29,750,309	 	 	 	25,312,593	 	 	 	29,242,118	 	 	 	25,310,783	 	
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Common shares outstanding, diluted:	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Weighted average common shares outstanding, basic	 	 	29,750,309	 	 	 	25,312,593	 	 	 	29,242,118	 	 	 	25,310,783	 	
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Weighted average restricted stock awards	 	 	207,389	 	 	 	143,820	 	 	 	193,906	 	 	 	128,260	 	
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Weighted average common shares outstanding, diluted	 	 	29,957,698	 	 	 	25,456,413	 	 	 	29,436,024	 	 	 	25,439,043	 	

On February 13, 2008, our board of directors approved a share repurchase program for up to a total of $50,000 of the Company's common stock.  The board will review the program after 12 months.  Share repurchases will be made from time to time for cash in open market transactions at prevailing market prices or in privately negotiated transactions. The timing and amount of purchases under the program will be determined by management based upon market conditions and other factors.  Purchases may be made pursuant to a program adopted under Rule 10b5-1 under the Securities Exchange Act. The program does not require the Company to purchase any specific number or amount of shares and may be suspended or reinstated at any time in the Company's discretion and without notice. Repurchases will be subject to restrictions under the 2007 Credit Facility.  The 2007 Credit Facility was amended as of February 13, 2008 to permit the share repurchase program and provide that the dollar amount of shares repurchased is counted toward the maximum dollar amount of dividends that may be paid in any fiscal quarter.  No such purchases have been made through June 30, 2008.

7 - RELATED PARTY TRANSACTIONS
 
The following are related party transactions not disclosed elsewhere in these financial statements:
 
In June 2006, the Company made an employee performing internal audit services available to General Maritime Corporation (“GMC”), where the Company’s Chairman, Peter C. Georgiopoulos, also serves as Chairman of the Board, Chief Executive Officer and President.   For the six months ended June 30, 2008 and 2007, the Company invoiced $65 and $64, respectively, to GMC for the time associated with such internal audit services.  Additionally, during the six months ended June 30, 2008 and 2007, the Company incurred travel and other related expenditures totaling $156 and $69, respectively, reimbursable to GMC or its service provider.   For the six months ended June 30, 2008 approximately, $9 of these travel expenditures were paid from the gross proceeds received from the May 2008 equity offering and as such were included in the determination of net proceeds.  At June 30, 2008, the amount due the Company is $4, and at December 31, 2007, the amount due GMC from the Company is $69.

 

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During the six months ended June 30, 2008 and 2007, the Company incurred legal services aggregating $61 and $29 from Constantine Georgiopoulos, father of Peter C. Georgiopoulos, Chairman of the Board. At June 30, 2008 and December 31, 2007, $42 and $86, respectively, was outstanding to Constantine Georgiopoulos.
 
In December 2006, the Company engaged the services of WeberCompass (Hellas) S.A. (“WC”), a shipbroker, to facilitate the sale of the Genco Glory.  One of our directors, Basil G. Mavroleon, is a Managing Director of WC and a Managing Director and shareholder of Charles R. Weber Company, Inc., which is 50% shareholder of WC.  WC was paid a commission of $132, or 1% of the gross selling price of the Genco Glory. No amounts were due to WC at June 30, 2008 or at December 31, 2007.
 
During March 2007, the Company utilized the services of North Star Maritime, Inc. (“NSM”) which is owned and operated by one of our directors, Rear Admiral Robert C. North, USCG (ret.).  NSM, a marine industry consulting firm, specializes in international and domestic maritime safety, security and environmental protection issues.  NSM was paid $7 for services rendered in March 2007.  No amounts were due to NSM at June 30, 2008 or at December 31, 2007.
 
8 - LONG-TERM DEBT
 
Long-term debt consists of the following:
 
 	 	June 30, 2008	 	 	December 31, 2007	 	
 	 	 	 	 	 	 	
Revolver, 2007 Credit Facility	 	$	989,250	 	 	$	936,000	 	
Less: Current portion	 	 	-	 	 	 	43,000	 	
 	 	 	 	 	 	 	 	 	
Long-term debt	 	$	 989,250	 	 	$	 893,000	 	

2007 Cre dit Facility

On July 20, 2007, the Company entered into a new credit facility with DnB Nor Bank ASA (the “2007 Credit Facility”) for the purpose of acquiring the nine new Capesize vessels and refinancing the Company’s existing 2005 Credit Facility and Short-Term Line.  DnB Nor Bank ASA is also Mandated Lead Arranger, Bookrunner, and Administrative Agent. The Company has used borrowings under the 2007 Credit Facility to repay amounts outstanding under the 2005 Credit Facility and the Short-Term Line, and these two facilities have accordingly been terminated.  The maximum amount that may be borrowed under the 2007 Credit Facility is $1,377,000.  Subsequent to the equity offering completed in October 2007, the Company is no longer required pay up to $6,250 or such lesser amount as is available from Net Cash Flow (as defined in the credit agreement for the 2007 Credit Facility) each fiscal quarter to reduce borrowings under the 2007 Credit Facility.  As of June 30, 2008, $387,750 remains available to fund future vessel acquisitions.  The Company may borrow up to $50,000 of the $387,750 for working capital purposes.
 
Under the 2007 Credit Facility, subject to the conditions set forth in the credit agreement, the Company may borrow an amount up to $1,377,000.  Amounts borrowed and repaid under the 2007 Credit Facility may be reborrowed.  The 2007 Credit Facility has a maturity date of July 20, 2017, or ten years from the signing date of the 2007 Credit Facility.
 
Loans made under the 2007 Credit Facility may be used for the following:

·  	up to 100% of the en bloc purchase price of $1,111,000 for nine modern drybulk Capesize vessels, which the Company has agreed to purchase from companies within the Metrostar Management Corporation group;	

·  	repayment of amounts previously outstanding under the Company’s 2005 Credit Facility, or $206,233;	

·  	the repayment of amounts previously outstanding under the Company’s Short-Term Line, or $77,000;	

 

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·  	possible acquisitions of additional dry bulk carriers between 25,000 and 180,000 dwt that are up to ten years of age at the time of delivery and not more than 18 years of age at the time of maturity of the 2007 Credit Facility;	

·  	up to $50,000 of working capital; and	

·  	the issuance of up to $50,000 of standby letters of credit.  At June 30, 2008, there were no letters of credit issued under the 2007 Credit Facility.	

All amounts owing under the 2007 Credit Facility are secured by the following:

·  	cross-collateralized first priority mortgages of each of the Company’s existing vessels and any new vessels financed with the 2007 Credit Facility;	

·  	an assignment of any and all earnings of the mortgaged vessels;	

·  	an assignment of all insurances of the mortgaged vessels;	

·  	a first priority perfected security interest in all of the shares of Jinhui owned by the Company;	

·  	an assignment of the shipbuilding contracts and an assignment of the shipbuilder’s refund guarantees meeting the Administrative Agent’s criteria for any additional newbuildings financed under the 2007 Credit Facility; and	

·  	a first priority pledge of the Company’s ownership interests in each subsidiary guarantor.	

The Company has completed a pledge of its ownership interests in the subsidiary guarantors that own the vessels acquired or to be acquired.  The other collateral described above was pledged, as required, within thirty days of the effective date of the 2007 Credit Facility.
 
The Company’s borrowings under the 2007 Credit Facility bear interest at the London Interbank Offered Rate (“LIBOR”) for an interest period elected by the Company of one, three, or six months, or longer if available, plus the Applicable Margin (which is 0.90% per annum for the first five years of the 2007 Credit Facility and 0.95% thereafter).  If the Company’s ratio of Total Debt to Total Capitalization (each as defined in the credit agreement for the 2007 Credit Facility) is less than 70%, the Applicable Margin decreases to 0.85% and 0.90%, respectively.  In addition to other fees payable by the Company in connection with the 2007 Credit Facility, the Company paid a commitment fee at a rate of 0.20% per annum of the daily average unutilized commitment of each lender under the facility until September 30, 2007, and 0.25% thereafter.
 
The 2007 Credit Facility will be subject to ten consecutive semi-annual reductions of 7.0% of the total amount of credit granted under the new facility, with the first reduction occurring on the fifth anniversary of the signing date and a balloon payment reduction of 30% on the maturity date.  The Company may prepay the 2007 Credit Facility, without penalty, with two days notice for LIBOR rate advances, in minimum amounts of $10,000 together with accrued interest on the amount prepaid.
 
The 2007 Credit Facility includes the following financial covenants which will apply to the Company and its subsidiaries on a consolidated basis and will be measured at the end of each fiscal quarter beginning with June 30, 2007:

·  	The leverage covenant requires the maximum average net debt to EBITDA to be ratio of at least 5.5:1.0.	
 
·  	Cash and cash equivalents must not be less than $500 per mortgaged vessel.	

 

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·  	The ratio of EBITDA to interest expense, on a rolling last four-quarter basis, must be no less than 2.0:1.0.	
 
·  	After July 20, 2007, consolidated net worth must be no less than $263,300 plus 80% of the value of the any new equity issuances of the Company from June 30, 2007.  Based on the equity offerings completed in October 2007 and May 2008, consolidated net worth must be no less than $590,780.	

·  	The aggregate fair market value of the mortgaged vessels must at all times be at least 130% of the aggregate outstanding principal amount under the 2007 Credit Facility plus all letters of credit outstanding; the Company has a 30 day remedy period to post additional collateral or reduce the amount of the revolving loans and/or letters of credit outstanding.	

Other covenants in the 2007 Credit Facility are substantially similar to the covenants in the Company’s previous credit facilities.  The Company believes it has been in compliance with these covenants since the inception of the facility through June 30, 2008.

On June 18, 2008, the Company entered into an amendment to the 2007 Credit Facility allowing the Company to prepay vessel deposits to give the Company flexibility in refinancing potential vessel acquisitions.

The Company can continue to pay cash dividends in accordance with its dividend policy and certain terms of the credit agreement so long as no event of default has occurred and is continuing and that no event of default will occur as a result of the payment of such dividend.  The 2007 Credit Facility also establishes a basket to accrue for dividends permitted but not actually distributed under the permitted dividend calculation since July 29, 2005.  In addition to Genco’s regular quarterly dividend, Genco can pay up to $150,000 in dividends from this basket.  In addition, the 2007 Credit Facility was amended as of February 13, 2008 to permit the Company to implement its share repurchase program, which was recently approved by its board of directors.  Under this amendment, the dollar amount of shares repurchased is counted toward the maximum dollar amount of dividends that may be paid in any fiscal quarter.  For further details of our share repurchase program, see Note 6 to our financial statements.

Due to refinancing of the Company’s previous facilities, the Company incurred a non-cash write-off of the unamortized deferred financing cost in the amount of $3,568 associated with the Company’s previous facilities and this charge was reflected in interest expense in the third quarter of 2007.

The following table sets forth the repayment of the outstanding debt of $989,250 at June 30, 2008 under the 2007 Credit Facility:

Period Ending June 30,	 	Total	 	
 	 	 	 	
2008 (July 1, 2008 – December 31, 2008)	 	$	-	 	
2009	 	 	-	 	
2010	 	 	-	 	
2011	 	 	-	 	
2012	 	 	-	 	
Thereafter	 	 	989,250	 	
 	 	 	 	 	
Total long-term debt	 	$	989,250	 	
 	 	 	 	 	
Interest rates

For the three months ended June 30, 2008, the effective interest rate associated with the interest expense for the 2007 Credit Facility, including the rate differential between the pay fixed receive variable rate on the swaps that were in effect, combined, and the cost associated with unused commitment fees with this facility was 5.31%.  For the three months ended June 30, 2007, the effective interest rate associated with the interest expense for the 2005 Credit Facility and Short-Term Line, including the rate differential between the pay fixed receive variable rate on

 

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the swaps that were in effect, combined, and the cost associated with unused commitment fees with this facility was 6.54%.

For the six months ended June 30, 2008, the effective interest rate associated with the interest expense for the 2007 Credit Facility, including the rate differential between the pay fixed receive variable rate on the swaps that were in effect, combined, and the cost associated with unused commitment fees with this facility, was 5.27%.  For the six months ended June 30, 2007, the effective interest rate associated with the interest expense for the 2005 Credit Facility and Short-Term Line, including the rate differential between the pay fixed receive variable rate on the swaps that were in effect, combined, and the cost associated with unused commitment fees with this facility, was 6.51%.

The interest rate on the debt, excluding the unused commitment fees, ranged from 2.98% to 5.60% and from 6.23% to 6.33%, for the three months ended June 30, 2008 and 2007, respectively.  The interest rate on the debt, excluding the unused commitment fees, ranged from 2.98% to 6.10% and from 6.23% to 6.39%, for the six months ended June 30, 2008 and 2007, respectively.
 
Short-Term Line - Refinanced by the 2007 Credit Facility
 
On May 3, 2007, the Company entered into a short-term line of credit facility under which DnB NOR Bank ASA, Grand Cayman Branch and Nordea Bank Norge ASA, Grand Cayman Branch are serving as lenders (the “Short-Term Line”).   The Short-Term Line was used to fund a portion of acquisitions we made in the shares of capital stock of Jinhui.  Under the terms of the Short-Term Line, we were allowed to borrow up to $155,000 for such acquisitions, and we had borrowed a total of $77,000 under the Short-Term Line prior to its refinancing.  The term of the Short-Term Line was for 364 days, and the interest on amounts drawn was payable at the rate of LIBOR plus a margin of 0.85% per annum for the first six month period and LIBOR plus a margin of 1.00% for the remaining term.  We were obligated to pay certain commitment and administrative fees in connection with the Short-Term Line.  The Company, as required, pledged all of the Jinhui shares it has purchased as collateral against the Short-Term Line.  The Short-Term Line incorporated by reference certain covenants from our 2005 Credit Facility.

The Short-Term Line was refinanced in July 2007 with the 2007 Credit Facility.

2005 Credit Facility   - Refinanced by the 2007 Credit Facility
 
The Company entered into the 2005 Credit Facility as of July 29, 2005.  The 2005 Credit Facility was with a syndicate of commercial lenders including Nordea Bank Finland plc, New York Branch, DnB NOR Bank ASA, New York Branch and Citibank, N.A.  The 2005 Credit Facility has been used to refinance our indebtedness under our original credit facility entered into on December 3, 2004 (the “Original Credit Facility”). Under the terms of our 2005 Credit Facility, borrowings in the amount of $106,233 were used to repay indebtedness under our Original Credit Facility and additional net borrowings of $24,450 were obtained to fund the acquisition of the Genco Muse.  In July 2006, the Company increased the line of credit by $100,000 and during the second and third quarters of 2006 borrowed $81,250 for the acquisition of three vessels.
 
The 2005 Credit Facility had a term of ten years and would have matured on July 29, 2015. The facility permitted borrowings up to 65% of the value of the vessels that secure our obligations under the 2005 Credit Facility up to the facility limit, provided that conditions to drawdown are satisfied. Certain of these conditions required the Company, among other things, to provide to the lenders acceptable valuations of the vessels in our fleet confirming that the aggregate amount outstanding under the facility (determined on a pro forma basis giving effect to the amount proposed to be drawn down) will not exceed 65% of the value of the vessels pledged as collateral.  The facility limit is reduced by an amount equal to 8.125% of the total $550,000, commitment, semi-annually over a period of four years and is reduced to $0 on the tenth anniversary.

On February 7, 2007, the Company reached an agreement with its syndicate of commercial lenders to allow the Company to increase the amount of the 2005 Credit Facility by $100,000, for a total maximum availability of $650,000.  The Company had the option to increase the facility amount by $25,000 increments up to the additional $100,000, so long as at least one bank within the syndicate agrees to fund such increase.  Any increase associated with this agreement was generally governed by the existing terms of the 2005 Credit Facility, although we and any

 

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banks providing the increase could have agreed to vary the upfront fees, unutilized commitment fees, or other fees payable by us in connection with the increase.

The obligations under the 2005 Credit Facility were secured by a first-priority mortgage on each of the vessels in our fleet as well as any future vessel acquisitions pledged as collateral and funded by the 2005 Credit Facility. The 2005 Credit Facility was also secured by a first-priority security interest in our earnings and insurance proceeds related to the collateral vessels.

All of our vessel-owning subsidiaries were full and unconditional joint and several guarantors of our 2005 Credit Facility. Each of these subsidiaries is wholly owned by Genco Shipping & Trading Limited.  Genco Shipping & Trading Limited has no independent assets or operations.
 
Interest on the amounts drawn was payable at the rate of 0.95% per annum over LIBOR until the fifth anniversary of the closing of the 2005 Credit Facility and 1.00% per annum over LIBOR thereafter. We were also obligated to pay a commitment fee equal to 0.375% per annum on any undrawn amounts available under the facility. On July 29, 2005, the Company paid an arrangement fee to the lenders of $2.7 million on the original commitment of $450,000 and an additional $600 for the $100,000 commitment increase which equates to 0.6% of the total commitment of $550,000 as of July 12, 2006. These arrangement fees along with other costs were capitalized as deferred financing costs.
 
Under the terms of our 2005 Credit Facility, we were permitted to pay or declare dividends in accordance with our dividend policy so long as no default or event of default has occurred and is continuing or would result from such declaration or payment.
 
The 2005 Credit Facility had certain financial covenants that require the Company, among other things, to:  ensure that the fair market value of the collateral vessels maintains a certain multiple as compared to the outstanding indebtedness; maintain a specified ratio of total indebtedness to total capitalization; maintain a specified ratio of earnings before interest, taxes, depreciation and amortization to interest expense; maintain a net worth of approximately $263,000; and maintain working capital liquidity in an amount of not less than $500 per vessel securing the borrowings.  Additionally, there were certain non-financial covenants that required the Company, among other things, to provide the lenders with certain legal documentation, such as the mortgage on a newly acquired vessel using funds from the 2005 Credit Facility, and other periodic communications with the lenders that include certain compliance certificates at the time of borrowing and on a quarterly basis.  For the period since facility inception through retirement of the facility, the Company believes it was in compliance with these covenants, except for an age covenant in conjunction with the acquisition of the Genco Commander, a 1994 vessel, for which the Company obtained a waiver for the term of the agreement.

The 2005 Credit Facility permitted the issuance of letters of credit up to a maximum amount of $50,000. The conditions under which letters of credit can be issued were substantially the same as the conditions for borrowing funds under the facility. Each letter of credit must terminate within twelve months, but can be extended for successive periods also not exceeding twelve months. The Company would pay a fee of 1/8 of 1% per annum on the amount of letters of credit outstanding.

The 2005 Credit Facility has been refinanced with the 2007 Credit Facility.

Letter of credit
 
In conjunction with the Company entering into a long-term office space lease (See Note 16 - Lease Payments), the Company was required to provide a letter of credit to the landlord in lieu of a security deposit. As of September 21, 2005, the Company obtained an annually renewable unsecured letter of credit with DnB NOR Bank.  The letter of credit amount as of June 30, 2008 and December 31, 2007 was in the amount of $520, at a fee of 1% per annum. The letter of credit is reduced to $416 on August 1, 2008 and is cancelable on each renewal date provided the landlord is given 150 days minimum notice. 

 

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Interest rate swap agreements
 
The Company has entered into nine interest rate swap agreements with DnB NOR Bank to manage interest costs and the risk associated with changing interest rates. The total notional principal amount of the swaps is $681,233 and the swaps have specified rates and durations.

The following table summarizes the interest rate swaps in place as of June 30, 2008 and December 31, 2007:

Interest Rate Swap Detail	 	June 30,
2008	 	 	December 31, 2007	 	
Trade Date	 	Fixed Rate	 	Start Date
of  Swap	End Date
of  Swap	 	Notional
Amount Outstanding	 	 	Notional
Amount Outstanding	 	
9/6/05	 	 	4.485	%	9/14/05	7/29/15	 	$	106,233	 	 	$	106,233	 	
3/29/06	 	 	5.25	%	1/2/07	1/1/14	 	 	50,000	 	 	 	50,000	 	
3/24/06	 	 	5.075	%	1/2/08	1/2/13	 	 	50,000	 	 	 	50,000	 	
9/7/07	 	 	4.56	%	10/1/07	12/31/09	 	 	75,000	 	 	 	75,000	 	
7/31/07	 	 	5.115	%	11/30/07	11/30/11	 	 	100,000	 	 	 	100,000	 	
8/9/07	 	 	5.07	%	1/2/08	1/3/12	 	 	100,000	 	 	 	100,000	 	
8/16/07	 	 	4.985	%	3/31/08	3/31/12	 	 	50,000	 	 	 	50,000	 	
8/16/07	 	 	5.04	%	3/31/08	3/31/12	 	 	100,000	 	 	 	100,000	 	
1/22/08	 	 	2.89	%	2/1/08	2/1/11	 	 	50,000	 	 	 	 	 	
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
 	 	 	 	 	 	 	 	$	681,233	 	 	$	631,233	 	

The differential to be paid or received for these swap agreements are recognized as an adjustment to interest expense as incurred.  The Company is currently utilizing cash flow hedge accounting for the swaps whereby the effective portion of the change in value of the swaps is reflected as a component of Other Comprehensive Income (“OCI”).  The ineffective portion is recognized as income or (loss) from derivative instruments, which is a component of other (expense) income.  For any period of time that the Company did not designate the swaps for hedge accounting, the change in the value of the swap agreements prior to designation was recognized as income or (loss) from derivative instruments and was listed as a component of other (expense) income.

The interest (expense) income pertaining to the interest rate swaps for the three months ended June 30, 2008 and 2007 was ($3,379) and $247, respectively.  The interest (expense) income pertaining to the interest rate swaps for the six months ended June 30, 2008 and 2007 was ($3,868) and $494, respectively.
 
The swap agreements, with effective dates on or prior to June 30, 2008, synthetically convert variable rate debt the fixed interest rate of swap plus the Applicable Margin (which is 0.85% per annum for the first five years of the 2007 Credit Facility and 0.90% thereafter).  If the Company’s ratio of Total Debt to Total Capitalization (each as defined in the credit agreement for the 2007 Credit Facility) is greater than or equal to 70%, the Applicable Margin increases to 0.90% for the first five years and 0.95% thereafter.
 
The liability associated with these swaps at June 30, 2008 and December 31, 2007 is $19,719 and $21,039, respectively, which are presented as the fair value of derivatives on the balance sheet.  Additionally, at June 30, 2008, the Company had a swap in an asset position of $997, which is presented as the fair value of derivatives on the balance sheet.  As of June 30, 2008 and December 31, 2007, the Company has accumulated OCI of ($18,683) and ($21,068), respectively, related to the effectively hedged portion of the swaps.  Hedge ineffectiveness associated with the interest rate swaps resulted in income or (loss) from derivative instruments of ($3) for the three months ended June 30, 2008.  Hedge ineffectiveness associated with the interest rate swaps resulted in income or (loss) from derivative instruments of ($20) for the six months ended June 30, 2008.  For the three and six months ended June 30, 2007 the swaps had no ineffectiveness resulting in any income or expense from derivative instruments.  At June 30, 2008, ($11,412) of OCI is expected to be reclassified into interest expense over the next 12 months associated with interest rate derivatives.

 

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9 – ACCUMULATED OTHER COMPREHENSIVE INCOME
 
The components of accumulated other comprehensive income included in the accompanying consolidated balance sheets consist of net unrealized gain (loss) from short-term investments, net gain (loss) on derivative instruments designated and qualifying as cash-flow hedging instruments, and cumulative translation adjustments on the short-term investment in Jinhui stock as of June 30, 2008 and December 31, 2007.

 	 	Accumulated OCI	 	 	Unrealized Gain (loss) on Cash Flow Hedges	 	 	Unrealized Gain on Short-term Investments	 	 	Currency Translation Gain (loss) on Short-term Investments	 	
OCI – January 1, 2008	 	$	19,017	 	 	$	(21,068	)	 	$	38,540	 	 	$	1,545	 	
Unrealized loss on short-term investments	 	 	(28,135	)	 	 	 	 	 	 	(28,135	)	 	 	 	 	
Translation gain on short-term investments	 	 	10,976	 	 	 	 	 	 	 	 	 	 	 	10,976	 	
Translation gain reclassed to (loss) income from derivative instruments	 	 	(9,894	)	 	 	 	 	 	 	 	 	 	 	(9,894	)	
Unrealized loss on cash flow hedges	 	 	6,253	 	 	 	6,253	 	 	 	 	 	 	 	 	 	
Interest income reclassed to (loss) income from derivative instruments	 	 	(3,868	)	 	 	(3,868	)	 	 	 	 	 	 	 	 	
OCI –June 30, 2008	 	$	(5,651	)	 	$	(18,683	)	 	$	10,405	 	 	$	2,627	 	

10 - FAIR VALUE OF FINANCIAL INSTRUMENTS
 
The estimated carrying and fair values of the Company’s financial instruments are as follows:
 
 	 	June 30, 2008	 	 	December 31, 2007	 	
 	 	Carrying Value	 	 	Fair Value	 	 	Carrying Value	 	 	Fair Value	 	
Cash and cash equivalents	 	$	95,964	 	 	$	95,964	 	 	$	71,496	 	 	$	71,496	 	
Short-term investments	 	 	158,952	 	 	 	158,952	 	 	 	167,524	 	 	 	167,524	 	
Floating rate debt	 	 	989,250	 	 	 	989,250	 	 	 	936,000	 	 	 	936,000	 	
Derivative instruments – asset position	 	 	997	 	 	 	997	 	 	 	-	 	 	 	-	 	
Derivative instruments – liability position	 	 	22,782	 	 	 	22,782	 	 	 	22,487	 	 	 	22,487	 	

The fair value of the short-term investments is based on quoted market rates.  The fair value of the revolving credit facility is estimated based on current rates offered to the Company for similar debt of the same remaining maturities.  Additionally, the Company considers its creditworthiness in determining the fair value of the revolving credit facility.  The carrying value approximates the fair market value for the floating rate loans.  The fair value of the interest rate and currency swaps (used for purposes other than trading) is the estimated amount the Company would receive to terminate the swap agreements at the reporting date, taking into account current interest rates, NOK spot rates, and the creditworthiness of both the swap counterparty and the Company.
 
The Company elected to early adopt SFAS No. 157 beginning in its 2007 fiscal year, and there was no material impact to its first quarter financial statements.  SFAS No. 157 applies to all assets and liabilities that are being measured and reported on a fair value basis.   SFAS No. 157 requires new disclosure that establishes a framework for measuring fair value in GAAP, and expands disclosure about fair value measurements.  This statement enables the reader of the financial statements to assess the inputs used to develop those measurements by establishing a hierarchy for ranking the quality and reliability of the information used to determine fair values. The statement requires that assets and liabilities carried at fair value will be classified and disclosed in one of the following three categories:

 

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Level 1: Quoted market prices in active markets for identical assets or liabilities.
Level 2: Observable market based inputs or unobservable inputs that are corroborated by market data.
Level 3: Unobservable inputs that are not corroborated by market data.

The following table summarizes the valuation of our short-term investments and financial instruments by the above SFAS No. 157 pricing levels as of the valuation dates listed:

 	 	June 30, 2008	 	
 	 	Total	 	 	Quoted market prices in active markets (Level 1)	 	 	
Significant Other Observable Inputs
(Level 2)	 	
Short-term investments	 	$	158,952	 	 	$	158,952	 	 	 	 	
Derivative instruments – asset position	 	 	997	 	 	 	 	 	 	 	997	 	
Derivative instruments – liability  position	 	 	22,782	 	 	 	 	 	 	 	22,782	 	
 	 	 	 	 	 	 	 	 	 	 	 	 	
 The Company holds an investment in the capital stock of Jinhui, which is classified as a short-term investment.  The stock of Jinhui is publicly traded on the Oslo Stock Exchange and is considered a Level 1 item.  The Company’s interest rate derivative instruments are pay-fixed, receive-variable interest rate swaps based on LIBOR.  In addition, the Company’s derivative instruments include a forward currency contract based on the Norwegian Kroner.   The Company has elected to use the income approach to value the derivatives, using observable Level 2 market expectations at measurement date and standard valuation techniques to convert future amounts to a single present amount assuming that participants are motivated, but not compelled to transact.  Level 2 inputs for the valuations are limited to quoted prices for similar assets or liabilities in active markets (specifically futures contracts on LIBOR for the first two years) and inputs other than quoted prices that are observable for the asset or liability (specifically LIBOR cash and swap rates, NOK spot rates and credit risk at commonly quoted intervals).  Mid-market pricing is used as a practical expedient for fair value measurements.  SFAS No. 157 states that the fair value measurement of an asset or liability must reflect the nonperformance risk of the entity and the counterparty. Therefore, the impact of the counterparty’s and Company’s creditworthiness has also been factored into the fair value measurement of the derivative instruments in an asset or liability position and did not have a material impact on the fair value of these derivative instruments.
 
11 - PREPAID EXPENSES AND OTHER CURRENT ASSETS
 
 	Prepaid expenses and other current assets consist of the following:	
 
 	 	June   30, 2008	 	 	December 31, 2007	 	
Lubricant inventory and other stores	 	$	3,126	 	 	$	2,720	 	
Prepaid items	 	 	2,784	 	 	 	1,769	 	
Insurance Receivable	 	 	629	 	 	 	1,331	 	
Interest receivable on deposits for vessels to be acquired	 	 	3,559	 	 	 	2,489	 	
Other	 	 	1,981	 	 	 	1,065	 	
Total	 	$	12,079	 	 	$	9,374	 	

12 – OTHER ASSETS, NET
 
 Other assets consist of deferred financing costs which include fees, commissions and legal expenses associated with securing loan facilities. These costs are amortized over the life of the related debt, which is included in interest expense. The Company has unamortized deferred financing costs of $6,230 and $6,130, respectively, at June 30, 2008 and December 31, 2007 associated with the 2007 Credit Facility. Accumulated amortization of

 

27

 
 
deferred financing costs as of June 30, 2008 and December 31, 2007 was $630 and $288, respectively.  During July 2007, the Company refinanced its previous facilities (the Short-Term Line and the 2005 Credit Facility) resulting in the non-cash write-off of the unamortized deferred financing cost of $3,568 to interest expense.  The Company has incurred deferred financing costs of $6,860 in total for the 2007 Credit Facility.  Amortization expense for deferred financing costs, including the write-off any unamortized costs upon refinancing credit facilities for the three months ended June 30, 2008 and 2007 was $152 and $176, respectively.  Amortization expense for deferred financing costs, including the write-off any unamortized costs upon refinancing credit facilities for the six months ended June 30, 2008 and 2007 was $342 and $272, respectively.
 
13 - FIXED ASSETS, NET
 
 	Fixed assets consist of the following:	
 
 	 	June 30, 2008	 	 	December 31, 2007	 	
Fixed assets:	 	 	 	 	 	 	
Vessel equipment	 	$	889	 	 	$	826	 	
Leasehold improvements	 	 	1,146	 	 	 	1,146	 	
Furniture and fixtures	 	 	347	 	 	 	347	 	
Computer equipment	 	 	356	 	 	 	342	 	
Total cost	 	 	2,738	 	 	 	2,661	 	
Less: accumulated depreciation and amortization	 	 	925	 	 	 	722	 	
Total	 	$	1,813	 	 	$	1,939	 	

 	14 - ACCOUNTS PAYABLE AND ACCRUED EXPENSES	
 
 	Accounts payable and accrued expenses consist of the following:	
 
 	 	June 30, 2008	 	 	December 31, 2007	 	
Accounts payable	 	$	3,279	 	 	$	4,164	 	
Accrued general and administrative expenses	 	 	7,424	 	 	 	9,108	 	
Accrued vessel operating expenses	 	 	5,914	 	 	 	4,242	 	
 	 	 	 	 	 	 	 	 	
Total	 	$	16,617	 	 	$	17,514	 	
 
15 - REVENUE FROM TIME CHARTERS
 
Total revenue earned on time charters for the three months ended June 30, 2008 and 2007 was $104,572 and $36,847, respectively, and for the six months ended June 30, 2008 and 2007 was $196,242 and $74,067, respectively. Future minimum time charter revenue, based on vessels committed to noncancelable time charter contracts as of July 25, 2008 is expected to be $196,376 for the remaining two quarters of 2008 $308,364 during 2009, $198,728 during 2010, $69,405 during 2011 and $17,623 during 2012, assuming 20 days of off-hire due to any scheduled drydocking and no additional off-hire time is incurred.  Future minimum revenue excludes the future acquisitions of the remaining seven Capesize vessels, one Panamax vessel, and three Handysize vessels to be acquired, which are to be delivered to Genco in the future, since estimated delivery dates are not firm.
 
16 - LEASE PAYMENTS
 
In September 2005, the Company entered into a 15-year lease for office space in New York, New York.  The monthly rental is as follows:  Free rent from September 1, 2005 to July 31, 2006, $40 per month from August 1, 2006 to August 31, 2010, $43 per month from September 1, 2010 to August 31, 2015, and $46 per month from September 1, 2015 to August 31, 2020.  The Company obtained a tenant work credit of $324.  The monthly straight-line rental expense from September 1, 2005 to August 31, 2020 is $39.  As a result of the straight-line rent

 

28

 
 
calculation generated by the free rent period and the tenant work credit, the Company has a deferred rent credit at June 30, 2008 and December 31, 2007 of $715 and $725, respectively.  The Company has the option to extend the lease for a period of five years from September 1, 2020 to August 31, 2025.  The rent for the renewal period will be based on prevailing market rate for the six months prior to the commencement date of the extension term.  Rent expense for the three months ended June 30, 2008 and 2007, was $117 for each of the respective periods.  Rent expense for the six months ended June 30, 2008 and 2007, was $233 for each of the respective periods.

Future minimum rental payments on the above lease for the next five years and thereafter are as follows: $243 for the remainder of 2008, $486 for 2009, $496 for 2010, $518, for 2011 through 2012 and a total of $4,132 for the remaining term of the lease.

17 - SAVINGS PLAN
 
In August 2005, the Company established a 401(k) plan which is available to full-time employees who meet the plan’s eligibility requirements.  This 401(k) plan is a defined contribution plan, which permits employees to make contributions up to maximum percentage and dollar limits allowable by IRS Code Sections 401(k), 402(g), 404 and 415 with the Company matching up to the first six percent of each employee’s salary on a dollar-for-dollar basis.  The matching contribution vests immediately.  For three months ended June 30, 2008 and 2007, the Company’s matching contribution to the Plan was $27 and $24, respectively, and for the six months ended June 30, 2008 and 2007, the Company’s matching contribution to the Plan was $88 and $65, respectively.
 
18- NONVESTED STOCK AWARDS
 
On July 12, 2005, the Company’s board of directors approved the Genco Shipping and Trading Limited 2005 Equity Incentive Plan (the “Plan”).  Under this plan, the Company’s board of directors, the compensation committee, or another designated committee of the board of directors may grant a variety of stock-based incentive awards to employees, directors and consultants whom the compensation committee (or other committee or the board of directors) believes are key to the Company’s success.  Awards may consist of incentive stock options, nonqualified stock options, stock appreciation rights, dividend equivalent rights, nonvested stock, unrestricted stock and performance shares.  The aggregate number of shares of common stock available for award under the Plan is 2,000,000 shares.
 
On October 31, 2005, the Company made grants of nonvested common stock under the Plan in the amount of 111,412 shares to the executive officers and employees and 7,200 shares to directors of the Company.  The executive and employee grants vest ratably on each of the four anniversaries of the date of the Company’s initial public offering (July 22, 2005).  On July 22, 2007 and 2006, 26,478 and 27,853 shares, respectively, of the employees’ and executives’ nonvested stock vested, and during the year ended December 31, 2007 and the year ended December 31, 2006, 3,375 and 750 shares, respectively, were forfeited.  Grants to the directors vested in full on May 18, 2006, the date of the Company’s annual shareholders’ meeting.  Upon grant of the nonvested stock, an amount of unearned compensation equivalent to the market value at the date of the grant, or $1,949, was recorded as a component of shareholders’ equity.  After forfeitures, the unamortized portion of this award at June 30, 2008 and December 31, 2007 was $124 and $250, respectively.  Amortization of this charge, which is included in general and administrative expenses, was $63 and $107, for the three months ended June 30, 2008 and 2007, respectively, and $126 and $206, for the six months ended June 30, 2008 and 2007, respectively.    The remaining expense for the years ended 2008, and 2009 will be $64 and $60, respectively.
 
On December 21, 2005, the Company made grants of nonvested common stock under the Plan in the amount of 55,600 shares to the executive officers and employees of the Company.  Theses grants vest ratably on each of the four anniversaries of the determined vesting date beginning with November 15, 2006.  During the year ended December 31, 2007 and 2006, 13,338 and 13,900 shares, respectively, of the employees’ and executives’ nonvested stock vested, and during the year ended December 31, 2007 1,687 shares were forfeited.  Upon grant of the nonvested stock, an amount of unearned compensation equivalent to the market value at the date of the grant, or $991, was recorded as a component of shareholders’ equity.  After forfeitures, the unamortized portion of this award at June 30, 2008 and December 31, 2007 was $112 and $181, respectively.  Amortization of this charge, which is included in general and administrative expenses, was $34 and $58, for the three months ended June 30, 2008 and 2007, respectively, and $69 and $116, for the six months ended June 30, 2008 and

 

29

 
 
2007, respectively.   The remaining expense for the years ended 2008 and 2009 will be $60 and $52, respectively.
 
On December 20, 2006 and December 22, 2006, the Company made grants of nonvested common stock under the Plan in the amount of 37,000 shares to employees other than executive officers and 35,000 shares to the executive officers, respectively.  These grants vest ratably on each of the four anniversaries of the determined vesting date beginning with November 15, 2007.  During the year ended December 31, 2007, 17,500 shares of the executives’ and other employees’ nonvested stock vested, and during the year ended December 31, 2007, 2,000 shares were forfeited.  Upon grant of the nonvested stock, an amount of unearned compensation equivalent to the market value at the respective date of the grants, or $2,018, was recorded as a component of shareholders’ equity.  After forfeitures, the unamortized portion of this award at June 30, 2008 and December 31, 2007 was $610 and $873, respectively.  Amortization of this charge, which is included in general and administrative expenses for the three months ended June 30, 2008 and 2007, was $132 and $273, respectively, and $263 and $563, for the six months ended June 30, 2008 and 2007, respectively.  The remaining expense for the years ended 2008, 2009 and 2010 will be $238, $265 and $107, respectively.
 
On February 8, 2007, the Company made grants of nonvested common stock under the Plan in the amount of 9,000 shares to employees and 7,200 shares to directors of the Company.  The employee grants vest ratably on each of the four anniversaries of the determined vesting date beginning with November 15, 2007.  During the year ended December 31, 2007, 2,250 shares of the employees’ nonvested stock vested.   Grants to the directors vested in full on May 16, 2007, the date of the Company’s annual shareholders’ meeting.  Upon grant of the nonvested stock, an amount of unearned compensation equivalent to the market value at the date of the grants, or $494, was recorded as a component of shareholders’ equity.  The unamortized portion of this award at June 30, 2008 and December 31, 2007 was $92 and $133, respectively.  Amortization of this charge, which is included in general and administrative expenses, was $20 and $147, for the three months ended June 30, 2008 and 2007, respectively, and $41 and $286, for the six months ended June 30, 2008 and 2007, respectively.  The remaining expense for the years ending 2008, 2009, and 2010 will be $36, $40 and $16, respectively
 
On December 21, 2007, the Company made grants of nonvested common stock under the Plan in the amount of 93,000 shares to the executive officers and the employees of the Company.  These grants vest ratably on each of the four anniversaries of the determined vesting date beginning with November 15, 2008.  Upon grant of the nonvested stock, an amount of unearned compensation equivalent to the market value at the date of the grants, or $4,935, was recorded as a component of shareholders’ equity.  The unamortized portion of this award at June 30, 2008 and December 31, 2007 was $3,479 and $4,852, respectively.  Amortization of this charge, which is included in general and administrative expenses, was $686 and $0, for the three months ended June 30, 2008 and 2007, respectively, and $1,373 and $0, for the six months ended June 30, 2008 and 2007, respectively.  The remaining expense for the years ending 2008, 2009, 2010 and 2011 will be $1,212, $1,305, $686 and $276, respectively.
 
On January 10, 2008, the Board of Directors approved a grant of 100,000 nonvested common stock to Peter Georgiopoulos, Chairman of the Board, this grant vests ratably on each of the ten anniversaries of the determined vesting date beginning with November 15, 2008.  Upon grant of the nonvested stock, an amount of unearned compensation equivalent to the market value at the date of the grant, or $4,191 was recorded as a component of shareholders' equity. The unamortized portion of this award at June 30, 2008 and December 31, 2007 was $3,557 and $0, respectively.  Amortization of this charge, which is included in general and administrative expenses, was $334 and $0, for the three months ended June 30, 2008 and 2007, respectively, and $634 and $0, for the six months ended June 30, 2008 and 2007, respectively.  The remaining expense for the years ending 2008, 2009, 2010, 2011, 2012, 2013, 2014, 2015, 2016 and 2017 will be $611, $816, $599, $457, $352, $267, $197, $136, $84 and $37, respectively.
 
On February 13, 2008, the Company made grants of nonvested common stock under the Plan in the amount of 12,500 shares to directors of the Company.  The grants to directors vested in full at the annual shareholders meeting of the Company which was held on May 14, 2008. Upon grant of the nonvested stock, an amount of unearned compensation equivalent to the market value at the date of the grant, or $689 was recorded as a component of shareholders' equity.  The unamortized portion of this award was $0 at both June 30, 2008 and December 31, 2007.  Amortization of this charge, which is included in general and administrative expenses, was $337 and $0, for

 

30

 
 
the three months ended June 30, 2008 and 2007, respectively, and $689 and $0, for the six months ended June 30, 2008 and 2007, respectively.
 
The table below summarizes the Company’s nonvested stock awards as of June 30, 2008:
 
 	 	Number of Shares	 	 	Weighted Average Grant Date Price	 	
Outstanding at January 1, 2008	 	 	231,881	 	 	$	34.32	 	
Granted	 	 	112,500	 	 	 	43.37	 	
Vested	 	 	(12,500	)	 	 	55.09	 	
Forfeited	 	 	-	 	 	 	-	 	
 	 	 	 	 	 	 	 	 	
Outstanding at June 30, 2008	 	 	331,881	 	 	$	36.61	 	

The fair value of nonvested stock at the grant date is equal to the closing stock price on that date.  The Company is amortizing these grants over the applicable vesting periods.  As of June 30, 2008, unrecognized compensation cost related to nonvested stock will be recognized over a weighted average period of 4.48 years.
 
19 - LEGAL PROCEEDINGS
 
From time to time the Company may be subject to legal proceedings and claims in the ordinary course of its business, principally personal injury and property casualty claims. Such claims, even if lacking merit, could result in the expenditure of significant financial and managerial resources. The Company is not aware of any legal proceedings or claims that it believes will have, individually or in the aggregate, a material adverse effect on the Company, its financial condition, results of operations or cash flows.
 
20 - SUBSEQUENT EVENTS
 
On July 24, 2008, the Board of Directors declared a dividend of $1.00 per share to be paid on or about August 29, 2008 to shareholders of record as of August 15, 2008.  The aggregate amount of the dividend is expected to be $31,796, which the Company anticipates will be funded from cash on hand at the time payment is to be made.

On July 24, 2008, the Company made grants of nonvested common stock under the Plan in the amount of 15,000 shares to directors of the Company other than Stephen A. Kaplan.  The grants to directors vest in full on the earlier of the first anniversary of the grant date or the date of the next annual shareholders meeting of the Company. Upon grant of the nonvested stock, an amount of unearned compensation equivalent to the market value at the date of the grant, or $938 will be recorded as a component of shareholders' equity.  Amortization of this charge is expected to be included in general and administrative expenses during 2008 and 2009.

On August 7, 2008, the Genco Hunter, a 2007-built Supramax vessel, collided with another vessel while transiting the Singapore Straits.  No injuries and no pollution from either vessel have been reported, and the Genco Hunter has been safely anchored.  An investigation into the cause of the incident by the Maritime and Port Authority of Singapore has commenced with Genco’s full cooperation. The Company anticipates the Genco Hunter to remain offhire for approximately 14 days and expects to be reimbursed under hull and machinery insurance claims related to this vessel for repair costs. The Genco Hunter is currently on a time charter with Pacific Basin Chartering Ltd. at a daily rate of $62,000, less a 5% third party commission.

 

31

 
 
ITEM 2 .	MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS	
 
This report 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,” “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 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 report are the following (i) changes in demand or rates in the drybulk shipping industry; (ii) changes in the supply of or demand for drybulk products, generally or in particular regions; (iii) changes in the supply of drybulk carriers including newbuilding of vessels or lower than anticipated scrapping of older vessels; (iv) 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; (v) increases in costs and expenses including but not limited to: crew wages, insurance, provisions, repairs, maintenance and general and administrative expenses; (vi) the adequacy of our insurance arrangements; (vii) changes in general domestic and international political conditions; (viii) 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; (ix) the amount of offhire time needed to complete repairs on vessels and the timing and amount of any reimbursement by our insurance carriers for insurance claims including offhire days; (x) our acquisition or disposition of vessels; (xi) the fulfillment of the closing conditions under, or the execution of customary additional documentation for, the Company’s agreements to acquire a total of 11 drybulk vessels; and 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, 2007 and subsequent reports on Form 8-K and Form 10-Q.  Our ability to pay dividends in any period will depend upon factors including the limitations under our loan agreements, applicable provisions of Marshall Islands law and the final determination by the Board of Directors each quarter after its review of our financial performance.  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.
 
The following management’s discussion and analysis should be read in conjunction with our historical consolidated financial statements and the related notes included in this Form 10-Q.
 
General
 
We are a Marshall Islands company incorporated in September 2004 to transport iron ore, coal, grain, steel products and other drybulk cargoes along worldwide shipping routes through the ownership and operation of drybulk carrier vessels. As of June 30, 2008, our fleet consisted of five Capesize, seven Panamax, three Supramax, six Handymax and eight Handysize drybulk carriers, with an aggregate carrying capacity of approximately 2,096,000 dwt, and the average age of our fleet was approximately 6.5 years, as compared to the average age for the world fleet of approximately 16 years for the drybulk shipping segments in which we compete. All of the vessels in our fleet are on time charters to reputable charterers, including Lauritzen Bulkers AS, Cargill International S.A., Hyundai Merchant Marine Co., Ltd., STX Panocean (UK) Co., Ltd., Pacific Basin Chartering Ltd., A/S Klaveness, ArcelorMittal, and COSCO Bulk Carriers Co., Ltd., and NYK Bulkship Europe S.A. All of the vessels in our fleet are presently engaged under time charter contracts that expire (assuming the option periods in the time charters are not exercised) between August 2008 and August 2012.
 
See page 39 for a table of all vessels currently in our fleet or expected to be delivered to us.

  We intend to grow our fleet through timely and selective acquisitions of vessels in a manner that is accretive to our cash flow. In connection with this growth strategy, we negotiated the 2007 Credit Facility, for the purpose of acquiring the nine new Capesize vessels, refinancing the outstanding indebtedness under our previous credit facilities, and acquiring additional vessels since entering into the Capesize acquisition with Metrostar.

Our management team and our other employees are responsible for the commercial and strategic management of our fleet. Commercial management includes the negotiation of charters for vessels, managing the

 

32

 
mix of various types of charters, such as time charters and voyage charters, and monitoring the performance of our vessels under their charters. Strategic management includes locating, purchasing, financing and selling vessels. We currently contract with four independent technical managers, to provide technical management of our fleet at a lower cost than we believe would be possible in-house. Technical management involves the day-to-day management of vessels, including performing routine maintenance, attending to vessel operations and arranging for crews and supplies. Members of our New York City-based management team oversee the activities of our independent technical managers.

On August 7, 2008, the Genco Hunter, a 2007-built Supramax vessel, collided with another vessel while transiting the Singapore Straits.  No injuries and no pollution from either vessel have been reported, and the Genco Hunter has been safely anchored.  An investigation into the cause of the incident by the Maritime and Port Authority of Singapore has commenced with Genco’s full cooperation. The Company anticipates the Genco Hunter to remain offhire for approximately 14 days and expects to be reimbursed under hull and machinery insurance claims related to this vessel for repair costs. The Genco Hunter is currently on a time charter with Pacific Basin Chartering Ltd. at a daily rate of $62,000, less a 5% third party commission.

 	Factors Affecting Our Results of Operations	
 
We believe that the following table reflects important measures for analyzing trends in our results of operations.  The table reflects our ownership days, available days, operating days, fleet utilization, TCE rates and daily vessel operating expenses for the three and six months ended June 30, 2008 and 2007.
 
 	 	For the three months ended June 30,	 	 	Increase	 	 	 	 	
 	 	2008	 	 	2007	 	 	(Decrease)	 	 	% Change	 	
Fleet Data:	 	 	 	 	 	 	 	 	 	 	 	 	
Ownership days (1)	 	 	 	 	 	 	 	 	 	 	 	 	
Capesize	 	 	455.0	 	 	 	-	 	 	 	455.0	 	 	 	N/A	 	
Panamax	 	 	553.1	 	 	 	637.0	 	 	 	(83.9	)	 	 	(13.2	%)	
Supramax	 	 	273.0	 	 	 	-	 	 	 	273.0	 	 	 	N/A	 	
Handymax	 	 	546.0	 	 	 	637.0	 	 	 	(91.0	)	 	 	(14.3	%)	
Handysize	 	 	728.0	 	 	 	455.0	 	 	 	273.0	 	 	 	60.0	%	
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
 Total	 	 	2,555.1	 	 	 	1,729.0	 	 	 	826.1	 	 	 	47.8	%	
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Available days (2)	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Capesize	 	 	455.0	 	 	 	-	 	 	 	455.0	 	 	 	N/A	 	
Panamax	 	 	552.2	 	 	 	636.7	 	 	 	(84.5	)	 	 	(13.3	%)	
Supramax	 	 	273.0	 	 	 	-	 	 	 	273.0	 	 	 	N/A	 	
Handymax	 	 	546.0	 	 	 	610.8	 	 	 	(64.8	)	 	 	(10.6	%)	
Handysize	 	 	710.1	 	 	 	455.0	 	 	 	255.1	 	 	 	56.1	%	
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
 Total	 	 	2,536.3	 	 	 	1,702.5	 	 	 	833.8	 	 	 	49.0	%	
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Operating days (3)	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Capesize	 	 	455.0	 	 	 	-	 	 	 	455.0	 	 	 	N/A	 	
Panamax	 	 	541.1	 	 	 	606.9	 	 	 	(65.8	)	 	 	(10.8	%)	
Supramax	 	 	268.8	 	 	 	-	 	 	 	268.8	 	 	 	N/A	 	
Handymax	 	 	545.2	 	 	 	606.3	 	 	 	(61.1	)	 	 	(10.1	%)	
Handysize	 	 	707.5	 	 	 	455.0	 	 	 	252.5	 	 	 	55.5	%	
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
 Total	 	 	2,517.6	 	 	 	1,668.2	 	 	 	849.4	 	 	 	50.9	%	

 

33

 

Fleet  utilization (4)	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Capesize	 	 	100.0	%	 	 	-	 	 	 	100.	%	 	 	N/A	 	
Panamax	 	 	98.0	%	 	 	95.3	%	 	 	2.7	%	 	 	2.8	%	
Supramax	 	 	98.5	%	 	 	-	 	 	 	1.0	%	 	 	N/A	 	
Handymax	 	 	99.8	%	 	 	99.3	%	 	 	0.5	%	 	 	0.5	%	
Handysize	 	 	99.6	%	 	 	100.0	%	 	 	(0.4	%)	 	 	(0.4	%)	
 Fleet average	 	 	99.3	%	 	 	98.0	%	 	 	1.3	%	 	 	1.3	%	

 	 	For the three months ended June 30,	 	 	Increase	 	 	 	 	
 	 	2008	 	 	2007	 	 	(Decrease)	 	 	% Change	 	
 	 	(U.S. dollars)	 	 	 	 	 	 	 	
Average Daily Results:	 	 	 	 	 	 	 	 	 	 	 	 	
Time Charter Equivalent (5)	 	 	 	 	 	 	 	 	 	 	 	 	
Capesize	 	$	81,791	 	 	$	-	 	 	$	81,791	 	 	 	N/A	 	
Panamax	 	 	36,675	 	 	 	25,673	 	 	 	11,002	 	 	 	42.9	%	
Supramax	 	 	48,124	 	 	 	-	 	 	 	48,124	 	 	 	N/A	 	
Handymax	 	 	34,825	 	 	 	21,952	 	 	 	12,873	 	 	 	58.6	%	
Handysize	 	 	20,039	 	 	 	13,354	 	 	 	6,685	 	 	 	50.1	%	
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Fleet average	 	 	40,945	 	 	 	21,046	 	 	 	19,899	 	 	 	94.6	%	
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Daily vessel operating expenses (6)	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Capesize	 	$	4,850	 	 	$	-	 	 	$	4,850	 	 	 	N/A	 	
Panamax	 	 	4,442	 	 	 	4,515	 	 	 	(73	)	 	 	(1.6	%)	
Supramax	 	 	4,562	 	 	 	-	 	 	 	4,562	 	 	 	N/A	 	
Handymax	 	 	4,621	 	 	 	3,527	 	 	 	1,094	 	 	 	31.0	%	
Handysize	 	 	3,784	 	 	 	2,905	 	 	 	879	 	 	 	30.3	%	
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
 Fleet average	 	 	4,378	 	 	 	3,727	 	 	 	651	 	 	 	17.5	%	

 	 	For the six months ended June 30,	 	 	Increase	 	 	 	 	
 	 	2008	 	 	2007	 	 	(Decrease)	 	 	% Change	 	
Fleet Data:	 	 	 	 	 	 	 	 	 	 	 	 	
Ownership days (1)	 	 	 	 	 	 	 	 	 	 	 	 	
Capesize	 	 	859.0	 	 	 	-	 	 	 	859.0	 	 	 	N/A	 	
Panamax	 	 	1,155.8	 	 	 	1,267.0	 	 	 	(111.2	)	 	 	(8.8	%)	
Supramax	 	 	546.0	 	 	 	-	 	 	 	546.0	 	 	 	N/A	 	
Handymax	 	 	1,092.0	 	 	 	1,318.6	 	 	 	(226.6	)	 	 	(17.2	)%	
Handysize	 	 	4,454.4	 	 	 	905.0	 	 	 	3,549.4	 	 	 	392.2	%	
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
 Total	 	 	5,107.2	 	 	 	3,490.6	 	 	 	1,616.6	 	 	 	46.3	%	
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Available days (2)	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Capesize	 	 	858.9	 	 	 	-	 	 	 	858.9	 	 	 	N/A	 	
Panamax	 	 	1,151.5	 	 	 	1,266.7	 	 	 	(115.2	)	 	 	(9.1	%)	
Supramax	 	 	546.0	 	 	 	-	 	 	 	546.0	 	 	 	N/A	 	
Handymax	 	 	1,092.0	 	 	 	1,271.7	 	 	 	(179.7	)	 	 	(14.1	%)	
Handysize	 	 	1,421.3	 	 	 	895.4	 	 	 	525.9	 	 	 	58.7	%	
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
 Total	 	 	5,069.7	 	 	 	3,433.8	 	 	 	1,635.9	 	 	 	47.6	%	

 

34

 

Operating days (3)	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Capesize	 	 	858.9	 	 	 	-	 	 	 	858.9	 	 	 	N/A	 	
Panamax	 	 	1,135.4	 	 	 	1,221.9	 	 	 	(86.5	)	 	 	(7.1	%)	
Supramax	 	 	541.6	 	 	 	-	 	 	 	541.6	 	 	 	N/A	 	
Handymax	 	 	1,079.7	 	 	 	1,255.1	 	 	 	(175.4	)	 	 	(14.0	%)	
Handysize	 	 	1,417.0	 	 	 	893.8	 	 	 	523.2	 	 	 	58.5	%	
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
 Total	 	 	5,032.6	 	 	 	3,370.8	 	 	 	1,661.8	 	 	 	49.3	%	
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Fleet  utilization (4)	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Capesize	 	 	100.0	%	 	 	-	 	 	 	100.0	%	 	 	N/A	 	
Panamax	 	 	98.6	%	 	 	96.5	%	 	 	2.1	%	 	 	2.2	%	
Supramax	 	 	99.2	%	 	 	-	 	 	 	99.2	%	 	 	N/A	 	
Handymax	 	 	98.9	%	 	 	98.7	%	 	 	0.2	%	 	 	0.2	%	
Handysize	 	 	99.7	%	 	 	99.8	%	 	 	(0.1	%)	 	 	(0.1	%)	
 Fleet average	 	 	99.3	%	 	 	98.2	%	 	 	1.1	%	 	 	1.1	%	

 	 	For the six months ended June 30,	 	 	Increase	 	 	 	 	
 	 	2008	 	 	2007	 	 	(Decrease)	 	 	% Change	 	
 	 	(U.S. dollars)	 	 	 	 	 	 	 	
Average Daily Results:	 	 	 	 	 	 	 	 	 	 	 	 	
Time Charter Equivalent (5)	 	 	 	 	 	 	 	 	 	 	 	 	
Capesize	 	$	76,155	 	 	$	-	 	 	$	76,155	 	 	 	N/A	 	
Panamax	 	 	33,680	 	 	 	25,771	 	 	 	7,909	 	 	 	30.7	%	
Supramax	 	 	49,993	 	 	 	-	 	 	 	49,993	 	 	 	N/A	 	
Handymax	 	 	31,926	 	 	 	21,278	 	 	 	10,648	 	 	 	50.0	%	
Handysize	 	 	19,997	 	 	 	13,328	 	 	 	6,669	 	 	 	50.0	%	
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Fleet average	 	 	38,419	 	 	 	20,863	 	 	 	17,556	 	 	 	84.1	%	
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Daily vessel operating expenses (6)	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Capesize	 	$	4,880	 	 	$	-	 	 	$	4,880	 	 	 	N/A	 	
Panamax	 	 	4,504	 	 	 	4,439	 	 	 	65	 	 	 	1.5	%	
Supramax	 	 	4,369	 	 	 	-	 	 	 	4,369	 	 	 	N/A	 	
Handymax	 	 	4,384	 	 	 	3,424	 	 	 	960	 	 	 	28.0	%	
Handysize	 	 	3,806	 	 	 	2,977	 	 	 	829	 	 	 	27.8	%	
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
 Fleet average	 	 	4,328	 	 	 	3,677	 	 	 	651	 	 	 	17.7	%	
 
Definitions
 
In order to understand our discussion of our results of operations, it is important to understand the meaning of the following terms used in our analysis and the factors that influence our results of operations.
 
(1) Ownership days .  We define ownership days as the aggregate number of days in a period during which each vessel in our fleet has been owned by us. Ownership days are an indicator of the size of our fleet over a period and affect both the amount of revenues and the amount of expenses that we record during a period.

 

35

 
(2) Available days .  We define available days as the number of our ownership days less the aggregate number of days that our vessels are off-hire due to scheduled repairs or repairs under guarantee, vessel upgrades or special surveys and the aggregate amount of time that we spend positioning our vessels. Companies in the shipping industry generally use available days to measure the number of days in a period during which vessels should be capable of generating revenues.
 
(3) Operating days .  We define operating days as the number of our available days in a period less the aggregate number of days that our vessels are off-hire due to unforeseen circumstances. The shipping industry uses operating days to measure the aggregate number of days in a period during which vessels actually generate revenues.
 
(4) Fleet utilization .  We calculate fleet utilization by dividing the number of our operating days during a period by the number of our available days during the period. The shipping industry uses fleet utilization to measure a company’s efficiency in finding suitable employment for its vessels and minimizing the number of days that its vessels are off-hire for reasons other than scheduled repairs or repairs under guarantee, vessel upgrades, special surveys or vessel positioning.
 
(5) TCE rates .  We define TCE rates as net voyage revenue (voyage revenues less voyage expenses) divided by the number of our available days during the period, which is consistent with industry standards. TCE rate is a common shipping industry performance measure used primarily to compare daily earnings generated by vessels on time charters with daily earnings generated by vessels on voyage charters, because charterhire rates for vessels on voyage charters are generally not expressed in per-day amounts while charterhire rates for vessels on time charters generally are expressed in such amounts.
 
 	 	For the three months ended
June 30,	 	 	For the six months ended
June 30,	 	
 	 	2008	 	 	2007	 	 	2008	 	 	2007	 	
 	 	(U.S. dollars in thousands)	 	
Voyage revenues	 	$	104,572	 	 	$	36,847	 	 	$	196,242	 	 	$	74,067	 	
Voyage expenses	 	 	724	 	 	 	1,017	 	 	 	1,468	 	 	 	2,430	 	
Net voyage revenue	 	$	103,848	 	 	$	35,830	 	 	$	194,774	 	 	$	71,637	 	

 
(6) Daily vessel operating expenses .  We define daily vessel operating expenses as vessel operating expense divided by ownership days for the period.  Vessel operating expenses include crew wages and related costs, the cost of insurance, expenses relating to repairs and maintenance (excluding drydocking), the costs of spares and consumable stores, tonnage taxes and other miscellaneous expenses.

 

36

 
 	Operating Data	

 	 	For the three months ended June 30,	 	 	Increase	 	 	 	 	
 	 	2008	 	 	2007	 	 	(Decrease)	 	 	% Change	 	
 	 	(U.S. dollars in thousands, except for per share amounts)	 	 	 	 	
 	 	 	 	 	 	 	 	 	 	 	 	 	
Revenues	 	$	104,572	 	 	$	36,847	 	 	$	67,725	 	 	 	183.8	%	
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Operating Expenses:	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Voyage expenses	 	 	724	 	 	 	1,017	 	 	 	(293	)	 	 	(28.8	%)	
Vessel operating expenses	 	 	11,187	 	 	 	6,445	 	 	 	4,742	 	 	 	73.6	%	
General and administrative expenses	 	 	4,431	 	 	 	3,052	 	 	 	1,379	 	 	 	45.2	%	
Management fees	 	 	665	 	 	 	393	 	 	 	272	 	 	 	69.2	%	
Depreciation and amortization	 	 	16,748	 	 	 	7,433	 	 	 	9,315	 	 	 	125.3	%	
Gain on sale of vessel	 	 	-	 	 	 	-	 	 	 	-	 	 	 	N/A	 	
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
 Total operating expenses	 	 	33,755	 	 	 	18,340	 	 	 	15,415	 	 	 	84.1	%	
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Operating income	 	 	70,817	 	 	 	18,507	 	 	 	52,310	 	 	 	282.6	%	
Other (expense) income	 	 	(9,918	)	 	 	(4,786	)	 	 	(5,132	)	 	 	107.2	%	
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Net income	 	$	60,899	 	 	$	13,721	 	 	$	47,178	 	 	 	343.8	%	
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Earnings per share - Basic	 	$	2.05	 	 	$	0.54	 	 	$	1.51	 	 	 	279.6	%	
Earnings per share - Diluted	 	$	2.03	 	 	$	0.54	 	 	$	1.49	 	 	 	275.9	%	
Dividends declared and paid per share 	 	$	1.00	 	 	$	0.66	 	 	$	0.34	 	 	 	51.5	%	
Weighted average common shares outstanding - Basic	 	 	29,750,309	 	 	 	25,312,593	 	 	 	4,437,716	 	 	 	17.5	%	
Weighted average common shares outstanding - Diluted	 	 	29,957,698	 	 	 	25,456,413	 	 	 	4,501,285	 	 	 	17.7	%	
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
EBITDA (1)	 	$	85,686	 	 	$	25,392	 	 	$	60,294	 	 	 	237.5	%	

 

37

 

 	 	For the six months ended June 30,	 	 	Increase	 	 	 	 	
 	 	2008	 	 	2007	 	 	(Decrease)	 	 	% Change	 	
 	 	(U.S. dollars in thousands, except for per share amounts)	 	 	 	 	
 	 	 	 	 	 	 	 	 	 	 	 	 	
Revenues	 	$	196,242	 	 	$	74,067	 	 	$	122,175	 	 	 	165.0	%	
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Operating Expenses:	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Voyage expenses	 	 	1,468	 	 	 	2,430	 	 	 	(962	)	 	 	(39.6	%)	
Vessel operating expenses	 	 	22,106	 	 	 	12,834	 	 	 	9,272	 	 	 	72.2	%	
General and administrative expenses	 	 	8,842	 	 	 	6,247	 	 	 	2,595	 	 	 	41.5	%	
Management fees	 	 	1,338	 	 	 	744	 	 	 	594	 	 	 	79.8	%	
Depreciation and amortization	 	 	32,612	 	 	 	14,619	 	 	 	17,993	 	 	 	123.1	%	
Gain on sale of vessel	 	 	(26,227	)	 	 	(3,575	)	 	 	(22,652	)	 	 	633.6	%	
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
 Total operating expenses	 	 	40,139	 	 	 	33,299	 	 	 	6,840	 	 	 	20.5	%	
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Operating income	 	 	156,103	 	 	 	40,768	 	 	 	115,335	 	 	 	282.9	%	
Other (expense) income	 	 	(21,217	)	 	 	(7,210	)	 	 	(14,007	)	 	 	194.3	%	
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Net income	 	$	134,886	 	 	$	33,558	 	 	 	101,328	 	 	 	301.9	%	
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Earnings per share - Basic	 	$	4.61	 	 	$	1.33	 	 	$	3.28	 	 	 	246.6	%	
Earnings per share - Diluted	 	$	4.58	 	 	$	1.32	 	 	$	3.26	 	 	 	247.0	%	
Dividends declared and paid per share 	 	$	1.85	 	 	$	1.32	 	 	$	0.53	 	 	 	40.2	%	
Weighted average common shares outstanding - Basic	 	 	29,242,118	 	 	 	25,310,783	 	 	 	3,931,335	 	 	 	15.5	%	
Weighted average common shares outstanding - Diluted	 	 	29,436,024	 	 	 	25,439,043	 	 	 	3,996,981	 	 	 	15.7	%	
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
EBITDA (1)	 	$	181,510	 	 	$	55,881	 	 	$	125,629	 	 	 	224.8	%	

(1)  	EBITDA represents net income plus net interest expense, income tax expense, depreciation and amortization, plus amortization of nonvested stock compensation, and amortization of the value of time charters acquired which is included as a component of other long-term assets or fair market value of time charters acquired.  EBITDA is included because it is used by management and certain investors as a measure of operating performance.  EBITDA is used by analysts in the shipping industry as a common performance measure to compare results across peers. Our management uses EBITDA as a performance measure in consolidating internal financial statements and it is presented for review at our board meetings. EBITDA is also used by our lenders in certain loan covenants. For these reasons, we believe that EBITDA is a useful measure to present to our investors. EBITDA is not an item recognized by U.S. GAAP and should not be considered as an alternative to net income, operating income or any other indicator of a company’s operating performance required by U.S. GAAP.  EBITDA is not a source of liquidity or cash flows as shown in our consolidated statement of cash flows. The definition of EBITDA used here may not be comparable to that used by other companies.  The following table demonstrates our calculation of EBITDA and provides a reconciliation of EBITDA to net income for each of the periods presented above:	

 

38

 
 
 	 	 	For the three months ended June 30,	 	 	For the six months ended June 30,	 	
 	 	 	 	2008	 	 	2007	 	 	2008	 	 	2007	 	
 	 	 	 	(U.S. dollars in thousands except for per share amounts)	 	
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Net income	 	 	$	60,899	 	 	$	13,721	 	 	$	134,886	 	 	$	33,558	 	
Net interest expense	 	 	 	11,193	 	 	 	3,192	 	 	 	22,427	 	 	 	5,616	 	
Income tax expense	 	 	 	—	 	 	 	—	 	 	 	—	 	 	 	—	 	
Amortization of value of time charter acquired (1)	 	 	 	(4,761	)	 	 	461	 	 	 	(11,610	)	 	 	917	 	
Amortization of restricted stock compensation	 	 	 	1,607	 	 	 	585	 	 	 	3,195	 	 	 	1,171	 	
Depreciation and amortization	 	 	 	16,748	 	 	 	7,433	 	 	 	32,612	 	 	 	14,619	 	
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
 EBITDA (2)	 	 	$	85,686	 	 	$	25,392	 	 	$	181,510	 	 	$	55,881	 	

(1) Amortization of liability or asset of time charter acquired is an (increase) reduction of revenue.
 
(2) See page 38 for an explanation of EBITDA.
 
Results of Operations
 
The following table sets forth information about the vessels in our fleet as of July 30, 2008 as well as vessels to be acquired:
Vessel	 
Year
Built	Charterer	Charter
Expiration (1)	Daily Cash
Rate (2)	Net Revenue Daily Rate (3)	Expected
Delivery (4)	
 	 	 	 	 	 	 	
Capesize Vessels	 	 	 	 	 	 	
Genco Augustus	2007	Cargill International S.A.	December 2009	45,263	62,750	-	
Genco Tiberius	2007	Cargill International S.A.	January 2010	45,263	62,750	-	
Genco London	2007	SK Shipping Co., Ltd	August 2010	57,500	64,250	-	
Genco Titus	2007	Cargill International S.A.	September 2011	45,000(5)	46,250	-	
Genco Constantine	2008	Cargill International S.A.	August 2012	52,750(5)	 	-	
Genco Hadrian	2008(6)	Cargill International S.A.	46 months from delivery	65,000(5)	 	Q4 2008	
Genco Commodus	2009(6)	To be determined (“TBD”)	TBD	  TBD	 	Q2 2009	
Genco Maximus	2009(6)	TBD	TBD	  TBD	 	Q2 2009	
Genco Aurelius	2009(6)	TBD	TBD	  TBD	 	Q2 2009	
Genco Claudius	2009(6)	TBD	TBD	  TBD	 	Q3 2009	
Genco Julian	2009(6)	TBD	TBD	  TBD	 	Q3 2009	
Genco Valerian	2009(6)	TBD	TBD	  TBD	 	Q4 2009	

 

39

 

Panamax Vessels	 	 	 	 	 	 	
Genco Beauty	1999	Cargill International S.A.	May 2009	31,500	 	-	
Genco Knight	1999	SK Shipping Ltd.	May 2009	37,700	 	-	
Genco Leader	1999	A/S Klaveness Chartering	December 2008	25,650(7)	 	-	
Genco Vigour	1999	STX Panocean (UK) Co. Ltd.	March 2009	29,000(8)	 	-	
Genco Acheron	1999	ArcelorMittal	July 2011	55,250(9)	 	-	
Genco Surprise	1998	Hanjin Shipping Co., Ltd.	December 2010	42,100	 	-	
Genco Raptor	2007	COSCO Bulk Carriers Co., Ltd.	April 2012	52,800	 	-	
Genco Thunder	2007	TBD	TBD	  TBD	 	Q4 2008	
 	 	 	 	 	 	 	
Supramax Vessels	 	 	 	 	 	 	
Genco Predator	2005	A/S Klaveness Chartering	October 2008	58,000(10)	 	-	
Genco Warrior	2005	Hyundai Merchant Marine Co. Ltd.	November 2010	38,750	 	-	
Genco Hunter	2007	Pacific Basin Chartering Ltd.	June 2009	62,000(11)	 	-	
Genco Cavalier	2007	Samsun Logix Corporation	July 2010	48,500(12)	47,700	-	
 	 	 	 	 	 	 	
Handymax Vessels	 	 	 	 	 	 	
Genco Success	1997	Korea Line Corporation	February 2011	33,000(13)	 	-	
Genco Carrier	1998	Louis Dreyfus Corporation	March 2011	37,000	 	-	
Genco Prosperity	1997	Pacific Basin Chartering Ltd	June 2011	37,000(14)	 	-	
Genco Wisdom	1997	Hyundai Merchant Marine Co. Ltd.	February 2011	34,500	 	-	
Genco Marine	1996	NYK Bulkship Europe S.A.	March 2009	47,000	 	-	
Genco Muse	2001	Norden A/S	August 2008	47,650	 	-	
 	 	 	 	 	 	 	
Handysize Vessels	 	 	 	 	 	 	
Genco Explorer	1999	Lauritzen Bulkers A/S	August 2009	19,500	 	-	
Genco Pioneer	1999	Lauritzen Bulkers A/S	August 2009	19,500	 	-	
Genco Progress	1999	Lauritzen Bulkers A/S	August 2009	19,500	 	-	
Genco Reliance	1999	Lauritzen Bulkers A/S	August 2009	19,500	 	-	
Genco Sugar	1998	Lauritzen Bulkers A/S	August 2009	19,500	 	-	
Genco Charger	2005	Pacific Basin Chartering Ltd.	November 2010	24,000	 	-	
Genco Challenger	2003	Pacific Basin Chartering Ltd.	November 2010	24,000	 	-	
Genco Champion	2006	Pacific Basin Chartering Ltd.	December 2010	24,000	 	-	
Genco Eagle	2008	TBD	TBD	  TBD	 	Q4 2008	
Genco Falcon	2008	TBD	TBD	  TBD	 	Q1 2009	
Genco Hawk	2008	TBD	TBD	  TBD	 	Q1 2009	

(1) The charter expiration dates presented represent the earliest dates that our charters may be terminated in the ordinary course.  Except for the Genco Titus, under the terms of each contract, the charterer is entitled to extend time charters from two to four months in order to complete the vessel's final voyage plus any time the vessel has been off-hire. The charterer of the Genco Titus and Genco Hadrian has the option to extend the charter for a period of one year.
 
(2) Time charter rates presented are the gross daily charterhire rates before third party commissions ranging from 1.25% to 6.25%, except as indicated for the Genco Leader in note 7 below. In a time charter, the charterer is responsible for voyage expenses such as bunkers, port expenses, agents’ fees and canal dues.
 
(3) For the vessels acquired with a below-market time charter rate, the approximate amount of revenue on a daily basis to be recognized as revenues is displayed in the column named “Net Revenue Daily Rate” and is net of any third-party commissions. Since these vessels were acquired with existing time charters with below-market rates, we allocated the purchase price between the respective vessel and an intangible liability for the value assigned to the below-market charterhire.  This intangible liability is amortized as an increase to voyage revenues over the minimum remaining term of the charter.  For cash flow purposes, we will continue to receive the rate presented in the “Cash Daily Rate” column until the charter expires.
 
(4) Dates for vessels being delivered in the future are estimates based on guidance received from the sellers and/or the respective shipyards.
 
(5) These charters include a 50% index-based profit sharing component above the respective base rates listed in the table. The profit sharing between the charterer and us for each 15-day period is calculated by taking the average over that period of the published Baltic Cape Index of the four time charter routes, as reflected in daily reports. If such average is more than the base rate payable under the charter, the excess amount is allocable 50% to each of the charterer and us. A third-party brokerage commission of 3.75% based on the profit sharing amount due to us is payable out of our share.

 

40

 

(6) Year built for vessels being delivered in the future are estimates based on guidance received from the sellers and/or the respective shipyards.
 
(7) The time charter rate presented is the net daily charterhire rate. There are no payments of commissions associated with this time charter.
 
(8) We have entered into a time charter for 23 to 25 months at a rate of $33,000 per day for the first 11 months, $25,000 per day for the following 11 months and $29,000 per day thereafter, less a 5% third-party commission. For purposes of revenue recognition, the time charter contract is reflected on a straight-line basis at approximately $29,000 per day for 23 to 25 months in accordance with generally accepted accounting principles in the United States, or U.S. GAAP.
 
(9) We have entered into a time charter agreement with ArcelorMittal for 35 to 37 months at a rate of $55,250 per day less a 5% third-party commission. The vessel delivered to the new charterer on August 1, 2008 after completion of its drydocking.
 
(10) We have entered into a short-term time charter with A/S Klaveness Chartering for 3 to 5 months at a rate of $58,000 per day less a 5% third-party commission. The new charter commenced following the completion of the prior time charter on July 18, 2008.
 
(11) We have reached an agreement to extend the time charter with Pacific Basin Chartering Ltd. for 11 to 13.5 months at a rate of $62,000 per day, less a 5% third party brokerage commission. The time charter commenced following the expiration of the vessel's prior time charter on July 21, 2008.
 
(12) The time charter for this vessel commenced on July 19, 2008. In completing the negotiation of certain changes we required for novation of the existing charter, we agreed to reduce the daily gross rate and received a rebate from the brokers involved in the vessel sale. Since the vessel was acquired with a below-market rate, we allocated the purchase price between the vessel and an intangible liability for the value assigned to the below-market charterhire.
 
(13) We extended the time charter for an additional 35 to 37.5 months at a rate of $40,000 per day for the first 12 months, $33,000 per day for the following 12 months, $26,000 per day for the next 12 months and $33,000 per day thereafter less a 5% third-party commission. In all cases, the rate for the duration of the time charter will average $33,000 per day. For purposes of revenue recognition, the time charter contract is reflected on a straight-line basis at approximately $33,000 per day for 35 to 37.5 months in accordance with U.S. GAAP.
 
(14) We recently extended the time charter for an additional 35 to 37.5 months at a rate of $37,000 per day less a 5% third-party commission. The new charter commenced on July 10, 2008, following the expiration of the previous charter.

Three months ended June 30, 2008 compared to the three months ended June 30, 2007
 
REVENUES-
 
For the three months ended June 30, 2008 revenues grew 184% to $104.6 million versus $36.8 million for the three months ended June 30, 2007.  Revenues in both periods consisted of charter hire revenue earned by our vessels.  The increase in revenues was due to the operation of a larger fleet as well as the renewal of time charters at higher charter rates than those previously contracted.
 
The average Time Charter Equivalent (“TCE”) rate of our fleet increased 95% to $40,945 a day for the three months ended June 30, 2008 from $21,046 a day for the three months ended June 30, 2007.  The increase in TCE rates was due to higher charter rates achieved in the six months ended June 30, 2008 versus the second quarter of 2007 for two of the Panamax vessels, six of the Handymax vessels, and five of the Handysize vessels in our current fleet. Furthermore, higher TCE rates were achieved in the second quarter of 2008 versus the same period last year due to the operation of five Capesize vessels acquired as part of the Metrostar acquisition.
 
For the three months ended June 30, 2008 and 2007, we had ownership days of 2,555.1 days and 1,729.0 days, respectively.  Fleet utilization for the same three month period ended June 30, 2008 and 2007 was 99.3% and 98.0%, respectively.  The utilization was lower for the three months ended June 30, 2007 primarily due to the 27 days of unscheduled offhire for the Genco Trader.

 

41

 
 
VOYAGE EXPENSES-
 
For the three months ended June 30, 2008 and 2007, we did not incur port and canal charges or any significant expenses related to the consumption of bunkers (fuel) as part of our vessels’ overall expenses because all of our vessels were employed under time charters that require the charterer to bear all of those expenses.
 
For the three months ended June 30, 2008 and 2007, voyage expenses were $0.7 million and $1.0 million, respectively, and consisted primarily of brokerage commissions paid to third parties.
 
VESSEL OPERATING EXPENSES-
 
Vessel operating expenses increased to $11.2 million from $6.4 million for the three months ended June 30, 2008 and 2007, respectively.  This was due mostly to the expansion of our fleet, as well as higher crewing and insurance expenses for the three months ended June 30, 2008 as compared to the three months ended June 30, 2007.
 
Daily vessel operating expenses grew to $4,378 per vessel per day for the three months ended June 30, 2008 from $3,727 per day for the three months ended June 30. 2007.  The increase in daily vessel operating expenses was due to higher crewing and insurance expenses, as well as the operation of larger class vessels, namely Capesize vessels for the second quarter of 2008 versus the same period last year.  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.  For the quarter ended June 30, 2008, daily vessel operating expenses per vessel were $322 below the $4,700 weighted average daily budget for 2008.
 
Based on management’s estimates and budgets provided by our technical manager, we expect our vessels to have daily vessel operating expenses during 2008 of:
 
Vessel Type	  Average Daily Budgeted Amount	
Capesize	 	$	5,200	 	
Panamax	 	 	5,150	 	
Supramax	 	 	4,250	 	
Handymax	 	 	4,700	 	
Handysize	 	 	4,200	 	

Our vessel operating expenses, which generally represent fixed costs, will increase as a result of the expansion of our fleet. Other factors beyond our control, some of which may affect the shipping industry in general, including, for instance, developments relating to market prices for crewing, lubes, and insurance, may also cause these expenses to increase.

GENERAL AND ADMINISTRATIVE EXPENSES-
 
For the three months ended June 30, 2008 and 2007, general and administrative expenses were $4.4 million and $3.1 million, respectively.  The increase in general and administrative expenses was due to costs associated with higher employee non-cash compensation and other employee related costs.
 
MANAGEMENT FEES-
 
We incur management fees to third-party technical management companies for the day-to-day management of our vessels, including performing routine maintenance, attending to vessel operations and arranging for crews and supplies.  For the three months ended June 30, 2008 and 2007, management fees were $0.7 million and $0.4 million, respectively.   The increase primarily was due to the operation of a larger fleet.

 

42

 
DEPRECIATION AND AMORTIZATION-
 
For the three months ended June 30, 2008, depreciation and amortization charges grew to $16.7 million from $7.4 million for the three months ended June 30, 2007.  The increase primarily was due to the operation of a larger fleet.

OTHER (EXPENSE) INCOME-

(LOSS) INCOME FROM DERIVATIVE INSTRUMENTS-

Effective August 16, 2007, the Company has elected hedge accounting for forward currency contracts in place associated with the cost basis of shares of Jinhui stock it has purchased.   However, the hedge is limited to the lower of the cost basis or the market value of the Jinhui stock.  For further details of the application of hedge accounting, please refer to the discussion under the subheading “Interest Rate Swap Agreements, Forward Freight Agreements and Currency Swap Agreements” on page 49.  For the three months ended June 30, 2008 and 2007, (loss) income from derivative instruments was ($1.3) million and ($1.6) million, respectively.  The loss for the three months ended June 30, 2008 is primarily due to the difference paid between the spot and forward rate on the forward currency contracts associated with our short-term investment.  The loss for the three months ended June 30, 2007 is primarily due to the unhedged activity associated with the forward currency contracts for that period.
 
NET INTEREST EXPENSE-
 
For the three months ended June 30, 2008 and 2007, net interest expense was $11.2 million and $3.2 million, respectively.  Net interest expense consisted mostly of interest payments made under our 2007 Credit Facility in 2008 and the 2005 Credit Facility and Short-term Line in 2007.  Additionally, interest income as well as amortization of deferred financing costs related to the respective credit facilities are included in both periods.  The increase in net interest expense for 2008 versus 2007 was mostly a result of higher outstanding debt due to the acquisition of additional vessels in the fourth quarter of 2007 through the second quarter of 2008.
 
INCOME FROM SHORT-TERM INVESTMENTS-

For the three months ended June 30, 2008, income from short-term investment was $2.6 million.  This was a result of a dividend income received from our holdings of Jinhui common stock.  No dividend was issued in the comparable period for 2007.

Six months ended June 30, 2008 compared to the six months ended June 30, 2007
 
REVENUES-
 
For the six months ended June 30, 2008 revenues grew 165% to $196.2 million versus $74.1 million for the six months ended June 30, 2007.  Revenues in both periods consisted of charter hire revenue earned by our vessels.  The increase in revenues was due to the operation of a larger fleet as well as the renewal of time charters at higher charter rates than those previously contracted.
 
The average TCE rate of our fleet increased 84% to $38,419 a day for the six months ended June 30, 2008 from $20,863 a day for the six months ended June 30, 2007.  The increase in TCE rates was due to higher charter rates achieved in the first half of 2008 versus the first half of 2007 for five of the Panamax vessels, six of the Handymax vessels, and five of the Handysize vessels in our current fleet. Furthermore, higher TCE rates were achieved in the six months ended June 30, 2008 versus the same period last year due to the operation of five Capesize vessels acquired as part of the Metrostar acquisition.   The TCE rate for the six months ended June 30, 2007 was reduced due to an 11 day delay in delivering the Genco Glory at time of sale and 27 days of unscheduled offhire related to maintenance for the Genco Trader.
 
For the six months ended June 30, 2008 and 2007, we had ownership days of 5,107.2 days and 3,490.6 days, respectively.  Fleet utilization for the same six month period ended June 30, 2008 and 2007 was 99.3% and

 

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98.2%, respectively.  The utilization was lower for the six months ended June 30, 2007 primarily due to the unscheduled offhire for the Genco Trader and Genco Glory as described above.
 
VOYAGE EXPENSES-
 
For the six months ended June 30, 2008 and 2007, we did not incur port and canal charges or any significant expenses related to the consumption of bunkers (fuel) as part of our vessels’ overall expenses because all of our vessels were employed under time charters that require the charterer to bear all of those expenses.
 
For the six months ended June 30, 2008 and 2007, voyage expenses were $1.5 million and $2.4 million, respectively, and consisted primarily of brokerage commissions paid to third parties.
 
VESSEL OPERATING EXPENSES-
 
Vessel operating expenses increased to $22.1 million from $12.8 million for the six months ended June 30, 2008 and 2007, respectively.  This was due mostly to the expansion of our fleet, as well as higher crewing and insurance expenses for the six months ended June 30, 2008 as compared to the six months ended June 30, 2007.
 
Daily vessel operating expenses grew to $4,328 per vessel per day for the six months ended June 30, 2008 from $3,677 per day for the six months ended June 30. 2007.  The increase in daily vessel operating expenses was due to higher crewing and insurance expenses, as well as the operation of larger class vessels, namely Capesize vessels for the first half of 2008 versus the same period last year.   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.  For the six months ended June 30, 2008, daily vessel operating expenses per vessel were $372, below the $4,700 weighted average daily budget for 2008.
 
GENERAL AND ADMINISTRATIVE EXPENSES-
 
For the six months ended June 30, 2008 and 2007, general and administrative expenses were $8.8 million and $6.2 million, respectively.  The increase in general and administrative expenses was due to costs associated with higher employee non-cash compensation and other employee-related costs.
 
MANAGEMENT FEES-
 
We incur management fees to third-party technical management companies for the day-to-day management of our vessels, including performing routine maintenance, attending to vessel operations and arranging for crews and supplies.  For the six months ended June 30, 2008 and 2007, management fees were $1.3 million and $0.7 million, respectively. The increase primarily was due to the growth in our fleet.
 
DEPRECIATION AND AMORTIZATION-
 
For the six months ended June 30, 2008, depreciation and amortization charges grew to $32.6 million from $14.6 million for the six months ended June 30, 2007.  The increase primarily was due to the operation of a larger fleet.
 
GAIN ON SALE OF VESSELS-
 
For the six months ended June 30, 2008 and 2007, the gain on the sale of vessels was $26.2 and $3.6 million, attributable to the sale of the Genco Trader in 2008 and the Genco Glory in 2007.

OTHER (EXPENSE) INCOME-

(LOSS) INCOME FROM DERIVATIVE INSTRUMENTS-

Effective August 16, 2007, the Company has elected hedge accounting for forward currency contracts in place associated with the cost basis of shares of Jinhui stock it has purchased.   However, the hedge is limited to the

 

44

 
 
lower of the cost basis or the market value of the Jinhui stock.  For further details of the application of hedge accounting, please refer to the discussion under the subheading “Interest Rate Swap Agreements, Forward Freight Agreements and Currency Swap Agreements” on page 49.   For the six months ended June 30, 2008 and 2007, (loss) income from derivative instruments was ($1.4) million and ($1.6) million, respectively.  The loss for the six months ended June 30, 2008 is primarily due to the difference paid between the spot and forward rate on the forward currency contracts associated with our short-term investment.  The loss for the six months ended June 30, 2007 is primarily due to the unhedged activity associated with the forward currency contracts for that period.
 
NET INTEREST EXPENSE-
 
For the six months ended June 30, 2008 and 2007, net interest expense was $22.4 million and $5.6 million, respectively.  Net interest expense consisted mostly of interest payments made under our 2007 Credit Facility in 2008 and the 2005 Credit Facility and Short-term Line in 2007.  Additionally, interest income as well as amortization of deferred financing costs related to the respective credit facilities are included in both periods.  The increase in net interest expense for 2008 versus 2007 was mostly a result of higher outstanding debt due to the acquisition of additional vessels in the fourth quarter of 2007 through the second quarter of 2008.
 
INCOME FROM SHORT-TERM INVESTMENTS-

For the six months ended June 30, 2008, income from short-term investment was $2.6 million.  This was a result of a dividend income received from our holdings of Jinhui common stock.  No dividend was issued in the comparable period for 2007.

LIQUIDITY AND CAPITAL RESOURCES
 
To date, we have financed our capital requirements with cash flow from operations, equity offerings and bank debt. We have used our funds primarily to fund vessel acquisitions, regulatory compliance expenditures, the repayment of bank debt and the associated interest expense and the payment of dividends. We will require capital to fund ongoing operations, acquisitions and debt service.  We expect to rely on operating cash flows as well as long-term borrowings to implement our growth plan and continue our dividend policy.  We also may consider debt and additional equity financing alternatives from time to time.   In May 2008, the Company closed on an equity offering of 2,702,669 shares of common stock at an offering price of $75.47 per share.  The Company received net proceeds of $195.5 million after deducting underwriters’ fees and expenses.  The Company has repaid a portion of the outstanding balance under the 2007 Credit Facility with proceeds from the offering.
 
In connection with the agreement to acquire nine Capesize vessels announced on July 18, 2007 and the additional acquisition of three Supramax and three Handysize vessels announced in August 2007, the Company, entered into the 2007 Credit Facility on July 20, 2007 to fund acquisitions and the repayment of all other existing debt under the 2005 Credit Facility and Short-Term Line.  During 2008, the Company has entered into agreements for additional vessel acquisitions.  We anticipate that internally generated cash flow and borrowings under our 2007 Credit Facility will be sufficient to fund the operations of our fleet, including our working capital requirements for the foreseeable future.  The Company anticipates utilizing its 2007 Credit Facility, internally generated cash flow, and a new credit facility or alternative financing to fund the acquisition of the remaining seven Capesize vessels, one Panamax vessel, and three Handysize vessels.

Dividend Policy
 
Our dividend policy is to declare quarterly distributions to shareholders by each February, May, August and November, which commenced in November 2005, substantially equal to our available cash from operations during the previous quarter, less cash expenses for that quarter (principally vessel operating expenses and debt service) and any reserves our board of directors determines we should maintain. These reserves may cover, among other things, drydocking, repairs, claims, liabilities and other obligations, interest expense and debt amortization, acquisitions of additional assets and working capital.  In the future, we may incur other expenses or liabilities that would reduce or eliminate the cash available for distribution as dividends.  The following table summarizes the dividends declared based on the results of the respective fiscal quarter:

 

45

 
 	 	Dividend per
share	 	Declaration
date	
FISCAL YEAR ENDED DECEMBER 31, 2008	 	 	 	 	
2 nd Quarter	 	$	1.00	 	7/24/08	
1 st Quarter	 	$	1.00	 	4/30/08	
FISCAL YEAR ENDED DECEMBER 31, 2007	 	 	 	 	 	
4 th Quarter	 	$	0.85	 	2/13/08	
3 rd Quarter	 	$	0.66	 	10/25/07	
2 nd Quarter	 	$	0.66	 	7/26/07	
1 st Quarter	 	$	0.66	 	4/26/07	
FISCAL YEAR ENDED DECEMBER 31, 2006	 	 	 	 	 	
4 th Quarter	 	$	0.66	 	2/8/07	
3 rd Quarter	 	$	0.60	 	10/26/06	
2 nd Quarter	 	$	0.60	 	7/27/06	
1 st Quarter	 	$	0.60	 	4/27/06	

On July 24, 2008, our board of directors declared a dividend of $1.00 per share, to be paid on or about August 29, 2008 to shareholders of record as of August 15, 2008.

The declaration and payment of any dividend is subject to the discretion of our board of directors. The timing and amount of dividend payments will depend on our earnings, financial condition, cash requirements and availability, fleet renewal and expansion, restrictions in our loan agreements, the provisions of Marshall Islands law affecting the payment of distributions to shareholders and other factors. Our board of directors may review and amend our dividend policy from time to time in light of our plans for future growth and other factors.

We believe that, under current law, our dividend payments from earnings and profits will constitute “qualified dividend income” and, as such, will generally be subject to a 15% U.S. federal income tax rate with respect to non-corporate U.S. shareholders that meet certain holding period and other requirements (through 2010). Distributions in excess of our earnings and profits will be treated first as a non-taxable return of capital to the extent of a U.S. shareholder's tax basis in its common stock on a dollar-for-dollar basis and, thereafter, as capital gain. 

Share Repurchase Program

On February 13, 2008, our board of directors approved a share repurchase program for up to a total of $50,000 of the Company's common stock.  The board will review the program after 12 months.  Share repurchases will be made from time to time for cash in open market transactions at prevailing market prices or in privately negotiated transactions. The timing and amount of purchases under the program will be determined by management based upon market conditions and other factors.  Purchases may be made pursuant to a program adopted under Rule 10b5-1 under the Securities Exchange Act. The program does not require the Company to purchase any specific number or amount of shares and may be suspended or reinstated at any time in the Company's discretion and without notice. Repurchases will be subject to restrictions under the 2007 Credit Facility.  The 2007 Credit Facility was amended as of February 13, 2008 to permit the share repurchase program and provide that the dollar amount of shares repurchased is counted toward the maximum dollar amount of dividends that may be paid in any fiscal quarter.  No such purchases have been made through June 30, 2008.  The Company anticipates that any shares repurchased would be primarily funded through cash generated from operations.

Cash Flow
 
Net cash provided by operating activities for the six months ended June 30, 2008 and 2007, was $131.6 million and $47.5 million, respectively.  The increase was primarily due to the operation of a larger fleet, which contributed to increases in net income, depreciation, and deferred revenues. Adjustments to operating cash flows include Jinhui investment activities of $9.6 million of realized losses on forward currency contracts offset by

 

46

 
 
$9.9 million of unrealized gains on hedged short-term investments, $2.6 million of realized income from dividends, and $1.6 million of unrealized loss on forward currency contracts.  Increases to cash flow were offset by a $26.2 million gain related to the sale of the Genco Trader, and $11.6 million of amortization of value of the time charters acquired as part of the Metrostar and Evalend acquisitions.  Net cash from operating activities for six months ended June 30, 2008 was mostly a result of recorded net income of $134.9 million, less the gain of $26.2 million due the sale of the Genco Trader and $11.6 amortization of time charters acquired, plus depreciation and amortization charges of $32.6 million. Net cash from operating activities for six months ended June 30, 2007 was mostly a result of recorded net income of $33.6 million, less the gain of $3.6 million due the sale of the Genco Glory, plus depreciation and amortization charges of $14.6 million.
 
Net cash used in investing activities increased to $302.0 million for the six months ended June 30, 2008 from $90.4 for the six months ended June 30, 2007.  For the six months ended June 30, 2008, cash used in investing activities primarily related to the purchase of vessels in the amount of $247.1 million, deposits on vessels to be acquired of $80.6 million, the purchase of $10.3 million of Jinhui stock, and payments on forward currency contracts of $9.6 million. The above were offset by proceeds from the sale of the Genco Trader in the amount of $43.1 million. For the six months ended June 30 2007, the cash used in investing activities related primarily to the purchase of Jinhui stock in the amount of $103.1 million off-set by proceeds of $13.0 million from the sale of the Genco Glory.
 
Net cash provided by financing activities for the six months ended June 30, 2008 and 2007 was $194.8 million and $37.1 million, respectively.  For the six months ended June 30, 2008, net cash provided by financing activities consisted of the drawdown of $321.3 million related to the purchase of vessels and $195.7 million in proceeds from our May 2008 follow-on offering. These inflows were offset by the repayment of $268.0 million under the 2007 credit facility and the payment of cash dividends of $53.8 million.  For the six months ended June 30, 2007, net cash provided by financing activities consisted primarily of proceeds from the Short-Term Line in the amount of $77.0 million offset by the payment of cash dividends in the amount of $33.7 million and repayment of $5.7 million of debt on our 2005 Credit Facility.

2007 Credit Facility

On July 20, 2007, the Company entered into the 2007 Credit Facility for the purpose of acquiring the nine new Capesize vessels and refinancing the Company’s existing 2005 Credit Facility and Short-Term Line.  DnB Nor Bank ASA is Mandated Lead Arranger, Bookrunner, and Administrative Agent. The Company has used borrowings under the 2007 Credit Facility to repay amounts outstanding under the 2005 Credit Facility and the Short-Term Line, which have been terminated.  The maximum amount that may be borrowed under the 2007 Credit Facility is $1,377 million.  Lastly, the Company, as required, pledged all of the Jinhui shares it has purchased as collateral against the 2007 Credit Facility.  As of June 30 2008, $387.8 million remains available to fund future vessel acquisitions.  The Company may borrow up to $50 million of the $387.8 million for working capital purposes.
 
Under the 2007 Credit Facility, subject to the conditions set forth in the credit agreement, the Company may borrow an amount up to $1,377 million.  Amounts borrowed and repaid under the 2007 Credit Facility may be reborrowed.  The 2007 Credit Facility has a maturity date of July 20, 2017, or ten years from the signing date of the 2007 Credit Facility.
 
Loans made under the 2007 Credit Facility may be used for the following:

·  	up to 100% of the en bloc purchase price of $1,111 million for nine modern drybulk Capesize vessels, which the Company has agreed to purchase from companies within the Metrostar Management Corporation group;	

·  	repayment of amounts previously outstanding under the Company’s 2005 Credit Facility, or $206.2 million;	

·  	the repayment of amounts previously outstanding under the Company’s Short-Term Line, or $77 million;	

 

47

 
·  	possible acquisitions of additional dry bulk carriers between 25,000 and 180,000 dwt that are up to ten years of age at the time of delivery and not more than 18 years of age at the time of maturity of this credit facility;	

·  	up to $50 million of working capital; and	

·  	the issuance of up to $50 million of standby letters of credit.  At June 30, 2008, there were no letters of credit issued under the 2007 Credit Facility.	

All amounts owing under the 2007 Credit Facility are secured by the following:

·  	cross-collateralized first priority mortgages of each of the Company’s existing vessels and any new vessels financed with the 2007 Credit Facility;	

·  	an assignment of any and all earnings of the mortgaged vessels;	

·  	an assignment of all insurances of the mortgaged vessels;	

·  	a first priority perfected security interest in all of the shares of Jinhui owned by the Company;	

·  	an assignment of the shipbuilding contracts and an assignment of the shipbuilder’s refund guarantees meeting the Administrative Agent’s criteria for any additional newbuildings financed under the 2007 Credit Facility; and	

·  	a first priority pledge of the Company’s ownership interests in each subsidiary guarantor.	

The Company has completed a pledge of its ownership interests in the subsidiary guarantors that own the vessels acquired or to be acquired.  The other collateral described above was pledged, as required, within thirty days of the effective date of the 2007 Credit Facility.
 
The Company’s borrowings under the 2007 Credit Facility bear interest at the London Interbank Offered Rate (“LIBOR”) for an interest period elected by the Company of one, three, or six months, or longer if available, plus the Applicable Margin (which is 0.90% per annum for the first five years of the 2007 Credit Facility and 0.95% thereafter).  If the Company’s ratio of Total Debt to Total Capitalization (each as defined in the credit agreement for the 2007 Credit Facility) is less than 70%, the Applicable Margin decreases to 0.85% and 0.90%, respectively.  In addition to other fees payable by the Company in connection with the 2007 Credit Facility, the Company paid a commitment fee at a rate of 0.20% per annum of the daily average unutilized commitment of each lender under the facility until September 30, 2007, and 0.25% thereafter.
 
The 2007 Credit Facility will be subject to ten consecutive semi-annual reductions of 7.0% of the total amount of credit granted under the new facility, with the first reduction occurring on the fifth anniversary of the signing date and a balloon payment reduction of 30% on the maturity date.  The Company may prepay the 2007 Credit Facility, without penalty, with two days notice for LIBOR rate advances, in minimum amounts of $10 million together with accrued interest on the amount prepaid.
 
The 2007 Credit Facility includes the following financial covenants which will apply to the Company and its subsidiaries on a consolidated basis and will be measured at the end of each fiscal quarter beginning with June 30, 2007:

·  	The leverage covenant requires the maximum average net debt to EBITDA to be a ratio of at least 5.5:1.0.	
 
·  	Cash and cash equivalents must not be less than $0.5 million per mortgaged vessel.	

·  	The ratio of EBITDA to interest expense, on a rolling last four-quarter basis, must be no less than 2.0:1.0.	

 

48

 
·  	After July 20, 2007, consolidated net worth must be no less than $263,300 plus 80% of the value of the any new equity issuances of the Company from June 30, 2007.  Based on the equity offering completed in October 2007 and May 2008, requires the consolidated net worth to be no less than $590.8 million.	

·  	The aggregate fair market value of the mortgaged vessels must at all times be at least 130% of the aggregate outstanding principal amount under the 2007 Credit Facility plus all letters of credit outstanding; the Company has a 30 day remedy period to post additional collateral or reduce the amount of the revolving loans and/or letters of credit outstanding.	

Other covenants in the 2007 Credit Facility are substantially similar to the covenants in the Company’s previous credit facilities.  The Company believes it has been in compliance with these covenants since the inception of the facility through June 30, 2008.

On June 18, 2008, the Company entered into an amendment to the 2007 Credit Facility allowing the Company to prepay vessel deposits to give the Company flexibility in refinancing potential vessel acquisitions.
 
The Company can continue to pay cash dividends in accordance with its dividend policy and certain terms of the credit agreement so long as no event of default has occurred and is continuing and no event of default will occur as a result of the payment of such dividend.  In addition, the 2007 Credit Facility was amended as of February 13, 2008 to permit the Company to implement its share repurchase program, which was recently approved by its board of directors.  Under this amendment, the dollar amount of shares repurchased is counted toward the maximum dollar amount of dividends that may be paid in any fiscal quarter.  For further details of our share repurchase program, see Note 6 to our financial statements.

Due to refinancing of the Company’s previous facilities, the Company incurred a non-cash write-off of the unamortized deferred financing cost in the amount of $3.6 associated with the Company’s previous facilities.
 
Interest Rate Swap Agreements, Forward Freight Agreements and Currency Swap Agreements
 
The Company has entered into nine interest rate swap agreements with DnB NOR Bank to manage interest costs and the risk associated with changing interest rates. The total notional principal amount of the swaps is $681.2 million and the swaps have specified rates and durations.

The following table summarizes the interest rate swaps in place as of June 30, 2008 and December 31, 2007:

Interest Rate Swap Detail	 	June 30,
 2008	 	 	December 31, 2007	 	
Trade
Date	 	Fixed
Rate	 	Start Date
of  Swap	End date
of  Swap	 	Notional
Amount Outstanding	 	 	Notional
Amount Outstanding	 	
 	 	 	 	 	 	 	(in thousands)	 	
9/6/05	 	 	4.485	%	9/14/05	7/29/15	 	$	106,233	 	 	$	106,233	 	
3/29/06	 	 	5.25	%	1/2/07	1/1/14	 	 	50,000	 	 	 	50,000	 	
3/24/06	 	 	5.075	%	1/2/08	1/2/13	 	 	50,000	 	 	 	50,000	 	
9/7/07	 	 	4.56	%	10/1/07	12/31/09	 	 	75,000	 	 	 	75,000	 	
7/31/07	 	 	5.115	%	11/30/07	11/30/11	 	 	100,000	 	 	 	100,000	 	
8/9/07	 	 	5.07	%	1/2/08	1/3/12	 	100,000	 	 	 	100,000	 	
8/16/07	 	 	4.985	%	3/31/08	3/31/12	 	 	50,000	 	 	 	50,000	 	
8/16/07	 	 	5.04	%	3/31/08	3/31/12	 	 	100,000	 	 	 	100,000	 	
1/22/08	 	 	2.89	%	2/1/08	2/1/11	 	 	50,000	 	 	 	 	 	
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
 	 	 	 	 	 	 	 	$	681,233	 	 	$	631,233	 	

 

49

 
The differential to be paid or received for these swap agreements are recognized as an adjustment to interest expense as incurred.  The Company is currently utilizing cash flow hedge accounting for the swaps whereby the effective portion of the change in value of the swaps is reflected as a component of Other Comprehensive Income (“OCI”).  The ineffective portion is recognized as income or (loss) from derivative instruments, which is a component of other (expense) income.  For any period of time that the Company did not designate the swaps for hedge accounting, the change in the value of the swap agreements prior to designation was recognized as income or (loss) from derivative instruments and was listed as a component of other (expense) income.

The interest (expense) income pertaining to the interest rate swaps for the three months ended June 30, 2008 and 2007 was ($3.4) million and $0.3 million, respectively.  The interest (expense) income pertaining to the interest rate swaps for the six months ended June 30, 2008 and 2007 was ($3.9) million and $0.5 million, respectively.
 
The swap agreements, with effective dates on or prior to June 30, 2008 synthetically convert variable rate debt the fixed interest rate of swap plus the Applicable Margin (which is 0.85% per annum for the first five years of the 2007 Credit Facility and 0.90% thereafter).  If the Company’s ratio of Total Debt to Total Capitalization (each as defined in the credit agreement for the 2007 Credit Facility) is greater than or equal to 70%, the Applicable Margin increases to 0.90% for the first five years and 0.95% thereafter.
 
The liability associated with these swaps at June 30, 2008 and December 31, 2007 is $19.7 million and $21.0 million, respectively, and are presented as the fair value of derivatives on the balance sheet.  Additionally, at June 30, 2008, the Company had a swap in an asset position of $1.0 million and is presented as the fair value of derivatives on the balance sheet.  The Company considered the creditworthiness of both the Company and the counterparty in determining the fair value of the interest rate derivatives, and such consideration resulted in an immaterial adjustment to the fair value of derivatives on the balance sheet.  Valuations prior to any adjustments for credit risk are validated by comparison with counterparty valuations.  Amounts are not and should not be identical due to the different modeling assumptions, however amounts are expected to be (and are) close.  Any material differences are investigated.  As of June 30, 2008 and December 31, 2007, the Company has accumulated OCI of ($18.7) million and ($21.1) million, respectively, related to the effectively hedged portion of the swaps.  Hedge ineffectiveness associated with the interest rate swaps resulted in loss from derivative instruments of three thousand dollars for the three months ended June 30, 2008.  Hedge ineffectiveness associated with the interest rate swaps resulted loss from derivative instruments of twenty thousand dollars for the six months ended June 30, 2008.  For the three and six months ended June 30, 2007 the swaps had no ineffectiveness resulting in any income or expense from derivative instruments.  At June 30, 2008, ($11.4) million of OCI is expected to be reclassified into income over the next 12 months associated with interest rate derivatives.

The Company has entered into a number of short-term forward currency contracts to protect the Company from the risk associated with the fluctuation in the exchange rate associated with the cost basis of the Jinhui shares as described above under the heading “Short-term investments” in Note 2 of our financial statements.  At June 30, 2008, the Company had one short-term forward currency contract to hedge the Company’s exposure to the Norwegian Kroner related to the cost basis of Jinhui stock as described above.  The forward currency contract for a notional amount of 739.2 million NOK (Norwegian Kroner) or $142.4 million, matured on July 21, 2008.  At December 31, 2007, the Company had one short-term forward currency contract to hedge the Company’s exposure to the Norwegian Kroner related to the cost basis of Jinhui stock as described above.  The forward currency contract for a notional amount of 685.1 million NOK (Norwegian Kroner) or $124.6 million, matured on January 17, 2008. As forward contracts expire, the Company continues to enter into new forward currency contracts for the cost basis of the Short-term investment, excluding commissions.  However, the hedge is limited to the lower of the cost basis or the market value at time of designation.  As of July 17, 2008, the Company has a forward currency contract for the notional amount of 739.2 million NOK for $144.9 million.  For the three months ended June 30, 2008 and June 30, 2007, the net losses (realized and unrealized) of $1.2 million and $1.9 million, respectively, related to the forward currency contracts and to the hedged translations gain on the cost basis of the Jinhui stock are reflected as (loss) income from derivative instruments and are included as a component of other expense.  For the six months ended June 30, 2008 and June 30, 2007, the net losses (realized and unrealized) of $1.3 million and $1.9 million, respectively, related to the forward currency contracts and to the hedged translations gain on the cost basis of the Jinhui stock are reflected as (loss) income from derivative instruments and are included as a component of other expense.  The short-term liability associated with the forward currency contract at June 30, 2008 and December 31, 2007 is $3.1 million and $1.4 million, respectively, and is presented as the fair value of derivatives on the balance

 

50

 
 
sheet. The Company considered the creditworthiness of both the Company and the counterparty in determining the fair value of the forward currency contracts and such consideration resulted in an immaterial adjustment to the fair value of derivatives on the balance sheet.  The gain or loss associated with either the asset or liability associated with the forward currency contracts is included in the net (loss) income from derivative instruments.
 
As part of our business strategy, we may enter into arrangements commonly known as forward freight agreements, or FFAs, to hedge and manage market risks relating to the deployment of our existing fleet of vessels.  These arrangements may include future contracts, or commitments to perform in the future a shipping service between ship owners, charters and traders.  Generally, these arrangements would bind us and each counterparty in the arrangement to buy or sell a specified tonnage freighting commitment “forward” at an agreed time and price and for a particular route.  Although FFAs can be entered into for a variety of purposes, including for hedging, as an option, for trading or for arbitrage, if we decided to enter into FFAs, our objective would be to hedge and manage market risks as part of our commercial management. It is not currently our intention to enter into FFAs to generate a stream of income independent of the revenues we derive from the operation of our fleet of vessels.  If we determine to enter into FFAs, we may reduce our exposure to any declines in our results from operations due to weak market conditions or downturns, but may also limit our ability to benefit economically during periods of strong demand in the market.  We have not entered into any FFAs as of June 30, 2008.
 
Interest Rates
 
For the three months ended June 30, 2008, the effective interest rate associated with the interest expense for the 2007 Credit Facility, including the rate differential between the pay fixed receive variable rate on the swaps that were in effect, combined, and the cost associated with unused commitment fees with this facility was 5.31%.  For the three months ended June 30, 2007, the effective interest rate associated with the interest expense for the 2005 Credit Facility and Short-Term Line, including the rate differential between the pay fixed receive variable rate on the swaps that were in effect, combined, and the cost associated with unused commitment fees with this facility was 6.54%.

For the six months ended June 30, 2008, the effective interest rate associated with the interest expense for the 2007 Credit Facility, including the rate differential between the pay fixed receive variable rate on the swaps that were in effect, combined, and the cost associated with unused commitment fees with this facility was 5.27%.  For the six months ended June 30, 2007, the effective interest rate associated with the interest expense for the 2005 Credit Facility and Short-Term Line, including the rate differential between the pay fixed receive variable rate on the swaps that were in effect, combined, and the cost associated with unused commitment fees with this facility was 6.51%.

The interest rate on the debt, excluding the unused commitment fees, ranged from 2.98% to 5.60% and from 6.23% to 6.33%, for the three months ended June 30, 2008 and 2007, respectively.  The interest rate on the debt, excluding the unused commitment fees, ranged from 2.98% to 6.10% and from 6.23% to 6.39%, for the six months ended June 30, 2008 and 2007, respectively.
 
Contractual Obligations
 
The following table sets forth our contractual obligations and their maturity dates as of June 30, 2008, including the borrowing of $62.9 million associated with acquisition of the Genco Cavalier in July 2008.    The table incorporates the agreement to acquire the remaining seven Capesize vessels, the agreement to acquire one Panamax vessel and three Handysize vessels for approximately $940.0 million, inclusive of commissions for these acquisitions, and the employment agreement entered into in September 2007 with the Chief Financial Officer, John Wobensmith.  The Company plans to fund the remaining acquisitions with the remaining availability under the 2007 Credit Facility, cash generated from operations and a new credit facility or alternative financing.  The interest and fees are also reflective of the 2007 Credit Facility and the interest rate swap agreements as discussed above under “Interest Rate Swap Agreements and Forward Freight Agreements and Currency Swap Agreements.”

 

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 	 	Total	 	 	Within One
Year (1)	 	 	One to Three
Years	 	 	Three to Five
Years	 	 	More than
Five Years	 	
 	 	(U.S. dollars in thousands)	 	
2007 Credit Facility	 	$	1,052,150	 	 	$	-	 	 	$	-	 	 	$	-	 	 	$	1,052,150	 	
Remainder of purchase price of acquisitions (2)	 	$	939,950	 	 	$	269,550	 	 	$	670,400	 	 	$	-	 	 	$	-	 	
Interest and borrowing fees	 	$	370,044	 	 	$	26,858	 	 	$	105,602	 	 	$	97,104	 	 	$	140,480	 	
Executive employment agreement	 	$	452	 	 	$	186	 	 	$	266	 	 	$	-	 	 	$	-	 	
Office lease	 	$	6,393	 	 	$	243	 	 	$	982	 	 	$	1,036	 	 	$	4,132	 	

(1)  	Represents the six month period ending December 31, 2008.	
 	 	
(2)  	The timing of these obligations are based on estimated delivery dates for the remaining seven Capesize vessels and three Handysize vessels which are currently being constructed, as well as one Panamax vessel, and the obligation is inclusive of the commission due to brokers upon purchase of the vessels.	

Interest expense has been estimated using the fixed hedge rate for the effective period and notional amount of the debt which is effectively hedged and 2.81% for the portion of the debt that has no designated swap against it, plus the applicable bank margin of 0.85% in the first five years of the 2007 Credit Facility and 0.90% in the last five years, as long as the ratio of Total Debt to Total Capitalization as defined in the 2007 Credit Facility remains below 70%. If the ratio of Total Debt to Total Capitalization is equal to or greater than 70% then the applicable margin is increased to 0.90% in the first five years of the 2007 Credit Facility and 0.95% in the last five years.   The Company is obligated to pay certain commitment fees in connection with the 2007 Credit Facility.

Capital Expenditures
 
We make capital expenditures from time to time in connection with our vessel acquisitions. Our fleet currently consists of five Capesize drybulk carriers, six Panamax drybulk carriers, three Supramax drybulk carriers, six Handymax drybulk carriers and eight Handysize drybulk carriers.

In addition to acquisitions that we may undertake in future periods, we will incur additional capital expenditures due to special surveys and drydockings. We estimate our drydocking costs and scheduled off-hire days for our fleet through 2009 to be:

Year	 	Estimated Drydocking Cost	 	 	Estimated Off- hire Days	 	
 	 	  (U.S. dollars in millions)	 	 	 	 	
2008 (July 1- December 31, 2008)	 	$	4.5	 	 	 	100	 	
2009	 	 	4.1	 	 	 	100	 	
 
The costs reflected are estimates based on drydocking our vessels in China.  We estimate that each drydock will result in 20 days of off-hire.  Actual costs will vary based on various factors, including where the drydockings are actually performed.  We expect to fund these costs with cash from operations.
 
During the first half of 2008, the Genco Challenger and Genco Sugar completed drydocking at a cost of $0.5 million and $0.7 million, respectively.

 

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We estimate that five of our vessels will be drydocked in the remainder of 2008, of which three will be drydocked during the third quarter of 2008 and two vessels in the fourth quarter of 2008.  An additional five of our vessels will be drydocked in 2009.
 
Off-Balance Sheet Arrangements
 
We do not have any off-balance sheet arrangements.
 
Inflation
 
Inflation has only a moderate effect on our expenses given current economic conditions. In the event that significant global inflationary pressures appear, these pressures would increase our operating, voyage, general and administrative, and financing costs.  However, the Company expects its costs to increase based on the anticipated increased cost for crewing and lubes.
 
CRITICAL ACCOUNTING POLICIES
 
The discussion and analysis of our financial condition and results of operations is based upon our consolidated financial statements, which have been prepared in accordance with U.S. GAAP. The preparation of those financial statements requires us to make estimates and judgments that affect the reported amounts of assets and liabilities, revenues and expenses and related disclosure of contingent assets and liabilities at the date of our financial statements. Actual results may differ from these estimates under different assumptions and conditions.
 
Critical accounting policies are those that reflect significant judgments of uncertainties and potentially result in materially different results under different assumptions and conditions. We have described below what we believe are our most critical accounting policies, because they generally involve a comparatively higher degree of judgment in their application. For an additional description of our significant accounting policies, see Note 2 to our consolidated financial statements included in this 10-Q.
 
REVENUE AND VOYAGE EXPENSE RECOGNITION-
 
Revenues are generated from time charters. A time charter involves placing a vessel at the charterer’s disposal for a set period of time during which the charterer may use the vessel in return for the payment by the charterer of a specified daily or monthly hire rate.  In time charters, operating costs such as for crews, maintenance and insurance are typically paid by the owner of the vessel and specified voyage costs such as fuel, and port charges are paid by the charterer. There are certain other non-specified voyage expenses such as commissions which are borne by us.
 
We record time charter revenues over the term of each charter as service is provided. Revenues are recognized on a straight-line basis as the average revenue over the term of each time charter. We recognize vessel operating expenses when incurred.
 
DUE FROM CHARTERERS, NET
 
Due from charterers, net includes accounts receivable from charters net of the provision for doubtful accounts. At each balance sheet date, the Company provides for the provision based on a review of all outstanding charter receivables. Included in the standard time charter contracts with our customers are certain performance parameters, which if not met can result in customer claims.  As of June 30, 2008, we had a reserve of $0.2 million against due from charterers balance, and at December 31, 2007, we had no reserve against due from charterers balance. As of June 30, 2008 and December 31, 2007, the Company had a reserve of $0.9 million and $0.7 million, respectively in deferred revenue, each of which is associated with estimated customer claims against the Company including time charter performance issues.

Revenue is based on contracted charterparties and, although the Company's business is with customers whom the Company believes to be of the highest standard, there is always the possibility of dispute over terms and payment of hires and freights. In particular, disagreements may arise as to the responsibility of lost time and revenue

 

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due to the Company as a result. As such, the Company periodically assesses the recoverability of amounts outstanding and estimates a provision if there is a possibility of non-recoverability. Although the Company believes its provisions to be reasonable at the time they are made, it is possible that an amount under dispute is not ultimately recovered and the estimated provision for doubtful accounts is inadequate.
 
SHORT-TERM INVESTMENTS-
 
 The Company holds an investment in the capital stock of Jinhui Shipping and Transportation Limited (“Jinhui”).  Jinhui is a drybulk shipping owner and operator focused on the Supramax segment of drybulk shipping.  This investment is designated as Available For Sale (“AFS”) and is reported at fair value, with unrealized gains and losses recorded in shareholders’ equity as a component of OCI.  Effective August 16, 2007, the Company has elected hedge accounting for forward currency contracts in place associated with the cost basis of the Jinhui shares, however the hedge is limited to the lower of the cost basis or the market value at time of designation.  Therefore the unrealized currency gain or loss associated with the hedged portion or the cost basis in the Jinhui shares will now be reflected in the income statement as income or (loss) from derivative instruments to offset the gain or loss associated with these forward currency contracts.  The cost of securities when sold is based on the specific identification method.  Realized gains and losses on the sale of these securities will be reflected in the consolidated statement of operations in other (expense) income.  Additionally, the realized gain or loss on the forward currency contracts is reflected in the Consolidated Statement of Cash Flows as an investing activity and is reflected in the caption Payments on forward currency contracts, net.

Short-term investments are reviewed periodically to identify possible other-than-temporary impairment.  When evaluating the investments, the Company reviews factors such as the length of time and extent to which fair value has been below the cost basis, the financial condition of the issuer, the underlying net asset value of the issuers assets and liabilities, and the Company’s ability and intent to hold the investment for a period of time which may be sufficient for anticipated recovery in market value.  Should the decline in the value of any investment be deemed to be other-than-temporary, the investment basis would be written down to fair market value, and the write-down would be recorded to earnings as a loss.
 
VESSEL ACQUISITIONS-
 
When we enter into an acquisition transaction, we determine whether the acquisition transaction was the purchase of an asset or a business based on the facts and circumstances of the transaction.  In the shipping industry, the purchase of a vessel is normally treated as a purchase of an asset as the historical operating data for the vessel is not reviewed nor is material to our decision to make such acquisition.
 
When a vessel is acquired with an existing time charter, we allocate the purchase price of the vessel and the time charter based on, among other things, vessel market valuations and the present value (using an interest rate which reflects the risks associated with the acquired charters) of the difference between (i) the contractual amounts to be paid pursuant to the charter terms and (ii) management's estimate of the fair market charter rate, measured over a period equal to the remaining term of the charter. The capitalized above-market (assets) and below-market (liabilities) charters are amortized as a reduction or increase, respectively, to voyage revenues over the remaining term of the charter.
 
DEPRECIATION-
 
We record the value of our vessels at their cost (which includes acquisition costs directly attributable to the vessel and expenditures made to prepare the vessel for its initial voyage) less accumulated depreciation. We depreciate our drybulk vessels on a straight-line basis over their estimated useful lives, estimated to be 25 years from the date of initial delivery from the shipyard. Depreciation is based on cost less the estimated residual scrap value. We estimate the residual values of our vessels to be based upon $175 per lightweight ton. An increase in the useful life of a drybulk vessel or in its residual value would have the effect of decreasing the annual depreciation charge and extending it into later periods. A decrease in the useful life of a drybulk vessel or in its residual value would have the effect of increasing the annual depreciation charge. However, when regulations place limitations over the ability of a vessel to trade on a worldwide basis, we will adjust the vessel’s useful life to end at the date such regulations preclude such vessel’s further commercial use.

 

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IMPAIRMENT OF LONG-LIVED ASSETS-
 
We follow Statement of Financial Accounting Standards (“SFAS”) No. 144, “Accounting for the Impairment or Disposal of Long-Lived Assets”, which requires impairment losses to be recorded on long-lived assets used in operations when indicators of impairment are present and the undiscounted cash flows estimated to be generated by those assets are less than the asset’s carrying amount. In the evaluation of the fair value and future benefits of long-lived assets, we perform an analysis of the anticipated undiscounted future net cash flows of the related long-lived assets. If the carrying value of the related asset exceeds the undiscounted cash flows, the carrying value is reduced to its fair value. Various factors including future charter rates, scrap values, future drydock costs and vessel operating costs are included in this analysis.
 
DEFERRED DRYDOCKING COSTS-
 
Our vessels are required to be drydocked approximately every 30 to 60 months for major repairs and maintenance that cannot be performed while the vessels are operating. We capitalize the costs associated with drydockings as they occur and depreciate these costs on a straight-line basis over the period between drydockings. Capitalized drydocking costs include actual costs incurred at the drydock yard; cost of parts that are believed to be reasonably likely to reduce the duration or cost of the drydocking; cost of travel, lodging and subsistence of our personnel sent to the drydocking site to supervise; and the cost of hiring a third party to oversee the drydocking. We believe that these criteria are consistent with U.S. GAAP guidelines and industry practice and that our policy of capitalization reflects the economics and market values of the vessels.
 
DERIVATIVE FINANCIAL INSTRUMENTS-
 
Interest rate risk management
 
The Company is exposed to the impact of interest rate changes.  The Company’s objective is to manage the impact of interest rate changes on its earnings and cash flow in relation to borrowings for the purpose of acquiring drybulk vessels.  These borrowings are subject to a variable borrowing rate.  The Company uses pay-fixed receive-variable interest rate swaps to manage future interest costs and the risk associated with changing interest rate obligations.  These swaps are designated as cash flow hedges of future variable rate interest payments and are tested for effectiveness on a quarterly basis.
 
 The differential to be paid or received for the effectively hedged portion of any swap agreement is recognized as an adjustment to interest expense as incurred.  Additionally, the changes in value for the portion of the swaps that are effectively hedging future interest payments are reflected as a component of OCI.

For the portion of the forward interest rate swaps that are not effectively hedged, the change in the value and the rate differential to be paid or received is recognized as income or (expense) from derivative instruments and is listed as a component of other expense until such time the Company has obligations against which the swap is designated and is an effective hedge.
 
Currency risk management
 
The Company currently holds an investment in Jinhui shares that are traded on the Oslo Stock Exchange located in Norway, and as such, the Company is exposed to the impact of exchange rate changes on this available-for-sale security denominated in Norwegian Kroner.  The Company’s objective is to manage the impact of exchange rate changes on its earnings and cash flow in relation to its cost basis associated with its short-term investments. The Company uses foreign currency forward contracts to protect its original investment from changing exchange rates.
 
The change in the value in the forward currency contracts is recognized as income or (expense) from derivative instruments and is listed as a component of other expense.  Effective August 16, 2007, the Company  elected to utilize fair value hedge accounting for these instruments whereby the change in the value in the forward contracts continues to be recognized as income or (expense) from derivative instruments and is listed as a component of other expense.  Fair value hedge accounting then accelerates the recognition of the effective portion of the currency translation gain or (loss) on the Available for Sale Security from August 16, 2007 into income or

 

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(expense) from derivative instruments and is listed as a component of other expense.  Time value of the forward contracts are excluded from effectiveness testing and recognized currently in income.
 
 INCOME TAXES
 
Pursuant to Section 883 of the U.S. Internal Revenue Code of 1986 as amended (the “Code”), qualified income derived from the international operations of ships is excluded from gross income and exempt from U.S. federal income tax if a company engaged in the international operation of ships meets certain requirements. Among other things, in order to qualify, the company must be incorporated in a country which grants an equivalent exemption to U.S. corporations and must satisfy certain qualified ownership requirements.

The Company is incorporated in the Marshall Islands. Pursuant to the income tax laws of the Marshall Islands, the Company is not subject to Marshall Islands income tax. The Marshall Islands has been officially recognized by the Internal Revenue Service as a qualified foreign country that currently grants the requisite equivalent exemption from tax.

Based on the ownership of our common stock prior to our initial public offering on July 22, 2005 as discussed in Note 1 of our financial statements, we qualified for exemption from income tax for 2005 under Section 883, since we were a Controlled Foreign Corporation (“CFC”) and satisfied certain other criteria in the Section 883 regulations. We were a CFC, as defined in the Code, since until the initial public offering on July 22, 2005, over 50% of our stock was owned by United States holders each of whom owned ten percent or more of our voting stock, or US 10% Owners. During that time, approximately 93% of our common stock was held by US 10% Owners.

Based on the publicly traded requirement of the Section 883 regulations, we believe that the Company qualified for exemption from income tax for 2007.  In order to meet the publicly traded requirement, our stock must be treated as being primarily and regularly traded for more than half the days of any such year. Under the Section 883 regulations, our qualification for the publicly traded requirement may be jeopardized if shareholders of our common stock that own five percent or more of our stock (“5% shareholders”) own, in the aggregate, 50% or more of our common stock for more than half the days of the year.   We believe that during 2007, the combined ownership of our 5% shareholders did not equal 50% or more of our common stock for more than half the days of 2007. However if our 5% shareholders were to increase their ownership to 50% or more of our common stock for more than half the days of 2008 or any future taxable year, we may not be eligible to claim exemption from tax under Section 883 for that taxable year. We can therefore give no assurance that changes and shifts in the ownership of our stock by 5% shareholders will not preclude us from qualifying for exemption from tax in 2008 or in future years.

If the Company does not qualify for the exemption from tax under Section 883, it would be subject to a 4% tax on the gross “shipping income” (without the allowance for any deductions) that is treated as derived from sources within the United States or “United States source shipping income.” For these purposes, “shipping income” means any income that is derived from the use of vessels, from the hiring or leasing of vessels for use, or from the performance of services directly related to those uses; and “United States source shipping income” includes 50% of shipping income that is attributable to transportation that begins or ends, but that does not both begin and end, in the United States.
 
ITEM 3 .      QUALITATIVE AND QUANTITATIVE MARKET RISK
 
Interest rate risk
 
We are exposed to the impact of interest rate changes.  Our objective is to manage the impact of interest rate changes on our earnings and cash flow in relation to our borrowings.  At June 30, 2008, we held nine interest rate risk management instruments and at December 31, 2007 we held eight such instruments, in order to manage future interest costs and the risk associated with changing interest rates.
 
The Company has entered into nine interest rate swap agreements with DnB NOR Bank to manage interest costs and the risk associated with changing interest rates. The total notional principal amount of the swaps is $681.2 million and the swaps have specified rates and durations.

 

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The following table summarizes the interest rate swaps in place as of June 30, 2008 and December 31, 2007:

Interest Rate Swap Detail	 	June 30,
 2008	 	 	December 31, 2007	 	
Trade Date	 	Fixed Rate	 	Start Date of  Swap	End date of  Swap	 	Notional
Amount Outstanding	 	 	Notional
Amount Outstanding	 	
 	 	 	 	 	 	 	(in thousands)	 	
9/6/05	 	 	4.485	%	9/14/05	7/29/15	 	$	106,233	 	 	$	106,233	 	
3/29/06	 	 	5.25	%	1/2/07	1/1/14	 	 	50,000	 	 	 	50,000	 	
3/24/06	 	 	5.075	%	1/2/08	1/2/13	 	 	50,000	 	 	 	50,000	 	
9/7/07	 	 	4.56	%	10/1/07	12/31/09	 	 	75,000	 	 	 	75,000	 	
7/31/07	 	 	5.115	%	11/30/07	11/30/11	 	 	100,000	 	 	 	100,000	 	
8/9/07	 	 	5.07	%	1/2/08	1/3/12	 	 	100,000	 	 	 	100,000	 	
8/16/07	 	 	4.985	%	3/31/08	3/31/12	 	 	50,000	 	 	 	50,000	 	
8/16/07	 	 	5.04	%	3/31/08	3/31/12	 	 	100,000	 	 	 	100,000	 	
1/22/08	 	 	2.89	%	2/1/08	2/1/11	 	 	50,000	 	 	 	 	 	
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
 	 	 	 	 	 	 	 	$	681,233	 	 	$	631,233	 	

The swap agreements, with effective dates on or prior to June 30, 2008 synthetically convert variable rate debt the fixed interest rate of swap plus the Applicable Margin (which is 0.85% per annum for the first five years of the 2007 Credit Facility and 0.90% thereafter).  If the Company’s ratio of Total Debt to Total Capitalization (each as defined in the credit agreement for the 2007 Credit Facility) is greater than or equal to 70%, the Applicable Margin increases to 0.90% for the first five years and 0.95% thereafter.
 
The liability associated with these swaps at June 30, 2008 and December 31, 2007 is $19.7 million and $21.0 million, respectively, and are presented as the fair value of derivatives on the balance sheet.  Additionally, at June 30, 2008, the Company had a swap in an asset position of $1.0 million, which is presented as the fair value of derivatives on the balance sheet.  As of June 30, 2008 and December 31, 2007, the Company has accumulated OCI of ($18.7) million and ($21.1) million, respectively, related to the effectively hedged portion of the swaps.  Hedge ineffectiveness associated with the interest rate swaps resulted in a loss from derivative instruments of three thousand dollars for the three months ended June 30, 2008.  Hedge ineffectiveness associated with the interest rate swaps resulted in a loss from derivative instruments of twenty thousand dollars for the six months ended June 30, 2008.  For the three and six months ended June 30, 2007 the swaps had no ineffectiveness resulting in any income or expense from derivative instruments.  At June 30, 2008, ($11.4) million of OCI is expected to be reclassified into income over the next 12 months associated with interest rate derivatives.

Derivative financial instruments

The Company entered into nine interest rate swap agreements with DnB NOR Bank to manage interest costs and the risk associated with changing interest rates. The total notional principal amount of the swaps is $681.2 million, and the swaps have specified rates and durations.  See “Interest Rate Risk” above under this Item 3 for a table summarizing the interest rate swaps in place as of June 30, 2008 and December 31, 2007.
 
The differential to be paid or received for these swap agreements are recognized as an adjustment to interest expense as incurred.  The Company is currently utilizing cash flow hedge accounting for the swaps whereby the effective portion of the change in value of the swaps is reflected as a component of Other Comprehensive Income (“OCI”).  The ineffective portion is recognized as income or (loss) from derivative instruments, which is a component of other (expense) income.  For any period of time that the Company did not designate the swaps for hedge accounting, the change in the value of the swap agreements prior to designation was recognized as income or (loss) from derivative instruments and was listed as a component of other (expense) income.

 

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Amounts receivable or payable arising at the settlement of hedged interest rate swaps are deferred and amortized as an adjustment to interest expense over the period of interest rate exposure provided the designated liability continues to exist.  Amounts receivable or payable arising at the settlement of unhedged interest rate swaps are reflected as income or expense from derivative instruments and is listed as a component of other (expense) income.
 
The interest (expense) income pertaining to the interest rate swaps for the three months ended June 30, 2008 and 2007 was ($3.4) million and $0.3 million, respectively.  The interest (expense) income pertaining to the interest rate swaps for the six months ended June 30, 2008 and 2007 was ($3.9) million and $0.5 million, respectively.
 
The swap agreements, with effective dates on or prior to June 30, 2008 synthetically convert variable rate debt the fixed interest rate of swap plus the Applicable Margin (which is 0.85% per annum for the first five years of the 2007 Credit Facility and 0.90% thereafter).  If the Company’s ratio of Total Debt to Total Capitalization (each as defined in the credit agreement for the 2007 Credit Facility) is greater than or equal to 70%, the Applicable Margin increases to 0.90% for the first five years and 0.95% thereafter.
 
The liability associated with these swaps at June 30, 2008 and December 31, 2007 is $19.7 million and $21.0 million, respectively, and are presented as the fair value of derivatives on the balance sheet.  Additionally, at June 30, 2008, the Company had a swap in an asset position of $1.0 million, which is presented as the fair value of derivatives on the balance sheet.  As of June 30, 2008 and December 31, 2007, the Company has accumulated OCI of ($18.7) million and ($21.1) million, respectively, related to the effectively hedged portion of the swaps.  Hedge ineffectiveness associated with the interest rate swaps resulted in a loss from derivative instruments of three thousand dollars for the three months ended June 30, 2008.  Hedge ineffectiveness associated with the interest rate swaps resulted in a loss from derivative instruments of twenty thousand dollars for the six months ended June 30, 2008.  For the three and six months ended June 30, 2007 the swaps had no ineffectiveness resulting in any income or expense from derivative instruments.  At June 30, 2008, ($11.4) million of OCI is expected to be reclassified into income over the next 12 months associated with interest rate derivatives.

We are subject to market risks relating to changes in interest rates because we have significant amounts of floating rate debt outstanding.  For the six months ended June 30, 2008, we paid LIBOR plus 0.85% on the 2007 Credit Facility for the debt in excess of any designated swap’s notional amount for such swap’s effective period.  For the six months ended June 30, 2007, LIBOR plus 0.95% on the 2005 Credit Facility and the Short-term Line for the debt in excess of any designated swap’s notional amount for the respective swap’s effective period.  For each effective swap, the interest rate is fixed at the fixed interest rate of swap plus the applicable margin on the respective debt in place.  A 1% increase in LIBOR would result in an increase of $1.4 million in interest expense for the six months ended June 30, 2008, considering the increase would be only on the unhedged portion of the debt for which the rate differential on the relevant swap is not in effect.

Currency and exchange rates risk

The international shipping industry’s functional currency is the U.S. Dollar. Virtually all of our revenues and most of our operating costs are in U.S. Dollars. We incur certain operating expenses in currencies other than the U.S. dollar, and the foreign exchange risk associated with these operating expenses is immaterial.
 
The Company has entered into a number of short-term forward currency contracts to protect the Company from the risk associated with the fluctuation in the exchange rate associated with the cost basis of the Jinhui shares as described above under the heading “Short-term investments” in Note 2 of our financial statements.  For further information on these forward currency contracts, please see page 49 under the heading “Interest Rate Swap Agreements, Forward Freight Agreements and Currency Swap Agreements.”

Upon maturation of the forward currency contract in place for 739.2 million NOK at June 30, 2008, a 1% change in the value of the Norwegian Kroner could result in a currency gain or loss of approximately $1.4 million.  However, since the Company is utilizing hedge accounting on the cost basis of the Jinhui stock, the effective portion of the currency translation gain or (loss) on the Available for Sale Security is netted against the fluctuation in the currency gain or loss on the forward currency contract itself to the extent of the hedged notional amount.

 

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ITEM 4 .       CONTROLS AND PROCEDURES
 
EVALUATION OF DISCLOSURE CONTROLS AND PROCEDURES

Under the supervision and with the participation of our management, including our President and Chief Financial Officer, we have evaluated the effectiveness of the design and operation of our disclosure controls and procedures as defined in Rule 13a-15(e) and 15d-15(e) of the Securities Exchange Act of 1934, as amended (the “Exchange Act”) as of the end of the period covered by this Report. Based upon that evaluation, our President and Chief Financial Officer have concluded that our disclosure controls and procedures are effective.

There have been no changes in our internal control over financial reporting (as such term is defined in Rules 13a-15(f) and 15d-15(f) of the Exchange Act) during our most recent fiscal quarter that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

PART II:        OTHER INFORMATION
 
ITEM 1.       LEGAL PROCEEDINGS
 
From time to time the Company may be subject to legal proceedings and claims in the ordinary course of its business, principally personal injury and property casualty claims. Such claims, even if lacking merit, could result in the expenditure of significant financial and managerial resources. The Company is not aware of any legal proceedings or claims that it believes will have, individually or in the aggregate, a material adverse effect on the Company, its financial condition, results of operations or cash flows.
 
ITEM 2.      PURCHASES OF EQUITY SECURITIES BY THE ISSUER
 
 During the three months ended June 30, 2008, we did not repurchase any shares of our common stock pursuant to our share repurchase program.
 
ITEM 4.      SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
 
(a)           The Company held its Annual Meeting of Shareholders on May 14, 2008.
 
(b)           Not required.
 
(c)            Proposal No. 1 :                                       Election of Class III Directors:
 
For:  Peter C. Georgiopoulos	26,323,445	Withheld:	121,645	
For:  Stephen A. Kaplan	26,317,457	Withheld:	127,633	
 
Messrs. Georgiopoulos and Kaplan were re-elected as Class III directors until the Company’s 2011 Annual Meeting of Shareholders and until their successors are elected and qualified or until their earlier resignation or removal.

 	Proposal No. 2 :	Ratification of appointment of Deloitte & Touche LLP as the Company’s independent auditors for the year ending December 31, 2008:	

Total shares for:	26,406,071	
Total shares against:	22,646	
Total shares abstaining:	16,373	
Number of shares voted:	26,445,090	
 	 	
The appointment of Deloitte & Touche LLP as the Company’s independent auditors for the year ending December 31, 2008 was ratified.

 

59

 
 
(d)           None.
 
ITEM 5.	OTHER INFORMATION	
 
In compliance with Sections 302 and 906 of the Sarbanes-Oxley Act of 2002, we have provided certifications of our Principal Executive Officer and Principal Financial Officer to the Securities and Exchange Commission.  The certifications provided pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 accompanying this report have not been filed pursuant to the Securities Exchange Act of 1934.

 

 

60

Item 6.  EXHIBITS
 
Exhibit	Document	
 	 	
10.1	Amendment and Supplement No. 3 to Senior Secured Credit Agreement, dated as of June 18, 2008, by and among Genco Shipping & Trading Limited, the lenders signatory thereto, and DnB NOR BANK ASA, New York Branch, as Administrative Agent, Collateral Agent, Mandated Lead Arranger and Bookrunner.*	
 	 	
10.2	Form of Director Restricted Stock Grant Agreement dated as of July 24, 2008.*	
 	 	
10.3	Memorandum of Agreement dated as of May 7, 2008 by and among Genco Cavalier LLC, Bocimar International N.V., and Delphis N.V.*	
 	 	
10.4	Form of Memorandum of Agreement dated as of May 7, 2008 by and between subsidiaries of Genco Shipping & Trading Limited and Bocimar International N.V.*	
 	 	
10.5	Form of Memorandum of Agreement dated as of June 13, 2008 for acquisition of vessels from Lambert Navigation Ltd., Northville Navigation Ltd., Providence Navigation Ltd., and Prime Bulk Navigation Ltd.*	
 	 	
31.1	Certification of President pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.*	
 	 	
31.2	Certification of Chief Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.*	
 	 	
32.1	Certification of President pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.*	
 	 	
32.2	Certification of Chief Financial Officer pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.*	
 
(*)           Filed with this Report.

(Remainder of page left intentionally blank)

 
61

SIGNATURES
 
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereto duly authorized.

GENCO SHIPPING & TRADING LIMITED

 	 	 	
 
DATE: August 8, 2008	 	By:  /s/ Robert Gerald Buchanan              
Robert Gerald Buchanan
President
(Principal Executive Officer)	

DATE: August 8, 2008

By:  /s/ John C. Wobensmith                     
John C. Wobensmith
Chief Financial Officer, Secretary and Treasurer
(Principal Financial and Accounting Officer)	

 

62

 
 
Exhibit Index

Exhibit	Document	
 	 	
10.1	Amendment and Supplement No. 3 to Senior Secured Credit Agreement, dated as of June 18, 2008, by and among Genco Shipping & Trading Limited, the lenders signatory thereto, and DnB NOR BANK ASA, New York Branch, as Administrative Agent, Collateral Agent, Mandated Lead Arranger and Bookrunner.*	
 	 	
10.2	Form of Director Restricted Stock Grant Agreement dated as of July 24, 2008.*	
 	 	
10.3	Memorandum of Agreement dated as of May 7, 2008 by and among Genco Cavalier LLC, Bocimar International N.V., and Delphis N.V.*	
 	 	
10.4	Form of Memorandum of Agreement dated as of May 7, 2008 by and between subsidiaries of Genco Shipping & Trading Limited and Bocimar International N.V.*	
 	 	
10.5	Form of Memorandum of Agreement dated as of June 13, 2008 for acquisition of vessels from Lambert Navigation Ltd., Northville Navigation Ltd., Providence Navigation Ltd., and Prime Bulk Navigation Ltd.*	
 	 	
31.1	Certification of President pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.*	
 	 	
31.2	Certification of Chief Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.*	
 	 	
32.1	Certification of President pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.*	
 	 	
32.2	Certification of Chief Financial Officer pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.*	
 
 (*)           Filed with this Report.
 
(Remainder of page left intentionally blank)

 

63

 

 
Exhibit 10.1

 
AMENDMENT AND SUPPLEMENT NO. 3 TO
SENIOR SECURED CREDIT AGREEMENT
 
THIS AMENDMENT AND SUPPLEMENT NO. 3 TO SENIOR SECURED CREDIT AGREEMENT (this “ Amendment ”) is made as of June 18, 2008, by and among (1) GENCO SHIPPING & TRADING LIMITED, a corporation organized and existing under the laws of the Republic of Marshall Islands (the “ Borrower ”), (2) the banks and financial institutions acceptable to the Borrower and Mandated Lead Arranger (as defined below) as are signatories hereto, as lenders (the “ Lenders ”), and (3) DnB NOR BANK ASA, acting through its New York branch (“ DnB ”) as Administrative Agent (in such capacity, the “ Administrative Agent ”), mandated lead arranger (in such capacity, the “ Mandated Lead Arranger ”), as bookrunner (in such capacity, the “ Bookrunner ”), as security trustee and as collateral agent under the Security Documents (in such capacity, the “ Collateral Agent ”) and amends and is supplemental to the Senior Secured Credit Agreement dated as of July 20, 2007, as amended by that certain Amendment and Supplement No. 1 to the Senior Secured Credit Agreement dated as of September 21, 2007, and as amended by that certain Amendment and Supplement No. 2 to the Senior Secured Credit Agreement dated as of February 13, 2008 (the “ Credit Agreement ”), made by and among the parties. All capitalized terms used herein and defined in Section 13 of the Credit Agreement are used as therein defined.
 
W I T N E S S E T H :
 
WHEREAS, pursuant to the Credit Agreement, the Lenders made available to the Borrower a senior secured credit facility in the amount of US$1,377,000,000 (the “ Facility ”);
 
WHEREAS, pursuant to the Credit Agreement, the Borrower requested and the Lenders agreed to make available certain Additional Vessel Deposits the proceeds of which were to be used in making deposits for the purchase of various Additional Vessels by Subsidiary Guarantors pursuant to the relevant Purchase Contracts;
 
WHEREAS, the Borrower has requested and the Majority Lenders have agreed in principle to permit voluntary prepayment of any Additional Vessel Deposits;
 
WHEREAS, in consideration of the Borrower making voluntary prepayment of any Additional Vessel Deposits, the Majority Lenders have agreed to terminate each and all of the security interests granted by any Subsidiary Guarantor in favor of the Collateral Agent in respect of the Vessels for which such Additional Vessel Deposits were originally made available;
 
WHEREAS, the Credit Agreement currently does not provide for instances where it may be necessary to permit the Borrower to voluntarily prepay Additional Vessel Deposits and the Borrower and Lenders wish to amend the Credit Agreement to provide the terms and conditions for repayment of such Additional Vessel Deposits; and
 
WHEREAS, the Lenders and the Borrower have agreed to certain other amendments to the Credit Agreement.

 
 
NOW, THEREFORE, in consideration of the premises and such other good and valuable consideration, the receipt and adequacy of which are hereby acknowledged by the parties, it is hereby agreed as follows:
 
1.   Definitions .  Unless otherwise defined herein, words and expressions defined in the Credit Agreement have the same meanings when used herein, including in the recitals hereto.
 
2.   Representations and Warranties .  The Borrower hereby reaffirms, as of the date hereof, each and every representation and warranty made thereby in the Credit Agreement, the Note and the Security Documents (updated mutatis mutandis).
 
3.   No Defaults .  The Borrower hereby represents and warrants that as of the date hereof no Event of Default or event which, with the passage of time, giving of notice or both would become an Event of Default, has occurred.
 
4.   Performance of Covenants .  The Borrower hereby reaffirms that it has duly performed and observed the covenants and undertakings set forth in the Credit Agreement, the Note and the Security Documents, on its part to be performed, and the Borrower covenants and undertakes to continue duly to perform and observe such covenants and undertakings so long as the Credit Agreement, as the same is amended hereby and may hereafter be amended or supplemented, shall remain in effect.
 
5.   Amendments to the Credit Agreement .  Subject to the terms and conditions of this Amendment, the Credit Agreement is hereby amended and supplemented as follows:
 
(a)   All references to “this Agreement” shall be deemed to refer to the Credit Agreement, as further amended and supplemented hereby.
 
(b)   The following subsection (v) shall be added to Section 4.01 of the Credit Agreement:
 
“(v)           the Borrower may, upon three Business Days’ written notice to the Administrative Agent at its Notice Office, which notice the Administrative Agent shall promptly transmit to each of the Lenders, prepay the full amount of any Additional Vessel Deposit, together with accrued and unpaid interest thereon and other amounts owing to the Lenders with respect thereto; provided that , all other and subsequent Vessel Acquisition Loans in respect of the Vessel for which the proceeds of the Additional Vessel Deposit were made available are also prepaid in full, together with accrued and unpaid interest  and other amounts owing to the Lenders in respect of such Vessel Acquisition Loans, on the same date as the repayment of the Additional Vessel Deposit; and, provided further , that upon written confirmation by the Administrative Agent to the Lenders that such prepayment of the Additional Vessel Deposit and any subsequent Vessel Acquisition Loans in respect of the relevant Vessel have been

 

2

 
 
completed, the Collateral Agent shall terminate any and all security interests and guarantees granted by the Borrower or any Subsidiary Guarantor in favor of the Collateral Agent in respect of such Additional Vessel Deposit or subsequent Vessel Acquisition Loans in respect of the Vessel; and”.

(c)   Section 4.01(v) of the Credit Agreement shall be renumbered accordingly as subsection (vi).
 
6.   Fees and Expenses .  The Borrower shall pay promptly to the each of the Agents all reasonable legal fees of the Agents in connection with the preparation and execution of this Amendment.
 
7.   No Other Amendment .  All other terms and conditions of the Credit Agreement shall remain in full force and effect and the Credit Agreement shall be read and construed as if the terms of this Amendment were included therein by way of addition or substitution, as the case may be.
 
8.   Other Documents .  By the execution and delivery of this Amendment, each of the parties hereby consents and agrees that all references in the Note and the Security Documents to the Credit Agreement shall be deemed to refer to the Credit Agreement as amended and supplemented by this Amendment.  By the execution and delivery of this Amendment, the Borrower hereby consents and agrees that the Security Documents and any other documents that have been or may be executed as security for the Facility and any of its obligations under the Credit Agreement, the Note or any Security Document shall remain in full force and effect notwithstanding the amendments contemplated hereby.
 
9.   Governing Law .  This Amendment shall be governed by and construed in accordance with the laws of the State of New York.
 
10.   Further Assurances .  The Borrower hereby consents and agrees that if this Amendment or any of the Security Documents shall at any time be deemed by the Lenders for any reason insufficient in whole or in part to carry out the true intent and spirit hereof or thereof, it will execute or cause to be executed such other and further assurances and documents as in the reasonable opinion of the Lenders may be reasonably required in order more effectively to accomplish the purposes of this Amendment or any of the Security Documents.
 
11.   Counterparts .  This Amendment may be executed in as many counterparts as may be deemed necessary or convenient, and by the different parties hereto on separate counterparts each of which, when so executed, shall be deemed to be an original but all such counterparts shall constitute but one and the same agreement.
 
12.   Headings; Amendment .  In this Amendment, section headings are inserted for convenience of reference only and shall be ignored in the interpretation of this Amendment.  This Amendment cannot be amended other than by written agreement signed by the parties hereto.

 

3

 

IN WITNESS WHEREOF, each of the parties hereto has executed this Amendment by its duly authorized representative on the day and year first above written.
 
                       BORROWER:

                       GENCO SHIPPING & TRADING
                                                                                   LIMITED , as Borrower

                       By /s/ John C. Wobensmith            
                        Name: John C. Wobensmith
                        Title:   CFO

                                                                                   Address :
                       299 Park Avenue, 20th floor
                       New York, NY 10171
                       Telephone:(646) 443-8550
                       Facsimile:  (646) 443-8551

 

 
4

 

                 LENDERS :

                 DNB NOR BANK ASA, NEW YORK
                 BRANCH , as Administrative Agent,
                 Collateral Agent, Mandated Lead Arranger,
                 Bookrunner and a Lender

                 By /s/ Nikolai A. Nachamkin
                   Name: Nikolai A. Nachamkin
                   Title:   Senior Vice President

                 By /s/ Cathleen Buckley                                                                 
                   Name: Cathleen Buckley
                   Title:   Vice President

 

 
5

                 BANK OF SCOTLAND PLC ,
                 as a Lender
 
                 By /s/ M.J. Stevens             
                                                                              Name:  M.J. Stevens
                                                                              Title:  Director

                                                                             By___________________
                                                                              Name:
                                                                              Title:

 

 
6

 
           ALLIANCE & LEICESTER
           COMMERCIAL FINANCE PLC,
          as a Lender
 
           By /s/ Chris Jones                                                                     
                      Name: Chris Jones
            Title:  Director, Corporate &  
                        Structured Finance
 
          By /s/ Paul Hickford            
              Name: Paul Hickford
               Title:   Head of Syndicated &
             Leveraged Finance

 

 
 
7

                 
                 CREDIT INDUSTRIEL ET
                 COMMERCIAL, NEW YORK BRANCH,
                 as a Lender
 
                 By /s/ Alex Aupoix             
             Name: Alex Aupoix
                      T itle:   Vice President
 
                 By /s/ Adrienne Molloy     
             Name: Adrienne Molloy
             Title:   Vice President

 

 
 
8

 

 

 
Exhibit 10.2

Genco Shipping & Trading Limited
Director Restricted Stock Grant Agreement
 
THIS AGREEMENT, made as of July 24, 2008, between GENCO   SHIPPING & TRADING LIMITED   (the “Company”) and _______________ (the “Participant”).
 
WHEREAS, the Company has adopted and maintains the Genco   Shipping & Trading Limited 2005 Equity Incentive Plan (the “Plan”) to provide certain key persons, on whose initiative and efforts the successful conduct of the business of the Company depends, with incentives to: (a) enter into and remain in the service of the Company, (b) acquire a proprietary interest in the success of the Company, (c) maximize their performance and (d) enhance the long-term performance of the Company;
 
WHEREAS, the Plan provides that the Board of Directors of the Company (the “Board of Directors”) shall administer the Plan and determine the key persons to whom awards shall be granted and the amount and type of such awards; and
 
WHEREAS, the Board of Directors has determined that the purposes of the Plan would be furthered by granting the Participant an award under the Plan as set forth in this Agreement;
 
NOW, THEREFORE, in consideration of the premises and the mutual covenants hereinafter set forth, the parties hereto hereby agree as follows:
 
1.   Grant of Restricted Stock .  Pursuant to, and subject to, the terms and conditions set forth herein and in the Plan, the Board of Directors hereby grants to the Participant 2,500 restricted shares (the “Restricted Stock”) of common stock of the Company, par value $0.01 per share (“Common Stock”).  
 
2.   Grant Date .  The Grant Date of the Restricted Stock is July 24, 2008.
 
3.   Incorporation of Plan .  All terms, conditions and restrictions of the Plan are incorporated herein and made part hereof as if stated herein.  If there is any conflict between the terms and conditions of the Plan and this Agreement, the terms and conditions of the Plan, as interpreted by the Board of Directors, shall govern.  Except as otherwise provided herein, all capitalized terms used herein shall have the meaning given to such terms in the Plan.
 
4.   Vesting .  Subject to the further provisions of this Agreement, the Restricted Stock shall vest on the earliest of (i) July 24, 2009, (ii) the date of the annual shareholders meeting of the Company next following the date hereof (the “Annual Meeting Date”) and (iii) the occurrence of a Change in Control, as defined in Section 3.8(a) of the Plan, as in effect on the date of such occurrence (each such date, the “Vesting Date”).
 
5.   Restrictions on Transferability .  Until a share of Restricted Stock vests, the Participant shall not transfer the Participant’s rights to such share of Restricted Stock or to any rights related thereto.  Any attempt to transfer unvested shares of Restricted Stock or any rights related thereto, whether by transfer, pledge, hypothecation or otherwise and whether voluntary or

 

 
 
involuntary, by operation of law or otherwise, shall not vest the transferee with any interest or right in or with respect to such shares of Restricted Stock or such related rights.
 
6.   Termination of Service .
 
(a)           In the event that the Participant’s Service with the Company terminates before the Vesting Date for any reason other than the Participant’s death or disability (as defined in the Plan), the Restricted Stock, together with any property received in respect of such shares, as set forth in Section 9 hereof, shall be forfeited as of the date such Service terminates, and the Participant promptly shall return to the Company any certificates evidencing the Restricted Stock, together with any cash dividends or other property received in respect of such shares.  For purposes hereof, “Service” means a continuous time period during which the Participant is at least one of the following:  an employee or a director of, or a consultant to, the Company.
 
(b)           In the event that the Participant’s Service with the Company terminates before the Vesting Date for reason of the Participant’s death or disability (as defined in the Plan), all shares of Restricted Stock shall become vested immediately prior to such termination of Service.
 
7.   Issuance of Shares .
 
(a)           Reasonably promptly after the Grant Date, the Company shall issue and deliver to the Participant a stock certificate, registered in the name of the Participant, evidencing the shares of Restricted Stock or shall instruct its transfer agent to issue shares of Restricted Stock which shall be maintained in book entry form on the books of the transfer agent.  Such certificate may bear the following legend:
 
“THE SALE, TRANSFER, ASSIGNMENT, PLEDGE, HYPOTHECATION ENCUMBRANCE OR OTHER DISPOSAL OF THE SECURITIES REPRESENTED BY THIS CERTIFICATE ARE SUBJECT TO THE TERMS OF THE GENCO   SHIPPING & TRADING LIMITED   2005 EQUITY INCENTIVE PLAN AND A RESTRICTED STOCK GRANT AGREEMENT BETWEEN GENCO   SHIPPING & TRADING LIMITED   AND THE HOLDER OF RECORD OF THE SECURITIES REPRESENTED BY THIS CERTIFICATE.  NO TRANSFER OF THE SECURITIES REPRESENTED BY THIS CERTIFICATE IN CONTRAVENTION OF SUCH PLAN AND RESTRICTED STOCK GRANT AGREEMENT SHALL BE VALID OR EFFECTIVE.  COPIES OF SUCH AGREEMENT MAY BE OBTAINED BY WRITTEN REQUEST MADE BY THE HOLDER OF RECORD OF THE CERTIFICATE TO THE SECRETARY OF GENCO   SHIPPING & TRADING LIMITED.”
 
If the Restricted Stock is in book entry form, it shall be subject to electronic coding or stop order indicating that such shares of Restricted Stock are restricted by the terms of this Agreement and the Plan.  Such legend, electronic coding or stop order shall not be removed until such shares of Restricted Stock vest.
 
(b)           Reasonably promptly after any such shares of Restricted Stock vest pursuant to Section 4 hereof, (i) in the case of certificated shares, in exchange for the surrender to the Company of the certificates evidencing the Restricted Stock, delivered to the Participant under Section 7(a) hereof, and the certificates evidencing any other securities received in respect of such

 

2

 
 
shares, if any, the Company shall issue and deliver to the Participant (or the Participant’s legal representative, beneficiary or heir) a certificate evidencing such shares of Restricted Stock and such other securities, free of the legend provided in Section 7(a) hereof and (ii) in the case of book entry shares, the Company shall cause to be lifted and removed any electronic coding or stop order established pursuant to Section 7(a) hereof.
 
(c)           The Company may require as a condition of the delivery of stock certificates or the removal of any electronic coding or stop order, pursuant to Section 7(b) hereof, that the Participant remit to the Company an amount sufficient in the opinion of the Company to satisfy any federal, state and other governmental tax withholding requirements related to the vesting of the applicable shares.  The Board of Directors, in its sole discretion, may permit the Participant to satisfy such obligation by delivering shares of Common Stock or by directing the Company to withhold from delivery shares of Common Stock, in either case valued at their Fair Market Value on the Vesting Date with fractional shares being settled in cash.
 
(d)           The Participant shall not be deemed for any purpose to be, or have rights as, a shareholder of the Company by virtue of the grant of Restricted Stock, except to the extent a stock certificate is issued therefor or an appropriate book entry is made on the books of the transfer agent reflecting the issuance thereof pursuant to Section 7(a) hereof, and then only from the date such certificate is issued or such book entry is made.  Upon the issuance of a stock certificate or the making of an appropriate book entry on the books of the transfer agent, the Participant shall have the rights of a shareholder with respect to the Restricted Stock, including the right to vote the shares, subject to the restrictions on transferability and the forfeiture provisions, as set forth in this Agreement.
 
8.   Securities Matters .  The Company shall be under no obligation to effect the registration pursuant to the Securities Act of 1933, as amended (the “1933 Act”) of any interests in the Plan or any shares of Common Stock to be issued thereunder or to effect similar compliance under any state laws.  The Company shall not be obligated to cause to be issued any shares, whether by means of stock certificates or appropriate book entries, unless and until the Company is advised by its counsel that the issuance of such shares is in compliance with all applicable laws, regulations of governmental authority and the requirements of any securities exchange on which shares of Common Stock are traded.  The Board of Directors may require, as a condition of the issuance of shares of Common Stock pursuant to the terms hereof, that the recipient of such shares make such covenants, agreements and representations, and that any certificates bear such legends and any book entries be subject to such electronic coding, as the Board of Directors, in its sole discretion, deems necessary or desirable.  The Participant specifically understands and agrees that the shares of Common Stock, if and when issued, may be “restricted securities,” as that term is defined in Rule 144 under the 1933 Act and, accordingly, the Participant may be required to hold the shares indefinitely unless they are registered under such Act or an exemption from such registration is available.
 
9.   Dividends, etc .  Any cash dividends or other property (but not including securities) received by a Participant with respect to a share of Restricted Stock shall be returned to the Company in the event such share of Restricted Stock is forfeited.  Any securities received by a Participant with respect to a share of Restricted Stock as a result of any dividend, recapitalization, merger, consolidation, combination, exchange of shares or otherwise will not vest until such share of Restricted Stock vests and shall be forfeited if such share of Restricted Stock is forfeited.  Unless the

 

3

 
 
Board of Directors otherwise determines, such securities shall bear the legend or be subject to the electronic coding or stop order set forth in Section 7(a) hereof.
 
10.   Delays or Omissions .  No delay or omission to exercise any right, power or remedy accruing to any party hereto upon any breach or default of any party under this Agreement, shall impair any such right, power or remedy of such party, nor shall it be construed to be a waiver of any such breach or default, or an acquiescence therein, or of or in any similar breach or default thereafter occurring, nor shall any waiver of any single breach or default be deemed a waiver of any other breach or default theretofore or thereafter occurring.  Any waiver, permit, consent or approval of any kind or character on the part of any party of any breach or default under this Agreement, or any waiver on the part of any party or any provisions or conditions of this Agreement, must be in a writing signed by such party and shall be effective only to the extent specifically set forth in such writing.
 
11.   Right of Discharge Preserved .  Nothing in this Agreement shall confer upon the Participant the right to continue as a director of or in other service of the Company, or affect any right which the Company may have to terminate such service.
 
12.   Integration .  This Agreement contains the entire understanding of the parties with respect to its subject matter.  There are no restrictions, agreements, promises, representations, warranties, covenants or undertakings with respect to the subject matter hereof other than those expressly set forth herein.  This Agreement, including, without limitation, the Plan, supersedes all prior agreements and understandings between the parties with respect to its subject matter.
 
13.   Counterparts .  This Agreement may be executed in two or more counterparts, each of which shall be deemed an original, but all of which shall constitute one and the same instrument.
 
14.   Governing Law .  This Agreement shall be governed by and construed and enforced in accordance with the laws of the State of New York, without regard to the provisions governing conflict of laws.
 
15.   Obligation to Notify .  If the Participant makes the election permitted under Section 83(b) of the Internal Revenue Code of 1986, as amended (that is, an election to include in gross income in the year of transfer the amounts specified in Section 83(b)), the Participant shall notify the Company of such election within 10 days of filing notice of the election with the Internal Revenue Service and shall within the same 10-day period remit to the Company an amount sufficient in the opinion of the Company to satisfy any federal, state and other governmental tax withholding requirements related to such inclusion in Participant’s income. The Participant should consult with his or her tax advisor to determine the tax consequences of acquiring the Restricted Stock and the advantages and disadvantages of filing the Section 83(b) election.  The Participant acknowledges that it is his or her sole responsibility, and not the Company’s, to file a timely election under Section 83(b), even if the Participant requests the Company or its representatives to make this filing on his or her behalf.
 
16.   Reduction in Benefits .  Unless the Participant and the Company agree otherwise in writing, in the event that the Participant would incur an Excise Tax on any payments or benefits under this Agreement as a result of a Change of Control (or any other change described in Section 280G(b)(2) of the Code), the Company shall reduce the payments or benefits to be paid to or

 

4

 
 
granted to Participant hereunder to the greater of (i) the maximum amount payable to the Participant without the imposition of any Excise Tax with respect to the Restricted Stock and (ii) the amount that yields the Participant the greatest after-tax amount of benefits under this Agreement after taking into account any Excise Tax imposed on Participant, whether due to payments and benefits under this Agreement or otherwise.  “Excise Tax” means the tax imposed by Section 4999 of the Code and any successor tax.  The determination of whether the Participants payments and benefits should be reduced and the amount of any such reduction shall be made by independent counsel selected by the Participant and reasonably acceptable to the Company (“Independent Counsel”).  For purposes of such determination, (x) the total amount of payments and benefits received by the Participant as a result of such Change in Control (or such other change) shall be treated as “parachute payments” within the meaning of Section 280G(b)(2) of the Code, and all “excess parachute payments” within the meaning of Section 280G(b)(1) of the Code shall be treated as subject to the Excise Tax, except to the extent that, in the opinion of Independent Counsel, a payment or benefit hereunder (in whole or in part) does not constitute a “parachute payment” within the meaning of Section 280G(b)(2) of the Code and the Treasury Regulations under Section 280G of the Code (the “Regulations”), or such “excess parachute payments” (in whole or in part) are not subject to the Excise Tax; (y) the amount of the payments and benefits hereunder that shall be treated as subject to the Excise Tax shall be equal to the lesser of (A) the total amount of such payments and benefits or (B) the amount of “excess parachute payments” within the meaning of Section 280G(b)(1) of the Code (after applying clause (x) hereof); and (z) the value of any noncash benefits or any deferred payment or benefit shall be determined by Independent Counsel in accordance with the principles of Sections 280G(d)(3) and (4) of the Code.  All fees and expenses of Independent Counsel shall be borne by the Company.
 
17.   Participant Acknowledgment .  The Participant hereby acknowledges receipt of a copy of the Plan.  The Participant hereby acknowledges that all decisions, determinations and interpretations of the Board of Directors in respect of the Plan, this Agreement and the Restricted Stock shall be final and conclusive.
 
[Signature page follows]

 

5

 
IN WITNESS WHEREOF, the Company has caused this Agreement to be duly executed by its duly authorized officer, and the Participant has hereunto signed this Agreement on his own behalf, thereby representing that he has carefully read and understands this Agreement and the Plan as of the day and year first written above.

                             GENCO   SHIPPING & TRADING LIMITED

                                                                 By:	_______________________	
                                                                 Name:	John C. Wobensmith	
                                                                 Title:	Chief Financial Officer	
                                                                 ________________________________	
                                                                 [Participant Name]      	

 

 

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Exhibit 10.3

                                                                                                                                Norwegian Shipbrokers’ Association’s
MEMORANDUM OF AGREEMENT                                                                                                                                                                                        Memorandum of Agreement for sale and
                                                                                                                                purchase of ships.  Adopted by the Baltic
                                                                                                                              and International Maritime Council
Dated: 7 th May 2008                                                                                                             (BIMCO ) in 1956.
                                                                      Code-name
                                                                                                               SALEFORM 1993
                                                                                                                              Revised 1966, 1983 and 1986/7

BOCIMAR INTERNATIONAL N.V.  and DELPHIS N.V.„ hereinafter called the Sellers, have agreed to sell, and
 
GENCO CAVALIER LLC , a Marshall Islands limited liability company fully guaranteed by Genco Shipping and Trading Limited hereinafter called the Buyers, have agreed to buy
 
Name: M/V CMB Yangtze
 
Classification Society/Class: NIPPON KAIJI KYOKAI (NKK)
 
Built: May 2007                                            By: Dayang Shipbuilding Co. Ltd
 
Flag: Belgian                                                 Place of Registration: Antwerp
 
Call Sign: ONEI                                             Grt/Nrt: 31261/18291
 
IMO Number: 9345817
 
hereinafter called the Vessel, on the following terms and conditions:
 
Definitions
 
“Banking Days” are days on which banks are open both in the country of Belgium and the currency stipulated for the Purchase Price in Clause 1 and in the place of closing stipulated in Clause 8.
 
“Charter Party” is the charter party dated 29 th March 2008 between the Sellers and Samsun Logix Corporation of Seoul (the “Charterers”) which is attached to this Agreement.
 
“In writing” or “written” means a letter handed over from the Sellers to the Buyers or vice versa, a registered letter, e-mail, telefax or other modern form of written communication.
 
“Classification Society” or “Class” means the Society referred to in line 4.
 
1.  	Purchase Price: US$ 74,000,000 (United States Dollars Seventy Four Million)	
 
2.  	Deposit	
 
As security for the correct fulfillment of this Agreement the Buyers shall pay a deposit of 15% (fifteen per cent) of the Purchase Price within 3 (three) Banking Days from the date of the exchange by fax/e-mail of a copy of this Agreement signed by the Sellers and the Buyers.  This

 

 
 
deposit shall be placed with Sellers’ nominated bank , and held by them in a joint interest bearing account for the Sellers and the Buyers, to be released in accordance with joint written instructions of the Sellers and the Buyers.  Interest, if any, to be credited to the Buyers.  Any fee charged for holding/lifting the said deposit shall be borne equally by the Sellers and the Buyers.
 
3.  	Payment	
 
The Buyers shall lodge the balance of the Purchase money with the Sellers’ nominated Bank not later than one banking day prior to the estimated date of delivery of the Vessel which shall be released against presentation of a copy of the protocol of delivery and acceptance signed by the Buyers and Sellers .   The said Purchase Price shall be paid in full free of bank charges to Sellers’ account on delivery of the Vessel but not later than 3 banking days after the Vessel is in all respects physically ready for delivery in accordance with the terms and conditions of this Agreement and Notice of Readiness has been given in accordance with Clause 5.
 
4.  	Inspections	
 
a)*           The Buyers have inspected and accepted the Vessel’s Class Records and have waived their right for inspection.  The Vessel is therefore accepted by the Buyers and this sale is outright.
 
and the sale is outright and definite,
 
b) *         The Buyers have also accepted the Vessel’s classification records.
 
4 a) and 4b) are alternatives; delete whichever is not applicable.  In the absence of deletions, alternative 4a) to apply.
 
5.  	Notices, time and place of delivery	
 
a)           The Sellers shall provide the Buyers with 45 (fourty five), 30 (thirty), 15 (fifteen) and 5 (five) days approximate notice of the estimated time of delivery and 1 (one) day definite notice of delivery .  When the Vessel is at the place of delivery and in every respect physically ready for delivery in accordance with this Agreement the Sellers shall give the Buyers a written Notice of Readiness for delivery.
 
b)           The Vessel shall be delivered and taken over safely afloat at a safe and accessible berth or anchorage at Sellers’ option
 
Place or Yard: see clause 19.
 
Expected time of delivery: The Vessel will be delivered to the Buyers upon completion of the current Charterparty with BHP and concurrently with delivery of the Vessel to Charterers under the Charterparty – 1 st July -31 st July 2008
 
c)           Date of cancelling (see clauses 5 c), 6b) (iii) and 14): 1 st August 2008

 

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If the Sellers anticipate that, notwithstanding the exercise of due diligence by them, the Vessel will not be ready for delivery by the cancelling date they may notify the Buyers in writing stating the date when they anticipate that the Vessel will be ready for delivery and propose a new cancelling date.  Upon receipt of such notification the Buyers shall have the option of either cancelling this Agreement in accordance with Clause 14 within 7 running days of receipt of the notice or of accepting the new date as the new cancelling date.  If the Buyers have not declared their option within 7 running days notification or if the Buyers accept the new date, the date proposed in the Sellers’ notification shall be deemed to be the new cancelling date and shall be substituted for the cancelling date stipulated in line 61.
 
If this Agreement is maintained with the new cancelling date all other terms and conditions hereof including those contained in Clauses 5 a) and 5 c) shall remain unaltered and in full force and effect.  Cancellation or failure to cancel shall be entirely without prejudice to any claim for damages the Buyers may have under Clause 14 for the Vessel not being ready by the original cancelling date.
 
d)           Should the Vessel become an actual, constructive or compromised total loss before delivery the deposit together with interest earned shall be released immediately to the Buyers whereafter this Agreement shall be null and void.
 
6.  	Divers Inspection	
 
a)**
 
b)**        (i) The Vessel is to be delivered without drydocking.  However, the Buyers shall have the right at their expense to arrange for an underwater inspection by a diver approved by the Classification Society as soon as practicably possible upon arrival at the port of delivery .  The Sellers shall at their cost make the Vessel available for such inspection.  The extent of the inspection and the conditions under which it is performed shall be to the satisfaction of the Classification Society.  If the conditions at the port of delivery are unsuitable for such inspection, the Sellers shall make the Vessel available at a suitable alternative place near to the delivery port.
 
(ii)           If the rudder, propeller, bottom or other underwater parts below the deepest load line are found broken, damaged or defective so as to affect the Vessel’s class, then unless repairs can be carried out afloat to the satisfaction of the Classification Society, the Sellers shall arrange for the Vessel to be drydocked at their expense for inspection by the Classification Society of the Vessel’s underwater parts below the deepest load line, the extent of the inspection being in accordance with the Classification Society’s rules.  If the rudder, propeller, bottom or other underwater parts below the deepest load line are found broken, damaged or defective so as to affect the Vessel’s class, such defects shall be made good by the Sellers at their expense to the satisfaction of the Classification Society without condition/recommendation*.
 
Should damage(s) be found to the underwater parts which affect the clean certificate of class of the Vessel but which in the opinion of the Class surveyor present does or do not require drydocking prior to the next scheduled drydocking of the Vessel, the Buyers and the Sellers, if they cannot agree on adequate compensation, are to apply to 2 (two) reputable ship repairers in P.R. China or Singapore, 1 (one) to be selected by the Buyers

 

3

 
 
and 1 (one) to be selected by the Sellers, in order to obtain quotations for the direct cost to repair the specified damage(s) only.  Thereafter, it will be at the option of the Sellers whether to repair such damage(s) prior to delivery or to deliver the Vessel with the said damage(s) against a reduction in the Purchase Price of the cost of repairs, which are agreed to be defined as the average of the 2 (two) quotations obtained.  The Classification Society shall be the sole arbitrator as to whether any damage found may constitute a condition/recommendation.
 
(iii)           If the Vessel is to be drydocked pursuant to Clause 6 b) (ii) and no suitable dry-docking facilities are available at the port of delivery, the Sellers shall take the Vessel to a port where suitable drydocking facilities are available, whether within or outside the delivery range as per Clause 5 b).  Once drydocking has taken place the Sellers shall deliver the Vessel at the port of drydocking which shall, for the purpose of this Clause, become the new port of delivery.
 
c)           If the Vessel is drydocked pursuant to Clause 6 b) above
 
(i)           the Classification Society may require survey of the tailshaft system, the extent of the survey being to the satisfaction of the Classification surveyor.  If such survey is not required by the Classification Society, the Buyers shall have the right to require the tailshaft to be drawn and surveyed by the Classification Society, the extent of the survey being in accordance with the Classification Society’s rules for tailshaft survey and consistent with the current stage of the Vessel’s survey cycle.  The Buyers shall declare whether they require the tailshaft to be drawn and surveyed not later than by the completion of the inspection by the Classification Society.  The drawing and refitting of the tailshaft shall be arranged by the Sellers.  Should any parts of the tailshaft system be condemned or found defective so as to affect the Vessel’s class, those parts shall be renewed or made good at the Sellers’ expense to the satisfaction of the Classification Society without condition/recommendation*.
 
(ii)           the expenses relating to the survey of the tailshaft system shall be borne by the Buyers unless the Classification Society requires such survey to be carried out, in which case the Sellers shall pay these expenses.  The Sellers shall also pay the expenses if the Buyers require the survey and parts of the system are condemned or found defective or broken so as to affect the Vessel’s class*.
 
(iii)           the expenses in connection with putting the Vessel in and taking her out of drydock, including the drydock dues and the Classification Society’s fees shall be paid by the Sellers if the Classification Society issues any condition/recommendation* as a result of the survey or if it requires survey of the tailshaft system.  In all other cases the Buyers shall pay the aforesaid expenses, dues and fees.
 
(iv)           the Buyers’ representative shall have the right to be present in the dry-dock at his risk, but without interfering with the work or decisions of the Classification surveyor.
 
(v)           the Buyers shall have the right to have the underwater parts of the Vessel cleaned and painted at their risk and expense without interfering with the Sellers’ or the Classification surveyor’s work, if any, and without affecting the Vessel’s timely delivery.  If, however, the Buyers’ work in drydock is still in progress when the Sellers have completed the work which the

 

4

 
Sellers are required to do, the additional docking time needed to complete the Buyers’ work shall be for the Buyers’ risk and expense.  In the event that the Buyers’ work requires such additional time, the Sellers may upon completion of the Sellers’ work tender Notice of Readiness for delivery whilst the Vessel is still in drydock and the Buyers shall be obliged to take delivery in accordance with Clause 3, whether the Vessel is in drydock or not and irrespective of Clause 5
 
b).   Responsibility for undocking will be for Buyers’ account .
 
*           Notes, if any, in the surveyor’s report which are accepted by the Classification Society without condition/recommendation are not to be taken into account.
 
**         6a) and 6b) are alternatives; delete whichever is not applicable.  In the absence of deletions, alternative 6a) to apply.
 
7.  	Spares/bunkers, etc.	
 
The Sellers shall deliver the Vessel to the Buyers with everything belonging to her on board and on shore and including spare tail-end shaft(s) and/or spare propeller(s)/propeller blade(s), if any, belonging to the Vessel used or unused, whether on board or not shall become the Buyers’ property, but spares on order are to be excluded.  Forwarding charges, if any, shall be for the Buyers’ account.  The Sellers are not required to replace spare parts including spare tail-end shaft(s) and spare propeller(s)/propeller blade(s) which are taken out of spare and used as replacement prior to delivery, but the replaced items shall be the property of the Buyers.  The radio installation and navigational equipment shall be included in the sale without extra payment if they are the property of the Sellers.  Unused stores and provisions, if any, shall be included in the sale and be taken over by the Buyers without extra payment.
 
The Sellers have the right to take ashore crockery, plates, cutlery, linen and other articles bearing the Sellers’ flag or name, provided they replace same with similar unmarked items.  Library, forms, etc., exclusively for use in the Sellers’ vessel(s), shall be excluded without compensation.  Captain’s, Officers’ and Crew’s personal belongings including the slop chest are to be excluded from the sale, as well as the following additional items (including items on hire):
 
Oxygen and acetylene bottles
 
Videotel safety movies
 
The Buyers shall take over the remaining bunkers and unused greases and lubricating oils in tanks and drums as onboard and pay to the Sellers the contract price as evidenced by invoices/vouchers .
 
Payment under this Clause shall be made at the same time and place and in the same currency as the Purchase Price.
 
8.  	Documentation	
 
The place of closing: a venue nominated by the Sellers
 
In exchange for payment of the Purchase Price the Sellers shall furnish the Buyers with satisfactory documentation reasonably required to effect the registration of the Vessel under

 

5

 
the flag and ownership of the Buyers to be listed in Addendum to this Agreement.  Such documentation to be incorporated into an addendum to the MOA.
 
At the time of delivery the Buyers and Sellers shall sign and deliver to each other a Protocol of Delivery and Acceptance confirming the date and time of delivery of the Vessel from the Sellers to the Buyers.
 
At the time of delivery the Sellers shall hand to the Buyers, the classification certificate(s) as well as plans, etc., which are on board the Vessel.  Other certificates which are on board the Vessel shall also be handed over to the Buyers unless the Sellers are required to retain the same, in which case the Buyers to have the right to take copies.  Other technical documentation which may be in the Sellers’ possession shall be promptly forwarded to the Buyers at their expense, if they so request.  The Sellers may keep the Vessel’s log books but the Buyers to have the right to take copies of same at Buyers’ costs .
 
9.  	Encumbrances	
 
The Sellers warrant that the Vessel, at the time of delivery, is free from encumbrances, mortgages and maritime liens or any other debts whatsoever.  The Sellers hereby undertake to indemnify the Buyers against all consequences of claims made against the Vessel, which have been incurred prior to the time of delivery.
 
10.  	Taxes, etc.	
 
Any taxes, fees and expenses in connection with the purchase and registration under the Buyers’ flag shall be for the Buyers’ account, whereas similar charges in connection with the closing of the Sellers’ register shall be for the Sellers’ account.
 
11.  	Condition on delivery	
 
The Vessel with everything belonging to her shall be at the Sellers’ risk and expense until she is delivered to the Buyers, but subject to the terms and conditions of this Agreement she shall be delivered and taken over “as is where is” .
 
However, the Vessel shall be delivered with her class maintained without condition/ recommendation except for the Temporary repaired side shell plate IWO No.2 Void Space in bet. Fr. No. 145-148, SL9-11, (Strake N), free of average damage affecting the Vessel’s class and with her classification certificates and national and international certificates, as well as all other certificates the Vessel had, clean, valid and unextended without condition/recommendation by Class or the relevant authorities
 
“Inspection” in this Clause 11, shall mean the Buyers’ inspection according to Clause 4 a) or 4 b), if applicable, or the Buyers’ inspection prior to the signing of this Agreement.  If the Vessel is taken over without inspection, the date of this Agreement shall be the relevant date.
 
*           Notes, if any, in the surveyor’s report which are accepted by the Classification Society without condition/recommendation are not to be taken into account.

 

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12.  	Name/Markings	
 
Upon delivery the Buyers undertake to change the name of the Vessel and alter funnel marking.
 
13.  	Buyers’ default	
 
Should the deposit not be paid in accordance with Clause 2, the Sellers have the right to cancel this Agreement, and they shall be entitled to claim compensation for their losses and for all expenses incurred together with interest.
 
Should the Purchase Price not be paid in accordance with Clause 3, the Sellers have the right to cancel this Agreement, in which case the deposit together with interest earned shall be released to the Sellers.  If the deposit does not cover their loss, the Sellers shall be entitled to claim further compensation for their losses and for all expenses incurred together with interest.
 
14.  	Sellers’ default	
 
Should the Sellers fail to give Notice of Readiness in accordance with Clause 5 a) or fail to be ready to validly complete a legal transfer by the date stipulated in line 61 the Buyers shall have the option of cancelling this Agreement provided always that the Sellers shall be granted a maximum of 3 Banking Days after Notice of Readiness has been given to make arrangements for the documentation set out in Clause 8.  If after the Notice of Readiness has been given but before the Buyers have taken delivery, the Vessel ceases to be in all respects physically ready for delivery and is not made physically ready again in every respect by the date stipulated in line 61 and new Notice of Readiness is given, the Buyers shall retain their option to cancel.  In the event that the Buyers elect to cancel this Agreement the deposit together with interest earned shall be released to them immediately.
 
Should the Sellers fail to give Notice of Readiness by the date stipulated in line 61 or fail to be ready to validly complete a legal transfer as aforesaid they shall make due compensation to the Buyers for their loss and for all expenses together with interest if their failure is due to proven negligence and whether or not the Buyers cancel this Agreement.
 
15.  	Buyers’ representatives	
 
After this Agreement has been signed by both parties and the deposit has been lodged, the Buyers have the right to place two representatives on board the Vessel, as observers only and without interference with the working of the Vessel , at their sole risk and expense at the last loading port in final voyage .  These representatives are on board for the purpose of familiarisation and in the capacity of observers only, and they shall not interfere in any respect with the operation of the Vessel.  The Buyers’ representatives shall sign the Sellers’ letter of indemnity prior to their embarkation.   Victualling expenses and communication expenses of Buyers’ representatives are for Buyers’ account and will be paid together with the Purchase Price .
 
16.  	Arbitration	

 

7

 
 
a)*           This Agreement shall be governed by and construed in accordance with English law and any dispute arising out of this Agreement shall be referred to arbitration in London in accordance with the Arbitration Act 1996 or any statutory modification or re-enactment thereof for the time being in force, one arbitrator being appointed by each party.  On the receipt by one party of the nomination in writing of the other party’s arbitrator, that party shall appoint their arbitrator within fourteen days, failing which the decision of the single arbitrator appointed shall apply.  If two arbitrators properly appointed shall not agree they shall appoint an umpire whose decision shall be final.
 
b)*

c)*

*16 a), b) and 16 c) are alternatives; delete whichever is not applicable.  In the absence of deletions, alternative 16 a) to apply.
 
Clause 17
 
Negotiations are to be kept strictly private and confidential.  Sellers and Buyers are public companies and may have to make public announcement of this transaction, in which case Buyers’–Sellers’ name not to be disclosed without the prior approval of the Buyers – the Sellers.
 
Clause 18
 
The Buyers are to take over and perform the Charter Party and confirm they have approved the terms of the Charter Party which is attached to this Agreement and is to form part of same.  It is understood Buyers will be taking over this Charter Party in accordance with the terms of a standard novation agreement (which is to be based on standard wording usually used for this type of agreement), the consent to whose terms will not be unreasonably withheld.
 
Notwithstanding the above, the Buyers will require that the novation agreement provides that since Buyers’ interests shall be subject to United States of America (USA) and United Nations (UN) laws/regulations/sanctions (as amended from time to time) the Vessel shall not be permitted to trade to any port that would result in any contravention whatsoever of any of those laws/regulations/sanctions.
 
Should the Charterers refuse to insert wording in the novation agreement having substantially the same tenor as in the foregoing paragraph so as to conclude the novation agreement within 14 days after this agreement is signed by both Buyers and Sellers then this sale is to be considered null and void and the deposit plus any interest is to be returned to the Buyers.  In such event this shall not have any bearing whatsoever on the sales of either ‘CMB Aurélie’ or ‘CMB Laetitia’ which are considered as fully independent sales transactions.
 
However should the Charterers refuse to agree on the content of the novation agreement for reasons others than Buyers’ requirements provided in paragraphs 2 and 3 above, Sellers retain the option to remain in the Charter Party on a back-to-back basis with Charterers and

 

8

 
 
Buyers.  If the vessel is chartered back to Sellers, the charterparty will reflect the Buyers requirements of paragraphs 2 and 3 above.
 
Clause 19
 
As the Buyers interests shall be subject to United States of America (“USA”) and United Nations (“UN”) laws/regulations/sanctions.  The Sellers shall not be entitled to deliver the Vessel to the Buyers in any port that would result in any contravention whatsoever of any of those laws/regulations/sanctions.  The Buyers represent that the following countries are subject to USA’s laws/regulations/sanctions: Former Yugoslavia, Belarus, Burma, Ivory Coast, Cuba, Congo, Iran, Iraq, Liberia, North Korea, Sudan, Syria, Zimbabawe.

 
The Sellers                                                                                                     The Buyers

/s/ Benoit Timmermans                                                      /s/ Robert Gerald Buchanan                   
For and on behalf of                                                                                                 For and on behalf of
BOCIMAR INTERNATIONAL NV /DELPHIS NV                                               GENCO CAVALIER LLC
Name:  Benoit Timmermans                                               Name: Robert G. Buchanan
Title:  Director                                                                                                   Title: Manager
                                                                                                                                         9th May 2008  

 

9

 

 

Exhibit 10.4

                                                                                                                                Norwegian Shipbrokers’ Association’s
MEMORANDUM OF AGREEMENT                                                                                                                                                                                        Memorandum of Agreement for sale and
                                                                                                                                purchase of ships.  Adopted by the Baltic
                                                                                                                              and International Maritime Council
Dated: 7 th May 2008                                                                        (BIMCO ) in 1956.
                                                                                  Code-name
                                                                                                               SALEFORM 1993
                                                                                                                              Revised 1966, 1983 and 1986/7

 
BOCIMAR INTERNATIONAL N.V., hereinafter called the Sellers, have agreed to sell, and
 
GENCO ____________ LLC , a Marshall Islands limited liability company fully guaranteed by Genco Shipping and Trading Limited hereinafter called the Buyers, have agreed to buy
 
Name: M/V CMB ________
 
Classification Society/Class: BUREAU VERITAS (BV)
 
Built: _____ 2007                                            By:  Jiangnan Shipyard (Group) Co., Ltd
 
Flag: Belgian                                                  Place of Registration: Antwerp
 
Call Sign:                                                       Grt/Nrt:
 
IMO Number:
 
hereinafter called the Vessel, on the following terms and conditions:
 
Definitions
 
“Banking Days” are days on which banks are open both in the country of Belgium and the currency stipulated for the Purchase Price in Clause 1 and in the place of closing stipulated in Clause 8.
 
“In writing” or “written” means a letter handed over from the Sellers to the Buyers or vice versa, a registered letter, e-mail, telefax or other modern form of written communication.
 
“Classification Society” or “Class” means the Society referred to in line 4.
 
1.  	Purchase Price: US$ ___________ (United States Dollars ____________ Million)	
 
2.  	Deposit	
 
As security for the correct fulfillment of this Agreement the Buyers shall pay a deposit of 15% (fifteen per cent) of the Purchase Price within 3 (three) Banking Days from the date of the exchange by fax/e-mail of a copy of this Agreement signed by the Sellers and the Buyers.  This deposit shall be placed with Sellers’ nominated bank , and held by them in a joint interest bearing account for the Sellers and the Buyers, to be released in accordance with joint written instructions of the Sellers and the Buyers.  Interest, if any, to be credited to the Buyers.  Any fee charged for holding/lifting the said deposit shall be borne equally by the Sellers and the Buyers.

 
 
3.  	Payment	
 
The Buyers shall lodge the balance of the Purchase money with the Sellers’ nominated Bank not later than one banking day prior to the estimated date of delivery of the Vessel which shall be released against presentation of a copy of the protocol of delivery and acceptance signed by the Buyers and Sellers .   The said Purchase Price shall be paid in full free of bank charges to Sellers’ account on delivery of the Vessel but not later than 3 banking days after the Vessel is in all respects physically ready for delivery in accordance with the terms and conditions of this Agreement and Notice of Readiness has been given in accordance with Clause 5.
 
4.  	Inspections	
 
a)*          The Buyers have inspected and accepted the Vessel’s Class Records and have waived their right for inspection.  The Vessel is therefore accepted by the Buyers and this sale is outright.
 
and the sale is outright and definite,
 
b) *          [The Buyers have also accepted the Vessel’s classification records.]
 
4 a) and 4b) are alternatives; delete whichever is not applicable.  In the absence of deletions, alternative 4a) to apply.
 
5.  	Notices, time and place of delivery	
 
a)           The Sellers shall provide the Buyers with 45 (fourty five), 30 (thirty), 15 (fifteen) and 5 (five) days approximate notice of the estimated time of delivery and 1 (one) day definite notice of delivery .  When the Vessel is at the place of delivery and in every respect physically ready for delivery in accordance with this Agreement the Sellers shall give the Buyers a written Notice of Readiness for delivery.
 
b)           The Vessel shall be delivered and taken over safely afloat at a safe and accessible berth or anchorage at Sellers’ option
 
Place or Yard: at Sellers’ option.
 
Expected time of delivery:  _________________ 2008.  The Vessel will be delivered to the Buyers upon completion of the [current voyage / current time charterparty expiring latest September 30th 2008 without any intervening voyages by the Sellers
 
c)           Date of cancelling (see clauses 5 c), 6b) (iii) and 14): ___________ 2008
 
If the Sellers anticipate that, notwithstanding the exercise of due diligence by them, the Vessel will not be ready for delivery by the cancelling date they may notify the Buyers in writing stating the date when they anticipate that the Vessel will be ready for delivery and propose a new cancelling date.  Upon receipt of such notification the Buyers shall have the option of either cancelling this Agreement in accordance with Clause 14 within 7 running days of receipt of the

2

 
notice or of accepting the new date as the new cancelling date.  If the Buyers have not declared their option within 7 running days notification or if the Buyers accept the new date, the date proposed in the Sellers’ notification shall be deemed to be the new cancelling date and shall be substituted for the cancelling date stipulated in line 61.
 
If this Agreement is maintained with the new cancelling date all other terms and conditions hereof including those contained in Clauses 5 a) and 5 c) shall remain unaltered and in full force and effect.  Cancellation or failure to cancel shall be entirely without prejudice to any claim for damages the Buyers may have under Clause 14 for the Vessel not being ready by the original cancelling date.
 
d)           Should the Vessel become an actual, constructive or compromised total loss before delivery the deposit together with interest earned shall be released immediately to the Buyers whereafter this Agreement shall be null and void.
 
6.  	Divers Inspection	
 
a)**
 
b)**         (i) The Vessel is to be delivered without drydocking.  However, the Buyers shall have the right at their expense to arrange for an underwater inspection by a diver approved by the Classification Society as soon as practicably possible upon arrival at the port of delivery .  The Sellers shall at their cost make the Vessel available for such inspection.  The extent of the inspection and the conditions under which it is performed shall be to the satisfaction of the Classification Society.  If the conditions at the port of delivery are unsuitable for such inspection, the Sellers shall make the Vessel available at a suitable alternative place near to the delivery port.
 
(ii)           If the rudder, propeller, bottom or other underwater parts below the deepest load line are found broken, damaged or defective so as to affect the Vessel’s class, then unless repairs can be carried out afloat to the satisfaction of the Classification Society, the Sellers shall arrange for the Vessel to be drydocked at their expense for inspection by the Classification Society of the Vessel’s underwater parts below the deepest load line, the extent of the inspection being in accordance with the Classification Society’s rules.  If the rudder, propeller, bottom or other underwater parts below the deepest load line are found broken, damaged or defective so as to affect the Vessel’s class, such defects shall be made good by the Sellers at their expense to the satisfaction of the Classification Society without condition/recommendation*.
 
Should damage(s) be found to the underwater parts which affect the clean certificate of class of the Vessel but which in the opinion of the Class surveyor present does or do not require drydocking prior to the next scheduled drydocking of the Vessel, the Buyers and the Sellers, if they cannot agree on adequate compensation, are to apply to 2 (two) reputable ship repairers in P.R. China or Singapore, 1 (one) to be selected by the Buyers and 1 (one) to be selected by the Sellers, in order to obtain quotations for the direct cost to repair the specified damage(s) only.  Thereafter, it will be at the option of the Sellers whether to repair such damage(s) prior to delivery or to deliver the Vessel with the said damage(s) against a reduction in the Purchase Price of the cost of repairs, which are agreed to be defined as the average of the 2 (two) quotations obtained.  The Classification Society shall be the sole arbitrator as to whether any damage found may constitute a condition/recommendation.

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(iii)           If the Vessel is to be drydocked pursuant to Clause 6 b) (ii) and no suitable dry-docking facilities are available at the port of delivery, the Sellers shall take the Vessel to a port where suitable drydocking facilities are available, whether within or outside the delivery range as per Clause 5 b).  Once drydocking has taken place the Sellers shall deliver the Vessel at the port of drydocking which shall, for the purpose of this Clause, become the new port of delivery.
 
c)           If the Vessel is drydocked pursuant to Clause 6 b) above
 
(i)           the Classification Society may require survey of the tailshaft system, the extent of the survey being to the satisfaction of the Classification surveyor.  If such survey is not required by the Classification Society, the Buyers shall have the right to require the tailshaft to be drawn and surveyed by the Classification Society, the extent of the survey being in accordance with the Classification Society’s rules for tailshaft survey and consistent with the current stage of the Vessel’s survey cycle.  The Buyers shall declare whether they require the tailshaft to be drawn and surveyed not later than by the completion of the inspection by the Classification Society.  The drawing and refitting of the tailshaft shall be arranged by the Sellers.  Should any parts of the tailshaft system be condemned or found defective so as to affect the Vessel’s class, those parts shall be renewed or made good at the Sellers’ expense to the satisfaction of the Classification Society without condition/recommendation*.
 
(ii)           the expenses relating to the survey of the tailshaft system shall be borne by the Buyers unless the Classification Society requires such survey to be carried out, in which case the Sellers shall pay these expenses.  The Sellers shall also pay the expenses if the Buyers require the survey and parts of the system are condemned or found defective or broken so as to affect the Vessel’s class*.
 
(iii)           the expenses in connection with putting the Vessel in and taking her out of drydock, including the drydock dues and the Classification Society’s fees shall be paid by the Sellers if the Classification Society issues any condition/recommendation* as a result of the survey or if it requires survey of the tailshaft system.  In all other cases the Buyers shall pay the aforesaid expenses, dues and fees.
 
(iv)           the Buyers’ representative shall have the right to be present in the dry-dock at his risk, but without interfering with the work or decisions of the Classification surveyor.
 
(v)           the Buyers shall have the right to have the underwater parts of the Vessel cleaned and painted at their risk and expense without interfering with the Sellers’ or the Classification surveyor’s work, if any, and without affecting the Vessel’s timely delivery.  If, however, the Buyers’ work in drydock is still in progress when the Sellers have completed the work which the Sellers are required to do, the additional docking time needed to complete the Buyers’ work shall be for the Buyers’ risk and expense.  In the event that the Buyers’ work requires such additional time, the Sellers may upon completion of the Sellers’ work tender Notice of Readiness for delivery whilst the Vessel is still in drydock and the Buyers shall be obliged to take delivery in

4

 
accordance with Clause 3, whether the Vessel is in drydock or not and irrespective of Clause 5 b).   Responsibility for undocking will be for Buyers’ account .
 
*           Notes, if any, in the surveyor’s report which are accepted by the Classification Society without condition/recommendation are not to be taken into account.
 
**         6a) and 6b) are alternatives; delete whichever is not applicable.  In the absence of deletions, alternative 6a) to apply.
 
7.  	Spares/bunkers, etc.	
 
The Sellers shall deliver the Vessel to the Buyers with everything belonging to her on board and on shore and including spare tail-end shaft(s) and/or spare propeller(s)/propeller blade(s), if any, belonging to the Vessel used or unused, whether on board or not shall become the Buyers’ property, but spares on order are to be excluded.  Forwarding charges, if any, shall be for the Buyers’ account.  The Sellers are not required to replace spare parts including spare tail-end shaft(s) and spare propeller(s)/propeller blade(s) which are taken out of spare and used as replacement prior to delivery, but the replaced items shall be the property of the Buyers.  The radio installation and navigational equipment shall be included in the sale without extra payment if they are the property of the Sellers.  Unused stores and provisions, if any, shall be included in the sale and be taken over by the Buyers without extra payment.
 
The Sellers have the right to take ashore crockery, plates, cutlery, linen and other articles bearing the Sellers’ flag or name, provided they replace same with similar unmarked items.  Library, forms, etc., exclusively for use in the Sellers’ vessel(s), shall be excluded without compensation.  Captain’s, Officers’ and Crew’s personal belongings including the slop chest are to be excluded from the sale, as well as the following additional items (including items on hire):
 
Oxygen and acetylene bottles
 
Videotel safety movies
 
The Buyers shall take over the remaining bunkers and unused greases and lubricating oils in tanks and drums as onboard and pay to the Sellers the contract price as evidenced by invoices/vouchers .
 
Payment under this Clause shall be made at the same time and place and in the same currency as the Purchase Price.
 
8.  	Documentation	
 
The place of closing: a venue nominated by the Sellers
 
In exchange for payment of the Purchase Price the Sellers shall furnish the Buyers with satisfactory documentation reasonably required to effect the registration of the Vessel under the flag and ownership of the Buyers to be listed in Addendum to this Agreement.  Such documentation to be incorporated into an addendum to the MOA.

 

5

 
At the time of delivery the Buyers and Sellers shall sign and deliver to each other a Protocol of Delivery and Acceptance confirming the date and time of delivery of the Vessel from the Sellers to the Buyers.
 
At the time of delivery the Sellers shall hand to the Buyers, the classification certificate(s) as well as plans, etc., which are on board the Vessel.  Other certificates which are on board the Vessel shall also be handed over to the Buyers unless the Sellers are required to retain the same, in which case the Buyers to have the right to take copies.  Other technical documentation which may be in the Sellers’ possession shall be promptly forwarded to the Buyers at their expense, if they so request.  The Sellers may keep the Vessel’s log books but the Buyers to have the right to take copies of same at Buyers’ costs .
 
9.  	Encumbrances	
 
The Sellers warrant that the Vessel, at the time of delivery, is free from encumbrances, mortgages and maritime liens or any other debts whatsoever.  The Sellers hereby undertake to indemnify the Buyers against all consequences of claims made against the Vessel, which have been incurred prior to the time of delivery.
 
10.  	Taxes, etc.	
 
Any taxes, fees and expenses in connection with the purchase and registration under the Buyers’ flag shall be for the Buyers’ account, whereas similar charges in connection with the closing of the Sellers’ register shall be for the Sellers’ account.
 
11.  	Condition on delivery	
 
The Vessel with everything belonging to her shall be at the Sellers’ risk and expense until she is delivered to the Buyers, but subject to the terms and conditions of this Agreement she shall be delivered and taken over [ “as is where is” / as she was at the time of inspection, fair wear and tear excepted].
 
However, the Vessel shall be delivered with her class maintained without condition/ recommendation except for the Temporary repaired side shell plate IWO No.2 Void Space in bet. Fr. No. 145-148, SL9-11, (Strake N), free of average damage affecting the Vessel’s class and with her classification certificates and national and international certificates, as well as all other certificates the Vessel [had at the time of inspection], clean, valid and unextended without condition/recommendation by Class or the relevant authorities
 
[“Inspection” in this Clause 11, shall mean the Buyers’ inspection according to Clause 4 a) or 4 b), if applicable, or the Buyers’ inspection prior to the signing of this Agreement.  If the Vessel is taken over without inspection, the date of this Agreement shall be the relevant date.]
 
*           Notes, if any, in the surveyor’s report which are accepted by the Classification Society without condition/recommendation are not to be taken into account.

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12.  	Name/Markings	
 
Upon delivery the Buyers undertake to change the name of the Vessel and alter funnel marking.
 
13.  	Buyers’ default	
 
Should the deposit not be paid in accordance with Clause 2, the Sellers have the right to cancel this Agreement, and they shall be entitled to claim compensation for their losses and for all expenses incurred together with interest.
 
Should the Purchase Price not be paid in accordance with Clause 3, the Sellers have the right to cancel this Agreement, in which case the deposit together with interest earned shall be released to the Sellers.  If the deposit does not cover their loss, the Sellers shall be entitled to claim further compensation for their losses and for all expenses incurred together with interest.
 
14.  	Sellers’ default	
 
Should the Sellers fail to give Notice of Readiness in accordance with Clause 5 a) or fail to be ready to validly complete a legal transfer by the date stipulated in line 61 the Buyers shall have the option of cancelling this Agreement provided always that the Sellers shall be granted a maximum of 3 Banking Days after Notice of Readiness has been given to make arrangements for the documentation set out in Clause 8.  If after the Notice of Readiness has been given but before the Buyers have taken delivery, the Vessel ceases to be in all respects physically ready for delivery and is not made physically ready again in every respect by the date stipulated in line 61 and new Notice of Readiness is given, the Buyers shall retain their option to cancel.  In the event that the Buyers elect to cancel this Agreement the deposit together with interest earned shall be released to them immediately.
 
Should the Sellers fail to give Notice of Readiness by the date stipulated in line 61 or fail to be ready to validly complete a legal transfer as aforesaid they shall make due compensation to the Buyers for their loss and for all expenses together with interest if their failure is due to proven negligence and whether or not the Buyers cancel this Agreement.
 
15.  	Buyers’ representatives	
 
After this Agreement has been signed by both parties and the deposit has been lodged, the Buyers have the right to place two representatives on board the Vessel, as observers only and without interference with the working of the Vessel , at their sole risk and expense at the last loading port in final voyage .  These representatives are on board for the purpose of familiarisation and in the capacity of observers only, and they shall not interfere in any respect with the operation of the Vessel.  The Buyers’ representatives shall sign the Sellers’ letter of indemnity prior to their embarkation.   Victualling expenses and communication expenses of Buyers’ representatives are for Buyers’ account and will be paid together with the Purchase Price .
 
16.  	Arbitration	

7

 
 
a)*           This Agreement shall be governed by and construed in accordance with English law and any dispute arising out of this Agreement shall be referred to arbitration in London in accordance with the Arbitration Act 1996 or any statutory modification or re-enactment thereof for the time being in force, one arbitrator being appointed by each party.  On the receipt by one party of the nomination in writing of the other party’s arbitrator, that party shall appoint their arbitrator within fourteen days, failing which the decision of the single arbitrator appointed shall apply.  If two arbitrators properly appointed shall not agree they shall appoint an umpire whose decision shall be final.
 
b)*

c)*

*16 a), b) and 16 c) are alternatives; delete whichever is not applicable.  In the absence of deletions, alternative 16 a) to apply.
 
Clause 17
 
Negotiations are to be kept strictly private and confidential.  Sellers and Buyers are public companies and may have to make public announcement of this transaction, in which case Buyers’[–Sellers’] name not to be disclosed without the prior approval of the Buyers[ – the Sellers].
 
Clause 18
 
As the Buyers interests shall be subject to United States of America (“USA”) and United Nations (“UN”) laws/regulations/sanctions.  The Sellers shall not be entitled to deliver the Vessel to the Buyers in any port that would result in any contravention whatsoever of any of those laws/regulations/sanctions.  The Buyers represent that the following countries are subject to USA’s laws/regulations/sanctions: Former Yugoslavia, Belarus, Burma, Ivory Coast, Cuba, Congo, Iran, Iraq, Liberia, North Korea, Sudan, Syria, Zimbabawe.

 
The Sellers                                                                                              The Buyers

/s/ Benoit Timmermans                                                      /s/ Robert Gerald Buchanan
For and on behalf of                                            For and on behalf of
BOCIMAR INTERNATIONAL NV                            GENCO _____________ LLC
Name:  Benoit Timmermans                                      Name: Robert G. Buchanan
Title:  Director                                                                                         Title: Manager
                                                             9th May 2008

 
 
8

 

Exhibit 10.5

                                                                                                                                Norwegian Shipbrokers’ Association’s
MEMORANDUM OF AGREEMENT                                                                                                                                                                                        Memorandum of Agreement for sale and
                                                                                                                                purchase of ships.  Adopted by the Baltic
                                                                                                                              and International Maritime Council
Dated: 13 th June 2008                                                                                                            (BIMCO ) in 1956.
                                                                      Code-name
                                                                                                               SALEFORM 1993
                                                                                                                              Revised 1966, 1983 and 1986/7

 
____________ Navigation Ltd, Trust Company Complex, Ajeitake Road, Ajeltake Island Majuro, The Republic of the Marshall Islands hereinafter called the Sellers, have agreed to sell, and Genco ______ Ltd, Marshall Islands, the performance of which to be guaranteed by Genco Shipping and Trading Limited hereinafter called the Buyers, have agreed to buy
 
Name:  = ­­­­­­­­­­­­­­­­­­­_______________________ =
 
Classification Society/Class:   ____
 
Built:   scheduled delivery end of _________   By:   ________ Shipbuilding Co Ltd, South Korea
 
Flag:   Marshall Islands                       Place of Registration:   Marshall Islands
 
Call Sign:                                               Grt/Nrt:
 
Register Number:
 
hereinafter called the Vessel, on the following terms and conditions:
 
Definitions
 
“Banking days” are days on which banks are open both in the country of the currency stipulated for the Purchase Price in Clause 1, Germany, Greece, USA, South Korea and in the place of closing stipulated in Clause 8.
 
“in writing” or “written means a letter handed over from the Sellers to the Buyers or vice versa, a registered letter, telex, telefax or other modern form of written communication.
 
“Classification Society” or “Class” means the Society referred to in line 4.
 
1.       Purchase Price U.S.$ _____________ (United States Dollars ___________________) less liquidated damages if any
 
2.       Deposit
 
As security for the correct fulfilment of this Agreement the Buyers shall pay a deposit of 10 % (ten per cent) of the Purchase Price within four (4) banking days from the date of this Agreement has been signed by both the Buyers and the Sellers on fax provided the account is open   and functional .   This deposit shall be placed with ____________ AG, Hamburg and held by them in a joint, interest bearing account for the Sellers and the Buyers, to be released in accordance with joint written instructions of the Sellers and the Buyers.  Interest to be credited to the Buyers.  Any fee charged for holding the said deposit shall be borne equally by the Sellers and the Buyers.

 
 
3.       Payment
 
The said Purchase Price shall be paid in full free of bank charges to the Seller’s account at ____________ AG, Hamburg on delivery of the Vessel, but not later than 3 banking days after the Vessel is in every respect physically ready for delivery in accordance with the terms and conditions of this Agreement and Notice of Readiness has been given in accordance with Clause 5 against Sellers’ presentation of documents required by the Buyers.  Such documents are to be . mutually agreed and incorporated into an Addendum to the MOA.  The agreement of such addendum is not to delay the signing of the MOA.
 
4.       Inspections
 
5.       Notices, time and place of delivery
 
a)  	The Sellers shall keep the Buyers well informed of the Vessel’s itinerary in   accordance with   schedule from the shipyard and shall	
 
 	provide the Buyers with 30/21/14, 10/7, and 5   days approximate   notice of the delivery and 3/1 days definite notice of the delivery .  When the Vessel is at the place of delivery and in every respect physically ready for delivery in accordance with this Agreement, the Sellers shall give the Buyers a written Notice of Readiness for delivery.	
 
b)  	The Vessel shall be delivered and taken over safely afloat at a safe and accessible berth or safe and accessible anchorage at/in ________ Shipyard, South Korea	
 
Expected time of delivery:   between _________ and _________
 
Date of cancelling (see Clauses 5 c), 6 b) (Ill) and 14): _________ in the Buyers’ option
 
c)  	If the Sellers anticipate that, notwithstanding the exercise of due diligence by them, the Vessel will not be ready for delivery by the cancelling date they may notify the Buyers in writing stating the date when they anticipate that the Vessel will be ready for delivery and propose a new cancelling date.  Upon receipt of such notification the Buyers shall have the option of either cancelling this Agreement in accordance with Clause 14 within 7 running days of receipt of the notice or of accepting the new date as the new cancelling date. If the Buyers have not declared their option within 7 running days of receipt of the Sellers’ notification or if the Buyers accept the new date, the date proposed in the Sellers’ notification shall be deemed to be the new cancelling date and shall be substituted for the cancelling date stipulated in line 61.	
 
If this Agreement is maintained with the new cancelling date all other terms and conditions hereof including those contained in Clauses 5 a) and 5 c) shall remain unaltered and in full force and effect. Cancellation or failure to cancel shall be entirely without prejudice to any claim for damages the Buyers may have under Clause 14 for the Vessel not being ready by the original cancelling date.

 
 
d)  	Should the Vessel become an actual, constructive or compromised total loss before delivery the deposit together with interest earned shall be released immediately to the Buyers whereafter this Agreement shall be null and void.	
 
7.       Spares/bunkers, etc.
 
The Sellers shall deliver the Vessel to the Buyers with everything belonging to her on board and on shore.  All spare parts and spare equipment including spare tail-end shaft(s) and/or spare propeller(s)/propeller blade(s), if any, belonging to the Vessel at the time of delivery used or unused, whether on board or not shall become the Buyers’ property, but spares on order are to be excluded.  Forwarding charges, if any, shall be for the Buyers’ account.  The Sellers are not required to replace spare parts including spare tail-end shaft(s) and spare propeller(s)/propeller blade(s) which are taken out of spare and used as replacement prior to delivery, but the replaced items shall be the property of the Buyers.  The radio installation and navigational equipment shall be included in the sale without extra payment.  Unused stores and provisions shall be included in the sale and be taken over by the Buyers without extra payment.
 
The Sellers have the right to take ashore crockery, plates, cutlery, linen and other articles bearing the Sellers’ flag or name, provided they replace same with similar unmarked items.  Library, forms, etc., exclusively for use in the Sellers’ vessel(s), shall be excluded without compensation.  Captain’s, Officers’ and Crew’s personal belongings including the stop chest are to be excluded from the sale, as well as the following additional items (including items on hire):
 
The Buyers shall take over the remaining bunkers and unused lubricating oils/ greases on board at the time of delivery .
 
Lubricating oils to be those in sealed drums and/or designated storage tanks not having been used or circulated in the vessel’s machinery and pay the Sellers ’ net contract price (excluding barging expenses) from time of supply.
 
Payment under this Clause shall be made at the same time and place and in the same currency as the Purchase Price.
 
8.       Documentation
 
The place of closing:   ____________ AG, Hamburg
 
In exchange for payment of the Purchase Price the Sellers shall furnish the Buyers with delivery documents as per Addendum .
 
At the time of delivery the Buyers and Sellers shall sign and deliver to each other a Protocol of Delivery and Acceptance   confirming the date and time of delivery of the Vessel from the Sellers to the Buyers.
 
At the time of delivery the Sellers shall hand to the Buyers the classification certificate(s) as well as all plans etc., which are on board the Vessel. Other certificates which are on board the Vessel shall also be handed over to the Buyers unless the Sellers are required to retain same, in which case the Buyers to have the right to take copies. Other technical documentation which may be in the Sellers’ possession shall be promptly forwarded to the Buyers at their expense, if they so request. The Sellers may keep the Vessel’s log books but the Buyers to have the right to take copies of same.

 
 
9.        Encumbrances
 
The Sellers warrant that the Vessel, at the time of delivery, is free from all charters, encumbrances, mortgages, taxes and maritime liens or any other debts whatsoever.  The Sellers hereby undertake to indemnify the Buyers against all consequences of claims made against the Vessel which have been incurred prior to the time of delivery.
 
10.       Taxes, etc.
 
Any taxes, fees and expenses in connection with the purchase and registration under the Buyers’ flag shall be for the Buyers’ account, whereas similar charges in connection with the closing of the Sellers’ register shall be for the Sellers’ account.
 
11.       Condition on delivery    See Clause 17
 
The Vessel with everything belonging to her shall be at the Sellers’ risk and expense until she is delivered to the Buyers.  However, the Vessel shall be delivered with her class maintained without condition/recommendation*, free of average damage affecting the Vessel’s class, and with her classification certificates and national certificates, as well as all other certificates, valid and unextended without condition/recommend action* by Class or the relevant authorities at the time of delivery.   Validity   of all above Certificates to be minimum 5 months after the date of delivery with the exception of those which are interim due the Vessel being a newbuilding where final approval of certain documentation by classification society is pending at the time of delivery.
 
*Notes, if any, in the surveyor’s report which are accepted by the Classification Society without condition/recommendation are not to be taken into account.
 
12.       Name/markings
 
Upon delivery the Buyers undertake to change the name of the Vessel and alter funnel markings.
 
13.       Buyers’ default
 
Should the deposit not be paid in accordance with Clause 2, the Sellers have the right to cancel this Agreement, and they shall be entitled to claim compensation for their losses and for all expenses incurred together with interest.
Should the Purchase Price not be paid in accordance with Clause 3, the Sellers have the right to cancel the Agreement, in which case the deposit together with interest earned shall be released to the Sellers.  If the deposit does not cover their loss, the Sellers shall be entitled to claim further compensation for their losses and for all expenses incurred together with interest.

 

 
14.       Sellers’ default
 
Should the Sellers fall to give Notice of Readiness in accordance with Clause 5 a) or fail to be ready to validly complete a legal transfer by the date stipulated in line 61 the Buyers shall have the option of cancelling this Agreement provided always that the Sellers shall be granted a maximum of 3 banking days after Notice of Readiness has been given to make arrangements for the documentation set out in Clause 8.  If after Notice of Readiness has been given but before the Buyers have taken delivery, the Vessel ceases to be physically ready for delivery and is not made physically ready again in every respect by the date stipulated in line 61 and new Notice of Readiness given, the Buyers shall retain their option to cancel.  In the event that the Buyers elect to cancel this Agreement the deposit together with interest earned shall be released to them immediately.
Should the Sellers fail to give Notice of Readiness by the date stipulated in line 61 or fail to be ready to validly complete a legal transfer as aforesaid they shall make due compensation to the Buyers for their loss and for all expenses together with interest if their failure is due to proven negligence and whether or not the Buyers cancel this Agreement.
 
15.       Buyers’ representatives See Clause 18
 
16.       Arbitration
 
a)  	This Agreement shall be governed by and construed in accordance with English law and any dispute arising out of this Agreement shall be referred to arbitration in London in accordance with the Arbitration Acts 1950 and 1979 or any statutory modification or re-enactment thereof for the time being in force, one arbitrator being appointed by each party.  On the receipt by one party of the nomination in writing of the other party’s arbitrator, that party shall appoint their arbitrator within fourteen days, falling which the decision of the single arbitrator appointed shall apply.  If two arbitrators properly appointed shall not agree they shall appoint an umpire whose decision shall be final.	
 
16 a), 16 b) and 16 c) are alternatives; delete whichever is not applicable.  In the absence of  deletions, alternative 16 a) to apply.
 
Clauses 17 to 19 are to form an integral part of this Agreement.
 
Clause 17
 
The Vessel is to be delivered to the Buyers in accordance with the terms and conditions of the Shipbuilding contracts a copy of which is to be appended to the MOA.  All the rights of the Sellers under the contract and warranties are to be assigned to the Buyers and the Buyers, Sellers, and Shipyard shall upon delivery sign to tripartite agreement to cover the assignment of all guarantees, 3rd party warranties and liquidated damages in full.  In the event of the Shipyard being unwilling to assign the warranties for whatsoever reason, then the Sellers undertake to process the warranty items an behalf of the Buyers.

 
 
Clause 18
 
The supervision will be undertaken by the Sellers to the Sellers’ normal standards once the MOA has been signed and the deposit has been lodged then the Buyers have the right to place one representative at the yard after keel laying as part of the Seller’s site team for familiarization purposes only and without interference.
 
On receipt of 30 day notice, the Buyers are to have the right to send their captain and chief engineer to the yard to be present at seatrials. All these representatives are to sign Seller’s usual indemnity forms and will remain at yard until and including the time of delivery.
 
Clause 19
 
All negotiations/terms of sale are to remain strictly private and confidential.  However as the Buyers are a publicly listed company in the USA, they are permitted to make disclosures in accordance with USA securities laws.  Such disclosure shall identify ____________ Navigation Ltd only as Seller.
 
This agreement is drawn up in two originals of even tenor and date one to be retained by each party.
 
For the Sellers                                    For the Buyers
 
This document is a computer generated copy of “SALEFORM 1993”, printed by authority of the Norwegian Shipbrokers’ Association, using software which is the copyright of Strategic Software Ltd.  Any insertion or deletion to the form must be clearly visible.  In the event of any modification made to the preprinted text of this document, the original document shall apply.  The Norwegian Shipbrokers’ Association and Strategic Software Ltd. assume no responsibility for any loss or damage caused as a result of discrepancies between the original approval document and this document.

 

 

 
Exhibit 31.1

CERTIFICATION OF THE PRINCIPAL EXECUTIVE OFFICER

I, Robert Gerald Buchanan, certify that:

1.  	I have reviewed this Quarterly Report on Form 10-Q for the quarter ended June 30, 2008 of Genco Shipping & Trading Limited;	

2.  	Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;	

3.  	Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;	

4.  	The registrant’s other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:	

(a)  	Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;	

(b)  	Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;	

(c)  	Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and	

(d)  	Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and	

5.  	The registrant’s other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):	

(a)  	All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and	
(b)  	Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.	

 	/s/ Robert Gerald Buchanan                 	 	
 	Name: Robert Gerald Buchanan	
Date:	August 8, 2008	 	Title:   President	

 

 
Exhibit 31.2

CERTIFICATION OF THE PRINCIPAL FINANCIAL OFFICER

I, John C. Wobensmith, certify that:

1.  	I have reviewed this Quarterly Report on Form 10-Q for the quarter ended June 30, 2008 of Genco Shipping & Trading Limited;	

2.  	Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;	

3.  	Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;	

4.  	The registrant’s other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:	

(a)  	Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;	

(b)  	Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;	

(c)  	Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and	

(d)  	Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and	

5.  	The registrant’s other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):	

(a)  	All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and	
(b)  	Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.	

 	/s/ John C. Wobensmith                    	 	
 	Name: John C. Wobensmith	
Date:	August 8, 2008	 	Title:   Chief Financial Officer	

 

 
Exhibit 32.1

CERTIFICATION PURSUANT TO
18 U.S.C. SECTION 1350,
AS ADOPTED PURSUANT TO
SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

In connection with Genco Shipping & Trading Limited’s (the “Company”) quarterly report on Form 10-Q for the six months ending June 30, 2008, as filed with the Securities and Exchange Commission on the date hereof (the “Report”), the undersigned President of the Company, hereby certifies pursuant to 18 U.S.C. § 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that:
 
(1)  	The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and	

(2)  	The information contained in the Report fairly presents, in all material respects, the financial condition and result of operations of the Company.	

Date:   August 8, 2008	 	/s/ Robert Gerald Buchanan                  	 	
 	 	Name: Robert Gerald Buchanan	
 	 	Title:   President	

The foregoing certification is being furnished solely pursuant to 18 U.S.C. § 1350 and is not being filed as part of the Report or as a separate disclosure document.  A signed original of this written statement required by Section 906 has been provided to the Company and will be retained by the Company and furnished to the Securities and Exchange Commission or its staff upon request.

 

Exhibit 32.2

CERTIFICATION PURSUANT TO
18 U.S.C. SECTION 1350,
AS ADOPTED PURSUANT TO
SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

In connection with Genco Shipping & Trading Limited’s (the “Company”) quarterly report on Form 10-Q for the six months ending June 30, 2008, as filed with the Securities and Exchange Commission on the date hereof (the “Report”), the undersigned Chief Financial Officer of the Company, hereby certifies pursuant to 18 U.S.C. § 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that:
 
(1)  	The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and	

(2)  	The information contained in the Report fairly presents, in all material respects, the financial condition and result of operations of the Company.	

Date:   August 8, 2008	 	/s/ John C. Wobensmith               	 	
 	 	Name: John C. Wobensmith	
 	 	Title:   Chief Financial Officer	

The foregoing certification is being furnished solely pursuant to 18 U.S.C. § 1350 and is not being filed as part of the Report or as a separate disclosure document.    A signed original of this written statement required by Section 906 has been provided to the Company and will be retained by the Company and furnished to the Securities and Exchange Commission or its staff upon request.