Good day, and thank you for standing by. Welcome to the Global Ship Lease Fourth Quarter 2021 Earnings Conference Call. At this time, all participants are on listen only mode. After the speaker presentation, there will be a question and answer session. To ask a question during the session, you will need to press star one on your telephone. Please be advised that today's conference is being recorded and if you require any further assistance, please press star zero. I want to hand the conference over to speaker today, Ian Webber. Please go ahead.
Thank you very much, and apologies for being late by a minute or two. Good morning, good afternoon, everybody, and welcome to the GSL fourth quarter 2021 earnings conference call. As normal, the slides that accompany today's presentation are available on our website at www.globalshiplease.com. Slides two and three remind you that today's call may include forward-looking statements that are based on current expectations and assumptions and are, by their nature, inherently uncertain and outside of the company's control. Actual results may differ materially from these forward-looking statements due to many factors, including those described in the Safe Harbor section of the slide presentation.
We also draw your attention to the Risk Factors section of our most recent annual report on Form 20-F, which is for 2020 and was filed with the SEC on March 19, 2021. You can obtain this via our website or via the SEC's. All of our statements are qualified by these and other disclosures in our reports filed with the SEC. We do not undertake any duty to update forward-looking statements. For reconciliations of the non-GAAP financial measures to which we will refer during this call to the most directly comparable measures calculated and presented in accordance with GAAP, you should refer to the earnings release that we issued this morning, which is also available on our website.
As usual, I'm joined today by our Executive Chairman, George Youroukos, our Chief Financial Officer, Tassos Psaropoulos, and our Chief Commercial Officer, Tom Lister. George will begin the call with a high-level commentary on GSL and our industry. Tassos, Tom, and I will take you through our achievements, our quarterly and yearly results and financials, the current market, and after that, we'll be pleased to take your questions. Turning now to slide four, I'll pass the call over to George.
Thank you, Ian, and good morning or good afternoon to all of you joining us today. Before I get into the slides, a few words about the dreadful situation in Ukraine. It feels very wrong to be discussing the implications for our business of this conflict in the midst of a humanitarian crisis on this scale. We recognize that it's important to provide context to the extent that we can. The situation is obviously dynamic. It's far too early to assess the broader repercussions. I'll keep my comments narrow and industry focused. Last year, the combined containerized throughput of Russian and Ukrainian Black Sea ports was about 1.8 million TEUs. That's against global containerized volumes of around 201 million TEUs in the same period.
It's thought likely that a significant portion of those Black Sea related volumes will be rerouted via North German and Baltic ports. There will be clearly localized and regional disruption to trade patterns, routes, and volumes. The big question for our industry, of course, is what will be the impact of sanctions and Russia's reaction to those sanctions on the global macroeconomic environment? Obviously, a critical question, but also one that it is far too soon to answer. Although we know that some of the lines have just put a freeze on cargo bookings to and from Russia. In the meantime, we will focus very strongly on safeguarding our people, our ships, and the cargo they carry. Now back to the slides. I'm very pleased to say that the highly supportive container ship market conditions that I highlighted on our previous calls have continued.
Demand for container shipping services grew by 7.1% in 2021, far in excess of the 1.4% capacity growth in ships below 10,000 TEU, where GSL is specializing. So far this year, we have powered straight through the Chinese New Year period, which is typically a weak period of the year in our seasonal as well as cyclical industry. 2022 forecasts are currently for 4.2% demand growth. Again, far in excess of the 1.7% capacity growth below 10,000 TEU. As a result, we're experiencing record high freight and charter markets. With the support of these strong fundamentals, we have accomplished a great deal in the last 14 months.
We acquired 23 ships on an opportunistic, immediately accretive basis for a total of just under half a billion dollars and increasing the size of our fleet by more than 50%. A demonstration of the impact and good timing of our growth is that EBITDA in fourth quarter 2021, with 65 ships, was $85.4 million, more than double the $38.7 million reported for fourth quarter 2020 before the 2022 and 2021 ships additions. We secured 51 new charters for our fleet, adding more than $1.5 billion of contracted revenue spread out over several years. I would highly highlight that a number of the attractive charters that we agreed during 2021 were on a forward start basis, and thus we expect to see the full cash effect from those new charters building as 2022 progresses, particularly in the fourth quarter.
We refinanced more than $400 million of debt, materially reducing our cost of debt, and we have also hedged all of our floating interest rate exposure and have earned upgraded credit ratings of BB- and B1. We delivered record earnings with a normalized 2021 EPS of $4.86. As I expect, many of you are well aware, we announced an initiation of a quarterly dividend just over a year ago, originally contemplating a dividend of $0.12 per share before more than doubling it in very short order to $0.25 , driven by a surge of accretive growth and long-term charter signings.
We have subsequently announced that starting with our dividend for this current quarter, first quarter 2022, the payout will increase to $0.375 per share per quarter, more than triple the originally contemplated amount in just over a year. This sustainable dividend payment is an important component of our dynamic capital allocation policy, which now includes the return of a substantial amount of capital to shareholders through our sustainable dividend and under our newly introduced 40 million shares repurchase authorization. Fleet improvement for decarbonization, balance sheet strengthening, and fleet renewal through selective, disciplined, accretive, and opportunistic acquisitions, all of which Ian will discuss in more detail.
Fundamentally, though, we will continue to execute the long-term shareholder-oriented strategy that has served us very well to this point and will continue to deploy our capital in such a manner as maximizes value for our shareholders in a risk-adjusted, sustainable, and I have to say the word twice, sustainable, opportunistic manner. To put this in context, we returned approximately $46.2 million to shareholders in 2021, $36.2 million by dividends, and $10 million in stock buybacks, which was a little more than the net unrestricted cash generated in the year after CapEx growth and debt amortization. Essentially, all of our available cash flow. Looking at the EBITDA calculator on page 22 of the slides, the math gives $120 million of cash flow after debt amortization, of which $60 million, 50% is committed to dividends.
This is up 65% on the 2021 dividends and does not take into account any stock buybacks nor incremental CapEx in response to their decarbonization, selective fleet renewal, or further balance sheet improvement. If you now turn to slide five, I'll describe the big picture for our industry at this moment. While there are many factors that play a role in determining the strength or weakness of the containership market, and Tom will cover a number of them later, the broad strokes are very straightforward in this case. In the face of sustained demand for the transportation of containerized cargos and a limited supply of containerships, liner companies have been willing to offer much higher rates and for much longer durations than are available during more normal periods.
They're able to offer us these terms because the liners themselves have been making record profits and transforming their balance sheets. The high level of underlying freight demand, which was thought initially to be a temporary phenomenon, has proven to be highly durable. Meanwhile, containership supply, particularly in the mid-size and smaller segments where we operate, remains very limited. This has meant that both charter rates and asset values have sustained their upward trajectory. Moving forward, the limited vessel supply in the relevant segments and inventory restocking represents a further incremental layer of demand on top of fundamentals. As you can see in the lower left, the strong market has quite rationally resulted in a near total absence of any scrapping, even for vessels that would, in normal markets, almost certainly be scrapped.
By 2024, nearly 8% of the global fleet under 10,000 TEU will be over 25 years old, including much lower specification tonnage that we would expect to be removed from service upon a normalization of demand, thus retightening the market. As clearly supportive as the fundamental situation is, it is also apparent that there is real uncertainty in the overall macro environment, including the ongoing potential for further COVID variants, inflation, and of course, geopolitical uncertainty, specifically surrounding Russia and Ukraine, which introduces substantial complexity into the regional economy and supply chain with broader implications throughout the world, none of which are yet clear. Further, the need to decarbonize our industry, driven by an evolution of both regulation and customer needs, is likely to play an increasing role in our business in the quarters and years ahead.
In the long term, this will involve changes to propulsion and design for new ships entering the global fleet. Many of the new technologies remain unproven and are speculative at this stage. At GSL, we will be focused on enhancing the fuel efficiency of our existing ships in collaboration with our liner partners, using proven technologies and solutions. Across the global fleet, we expect that compliance with the new regulations coming into effect in January 2023 will likely result in slower average sailing speeds. While it's hard to assess the degree to which the global fleet may slow down, a reduction in average speed of just one knot equates to reducing effective supply by 5%-6%. We will come back to capital allocation later in the presentation, but I will briefly summarize.
As the excellent charters that we signed in 2021 increasingly come into effect and build their contribution to earnings, we have greater discretion in allocating capital, returning increasing amounts to shareholders. We also keep in mind improving our fleet to respond to the decarbonization imperative and also strengthening our balance sheet. We will maintain our strict discipline of fleet renewal through selective acquisitions that generate accretive growth on a non-speculative basis. We do not chase assets at public auctions where the highest bidder wins, and we have passed on far more acquisition opportunities than we have pursued over the last year. If we do not have high conviction that an acquisition will be in the best long-term interest of the company and our shareholders, we simply do not take it forward.
Beyond that, we will continue to optimize our balance sheet while also returning capital to shareholders in the form of our increased dividend and also on an opportunistic basis through the $40 million share repurchase authorization announced today. With that, I will turn the call to Ian.
Thank you, George. Please turn to slide six. In 2021, we enhanced our earnings by both expanding our fleet by more than 50%, and also securing highly attractive long-term charters across our existing fleet. On this slide, which shows the 43 vessels we owned at the beginning of last year, we indicate in dark blue the 21 charters that we added since the beginning of 2021, totaling nearly $900 million in additional contracted revenue. You'll see that many of these charters extend well out through into the middle of the decade or even longer, and are in many cases at rates that are multiples of their prior levels. All else equal, an increase in the charter rate goes straight to our bottom line.
Also, as you can see here, the vessels are fully booked through 2023. I think we have three open days this year, at the moment, and much of 2023, sorry. If I said 2023, I meant 2022. We're fully booked through 2022 with three open days, and much of 2023 is covered, giving us strong visibility. Given the extraordinary tightness of the market, there may be some opportunities to forward fix more of our vessels well in advance of their expires. On the next slide seven, we show the 23 vessels that we acquired during the course of last year, which have now all been delivered, and are generating revenue for us. These ships have increased our contracted revenue by $650 million.
The dark blue bars on this slide are those legacy charters that were in place when we agreed the transactions. To our considerable benefit, these below-market charter rates translated into below-market prices for the vessels themselves when we purchased the ships. The red bars on this slide show those charters that were agreed subsequent to the acquisitions by us and thus which, reflect the strength of the charter market. As was the case with the existing fleet, these newly agreed charters are at far higher rates than those they replaced, some of them triple or more, of the previous rates, and they extend for multiple years.
In total, as George mentioned, our actions during 2021 have increased our adjusted EBITDA for the fourth quarter of 2021 to $85.4 million, which is 2.2x that for the same quarter last year, quarter four in 2020. They have also increased our adjusted EBITDA backlog by $1.2 billion and brought our total contract cover to $1.8 billion on average over the next 2.6 years. On the next slide eight, I'll provide some illustrative guidance on how our contract cover flows through into our earnings.
To be clear, we are not providing a forecast, but rather providing you with a framework for understanding our revenue and adjusted EBITDA in the three illustrative scenarios we've set out, along with the various assumptions spelled out in detail in the EBITDA calculator in the appendix of this presentation. I will highlight just a few things. As mentioned, we're fully contracted essentially through 2022, so our revenue for the year is not sensitive to any changes in the charter market or charter rates agreed by ourselves. Variability in revenue will be driven by the actual amount of off-hire compared to our assumptions off-hire for dry docking and unplanned off-hire for breakdowns. Looking out to 2023, our spot exposure remains limited.
According to the EBITDA calculator, which I mentioned before, it's on page 22 of the presentation, 86% of our ownership days for 2023 are covered. Moreover, the vessels that are due to come open in 2023 currently have rates reflecting the previous weak market, meaning that their rechartering would increase our cash flow under any of the three illustrative scenarios mentioned here. For context, and as I mentioned last quarter, GSL's runway to adjusted EBITDA in 2019 and 2020, the two years since our 2018 merger with Poseidon, was approximately $180 million a year. The extent of the improvement here is dramatic.
In short, we are in a good position with high visibility of cash flows, EBITDA, through at least the medium term, with very limited reliance on the charter market, and this is particularly reassuring given the current geopolitical and economic backdrop. Moving on to slide nine, I'll discuss our dynamic approach to capital allocation. We're now generating a great deal more cash flow than in the past, from growth and improved charter rates, and as such, we have an expanded set of opportunities to allocate capital in a way that sustainably maximizes shareholder value and relative returns on a risk-adjusted basis. As you saw in 2021, we do pursue accretive growth and fleet renewal opportunities on a selective and disciplined basis.
As George mentioned, we've foregone far more growth opportunities than we've pursued as we've maintained strict discipline and a set of criteria that has served GSL and our shareholders very well. Importantly, we also look to return capital to investors on a sustainable value-creating basis. As mentioned, we're increasing our quarterly dividend to $37.5 per share, more than triple the level indicated just over a year ago. We believe that we're well positioned to reliably support this payment on a sustainable basis. We also intend to pursue share buybacks on an opportunistic basis. As you saw in the third quarter of 2021 when we repurchased $10 million of GSL shares and canceled them.
Additionally, we've announced today that our board has put in place a $40 million share repurchase authorization, enabling us to move quickly to opportunistically repurchase shares in the market without the administrative delay of having to seek board approval. Please note, as George has already said, the cash effect of our higher rate charters builds as 2022 develops. Further, our dry-docking schedule is weighted towards Q1, Q2, and Q3, and consequently, cash availability is weighted towards the latter part of the year. Over the course of less than one year, we've significantly increased the amount of capital being returned to shareholders and expect to continue this trend via the higher quarterly dividend, which we've announced, and the new $40 million repurchase authorization.
To repeat what George said earlier because it's important, we return to shareholders a little more than all of our net unrestricted cash flow last year after CapEx growth and debt amortization. This return was by way of dividends and stock repurchases. For 2022, based on the EBITDA calculator on page 22, 50% of operating cash flow after the same items, debt amortization, dry docking, etc., is committed to dividends on both the preferred and the common stock. This does not take into account any stock buybacks or incremental CapEx, as George also mentioned in response to decarbonization, selective fleet renewal or further balance sheet improvement. We also continue to look for opportunities to not just refinance and lower our cost of debt, but also to delever in a way that builds equity value and manages balance sheet risk.
Finally, and importantly, in addition to the CapEx that is inherent in our ongoing operations for regulatory dry dockings, for example, we also expect to deploy capital to meet evolving market and regulatory demands of decarbonization. We intend to focus on deploying proven technologies and solutions to enhance the carbon footprint and the fuel efficiency of our fleet, rather than any of the current speculative alternatives. We expect such CapEx to be of commercial benefit in increasing the attractiveness of our fleet and thus our ability to continue to charter our ships at premium rates as we've been able to do in the past. Of course, when weighing these options, we and the board take into consideration the risks to our cash flows, our expected profitability through the cycle, and the regulatory and market variables ahead of us.
Fundamentally, though, we focus on generating long-term value for our shareholders, targeting a balanced approach to capital allocation that builds shareholder value on a sustainable basis in what is a cyclical industry. With that, I'll turn the call over to Tassos to talk you through our financials.
Thank you, Ian. On slide 10, we have summarized our 2021 financial highlights. Revenue for the year was $448 million, up from $282.8 million in 2020. Similarly, adjusted EBITDA for the year was $252.2 million, up from $163.2 million in 2020. Our normalized income, which adjusted for one-off items, increased from $49.6 million in 2020 to $170.7 million in 2021. Moving to the balance sheet items, much of this has been previously covered, but I would highlight the following.
We had $203.5 million of cash at year-end, of which $128.4 million is restricted and approximately $25 million represent a minimum free liquidity level set from our debt facilities. We also refinanced $383.1 million of debt within 2021, and an additional $26.2 million within 2022 to date, materially reducing our annual debt service and eliminating any maturities before May 2024. We have purchased instruments capping LIBOR on $992 million of our floating rate debt at 0.75%. The first interest rate cap on $484.1 million of debt was put in place in December 2021 at a cost of $7 million.
The second cap of $507.9 million of debt was put in place in February of this year at a cost of $15.4 million. The other items on this slide, such as the share buyback, you will be familiar with from our third quarter earnings call, but I will be happy to address any questions you might have during Q&A. For the record, our detailed financial statements appear in full on slides 11 through 13. Now, on slide 14, you can see in the upper left our scheduled amortization in the coming years. As is prudent, especially in a cyclical industry like ours with assets that have a finite life, we amortize an adequate amount each year as agreed with our lenders, utilizing our cash flows to deleverage and to limit our exposure to refinance risk at loan maturity.
On the upper right, you can see the dramatic reduction in our cost of debt from 7.7% at year-end 2018 to 6.3% in early 2021, and all the way to 4.7% now. In a business like ours, this greatly increases our competitiveness. On the lower left, you will see that the trading liquidity in our stock has increased substantially over the last year, making it far easier for investors to take position in GSL, particularly as our public float increased to 84% by year-end. With that, I will turn it over to Tom.
Thanks, Tassos. Slide 15 is intended to highlight the ship sizes on which our business is focused, which will help with the subsequent slides in context. Many of you will have heard this before, but I'll repeat it nevertheless. GSL is focused on mid-size and smaller ships, which is shorthand for ships ranging from about 2,000 TEU up to about 10,000 TEU. The top map on the left shows the deployment of our sizes of ship, i.e., ships under 10,000 TEU, and emphasizes their operational flexibility. As you can see, they're deployed pretty much everywhere. The bottom map, on the other hand, shows where the big ships, those larger than 10,000 TEU, are deployed, which tends to be on the east-west main lane or arterial trades where the cargo volumes and shoreside infrastructure support them.
It's important to note that over 70% of global containerized trade volumes, in fact, 72% in 2021, are moved outside these main lanes in the north-south regional and intermediate trades served by ships like ours. George covered the demand side in his opening remarks, highlighting the rebound in containerized volumes with year-on-year growth of 7.1% in 2021, and for the moment at least, forecast to be 4.2% in 2022, with continued supply chain disruption amplifying the demand for effective supply. The next slide is mainly supply oriented. Slide 16 shows the supply-side trends that tend to be a barometer of health for the sector. The top chart shows idle capacity, which at the year-end was 0.6%.
This is pretty much full employment, which remained the case during the traditional slow season and through Chinese New Year. A very strong baseline. The bottom chart tells a similar story. Ship recycling or scrapping was almost non-existent for container ships in 2021, which has remained the case through the first couple of months of this year. The explanation is straightforward. Why scrap even an ancient ship if you can employ her very lucratively? To illustrate this point, a 25-year-old feeder has just been fixed by one of our competitors for a little over three years at $41,000 a day.
You'll remember that we fixed Kumasi, a 20-year-old feeder, just a couple of months back at $38,000 a day for a similar period, which in turn was up on $32,000 a day for a couple of her sisters fixed two months prior. I'll come back to this later. In the meantime, please turn to slide 17, which looks at the order book. Here you can see on the left the composition of the order book by size segment.
As I'm sure you will have read in the industry press, and as we acknowledged on our last earnings call, the order book has expanded during the course of 2021, reaching an overall order book to fleet ratio of 23.4% at year-end. However, this overlooks the fact that the order book is very heavily weighted towards the bigger ships over 10,000 TEU. If, on the other hand, you look at our focus segments of 2,000-10,000 TEU highlighted in the red box, you can see that these sizes, the order book to fleet ratio is significantly lower at only 8.7%. Another point to emphasize when discussing the order book is that the delivery schedule is backloaded.
By this, I mean that order book deliveries tend to be weighted more heavily towards 2023 and 2024, now slipping into 2025, rather than to 2022. This backloading is significant as 2023 marks the implementation of the new environmental regulations, which we expect to cause a slowing down of the global fleet, reducing effective supply. It also ties in with the point George underlined early in his commentary on slide five that mid-size and smaller container ship fleet, the global fleet is aging. As you can see from the chart on the right of this slide, if scrapping were to continue to be deferred, by the end of 2024, between 7.5% and 8% of sub-10,000 TEU capacity currently on the water would be at least 25 years old and candidates for the recycling yards.
Net this out against the total order book of sub-10,000 TEU due to be delivered from year-end 2021 through to the end of 2024, and you would get implied net growth in these sizes of just 2.3%. Not 2.3% per year, I hasten to add, but 2.3% total over the coming three years. In short, we continue to see supportive supply side fundamentals for our focus size segments. Which brings us to slide 18, the charter market. The chart here provides an index covering charter market rates for a basket of container ship sizes and shows the general direction of travel for the market as a whole.
The index is up by almost 4 x, as you can see, on where it was at the start of 2021 and by an incredible 9 x since the lows of 2020. It's important to note here that the index is based on short-term fixtures, by which I mean fixtures of under a year and usually of just a few months, which explains the apparent, and I emphasize apparent, loss of momentum in the second half of 2021. What is really happening here is that the market migrated to longer term fixtures of the type we as GSL have always been focused upon at the expense of the short-term market.
As you can see from the rates on the right-hand side of this slide, the market for multi-year charters has remained very strong indeed, with rates firming especially vigorously in the smaller sizes as well, illustrated by the three-year feeder fixtures, including that of the Kumasi I referenced earlier. The supply side fundamentals suggest more of the same in 2022 and 2023. As we all know, the macro and geopolitical environment makes the demand side exceptionally difficult to call at the moment. With that, I'll turn the call back to George to wrap up.
Thank you, Tom. I will briefly summarize, and then we will be happy to take your questions. By signing a large number of long-term charters at high rates and selectively acquiring ships, we enter 2022 with a $1.8 billion of contract cover over 2.6 years, easily providing cash flow to cover all of our debt service, CapEx, and dividends for 2022 and 2023. We thus have no reliance on further renewals throughout the end of 2023, though of course we intend to pursue additional charters for those ships coming open in 2023. Our fleet of high reefer mid-size post-Panamax and smaller container ships is in the sweet spot of the market. While there is essentially zero idle capacity or scrapping at the moment, the mid-size and smaller fleet is aging, creating a scrapping backlog.
Set against a negligible order book and incoming regulations, we might actually see effective capacity shrink from 2023. In the charter market, all signals are positive. With freight markets continuing to be red hot, liners forecasting another year of exceptional profitability and charter markets currently up almost 9 x from the mid-2020 lows. Finally, as our cash flows expand, we're allocating capital to maximize long-term value through a greatly increased dividend and our newly announced repurchase authorization, substantially increasing the return of capital to shareholders. Fleet improvement for decarbonization. Fleet renewal through selective, disciplined, accretive, and opportunistic acquisitions. Further deleveraging, which also contributes to creating equity value. With that, we would be happy to take your questions.
As a reminder, to ask a question, you will need to press star one on your telephone. To withdraw your question, just press the pound key. Please stand by while we compile the Q&A roster. Our first question will come from the line of Randy Giveans from Jefferies. You may begin.
Howdy, team GSL. How's it going?
Great.
Good.
Great, Randy. Thank you.
Great indeed. I guess first question here about the dividend. Good to see the increase. How did you decide on that amount? Should we expect some continued smaller increases in the future as vessels are forward-fixed? How do you balance that dividend with share repurchases? Clearly, your share price is pretty undervalued here.
Ian, do you wanna?
Sure.
-try this?
Thanks, Randy. Yes. I mean, we review the dividend or capital allocation more generally, but let's focus on shareholder returns. We review the return of capital to shareholders regularly, as you'd expect. With the refinancing of our expensive high-yield notes back in January of last year, we were able to announce the $0.12 dividend. We reviewed that a couple of months later, when we were about to announce a real dividend. We announced $0.25 because we saw that there was more cash available from the improving market and from some growth.
We reviewed that again at the end of or towards the end of 2021 with further growth and with further forward fixings and determined that $0.375, $1.50 in the year was an appropriate allocation of capital to shareholders and crucially was sustainable given our view of the future. This is an art, not a science, as you'll appreciate. Forward cover, forward contract cover, which has been increasing, as we've said, both in absolute terms, dollar numbers and timeline, the length of charter commitments, gives us higher visibility and greater degree of confidence. We've looked again more recently prior to this earnings call at capital allocation and determined that we should allocate more to shareholders.
This time around, the board determined that the best way of doing it in the circumstances was to create this $40 million share buyback authorization rather than further increase the dividend. We expect, Randy, to continue this dynamic approach to capital allocation more widely to competing demands. We talked about, you know, decarbonization imperatives, fleet renewal, de-leveraging, and return of capital to shareholders. We expect to continue to review this on an ongoing basis as the market develops. Yes, to your crucial question, to the extent we get further visibility on 2023 with forward fixings of new charters, the cash flow effect of which will only come through during 2023, of course, then that will feed into a determination about increasing the dividend or not.
History is that we've responded to improvements in cash flow and crucially improvements in forward cover, supporting sustainability, that's fed through into increased amounts of capital allocated to shareholders.
Sure. All right. That's fair. Kind of touching on that, you do have a couple of vessels coming off charter in early 2023. We've seen some peers locking in charters to start at that timeframe already. When do you expect to kind of forward-fix those? Are you getting kind of inquiries on those now?
Well, we're working on all of our forward fixtures and we're trying to get the best out of it.
Yeah.
You know, it's a complicated mix. We've got some ships, some smaller, some bigger ships, and we're trying to make the best mix and the best possible forward fixtures. This is our priority right now, forward-fixing our ships is our top priority.
Got it. All right. Just one quick modeling question. You saw $18.4 million or so on the amortization of the charter adjustments and other things in the fourth quarter. Do you have a run rate for that for kind of quarterlies in 2022 and 2023?
I can answer that, having just had a quick look at it. This is the inherent value in below-market charters on the ships that were acquired in 2021. You know, we can't give precise figures, but, you know, the effect in each quarter will reduce as time goes by, as those legacy charters, the below-market ones expire. You know, maybe you can assume that those charters have got a couple of years to go, or 2.5 years to go at the stage that we bought the ships in the middle of the year. You know, there'll be a reducing amount of intangible credit coming through over the next couple of years.
Got it.
Kind of straight line depreciation.
Yep. All right. We'll run with that. That's it for me. Thanks again and congrats on a solid quarter.
Thank you.
Our next question comes from the line of Liam Burke from B. Riley. You may begin.
Thank you. How is everybody today?
Smiling.
Not surprised.
Thank you.
I was interested in the 23 vessels you acquired in a very accretive manner. Some of them were, I mean, about a third of them were over 20 years old. They were purchased and the acquisition implied a scrap value for these vessels, which translated to a healthy return. Would you anticipate any of these vessels actually staying in the global fleet and recharter? Or do you just anticipate, all right, a good deal is a good deal, we'll just scrap them?
Well, it very much depends on the market. We generally do not think that ships 25 years or older, it's gonna be easy to be rechartered unless the market is red-hot like today. We've got plenty of life which we can squeeze out of our existing fleet. You know, we might surprise ourselves when the end of these charters come to an end. The thing is that the ships we have which are a bit older, like you said, also are quite unique because they're post-Panamax ships, and those ships are not being built enough, and those ships carry a big advantage in the new CII regulations. What I mean by that, the CII regulations is a very complicated equation coming into effect on first of January 2023.
It is to make it simple for the people who listen, there are five categories A, B, C, D and E. The ships have to trade on A, B, or C. Now, whether a ship is on A, B or C or D and E, which you shouldn't be, it is a matter of, it is a combination of how much fuel you're burning, and therefore CO2 emitting, how much cargo you have on board. A very economic ship that carries half its cargo, it is penalized because you are polluting without moving a lot of cargo and the distance you travel. It is a combination of the three. But very important is the amount of cargo you carry.
Ships that carry a lot of cargo have a better rating than ships that carry less cargo. I'm talking about assuming a full capacity. Let's say a ship is 100% loaded. You've got a 5,000 TEU, for example, Panamax ship and a 5,000 TEU post-Panamax. The post-Panamax ship can take 40% or more cargo loaded containers than the Panamax because it's wider, more stable. Therefore, that ship is gonna have a better rating. Most of our old ships, if you see in our fleet, are post-Panamaxes. They have this advantage. Of course, we have to modify our ships, and we are going to modify our ships, and we have taken into account the CapEx for that. We have to modify our ships for two reasons.
One is that the carbon emission is directly related to the fuel consumption. The more fuel you burn, the more CO2 you emit, obviously. For the carbon emission purposes, we will modify our ships. Equally, today, after this conflict of Russia and Ukraine, fuel prices have gone through the roof. They are $700-$800, which is the highest price since 2012 to 2013. Apart from the fact that environmentally it is important ships to consume little fuel, as little fuel as possible, so they don't emit too much CO2, from a commercial perspective, you know, fuel is so expensive, so it is also double dip. You know, it's becoming important in two respects for the liner companies, a ship that consumes less fuel.
Any improvement we do to our ships to reduce consumption is giving us a double benefit and ability to forward fix our ships or extend the existing charters or do a commercial agreement with the charters going forward.
Good. George.
Liam, can I just add
Oh, sorry, go ahead.
It may be the same thing. I'm gonna just add a couple of comments, Liam, and circle back to your original question. You're absolutely right. When we ran the investment analyses on the 23 ships that we acquired last year, we applied pretty conservative criteria, you know, assuming that they may be scrapped out at the end of, you know, the initial charters or the charters that we had visibility on. However, we do see scope to extend significantly beyond that time horizon, as a result to add upside to the returns. If you scroll through the presentation to slide 30, you'll see on the right-hand side of that slide, the age profile by size segment of the global fleet.
You can see that, yes, it's true, a number of our ships are aging, but also the peer group for each of those segments is also aging, which again adds to our view that particularly in light of a comparatively small order book for mid-size and smaller tonnage and an aging peer group, there is scope, particularly with the enhancements that George has discussed just now, to extend the life and enhance the returns of the acquisitions we've made. Ian, was that the point you were gonna make, too?
Yes. Yeah, it was, Tom. We think similarly. I mean, it just reemphasizes the cautious approach we have when we're making decisions to purchase ships. We don't rely on strong markets continually.
We look to, you know, very skinny residual values, scrap values. We look to ensure that we can earn the required return over a three to five year timeframe, not running the vessels out to, say, a 30-year life.
Great. I guess on the other front, you are looking at potential acquisitions every day. You mentioned in prepared comments that you have walked away from a lot of deals. Do you still see opportunity out there considering the fact that asset values are sky-high?
Well, the obvious answer is we do not. As our business is very peculiar, we might find transactions where ships have existing charters. Such as the deals we've done with Maersk, where you're buying a ship with a specific charter attached to it with a liner company, and then it's a sale and leaseback kind of thing, which might bring the high returns we require, and to allocate capital for such transactions. We're not out. We're definitely not looking to buy any charter-free ship. I mean, we're not looking to buy anything that it does not meet our strict, stringent criteria. Therefore, that's why you've seen after this, let's say, acquisitions flurry we did. After all these many ships, we did nothing. We don't believe that we should grow the company for the sake of growth. Absolutely not.
This is not how you make money in shipping, whether it's a public or private company. It's all about timing the acquisition. Once the market, of course, deflates, because it's a cyclical business, and it will deflate at a point, then a lot more opportunities will come up, which will help us renew our fleet, and bring down the average age of our fleet. But right now, I would say that the only deals that would make sense, if at all, would be deals where we have certainty of income and calculated returns. I don't know, Tom, if you want to add something.
Sure. Thanks, George. Yeah, I mean, I just echo what we said really in the prepared remarks, which is in broader terms, capital allocation is all about relative returns on a risk adjusted basis. You know, for the last six months or so, in our view, we should be directing capital towards returns to shareholders and delevering, rather than directing it towards acquisitions, simply because although we're seeing plenty of opportunities, as George says, those opportunities don't meet our our risk and return criteria. This is a cyclical industry, and if we are to continue to generate attractive cash flows over the long term, we of course have to have an eye to fleet renewal. It's all about timing those acquisitions or structuring them in such a way that the risk and return profile fits.
If I may add, Liam, to this. You know, in 2021, we returned all the money that was surplus to the company, to the shareholders, and more than all. That shows you that we have a policy where we have a sustainable dividend, and I have to say sustainable. It's the CSS policy. We're not having a dividend for 12 months. We're having a sustainable dividend. Then we see what's happening over and above that money, and we allocate it appropriately, depending on where we stand on the cycle, what's the cash flow contract and how we're doing with forward fixing and so on and so forth. I think our actions speak for themselves.
It's nice for one company to go out and say, "You know, I'm going to dividend out X percentage of my cash flow or my net income or whatever." We have done that 100%, actually, last year. As we speak, we are at 50% on current year, and we don't intend to stay there, obviously. Returning equity to the shareholders, it's gonna be more than 50%. Actions speak for ourselves, and I'm a shareholder, a major shareholder in the company, and I feel very happy with this return as a shareholder.
Great. Thank you very much.
Once again, that's star one for questions. Star one. Our next question comes from the line of J Mintzmyer from Value Investor's Edge. You may begin.
Hi. Good morning, gentlemen. Good afternoon to you over in Europe. Congrats on the excellent results today.
Thank you.
Thank you, J.
Great discussion so far. I wanted to dive into the cash balance and the discussion of the refinancing a little bit. I apologize if I missed it. I got on the call a little later. I wanted to dig into the restricted cash balance just a little bit more. There's a massive, restricted cash balance. A lot of its non-current. Was that related to the recent refinancing, or is that expected to be on the balance sheet long term in that form?
Ian, you wanna answer that?
Sure. Yeah, it is a big number, J, and thank you for pointing it out because it's important in understanding the cash that's available. You look at the balance sheet and see $200 million, you think, whoa. Actually, you know, 150 of that's locked up both formally as restricted cash, and, you know, we have a minimum liquidity requirement outside restricted cash of $25 million under our banking facilities. The vast majority of the $128 million of restricted cash relates to kind of one generic item, which is charter hire received in advance. This is advance payments for charters that we renegotiated or negotiated in the second half of last year. It's commercially very sensitive, so we can't talk too much about it.
We would expect this to continue to build a little, in the short term, as the charterer pays us above the agreed rate, and then the payment drops down and we draw on this restricted cash to make up the credit to revenue in our P&L. This is a mostly advanced payment of hire. It will be a feature of the balance sheet for the next little while, but over time, the amount will reduce.
Yeah. Thanks for diving into that a little bit. I noticed you have the interesting revenue item, right? As you accrue those charters down, it's like an additional revenue line item.
Yeah.
Um, look-
Yeah. Technically, the other side of the entry is deferred revenue.
Yeah. Yeah.
Yeah. It's gonna be.
Restricted cash, credit, deferred revenue.
I wanted to circle back. We talked about this in previous conference calls, but I wanted to circle back on the baby bonds. I know you issued some more of those last spring and summer to help with the growth, and it's been very accretive. Now they're sitting there at 8% at a much higher cost than most of your other loans. We talked about the call option that's available on those. I know you have to pay a slight premium now. Is there any interest? Is that on the near-term table for perhaps the next year, or is that more of something we'd look towards maturity to take care of?
Well, it's.
Yeah.
It's one of the important things that we have in our minds, and Tassos can talk to you about it. Yeah.
Like we have said a number of times, that for us it's a primary goal to reduce the cost. This is something that we have done since 2018 and would continue to do. It is something that we examine. It couldn't be called before the end of the year, so this is something that it is in our plan to examine when it's going to be the appropriate time and the appropriate opportunity in order for us to save money.
Yeah, certainly makes sense. It depends what other opportunities you have, of course. A little niche question here on the ship charters. I noticed you have a few CMA CGM ships, about 4,000 TEUs. Previous to this, you've listed them as expiring somewhere between third quarter of this year and first quarter 2023. Obviously, the market's strong, so we'd expect those to go to at least the latest expiration date. But now on your presentations, you're showing those same ships, and you're showing them going out until the middle of 2023. Were there some additional options that weren't listed previously, or what's going on with those ships?
Tom, you want to-
This is Tom. Thanks, George. I'm sorry this may have been lost in the footnotes, but if you look at the footnotes to slide six and seven, you'll see that what is happening here is the following. Under most charter agreements, a charterer has the option to add on accrued off-hire days that have built up during the lifetime of a given charter. If, for example, the ship's been off hire for 30 days in dry dock, the charterer has the option to add those 30 days onto the end of the charter. This is something we haven't really seen, or at least I haven't seen in the industry since about 2005, you know, the last super cycle.
Because capacity is so tight and because the lines are so anxious to hang on to capacity for just as long as they can in their networks, it's something that we're beginning to see again now, hence the stretching of the expected delivery dates into the subsequent quarters for a number of these vessels. It's a function really of the tremendous, good health of the market, Jay. In this case, paradoxically, it works against us a little bit.
Yeah, certainly noted the slippage in a few of those ships. I mean, it'll be the rate, current rate is decent, but it means that a lot of the, you know, early 2023 is now middle 2023, right? Final question. What's kind of the next couple ships that you would expect to forward fix, and when would be the timeline for those? I note that you have the GSL Susan is one of the vessels that comes up at the end of this year. I think you have the Nicholas as well, comes up soon. Is there something we could expect to see by say this summer, or is this more of like a 2023 thing?
Well, we are trying to fix them sooner rather than later. I would imagine that it's something that you should see before the summer. You know, always this is a matter of a negotiation, but this is our prime target is to forward fix our ships and not just those, but any 2023 ship. This is our top priority, as I said before, to try and fix those ships forward.
Yeah, sounds good. You have a lot of ships with CMA CGM that look pretty darn attractive, so hopefully you can get a deal done. Congrats on the excellent results and we'll look forward to the stock price catching up to the valuations here.
Thank you.
Our next question will come from the line of Frode Mørkedal from Clarksons Securities. You may begin.
Yeah. Thank you. Hi, guys.
Hello.
Uh, just-
Hello, Frode.
Yeah. I just want to first of all applaud your decision to buy back shares. This is something that a lot of investors have requested, I think so. Given the big discount to the NAV, I think this is clearly good news. Should be accretive both to EPS of course, but also the implied vessel prices. That's good. Maybe you have already touched upon it, but are there any constraints to this buyback program, let's say in terms of timing and pricing?
No, Frode. There aren't. It's at management's discretion.
However, it's obviously subject to availability of cash. Sorry, and maybe you were about to say that.
Yeah, no, that's.
As we said in-
No, thanks, Tom. Yeah.
As we said in the prepared remarks, [crosstalk] Frode, we build cash, but it's backloaded really in 2022. It's practical constraints and obviously, you know, however the market develops.
Absolutely.
Yeah, I understand. On the decarbonization investments you're targeting, can you give some more color on what type of equipment or investments you're looking into? In connection with that, what's the expected CapEx and expected fuel savings from that type of investment?
Well, we have a specific program that we're looking via a classification society and a design lab throughout the whole fleet for EEXI and CII. The obvious answer is that, of course, it depends on each ship, so I cannot give you a color on the size of it right now. The things that you can do on a ship to improve is and Tom will come into this more, it's changing the bulbous bow, changing the propeller. Those are major changes. Applying silicone-based paints. There is some even more innovative solutions such as air bubbles, et cetera, which we haven't yet looked in-depth.
Putting some special, let's call it appendages in the back of the propeller to help the flow of water and make the ship more efficient. All of those could give anything between 12%-17% improvement in the fuel consumption and hence CO2 emissions. Tom, I don't know if I covered that.
Sure.
That would be additive, though. That would be if we put all of these enhancements on one ship. Individually, they're smaller fuel benefits. So, it's a suite of enhancements that we would be potentially looking at. But, Tom, you've got the handle on this, but there are two stages to this. One is responding to the change in regulations directly effective on the January 1st next year. Then two is the more general, what are we doing to improve the efficiency of our vessels and the commercial attractiveness?
Yes. Within that, Frode, as you'll understand, this is where things get commercially a little bit sensitive, so you know, we have to be a little bit guarded in our discussions. Clearly, if you enhance the ship and you reduce the fuel consumption and thus emissions of that ship, the economic benefits accrue primarily in the short term to the charterer. In the longer term, obviously, they accrue to the ship owner because you have a commercially more attractive ship. In the short term, they accrue to the charterer. We would be looking for a collaborative approach with our charterers, with the liner operators to improve ships, and I guess it's a bit of a crude analogy, but it's an easy one.
You know, in the past, we have installed scrubbers on two of our ships, and we did so because there was economic justification in doing so. Yeah, this is a commercial as well as an operational as well as a regulatory issue. We, along with the rest of the industry, are feeling our way, I would say, at the moment.
This would be some type of profit share agreement perhaps, in order to-
Potentially a rate premium, potentially a longer charter, potentially shared CapEx potentially, potentially, potentiall . There isn't an easy response to you because it's something that not only we, but the industry and the market as a whole is evolving at the moment.
Yeah. If I may say, Frode, I think you're thinking of transactions such as in tankers more or bulkers where you have a ship has a base rate and then there's a profit share. In containers we don't have that because there's no index to benchmark and get the profit share. In containers what you get is an increase in charter rate or a longer charter rate at the same rate or something, some sharing. It's a different way of doing it. The beauty about it is that this different way is more a certain way.
In tankers and bulkers, you have a profit sharing, but for a profit to be shared, it has to exist. As we know, tankers and bulkers, they trade more in the spot market rather than in long-term charters. Therefore, it's an expected hopeful profit, while in containers is more of a, you know, solid certain profit. Let's put it this way.
Sure, understand. Okay, finally, given your investments, what's your current assessment of the need for slow steaming for your fleet perhaps, or maybe if you have any assessment on the wider fleet, that would be helpful. Thanks.
Well, I would say that the general idea is that the world fleet right now is trading around 20-21 knots. I would say for the EEXI numbers to work and the CII, et cetera, I would expect the world fleet to be trading around 19 knots as a general rule. I mean, the modern ships can trade higher. The less modern ships can trade lower, so average 19 knots. Let's not forget that more than 21 knots, we haven't seen for a decade. So right now, we're at the maximum, let's say, realistic speed. Now, fuel comes into play right now, which wasn't the case in the last three months ago.
Now, fuel is a very important issue, which right now, CO2 emissions for the rest of the year is not an issue, but it will become an issue in January 2023. Before this becomes an issue, fuel has already become an issue now. The freight rates are of course too high and probably line companies will not slow down because of fuel as we speak with these kinds of freight rates . Let's keep in mind that, you know, it's a double effect, you know, fuel consumption and CO2 emissions. They're gonna put the pressure. One thing I'd like to say, which is very important, and you guys understand it in Clarksons as you are, you know, experts in shipping, with your brokers.
The fact that the CII calculation takes into effect a big portion of what the cargo the ship has, that is going to be, in my opinion, a protection for the future for cascading. We cannot have big ships moving around half empty as the cascade years, you know, 2016, 2015, 2014. These years, you know, line companies would put a bigger ship than they needed because they had ordered them and they didn't know what to do with them into trades that did not need it. They only had to pay fuel, but fuel was cheap then. Now, the CII calculation is gonna kill such a practice because if you have a ship half empty, it's disastrous for the CII calculation.
Keep that in mind. It's an interesting angle.
Certainly. Thank you very much.
Our next. I also have a follow-up from the line of Randy Giveans from Jefferies. You may begin.
Hey, guys. I know it's a long call, but just a quick question. What is the current outstanding preferred equity amount? Just trying to get that calc for the income statement.
It is around. It's maybe little bit higher than $100 million, if I remember correct, $110.
$110. Perfect. That's it. Thank you all.
Thank you.
Thank you. This concludes today's conference call. Sorry, this concludes the Q&A. I'll turn it over to Ian Webber for any closing remarks.
Yeah, thank you very much. Thank you all for listening to us. It's been a good call. We appreciate the questions, and we look forward to giving you an update in May, most likely the second week of May, when we will issue our first quarter 2022 results. Thank you very much.
Thank you very much also.
Thank you.
This will conclude today's conference call. Thank you for participating. You may now disconnect. Everyone, have a great day.