Good day, and thank you for standing by. Welcome to the Global Ship Lease second quarter 2021 earnings conference call. Please be advised that today's conference is being recorded. At this this time all participants are in a listen-only mode. After the speakers presentation, there will be a question-and-answer session. To ask a question during that session you will need to press star one on your telephone. If you require any further assistance please star zero. It is my pleasure to hand the conference over to Ian Webber, Chief Executive Officer. Please go ahead.
Thank you very much. Thank you. Good morning, good afternoon, everybody, and welcome to the GSL second quarter 2021 earnings conference call. The slides that accompany the presentation are available at our website at www.globalshiplease.com. As usual, slides two and three remind you that the call today 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 factor section in our most recent annual report on Form 20-F, which is for 2020 and was filed with the SEC on March the 19th this year. 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 don't 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, please refer to the earnings release that we issued this morning.
That's also available on our website. I'm joined, as usual, by Executive Chairman George Youroukos, our Chief Financial Officer, Tassos Psaropoulos, and our Chief Commercial Officer, Tom Lister. George will begin the call with some high-level commentary and an update on our current areas of focus. Then Tassos, Tom, and I will take you through our recent achievements, quarterly results, and financials on the current market environment. After that, we'll be pleased to take your questions. Turning now to slide four, I'll pass the call to George.
Thank you, Ian. Good morning or good afternoon to all of you joining us today. After an excellent first quarter, the second quarter of 2021 has seen the container shipping industry, and GSL in particular, continuing to reach new heights in ways that will benefit us for many years to come. We're currently in the midst of red-hot freight and charter markets based upon highly supportive fundamentals and exacerbated by port congestion and an overburdened supply chain that have proven to be longer-term features of the market than was initially expected. In this environment, we have been very active year-to-date, agreeing to acquire 23 ships, 19 of which have been delivered, for approximately $500 million and securing 40 new charters, representing $900 million of revenue. This has been achieved with only modest equity dilution from our capital raise in January.
The 23 ships are well specified and in the mid-sized and smaller vessel classes, which continues to be our focus, with attached charters that minimize downside or residual risk. As a result, we have grown our fleet by over 50% this year, driven our earnings dramatically higher to record levels in a sustainable manner, and initiated a quarterly dividend of $0.25 per share, more than twice that was originally expected. We have also refinanced the vast majority of our 2022 maturity debt, including the expensive 9.875 senior secured notes, significantly reducing our cost of capital. The rating agencies have acknowledged our improved credit quality. Both Moody's and S&P upgraded us in Q1, and Moody's has upgraded us again. Our rating today are B+ stable and B1 stable.
Now, from this materially improved strategic position, we are positioned to continue executing our proven growth strategy and seizing additional immediately accretive opportunities ahead of us while maintaining the discipline and high standards that have served us so well in getting us to this point. Now, if you turn to slide five, I'll describe the big picture for our industry at this moment. Where the second half of 2020 demonstrated the resilience of containerized trade in snapping back rapidly despite COVID-driven widespread lockdowns and diverse global challenges, 2021 is set to show demand growth significantly higher than that seen in recent years, at nearly 7%. Current projections for 2022 are for demand to once again be meaningfully above recent levels at nearly 6%.
Against such robust demand growth, the very limited underlying supply growth in the midsize and smaller classes, supplemented by the global fleet speeding up to increase effective capacity, has led to rates and overall charter terms getting better and better for owners such as GSL. Beyond earnings and asset value improvements for GSL, the fundamentals-driven recovery has seen our liner company customers guiding to record earnings for the year and taking major steps towards improving their balance sheets. It has been reported that the market strength has caused an uptick in new vessel orders. It is important to understand four things here. First, as has been the case for many years now, these new orders are heavily weighted towards the largest vessels, which do not and often cannot participate in the non-mainlay trades where our vessels operate.
Second, because the majority of the current order book is recently contracted and shipyards face capacity limitations in addition to the lengthy construction times themselves, there is still very little capacity scheduled to be delivered until at least late 2023, early 2024, with demand growth in the interim expected to significantly outpace supply growth, and with little that can be done to augment that supply in the interim. Third, when we talk about new orders in container shipping, comparisons are inevitably made to the situation of 2008-2009, when the order book hit a peak of 60% of standing capacity. Let us face this comparison head on. The order book has obviously grown so far this year in response to a clear instance of undersupply, as it is meant to.
The difference here is not only that the current size of the order book is a fraction of that from 2008-2009, which it is, in fact, but also that the combination of lessons learned and uncertainty about the green fuels of the future have capped the willingness of owners and their lenders to engage in the kind of speculative ordering that characterized and supercharged that order book before the financial crisis. There's a clear distinction between, on the one hand, the recent increase vessel ordering due to a real and current shortage of capacity, and on the other hand, the extreme speculative ordering seen up to 2008, driven in part by an apparently infinite supply of cheap capital, often from Germany.
The fourth point that I would like to make here is that on the increasing imperative to decarbonize, which the EU, the IMO, and a growing number of regulatory bodies and governments are looking to encourage. From January 2023, one such important regulation is set to come into effect known as EEXI. Under this more stringent performance emissions requirement, much of the global fleet of container ships will only be able to achieve compliance by reducing its speed to reduce fuel burn, to reduce CO2 emissions. Just 1- knot average reduction of speed equates to an effective reduction in global fleet capacity of 5%-6%. This is a hugely impactful regulation that will have a profound effect on the supply-demand balance in our business, potentially just when slightly elevated levels of new buildings are being delivered.
One final point that I would like to make here is that we still believe that there's a great deal of potential for consolidation. The container ship owner sector remains highly fragmented, with dozens of sub-scale players who are unable to benefit from the scale advantages, mainly access to capital, of a sizable and publicly listed platform such as GSL. The exodus of some of the financial players who entered this sector often a decade or more ago offers a range of additional acquisition opportunities, as we have proven. We are in an excellent position, and we see much to be optimistic about in the coming quarters and years. I will turn the call to Ian.
Thank you, George. Let's turn to slide six. If you follow GSL, you'll probably already be familiar with the 23 ships that we've acquired this year. I'll come to them shortly, but wanted to spend a few moments first on the additional value that we continue to generate from our preexisting fleet. On this slide, we show those vessels which were part of the GSL fleet as at the beginning of the year, less the La Tour, which we sold at the end of June this year, on June 30th, in fact. We've indicated in dark blue those charters that have been agreed year-to-date. You'll notice that for nearly all of these, they're now for multiple years and are at rates that are materially above those that came before, in a number of instances, quite dramatically above.
Let me highlight for you the very first vessel on the list, the 18-year-old 2,200 TEU Keta, which will transition in Q4 of this year from a current day rate of $9,400 per day to a new rate of $25,000 per day all the way through 2025, when she'll become 22 years old. Similarly, further down the list, the 2002-built 6,800 TEU GSL Nicoletta is currently earning $13,500 a day and will, in short order, be earning $35,750 per day well into 2024, when she too will be 22 years old. Just to remind you that the operating leverage inherent in our business means that 100% of any revenue increase goes straight to our bottom line, both earnings and cash, because our costs are fixed, operating costs are largely fixed.
By the way, it can take some time to negotiate a new charter and some time for that charter to become public. Some of the fixtures we're announcing today, and that are included in this chart, were settled a while ago, when rates in the market were lower. What does all this activity amount to? 14 charters added year-to-date to our existing fleet total some $441 million of contracted revenue. 23 ships acquired in 2021, year-to-date, on the next page, which we'll come to, bring a further $465 million of contracted revenue. For a total contract cover, long a central point of emphasis for GSL, of nearly $1.4 billion over a weighted average remaining duration of 2.5 years.
Furthermore, across the entirety of our fleet, we have 11 ships scheduled to come off their current charters during the rest of this year or in 2022. All of which are presently earning rates below those available in the market, in most cases, materially so. Let's turn to slide 7. We'll finish our fleet overview with the 23 vessels that we've agreed to buy so far this year, 2021, for an aggregate purchase price of just under $500 million. This grows our fleet to 65 ships, an increase of more than 50% on the year-end position. As we speak, 19 of these vessels have been delivered and are generating revenue and cash flow for the business. The remaining four are going to be delivered in the next few months.
All of these acquisitions are immediately accretive, with an estimated purchase price to average annual adjusted EBITDA ratio in the range 3.6x-4x , 4.0x . As you can see, these acquisitions, particularly in those larger vessels making up the bottom half of the table, generally have long remaining charter durations at attractive rates, which ensure that Global Ship Lease's payback period is largely or even accounted for, limiting or eliminating downside risk in the purchase. For the smaller vessels in the upper half of the table, we've also structured the acquisitions to ensure that our risk profile is skewed to the upside, but with a certain amount of near-term charter market exposure.
As you can see from the red bars, which illustrate charters signed subsequent to our agreement to acquire the vessels, the strategy of layering in a measured amount of charter market exposure has thus far paid off handsomely, with three of those vessels having secured forward charters at rates from approximately 2x to more than 3x their current rates, with those durations extending out to late 2024 and 2025. Between the growth provided by these 23 new vessels and their charters that you see here on page seven, and the new charters that we've secured year-to-date on our existing fleet on page seven, we have this year already added approximately $660 million of total adjusted EBITDA based on contracted revenue. Slide eight is a new slide.
Given both our substantial growth by acquisition and our signing of new charters for existing ships, we thought that it would be helpful to illustrate the earnings impact of all that we've done across three different scenarios. The data takes into account the actual or anticipated delivery dates of the 23 new ships and the expected dates for changes in effective charter rates for the existing fleet. To be very clear, none of these are or should be considered a forecast. The slide simply summarizes the mathematical results for 2021 and 2022 of plugging in different charter rates to our usual EBITDA calculator, which we show on page 21 in the appendix. We've run three scenarios. Firstly, rechartering in the next 18 months at estimated market rates of July this year, so kind of current market rates, for multi-year charters.
Scenario 2, at 15-year historic average rates, and scenario 3, at 10-year historic average rates. As market rates for July this year are so much stronger than the historic averages, spot revenue in 2022, for example, is $132 million at those July rates, compared to $57 or $48 million at the 15 and 10-year historic rates respectively. The difference in spot revenue between the scenarios explains exactly, as I mentioned before, because of our operating leverage, the difference in free cash flow. Overall, you'll see the extent of the step change that we're experiencing here in terms of our contracted revenue and adjusted EBITDA between 2021 and 2022 as a result of growth and charter renewals at substantially higher rates and the full-year impact of those in 2022.
For context, our annual adjusted EBITDA in 2019 and 2020, the two full years following our merger with Poseidon late in 2018, was around $160 million. While on this slide, I'm sorry for all this data, please note that even if you do not include anything for spot revenue, in 2021 and 2022, taking 100% of the operating cost of the vessels, so you assume no income on our spot ships, but all of the costs. Our already contracted revenue drives more than ample expected adjusted EBITDA to cover debt service and CapEx, as well as dividends on our preferred and on our common stock at current rates. Numerically, working out the numbers, zero spot revenue in 2022 gives adjusted EBITDA of some $290 million. Operating cash flow after debt service and CapEx, which you can get from page 21, are $68 million.
Aggregate preferred and common dividends at today's share counts is approximately $44 million, leaving $22 million of net cash flow. Remember, that's not including any revenue at all from our spot ships. Every dollar of that revenue will increase net cash flow by the same amount. Moving on to slide nine. This describes our growth strategy. We covered this on our last call, with an additional 16 ships added since then, we should definitely revisit our value-accretive growth strategy. We focus on existing ships with charters attached or put in place as part of the purchase, and ships and charters which are immediately accretive to cash flow, as opposed to new buildings for which there can be a two or three-year wait before they come online, during which time the owner has all of the funding costs.
The 23 ships that we will add from our activity year-to-date have a purchase price, as I mentioned, of just under $500 million, and the charter contracts are expected to generate some $332 million of adjusted EBITDA. We're disciplined, we're risk-averse. We look for decent returns on assets with low economic depreciation, limited residual value risk from good downside cover including scrap value and compelling upside potential. A purchase price to EBITDA multiple of between 3.6x and 4x increase overall adjusted EBITDA, net income, and earnings per share for the business significantly. We look to align the ESG and economic strengths of our strategy, aiming to take a full life cycle approach to the carbon footprint of ships. This means taking into account the building and recycling of ships, as well as operating them through their economic life.
It seems to us that it only makes sense to build new ships when we collectively, the industry as a whole, know with more certainty what the fuel of the future will be. Until then, we think it's preferable to optimize and maximize the economic life of existing ships. Finally, we want to stay nimble. We aim for attractive investment returns within five years or less. This allows us to adjust our strategy to the evolving decarbonization environment. We want to position GSL to be legacy problem-free, with a strong cash position to be able to capitalize on the next generation of green technologies as they're proven out and mature over, say, the coming decade. With that, I'll turn the call over to Tassos to talk you through our financials.
Thank you, Ian. As you know, the first half of the year has been very active with a significant number of moving pieces in the financials, so we have summarized the key points for you on slide 10. Revenue for the first half was $155.9 million, up from $142.3 million in the first half of 2020. Similarly, adjusted EBITDA was $96.2 million, up from $82.6 million in the first half of last year. Normalized net income, which adjusts for one-off items, was up from $24.4 million- $41.5 million. I would like to spend a moment on the one-off items now. In the second quarter, we completed the refinancing of all material 2022 debt maturities, which we commenced in the first quarter. We incurred prepayment fees of $1.4 million in relation to this refinancing.
In addition, we sold our 2,200 TEU 2001-built ship La Tour, recording a net gain of $7.8 million. Moving to the balance sheet items, there are value points to highlight. Our cash position at June 30, 2021, was $165.5 million. As I have mentioned above, in the quarter, we have successfully refinanced our last material 2022 maturity debt. We have refinanced the three tranches of $143.8 million ODYSSEA credit facility with new facilities with Deutsche, Crédit Agricole, and CMBCEL, pushing those maturities out to 2026 for the first two and 2028 for the third one, reducing also annual debt service by about $11.1 million and bringing down our margin from 4.8% to 3.2%. Meantime, we have raised in the second quarter under our ATM program, $7.6 million of our 2024 notes and $23.6 million of our perpetual preferred, further increasing our flexibility.
Additional funds have been raised since the quarter end. Regarding our acquisitions, for the seven post-Panamax ships we contracted to purchase in February for aggregate $116 million, we have arranged financing of $78.9 million. Of which we have drawn down $68.2 million against the six ships delivered by June 30, 2021. The final delivery and drawdown took place end of July. In addition, as of the quarter end, we had paid deposits of $25.1 million for the acquisition of our new vessels, the 12 Borealis ships and the last of the seven post-Panamax ships we contracted to purchase. As mentioned before, we sold La Tour for net profits of $16.5 million. Our detailed financial statements appear in full on slides 11 through 13.
Our strong current performance and confidence for the future has allowed the board to declare a dividend of $0.25 per common share for the second quarter to be paid on September 3rd to shareholders of record on August 23. Turning to slide 14, we have summarized some of the major positive impacts on our capital structure now and moving forward. As you can see in the upper left, our total debt outstanding is set to increase through the end of the year in line with the deliveries of the vessels that we have agreed to purchase, but is then scheduled to amortize significantly thereafter by about $300 million through year-end 2023. This aggressive schedule leaves significant upside on low-levered assets.
Incidentally, taking the end 2021 and 2022 debt numbers from this slide and the adjusted EBITDA from slide eight, illustrative earnings, the debt and its gross before netting of cash to adjusted EBITDA is 4.4x-4.5x for 2021, which is not a full year of earnings from the new ships, and 2.2x-2.7x for 2022. At the same time, you can see in the upper right chart that we can have very significantly reduced our average cost of debt from 7.7% at the end of 2018 to now being on track to fall below 5% at the end of this year.
On the lower left, you will see that the trading liquidity in our stock, once quite thin, has increased dramatically as our business has developed, as we have continued to actively and transparently engage with the market, and as our fleet load has increased following our equity offering earlier this year, and then again, as our large legacy shareholder, Kelso, sold a portion of their holdings into the market. From $3 million a month year ago to 100x this amount to just over $300 million in June. Our stock has clearly become much more accessible for investors.
In the lower right is the current split of GSL common stock ownership with 71% freely traded by the public and the remainder held by our board and management, CMA CGM, and Kelso. Finally, on the appendix, you can find as always our EBITDA and cash flow calculator, slide 21, which is intended to help you with your modeling. On slide 22, we give the guidance on cap spending. With that, I will turn you over to Tom.
Thanks, Tassos. Hello, everyone. Let's move to slide 15, which is intended to highlight the ship sizes on which we're focused, which will help put in context the subsequent slides. We're focused on mid-size and smaller ships, which is shorthand for ships ranging from about 2,000 TEU up to 10,000 TEU. The top map on the left shows the deployment of "our sizes of ships," i.e., ships under 10,000 TEU, and emphasizes their operational flexibility. As you can see, they're deployed everywhere. The bottom map shows where the big ships, those larger than 10,000 TEU, are deployed, which tends to be on the east-west mainline trades, where the cargo volumes and shoreside infrastructure can support them. It's important to note that roughly 70% of global containerized trade volumes are moved outside these main lanes.
In other words, in the north-south regional and intermediate trades served by ships like ours. Slide 16 shows supply-side trends that tend to be a barometer of health for the sector. Top chart shows idle capacity, which at the end of June was 0.8%, which is pretty much full employment and explains why the liner operators have had little choice but to speed up their ships to try to generate additional effective capacity to accommodate demand. The bottom chart tells a similar story. Ship recycling or scrapping has been almost nonexistent for container ships this year. Why? The charter market, as George said at the outset, has been red hot. Why scrap a ship if you can squeeze a few more millions of EBITDA out of her? That's the baseline, full fleet employment, which sets us up nicely for the next slide 17.
Here you can see on the left how the various fleet size segments have grown over the last few years. The segments we're focused on, those sitting in the red box, have seen negligible or even negative fleet growth due to under-investment. The same phenomenon carries through to the chart on the right showing the order book pipeline scheduled for delivery through 2024. The fleet segments in the red box, our segments, have minimal order books. As you can infer from the chart, the ordering activity you have read about has been heavily focused on the big ships above 10,000 TEU and actually, frankly, above 15,000 TEU, not a sector in which we compete.
This explains why the order book to fleet ratios for our focus and core segments are 5.2% and 3.8% respectively, while that for the order book as a whole is a little over 20%. What has all this done for earnings in the containership charter market? For the answer to that, please turn to the next slide 18. In the past, we provided rate data on this slide for 6 to 12-month charters. This showed the direction of travel of the market well enough that the dollar values of the rates themselves were becoming unrepresentative. The reason for this is that the charter market has bifurcated over recent months into charters for very short periods at very high rates, and charters for multiple years, still at incredibly attractive rates, which is where we're focused.
Today we provide a charter index based on a basket of ship sizes, which paints a clear picture of how the market is evolving, together with a table on the right-hand side showing where rates for multi-year charters are, or at least were, because rates keep moving up in July. As you can see, the charter rate index is up by a multiple of 5x since the trough in 2Q 2020, and has more than doubled during the first half of 2021. Any way you look at it, a truly fantastic market. On that high note, I'll turn the call back to George to wrap things up. George?
Thank you, Tom. Yeah, thank you, Tom. I will very briefly summarize, and then we will be happy to take your questions. Through growth and successful rechartering, we have built up almost $1.4 billion of contracted revenue and average contract cover of 2.5 years across our fleet. Importantly, through at least 2022, all of our debt service, CapEx, and dividends are fully covered by contracted cash flows, as Ian told you. While we're excited and very confident about our rechartering exposure and related upside that we have over the next 18 months, we're in no way reliant upon it. Our balance sheet is very strong with $166 million of cash.
Our credit ratings have been upgraded to B+ stable and to B1 stable, and nearly all of our 2022 debt has already been successfully refinanced, while both our leverage ratios and our cost of debt are trending strongly in the right direction. We believe that our fleet represents a sweet spot in the market, as mid-sized post-Panamax and smaller containerships with high reefer capacity are not only doing extremely well during this red-hot market, but look set to remain in high demand for many years to come as they continue to be significantly underrepresented in the order book, despite the critical workhorse role that they play in the market. With the onset of new environmental regulations in 2023, we expect that the effective capacity of these vessel classes may in fact shrink from slower steaming to reduce emissions to comply with the new regulations.
As we have said, the freight and charter market remains very hot, and our liner customers have also been delivering outstanding results so far this year. Relative to their lows in the second quarter of 2020, market charter rates are up approximately 5x , and they're up 2.2x versus the beginning of this year. In terms of our strategic priorities, the most fundamental is the safety and welfare of our personnel at sea and on shore, who have worked hard in challenging conditions throughout the last 18 months to consistently deliver an excellent performance, and in so doing, helping to keep the global economy moving. We cannot emphasize strongly enough that we appreciate their crucial contribution. In addition, we're strongly focused on delivering further accretive growth, thus giving additional support to our recently implemented quarterly dividend.
We've grown the fleet by over 50% in the year-to-date, adding $662 million of contracted adjusted EBITDA in the process, along with charter renewals on the existing fleet, and we believe that there are still a lot of exciting opportunities out there that GSL is uniquely well-positioned to seize. With that, we would be happy to take your questions.
Thank you. As a reminder, to ask a question, simply press star one on your telephone. To withdraw your question, press the pound or hash key. Please stand by while we compile the Q&A roster. Our first question comes from Randy Giveans with Jefferies.
Howdy, gentlemen. How's it going?
Very well, thank you.
Good, Randy.
All right. Yeah, as you've kind of discussed throughout the press release, through the presentation, you've been pretty aggressive in acquiring tonnage, obviously most with charters attached. At this point, do you look to continue on that path or maybe look the other direction, in terms of selling some older vessels? What are your thoughts on possible dividend increases or share repurchases at these discounted levels?
I will start, Randy, with the first part, and then I'll pass it on to Ian.
Great.
There are deals still out there for us. We do not go in the mainstream transactions. We have our sources for transactions that are mainly off-market, like the ones we have executed. We haven't done any market deals, really. We always do deals off the market. There's a great stream of deals coming in our direction. The answer to the first part is yes, we are looking at accretive growth, at accretive opportunities to grow the company, but very selectively and very carefully, and I stress the word carefully. We're not out there to do deals just for the sake of doing deals. We only do deals that make a lot of sense and they're very accretive to our balance sheet. Ian, you want to take the rest?
Sure. We've only paid one dividend so far. That was twice what we indicated because we actually took delivery of ships a little earlier than we were expecting, and charter rates moved up a little faster than we were expecting. We're just about to pay our second dividend. Actually, if you look at our yields, Randy, and I'm sure you do, we're pretty well up there compared to other folk in the sector. We keep dividend levels under review. As George has just said, our focus at the moment is deploying capital on accretive growth as we've done so successfully year-to-date, and that's our base case. As I say, we keep everything under review, and as the situation changes, if it does, then our capital allocation changes as well.
Got it. Okay. Sure. Looking at your chartering, average container ship rates have increased for what, I don't know, 60 weeks in a row now. I guess two parts to that. One is just your outlook on the market, and what and when do you think those increases will end? What will cause that kind of turning over of rates? In the meantime, will you continue to forward fix those 11 vessels that come available in the next 12 months? Are you wanting to kind of wait until closer to expiry to kind of maybe book some short-term charters or see what the market is at that time?
Yeah. Let me try to start with a question, and then Tom also can help me with this. What I think is when we came to the market for the future, we believe that there are fundamentals in this market apart from the fact that the market can go, in some cases, crazily up because you see the short-term fixtures that are in stratospheric numbers. This is because there's all these problems of COVID-related congestions and so on and so forth. As long as COVID is out there, and I think that the consensus is that COVID is not going to go away anytime soon. In my personal opinion, the full 2022 is going to be not COVID-free for the world.
As long as COVID is out there and these disruptions in the supply chains and everything, we will continue to see these stratospheric rates for the short-term periods, while at the same time, the longer periods, where you see the three to five-year charters, are more based on fundamentals. A liner company doesn't need to fix a ship three to five years unless they see the fundamentals going forward. They could simply offer, I don't know, $400,000 a day for three months and get on with it.
Yeah.
I believe that the market will be on the more long-term rates, more sustainable, and I would say 2022, in my personal opinion, will be a good year and possibly even further, but this is purely my own personal opinion.
Sure.
If Tom want to talk a bit more about what we feel as a strategy going forward for us.
Sure. First of all, I agree with everything George has said. If you look at the data, the supply side fundamentals for the sizes that we're focused on remain extraordinarily supportive, which is great news. Our business model is a conservative one and always has been a conservative one, and that's served us well during the downs as well as the ups of this cyclical business. Although all things being equal, the supply side fundamentals are great. As we've learned, well, as the world has learned, you can be taken by surprise by big macro events over which no one has any control and no one has any forward visibility. We continue to believe that fixing long and, where possible, forward fixing long makes sense in terms of the risk return profile that we're seeking.
Got it. Good deal. Well, hey, that's it for me. Keep up the great work. Thank you.
Thank you.
Thanks, Randy.
Thank you. Our next question comes from Frode Mørkedal with Clarksons Securities.
Yes. Thank you. Hi, guys.
Hi, Frode.
Looking at this EBITDA chart you had, which is very interesting. If you add on the prevailing market rates, you're looking at more than $400 million EBITDA next year, which is, I guess, approximately $300 million net income and more than $8 per share. That's huge. The first question is really, how quickly can you start chartering out that open capacity next year? Let's say by end of this year, how much of that open capacity do you expect to have covered, so to speak, at these prevailing rates?
If I may try to answer that, usually, the shorter we come to the open position, the higher the rate we can get. The more prompt the vessel is, the higher the charter you can get. Obviously, this is a balance between risk and reward. We see the market, and as we see the market, we can predict, let's say, with safety for ourselves, three to six months quite accurately. We tend to try and fix forward anything between three to six to nine months. I would say that looking at our maturities of the expiration of the charters, you could imagine that all things being equal, and if the market continues to be as it is today, without an upward or downward trend, we would be fixing in advance anything between three months to nine months ahead.
That would be my genuine response to your question. I wouldn't be able to tell you more specifically, because if we see the market trending upwards, we go for the three-month, let's say, extension. If we see the market flat, we go for the six months. If we see the market going down, we might go for the nine months. Let's say like that, something to give you a bit of a feel of how we view things.
If you look at pages six and seven, just eyeballing it, all of the ships that come open between 2021, 2022, the latest open period, and I know this is only just quarter by quarter, but the charters, the latest that any existing charter runs to is the end of Q2 next year. Most of the ships come open end of this year or end of Q1 next year. Consistent with what George has said, by year-end, and certainly by the time we have the Q4 call, there's a good chance that we'll have most of this tonnage wrapped up.
Yeah. That's great news. I guess the message from the liner companies the past few weeks is that they expect that this market would stay strong at least to the end of this year. That seems to be the message. It seems to me that it's a good chance that you actually can capture a lot of those. That $400 million EBITDA is actually quite in reach. That's my personal opinion. It also means that your cash flow would be quite substantial, right? Even after the maintenance CapEx and the debt repayments, that $400 million should translate to probably $200 million cash flow. You have a lot of liquidity suddenly. I guess you already answered that partly in the first question by Randy, what are you going to do with all this liquidity?
You've been very active, I guess the most active buyers, except the liner companies themselves. You've been buying a lot of ships the past 18 months or so at very attractive values, right? What do you think about these opportunities at the moment, given the quite steep appreciation we've seen in the ship values just over the past month or so?
Well, it's difficult to say any more than we've already said. We still believe that there are genuine opportunities to invest in growth on an accretive basis. We've said that we want to focus on existing ships. We think that's the right thing to do whilst there's so much uncertainty about propulsion technology. Of course, we've basically got to earn this cash. It does look pretty solid, nevertheless, we've got to earn it. It's got to hit our bank accounts, it accumulates over time. It's not as if we get all $200 million, if that's the right number, on the 1st of January. The cash position builds over time, we would expect to invest over time. Come the day, if we're unable to invest, as I implied before, we would look at modifying our capital allocation.
We're also kind of mindful of the regulatory changes that are coming up in 2023 with the EEXI and all of the rest of it. We're mindful of the massive uncertainties around COVID still. We're mindful of the huge uncertainties around decarbonization. To ensure flexibility for us and survivability and be legacy problem-free over the next few years, maybe sitting on cash is not such a bad thing.
If I may add, Frode, something very simple and very obvious. We all think, I'm sure you guys are thinking, what is going to look like in 2023? In 2022, we all feel more or less happy about. What is going to look 2023? How is it going to look 2024? Then there are three scenarios, I guess, for everybody. Scenario one is going to be equal to today, we're going to be making money hand over fist. Easy to solve this problem. We're going to have to increase our dividend if the market goes sky high and continues to be sky high. We're not going to grow the company to 1,000 ships. Scenario two is the market is a medium market. In that case, we keep on making money. We're not making the crazy money we're making today, we're making very good money.
Obviously, investments are more easy to make, and so we can combine the two, where we can continue investing and probably look at also sharing dividends with the shareholders. You have the third scenario where the market is low, and in that scenario, where what we want to be, we are going to be in a very strong position, very little debt. We have very strong debt maturities. We're paying down debt very fast, so we're not worried about this scenario at all. We want to be, in this scenario, cash rich so that we can do what we normally know well to do, which is buy cheap vessels, and which later become cash cows, like the ships we have today in our fleet. This is what we've been doing over the past years very successfully.
In all three scenarios, mind you, we always do sell and lease back transactions, which are not really market related because these deals carry no market risk as we're buying an asset together with a charter, so it's very calculated, the transaction, and we don't usually do it on ships that have a high residual value risk at the end of the fixed charter period. We always have the ability to deploy capital accretively, regardless of whether the market is high or low on a sell and lease back. We deploy a lot of money on a low market or a market we believe is going to rise in the foreseeable future.
Yes. Great. Make sense. Thank you very much.
Thank you. Our next question comes from Liam Burke with B. Riley.
Thank you. How is everybody today?
Super-duper.
Really well. With this market.
It's kind of tough to ask any questions. George, in the vessel classes that you see the opportunities, do you have any preference within your fleet, any particular vessel class that you find more attractive than others now?
We always felt, in the past years that the sweet spot is on vessels that offer low slot cost, and those ships have been the post-Panamaxes. That was our first choice, and that's where our core business is. We heard various arguments over the years, and also we liked, of course, the, let's call it smaller feeder vessels, but with special characteristics. The good ones. We heard arguments over the years that none of those were being built, so maybe we were wrong and they were not being built because they were not needed. We were very focused on our analysis, and we don't go by the what if scenarios. We only focus on what we know, and what we know best is container shipping. We load ships every day. We know what the cargoes are. We know what the requirements are.
We do not rely on what the general analysis comes in. We know more than that from the business. We stuck to our model, which now proved the dividends, where the ships we have are the ones that are in the highest demand, and they make a killing. Going forward, we will continue to focus on these ships as we believe that these are the ships that will be the workhorses, and that is proven now. Ideally, we would love to have more post-Panamaxes, high reefer containers like we're buying or specialized smaller ships. It very much depends on what the actual deal will be. We look at each transaction on its own merits. If it was in an ideal world and you ask me what ships I want to buy at the right price, yeah, obviously post-Panamaxes is the immediate answer.
I know that you, on your acquisition, are very niche oriented in terms of how you buy, are you seeing any competition for assets at all as you start evaluating your opportunities?
Well, the main competitors in this market for prompt vessels, for ships that are going to be charter free the next three to six months, are the liner companies. We are the third largest buyer after the first and seconnd being liner companies in the market. We have seen the competition coming from liner companies. Liner companies are not competing on sell and leaseback transactions, as you can imagine, because it's not of their interest.
They're not competing on ships which have cover of charter extending more than nine months because they want the ship right now to deploy and make money for their trade. We have a different approach, obviously. We make money from fixing the ship, chartering the ship forward. That's how we manage to navigate through the competition of liner companies. Apart from the liner companies, the competition from fellow ship owners, it's not as strong as the liner companies.
Got it. Great. Thank you, George.
Our next question comes from J. Mintzmyer with Value Investor's Edge.
Hi, good morning, gentlemen. Congrats on an excellent quarter.
Thanks.
Thank you.
Lots of good questions this morning. Won't labor this too much. Just a niche question here. You disposed of the La Tour, you sold it for almost $17 million. I don't want to read too much into that, but you have a sister ship, the Manet, that comes up Q4 that you haven't chartered yet. You also have two very similar vessels, also 2002 built, older ships, same size, that also come up Q4. Are those three ships potentially on the sales block, or do you plan on rechartering those?
Ian, do you want to explain why we sold the La Tour?
Sure. The short answer to your question, J, is we keep everything under review all of the time. We made a decision to monetize La Tour a while ago, to help finance the purchase of newer ships. Remember, La Tour is an old lady, and we sold her and renewed the fleet, brought down the average age. We're not averse to doing that on a sort of tactical basis. Strategically, have we made the decision to deliberately exit our older tonnage? No, we haven't. It's very much on a case-by-case basis.
Yeah.
Furthermore, La Tour had a charter that was coming open, and the market wasn't as hot as it is now, et cetera. Very dynamic circumstances.
Yes. If I can add to that, J, this is Tom. We wanted to make the acquisition of the high reefer ships without issuing any additional diluted equity. Clearly, we had to look at a financing mix that made sense. I've been frantically scribbling down these numbers as Ian's been talking. If you look at the GSL Julie, which is a sister to the La Tour, we fixed her at a rate of roughly $20,000 a day for two years or so. Back when we were looking at this transaction, we were assuming roughly a $20,000 a day rate on the La Tour. If you remove 5% for commissions, assume roughly $6,500 OpEx, that results in an annualized EBITDAR of about $4.6 million. Now, if you divide the sale price of $16.75 million by $4.6 million, you get a price to EBITDAR multiple of 3.6x.
That's pretty much identical to the multiple for the four high reefer Maersk ships, with the difference being, as Ian has said, they're half the age of the Manet. They're much higher specification than the Manet. They have a better future, simply because they're younger ships and higher specification than the Manet, and they can support, as a result, higher leverage, and generate higher returns than the Manet. That was really our thinking when deciding whether or not to selectively sell one of our assets to remonetize her in the investment of what we saw as even better assets generating higher returns. I hope that's helpful.
Yeah, it's very helpful. Thanks, all, for comprehensive answers. I guess the reason I was looking at those is, obviously, the values have went up, and you mentioned it was $20,000 a day for two years when you sold the vessel, but now you can get $25,000 or $30,000 for three or four years. Right? The market's different now. I realize you sold those before. At the same time, you could also sell those vessels now, I would imagine, for maybe $25 million or $30 million a piece. If you sold those three vessels that are coming up, $75 million, $80 million in block proceeds, and you relevered that, you could do another big block deal. I guess that's what I'm getting at, is saying, can you rinse, wash, repeat? Is there room for more deals like that?
Yeah. Possibly selectively, but we would look at it case by case.
Definitely. Last question for you. The shares have improved nicely year-over-year, but over the past few months, you've lagged the markets a lot. Price to NAV, it's always debatable depending on how much of a charter discount you put in there, but I have you guys somewhere between 40%, 55%, 60% price to NAV. It's a sizable discount. I know you care about liquidity. It's clear on slide, in your appendix there, you mentioned the liquidity has improved. However, you also have Kelso, a large block there. You also have 71% public float, which is great. Is there room for some sort of a repurchase or a tender offer, either to take out Kelso, take out that overhead, or to simply arbitrage your share price? There's a huge discount going on here.
Yeah. There is, and we kind of agree with you. However, I go back to what I was saying earlier, J, about using cash for growth. That is our preference, and that is what we hear from investors. Not all investors, but the majority who express an opinion support us continuing to grow the business for long-term value creation. Now, as I've said, should the growth opportunities not be apparent, then we will revise our capital allocation strategy policy, call it what you will. We review it comprehensively from time to time, and it's always open to us to review at every board meeting, which happen quarterly.
Certainly. Thank you, gentlemen. Have a great day, and keep up the good work.
Thank you.
Thanks. Thank you.
Thank you. We have a question from the line of Joe Kaplan with Whitefort Capital .
Yes. Hi, gentlemen. Congratulations on the execution of several accretive vessel acquisitions. Thank you in particular for the additional disclosures, in particular the illustrative earnings on page eight of the presentation. The EBITDA calculator, including through 2023 on page 21 of the presentation, which shows the pro forma free cash generation of the fleet based on the July 2021 long-term three to five-year recharter rates. I have a couple questions and then a couple comments. The questions are, the July 2021 charter rates listed on the right column of page 21 of the presentation. As you are aware, the HARPEX Index is up 37% even in the month of July alone. Do these rates reflect the beginning of July, the end of July, or the middle of July relative to the most recent index rates that we have?
Hi, Joe. This is Tom. I would say that they are average rates for July.
Okay. If we were to mark that to market to the current spot rates and understanding that you don't necessarily get those, but given that the majority of your open charters will come off of charter in the fourth quarter of this year and the first quarter of next year, it would seem that there's potentially even some room above the illustrative earnings scenario of $424 million in EBITDA for 2022 on page eight. Is that fair, just from a mathematical modeling perspective?
Potentially. Sorry. I was going to say potentially, Joe, but one thing I would caution you is that, and I think Ian mentioned this in the prepared remarks, negotiations on new charters take time. The fact that you have a charter that is announced today, for example, doesn't necessarily mean it's going to have been fixed on rates available in the market today. Inevitably, there's going to be a, let's call it, a four to six -week lag between when heads of terms are agreed, and when the charters are actually documented and announced. I would just encourage you to keep that in mind as well.
Sure.
Particularly in a rising market.
My second question, in terms of the pro forma weighted average fleet age, based on the new vessel acquisitions, we calculate that to be approximately 15 years on a weighted average basis. Is that ballpark correct?
Good question. I had 13.5 years in mind. I may be mistaken. To put this in context, it might be quite useful to look at slide 28 of the presentation. If you go to the appendix on slide 28, you can see how the fleet's age profile of the global fleet is composed by size segment. There are some useful sort of reference points in there. You can see that by and large, the mid-size and smaller segments, because they have been underinvested over the course of the last few years, they tend to be materially older. Whenever you sort of assess the age of our fleet, it's important that you assess it against the age of the corresponding peer group. Hopefully the data on slide 28 is helpful in that regard.
Understand. Just a couple of comments going back to some of the earlier questions on the call regarding capital allocation. When we run the spot recharter assumptions through the EBITDA calculator on page 21 for 2022 and 2023, we get somewhere between $425 million and $450 million of EBITDA for 2022. Just the pull-through of those full-year recharters into 2023, mathematically gets you in excess of $500 million for 2023, on a pro forma TEV of the company at the current stock price of $18 implies approximately $1 billion and $7 billion. That implies that effectively you would earn the entire enterprise value of the company in free cash flow over a little more than three years.
As George alluded, your weighted average contracts covered today is 2.5 years, and you're rechartering your new ships for three to five years out. That implies effectively ascribing zero value to the residual life of the fleet, and these are 25 year useful life assets, and the average life is something like, as you said, between 13.5 and 15 years.
That implies effectively an extra 10+ years that is not being imputed into the valuation at all. When we look at it just in terms of back of the envelope range of valuations on a forward recharter basis, even an extremely punitive scenario of a liquidation scenario, and I'm not saying that that's anywhere where the company is going given the growth and earnings trajectory, but if you just assumed that you just ran off the charters through 2022 and were to just scrap the ships based on the scrap values of $500+ per lightweight ton that you have on page 28, that in itself, discounted back at 10%, gets you to the current stock price of $18 per share approximately.
Then if you were even to conservatively assume a mean reversion to the 15-year average charter rates for 2023 and beyond, which implies a 75% discount to the current Harpex Index, and you discount that back at 10%, that gets you to sort of a mid-$30s per share stock price. Then as George Youroukos alluded, there's significant incremental upside to recharters if rates stay higher for longer given the fixed operating leverage in the business, both because the order book to fleet ratio in the mid and small size segment is still quite low, and because of the potential beneficial impact of IMO 2023 going into 2023. To echo two of the comments from prior callers in terms of capital allocation and capital return to shareholders, two takeaways.
The first is that on that range of values, it does seem conservatively that your current stock price reflects at least a 50% discount to what is largely contracted NAV going forward. The takeaways we have from that is one, we would not want to see any primary equity stock issuance at these levels. To the extent that there is an accretive solution to tender for the remaining Kelso shares, we would be supportive of that. With regard to evaluating any new ship vessel purchases and the accretive impact of that, we are supportive with the caveat that that should be weighed against the return to capital to shareholders, either in the form of dividends or accretive repurchases.
In terms of the dividend payout ratio, which you alluded is approximately $1 a share, which is a 6% dividend yield, which is high, but as a payout ratio on 2022 implies only approximately 20% of 2022 free cash flow, which is quite low and suggests substantial room for potentially increasing that dividend. If you had concerns about the variability of earnings, even though they're largely contracted over the next few years you could potentially target a variable dividend targeting a percentage payout of free cash flow or a combination of a base dividend plus a variable dividend.
The last point is just in terms of your debt stack, which is approximately $1 billion pro forma for the acquisitions, given the levels of free cash flow over the next two years, which are contracted, you will have the ability to pay down a very significant portion of that debt stack very rapidly. The ability to either refinance that debt stack at lower rates which is accretive or potentially get additional flexibility in your capital structure by issuing in the baby bond market or cumulative preferred market, we would be supportive of that as well. Thank you.
Thanks, Joe.
All right. This concludes our Q&A session for today. I would like to turn the call back to Ian Webber for closing remarks.
Thanks, everybody. Thank you so much for your engagement in Q&A and for comments. We look forward to giving a further update on the business for Q3 which will be in about three months' time. Thank you very much.
With that, we conclude today's conference call. Thank you for your participation, and you may now disconnect.