Good day. My name is Dennis, and I will be your conference operator today. At this time, I would like to welcome everyone to the Global Ship Lease Second Quarter 2022 Earnings Conference Call. All lines have been placed on mute to prevent any background noise. After the speaker's remarks, there will be a question-and-answer session. If you would like to ask a question during this time, simply press star then the number one on your telephone keypad. To withdraw your question, press star one again. I would now like to turn the conference over to Ian Webber, Chief Executive Officer of Global Ship Lease. Please go ahead.
Thank you very much. Good morning, good afternoon, everybody, and welcome to the Global Ship Lease Second Quarter 2022 Earnings Conference Call. The slides that accompany today's presentation are available on our website at www.globalshiplease.com. Slides two and three of that presentation 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 2021 and was filed with the SEC on March 24 this year.
You can obtain this via our website or by 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, and then Tasos, Tom, and I will take you through our recent activity, quarterly results and financials, current market environment, after which we'd be pleased to take your questions. Now turning to slide four, I'll pass the call over to George.
Thank you, Ian, and good afternoon or evening to all of you joining us today. On our last quarterly call in early May, we noticed that the microenvironment contained significant uncertainty, ranging from war in Ukraine, to lockdowns in China, to rising inflation around the world. We also, at the time, drew a contrast between those very real unknowns on the one hand and the clarity and fixed nature of GSL's business and earnings on the other. These dynamics continue to define the current period as questions about the macroenvironment grow more pronounced while GSL continues to reap the benefits of a market segment with almost zero idle capacity and limited net fleet growth through the middle of the decade. Meanwhile, port congestion continues to tie up ships and potential labor disputes present a risk of further disruption to the liner sector and broader supply chain.
Now turning briefly to the numbers. Throughout the first half of this year, the substantial uplift from our 2021 accretive growth and from locking in new charters at higher rates has doubled our EBITDA and more than trebled our normalized net income versus the same period last year. We have continued to agree additional charters and extensions in 2022, including forward fixtures for 2023, adding a further $435 million of contract cover for our fleet in the year to date. On the basis of this strong multi-year coverage, we were able to place $350 million of senior secured notes in a private placement during the quarter, simplifying our capital structure and reducing our cost of debt in a manner that strengthens us for the long term.
This paper was privately rated investment grade, and further improvements in our balance sheet were recognized in an improved outlook in our corporate rating from Moody's and a notch up to double B from Standard & Poor's. In line with the growing consensus from customers and other stakeholders, we have established good momentum on the decarbonization front. We are focused primarily on retrofitting our existing ships with proven technologies to improve their energy efficiency and reduce emissions. We have various projects underway in close collaboration with our liner operator customers to ensure that efficiency-enhanced CapEx increases the commercial value of a ship and drives improved earnings going forward. We also monitor technically and commercially promising new carbon mitigation solutions in the market, including a compelling carbon capture technology in which we made a small investment in the quarter.
Concluding my opening remark, we're living in uncertain times, and the extraordinary volatility of the capital markets across all sectors reflects that. Against this backdrop, we maintain our conservative and risk-averse approach, extending forward contract cover, building equity value by reducing our cost of debt and delivering, allocating capital in a highly disciplined manner, and growing cash liquidity to ensure that we're well-positioned to manage risks and capitalize on opportunities as they arise. With that, I will turn the call to Ian.
Thank you, George. As previously, please turn to slide five. We split onto two slides the portions of our fleet that we owned up to the beginning of 2021, and those purchased thereafter, essentially during the course of 2021. This slide five, shows the former group, our fleet as of the end of 2020. It illustrates our high activity level and the dramatically improved rates and long durations of charters signed over the last year and a half. The light blue bars are those charters which were already in place coming into 2021. The dark blue bars indicate those agreed during 2021. The red bars are new charters agreed or extensions options exercised so far this year in 2022. The trend is clear.
Rates across our fleet have improved significantly. Our contract coverage is strong through at least the medium term, and in many cases, we've been able to secure multi-year charters for relatively older vessels at rates far above their previous employment. In each instance, the operating leverage in our business means that incremental cash flow goes almost entirely to our bottom line. The next slide 6, shows vessels that were acquired during the course of last year, 2021, with the dark blue and red bars indicating charters agreed subsequent to them joining the GSL fleet. Again, the trend is clear, as the newer charters are at multiples of their prior levels.
All in all, we have over $1.9 billion of contract cover over an average remaining duration of 2.6 years, and we've seen our adjusted EBITDA in the first half of 2022 more than double, compared to the first half of 2021. On the next slide seven, we provide some illustrative guidance on how our contract cover flows to our earnings. As we've said in the past, we need to be clear that this is not a forecast. We're just providing three illustrative scenarios that demonstrate our limited degree of spot market exposure through the end of 2023, and the manner in which prevailing market charter rates would be expected to flow through to our adjusted EBITDA. The assumptions underlying this exercise are spelled out in detail in the EBITDA calculator in the appendix of this presentation.
Let me highlight just a few things. For 2022, we have no exposure to the charter market. Aside from unanticipated off-hire, unplanned off-hire days, our revenue streams are essentially fixed for the year. For 2023, you will have seen that the white bars in the red boxes on the left of each chart, which represents spot or unfixed revenues, have been shrinking in recent quarters. Correspondingly, the bars showing contracted revenue have grown as we've agreed new charters and extension options have been exercised to lock in additional fixed-rate cash flow and further limit our charter market exposure through the end of next year. At this point, we have 91% of our ownership days in 2023 covered.
Those vessels that do have availability in 2023 are currently on charters at below prevailing market rates, implying scope for additional earnings uplift on renewal. The main takeaway from this slide is that under a variety of market scenarios, our adjusted EBITDA pathway is trending positively, supported by a high percentage of fixed charter contracts. Turning now to slide 8 for an overview of our dynamic and disciplined capital allocation strategy. Because our core business needs, that is operating expenses for the ships, maintenance, CapEx, and amortization, cash for dividends, SG&A, are well-covered by contracted cash flows, we're in a position to focus our attention on additional capital allocation opportunities, looking at relative returns adjusted for risk.
Among those opportunities are a return to capital shareholders, consisting of both our sustainable quarterly dividend, which we increased by 50% last quarter to $0.375 per share, and opportunistic share buybacks. During the second quarter, we invested $4.9 million in buying back our shares as part of the $40 million authorization, which we talked about last quarter. This brings our total buybacks over the last 12 months to almost $15 million. We continue to look at buybacks going forward, always subject to context. As George mentioned, we're also de-leveraging to manage balance sheet risk and build equity value as we've done for some time.
Beyond basic maintenance CapEx and regulatory dry dockings, it is clear that evolving market and regulatory demands make decarbonization-related CapEx a necessity for ensuring regulatory compliance and medium- to long-term competitiveness of our ships and viability in the container shipping industry. Notably, the increasing reach of Scope 3 emissions reporting means that our customers, such as the big retailers in the U.S. and elsewhere, are now focused on the emission profiles of their supply chains to a greater extent than ever before. As George mentioned at the beginning of the call, we're focused on proven decarbonization solutions while keeping an eye on new developments. We intend to take a proactive but measured approach to ensure that our vessels remain competitive while also maximizing their useful lives. We also keep an eye on accretive growth opportunities and fleet renewal opportunities on a selective and disciplined basis.
We have demonstrated both the willingness to be patient and the capacity to act decisively when an appealing and accretive growth opportunity arises, and we will maintain that posture. More generally, we're building cash liquidity both for resilience and for optionality, valuable qualities in an uncertain time and within a cyclical industry. When considering risks to these capital allocation paths, we're acutely aware of things like forward visibility or lack thereof, of our contract cover, the macro environment, industry cyclicality, evolving regulations, and the changing decarbonization landscape. Fundamentally, we're focused on generating long-term value for shareholders through a balanced approach that is sustainable in the cyclical industry. With that, I'll turn the call over to Tassos to talk you through our financials.
Thank you, Ian. On slide nine, we have summarized our first half 2022 financials and highlights. Revenue for the first half was $308 million, up from $156 million in the prior year period. Similarly, adjusted EBITDA for the first half was $190 million, up from $94 million first half of 2021. Our normalized income, which adjust for one-off items, increased from $41.5 million in the first half of 2021 to $137 million in the first half of 2022, a multiple of 3.3x. Moving to the balance sheet items, I would highlight the following for the six-month period.
Recently, we completed the U.S. private placement of $350 million of privately rated investment-grade debt, priced at 5.69%, which consists of 2.84% at 3.2 years interpolated U.S. Treasury yield, plus a margin of 2.85% and use the funds to fully redeem our 8% senior unsecured notes due 2024 as of July 2022. Fully repaid our $197.6 million outstanding balance on our LIBOR + 7% Hayfin credit facility due 2026, and fully repaid our $99.7 million Hellenic LIBOR + 3.9% facility due 2024, which also freed up five ships that are now unencumbered.
We favorably amend the covenants and extended the maturity till December 2026 of our LIBOR + 3% syndicated loan facility with an outstanding balance of $197.2 million. Those amendments freed up three ships from the syndicated loan security package, and we subsequently raised a $60 million syndicated loan against those three ships at LIBOR + 2.75% with maturity in 2026. In a move that we are more pleased about each day, we have put in place interest rate caps at 0.75% LIBOR for all of our floating rate debt. We also put in place a 40 million share buyback authorization, of which we have already utilized $4.19 million.
Finally, we are paying a quarterly dividend of $0.375 per share, $1.50 per share annualized, which we increased to that level last quarter. Now, on slide 10 is a summary of our key capital structure developments over time. In the upper left is our scheduled amortization in the coming years. We believe that an aggressive amortization schedule is prudent for our business, and we utilize our cash flows to deleverage while limiting our exposure to refinancing risk at loan maturity. Our detailed amortization schedule is in the appendix of this presentation on slide 26. On the upper right, you can see that we have continued to reduce both the margin of our debt and our overall cost of debt, even in the current inflationary environment.
Overall, we have reduced our average margin from 4.6% at the beginning of the year to under 3.1% now, and our total cost of debt now stands at just over 4.5% against the backdrop of an increasing interest rate environment. These improvements reflect our significantly strengthened balance sheet and support our long-term competitiveness as a lessor. On the lower left, you will see that the trading liquidity in our stock, while reduced recently as a result of a sector-wide pullback in valuations, remains substantially above earlier levels, helped, we believe, by a material increase in our public float and trading in our stock. With that, I will turn the call over to Tom.
Thanks, Tassos. As usual, and for the benefit of listeners who are new to GSL, slide 11 is intended to highlight the ship sizes on which our business is focused and which will help put the subsequent slides in context. GSL is focused on midsize and smaller ships, which is shorthand for ships ranging from about 2,000 TEU up to about 10,000 TEU.
Which is effectively the liquid charter market. The top map on the left shows the deployment of quote-unquote, "our sizes of ship," i.e. ships under 10,000 TEU, and emphasizes their operational flexibility. As you can see, they're deployed 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 can support them. It's important to note that over 70%, 70%, of global containerized trade volumes are moved outside the main lanes in the north-south regional and intermediate trades, served primarily by ships like ours. In his opening remarks, George acknowledged the cloudier macro and geopolitical outlook that we're all currently facing, and the uncertainty that that may bring to the consumer demand front.
As usual, rather than trying to second-guess how containerized demand itself may or may not evolve, we prefer to focus on the supply side, where we do have visibility, and against which investors and others can set containerized trade or GDP growth projections as they feel appropriate. Slide 12 shows the supply side trends that are a barometer of health of a sector. The top chart shows idle capacity, which remains below 1%, so effectively full employment of the global fleet. The bottom chart tells a similar story. Container ship recycling, scrapping, was almost nonexistent for container ships in 2021 and has fallen to zero year to date in 2022. Both these factors are symptomatic of the continued demand from liner operators for the limited capacity available in the market with even the very oldest ships finding continued employment.
Slide 13 looks at the order book. Here you can see on the left the composition of the order book by size segment, covering deliveries scheduled to take place all the way through into 2025. Now undeniably, the order book has expanded during the course of the last 18 months or so, reaching an overall order book to fleet ratio of 29.9% at the end of June. However, it continues to be heavily skewed towards the bigger ships over 10,000 TEU, for which the order book to fleet ratio is 52.3%. Meanwhile, our focus segments of 2,000 to 10,000 TEU, highlighted in the red box, have a significantly lower ratio of a little over 15%. There are two important points to keep in mind when assessing the order book.
The first is that mid-size and smaller container ship fleet is aging. As you can see from the chart on the right, if scrapping were to continue to be deferred, by the end of 2025, a substantial slice of the sub-10,000 TEU capacity currently on the water, about 1.5 million TEUs worth, 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 through to the end of 2025, and you would get implied net growth in these sizes of just 5.5%, which itself would be spread out over the coming 3.5 years or so.
The second point is that 2023 marks the implementation of the new environmental decarbonization regulations, which according to growing industry consensus, is expected to cause a slowing down of the global fleet to reduce emissions, thus reducing effective supply. To put that in context, reducing the average operating speed of the global container ship fleet by only one knot is calculated by MSI, which is the independent consultancy we use, to reduce effective supply by 6%-7%. While macro uncertainty is very real and the order book is growing faster than we would ideally like, we still see the supply side fundamentals for our focus sizes as supportive. Which brings us to slide 14, the charter market.
As you can see from the chart, while the charter market continued to firm through the first quarter of this year, upward momentum tailed off during the second quarter, albeit remaining at cyclical highs. Capacity is still tight and demand is still there, hence the new charters, including the forward fixtures we have just announced. The market is, for the time being, lacking the same firm direction we saw in previous quarters and is probably best described, as in the title of this slide, as being in wait and see mode. On this basis, you will see on the right-hand side of the slide that we have softened a little our guidance on term charter rates and durations available in the market for prompt tonnage today. Still extremely attractive, but slightly off the all-time peaks we saw earlier in the year.
With that, I'll turn the call back to George to wrap up. George?
Thank you, Tom. I will provide just a brief summary and then we would be happy to take your questions. With $1.9 billion of contracted revenue spread out over an average of 2.6 years, we have our debt service, CapEx, and dividends for 2022, 2023, and much of 2024 fully covered with no reliance upon charter renewals while we continue to focus on additional forward fixtures.
We have a great balance sheet that is stronger than it has ever been, and we have continued to reduce our cost of debt in the context of a rising interest rate environment and following an aggressive amortization schedule, allowing us to both de-risk the balance sheet and build equity value. We intend to build further our cash liquidity, both for resilience and to be able to take advantage on a highly disciplined basis of any accretive dividend supporting growth opportunities that may arise. Our fleet of high reefer, mid-size Post-Panamax and smaller container ships is in the sweet spot of the market and supported by supply side fundamentals. In fact, effective capacity in our segments may shrink from 2023 due to new regulations that will slow vessels down.
The macro picture is clouded by uncertainty, and we have seen sentiment softening relative to recent quarters and liners taking a wait-and-see approach. Nevertheless, the global fleet is effectively fully employed. Charter markets remain close to their cyclical highs, and the liners are forecasting another year of exceptional earnings in 2022. Finally, we're allocating our capital in an accretive and balanced manner that maximizes long-term value, as evidenced by the doubling of our adjusted EBITDA and more than tripling of normalized net income over the last year. We're paying a highly sustainable quarterly dividend equating to $1.50 per share per year, and have also spent almost $15 million on share buybacks within the last 12 months.
I will conclude by repeating for emphasis that we are building cash liquidity for resilience, optionality, and to ensure that the GSL fleet remains competitive on both a general performance and decarbonization basis in line with evolving customer demand and regulations. With that, we will be happy to take your questions.
At this time, I would like to remind everyone, in order to ask a question, simply press star then the number one on your telephone keypad. Your first question is from the line of Omar Nokta with Jefferies. Please go ahead.
Thank you. Hey, guys. Good afternoon. Obviously, congratulations on a pretty solid quarter and really further strengthening the balance sheet. I did wanna ask maybe just on your comments regarding the wait-and-see mode that charters have, currently. Obviously there's been commentary of liners taking a step back and kind of assessing what to do in terms of chartering ships as they become available. I mean, except that, of course, you guys just fixed 4 of your ships for 5 years at a pretty attractive rate. Maybe just in general, could you maybe qualify a little bit that wait-and-see mode? Does that apply to, as you show on Slide 4, the different ship sizes? Where would you say that that's actually happening in a meaningful way and whether the.
What size range is probably more affected by the wait-and-see mode and which ones at the moment are still looking firm, if that's the case?
Hi. Thank you. Thank you for the good question. I will try to give my opinion, then Tom also will join me. I think that right now, every day we hear more news on the inflation and the possible slowing down of the economy. IMF comes out with reducing forecasts and so on and so forth. Liner companies like us, they don't have a crystal ball, so they are worried about demand going forward. Obviously that puts the, let's say, wait-and-see mode that they are in. On the other hand, what they all know, and this is right now it's happening in our industry, it's a lot of questions, a lot of answers, a lot of analysis, a lot of projections on 2023 speed of the ships, in accordance with complying with the new EEXI/CII requirements.
The liner companies are asking us, "Guys, this ship, in order to be EEXI compliant, what's the maximum speed it can do?" Then the next question comes, "On the basis of 2021 performance, what her CII looks like? And what can we do to make the CII within the acceptable limits, which is ABC rather than D & E?" I don't know if anybody has seen the article of yesterday from Mr. Skou, who is the Head of Maersk, who said that according to what is going to be the new regulations, there's gonna be a shortage of 5%-15% for at least Maersk, if I recall the article right, of ships because of the slower slow steaming.
In other words, the same ships, in order to be moving slower, they're gonna need to be 15% more ships to make the same job. Right now, something that investors do not know, there is a big, let's say, analysis happening in all liner companies on seeing the existing fleet that they have, what speed they can achieve next year in order to be compliant. That speed probably is 2, 3 knots sometimes lower than it is today. E asily 15% lower than what it used to be in 2021, at least from what we see. It's not just the speed, it's a lot of other things. O nce the ship has to stop and sit in an anchorage, wait for getting in the berth because of congestion, that destroys the CII rating of the ship.
Congestion doesn't help, and congestion makes ships to have to move even slower than they would have if there was no congestion. I don't know if I'm becoming too technical, but I'm just trying to give you guys real-time information rather than just tell you generalities. That is on one hand, it's like a balance. On one hand, we have this question mark of slow steaming and everything in reducing supply of ships. On the other hand, we have the economy, which there's a question mark with inventories and stuff going up or reducing demand. Which side the balance is gonna tilt, it's the question, I think, in the heads of liner companies.
In this respect, they are obviously wanting to secure the ships that they feel are of primary use. T he important ships to them. They feel a little bit less interested in securing the less interesting ships. I'll let Tom speak about that more.
Sure. Thanks, George. Omar, to address your question on size. We've got, I think seven ships ranging from around 2,200 TEU up to 3,500 TEU, coming open within the next 6 to 9 months or so. When we analyze the rest of the market, and ships coming open of comparable size within the next 6 months or so, there are only roughly 20 - 30 in the overall market. There's still very limited capacity coming available, and as a result, that is generally supportive of being able to find employment for those ships. As George said, the lines are holding their horses a little bit and waiting to see both how the macro plays out and how this new regulation begins to play out.
Because it's all theoretical. We won't really know until it actually sort of comes into play for the industry. Nevertheless, we think the outlook is comparatively supportive from a supply- side perspective. The caveat is really upon the demand side. I don't know if that addresses the questions you had. I would also add that within that context, we are supremely aware that lines are gonna be focused not only on decarbonization, but also in a high fuel environment, on reducing fuel burn. Now, both of those arrows point in the same direction, which is to make ships A more efficient, so invest in decarbonization, energy enhancements. And B, also slow the ships down. We see that as helpful on both fronts. I'll pause there.
That was very good and very detailed. Yeah, just a couple maybe follow-ups to that, Tom. I think as you mentioned the net size range, it does sound somewhat familiar. A similar dynamic took place, if I recall, last fall, where there was that wait-and-see attitude around maybe October, November, and then they finally opened up and took those ships in. I guess in terms of George has been mentioning regarding the CII and that sounds fairly significant. So I think up to this point, it's felt maybe a little or maybe too big picture, but it sounds like it's really happening, where there's real tangible activity in terms of liners looking to slow down or preparing to slow down.
Tom, you had mentioned each knot is, what, 6% of the fleet. If we're talking three knots, that's right there. That's 18% of the fleet. Do you think that it sounds like it is just based off of your commentary, but is that kind of where the market's heading?
Well, that's sort of where the consensus sits at the moment. I think to echo what George said, according to the article covering Søren Skou's comments, they talk about 5%-15%. They very wisely are offering a range in terms of where shortfalls in capacity may come as a result of slowing down the fleet. I don't think there's any dispute, at least that I've heard, about the idea that slowing down the fleet is going to be necessary in order to meet the decarbonization regs. The only question is by how much. T hat's gonna be speculation for the time being until 2023 when it actually kicks in.
You're right, 6%-7% for each knot of average operating speed that the fleet slows down is the number we have.
Interesting. Well, very good. Thanks for that. I just have one follow-up on the swaps that cover the floating rate that was live at 75 basis points. Just wanted to ask how far out does the floating rate that-
The interest rate caps, and here Tassos can correct me, but I think they go out as far as 2026.
Correct.
Follow the same amortization as the existing debt.
YeahS orry, Omar, I didn't hear you very well. It actually follows the amortization that we have in line on January that we have closed the facility and it goes up to 2026.
Got it. Okay. Just mimics the entire life of the facility.
Correct.
Well, very good. Okay, well, thanks for taking my question. I'll turn it over.
My pleasure. Thanks, Omar.
Your next question is from the line of Liam Burke with B. Riley. Please go ahead.
Thank you, and how are you today?
We're well, thank you. How are you?
I'm fine, thank you. Can we talk a bit about acquisitions? You've been very opportunistic. Obviously, you don't see a lot of opportunity out there 'cause you bought back your stock, presumably at a better return. What does the asset acquisition market look like now? Are you seeing any lightening up with spot rates sort of moving down?
Yes, Liam, we continuously discuss and evaluate sell and leaseback deals, which are not really market- related. Those deals have nothing to do with where the market is today. Those are financial transactions that we just buy the asset at a specific price unlikely to the market price, usually less, and we get a lease at a lower charter rate. That's just a sell and leaseback. These deals we continuously look and evaluate. We haven't found yet something to make us overexcited, but there's a number of those deals coming.
Actually as we go into the summer, we believe in the fall, we're gonna see more of those given all these technical issues about slowing down ships et cetera. Now on opportunistically buying ships that do not have a charter, right now the prices are too high for us, and that's why we haven't done anything for the last 12 months. We will see, we expect once the market softens, we will see opportunities coming into the market. It's the usual cyclicality, and that's what we know how to do. We know how to buy ships at the right time and then milk them away in a better market or put the ships on long-term employment and give great results in EBITDA.
We do not think that this is gonna happen in the immediate future of the next, let's say, six months. We only think that in the next six months, the opportunities will probably come, if they do come from sale and leaseback transactions.
Liam, if I can just add to those remarks of George. T o some extent, although I agree with everything that George has said about the cyclicality of the market and the nature of opportunities, which we haven't seen anything that meets our criteria or would meet our criteria, over the course of the last, well over 12 months, it's also a little bit academic because the cash that we're generating is, we're beginning to harvest from the acquisitions we made last year and from the charters, but it's only really going to start to accumulate towards the back end of this year.
There hasn't been a huge amount of let's say cash to put opportunistically to work, even if we were to wish to do so, although obviously, were we to buy ships, we would be able to put debt against them. I just wanted to make that point. There isn't a huge amount of discretionary cash sloshing around to be deployed opportunistically at the moment.
Fair enough. Also on your most recent recharters, I believe that they were for 60 months and at nice premium to what you've been earning. Now, looking at the remaining vessels, are you looking at a significant trade-off between rates and duration? How is that working out?
Okay, there isn't a neat answer to that, unfortunately, Liam. As I said, we've got 7 ships that are coming open in the next 6-9 months. I would say that the charter market is waiting to see on both sides. W e're in no hurry to fix the ships. We've got great charter coverage as it is, you know, we're not panicking to fix them. The lines, as we mentioned earlier, are in a bit of a wait and see mode to try and understand how the macro is gonna play out and how the regulations are going to play out. At least on the smaller ships, it's more challenging to put in place forward fixtures.
However, we are continuing to look at forward fixtures for, you know, some of the larger tonnage. You know, obviously, if and when we have something to report, we'll report to the market. Sorry, a slightly elusive answer in a way.
Well, wait and see is a good answer.
Good.
All right. Well, thank you very much.
My pleasure. Thank you.
Your next question is from the line of Climent Molins with Value Investors Edge. Please go ahead.
Good morning. Thank you for taking my questions. I want to start by asking about environmentally related CapEx going forward. Could you provide some commentary on the investments you'll be making? Secondly, do you believe you'll be able to recoup part of those investments from charters, for example, through a higher rate than previously agreed?
Hi, Climent. This is Tom Lister talking. Thanks for the question. Okay, how to answer this elegantly. We're in conversations with charterers on this, the nature of which is commercial and somewhat confidential. I think the easiest analogy to draw between what is happening now when it comes to decarbonization and what we have done in the past with scrubbers, so installing exhaust gas cleaning systems on ships, is that we only installed those scrubbers against either a rate uplift, so an earnings uplift, or a contractual extension, or indeed both. Yes, we would expect any CapEx spent on decarbonization enhancements to translate into an increase in EBITDA on the corresponding vessels over time, number one.
Number two, if you enhance the vessels, you're left with a more valuable asset, i.e., a more commercially attractive asset, which is likely to be more sticky, let's say, for the charterer with whom we would have coordinated the enhancements. Hope that covers your question, but happy to follow, cover any follow-ups.
I ndeed it does. In April you repurchased around $5 million worth of shares, but no repurchases were conducted thereafter despite a lower share price. Was this due to the refinancing transactions? Secondly, as free cash flow ramps up going forward, how do you plan on balancing share repurchases with potential acquisitions?
Ian, you want to take that?
Sure. Y ou're right. We did opportunistically buy back around $5 million worth of stock in April. We were focused on the refinancing transaction, but we made a conscious decision not to repurchase stock in the last quarter. W e've mentioned our desire to build cash liquidity for resilience to take advantage of opportunities down the line. Tom has mentioned already, and we've talked on previous earnings calls that the increase in cash flow associated with our chartering activity over the last 12 months really doesn't flow until towards the end of this current year. We've had limited cash available to repurchase stock or make acquisitions in the context of what Tom said.
We remain very open to deploying the remaining $35 million of the authorized amount that we have from our board on an opportunistic basis. It's always risk adjusted, it's always a judgment call. We understand that you know, some people would have different views on ours. Our decision has been to wait and see on stock, the cash and capital allocation and stock repurchases.
All right. Thanks for the color. That's all for me. Thank you for taking my questions, and congratulations for the quarter.
Thank you.
Your next question is from the line of Frode Mørkedal with Clarksons Securities. Please go ahead.
Thank you. Hi, guys.
Hi, Frode.
Just a market question really. There's been a lot of talk about counterparty risk, particularly for liner companies which have these, you know, multiyear contracts at elevated rates. Seems likelier that these rates could be tried to reduce, if spot rates go down, I mean, talking about spot box rates now. How would you think about for you guys on the time charter counterparty risk? Do you see-
Okay.
that as a real risk or something that is unlikely to happen, just.
Well, I'll give this a go. We think it's highly unlikely to happen. You know, the container shipping industry, along with the rest of the global economy, went through some incredibly difficult times after 2008, 2009. The liner companies honored all of their contracts, not just with us, but as far as we know, and I think we would know, pretty much with everybody else. All the liner companies, bar one, Hanjin, survived that deepest, most extended downturn ever. We have fixed- rate, non-cancelable time charter contracts with our counterparties who are in the strongest position that they've ever been in, because of the earnings that they've been generating over the last 12 or 18 months.
Those contracts have been tested throughout history, both in practical terms and also legally. We really don't have any. We're not losing any sleep about the prospect of counterparty default.
Understand. That's great. That brings me to the next question, which is when you look at the EBITDA calculator you have, and even if you factor in the low end or the 15-year time charter rates, you basically have free cash flow of the debt repayments of more than $100 million this year and more than $200 million free cash flow next year. You don't say anything about 2024, but on my calculation, that's similar to 2023. Basically you have $500 million of free cash flow in the near future. I understand that you're you need to see the cash coming in and the cash being available before buying back stock. Basically, if you look at the free cash flow per share, it's it sums up to $14 per share.
It's quite significant. In my view, I would urge you to buy back shares if, when and you can, of course, do it.
Y es. I've given a reply to that, Tom, or made some comments on that subject just earlier, Frode. The practical matter is that we don't have spare cash at the moment. That builds towards the end of the year, and we take note of your comment and the similar comments that we have from other folks who are interested in GSL.
Yes. Good. Even if it's on buyback shares, of course, it's another de-leveraging opportunity as well. Anyway, that's all for me. Thank you.
Thanks, Frode.
Your next question's from the line of Brett Hendrickson with Nokomis Capital. Please go ahead.
Hey, how's it going, guys?
Hey, Brett.
Frode actually asked. Was on the same wavelength as me there. I wanted to ask about a couple of those things, and maybe I'll just adjust the question a little bit. Before that, Tassos, I wanted to make sure I heard you right on the. Were you giving the average weighted interest going forward after these refis?
Yes. We have reduced the margin, as we have mentioned, to below 3.1%. In general, along with hedging, we have managed to secure the company that it will remain at a low-cost, more or less the level that we are right now.
Okay. With the hedging locked in and with LIBOR, what's your average rate then? Understanding the rate's 3.1%.
It is around 4.5% right now, which I believe that it will be more or less the same.
Okay, good. I heard 0.5% in the prepared remarks, and I just, I thought I heard you wrong, but that's great. Okay.
Yeah. You can see the analysis if you want on page 10 of our presentation of how we ended up.
Okay. I had modeled, you know, interest and other finance expense next year going down, but I think I'm gonna have to revise that 'cause I think it's gonna go down even faster. You just told Frode Mørkedal that you don't have, you know, any counterparty risk. I guess we know then that this cash is gonna come in in Q4. I guess why not use line of credit availability to buy stock now just in case the stock's way higher in Q4 when the cash comes in to kind of massage that difference a little bit?
We've thought about lines of credit. We don't actually have one at the moment. We could probably get one if we wanted to. You know, we've been focused on the refinancing, Brett, but it's, you know, certainly an idea we can look at.
Yeah, if I may add. You know, we don't want to add more debt on the company right now, as we have managed to have an excellent rating with rating agencies, and it looks like we're gonna get upgraded hopefully very soon on Moody's also. If we, you know, get more debt without, you know, just to buy back our stock, it would hurt our rating, I'm sure, and that wouldn't be great for the company.
I agree.
Sorry, just a quick clarifying remark there. We're not suggesting that Moody's is expecting to upgrade us. George is referencing the fact that they've changed the outlook from stable to positive, just to be clear.
Yeah. I would think that Moody's and really all people involved, whether they're lenders or equity investors, would also understand that. I mean, for every $10 million of stock you buy back at these prices, you're saving, you know, almost $1 million on dividends, which isn't the same as interest because it can always be canceled. Moody's and other rating agencies know that you don't like to cancel the dividends. They take the dividend burden into consideration. I mean, you're reducing the dividend. Can you remind us the $181 million of cash that's there? I know when we talked back in January and February, some of that was tied up on.
No . The $180 million that you actually see in our cash equivalent in the balance sheet right now, it also include a portion that have been already used in order to eliminate the 2024 notes, which was around $92 million. You will find that in the subsequent events. It more or less releases half of it as a free liquidity. In that case, we also have out of this free liquidity a covenants of a little bit higher than $20 million, which is related to the free minimum liquidity loan covenants that there are throughout our facilities.
Besides any working capital that you may need for operation and all of that. You're leaving something like $70-something million of free cash, which in this case it includes also the working capital, the operation that you may need and everything.
Until some more of that cash flow comes in, there's some room to buy back stock, I would think, within that $90 million remaining, knowing that you had to set aside $10 or $20 for one of those longer-term contracts. I would think there's. Given that there's cash coming in. We can talk more offline. I just wanted to make sure you guys weren't missing the opportunity. I think it is kind of a gift that you're able to buy back stock at such a high free cash flow yield when you've got so much free cash flow between now and the end of 2024 locked in with fleet. With effective fleet capacity being reduced by the reductions in speed that the liner company is gonna have to do.
It just seems like a unique moment in history to take advantage of. As we've talked about in the wintertime, just don't want you guys to miss it. We're, you know, pretty understanding of, hey, the $40 million is gonna be back-end weighted. I just I worry if it's too back-end weighted, you'll miss the opportunity completely. I think we're on the same page, and I appreciate all the work you guys are doing, all your time. We can chat offline as needed. Thanks.
Thank you, Brett.
At this time, there appear to be no further questions. I will turn the call back to Ian for any closing remarks.
Thank you very much. Thanks, everybody. Thanks for listening. Thank you for your questions. We look forward to giving you an update on our progress and discussing our Q3 results at the normal time, which would likely be early November. We'll talk to you then. Thanks very much.
This does conclude the Global Ship Lease Second Quarter 2022 Earnings Conference Call. Thank you all for joining. You may now disconnect.