Earnings Call Transcript
Global Ship Lease, Inc. (GSL)
Earnings Call Transcript - GSL Q2 2022
Operator, Operator
Good day. My name is Dennis. And I'll be your conference operator today. At this time, I would like to welcome you to the Global Ship Lease Second Quarter 2022 Earnings Conference Call. After speakers' marks, there will be a question-and-answer session. I would now like to turn the conference over to Mr. Ian Webber, CEO of Global Ship Lease. Please go ahead.
Ian Webber, CEO
Thank you very much. Good morning. Good afternoon, everybody. Welcome to the Global company's second quarter 2022 earnings conference call. The slides that accompany today's presentation are available on our website at www.globalshiplease.com. Slides 2 and 3 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 of this year. You can obtain this via our website or via the SEC. All of my 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 high-level commentary on GSL and our industry. And then Tassos, Tom, and I will take you through our recent activity, quarterly results, financials, and the current market environment, after which we'd be pleased to take your questions. Now turning to Slide 4, I'll pass the call over to George.
George Youroukos, Executive Chairman
Thank you, Ian. And good afternoon or evening to all of you joining us today. On our last quarterly call in early May, we noted that the microenvironment contains significant uncertainty ranging from the 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 macro environment 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 the 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 tripled 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 year-to-date. On the basis of the 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. Furthermore, improvements in our balance sheet were recognized in an improved outlook in our corporate rating from Moody's and a notch up to BB from Standard and Poor's. In line with a growing consensus from customers and other stakeholders, we have established good momentum on the decarbonization front. We're 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 and hence 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 remarks, 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, 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. And with that, I will turn the call to Ian.
Ian Webber, CEO
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 5 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, and the red bars represent new charters agreed or extensions exercised so far this year in 2022. The trend is clear; rates across the board 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 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, 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, Slide 7, we provide some illustrative guidance on how our contract cover flows to our earnings. As we said in the past, we need to be clear that this is not a forecast, but rather three illustrative scenarios that demonstrate a limited degree of market exposure to 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 or unplanned off holidays, revenue streams are essentially fixed for the year 2023. You will have seen that the white bars in the red boxes on the left of each chart, which represent our unfixed revenues have been shrinking in recent quarters. Correspondingly, the bar showing contracted revenue has 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. Also note that those vessels that do have availability in 2023 are currently on charters 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—operating expenses for the ships, maintenance CapEx, and quarterly dividends—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 the return of capital to shareholders, consisting of 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 $14 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 deleveraging to manage balance sheet risk and build equity value, as we've done for some time. Beyond basic maintenance 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, and 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 a 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 are 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 contracts that 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 a cyclical industry. With that, I'll turn the call over to Tassos to talk you through our financials.
Tassos Psaropoulos, CFO
Thank you, Ian. On Slide 9, 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 in the first half of 2021. Our normalized income, which adjusts for one-off items, increased from $41.5 million in the first half of 2021 to $137 million in the first half of 2022 and multiples of 3.3 times. Moving to the balance sheet items, I'd 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 interpolate U.S. Treasury yield plus a margin of 2.85% and used 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 plus 7% Hayfin credit facility due 2026 and fully repaid our $39.7 million Hellenic LIBOR plus 3.9% facility due 2024, which also freed up five ships that are now unencumbered. We favorably amended the covenants and extended the maturity to December 2026 of our LIBOR plus 3% syndicated loan facility with an outstanding balance of $197.2 million. Those amendments freed up three ships from the syndicated loan security packages, and we subsequently raised a $60 million syndicated loan against those three ships at LIBOR plus 2.75% with maturity in 2026. In a move that we are more pleased about, 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 $14 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, annualized to $1.50 per share, which we increased to this level last quarter.
Tom Lister, Chief Commercial Officer
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, which will help the subsequent slides in context. So 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 all our sizes of ship, i.e., ships under 10,000 TEU and emphasizes the 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 tend to be on the East-West Mainlane or arterial trades where the cargo volumes and shore-side infrastructure can support them. And it's important to note that over 70% of global containerized trade volumes are moved outside the Mainlanes 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. But 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 for the 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 non-existent 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. Undeniably, the order book has expanded during 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 TEU to 10,000 TEU, highlighted in the red box, have a significantly lower ratio of a little over 15%. Two important points to keep in mind when assessing the order book are as follows. First, the midsize 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 recycling yards. Net this out against the total order book of sub-10,000 TEU due to be delivered through 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% to 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. This 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've just announced, but the market is for the time being lacking the same firm direction we saw in previous quarters, and is probably best described as being in, as titled in this slide, '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, which are 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 Youroukos, Executive Chairman
Thank you, Tom. I would 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 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 have continued to reduce our cost of debt in the context of a rising interest rate environment and follow an aggressive amortization schedule allowing us to both de-risk the balance sheet and build equity value. We then 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-refer midsize 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 sentiments softening relative to recent quarters, with 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 to maximize 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 general performance and decarbonization basis, in line with evolving customer demand and regulations. With that, we will be happy to take your questions.
Operator, Operator
Your first question is from an analyst with Jefferies. Please go ahead.
Unidentified Analyst, Analyst
Thank you. Hey, guys, good afternoon. Obviously, congratulations on a pretty solid quarter, and really further strengthening the balance sheet. I did want to 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 shifts as they become available. Except that, of course, you guys just fixed four of your ships for five years at a pretty attractive rate. So maybe just in general, could you 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 what size range is probably more affected by the wait-and-see approach and which ones at the moment are still looking firm? If that's the case?
Ian Webber, CEO
Thank you for your question. I appreciate it. I'll share my thoughts, and then Tom will add to that. Currently, we hear increasing news about inflation and the potential slowdown of the economy. The IMF has revised its forecasts, which raises concerns for liner companies like ours regarding future demand. This uncertainty has put companies in a wait-and-see mindset. At the same time, there’s a lot of discussion and analysis happening within our industry about the speeds of ships for 2023, particularly in relation to meeting new EXI and CII regulations. Liner companies are inquiring about how fast ships can go to remain EXI compliant, and they are also looking at their 2021 performance to evaluate their CII standings and what adjustments are necessary to stay within acceptable limits. There was a recent statement from the head of Mærsk indicating that new regulations could result in a ship shortage of 5% to 15% due to slower steaming requirements. As a result, to achieve the same output, companies may need 15% more ships. Right now, liner companies are actively analyzing their fleets to determine what speeds they can realistically achieve next year to comply with regulations, which will likely be two to three knots slower than the current speeds, and at least 15% lower than what was typical in 2021. Additionally, factors like congestion can negatively impact a ship's CII rating, as waiting at anchor before entering a port affects their efficiency. We are attempting to provide you with real-time insights rather than general observations. On one hand, slow steaming introduces uncertainties that could decrease supply. On the other hand, economic factors being uncertain, including rising inventories, might reduce demand. The key question for liner companies is how this balance will play out. They are keen to secure ships that are deemed critical while showing less interest in those considered less essential. I'll let Tom elaborate further on this.
Tom Lister, Chief Commercial Officer
Sure. Thanks, George. To address your question on size, we've got, I think, seven ships ranging from about 2,200 TEU up to 3,500 TEU coming open within the next six to nine months or so. When we analyze the rest of the market and ships coming open of comparable size within the next six months, there are only roughly 20 to 30 in the overall market. So there's still very limited capacity coming available. As a result, that is generally supportive of being able to find employment for those ships. But as George said, the lines are holding their horses a little bit, 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 comes into play for the industry. But 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 acutely aware that lines are going to focus on decarbonization but also in a high fuel environment on reducing fuel burn. Now both of those factors point in the same direction, which is to make ships more efficient. So we are investing in decarbonization and energy enhancements while also slowing ships down. We see that as beneficial for both fronts.
Unidentified Analyst, Analyst
That was very good and very detailed. And yes, just a couple of maybe follow-ups to that. Tom, I think as you mentioned the, I guess in that size range, it does sound somewhat similar dynamic, I guess took place, if I recall, last fall where there was a 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's 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. And Tommy had mentioned, each knot is what, 6% of the fleet and if we're talking three knots, that’s right there, where that's 18% of the fleet. Do you think that's a mistake? I mean, it sounds like it is just based off of your commentary, but is that kind of where the market's heading?
Tom Lister, Chief Commercial Officer
Well, I mean, that's sort of where the consensus sits at the moment. I think, to echo what George said, according to the article covering Soren Skou's comments, they talk about 5% to 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. So 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. But the only question is by how much, and that’s going to be speculation for the time being until 2023 when it actually kicks in. But you're right, 6% to 7% for each knot of average operating speed that the fleet slows down is the number we have.
Unidentified Analyst, Analyst
Interesting, very good. Thanks for that. And I just have one follow-up on the swaps that cover the floating rate with LIBOR at 75 bps. I just wanted to ask how far up is the floating rate that?
George Youroukos, Executive Chairman
The interest rate caps, and here Tassos can correct me, but I think they go out as far as 2026 or follow the same amortization as the existing debt.
Tassos Psaropoulos, CFO
It follows the amortization that we have established in January when we closed the facility, and it extends up to 2026.
Unidentified Analyst, Analyst
Got it. Okay, so just the entire life of the facility.
Tassos Psaropoulos, CFO
Correct.
Unidentified Analyst, Analyst
No, very good. Okay. Well, thanks for taking my question. I'll turn it over.
Tassos Psaropoulos, CFO
Our pleasure. Thanks.
Operator, Operator
Your next question is from the line of Liam Burke with B. Riley. Please go ahead.
Liam Burke, Analyst
Thank you, and how are you today?
Ian Webber, CEO
We're well. Thank you. How are you?
Liam Burke, Analyst
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 because 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?
George Youroukos, Executive Chairman
Yes, Liam, we do seek and continuously discuss and evaluate sale 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; we buy the asset at a specific price, unlike the market price, usually less, and we get a lower charter rate. But that's certainly a side activity we continuously look at and evaluate. We haven't found yet something to make us overly excited. But there are a number of those deals coming and actually as we go into the summer, we believe in the fall, we're going to see more of those given all these technical issues about slowing down ships, etc. On opportunistically buying ships that do not have a charter, right now the prices are too high for us. That’s why we haven’t done anything for the last 12 months. We expect that once the market softens, we will see opportunities coming into the market. It’s the usual cyclicality. And we know how to buy ships at the right time and then make them work in a better market or put ships on long-term employment and get great results and EBITDA. But we do not think that this will happen in the immediate future over the next six months. We think that in the next six months, the opportunities will probably come if they do come from certain leaseback transactions.
Ian Webber, CEO
And Liam, if I can just add to those remarks of George, I mean to 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 past well over 12 months, it's also a little bit academic. 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. So there hasn’t been a huge amount of cash, let’s say, to put opportunistically to work, even if we were to wish to do so. Although obviously, if we do buy ships, we will be able to put debt against them. But 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.
Liam Burke, Analyst
Fair enough. Also, on your most recent charters, I believe that they were for 60 months and a 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, and how is that working out?
Ian Webber, CEO
Okay, so there isn't a sort of a neat answer to that, unfortunately, Liam. As I said, we’ve got seven ships that are coming open in the next six to nine months. I would say that the charter market is waiting to see on both sides. We're in no hurry to fix the ships; we've got great charter coverage as it is. So, we’re not panicking to fix them, and the lines, as we mentioned earlier, are in a bit of a wait-and-see mode to try and understand how the macro and how the regulations are going to play out. So 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 some of the larger tonnage. But obviously, if and when we have something to report, we will report it to the market. Sorry, a slightly elusive answer in a way.
Liam Burke, Analyst
Well, wait-and-see is a good answer. All right, well, thank you very much.
Ian Webber, CEO
It is my pleasure. Thank you.
Operator, Operator
Your next question is from the line of an unidentified analyst with Value Investor's Edge. Please go ahead.
Unidentified Analyst, Analyst
Good morning. Thank you for taking my questions. I wanted to start by asking about environmentally related CapEx going forward. Could you provide some commentary on the investments you'll be making? And 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?
Tom Lister, Chief Commercial Officer
Hi, Clement, this is Tom Lister speaking. Thanks for the question. Okay, how to answer this elegantly? We're in conversations with charters on this, the nature of which is commercial and somewhat confidential. But 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—installing exhaust gas cleaning systems on ships—is that we only installed those scrubbers against either a rate uplift or a contractual extension, or indeed both. So yes, we would expect any CapEx spent on decarbonization enhancements to translate into an increase in EBITDA on the corresponding vessels over time. Secondly, if you enhance the vessels, you're left with a more valuable asset, a more commercially attractive asset, which is likely to be more desirable to the charterer with whom we coordinated the enhancements. Hope that covers your question, but I’m happy to follow up if you have any.
Unidentified Analyst, Analyst
No, indeed, it does. And in April, you repurchased around $5 million worth of shares, but no repurchases were conducted thereafter, despite the lower share pricing. Was this due to the refinancing transactions? And secondly, as free cash flow ramps up going forward, how do you plan on balancing share repurchases with potential acquisitions?
Tom Lister, Chief Commercial Officer
Ian, do you want to take that?
Ian Webber, CEO
Sure, yes, you are 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. We’ve mentioned our desire to build cash liquidity for resilience to take advantage of opportunities down the line. Thomas 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. So we’ve had limited cash available to repurchase stock or make acquisitions in the context of what Tom said. But we remain very open to deploying the remaining $35 million. The authorized amount that we have from our board is on an opportunistic basis, which is always risk adjusted. It’s always a judgment call. We understand that some people would have different views on ours. Our decision has been to wait and see on stock in cash and capital allocation and stock repurchases.
Unidentified Analyst, Analyst
All right, thanks for the color. That's all for me. Thank you for taking my questions and congratulations on the quarter.
Ian Webber, CEO
Thank you.
Operator, Operator
Your next question is from the line of Frode Morkedal with Clarksons Securities. Please go ahead.
Frode Morkedal, Analyst
Thank you, hi George.
George Youroukos, Executive Chairman
Hi, Frode, just a market question really. There's been a lot of talk about counterparty risk, particularly for liner companies, which have these multi-year contracts at elevated rates. It's likely that these rates could be tried to reduce if spot rates go down. I mean, talking about box rates now. How would you think about it for you guys on the time charter counterparty risk? Do you see that as a real risk or is it something that is unlikely to happen?
Ian Webber, CEO
I will give this a go. We think it's highly unlikely to happen. Maybe the container shipping industry, along with the rest of the global economy, went through some incredibly difficult times after 2008-2009, and the liner companies honored all of their contracts, not just with us but as far as we know. I think we would know pretty much everything else and all liner companies by one have 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, 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. So we really don't have any, we’re not losing any sleep about the prospect of counterparty default.
Frode Morkedal, Analyst
Understood, that's great. And that brings me to the next question regarding switches. When you look at the EBITDA calculator you have, even if you guys factor in the low-end or the 15-year time charter rates, you basically have free cash flow after 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 for my calculation that is similar to 2023. So basically, you have $550 million in the free cash flow in the near future. I understand that you need to see the cash coming in and available before buying back stock. But basically, if you look at the free cash flow per share, it sums up to $14 per share. So it's quite significant. So in my view, I would urge you to buy back shares when you can, of course, do it.
Ian Webber, CEO
Yes, I've indicated while I've given the reply to that or made some comments on that subject, so just earlier further, 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 most of your comments and the similar comments that we have from other folks who are interested in GSL.
Frode Morkedal, Analyst
Yes, good. Even if you don't buy back shares, of course, it's a massive deleveraging opportunity as well. So anyway, that's all for me. Thank you.
Ian Webber, CEO
Thanks, Frode.
Operator, Operator
Your next question is from the line of Brett Hendrickson with Nokomis Capital. Please go ahead.
Brett Hendrickson, Analyst
Hey, how's it going, everyone? Frode asked something that aligns with my thoughts. I wanted to inquire about a couple of those issues. I might adjust the question a bit, but first, Tassos, I wanted to confirm if I understood you correctly regarding the average weighted interest moving forward after the refinancings.
Ian Webber, CEO
Yes, we have reduced the margin as we have mentioned to below 3.1%. Along with hedging, we have managed to secure the company that it will remain at a low cost more or less at the level that we are right now.
Brett Hendrickson, Analyst
Okay, so then with the hedging locked in and with LIBOR, what's your average rate then understanding the rate is 3.1?
Ian Webber, CEO
It is around 4.5% right now, which I believe will be more or less the same.
Brett Hendrickson, Analyst
Okay, good. I have heard of the 4.5 in the prepared remarks. And I thought I heard you wrong, but that's great.
Ian Webber, CEO
Yes, so you can see the analysis if you want on Page 10 on our presentation of how we do.
Brett Hendrickson, Analyst
Okay, and I had modeled interest and other finance expense next year going down, but I think I'm going to revise that because I think it's going to go down even faster. And you just told Frode that you don't have any counterparty risks. So I guess, and we know that this cash is going to come in Q4. I guess, why not? Why not use line of credit availability to buy stock now, just in case the stock is way higher in Q4 when the cash comes in to kind of massage that difference a little bit?
Ian Webber, CEO
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. We've been focused on the refinancing. But it's most certainly an idea we can look at.
George Youroukos, Executive Chairman
Yes, 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 going to get upgraded, hopefully very soon on Moody's also. So if we get more debt just to buy back our stock, it would hurt our rating, I'm sure, and that wouldn’t be great for the company.
Brett Hendrickson, Analyst
I agree.
Ian Webber, CEO
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.
Brett Hendrickson, Analyst
Yes, and I would think that Moody's and really all people involved, whether they're lenders or equity investors, but also understand that, I mean, for every $10 million of stock you buy back at these prices, you are saving almost a million dollars on dividends, which isn't the same as interest because it's can always be canceled. But Moody's and other places know that you don't, other rating agencies know that you don't like to cancel the dividend. So they take the dividend burden into consideration.
Ian Webber, CEO
But I mean, you're reducing the dividend. Can you remind us that 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, no, the $180 million that you actually see on our cash and cash equivalent balance sheet right now, it also includes a portion that has already been used to eliminate the 2024 no exposure around $92 million, you will find that in the subsequent events. So it more or less releases half of it as free liquidity. In that case, we also have out of these three liquidity covenants of a little higher than $20 million, which is related to the free minimum liquidity loan covenants that they are throughout our facilities.
Brett Hendrickson, Analyst
Besides any work you may need for operation and all of that, so you're going to leave something like 70-something million of free cash, which in this case includes also the working capital, the operation that you may need and everything?
Ian Webber, CEO
Yes, okay. So yes, until some more of that cash flow comes in, there's just some room to buy back stock, I would think within that $90 million remaining, knowing that you had to set aside $10 or $20 million for one of those longer-term contracts. But I would think there’s given that there's cash coming in, but 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 have so much free cash flow between now and the end of 2024 locked in with the fleet. With effective fleet capacity being reduced by the reductions and speeds that the liner company is going to have to do. It seems like a unique moment in history to take advantage of it.
George Youroukos, Executive Chairman
Thank you, Brett.
Operator, Operator
At this time, there appear to be no further questions. I will turn the call back to Ian for any closing remarks.
Ian Webber, CEO
Thanks very much. Thanks everybody 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. So we'll talk to you then. Thanks very much.
Operator, Operator
This does conclude the Global Ship Lease second quarter 2022 earnings conference call. Thank you all for joining. You may now disconnect.