Business Context and Reporting Period
Company: Navios Maritime Partners L.P.
Filing Type: Form 6-K (Report of Foreign Private Issuer)
Date: November 18, 2020
Reporting Period: Three and nine months ended September 30, 2020 (unaudited).
Business Overview: Navios Partners is an international owner and operator of dry cargo vessels, including Panamax, Capesize, Ultra-Handymax, and Containerships. The fleet is primarily chartered under long-term time charters. As of November 17, 2020, the fleet consisted of 55 vessels (24 Panamax, 15 Capesize, 6 Ultra-Handymax, 10 Containerships), plus two bareboat charter-in vessels expected in 2021.
Key Financial Metrics
| Metric ($ in thousands) | 3 Months Ended Sep 30, 2020 | 3 Months Ended Sep 30, 2019 | 9 Months Ended Sep 30, 2020 | 9 Months Ended Sep 30, 2019 |
|---|---|---|---|---|
| Time Charter & Voyage Revenues | $64,499 | $63,548 | $157,538 | $158,111 |
| Net Income / (Loss) | $6,991 | $16,859 | $(18,374) | $813 |
| EBITDA | $29,143 | $41,309 | $48,814 | $75,321 |
| Adjusted EBITDA | $30,923 | $41,309 | $64,294 | $86,304 |
| Operating Surplus | $16,011 | $25,726 | $19,314 | $37,635 |
| Net Cash from Operating Activities | $21,025 | $32,669 | $68,700 | $47,095 |
| Time Charter Equivalent (TCE) Rate (Combined) | $13,652/day | $18,778/day | $11,917/day | $15,369/day |
| Fleet Utilization | 99.4% | 98.4% | 98.7% | 98.6% |
| Total Borrowings (Net of deferred costs) | $505.7 million (as of Sep 30, 2020) | |||
| Current Assets / Liabilities | $67.1M / $277.1M (Negative Working Capital: $210M) |
Material Changes vs. Prior Period
- Revenue: Nine-month revenue remained relatively flat ($157.5M vs $158.1M) despite a 30% increase in available fleet days, driven by a significant decline in TCE rates ($11,917 vs $15,369 per day).
- Profitability: The company reported a net loss of $18.4 million for the nine months ended September 30, 2020, compared to a net income of $0.8 million in the prior year. This was primarily due to impairment charges and increased operating expenses.
- Impairments: Significant non-cash impairment losses were recorded in 2020:
- $6.8 million impairment on three containerships (recorded in Q2).
- $1.8 million impairment on the Esperanza N (recorded in Q3).
- $6.9 million impairment of receivable from Navios Europe II.
- Expenses: Vessel operating expenses increased by 37.4% ($68.4M vs $49.8M) and General & Administrative expenses increased by 9.8% ($15.8M vs $14.4M) for the nine-month period, largely due to fleet expansion.
- Interest Expense: Net interest expense decreased by 47.0% ($18.6M vs $35.2M) due to a lower weighted average interest rate (4.69% vs 7.11%) and debt prepayments in the prior year.
Guidance, Outlook, and Risks
- Distribution Policy: The Board declared a quarterly cash distribution of $0.05 per unit for Q3 2020, paid on November 13, 2020. This reflects a reduction from the previous policy of $0.30 per unit, which was amended in July 2020 to $0.05 per unit ($0.20 annually).
- Strategic Transactions:
- Navios Containers Acquisition: On November 16, 2020, Navios Partners proposed to acquire the outstanding common units of Navios Maritime Containers L.P. via a merger (0.37 Navios Partners units for 1 Navios Containers unit). The transaction is subject to approvals and definitive agreements.
- Fleet Activity: Acquired two vessels (Navios Gem and Navios Victory) for $51.0 million in September 2020. Agreed to sell two vessels (Esperanza N and Navios Soleil) for a net $12.7 million, expecting a book loss of $11.7 million.
- Liquidity: The company has a negative working capital position of $210 million, primarily due to $131.5 million in balloon payments due in 2021. Management expects to refinance or sell vessels to meet these obligations. Cash forecasts indicate sufficient liquidity for operations and debt service (excluding balloons) for at least 12 months.
- Risks:
- COVID-19: Continued uncertainty regarding global economic activity, demand for seaborne trade, and charter rates.
- Debt Covenants: Distributions are restricted by credit facility covenants, including minimum EBITDA to interest expense ratios and liquidity requirements.
- Customer Concentration: HMM Co., Ltd. represented 24.6% of total revenues for the nine months ended September 30, 2020.
Investor Verification Checklist
- Debt Maturity Wall: Verify the company's ability to refinance or sell assets to cover $131.5 million in balloon payments due in Q2 and Q3 2021.
- Impairment Trends: Monitor future vessel impairment tests, particularly for containerships, given the volatility in charter rates and the $15.5 million in impairments already recognized in 2020.
- Navios Containers Merger: Track the progress of the proposed acquisition of Navios Maritime Containers L.P., including regulatory and shareholder approvals.
- Distribution Sustainability: Assess whether the reduced distribution of $0.05 per unit is sustainable given the negative net income and high debt service requirements.
- Customer Concentration: Evaluate the risk associated with HMM representing nearly 25% of revenue and the potential impact of charterer creditworthiness.