NMM

Business Context and Reporting Period

Company: Navios Maritime Partners L.P. (NMM)
Filing Type: Form 6-K (Report of Foreign Private Issuer)
Reporting Period: Three months ended March 31, 2019 (Q1 2019)
Filing Date: May 17, 2019
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 May 16, 2019, the fleet consisted of 37 vessels (15 Panamax, 14 Capesize, 3 Ultra-Handymax, and 5 Containerships).

Key Financial Metrics

Material Changes vs. Prior Period

• Revenue Decline: Revenues decreased by $6.2 million (11.8%) primarily due to the sale of vessels in late 2018 (YM Unity, YM Utmost, Navios Felicity, Navios Libra II) and a decrease in the TCE rate from $16,108 to $13,209 per day.
• Net Loss: The company reported a net loss of $9.5 million compared to net income of $5.5 million in Q1 2018. This swing was driven by a $7.3 million vessel impairment loss on the Navios Galaxy I, higher interest expenses, and lower revenues.
• Impairment Loss: A one-time impairment loss of $7.3 million was recorded for the Navios Galaxy I, which was subsequently sold in April 2019.
• Interest Expense: Interest expense increased by $1.7 million (16.8%) to $11.5 million due to a higher weighted average interest rate (7.4% vs 6.4%) and a slightly higher average loan balance.
• Cash Flow: Net cash provided by operating activities improved by $4.1 million to $10.5 million, despite the net loss, largely due to non-cash adjustments including depreciation and the impairment loss.

Guidance, Outlook, and Recent Developments

• Reverse Stock Split: The Board approved a 1-for-15 reverse split of common units, effective May 21, 2019. Post-split, the company expects approximately 11.1 million common units outstanding.
• Distributions: A cash distribution of $0.02 per unit ($3.4 million aggregate) was declared for Q1 2019 and paid on May 14, 2019. The company maintains a policy of targeting $0.02 per unit quarterly, subject to available cash and credit facility covenants.
• Share Repurchase: In January 2019, a $50 million repurchase program was authorized. As of May 16, 2019, the company had repurchased and cancelled approximately 4.7 million units for $4.5 million.
• Financing Activity:
  • Completed a $20 million sale and leaseback for the Navios Sol (Capesize) with an implied fixed interest rate of 6.6%.
  • Drew $31.4 million under a new DVB Bank facility to refinance two Capesize vessels.
  • Drew $11.9 million under a new NIBC Bank facility to refinance an Ultra-Handymax vessel.
  • Prepaid approximately $73.5 million on the Term Loan B facility, releasing five vessels from collateral. The remaining balance is $339.3 million, fully repayable at maturity in September 2020.
• Risks: Key risks include global trade uncertainty, fluctuations in charter rates, customer creditworthiness (HMM and Cargill represented ~42% of Q1 2019 revenue), and the ability to secure favorable financing.

Investor Verification Checklist

• Impairment Realization: Verify the final sale price and proceeds from the Navios Galaxy I (sold April 2019) to confirm the $7.3 million impairment loss was accurate.
• Debt Maturity Wall: Confirm the status of the Term Loan B facility ($339.3 million outstanding) maturing in September 2020 and the company's refinancing strategy.
• Reverse Split Impact: Monitor trading volume and liquidity of the common units following the 1-for-15 reverse split effective May 21, 2019.
• Customer Concentration: Assess the financial health of major charterers, specifically Hyundai Merchant Marine (HMM) and Cargill, which accounted for nearly 30% and 12% of revenues, respectively.
• Operating Surplus vs. Distributions: Compare the Q1 Operating Surplus ($5.7 million) against the cash distribution paid ($3.4 million) to evaluate the sustainability of the $0.02 per unit payout policy.