NMM

Business Context and Reporting Period

Company: Navios Maritime Partners L.P.
Filing Type: Form 6-K (Report of Foreign Private Issuer)
Reporting Period: Three months ended March 31, 2017 (unaudited)
Business Overview: Navios Partners is an international owner and operator of dry cargo and container vessels. As of March 31, 2017, the fleet consisted of 31 vessels (14 Panamax, 12 Capesize, 2 Ultra-Handymax, and 7 Container vessels), with several additional acquisitions pending delivery in 2017. The company operates primarily under long-term time charters.

Key Financial Metrics

Note: Working Capital calculated as Current Assets ($154.6M) minus Current Liabilities ($51.2M).

Material Changes vs. Prior Period

• Revenue Decline: Revenues decreased by 7.1% ($3.2 million) to $42.4 million, primarily due to a lower Time Charter Equivalent (TCE) rate of $14,671 per day (vs. $15,524 in Q1 2016) and the sale of the vessel MSC Cristina in January 2017.
• Net Loss: The company reported a net loss of $5.7 million compared to a net income of $0.2 million in the prior year. This was driven by increased interest expense, a $1.5 million allowance for doubtful accounts, and a $1.3 million loss on the disposal of the MSC Cristina.
• Interest Expense: Interest expense increased by 35.1% to $10.4 million due to a higher weighted average interest rate (5.4% vs. 4.6%).
• Cash Flow Shift: Operating cash flow turned negative ($1.7M outflow) compared to a $23.5M inflow in Q1 2016. However, investing cash flow was strongly positive ($98.0M inflow) due to proceeds from the sale of the MSC Cristina.
• Debt Reduction: Total borrowings decreased to $424.5 million from $577.1 million in Q1 2016, following the repayment of specific credit facilities using vessel sale proceeds.

Guidance, Outlook, and Recent Developments

• Distribution Policy: Quarterly cash distributions to unitholders remain suspended as of the quarter ended December 31, 2015, to preserve liquidity. There is no guarantee of reinstatement.
• Strategic Acquisitions:
  • Navios Maritime Containers Inc.: Formed in May 2017 to acquire a fleet of 14 container vessels from Rickmers Maritime Trust. Navios Partners is investing $30 million for a 40% equity stake. The offering is expected to close around June 1, 2017.
  • Vessel Purchases: Agreements were reached in April and May 2017 to acquire two Panamax vessels and three Capesize vessels for a total of approximately $113.85 million, with deliveries expected between June and September 2017.
• Debt Refinancing: In March 2017, the company issued a new $405 million Term Loan B facility (LIBOR + 500 bps) to refinance prior debt. Additionally, a $32 million facility with DVB Bank was agreed upon to refinance an existing credit line.
• Risks: Key risks include global trade uncertainty, fluctuations in charter rates, the aging of the fleet, and the ability to secure long-term charters. The company notes that actual results may differ materially from forward-looking statements.

Investor Verification Checklist

• Distribution Status: Confirm the continued suspension of quarterly distributions and the conditions required for reinstatement.
• Acquisition Closing: Verify the closing of the Navios Maritime Containers Inc. offering and the subsequent acquisition of the Rickmers fleet, noting that these are subject to conditions.
• Debt Covenants: Review compliance with financial covenants, specifically the EBITDA to interest expense ratio (minimum 2.00:1.00) and loan-to-value ratios under the new Term Loan B facility.
• Customer Concentration: Note that Hyundai Merchant Marine Co., Ltd. and Yang Ming Marine Transport Corporation accounted for approximately 47.8% of total revenues in Q1 2017.
• Allowance for Doubtful Accounts: Investigate the $1.5 million allowance recorded in Q1 2017 and its impact on future receivables.