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 and nine months ended September 30, 2011
Date of Filing: October 24, 2011

Navios Maritime Partners L.P. is an international owner and operator of dry bulk vessels. As of September 30, 2011, the fleet consisted of 18 vessels: 11 Panamax, 6 Capesize, and 1 Ultra-Handymax. The company operates primarily under medium to long-term time charters. Navios Holdings Inc. owns a 27.1% interest in the partnership.

Key Financial Metrics

Note: All figures are in thousands of U.S. dollars unless otherwise noted. EBITDA and Operating Surplus are non-GAAP measures.

Material Changes vs. Prior Period

• Revenue Growth: Time charter revenues increased 35.6% ($35.8 million) for the nine months ended September 30, 2011, compared to the same period in 2010. This was driven by the acquisition of six vessels (Navios Hyperion, Sagittarius, Aurora II, Pollux, Fulvia, Melodia, Luz, and Orbiter) which increased available fleet days from 3,498 to 4,604.
• Profitability: Net income increased 10.8% ($4.6 million) to $46.7 million for the nine-month period. Operating Surplus increased 39.6% to $84.6 million.
• Expenses: Management fees increased 39.0% to $19.6 million due to the expanded fleet. Depreciation and amortization rose 63.3% to $46.8 million, reflecting new vessel acquisitions and amortization of favorable lease terms.
• Unusual Items: A $4.0 million write-off of an intangible asset was recorded in the nine-month period due to the termination of the charter-out contract for the Navios Apollon following an engine breakdown.
• Debt: Total borrowings increased to $334.0 million as of September 30, 2011, from $271.5 million in the prior year, primarily due to new tranches to finance vessel acquisitions.

Guidance, Outlook, and Risks

• Management Agreements: In October 2011, the company extended its Management and Administrative Services Agreements with Navios Shipmanagement Inc. until December 31, 2017. Management fees for the owned fleet were fixed through December 31, 2013, at rates of $4,650/day (Ultra-Handymax), $4,550/day (Panamax), and $5,650/day (Capesize).
• Distributions: The Board authorized a quarterly cash distribution of $0.44 per unit for the quarter ended September 30, 2011, payable November 11, 2011. The minimum quarterly distribution target is $0.35 per unit.
• Outlook: The company intends to operate vessels in the long-term charter market to ensure stable cash flows. Future results depend on dry bulk demand, charter rates, and vessel utilization.
• Risks:
  • Counterparty Risk: Korea Line Corporation (charterer of Navios Melodia) filed for receivership in January 2011. The charter was affirmed, but payments are made directly by the sub-charterer during an interim period.
  • Interest Rate Risk: Borrowings are based on LIBOR plus a margin. A 1% increase in LIBOR would increase interest expense by approximately $2.4 million for the nine-month period.
  • Concentration: Five charterers accounted for approximately 69.1% of total revenues for the nine months ended September 30, 2011.

Investor Verification Checklist

• Fleet Utilization: Verify the impact of unscheduled off-hires (which reduced revenue by $6.9 million in the nine-month period) on future cash flows.
• Debt Covenants: Confirm continued compliance with financial covenants under the Credit Facilities, particularly given the increased debt load to $334 million.
• Related Party Transactions: Review the terms of the extended Management Agreement and the volume of vessel acquisitions from Navios Holdings.
• Charter Expirations: Assess the risk of charter renewals for vessels expiring in 2012 (e.g., Navios Apollon, Navios Libra II, Navios Prosperity).
• Counterparty Solvency: Monitor the status of Korea Line Corporation and the direct payment arrangement for the Navios Melodia.