Business Context and Reporting Period
Company: Navios Maritime Partners L.P. (Navios Partners)
Filing Type: Form 6-K (Report of Foreign Private Issuer)
Reporting Period: Three and nine months ended September 30, 2008
Date Filed: October 22, 2008
Navios Partners is an international owner and operator of Capesize and Panamax drybulk vessels. The company operates under long-term time charters with an average remaining term of approximately 4.7 years. As of September 30, 2008, the fleet consisted of eight owned vessels (seven active, one newbuild expected in June 2009) and two chartered-in vessels. Navios Holdings Inc. owns a 51.6% interest in the partnership.
Key Financial Metrics
| Metric ($ in thousands) | Three Months Ended Sept 30, 2008 |
Nine Months Ended Sept 30, 2008 |
|---|---|---|
| Time Charter & Voyage Revenue | $21,272 | $53,531 |
| Net Income | $8,948 | $19,949 |
| EBITDA | $14,581 | $35,903 |
| Operating Surplus | $9,614 | $22,679 |
| Net Cash from Operating Activities | $16,370 | $30,271 |
| Cash and Cash Equivalents (End of Period) | $25,250 | |
| Long-Term Debt Outstanding | $235,000 | |
| Fleet Utilization | 98.7% | 99.2% |
| Time Charter Equivalent (per day) | $25,691 | $24,437 |
Material Changes and Operational Highlights
- Fleet Expansion: The company acquired two vessels during the period: Navios Fantastiks (Capesize) on May 2, 2008, for $34.2 million, and Navios Aurora I (Panamax) on July 1, 2008, for $35.0 million cash plus the issuance of 3.1 million common units to Navios Holdings.
- Debt Utilization: Borrowings under the revolving credit facility increased from $165.0 million at year-end 2007 to $235.0 million as of September 30, 2008, to fund vessel acquisitions. The facility was amended in June 2008 to increase total capacity to $295.0 million.
- Liquidity: Cash and cash equivalents increased to $25.3 million from $10.1 million at December 31, 2007. This includes $14.5 million held in a monthly time deposit.
- Revenue Growth: Revenue for the nine-month period increased significantly compared to the prior year, driven by the expanded fleet and high utilization rates.
Outlook, Risks, and Management Commentary
- Future Acquisitions: The company expects to acquire Navios TBN I (Capesize) in June 2009 for $130.0 million, funded primarily by borrowings and unit issuance. An option exists to acquire Navios TBN II in October 2009.
- Distributions: The Board authorized a quarterly distribution of $0.385 per unit for the quarter ended September 30, 2008, payable November 7, 2008. The minimum quarterly distribution target is $0.35 per unit.
- Accounting Updates: Management is evaluating the impact of several new FASB pronouncements (SFAS 141R, SFAS 160, FSP 157-3) effective in fiscal years beginning after December 15, 2008. No material impact is currently expected.
- Risks: Key risks include changes in demand for drybulk vessels, competitive market factors, foreign exchange risk (though operations are predominantly USD-denominated), and interest rate risk on variable-rate debt (LIBOR + margin). A 1% increase in LIBOR would increase interest expense by approximately $1.5 million annually.
Investor Verification Checklist
- Debt Covenants: Verify continued compliance with financial covenants (tangible net worth, debt coverage ratios) under the $295 million credit facility, as default would restrict distributions.
- Related Party Transactions: Review the management agreement with Navios Holdings, which charges fixed daily fees ($4,000 for Panamax, $5,000 for Capesize) covering all operating expenses.
- Charter Expirations: Monitor the charter expiration dates for the fleet, particularly Navios Gemini S (February 2009) and Navios Libra II (December 2010), to assess renewal risks.
- Capital Expenditures: Confirm funding sources for the upcoming $130 million acquisition of Navios TBN I and the impact on leverage ratios.
- Subordination Period: Understand the distribution waterfall where common units receive priority over subordinated units (held by Navios Holdings) until minimum distributions are met.