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 six months ended June 30, 2008
Date Filed: July 30, 2008
Navios Partners is an international owner and operator of drybulk carriers, formed in August 2007. The company operates a fleet of Panamax and Capesize vessels chartered under long-term time charters to major counterparties including Cargill, Mitsui O.S.K. Lines, and Rio Tinto. The company does not present comparative information for periods prior to its November 2007 IPO due to changes in business focus and accounting policies.
Key Financial Metrics
| Metric ($ in thousands) | Three Months Ended June 30, 2008 |
Six Months Ended June 30, 2008 |
|---|---|---|
| Revenue (Time charter & voyage) | $17,939 | $32,259 |
| Net Income | $7,155 | $11,001 |
| EBITDA | $12,142 | $21,322 |
| Operating Surplus | $5,909 | $13,065 |
| Net Cash from Operating Activities | $10,397 | $13,901 |
| Long-Term Debt (Outstanding) | $200,000 | $200,000 |
| Cash and Cash Equivalents | $14,782 | $14,782 |
Fleet Utilization: 99.2% (3-month) and 99.6% (6-month).
Time Charter Equivalent (per day): $24,641 (3-month) and $23,674 (6-month).
Material Changes and Recent Developments
- Vessel Acquisitions:
- Navios Fantastiks: Acquired on May 2, 2008, for approximately $34.2 million. Financed via a $35.0 million drawdown on the existing credit facility.
- Navios Aurora I: Acquired on July 1, 2008 (subsequent to period end), for $80.0 million ($35.0 million cash and 3.13 million common units issued to Navios Holdings).
- Debt Facility Expansion: On June 25, 2008, the revolving credit facility was amended to increase total available borrowings from $260 million to $295 million. Outstanding debt as of June 30, 2008, was $200 million.
- Related Party Transactions: Management fees and administrative expenses paid to Navios Holdings subsidiaries totaled $2.6 million for the three months and $4.9 million for the six months ended June 30, 2008.
Outlook, Risks, and Management Commentary
- Distributions: The Board authorized a quarterly cash distribution of $0.35 per unit for the quarter ended June 30, 2008, payable August 14, 2008. The aggregate amount is approximately $6.5 million. Units issued for the Navios Aurora I acquisition are excluded from this specific distribution.
- Future Acquisitions: The company expects to acquire the newbuild Capesize vessel Navios TBN I in June 2009 for $130 million, funded primarily by borrowings and unit issuances. An option exists to acquire Navios TBN II in October 2009.
- Risks:
- Market Risk: Exposure to changes in dry bulk demand, competitive factors, and foreign exchange rates (though operations are predominantly USD-denominated).
- Interest Rate Risk: Borrowings are at LIBOR plus a margin. A 1% increase in LIBOR would increase interest expense by approximately $0.9 million for the six-month period.
- Credit Concentration: Top five customers accounted for approximately 84.5% of total revenues for the six months ended June 30, 2008.
- Accounting Updates: The company is evaluating the impact of several new FASB pronouncements (SFAS 141R, SFAS 160, Issue 07-4) effective in fiscal years beginning after December 15, 2008, but does not expect material impacts at adoption.
Investor Verification Checklist
- Debt Covenants: Verify continued compliance with financial covenants (tangible net worth, debt coverage ratios) under the $295 million credit facility, especially given the recent $35 million drawdown.
- Related Party Dependence: Assess the impact of management fees and administrative costs paid to Navios Holdings, which control the General Partner and hold significant subordinated units.
- Customer Concentration: Review the creditworthiness of the top five charterers, who represent the vast majority of revenue.
- Capital Expenditures: Confirm funding sources for the upcoming $130 million acquisition of Navios TBN I and the potential impact on leverage ratios.
- Distribution Sustainability: Monitor Operating Surplus versus the minimum quarterly distribution requirement of $0.35 per unit to ensure cash flow adequacy.