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, 2021 (Q1 2021)
Date Filed: May 18, 2021
Business Overview: Navios Partners is an international owner and operator of dry cargo vessels, including drybulk (Panamax, Capesize, Ultra-Handymax) and containerships. The company generates revenue primarily through long-term time charters.

Key Financial Metrics

Note: EBITDA, Adjusted EBITDA, and Operating Surplus are non-GAAP financial measures.

Material Changes vs. Prior Period

• Revenue Growth: Revenues increased 40.0% to $65.1 million, driven by a 38.4% increase in the Time Charter Equivalent (TCE) rate to $14,836 per day.
• Profitability Surge: Net income swung from a $10.7 million loss in Q1 2020 to a $136.7 million profit in Q1 2021. This is primarily due to two non-cash, one-time items:
  • Equity in Net Earnings: An $80.8 million gain from the remeasurement of the previously held interest in Navios Maritime Containers L.P. upon merger completion.
  • Bargain Purchase Gain: A $44.1 million gain resulting from the acquisition of Navios Containers, where the fair value of net assets exceeded the purchase price.
• Adjusted EBITDA: Excluding the one-time merger gains, Adjusted EBITDA increased 76.4% to $33.7 million, reflecting improved operational performance and higher charter rates.
• Debt Levels: Total borrowings increased significantly to $701.2 million (from $486.9 million) due to the consolidation of Navios Containers' debt and new financing for vessel acquisitions.

Guidance, Outlook, and Recent Developments

Recent Developments

• Merger Completion: On March 31, 2021, Navios Partners completed the merger with Navios Maritime Containers L.P., acquiring its 29-vessel fleet. Results of Navios Containers are consolidated starting April 1, 2021.
• Vessel Acquisitions:
  • Acquired three containerships (Ete N, Fleur N, Spectrum N) from Navios Acquisition for $55.5 million (completed May 10, 2021).
  • Agreed to acquire a Capesize vessel from Navios Holdings for $28.5 million (expected delivery Q2 2021).
  • Acquired two Panamax vessels (Navios Avior, Navios Centaurus) from Navios Holdings for $39.3 million (completed March 30, 2021).
• Vessel Sale: Agreed to sell the containership Navios Dedication for $34.2 million (expected completion Q2 2021).
• Refinancing: Entered into multiple new credit facilities in April and May 2021 totaling over $250 million to refinance maturing debt and fund acquisitions. Key facilities include a $160 million facility with Hamburg Commercial Bank and a $40 million facility with BNP Paribas.

Outlook and Risks

• Distribution Policy: The Board authorized a quarterly cash distribution of $0.05 per unit for Q1 2021, paid on May 14, 2021. Future distributions remain subject to Board discretion and credit agreement restrictions.
• Capital Raising: Entered a new Continuous Offering Program (ATM) in April 2021 for up to $75 million. As of May 17, 2021, $73.1 million in net proceeds had been raised.
• Risks: Key risks include global economic conditions, the impact of the COVID-19 pandemic, charterer creditworthiness, vessel supply and demand dynamics, and the ability to refinance debt on favorable terms.

Investor Verification Checklist

• Merger Accounting: Verify the sustainability of the $124.9 million in one-time gains ($80.8M equity gain + $44.1M bargain purchase) and their impact on reported Net Income vs. Adjusted EBITDA.
• Debt Covenants: Confirm compliance with financial covenants (e.g., EBITDA/Interest ratio > 2.00:1, Net Worth > $135M) given the increased debt load post-merger.
• Charter Expirations: Review the fleet charter expiration schedule, noting several vessels expiring in mid-to-late 2021, to assess re-chartering risk.
• Related Party Transactions: Monitor ongoing transactions with Navios Holdings and Navios Acquisition, including vessel purchases and management fees.
• Accountant Change: Note the dismissal of PricewaterhouseCoopers (PwC) and the engagement of Ernst & Young (Hellas) as the new independent auditor on April 22, 2021.