Business Context and Reporting Period
Company: Navios Maritime Partners L.P.
Filing Type: Form 6-K (Report of Foreign Private Issuer)
Date: November 25, 2019
Reporting Period: Three and nine months ended September 30, 2019 (unaudited).
Business Overview: Navios Partners is an international owner and operator of dry cargo vessels (Panamax, Capesize, Ultra-Handymax) and containerships. The fleet is primarily chartered under long-term time charters. As of November 25, 2019, the fleet consisted of 37 owned vessels and 1 chartered-in vessel, with additional vessels expected for delivery by December 2019.
Key Financial Metrics
| Metric ($ in thousands) | 3 Months Ended Sept 30, 2019 | 9 Months Ended Sept 30, 2019 |
|---|---|---|
| Time Charter & Voyage Revenues | $63,548 | $158,111 |
| Net Income / (Loss) | $16,859 | $813 |
| EBITDA | $41,309 | $75,321 |
| Adjusted EBITDA | $41,309 | $86,304 |
| Operating Surplus | $25,726 | $37,635 |
| Net Cash Provided by Operating Activities | $32,669 | $47,095 |
| Total Borrowings (Net) | $455,265 (as of Sept 30, 2019) | N/A |
| Cash and Cash Equivalents | $23,968 (as of Sept 30, 2019) | N/A |
Fleet Performance (9 Months Ended Sept 30, 2019):
- Time Charter Equivalent (TCE) Combined: $15,369 per day.
- Fleet Utilization: 98.6%.
Material Changes vs. Prior Period
- Revenue: For the nine months ended September 30, 2019, revenues decreased by $15.7 million (9.0%) to $158.1 million compared to $173.8 million in the prior year. This was primarily due to vessel sales (YM Unity, YM Utmost, Navios Felicity, Navios Libra II, Navios Galaxy I) and a decrease in the TCE rate to $15,369 per day from $16,745 per day.
- Net Income: Net income improved significantly from a net loss of $13.6 million in the prior year to a net income of $0.8 million. This turnaround was driven by the absence of significant vessel impairment losses recorded in 2018 ($43.1 million) and lower depreciation expenses.
- Interest Expense: Interest expense increased by $3.8 million (12.1%) to $35.2 million for the nine-month period, largely due to a $2.9 million write-off of deferred finance fees following prepayments of the Term Loan B Facility.
- Impairment Losses: The Company recorded a $7.3 million impairment loss in Q1 2019 related to the Navios Galaxy I, compared to $43.1 million in the prior year period.
Guidance, Outlook, and Recent Developments
Recent Developments (Post-Sept 30, 2019):
- Debt Refinancing: On October 10, 2019, Navios Partners fully repaid its $253.8 million Term Loan B Facility. It simultaneously drew on new credit facilities (HCOB, DNB, DVB, CACIB, NIBC) totaling approximately $233.7 million. This action extended debt maturities through 2030, with no debt maturities due until Q3 2021.
- Vessel Acquisitions: On November 25, 2019, the Company agreed to acquire three Panamax and one Ultra-Handymax vessel for $37.0 million from an affiliate of the Chairman/CEO. Additionally, on October 18, 2019, it agreed to bareboat charter-in two newbuilding Kamsarmax vessels for delivery in 2021.
- Liquidation: An agreement was reached on November 22, 2019, to liquidate Navios Europe I. Navios Partners waived a $3.2 million penalty and expects to acquire the five containerships owned by Navios Europe I.
- Distributions: The Board declared a cash distribution of $0.30 per unit for Q3 2019, payable November 14, 2019.
Risks and Contingencies:
- Customer Concentration: For the nine months ended September 30, 2019, Hyundai Merchant Marine Co., Ltd. (HMM) represented 26.9% of total revenues.
- Market Risks: Results are subject to fluctuations in charter rates, global trade volumes, and fuel costs. The Company faces interest rate risk as borrowings are based on LIBOR.
- Related Party Transactions: Significant management fees and administrative costs are paid to Navios Ship Management Inc. (the Manager), an affiliate. The Company also has significant receivables from affiliates (Navios Europe I and II).
Investor Verification Checklist
- Debt Maturity Profile: Verify the impact of the October 2019 refinancing on the debt maturity schedule and interest rate exposure (LIBOR + margins).
- Related Party Acquisitions: Review the terms and valuation of the $37.0 million vessel acquisition from the Chairman/CEO affiliate approved on November 25, 2019.
- Navios Europe I Liquidation: Confirm the final terms of the liquidation agreement and the expected timeline for acquiring the five containerships.
- Customer Concentration: Assess the risk associated with HMM representing over 26% of revenue and the stability of their long-term charters.
- Impairment History: Monitor future vessel sales and potential impairment charges, given the significant write-downs in 2018 and the $7.3 million charge in 2019.