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, 2010
Date Filed: April 28, 2010

Navios Maritime Partners L.P. is an international owner and operator of dry bulk vessels. As of March 31, 2010, the fleet consisted of 13 vessels (10 Panamax, 2 Capesize, 1 Ultra-Handymax) operating primarily under long-term time charters. The company is managed by Navios ShipManagement Inc., a subsidiary of Navios Maritime Holdings Inc., which holds a 35.2% interest in the partnership.

Key Financial Metrics

Per Unit Earnings (Basic & Diluted): Common Units: $0.39 (Q1 2010) vs $0.41 (Q1 2009); Subordinated Units: $0.26 (Q1 2010) vs $0.41 (Q1 2009).

Material Changes vs. Prior Period

• Revenue Growth: Revenues increased 38.7% to $29.4 million, driven by the acquisition of four vessels (Navios Sagittarius, Navios Apollon, Navios Hyperion, and Navios Aurora II) during the period.
• Profitability: Net income rose 40.5% to $12.6 million. This was achieved despite a 134% increase in depreciation and amortization ($7.7 million vs $3.3 million) due to new assets and backlog amortization.
• Interest Expense: Net interest expense decreased 51% to $1.2 million, attributed to a lower weighted average interest rate (2.12% vs 4.27%) and a reduction in average outstanding loan balances.
• Cash Flow: Operating cash flow decreased 44.7% to $23.8 million, primarily due to a decrease in deferred voyage revenue adjustments compared to the prior year. Investing cash outflows surged to $175.8 million due to vessel acquisitions.
• Debt Levels: Total borrowings under the Credit Facility increased to $236.5 million from $195.0 million to fund fleet expansion.

Guidance, Outlook, and Risks

Recent Developments & Capital Allocation:

• Equity Offering: On February 8, 2010, the company completed a public offering of 3.5 million common units plus an overallotment of 525,000 units, raising net proceeds of approximately $59.5 million.
• Vessel Acquisitions: Acquired Navios Hyperion ($63M), Navios Sagittarius ($25M), and Navios Aurora II ($110M, partially paid in equity) in Q1 2010.
• Dividends: Declared a quarterly distribution of $0.415 per unit for Q1 2010 (payable May 13, 2010), totaling $15.8 million.

Outlook & Risks:

• Market Risks: Results are subject to dry bulk demand, charter rate fluctuations, and geopolitical conditions. The company relies on long-term charters to mitigate spot market volatility.
• Counterparty Concentration: Top four charterers (Mitsui O.S.K. Lines, Cargill, Cosco, Sanko) accounted for ~68% of Q1 2010 revenues.
• Interest Rate Risk: Borrowings are floating rate (LIBOR + margin). A 1% increase in LIBOR would increase interest expense by approximately $0.5 million per quarter.
• Liquidity: The company maintains a Credit Facility with covenants including a minimum net worth of $135 million and a Value Maintenance Covenant (VMC) of 143%. The company was in compliance as of March 31, 2010.

Investor Verification Checklist

• Debt Covenants: Verify continued compliance with the 143% Value Maintenance Covenant and $135 million minimum net worth requirement given recent debt increases.
• Charter Expirations: Review the fleet charter expiration schedule; two vessels (Navios Libra II and Navios Alegria) have charters expiring in December 2010.
• Related Party Transactions: Confirm the valuation and terms of vessel acquisitions from Navios Holdings (Navios Hyperion, Navios Aurora II) and the ongoing management fee structure ($4,400-$5,500/day per vessel).
• Deferred Revenue: Monitor the amortization of the $30.4 million lump sum deferred revenue related to the Navios Hope charter.
• Counterparty Credit: Assess the creditworthiness of the top four charterers, which represent a significant concentration of revenue risk.