Navios Maritime Partners L.P. — FY2020 Form 20-F
Reporting period: Fiscal year ended December 31, 2020. This is an annual report, not a standalone fourth-quarter filing. Amounts are in U.S. dollars; financial figures below are in millions unless stated otherwise.
Business context
Navios Partners owns and operates drybulk and containership vessels, principally under medium- and long-term charters. It reported 52 vessels operating at year-end in selected data. Fleet growth during 2020 included acquisitions of seven drybulk vessels; one vessel was sold during the year. The company relies on its affiliated manager for vessel operations and administrative services.
Key financial metrics
| Metric | 2020 | 2019 | Change / context |
|---|---|---|---|
| Time charter and voyage revenue | $226.8 | $219.4 | Up 3.4%; fleet expansion offset lower realized rates |
| Net loss | $(68.5) | $(62.1) | Loss widened by $6.4 |
| Loss per common unit | $(6.13) | $(5.62) | Basic and diluted |
| Adjusted EBITDA | $99.8 | $120.0 | Down $20.2; non-GAAP |
| Operating surplus | $39.9 | $58.8 | Down $18.9; non-GAAP |
| Cash from operating activities | $94.1 | $70.4 | Up $23.7 |
| Cash used in investing activities | $(83.9) | $(17.0) | Primarily vessel acquisitions and deposits |
| Cash used in financing activities | $(9.9) | $(84.4) | Debt repayments and distributions, partly offset by borrowings |
| Cash, cash equivalents and restricted cash | $30.7 | $30.4 | Includes $11.4 restricted cash |
| Total assets | $1,207.3 | $1,253.5 | Vessels, net: $1,041.1 |
| Total partners’ capital | $654.8 | $728.0 | Lower year over year |
| Total borrowings, gross | $491.2 | $494.4 | Includes debt and financial liabilities |
Management reported an average time-charter-equivalent rate of $12,497 per day in 2020, down from $15,791 in 2019. Adjusted EBITDA was approximately 44% of revenue, but is a company-defined non-GAAP measure and should not be treated as a GAAP operating margin.
Liquidity, debt and distributions
- Year-end current assets were $60.8 million versus current liabilities of $253.3 million, producing negative working capital of $192.5 million. Management attributed the position principally to $131.5 million of balloon payments due in the second and third quarters of 2021.
- Current portion of long-term debt and financial liabilities, net, was $201.8 million. Contractual obligations include $197.0 million of loan principal due within one year, excluding interest.
- The company reported compliance with applicable credit-facility covenants at December 31, 2020. Facilities include minimum liquidity, collateral, leverage, interest-coverage and net-worth tests; noncompliance can restrict distributions or trigger default.
- After year-end, the company sold four vessels for approximately $32.7 million, with some proceeds used for upcoming balloon payments. It was in advanced discussions for a refinancing facility of up to $115 million, but stated there was no certainty the refinancing would close. Management expected sufficient cash for normal operations and scheduled debt service for at least 12 months, excluding balloon payments, and anticipated refinancing or vessel sales to address those maturities.
- The quarterly distribution was reduced from $0.30 to $0.05 per unit in July 2020. The $0.05 distribution for the quarter ended December 31, 2020 was paid in February 2021. Future distributions remain at the board’s discretion and are subject to debt restrictions.
Material changes and unusual items
- Vessel impairment losses totaled $71.6 million in 2020, compared with $36.7 million in 2019. This included $51.0 million for four drybulk vessels, $6.8 million for three containerships, and impairments related to vessel sales. The auditor identified the long-lived-asset impairment assessment as a critical audit matter due to substantial estimation and judgment.
- Operating expenses rose with fleet growth: vessel operating expenses increased 37.5% to $93.7 million, and general and administrative expenses rose 14.4% to $24.0 million. The company identified increased management fees and available fleet days as key drivers.
- Net interest and finance costs fell to $24.2 million from $45.3 million, mainly following full repayment of the Term Loan B in 2019 and a lower weighted-average interest rate (4.50% versus 6.71%).
- A $6.9 million impairment was recorded on a receivable from affiliated Navios Europe II during its liquidation. The company also recorded $5.1 million of other income, including a $2.7 million recovery related to a vessel.
- Revenue remained concentrated: HMM accounted for 23.4%, Singapore Marine 19.5%, and Cargill 11.4% of 2020 revenue. Customer default, non-renewal or renegotiation could materially affect results.
Outlook, risks and contingencies
- No quantified revenue or earnings guidance is provided. Management’s liquidity outlook depends on refinancing or selling assets to address near-term balloon maturities.
- The company agreed to acquire Navios Containers’ publicly held units in exchange for 0.39 Navios Partners common units per Navios Containers unit. The transaction was approved by Navios Containers’ unitholders and was expected to close around March 31, 2021. The filing anticipated a larger, more diversified fleet; closing, integration, dilution and acquisition accounting should be checked against subsequent disclosures.
- Management highlighted COVID-19 uncertainty, volatile drybulk and container charter markets, vessel oversupply, customer and China trade concentration, vessel-value impairment risk, off-hire and drydocking costs, and environmental and emissions compliance costs. Many drybulk charters were scheduled to expire between March 2021 and June 2024.
- Debt bears floating rates generally linked to LIBOR, and the company disclosed no current hedging against interest-rate increases. A 1% LIBOR increase was estimated to raise 2020 interest expense by $4.3 million. LIBOR transition also presents contractual and pricing uncertainty.
- Navios Partners disclosed litigation involving Navios Containers and unresolved Hanjin-related claims; the company stated that the Hanjin amounts were fully provided for. It reported no other legal proceedings expected to have a material adverse effect.
- The independent auditor issued unqualified opinions on the financial statements and internal control over financial reporting. Management also concluded disclosure controls and internal controls were effective at year-end.
Important facts for investors to verify
- Whether the planned refinancing of the 2021 balloon maturities closed, on what terms, and whether all near-term debt obligations were met.
- Actual subsequent cash generation, liquidity and covenant headroom, including the distinction between unrestricted and restricted cash.
- Results of the Navios Containers merger, including closing, unit issuance and dilution, purchase-price allocation, and the acquired fleet’s contribution to cash flow and debt.
- Whether charter rates and vessel utilization recover enough to support projected cash flows, given the company’s impairment assumptions and upcoming charter expirations.
- Whether the $0.05 quarterly distribution is sustainable and remains permitted under credit agreements.
- Collection of the remaining $5.0 million Navios Holdings guarantee receivable and developments in disclosed litigation and claims.