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 and nine months ended September 30, 2014.
Business Overview: Navios Partners is an international owner and operator of dry cargo vessels, including Panamax, Capesize, Ultra-Handymax, and Container vessels. The fleet is primarily chartered under long-term time charters. As of October 29, 2014, the fleet consisted of 31 vessels (14 Panamax, 8 Capesize, 3 Ultra-Handymax, and 7 Container vessels).

Key Financial Metrics

Material Changes vs. Prior Period

• Revenue Growth: Nine-month revenues increased 15.0% to $168.0 million, driven by the addition of new vessels (Navios Joy, Navios Harmony, five container vessels, Navios La Paix, Navios Sun, and YM Utmost). Available fleet days increased from 5,736 to 8,072.
• Rate Decline: Despite revenue growth, the Time Charter Equivalent (TCE) rate decreased to $20,277 per day for the nine months ended Sept 30, 2014, down from $24,903 in the prior year.
• Expense Increases:
  • Management Fees: Increased 42.5% to $36.9 million due to a larger fleet.
  • Interest Expense: Increased 98.7% to $21.2 million, attributed to a higher weighted average interest rate (4.67% vs 3.17%) and increased average loan balances ($536.7 million vs $311.2 million).
  • Depreciation & Amortization: Increased 33.8% to $78.0 million, primarily due to new vessel acquisitions and accelerated amortization of the Navios Pollux favorable lease intangible.
• Other Income: Significantly increased to $48.1 million (from $13.4 million) due to the sale of a defaulted counterparty claim ($17.8 million) and compensation from the termination of a credit default insurance policy ($29.8 million).

Guidance, Outlook, and Risks

• Recent Acquisitions: Acquired the YM Utmost (Aug 2014) for $59.0 million and the YM Unity (Oct 2014) for $58.9 million. A new $56.0 million credit facility was secured to finance these purchases.
• Liquidity: The company maintains a shelf registration for up to $500.0 million in securities, with approximately $390.6 million available. Management believes cash flows from operations are sufficient for short-term needs.
• Distributions: The Board authorized a quarterly distribution of $0.4425 per unit for the period ended Sept 30, 2014, payable November 10, 2014. The minimum quarterly distribution target is $0.35 per unit.
• Risks:
  • Market Risk: Exposure to fluctuating charter rates and dry bulk demand.
  • Interest Rate Risk: Borrowings are based on LIBOR; a 1% increase would have increased interest expense by $4.1 million for the nine-month period.
  • Concentration Risk: Hyundai Merchant Marine Co., Ltd. and Navios Corporation accounted for 24.8% and 11.2% of revenues, respectively, in the first nine months of 2014.

Investor Verification Checklist

• Debt Covenants: Verify continued compliance with financial covenants, specifically the EBITDA to interest expense ratio (minimum 5.00:1.00) and loan-to-value ratios.
• Non-Recurring Income: Assess the sustainability of net income given the $48.1 million "Other income" driven by one-time insurance and claim settlements.
• Charter Expirations: Review the fleet charter expiration schedule, noting several vessels expiring in late 2014 and early 2015 (e.g., Navios Soleil, Navios Pollux, Navios Helios, Navios Hope).
• Related Party Transactions: Monitor management fees and administrative expenses paid to Navios Holdings, which increased significantly with fleet expansion.
• Capital Expenditures: Track future cash requirements for vessel deposits and maintenance reserves, estimated at $24.0 million for the full year 2014.