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, 2020 (Q1 2020)
Date of Filing: May 29, 2020
Business Overview: Navios Partners is an international owner and operator of dry cargo vessels, including Panamax, Capesize, Ultra-Handymax, and Containerships. The fleet is primarily chartered under long-term time charters. As of May 28, 2020, the fleet consisted of 46 vessels (20 Panamax, 14 Capesize, 4 Ultra-Handymax, and 10 Containerships), with two additional Panamax vessels expected to be delivered in the first half of 2021.
Key Financial Metrics
| Metric | Q1 2020 ($000s) | Q1 2019 ($000s) |
|---|---|---|
| Time Charter and Voyage Revenues | $46,490 | $46,818 |
| Net Loss | $(10,724) | $(9,523) |
| EBITDA | $12,181 | $15,313 |
| Adjusted EBITDA | $19,081 | $22,658 |
| Operating Surplus | $4,431 | $5,702 |
| Net Cash Provided by Operating Activities | $20,937 | $10,483 |
| Total Borrowings (Net of Deferred Fees) | $476,057 | $489,028 |
| Cash and Cash Equivalents | $22,049 | $23,354 |
| Restricted Cash | $9,098 | $7,048 |
Fleet Performance (Q1 2020):
- Time Charter Equivalent (TCE) Combined: $10,717 per day (vs. $13,209 in Q1 2019).
- Fleet Utilization: 97.5% (vs. 98.0% in Q1 2019).
- Available Days: 4,097 (vs. 3,277 in Q1 2019).
Material Changes vs. Prior Period
- Revenue: Decreased slightly by 0.7% ($0.3 million) to $46.5 million, primarily due to a decline in the TCE rate, partially offset by an increase in available days.
- Net Loss: Increased by $1.2 million to $10.7 million. This was driven by a $6.9 million impairment of a receivable from an affiliated company (Navios Europe II) and increased vessel operating expenses ($5.6 million increase), partially mitigated by a significant decrease in interest expense ($4.6 million decrease).
- Operating Expenses: Vessel operating expenses (management fees) rose 33.7% to $22.2 million due to a larger fleet and increased daily rates. Direct vessel expenses increased by $1.0 million due to amortization of dry dock costs.
- Interest Expense: Decreased 39.7% to $6.9 million due to a lower weighted average interest rate (5.26% vs. 7.44%) and a reduced average loan balance.
- Cash Flow: Net cash provided by operating activities more than doubled to $20.9 million, largely due to a $15.4 million decrease in amounts due from related parties.
Guidance, Outlook, Risks, and Unusual Items
Recent Developments and Unusual Items
- Navios Europe II Liquidation: On April 21, 2020, Navios Europe II agreed to release liabilities under a junior participating loan facility for $5.0 million. Navios Partners expects to receive approximately $4.0 million cash, two Ultra-Handymax vessels, and three Panamax vessels. The transaction closing is expected in Q2 2020, subject to financing.
- Impairment: A $6.9 million non-cash impairment loss was recognized in Q1 2020 related to the receivable from Navios Europe II, deemed other-than-temporary.
- Distributions: The Board declared a cash distribution of $0.30 per unit for Q1 2020, paid on May 14, 2020. Future distributions remain subject to Board discretion and credit agreement restrictions.
Risks and Contingencies
- COVID-19 Impact: The filing highlights significant risks related to the global pandemic, including potential disruptions to global economic activity, demand for seaborne transportation, and charterer creditworthiness.
- Liquidity: As of March 31, 2020, the company had a negative working capital position of $15.4 million. However, management forecasts sufficient cash to meet obligations for the next 12 months.
- Customer Concentration: Hyundai Merchant Marine Co., Ltd. (HMM) represented 29.2% of total revenues in Q1 2020.
- Debt Covenants: The company is subject to restrictive covenants, including minimum free consolidated liquidity and EBITDA to interest expense ratios. As of March 31, 2020, the company was in compliance.
Key Facts for Investor Verification
- Impairment Specifics: Verify the final settlement terms and asset allocation details regarding the Navios Europe II liquidation and the $6.9 million impairment charge.
- Debt Maturity Profile: Review the significant debt maturities in 2021 ($66.7 million principal payments) and the status of refinancing efforts, particularly for the ABN Credit Facility maturing in Q3 2020.
- Charter Expirations: Monitor the expiration of charters for vessels currently on spot or short-term contracts, as well as the renewal rates for long-term charters expiring in 2020-2021.
- Working Capital: Track the company's ability to maintain a positive working capital position given the current negative balance and reliance on cash flow from operations.
- Related Party Transactions: Note the significant management fees paid to the Manager (Navios Shipmanagement Inc.) and the outstanding guarantee claim receivable of $10.0 million from Navios Holdings.