Business Context and Reporting Period
Company: Navios Maritime Partners L.P.
Filing Type: Form 6-K (Report of Foreign Private Issuer)
Date: November 14, 2016
Reporting Period: Three and nine months ended September 30, 2016 (unaudited).
Business Overview: Navios Partners is an international owner and operator of dry cargo and container vessels. As of November 11, 2016, the fleet consisted of 12 Panamax, 9 Capesize, 3 Ultra-Handymax, and 8 Container vessels. The company operates primarily under long-term time charters.
Key Financial Metrics
| Metric ($ in thousands) | 9 Months Ended Sep 30, 2016 | 9 Months Ended Sep 30, 2015 |
|---|---|---|
| Time Charter & Voyage Revenues | $140,859 | $170,362 |
| Net (Loss)/Income | $(50,460) | $33,998 |
| EBITDA | $53,266 | $117,547 |
| Adjusted EBITDA | $89,894 | $117,547 |
| Operating Surplus | $60,908 | $87,557 |
| Net Cash from Operating Activities | $34,625 | $97,308 |
| Total Debt (Net) | $554,460 | $598,100 (Dec 31, 2015) |
| Cash and Cash Equivalents | $40,579 | $26,750 (Dec 31, 2015) |
| Time Charter Equivalent (TCE) per Day | $16,165 | $20,267 |
Material Changes vs. Prior Period
- Revenue Decline: Revenues decreased by $29.5 million (17.3%) year-over-year, primarily due to a decline in the freight market and lower TCE rates, partially offset by increased available days from fleet expansion.
- Net Loss: The company reported a net loss of $50.5 million compared to net income of $34.0 million in the prior year. This swing was driven by:
- Non-Cash Charges: A $19.4 million loss on the sale of Hyundai Merchant Marine (HMM) securities and a $17.2 million impairment loss on the MSC Cristina vessel (classified as held for sale).
- Accelerated Amortization: $20.5 million in accelerated amortization of favorable lease intangibles due to the early redelivery of vessels from Hanjin Shipping.
- Debt Reduction: Total borrowings decreased to $554.5 million. In November 2016, the company reduced a commercial bank facility by $30.2 million through prepayment.
- Customer Concentration: For the nine months ended September 30, 2016, four customers (HMM, Yang Ming, Mediterranean Shipping, and Hanjin) accounted for approximately 65.7% of total revenues.
Guidance, Outlook, and Risks
- Distribution Suspension: The Board of Directors suspended quarterly cash distributions beginning with the quarter ended December 31, 2015, to preserve cash and improve liquidity. There is no guarantee of reinstatement.
- Hanjin Shipping Impact: Following Hanjin's rehabilitation filing in August 2016, two Capesize vessels were redelivered to Navios Partners in September. The company is proceeding with claims for lost revenues under a guarantee agreement with Navios Holdings.
- HMM Restructuring: In July 2016, the company restructured charters with HMM, reducing daily hire rates in exchange for senior unsecured notes and HMM securities. The securities were subsequently sold at a loss.
- Acquisitions: In October 2016, the company agreed to acquire a 2004-built Capesize vessel for $15.1 million, expected to be delivered in Q4 2016.
- Risks: Key risks include global trade uncertainty, fluctuations in charter rates, customer credit risk (specifically regarding Hanjin and HMM), and the ability to refinance debt or obtain favorable terms.
Investor Verification Checklist
- Distribution Policy: Confirm the status of the suspended distributions and the Board's criteria for reinstatement.
- Hanjin Claims: Monitor the progress and recovery amount of claims filed against Hanjin Shipping for lost charter revenue.
- Debt Covenants: Verify continued compliance with financial covenants (e.g., EBITDA to interest expense ratio of 2.00:1.00) given the recent net loss.
- Vessel Sales: Track the sale of the MSC Cristina (held for sale) and the impact on debt repayment.
- Related Party Transactions: Review the $24.4 million due from related parties (primarily management fees) and the $11.0 million due to related parties.