Navios Maritime Partners L.P. — FY 2016 Form 20-F
Reporting period: Fiscal year ended December 31, 2016; U.S. GAAP, audited. This is an annual report, not a standalone fourth-quarter filing. Navios Maritime Partners owns and operates drybulk and container vessels, generally under medium- to long-term time charters.
Business context and financial results
Amounts below are in U.S. dollars; financial statement amounts are in millions unless stated otherwise.
| Metric | FY 2016 | FY 2015 |
|---|---|---|
| Time charter and voyage revenue | $190.5 | $223.7 |
| Net income (loss) | ($52.5) | $41.8 |
| Basic and diluted earnings per common unit | ($0.62) | $0.48 |
| Net cash from operating activities | $56.5 | $123.3 |
| Operating Surplus (non-GAAP) | $85.0 | $112.7 |
| Adjusted EBITDA (non-GAAP) | $123.5 | $153.3 |
| Cash distributions paid | $0 | $132.3 |
- Revenue fell 14.8%; management attributed the decline primarily to weaker freight markets. Average daily TCE declined to $16,364 from $19,739, while available fleet days increased to 11,296 from 11,051.
- At December 31, 2016, total assets were $1,268.6, total liabilities $588.4, partners’ capital $680.2, and net debt carrying value $523.8. Cash and cash equivalents were $17.4; restricted cash was $7.7.
- Current assets of $56.3 compared with current liabilities of $99.0, a negative working-capital position of $42.6. The filing states management believed the partnership had adequate resources to meet commitments for at least 12 months from issuance.
- Operating cash flow decreased by $66.7 year over year. Investing activities provided $5.1, including proceeds from the sale of HMM securities, while financing activities used $71.0, including $104.6 of debt repayments.
- Weighted-average borrowing cost was 4.67%, versus 4.44% in 2015. A 1 percentage-point increase in LIBOR was estimated to increase annual interest expense by $5.5.
Material changes, unusual items, and subsequent events
- FY 2016 included $27.2 of vessel impairment losses: $17.2 related to the MSC Cristina, classified as held for sale, and $10.0 for the Navios Apollon. The MSC Cristina was sold in January 2017 for net proceeds of $125.0; the Apollon was agreed for sale for $4.8, with delivery expected by April 2017.
- A $19.4 loss was recorded on the sale of HMM securities. Under a July 2016 restructuring of charters for five HMM containerships, hire rates were reduced through 2019 and the partnership received notes and HMM securities. The shares were sold in August 2016 for net proceeds of $20.8. The charter-rate reduction was approximately $38.5 in total; the filing reports deferred revenue associated with the non-cash consideration.
- Other income was $14.5, including $9.6 recognized from claims under the Navios Holdings guarantee for charterer defaults. The guarantee’s maximum cash payment is $20.0.
- Management fees rose to $59.2 from $56.5; general and administrative expenses rose to $12.4 from $7.9. Depreciation and amortization increased to $92.4, including accelerated amortization of favorable charter intangibles.
- The board suspended quarterly distributions in February 2016, including the distribution for the quarter ended December 31, 2015, to conserve cash and improve liquidity. Reinstatement is at the board’s discretion; no guidance or timetable is provided.
- In January 2017, sale proceeds from the MSC Cristina were used to repay the $71.0 April 2015 facility and $29.0 June 2016 facility. On March 6, 2017, the partnership announced a proposed $405.0 Term Loan B refinancing at LIBOR plus 500 basis points for 3.5 years; definitive documentation was still pending.
- As of December 31, 2016, the Term Loan B had a $386.3 final payment due in June 2018. Contractual principal payments totaled $76.8 in less than one year and $398.1 in one to three years, before interest.
Outlook, risks, and contingencies
- Management’s stated strategy is to pursue long-term charters, selectively expand and diversify the fleet, and use its relationship with Navios Holdings. The filing gives no quantitative earnings or revenue guidance.
- Shipping markets were weak and cyclical, with low charter rates and vessel values. Management’s impairment analysis found aggregate carrying values exceeded estimated fair values by approximately $431.6 across the fleet, but concluded projected undiscounted cash flows supported the carrying values of vessels not written down. A prolonged or deeper downturn could lead to further impairment.
- Customer concentration is significant: HMM represented 29.6% of 2016 revenue, Yang Ming 13.0%, and MSC 11.6%. HMM’s financial difficulties and the charter restructuring are material counterparty risks.
- Debt facilities are secured and impose financial and operational covenants, including liquidity, leverage, interest coverage, and restrictions on distributions. The partnership reported compliance with applicable covenants or cure provisions at year-end; covenant breaches could restrict distributions or permit acceleration and enforcement against vessels.
- Interest rates are floating and unhedged. Environmental rules—including the global marine fuel sulfur limit scheduled for 2020 and ballast-water requirements—may increase compliance and operating costs.
- The partnership relies on Navios Holdings’ affiliates for management and administrative services. Related-party management fees and reimbursements are payable regardless of profitability, and governance and time-allocation conflicts are disclosed. The filing reports no legal proceedings expected to have a material effect.
Most important facts for investors to verify
- Whether the proposed $405.0 Term Loan B refinancing closed, on what final terms, and how it changes maturities, covenants, and liquidity.
- Current unrestricted cash, covenant headroom, and the sources available to address near-term debt service and negative working capital.
- HMM’s performance under the restructured charters, collection and timing of note payments, and the resulting deferred-revenue recognition.
- Current charter coverage, rechartering rates for expiring vessels, and customer concentration after the MSC Cristina sale.
- Whether weak vessel markets trigger further impairments or affect collateral coverage, and the actual cost of upcoming maintenance and environmental compliance.
- Any board decision or lender restriction affecting the suspension of distributions, and the terms and potential dilution from the continuous offering program of up to $25 million.