Navios Maritime Partners: Strong Results Given Weak Market Backdrop

Angeliki Frangou

Navios Maritime Partners L.P., an international owner and operator of dry cargo vessels, reported its financial results for the first quarter ended March 31, 2019.

Angeliki Frangou, Chairman and Chief Executive Officer of Navios Partners stated, “I am pleased with the results for the first quarter of 2019 during which Navios Partners reported $46.8 million of Revenue and $22.7 million of Adjusted EBITDA. For the quarter, we declared a quarterly distribution of $0.02 cents per unit, representing a current yield of approximately 8%.”

Angeliki Frangou continued, “Our results were particularly strong given the weak market backdrop. Charter rates in the drybulk sector were adversely effected by January’s tragic dam collapse in Brazil, which removed a significant amount of iron ore from the longest trading route to China.

Despite this challenging environment, NMM earned a TCE rate of $13,209 per day for its fleet in the first quarter. Also, we have seen material rate improvement since Q1. The current spot rate for capesize vessels of $11,182 has increased about 90% from the average spot rate for the months of February and March.”

Cash Distribution

The Board of Directors of Navios Partners declared a cash distribution for the first quarter of 2019 of $0.02 per unit. The cash distribution is payable on May 14, 2019 to all unitholders of record as of May 10, 2019.

Financing Arrangements

On April 5, 2019, Navios Partners completed a $20.0 million sale and leaseback transaction with unrelated third parties, for a 2009-built Capesize vessel. The sale and leaseback transaction has a duration of ten years and an implied fixed interest rate of 6.6%. Navios Partners has the option to buy the vessel starting at the end of year four de-escalating to a $6.3 million obligation at maturity. There are no financial covenants or no loan-to-value requirements in connection with the sale and leaseback transaction.

On April 15, 2019, Navios Partners drew $31.4 million under a new commercial bank facility to refinance two Capesize vessels.

On April 23, 2019, the Navios Galaxy was sold for approximately $6.0 million and released from the Term Loan B collateral package. The sale resulted in an impairment loss of $7.3 million, which was included in the first quarter of 2019.

On May 3, 2019, Navios Partners released one Ultra-Handymax vessel from the Term Loan B collateral package.

Following the above transactions, Navios Partners prepaid $73.5 million to the Term Loan B in order to release five vessels from the collateral package.

Reverse Stock Split

On April 25, 2019, Navios Partners announced that its Board of Directors has approved a 1-for-15 reverse split of its issued and outstanding common units. The reverse split will be effected before the market opens on May 21, 2019. Common units will begin trading on May 21, 2019 on a split-adjusted basis on the New York Stock Exchange, under the same ticker symbol, NMM. Following the reverse split, the Company expects to have approximately 11.1 million common units issued and outstanding.

Long-Term Cash Flow

Navios Partners has entered into medium to long-term time charter-out agreements for its vessels with a remaining average term of approximately 2.2 years. Navios Partners has currently contracted out 84.8% of its available days for 2019, 36.2% for 2020 and 23.4% for 2021, including index-linked charters, expecting to generate revenues (excluding index-linked charters) of approximately $117.2 million, $82.0 million and $80.8 million, respectively. The average contracted daily charter-out rate for the fleet is $15,811, $27,479 and $27,684 for 2019, 2020 and 2021, respectively.

Three month periods ended March 31, 2019 and 2018

Time charter and voyage revenues for the three month period ended March 31, 2019 decreased by $6.2 million, or 11.8%, to $46.8 million, as compared to $53.1 million for the same period in 2018. The decrease in time charter and voyage revenues was mainly attributable to: (i) the decrease in revenue due to the sales of the YM Unity and the YM Utmost in July 2018 and the Navios Felicity and the Navios Libra II in December 2018; and (ii) the decrease in the time charter equivalent rate, or TCE rate, to $13,209 per day for the three month period ended March 31, 2019, from $16,108 per day for the three month period ended March 31, 2018. That decrease was partially mitigated by the increase in revenue following the acquisition of five vessels in 2018. The available days of the fleet increased to 3,277 days for the three month period ended March 31, 2019, as compared to 3,186 days for the three month period ended March 31, 2018, mainly due to the increased size of the fleet.

EBITDA for the three month period ended March 31, 2019 was negatively affected by the accounting effect of a $7.3 million impairment loss on the sale of the Navios Galaxy I. EBITDA for the three month period ended March 31, 2018 was negatively affected by the accounting effect of a $0.6 million equity compensation expense. Excluding these items, Adjusted EBITDA decreased by $8.9 million to $22.7 million for the three month period ended March 31, 2019, as compared to $31.5 million for the same period in 2018. The decrease in Adjusted EBITDA was primarily due to a: (i) $6.2 million decrease in revenue; (ii) $1.8 million increase in time charter and voyage expenses; (iii) $1.1 million increase in general and administrative expenses; (iv) $0.4 million decrease in other income; and (vi) $1.0 million decrease in equity in net earnings of affiliated companies. The above decrease was partially mitigated by a: (i) $0.1 million decrease in management fees; and (ii) $1.6 million decrease in other expenses.

The reserves for estimated maintenance and replacement capital expenditures for the three month periods ended March 31, 2019 and 2018 were $7.5 million and $6.1 million, respectively (please see “Reconciliation of Non-GAAP Financial Measures” in Exhibit 3).

Navios Partners generated an operating surplus for the three month period ended March 31, 2019 of $5.7 million, as compared to $17.5 million for the three month period ended March 31, 2018. Operating Surplus is a non-GAAP financial measure used by certain investors to assist in evaluating a partnership’s ability to make quarterly cash distributions (please see “Reconciliation of Non-GAAP Financial Measures” in Exhibit 3).

Net Loss for the three month period ended March 31, 2019 was negatively affected by the accounting effect of a $7.3 million impairment loss on the sale of the Navios Galaxy I. Net Income for the three month period ended March 31, 2018 was negatively affected by the accounting effect of a $0.6 million equity compensation expense. Excluding these items, Adjusted Net Loss for the three month period ended March 31, 2019 amounted to $(2.2) million compared to $6.1 million for the three month period ended March 31, 2018. The decrease in Adjusted Net Income of $8.3 million was due to: (i) an $8.9 million decrease in adjusted EBITDA; and (ii) a $1.7 million increase in interest expense and finance cost, net. The above decrease was partially mitigated by a: (i) $1.4 million decrease in depreciation and amortization expense; and (ii) $0.8 million increase in interest income.

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