Navios Partners acquires kamsarmaxes, takes capesizes on bareboat deals

Navios_Partners

Navios Partners, an international owner and operator of dry cargo vessels, reported its financial results for the fourth quarter and year ended December 31, 2020.

Angeliki Frangou, Chairman and Chief Executive Officer of Navios Partners stated, “I am pleased with the results for the full year and fourth quarter of 2020. For the full year 2020, Navios Partners reported revenue of $226.8 million and adjusted EBITDA of $99.8 million. For the fourth quarter, Navios Partners reported revenue of $69.2 million and adjusted EBITDA of $35.5 million.”

Angeliki Frangou continued, “Our approved merger with Navios Maritime Containers will be a transformative transaction. Proforma for the merger, we will have 85 vessels and have one of the 10 largest publicly listed dry cargo fleets. The transaction also provides significant benefits of diversification. Approximately half of our vessels in the fleet will be dry bulk vessels and the other half will be containerships. Navios Partners is well positioned to benefit from the different sector fundamentals.

The transaction builds scale through a larger, diversified asset base. We will also benefit from eliminating duplicative costs. The financial potency of the combination can be measured through proforma combined revenue. Had the merger been effective for 2020, revenue would have been $354 million. For 2021, contracted revenue already exceeds this amount and with more than a third of available days either open or index linked, there is ample opportunity for significant additional revenue and free cash flow. ”

Acquisition of Navios Maritime Containers L.P.

On March 24, 2021, at a Special Meeting of limited partners of Navios Maritime Containers L.P. (“Navios Containers”), the Navios Containers’ common unit holders approved the merger (the “Merger”) contemplated by the previously announced Agreement and Plan of Merger, (the “Merger Agreement”), dated December 31, 2020, by and among Navios Partners, its direct wholly-owned subsidiary NMM Merger Sub LLC (“Merger Sub”), Navios Containers and its general partner, Navios Maritime Containers GP LLC. Pursuant to the Merger Agreement, Merger Sub will be merged with and into Navios Containers, with Navios Containers being a wholly-owned subsidiary of Navios Partners.

Pursuant to the terms of the Merger Agreement, at the effective time of the Merger, each outstanding common unit representing limited partner interests in Navios Containers that is held by a common unit holder other than Navios Partners, Navios Containers and their respective subsidiaries will be cancelled and automatically converted into the right to receive 0.39 of a common unit representing limited partner interests in Navios Partners.

The Merger is expected to be completed on March 31, 2021. The assets and liabilities and results of operations of Navios Containers will be included in Navios Partners’ consolidated results of operations from and only for periods subsequent to the closing of the Merger. Following the Merger, Navios Containers will no longer be a publicly traded company.

Fleet Developments

• Three Bareboat Charter-in Newbuilding Capesize Vessels

In January 2021, Navios Partners agreed to bareboat charter-in three Japanese newbuilding capesize vessels from an unrelated third party. Each vessel has approximately 180,000 dwt and is being bareboat chartered-in for 15 years. Navios Partners has the option to acquire the vessels starting at the end of year four until the end of the charter period. Assuming exercise of the option at the end of the 15-year period, the implied fixed interest rate is 4.4%. The vessels are expected to be delivered into Navios Partners’ fleet during the second half of 2022.

• Acquisition of two Kamsarmax Vessels

In March 2021, Navios Partners agreed to acquire from Navios Maritime Holdings Inc. (“Navios Holdings”) (NYSE:NM) the Navios Avior, a 2012 built Kamsarmax vessel of 81,355 dwt, and the Navios Centaurus, a 2012 built Kamsarmax vessel of 81,472 dwt, for a purchase price of 39.3 million, including working capital adjustments. The acquisition of the vessels will be financed with a $26.7 million to be drawn from a new credit facility from a commercial bank and the remaining balance with available cash.

• Acquisition of one Newbuilding Kamsarmax Vessel

In March 2021, Navios Partners agreed to acquire from an unrelated third party a newbuilding Kamsarmax vessel for a purchase price of $31.6 million. The vessel has approximately 81,000 dwt and is expected to be delivered into Navios Partners’ fleet during the second half of 2022.

• $ 32.8 million Sale of four Vessels in Q1 2021

In January 2021, Navios Partners, completed the sale of the Solar N, a 2006-built Containership of 3,398 TEU to an unrelated third party for a net sale price of $11.1 million.

In January 2021, Navios Partners, completed the sale of the Esperanza N, a 2008-built Containership of 2,007 TEU to an unrelated third party for the net sale price of $4.6 million.

In February 2021, Navios Partners, completed the sale of the Castor N, a 2007-built Containership of 3,091 TEU to an unrelated third party for a net sale price of $8.9 million.

In February 2021, Navios Partners agreed to sell the Joie N, a 2011-built Ultra Handymax vessel of 56,557 dwt, to an unrelated third party, for a net sale price of approximately $8.2 million.

Financing Arrangements

In March 2021, Navios Partners entered into a new credit facility with a commercial bank for a total amount of $58.0 million in order to refinance two dry bulk vessels and to finance the acquisition of two dry bulk vessels. The credit facility has an amortization profile of 8.8 years, matures in March 2026 and bears interest at LIBOR plus 3% per annum.

Navios Partners is in advance discussions with a commercial bank for a new credit facility of up to $115.0 million for the refinancing of its’ existing facility maturing in August 2021. The new facility is expected to have an amortization profile of 5.0 years, matures in the second quarter of 2025 and bears interest at LIBOR plus 3% per annum. The transaction is expected to close in the second quarter of 2021. No assurance can be provided that the definitive agreement will be executed or that the refinancing will be consummated in whole or in part.

Cash Distribution

The Board of Directors of Navios Partners declared a cash distribution for the fourth quarter of 2020 of $0.05 per unit. The distribution was paid on February 12, 2021 to all unitholders of record as of February 9, 2021. The aggregate amount of the declared distribution was $0.6 million. The declaration and payment of any further dividends remain subject to the discretion of the Board of Directors and will depend on, among other things, Navios Partners’ cash requirements as measured by market opportunities and restrictions under its credit agreements and other debt obligations and such other factors as the Board of Directors may deem advisable.

Charter coverage for Q1 2021

As of March 22, 2021, Navios Partners and Navios Containers (together, the “Navios Partners Group”) have chartered-out approximately 98% and 100% of the available days for the first quarter of 2021 at an Average Expected daily charter-out rate of $15,151 and $16,949, respectively. The Average Expected daily charter-out rate is the contracted rate net of commissions and is subject to performance by the counterparties and the Navios Partners Group.

Long-Term Cash Flow

Following the completion of the Merger, Navios Partners will own and operate a fleet comprised of 49 dry bulk vessels and 36 containerships. Navios Partners Group has entered into medium to long-term time charter-out agreements for its vessels with a remaining average term of approximately 1.4 years. Navios Partners Group has currently contracted out 79.3% of its available days for 2021, 31.5% for 2022 and 15.8% for 2023, including index-linked charters. Excluding index-linked charters, Navios Partners Group expects to generate revenues of approximately $356.4 million, $201.4 million and $106.0 million, respectively. The Average Expected daily charter-out rate for the fleet is $18,612, $25,011 and $27,828 for 2021, 2022 and 2023, respectively.

EARNINGS HIGHLIGHTS

For the following results and the selected financial data presented herein, Navios Partners has compiled condensed consolidated statements of operations for the three month periods and years ended December 31, 2020 and 2019. The quarterly information was derived from the unaudited condensed consolidated financial statements for the respective periods. EBITDA, Adjusted EBITDA, Adjusted Earnings per Common Unit and Adjusted Net Income are non-GAAP financial measures and should not be used in isolation or substitution for Navios Partners’ results calculated in accordance with U.S. generally accepted accounting principles (“U.S. GAAP”).

Three month periods ended December 31, 2020 and 2019

Time charter and voyage revenues for the three month period ended December 31, 2020 increased by approximately $8.0 million, or 13.0%, to $69.2 million, as compared to $61.3 million for the same period in 2019. The increase in time charter and voyage revenues was mainly attributable to the increase in the size of our fleet. The available days of the fleet increased to 4,805 days for the three month period ended December 31, 2020, as compared to 3,450 days for the three month period ended December 31, 2019. For the three month period ended December 31, 2020, the time charter equivalent rate, or TCE rate, decreased to $14,021 per day, in relation to $16,981 per day which was for the three month period ended December 31, 2019.

EBITDA for the three month period ended December 31, 2020 and 2019 was affected by items described in the table above. Excluding these items, Adjusted EBITDA increased by $1.8 million to $35.5 million for the three month period ended December 31, 2020, as compared to $33.7 million for the same period in 2019. The increase in Adjusted EBITDA was primarily due to: (i) an approximately $8.0 million increase in time charter and voyage revenues; (ii) a $1.2 million decrease in time charter voyage expenses; and (iii) a $2.4 million increase in other income. The above increase was partially mitigated by a: (i) $6.9 million increase in vessel operating expenses, mainly due to the increased fleet; (ii) $1.6 million increase in general and administrative expenses, mainly due to the increased fleet; (iii) $0.9 million increase in other expenses; and (iv) $0.4 million decrease in equity in net earnings of affiliated companies.

Net Loss for the three month period ended December 31, 2020 was $50.2 million as compared to $62.9 million for the same period in 2019. Net Loss was affected by items described in the table above. Excluding these items, Adjusted Net Income for the three month period ended December 31, 2020 amounted to $12.8 million compared to $12.2 million income for the three month period ended December 31, 2019. The increase in Adjusted Net Income of $0.7 million was due to a: (i) $1.8 million increase in Adjusted EBITDA; and (ii) $1.4 million decrease in interest expense and finance cost, net. The above increase was partially mitigated by a: (i) $0.5 million increase in direct vessel expenses; (ii) $1.2 million increase in depreciation and amortization expense; and (iii) $0.7 million decrease in interest income.

Years ended December 31, 2020 and 2019

Time charter and voyage revenues for the year ended December 31, 2020 increased by $7.4 million, or 3.4%, to $226.8 million, as compared to $219.4 million for the same period in 2019. The increase in time charter and voyage revenues was mainly attributable to the increase in the size of our fleet. The available days of the fleet increased to 17,430 days for the year ended December 31, 2020, as compared to 13,170 days for the year ended December 31, 2019. For the year ended December 31, 2020, the TCE rate, decreased to $12,497 from $15,791 per day for the year ended December 31, 2019.

EBITDA for the year ended December 31, 2020 was $21.4 million, as compared to $37.1 million for the same period in 2019. EBITDA was affected by items described in the table above. Excluding these items, Adjusted EBITDA decreased by $20.2 million to $99.8 million for the year ended December 31, 2020, as compared to $120.0 million for the same period in 2019. The decrease in Adjusted EBITDA was primarily due to a: (i) $25.5 million increase in vessel operating expenses, mainly due to the increased fleet; (ii) $3.0 million increase in general and administrative expenses, mainly due to the increased fleet; (iii) $2.9 million increase in other expenses; and (iv) $1.4 million decrease in equity in net earnings of affiliated companies. The above decrease was partially mitigated by a: (i) $7.4 million increase in time charter and voyage revenues; (ii) $1.3 million decrease in time charter and voyage expenses; and (iii) $4.0 million increase in other income.

Net Loss for the year ended December 31, 2020 was $68.5 million, as compared to $62.1 million loss for the same period in 2019. Net Loss was affected by items described in the table above. Excluding these items, Adjusted Net Income for the year ended December 31, 2020 amounted to $9.9 million compared to $26.9 million for the year ended December 31, 2019. The decrease in Adjusted Net Income of $16.9 million was due to a: (i) $20.2 million decrease in adjusted EBITDA; (ii) $3.4 million increase in direct vessel expenses; (iii) $2.8 million increase in depreciation and amortization expense; and (iv) $5.5 million decrease in interest income. The above decrease was partially mitigated by a $15.0 million decrease in interest expense and finance cost, net.

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