Navios says balance sheet healthy, no major maturities till 2017

By Paul Deckelman

New York, Aug. 21 - Navios Maritime Acquisition Corp. completed the second quarter with what its chief executive officer on Tuesday called a "relatively healthy" balance sheet.

And Angeliki N. Frangou, who also is the chairman of the Piraeus, Greece-based operator of oil and chemical tanker ships, further noted on the company's conference call following the release of results for the period ended June 30 that Navios faces no significant debt repayments until 2017, and capital spending for its ambitious ship-building program is now fully funded.

She said that the company's liquidity at the end of the quarter stood at $126 million, including $73.4 million of cash and cash equivalents, and declared that "with the cash flow from our fleet, we will delever naturally."

The company currently has 16 ships afloat including seven super-sized tankers for carrying crude oil from drilling sites to refineries, seven intermediate-sized product tankers that carry refined petroleum products such as gasoline, kerosene and jet fuel from refineries to storage and distribution facilities and two smaller product tankers that handle other kinds of liquid chemical cargoes. It also has 13 petroleum product tankers in various stages of construction and slated for delivery throughout the remainder of this year, in 2013 and 2014.

The company's chief financial officer, Leonidas Korres, told analysts on the call that Navios had total debt at June 30 of $994.5 million, with a ratio of net debt as a percentage of total capitalization of 75.1%.

He said that the company's leverage had increased due to the borrowing it did to finance the building of its new vessels, but he added that "as vessels are delivered to our fleet and we start repaying the respective debt facilities, the ratio is expected to decrease."

Bond debt dominates

Frangou said that the company's leverage ratio "is appropriate given the nature of the underlying debt." She noted that more than half of the debt consists of about $505 million of 8 5/8% first-priority ship mortgage notes that come due on Nov. 1, 2017. The company originally sold $400 million of the bonds after pricing them at par on Oct. 6, 2010, with the deal coming to market after a standard investor roadshow; it then did a quickly shopped $105 million add-on that priced at 102.25 on May 12, 2011 to yield 8.0009%.

The balance sheet also includes $47.2 million due in 2016, an additional $39.9 million beyond the 8 5/8% bonds that is due in 2017, $67 million due in 2018, $108.6 million due in 2019 and $29.9 million due in 2020 and beyond.

Besides the $73.4 million cash position, which Korres said includes restricted cash, the company's $126 million of total liquidity includes $52.6 billion of borrowing availability under credit lines totaling $120 million, with $67.4 million having already been drawn against those facilities.

The CFO said that Navios "has a prudent financial strategy. Our capital structure is based on long-term debt. Approximately half of our debt is non-amortizing, which provides significant cash flow flexibility."

Frangou added that this "allows us to re-deploy interim cash flow to grow the company."

The two executives also noted that the company's debt does not have loan-to-value covenants, which, Korres said "have been adversely affecting many of our peers."

Frangou said that consequently, Navios "does not need to deal with volatility within our balance sheet" caused by the demands of such covenants.

Korres said that overall, "our strategy has provided lenders an additional level of comfort relating to the stability of our balance sheet." He noted that as of June 30, the company was in compliance with all the covenants on its credit facilities and ship mortgage notes.

Intercompany debt no concern

The company also carries a balance of $35 million of intercompany loans from its corporate parent, Piraeus-based Navios Maritime Holdings Inc., which operates other types of shipping, including dry-bulk cargo carriers through its Navios Maritime Partners LP subsidiary; the parent company is also chaired by Frangou.

Korres told an analyst who asked about the loans that they are structured as draws against a $40 million credit line, with Navios Acquisition having until the end of 2014 to repay them. He and Frangou said that with the new ships now under construction coming on line between now and then, the company's cash flow will grow sufficiently to allow it to repay that obligation.

For the quarter, Navios Acquisition reported that revenues grew 38% to $35.9 million from $26 million in the 2011 second quarter, and EBITDA increased 54.4% to $22.7 million from $14.6 million a year ago. Its net loss narrowed to $1.9 million from the year-earlier red ink of $3.1 million.

With Navios' existing ships and those expected to come on line shortly completely booked up for the remainder of this year under long-term charter agreements with energy and chemical companies and 83% booked for next year, and with the company's economies of scale and relatively low break-even level against its costs, Frangou declared that even with unsettled conditions in the oil-tanker business, "Navios Acquisition has been able to execute on its strategies, while most of its peers struggle for survival."

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