A long-standing investor in tanker owner Navios Maritime Acquisition (ticker symbol: NNA) is continuing to press for changes in the New York-listed company’s board of directors despite the withdrawal of a controversial intra-group loan.
Montpelier Asset Management, which is based in London, approached TradeWinds this week in the wake of coverage directed at Navios Maritime Acquisition’s $50m loan to parent Navios Maritime Holdings (ticker symbol: NM) at below-market rates.
Whereas the Navios group elected to cancel the loan in the wake of a shareholder lawsuit, analyst criticism and adverse publicity, Montpelier founder Nicholas Cournoyer made clear in an interview with TradeWinds that the outcome does not quell his concerns over Navios Maritime Acquisition’s board structure.
He believes a lack of truly independent directors presents further danger of improper financial transactions given the relatively weak financial condition of Navios Maritime Holdings and Navios Maritime Acquisition’s status as a “cash cow” for the group.
“We’re glad the loan issue got sorted out, and we credit [fellow shareholder] Metropolitan Capital for highlighting the problem and putting together a good case in their lawsuit,” Cournoyer said.
“However, what we see is that given [Navios Maritime Holdings’] further difficulties in the dry bulk market and with the loss of a contract with Vale in their South American logistics business, we’re afraid the issue can arise again in some form as they look to tap whatever financial resources are within the group — and right now that is essentially [Navios Maritime Acquisition].”
Cournoyer argues the best way to address that problem is to encourage changes in Navios Maritime Acquisition’s board to ensure independence.
“We think the right thing to do is to keep pushing them to adopt an independent board, with the independent directors the only ones voting on related-party transactions,” he said.
Cournoyer says Montpelier came to TradeWinds only
Sentiment: Strong Buy
Cournoyer stresses that apart from governance issues, he is a big fan of Navios Maritime Acquisition. It is why Montpelier owns slightly under 1% of outstanding shares and why he has been invested since 2012.
“We wouldn’t be having this conversation if I didn’t think they were a good company,” he said. “I’ve met with Angeliki [Frangou] and Ted Petrone half a dozen times since we’ve been investors.
“We think they do a lot of things well. She knows her business and her team knows their business extremely well. We’re not trying to micro-manage them or tell them how to do shipping, that’s their area of expertise.
“But in this area, you almost feel that you’re trying to do them a favour. If they could manage to run this company independently, we feel their share price would be 40% higher than it is now.
“Their price was $2.80 per share when we got involved in 2012 and it’s $1.90 now, and in the meantime [hire] rates have doubled. Absolutely, I think independence is the main factor.”
Cournoyer says Montpelier also invests in products tanker owners such as New York-listed Scorpio Tankers and Italy’s d’Amico.
“It’s natural to compare Navios Acquisition to a Scorpio Tankers — and, in many ways, I think Navios is better managed because it doesn’t have all the fee structures charged by Scorpio. Yet Scorpio trades better and I think it is because of the overhang Navios has on this issue,” he said.
Wells Fargo Securities analyst Michael Webber recently rated Navios Maritime Acquisition poorly on the issue of director independence in a wider review of listed companies’ compliance with corporate governance standards.
Only six of 42 outfits scored below Navios Maritime Acquisition’s grade of 56% for independent directors.
However, Navios Maritime Acquisition did do better in the overall governance rating, coming in 28th out of the 42 companies.
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If I would hold RAS for 6 years, I am pretty sure to earn $2 in dividends and another $4 in capital gains... Hold RAS I sleep very well, specially now that we have put dividend decrease past us. The 9 cents is very, very safe.
Hey everyone... After a couple years away from RAS, I went ALL in today at $2.35. I will be selling at $4, for a 70% gain.
Sentiment: Strong Buy
Hello everyone, and specially hello to Davis.
I have been out of RAS for 2 years, but it seems now is a good entry point. Should I?
Davis, whats your thoughts on the reason for RAS been declining for 2 years?
RSO has fallen a lot, to the point where dividend now stands at 20%. I am expecting RAS to reach that point too... I don't see why RAS should be any better than RSO... Actually I think RSO has a better book value, and not a cooked one.
I am feeling good that I bought thusands of shares average $3.14 per share, when a couple years ago those same shares where sold for $20.
I agree, there is no requirement... From their SEC-fillng:
Our partnership agreement requires us to distribute all of our available cash quarterly. Our cash distribution policy reflects our belief that our unitholders will be better served if we distribute, rather than retain, our available cash. Generally, our available cash is the sum of our (i) cash on hand at the end of a quarter after the payment of our expenses and the establishment of cash reserves and (ii) cash on hand resulting from working capital borrowings made after the end of the quarter. Because we are not subject to an entity-level federal income tax, we have more cash to distribute to our unitholders than would be the case were we subject to federal income tax.
Limitations on Cash Distributions and Our Ability to Change Our Cash Distribution Policy
There is no guarantee that our unitholders will receive quarterly distributions from us. We do not have a legal obligation to pay the minimum quarterly distribution or any other distribution except as provided in our partnership agreement. Our cash distribution policy may be changed at any time and is subject to certain restrictions, including the following:
Our cash distribution policy may be subject to restrictions on distributions under our new credit facility or other debt agreements entered into in the future. Our new credit facility will contain financial tests and covenants that we must satisfy. These financial tests and covenants are described in "Management's Discussion and Analysis of Financial Condition and Results of Operations—Liquidity and Capital Resources—Our Credit Facility." Should we be unable to satisfy these restrictions or if we are otherwise in default under our new credit facility, we will be prohibited from making cash distributions to you notwithstanding our stated cash distribution policy.
Our general partner will have the authority to establish reserves for the prudent conduct of our business and for future
I think the same... I have all eggs in one basket with this stock and I will not sell for less than $9... Worst case scenario, distributions get temporarily cut to $0.80, in which case still a good value.
Sentiment: Strong Buy
For a stock selling at $2.30, this is a pretty good report. Dividend is safe at 15% yield. Company is profitable... Common guys, if RAS would be selling for $7, I would be worried, but common, at $2.30, this is a steal.
Sentiment: Strong Buy
"Because of the stringent provisions on MLPs and the nature of the quarterly required distributions, the vast majority of MLPs are pipeline businesses, which earn very stable income from the transport of oil, gasoline or natural gas."
If you go to the company's website, they write they are an MLP. They said they would generate 23 million is cash flow, so if there is nothing to prevent them from distributing this, they will, because that's what MLP's do.