Is Navios Maritime Partners Still Attractive?
It is important for investors in the shipping industry to know a company’s debt levels. It is such a capital-intensive industry that high levels of debt can put a strain on a company’s credit ratings.
Navios Maritime Partners LP (NMM) had a cash balance of $49 million and $60 million in a credit line as of June 30, 2015. Its net debt at the end of 2Q15 was $582 million, compared with $430 million at the end of the first quarter. The increase in net debt is due to the acquisition of one container vessel during the quarter. The increase was mitigated by $48.7 million in debt repayments during the quarter.
The company doesn’t have any debt maturing in 2015 and 2016, and it has $58 million in maturing debt in 2017. Major debt repayments will begin in 2018. The company’s capital expenditure needs are also minimal going forward, as management has no fleet acquisition plans in the near future.
Not exercising an option to acquire a container vessel reflects management’s conservative approach in the current market. It also shows its focus on keeping debt within manageable limits.
NMM has a net debt-to-forward EBITDA ratio of 3.5x. Among its industry peers (SEA), Diana Shipping (DSX), Safe Bulkers (SB), and DryShips (DRYS) have ratios of 10.9x, 9.2x, and 5.3x, respectively. Safe Bulkers (SB) is slightly more leveraged than NMM. Diana Shipping (DSX) has the lowest financial leverage, with a debt-to-assets ratio of 32.5%.
Navios Holdings (NM) owns a 20% interest in Navios Maritime Partners, which includes a 2% general partner interest. NM has 2.03% holdings in SEA. The SPDR S&P 500 Trust ETF (SPY) represents the broader transportation industry.
In an industry downturn, companies with higher leverage usually underperform. If the dry bulk shipping industry does recover, companies with higher leverage ratios can generally outperform those with lower leverage.
Being an MLP, NMM has tried to keep its distributions safe. In the next part, we’ll see if the rechartering could pose a risk to that effort.
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