The news release linked above has pretty much slipped under the radar for the major investment websites. As of this morning Navios Maritime Partners NMM does not even have it linked on their website. I listened to the conference call and they referenced some slides, but I have not been able to find them on line, so I will put up my notes now.
NMM has contracted to add 4 new Capesize drybulk vessels to their fleet. The current 10 vessel fleet includes only one Capesize, so this is a greater than 50% increase in capacity. These vessels are to be delivered in the second half of 201o and early 2011. Also noted in the press release, the company has 3 previously contracted Capesize new build vessels coming online in the 2nd half of 2009.
The purchase price for the 4 new ships is $324 million, or about $81 million each. This seems like a pretty reasonable price for a new Capesize. NMM is borrowing $240 million at a margin of 2.25% (margin over what, I do not know) and will be issuing $165 million in mandatory convertible preferred stock to pay the balance and a portion of the cost of the 3 ships coming later this year.
The convertible preferred issue raises some questions: How much dilution when converted? The most likely outcome is that the preferred will be converted sometime after 3 years at $14 per share. This would result in 11.8 million new shares. It is possible some or all of the issue could convert at $10 per share. This would give 16.5 million new shares. The $10 mandatory conversion does not kick in until 10 years after issue. From my calculations there are currently about 24 million common units outstanding making the convertible preferred and 50% dilution but at a share price of at least $14. The preferred shares will be earning a 2% annual dividend, making them a very low cost financing until converted.
The 7 new Capesize vessels are already signed to long term contracts at attractive rates. In total they are projected to generate $77 million per year in EBIDTA or about $19 million per quarter. To compare, in the 1st quarter of 2009 Navios Maritime Partners generated $14.7 million in EBIDTA which resulted in $10.5 million of operating surplus. The current 40ยข dividend will “cost” about $9.5 million. So even with the dilution, NMM should be able to significantly increase the distribution over the next several years.
Because of their relationship with Navios Maritime Holdings [[NM]], Navios Maritime Partners has been able to cherry-pick the best new-build purchases and best long term charter contracts for their vessels. I currently have a position in NMM and plan to add more in the future.
Navios Maritime Partners increases fleet size
News Release.
The news release linked above has pretty much slipped under the radar for the major investment websites. As of this morning Navios Maritime Partners NMM does not even have it linked on their website. I listened to the conference call and they referenced some slides, but I have not been able to find them on line, so I will put up my notes now.
NMM has contracted to add 4 new Capesize drybulk vessels to their fleet. The current 10 vessel fleet includes only one Capesize, so this is a greater than 50% increase in capacity. These vessels are to be delivered in the second half of 201o and early 2011. Also noted in the press release, the company has 3 previously contracted Capesize new build vessels coming online in the 2nd half of 2009.
The purchase price for the 4 new ships is $324 million, or about $81 million each. This seems like a pretty reasonable price for a new Capesize. NMM is borrowing $240 million at a margin of 2.25% (margin over what, I do not know) and will be issuing $165 million in mandatory convertible preferred stock to pay the balance and a portion of the cost of the 3 ships coming later this year.
The convertible preferred issue raises some questions: How much dilution when converted? The most likely outcome is that the preferred will be converted sometime after 3 years at $14 per share. This would result in 11.8 million new shares. It is possible some or all of the issue could convert at $10 per share. This would give 16.5 million new shares. The $10 mandatory conversion does not kick in until 10 years after issue. From my calculations there are currently about 24 million common units outstanding making the convertible preferred and 50% dilution but at a share price of at least $14. The preferred shares will be earning a 2% annual dividend, making them a very low cost financing until converted.
The 7 new Capesize vessels are already signed to long term contracts at attractive rates. In total they are projected to generate $77 million per year in EBIDTA or about $19 million per quarter. To compare, in the 1st quarter of 2009 Navios Maritime Partners generated $14.7 million in EBIDTA which resulted in $10.5 million of operating surplus. The current 40ยข dividend will “cost” about $9.5 million. So even with the dilution, NMM should be able to significantly increase the distribution over the next several years.
Because of their relationship with Navios Maritime Holdings [[NM]], Navios Maritime Partners has been able to cherry-pick the best new-build purchases and best long term charter contracts for their vessels. I currently have a position in NMM and plan to add more in the future.