Navios Maritime Acquisition Corp. (NNA) maintains cash deposits and equivalents in excess of government-provided insurance limits and also minimizes its exposure to credit risk by dealing with a diversified group of major financial institutions. Cash deposits and cash equivalents in excess of amounts covered by government-provided insurance are exposed to loss in the event of non-performance by financial institutions.
At the end of the first quarter of 2014, NNA recorded available credit lines of $40 million and $124.5 million in cash and restricted cash balance. With this, NNA’s total liquidity stands at $164.5 million. The company believes it has more than sufficient cash on hand to fully fund the remaining balance of its new-building commitment. Also, in late 2013, NNA indulged in bond refinancing, thereby having no significant debt maturities until the fourth quarter of 2021. So NNA has disposable cash for expansion and capturing growth opportunities in an improving market.
With the majority of 2014 and 2015 being fixed with contracted revenue, NNA also estimates a fully loaded cost, including opex, general and administrative expenses, and other expenses, for those years. The calculation of its forecasted numbers indicate that NNA’s total cost exceeds its total estimated revenue by $3.6 million. However, with the cushion of NNA’s profit sharing strategy, high cash flow helps to bridge the gap of excess cost over revenue.
Strong liquidity is positive for NNA, as it positions the company better to face market fluctuations and also expand its opportunities. With strong buying power, NNA believes it can generate strong cash flows for the upcoming five years.
And with the adoption of this financial strategy, NNA has a secure position. The cycles goes like this:
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