Is Navios Partners Well Positioned Financially?
It is important for investors in the shipping industry to understand a company’s debt levels. Shipping is such a capital-intensive industry that high levels of debt can put a strain on a company’s credit ratings.
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Navios Maritime Partners (NMM) had a cash balance of $32.9 million as of September 30, 2015, as compared to $49 million as of June 30, 2015. It also had a credit line of $60 million. Its net debt at the end of 3Q15 was $570 million as compared to $560 million at the end of the second quarter.
During the call, management said that the company’s debt-to-book capitalization is 42%, which is a good leverage ratio considering this market.
The company is now well positioned as far as debt obligations are concerned. It does not have any debt maturing in 2015 or 2016. $58 million will mature 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.
Navios Partners has a net-debt-to-forward EBITDA ratio of 3.6x. 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.
Navios Holdings (NM) owns a 20% interest in Navios Maritime Partners, which includes a 2% general partner interest. NM has 2.0% of its holdings in SEA. The SPDR S&P 500 Trust ETF (SPY) (DIA) 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.