Navios Maritime Partners: Afloat on a sea of well-managed debt
Navios Maritime Partners hopes for clear sailing next fiscal (Part 9 of 11)
Liquidity and debt profile
At the end of 4Q14, Navios Maritime Partners (NMM) generated total cash, including restricted cash, of $100.4 million and total debt of $583.3 million. The company doesn’t have any significant debt maturities until $418 million comes due in 2018. In 2017, it must account for a $58.2 million, and in 2019, debt maturity stands $28.5 million.
Total assets stood at $1.35 billion compared to $1.25 billion as of December 31, 2013, reflecting the larger Navios fleet. Long-term debt, including the current portion, increased by approximately $50 million. This was mainly due to a $56 million dropdown for the financing of the two container vessels acquired in the last two quarters of 2014. Net debt-to-asset value on a charter-adjusted basis at the end of the quarter was 45.4%.
Net debt-to-EBITDA ratio
Net debt-to-EBITDA (earnings before interest, taxes, depreciation, and amortization) is a measure of leverage. It indicates how many years it would take for a company to pay back its debt if net debt and EBITDA were held constant. If a company has more cash than debt, the ratio can be negative.
For the fourth quarter, Navios Maritime Partners recorded net debt-to-EBITDA of 3.08 compared to an industry average of 5.57. The company’s ratio declined from 3.4 in the same quarter a year ago. For 2015, it’s estimated to come in at 3.5. This ratio indicates that NMM is in a comfortable position to meet its debt obligation.
Dry bulk peers reported these ratios:
DryShips (DRYS) – 5.91
Diana Shipping (DSX) – 5.40
Safe Bulkers (SB) – 3.43
The net debt-to-EBITDA ratio is popular with analysts because it takes into account a company’s ability to service its debt obligations. Ratios higher than 4 or 5 typically set off alarm bells because this indicates that a company is less likely to be able to handle its debt burden. As a result, it’s less likely to be able to take on the additional debt required to grow the business. Having said that, it ultimately depends on the benchmark of the industry you’re looking at.
Investors interested in broader industry exposure should consider the SPDR S&P 500 ETF Trust (SPY).
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