Another Way to Make a Buck – Profiting from a Buyback

Navios Maritime Holdings continues to find new ways to make profits. In its latest iteration, the company agreed to purchase $131.3 million of its 2% mandatorily convertible preferred stock issued in connection with the acquisition of certain capsize vessels. The company has agreed to pay $49.2 million in cash for the $131.2 million of preferred stock, representing a 62.5% discount to the face amount. Or, from the equity perspective, the company purchased its equity back at effectively $3.75/share, a discount of approximately 27% to the then market price. Not only was a discount obtained, Navios also avoided the payment of the dividend of $2.6 million that was due, as well as, obviated the possibility of issuing an additional 13.132 million shares at maturity. Navios was able to achieve these favorable terms as a consequence of the seller’s liquidity needs. Not a bad trade at all.

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