Personnel Changes and Notes, July 22, 2010

Navios Maritime Partners has appointed Mr. Michael Sarris to its Board of Directors July 21, 2010, upon the resignation of Efstathios Loizos. Mr. Sarris has previously held positions as Minister of Finance of the Republic of Cyprus (September 2005 – March 2008) and Director of the World Bank, an organization he has served for 29 years. He has received Bachelor and Doctoral Degrees in Economics from the London School of Economics and Wayne State University, respectively.

The Paragon Shipping Board of Directors has appointed the firm’s Chairman and Chief Financial Officer Mr. Michael Bodouroglou to also serve as Interim Chief Financial Officer. Mr. Christopher J. Thomas, prior CFO of Paragon Shipping, departed the company July 14, 2010, at which time Mr. Bodouroglou assumed the interim position. Paragon is looking for a permanent replacement for the position.

Another Dropdown Coming?

Last Thursday as we reported Navios Maritime Partners announced the follow-on offering of a further 4.5 million common units with a green shoe of 675 thousand units. On the following day the transaction was priced at $17.84 per unit a 5.26% discount from Thursday’s closing price of $18.83. Proceeds from the offering will be used to fund its fleet expansion and for general partnership purposes. Greater detail is shown in our Guts of the Deal below.
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And After the Market Closed

Navios Maritime Partners announced that it plans to offer another 4.5 million common units in a public offering, with a green shoe of a further 675 thousand units. Proceeds will be used for fleet expansion or general partnership purposes. This is Partners’ second offering of the year. The first raised $54 million back in February. The shares closed down $0.59 (3.04%) at $18.83 and fell a further $1.03 (5.5%) to $17.80 in after hours trading. At today’s closing price, gross proceeds would be approximately $85 million. We will cover this story as it evolves next week.

Silence Is Golden

It’s Wednesday, as we write this, and for the first time we can remember in months it’s been a quiet week in terms of transactions. We took the opportunity of a free moment to meet with Mark Friedman and Hugh Baker of Evercore Partners. Our agenda was twofold: we wanted to understand how Evercore is positioning itself in the competitive landscape of investment banking and to engage in a post-mortem of the recent shipping equity offerings to better understand why some have succeeded while others struggled.

Evercore is different. It is obvious when you walk into their offices, which are quieter than a library should be. There is no trading floor. This is about advisory work in the old style, built on relationships and trust. Like all bankers, they are client-centric, but with a difference. Lacking distribution, they are less driven by the constant need to feed securities through a distribution network. Instead, they are focused on long-term relationships and providing the highest quality advice with respect to their clients’ strategic needs.
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Why is Navios Moving from Norwalk to New York City?

The simple answer is that they were spending too much time in New York raising capital and the commutation costs were becoming excessive. In the latest iteration, Navios Maritime Partners announced on Tuesday a follow-on offering of 3.5 million common units. This is its first offering of this year and follows three such offerings done last year that raised approximately $135 million.
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Addition by Subtraction

In its financial report on the 4th quarter and year-end 2009, Navios Maritime Partners reported that it had amended its existing credit facility last month. Throughout 2009, the company met its amended covenants, while posting additional quarterly cash reserves. With three follow-on equity offerings, fleet additions and the avoidance of any writedowns, the company’s balance sheet was pristine and the company applied these cash reserves, totaling $12.5 million, to the pay down of its debt. This allowed the company to borrow an additional $24 million to refinance the acquisitions of the Apollon and Hyperion as well as the exercise of the option on the Sagittarius. But just as importantly, the company was able to revert back to the original covenants and interest rate margins, generating substantial savings in interest expense. While there is nothing terribly exciting in the news, it does illustrate one of the many reasons Navios is successful. It carefully manages every aspect of its business at a micro level.

Not to Be Outdone

Navios Maritime Partners announced after the market closed Wednesday that it intended to issue 4 million common units with a green shoe of 600 thousand units. Proceeds would be used for fleet expansion and/or general partnership purposes. The deal was priced today at $14.90 per unit, a discount of 5.8% from the prior close.

Joint book running managers were Citi and JPMorgan with S. Goldman Advisors, DVB and Cantor Fitzgerald serving as co-managers.

Back to the Well

Utilizing its $500 million shelf registration from February, Navios Maritime Partners (“NMP”) went back into the market last week for its second follow-on offer of this year. In May, NMP issued 3.5 million shares at a price of $10.32. Last week’s offering of 2.8 million shares was priced $12.21 per share a discount of 6.5% from the prior day’s closing price. Proceeds will be used to fund its fleet expansion and/or for general corporate purposes.

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Fair Exchange

Last week, Navios Holdings (“Navios”) and Navios Maritime Partners (“NMP”) announced the re-structuring of certain arrangements between themselves. First, NMP agreed to acquire from Navios the leasehold rights to the M/V Navios Sagittarius, a 2006 Japanese built Panamax. The purchase price, $34.6 million, will be funded from cash on hand. The vessel is currently chartered out at $26,125, net per day until November 2018 and is expected to generate annual EBITDA of approximately $5.8 million. As part of the acquisition of the leasehold, the new owners have a purchase option beginning in December 2009 at an initial price of $25.9 million and the AA+ European Union charter insurance.

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De-leveraging

In its 1Q earnings release last week, Navios Maritime Partners (“Navios Partners”) announced that it had amended the terms of its existing $235 million credit facility with Commerzbank in January. The company prepaid $40 million during the first quarter resulting in an approximate $1.5 million in interest expense savings for 2009 and a commensurate reduction in leverage. Throughout 2009, the partnership will additionally have to fund into a pledged account a further $37.5 million. The interest rate on the remaining facility of $195 million now bears a spread of 2.25%, giving an estimated interest rate of 3.98% for 2009 including the margin (versus 4.17% the effective rate in 2008), and no further installments are due until the 1Q 2010.

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