Navios Maritime Holdings Inc (NM) 2008 Q4 法說會逐字稿

Good morning, my name is Rachel and I will be your conference operator today. At this time I would like to welcome everyone to the Navios Maritime Holdings fourth quarter fiscal year 2008 conference call. All lines have been place on mute to prevent any background noise. After the speakers' remarks there will be a question-and-answer session. (Operator Instructions) Thank you.

Thank you for joining us for this morning's call. With us today from Navios Maritime Holdings are Ms. Angeliki Frangou, Chairman and CEO; Mr. George Achniotis, Chief Financial Officer; and Mr. Ted Petrone, President. As a reminder this conference call is also being webcast. To access the webcast please refer to the press release for the web address which will direct you to the registration page.

Before I review the structure of this morning's call I would like to read the Safe Harbor statement. This conference call and the accompanying presentation could contain forward-looking statement within the meaning of the Private Securities Litigation Reform Act of 1995 about Navios. Forward-looking statements are statements that are not historical facts. Such forward-looking statements are based upon a current beliefs and expectations of Navios management and are subject to risks and uncertainties which could cause actual results to differ from forward-looking statements.

Such risks are more fully discussed in Navios' filings with the Securities and Exchange Commission. The information set forth herein should be understood in light of such risks. Navios does not assume any obligation to update the information contained in this conference call or the accompanying presentation.

Thank you. At this time I would like to outline the agenda for today's call. First, Ms. Frangou will offer opening remarks. Next, Mr. Petrone will provide an operational update and an overview of market fundamentals. Following Mr. Petrone's remarks Mr. Achniotis will review Navios' fourth-quarter and full-year 2008 financial results. Finally, Ms. Frangou will offer concluding remarks. After the completion of Ms. Frangou's remarks the Company will open the call to take your questions.

At this time I would like to turn the call over to Ms. Angeliki Frangou, Chairman and CEO of Navios.

Thank you, Tom, and good morning to all of you. 2008 was a challenging year literally without precedent in terms of margin and [velocity of the acceleration] in economic activity. The world is just beginning to come to grips with the fallout and governments are focusing on various means of providing catalyst to restart the global economic engine which is required for a healthy dry bulk industry. These difficulties are reflected in our financial performance.

Adjusted EBITDA was $33 million and $160 million for the fourth quarter and full year of 2008, respectively. Net income for the year was $118.5 million. George Achniotis, our CFO, will discuss our financial results in greater detail shortly.

The rate of change has required quick reaction. Our planning has been conservative and we have right-sized Navios as we have prepared for the worst case while hoping for the best. As noted on slide five, our recent focus has been on our balance sheet. As a result, during the fourth quarter we obtained $353.5 million in debt financing and we received favorable terms in difficult credit conditions. We have previewed our success in financing to the attractiveness of our conservative business model.

Highlights of this recent debt financing include three things -- number one, a 10-year term facility for $120 million secured at 60% of the original vessel values with interest at LIBOR plus 190 basis points, a two-year revolver for $200 million with interest at LIBOR plus 275 basis points, and a three-year term convertible debt for $33.5 million with a 2% per annum interest convertible at $11. We issued these bonds in connection with the seller financing for the Navios (inaudible).

In light of the global financing crisis during the second half of 2008 we also initiated and concluded a complete review of our business, capital needs, and industry opportunities. As a result of this review, we [trimmed] capital and (inaudible) in expenditures.

We reduced our cash commitment by canceling three Capesize newbuildings, none of which were chartered out. As a result of this cancellation, we reduced capital expenditures by approximately $265 million.

We also terminated without penalty nine long-term charters. These cancellations resulted in an annual savings of $61 million. [We will take a nautical] termination fee of $1.5 million.

We have also paid significant attention to our liquidity. Slide six shows that our current liquidity is favorable with a total liquidity available of $284 million, of which $150 million was cash on hand as of December 31, 2008. Also, our net debt to total capitalization was 43.2%. This liquidity should be measured in the context of our fully funded business plan.

Slide seven sets forth the funding requirement for our new buildings expected to be delivered during 2009. As you can see, the total capital required for these vessels is almost $854 million. When we discussed this in the third quarter of 2008 we needed $282 million in financing. We indicated that [opportunities] about concluding new loans because the vessels were all subject to long-term coverage averaging almost 7.5 years.

Since then management has obtained $153.5 million of debt financing. We are also in negotiations on the remaining facility for $65 million [but] we have obtained debt financing up to date of $440.5 million and paid equity of $344.7 million. Assuming that the last debt facility is closed, we will only need $3.7 million to complete the funding of our new building program.

Slide eight addresses our corporate strategy. We have always listed among our strengths our management (inaudible) and skills. I am proud of our management team as we have worked very long hours during this past quarter attending to the many details that are required to ensure operational performance. Our focus on long-term performance should provide stability during these volatile periods.

We have fixed more than 85% of the revenue days for 2009 and 65% for 2010. Our fixed revenue increases through 2010 and fixed revenues for 2012 are almost the same as 2008. At the same time, our operational excellency and young fleet allow us to control our costs. We believe that we will be able to reduce operational costs in the current environment.

As I have stated in the past, having a piece of paper promising performance is of no value if the funds do not flow. Our industry is coming in terms with this new reality. Slide nine is addressing the issue of credit. Navios has been as thought-leader on this issue as we consider means of maximizing the likelihood of payment from any commercial arrangement we enter into.

Last, we have established internal committees addressing credit and market issues. The credit committee meets monthly to review credit policy in light of the market conditions. The market committee meets daily and reviews the market conditions, fleet coverage, and FFA exposure.

We have also obtained insurance coverage from a AA+ rated EU governmental-backed entity. This coverage gives us comfort that our hard work will result in the worst case in payment in all events. This insurance covers our entire core fleet and includes also our contracts of our fragment. In addition, the insurance covers the entire duration of all of our core vessels including future deliveries. Thus, under this program approximately $1.8 billion in revenues are covered.

Please now turn to slide 10 and we will address the return of capital to our shareholders. We, along with virtually everyone in this industry, have been forced into a defensive mode. However, our quick reaction allowed us to right-size our company for the current environment and stabilize our balance sheet and profit centers so that we can continue to return capital to our shareholders through dividends and share repurchase programs. Our Board will continue to monitor the dividend policy in light of the health of our industry and alternative uses of our capital.

With this as an introduction, we have announced our fourth quarter 2008 dividend of $0.06 per share. The record date will be March 16, 2009, and the payment date will be April 3, 2009. Navios has also continued its November 2008 share repurchase program of $25 million. As of December 31, 2008, approximately 575,000 shares were repurchased and there is approximately $24 million of liquidity available under this program.

With that I would like to turn the call over to our president, Mr. Ted Petrone, who will take you through the Company operations and industry sections. Ted?

Thank you, Angeliki. Please turn to slide 12. The Navios Maritime core fleet consists of 53 vessels with 5.1 million dead weight. Our fleet with 35 vessels in the water is one of the youngest in the industry with an average age of 4.7 years. 25 vessels are owned and 28 vessels are controlled through long-term charters. We also have purchase options on 12 chartered-in vessels.

Turning to slide 13. Navios Holdings continues to lock in long-term cash flow with credit-worthy counterparties. In Q4 Navios chartered out the Panamax Navios Cielo. Since then we have also chartered out the Panamax Navios Esperanza and the Ultra-Handymax Navios Vega for a total of 7.5 years of solid cover.

Turning to slide 14, Navios' average charter-out rate for vessels in its core fleet is $27,624 for 2009. This rate increases in each year through 2012 to $33,894 for 2010, $36,052 for 2011, and $36,407 for 2012. Our long-term bias is also evident from reviewing the percentage of revenue days our core fleet is fixed -- 85.5% for 2009, 65% for 2010, 52% for 2011, and 45% for 2012. Contracted revenue is $237.5 million for 2009, $269.8 million for 2010, $235.4 million for 2011, $207.6 million for 2012. We have ensured our cash flow from an EU-backed AA+ entity.

Turning to slide 15. Navios continues to enjoy vessel operating expenses significantly below the industry average and has almost 100% utilization. Currently, Navios' daily OpEx is $4,672, 12% below the industry average. Navios' established reputation and strong operating history allow for favorable spreads between the long-term charter-in contracts and the medium to long-term charter-out contract. The positive average daily spread of $17,671 for 2009 will increase to $22,965 in 2010.

Turning to slide 16. We have provided our breakeven operating cost of $19,515 for 2009. This is an all-in cost which includes capital repayments. Even assuming zero revenue from our remaining unfixed portion of the fleet, we still maintain a profitable spread through 2010. Cost revenue from the fleet coming open will be substantially above zero.

Turning to slide 18. As you all know, we have approximately -- we own approximately 52% of Navios Partners, which currently has nine vessels in the water.

Turning to slide 19. This slide puts forth key operating metrics and demonstrates the significant growth we have been enjoying. Perhaps most importantly Navios Partners is a source of cash flow for Navios Holdings. In 2008 we received dividend distributions of approximately $14.4 million and we anticipate based on the current run rate receiving almost $18 million in distributions during 2009.

Turning to slide 21. This provides an overview of Navios South America Logistics, which is becoming one of the premier logistics providers in the region. In 2008 Navios Logistics earned EBITDA of approximately $27 million.

Navios Logistics has two divisions. The first is a transshipment facility in Nueva Palmira, Uruguay, the largest transfer storage facility in Uruguay. Its seven silos have total storage capacity of 270,440 tons. An eighth silo of 80,000 tons is anticipated to be operational in April 2009. This facility located in a tax-free zone transferred 2.5 million tons in 2008 into export commodities.

The second division is the barge and upriver terminal, which provides a strong presence in the inland waterway of the Hidrovia region and is in position to capitalize on the region's growing agricultural and mineral exports.

Turning to slide 22. Since we launched Navios South America Logistics at the beginning of this year we have grown this significantly to 240 wet and dry barges. In addition to operating in upriver ports in Paraguay, we are also operating in the Argentine cabotage business with the operation of four product oil tankers.

Turning to slide 24. This slide reviews our ownership in Navios Acquisition Corporation. We closed this offering in July 2008 and have approximately $250 million. We have until 2010 to complete an acquisition and find that the current environment is presenting favorable target opportunities.

Turning now to a status report on our industry, please see slide 26. The fourth quarter of 2008 ended an unprecedented year for dry bulk market. Ocean freight rates are as volatile as the commodities being carried. The disruption in world trade caused by the freezing of credit became apparent in Q4. After hitting a peak of 11,793 the Baltic Dry Index lost 94% of its value in December and stood at 663.

Coordinated government policy response unfroze credit somewhat and the Baltic Dry Index posted a small rebound which continues through the first few weeks of this year. For example, the cost of shipping iron ore from Brazil to China has risen from a low of $680 a metric ton in early December to $24.44 earlier this week, a 359% increase. As of February 18, the BDI stood at 1,986 and restrained optimism has return to the market.

Part of the optimism comes from steel prices. As we all know steel is the backbone of the dry bulk industry as raw materials for steel and steel products account for about 45% of all seaborne bulk cargoes. Steel prices have recently started to stabilize in China and after deep inventory cuts in stocks and the rebalancing of supply and demand has led to a small price recovery.

Looking back on Q4 most of the fall in dry bulk trade was in the steel related bulk cargoes. This is due to global steel demand falling 20% in the final quarter of 2008. This fall forced the largest cut ever in world steel production.

Industry utilization fell from an average of about 95% in early 2008 to only 75% in Q4. More specifically, global steel output in December slumped 24% year-on-year to 84.8 million metric tons. This put total 2008 production at 1.329 billion metric tons, a small increase on 2007's total of 1.322 billion tons.

In China, December steel production dropped 6% year-on-year to 39 million tons, but rose 3.9 million tons on the previous month. Despite the slowdown in Q4, annual Chinese steel output in 2008 was greater than 2007 with 502 million metric tons of crude steel produced, up almost 2% on the previous year.

The importance of Chinese steel production cannot be underestimated as China is producing as much steel as all the next eight top steel-producing nations. Chinese iron ore imports accounted for 53% of 2008 global iron ore trade, up from 49% in 2007. Preliminary data shows China imported 32.65 million metric tons of iron ore in January, well below the monthly average of 37 million metric tons for 2008. However, one should note that these figures relate to shipments fixed in December and only partially reflect the recent market strength.

After the recent price rebound Indian iron ore levels have remained relatively stable at about $70 per metric ton. Additionally, after topping out at 80 million metric tons in early December, Chinese iron ore stockpiles have also remained level at approximately 60 million metric tons.

Turning to slide 27. This chart shows the growth of the world's dry cargo trade over the past three decades. The 1980s saw a growth rate of 1.4% followed by the '90s with a 2.8% growth rate. Since 2001 when China was admitted into the WTO, world trade has grown by over 5%. And in fact, even with the severe downturn in the fourth quarter world trade grew in 2008 by 4%.

Turning to slide 28. Expectations are for the shipping market to improve during 2009 because of the return of trade financing and a slow but gradual improvement of the world economies led by the heavy infrastructure spending of the US and China. The recent Bloomberg Report states that the Chinese economic stimulus package has already taken effect. In fact, the four largest Chinese state-owned banks have already met 20% of their full-year lending targets.

Looking ahead some economists are expecting a modest global uptick in the economic activity in the second half of '09, which should turn into a broad-based recovery in 2010 with global GDP growth topping 3%. This growth will again be led by the emerging economies which are projected by the IMF to grow at over 5% in 2010.

Turning to slide 29. The major emerging economies led by China and India were the main engine behind the dramatic growth in the dry bulk trade over the last five years. The demand for natural resources for steel energy and food continue to be primarily driven by the urbanization and industrialization of these developing economies. Over the long run these trends are expected to continue.

Turning to slide 30. One critical aspect of any market recovery will be the amount of new building cancellations. For the calendar year 2008 actual deliveries were 20% below the volume scheduled on January 1, 2008. We expect that the newbuilding order book will continue to decline significantly as more cancellations are confirmed. Indications are that 40% to 50% of the order book will be canceled due to the lack of funding for both shipowners and shipbuilders.

The second reason for the high cancellation estimate is that almost one-third of bulk that is on the order are from greenfield yards. These yards are small, non-state-sponsored companies. The level of deliveries will be reduced by cancellations beginning in the second half of 2009 as these vessels have not yet been funded and are unlikely to find funding in the current environment.

Turning to slide 31. Any market recovery will depend on the amount of demolition sales. Historically, when the market turns down significantly scrapping follows in six to 12 months. However, in the current downturn scrapping activity is almost instant. As many as 25 vessels were scrapped in November and 58 in December.

November's 2 million dead weight of scrap broke the single-month record set in 1997 of 1.7 million deadweight tons. However, December quickly reset the record with 2.4 million deadweight tons scrapped. In fact, Q4 was the first quarter in history where as many capes were scrapped as delivered. The previous annual records for demolitions was in 1986 when 112.3 million deadweight was scrapped, followed closely by 1998's 12.2 million deadweight tons.

Although shipping rates have improved in 2009, scrapping activity is expected to remain high as over 2.7 million deadweight tons have already been sold for scrap this year. Some projections show scrapping levels double the previous record, particularly since 28% of the dry bulk fleet is over 20 years of age and 15% is over 25 years of age.

To this point, demolition prices continue to firm with prices in India and Bangladesh currently at $250 to $260 a ton after bottoming out at around $200 a ton in October of Q4.

In conclusion, in the latter part of Q4 the dry bulk market posted the lowest daily freight returns in a quarter century. However, we expect that rates for medium and long-term demand may stabilize because of the following three factors. One, much of the initial deterioration in the freight rate resulted from the liquidity and credit crisis as opposed to underlying economic conditions. Two, we expect a significant increase in scrapping. And three, we expect a significant reduction in new building activity.

Now I will pass the call over to George Achniotis, our CFO. George?

Thank you, Ted. I will now (inaudible) Navios' financial results for the fourth quarter and the year ended December 31, 2008. The financial information that I am about to discuss was included in yesterday's press release and is summarized in a slide presentation on the Company's website.

As shown on slide 33 revenue for the three months of operations ended December 31, 2008, was $215.3 million (sic -- see slides) as compared to $308.5 million for the same period of '07. Revenue from vessel operations for the fourth quarter of 2008 was $186 million as compared to $306.6 million for the same period during 2007.

The decrease in revenue is primary attributable to a decrease in the number of operating days by 1,188 days due to the decrease in short-term fleet available days and the sale of seven vessels to Navios Partners in November of 2007. In the decline in the freight market the average time charter equivalent rate excluding FFAs the quarter was $36,088 per day compared to $42,447 per day achieved in the same period last year.

Revenue from Navios Logistics increased from $1.9 million in the fourth quarter of 2007 to $27.2 million during the same period of 2008. The increase is mainly due to the acquisition of the Horamar Group in January of 2008. EBITDA for the fourth quarter 2008 was $24.4 million compared to $214.8 million in the same period of 2007. EBITDA for the fourth quarter of 2007 was favorably affected by $167.5 million gain relating to the sale of assets by Navios Holdings, Navios Partners.

EBITDA for the fourth quarter of 2008 was adversely affected by $8.6 million composed of the following items -- $3.7 million related to the accounting treatment of unrealized mark-to-market losses of certain sponsor warrants acquired in the IPO of Navios Acquisitions, $2.6 million due to the write-off of doubtful accounts relating to FFA trading, $1.5 million fee relating to the cancellation of three Capesize vessels, and $0.8 million of interest rate swap losses.

Excluding the effect of these items, EBITDA for the quarter would have been $33 million as compared to $47.2 million for the same period of '07. The decrease in EBITDA is mainly attributable to the $95.2 million decrease in revenue from $308.5 million in the fourth quarter of 2007 to $213.3 million in the same period of 2008, a $6.4 million decrease in FFA gain between the two periods, a $2.3 million increase in general and admin expenses mainly due to the acquisition of the Horamar Group in January of 2008, $0.6 million increase in direct vessel expenses, and a $0.7 million decrease in all other categories.

The above decrease in EBITDA was mitigated mainly by $85.3 million decrease in time charter voyage and logistics business expenses; by a $4.7 million increase in earnings from our affiliated companies, mainly Navios Partners; and $1 million decrease in minority interest between the fourth quarter of 2008 in the same period of '07. EBITDA from the Logistics business was $4.7 million for the three-month period ended December 31, 2008, compared to $1.1 million during the same period in 2007. This is mainly due to the acquisition of the Horamar Group in January of 2008.

Net income for the three months ended December 31, 2008, was also affected by the same one-off items which affected EBITDA. Excluding the effects of these items, net income for the quarter was $3 million compared to $29 million for the same period in '07. The decrease is mainly attributable to $14.2 million decrease in adjusted EBITDA; a $5.4 million increase in depreciation and amortization, mainly due to the purchase price allocation from the acquisition of Horamar; a $4.5 million decrease in interest income; a $1.1 million increase in income taxes; and a $0.8 million increase in interest expense.

Time charter and voyage expenses relating to vessel operations decreased by $85.3 million in the three-month period ended December 31, 2008, compared to the same period in '07. This was primarily due to the lower charter-in expenses relating to Capesize vessels servicing the [Siore] business and the decrease in the charter in-fleet activity.

Direct vessel expenses for the operational of the owned fleet increased by $0.6 million in the fourth quarter of 2008 as compared to the same period in '07. Direct vessel expenses include (inaudible) deck and engine stores, lubricating oils, insurance premiums, and maintenance and repairs. The increases resulted primarily from the increases in crew wages and insurance expenses.

Turning now to the 12-month results. Revenue for the 12 months ended December 31, 2008, increased by 58% to $1.2 billion as compared to $758.4 million for the same period in the '07. Revenue from vessel operations was $1.1 billion in 2008 compared to $748.7 million in 2007. This increase is mainly attributable to the increase in the available days of the fleet and the carrier's TCE rate that they achieved in 2008 compared to 2007.

The short-term fleet available days increased by 4,248 days, which was mitigated by a decrease of 650 days over the owned and long-term fleet mainly due to the sale of vessels to Navios Partners in November of 2007. The average TCE rate achieved in 2008, excluding FFAs, increased from $30,843 per day in 2007 to $45,566 per day in 2008.

Revenue from Logistics business was approximately $107.8 million for the year ended December 31, 2008, as compared to $9.7 million in 2007. This is due to the acquisition of the Horamar Group in January of 2008.

EBITDA for the year ended December 31, 2008, was $165.5 million compared to $349.9 million in the same period of '07. EBITDA for the year ended December 31, 2008, was favorably affected by $27.8 million from the gain of the sale of assets mainly due to the sale of Navios Aurora to Navios Partners and are favorably affected by $5.3 million due to the unrealized losses on the mark-to-market valuation of the (inaudible) acquired as part of the IPO of Navios Acquisitions, $2.9 million of swap losses, $2.6 million write-off of doubtful accounts relating to FFA trading, and $1.5 million relating to the cancellation of the three Capsize vessels.

Excluding the effect of these items, EBITDA for the year would have been $150 million as compared to $182.4 million in the same period of '07. The decrease in EBITDA is mainly attributable to a $508.1 million increase in time charter voyage and Logistics business expenses, a $15.3 million increase in general admin expenses, a $10.2 million decrease in gains from FFAs, a $1.3 million decrease in interest income from finance leases, a $1.7 million decrease in minority interest, and a $0.4 million increase in net other expenses.

The reduction was mitigated by a $487.6 million increase in revenue, a $15.5 million increase in net earnings from our affiliated companies, mainly Navios Partners, and a $1.5 million decrease in direct vessel expenses. EBITDA from Navios Logistics was $25.8 million for 2008 compared to $4.7 million in 2007. These are mainly due to the acquisition of the Horamar Group in January of 2008. Net income for the year ended December 31, 2008, was also affected by the same one-off adjustments that affected EBITDA.

In addition, net income for the year ended December 31, 2008, was positively affected by $57.2 million write-off of the deferred [pension] taxes. Ignoring the effect of these one-off items, adjusted net income for the year ended December 31, 2008 and 2007, was $45.8 million and $[103.5] million, respectively.

The decrease in adjusted net income was mainly affected by a $32.4 million decrease in adjusted EBITDA; a $25.2 million increase in depreciation and amortization expense, mainly due to the purchase price allocation from the acquisition of Horamar; a $3.1 million decrease in interest income; a $0.2 million increase in amortization of deferred dry dock and special [survey] costs; and a $2.1 million increase in share-based compensation expense. This unfavorable variance was mitigated by a $3.3 million decrease in income taxes and a $2 million decrease in interest expenses.

Turning now to the next slide, number 34, I will highlight key balance sheet changes between December 31, 2008, and December 31, 2007. Navios' cash and cash equivalents balance including restricted cash on December 31, 2008, was $151.5 million versus $511.3 million at the end of December 31, 2007. Vessels, port terminal, and other fixed assets net of depreciation grew by 73% to $737.1 million. This is mainly due to the acquisition of the Horamar Group in January of '08 and the additional of three vessels -- two from the chartered-in fleet and one new acquisition.

At this point I would like to highlight the fact that all but one of the vessels are reflected on the balance sheet at net book values between $19 million and $26 million. For this reason and because of our secure long-term charters there are no impairment issues with our fleet.

One other item that is significantly understated on our balance sheet due to US GAAP is the value of Navios' investment in Navios Partners. Navios Holdings controls a total of 11.2 million units in Navios Partners. Therefore, assuming the price of the publicly traded units is a proxy for our valuation as of December 31, 2008, the value of our interest in Navios Partners is approximately $80 million instead of approximately $27 million reflected on our balance sheet.

Total assets grew by 14.2% to $2.3 billion. This growth was generated primarily by a number of factors including the acquisition of the Horamar Group, the addition of two vessels into the old fleet from the long-term chartered-in fleet, the acquisition of Navios Ulysses, and the profit from the sale of Navios Aurora to Navios Partners. The long-term debt including the current portion increased to $589.4 million at the end of December 31, 2008, versus $315.9 million at the end of December 31, 2007. This increase was mainly due to the new financing for the construction of the newbuilding Capesize vessels to be delivered in 2009.

Turning to slide 35. As Angeliki mentioned earlier, in a difficult market where most companies are paying to obtain financing and are struggling to maintain their liquidity Navios has entered into new revolving facilities of up to $200 million which can be used for general corporate purposes. The facilities for a minimum period of two years with subsequent extension periods.

In addition, the Company has signed a new term loan of $120 million for the financing of two new Capesize vessels which are currently under construction. These facilities enhance significantly our liquidity position in a difficult financial market.

This concludes my review of the financials. At this time I will turn the call back over to Angeliki.

Thank you, George, and this concludes our formal presentation. We open the call to questions.

(Operator Instructions) Jon Chappell.

Thank you. Good morning, everybody. Angeliki, quick follow-up question on the insurance coverage. I understand it covers the entire core fleet and the COAs for a charter default. Does it cover any renegotiations? And by that I mean if someone is only paying you half of the contracted charter rate, does the insurance make up the difference of that or is it only for a pure default?

Of course, but for before you allow for any renegotiation you will have to as for the permission from the insurance if they agree, because if somebody is renegotiating and simply decide to give you 50% of the revenues you can actually sue them under your charter party. So you give that right to the insurance and you tell them what do you prefer they pay us 50% of that or should we go and get them. And this is their call.

You will be paid the full amount. So if we are at $45,000, you will receive your $45,000. You do not care from where.

Just on that same topic, have any of your charters come to you and tried to renegotiate back down to current market levels?

No, but I have to repeat that for us we do 5- and 10-year deals. So let's say for a (inaudible), as you have seen the ones we have fixed, we are not at over $100,000 a day. Our charters are about $45,000 so even the spot market today is about $58,000. So you have to realize that to begin with it is not as easy to renegotiate because we are not in a tremendous discrepancy.

And secondly, the only situation which we had is the one with (inaudible) Logic, which we have about $2.5 million revenues in this year. And the company went to a reorganization which is in a very early state and we have already notified our insurance company.

Okay. So what is the status on that? You are still waiting to hear from the insurance company on [Samson] Logic?

The insurance company is fully aware and fully aware of the situation. We will wait and see if actually they will perform our contract or not, because one of the issues is that a reorganization and the company is, I think, one of the top 10 South Korean shipping companies. So they will perform -- I think there is going to be performing certain things.

Okay. My final question is just your FFA and your short-term fleet exposure as you enter 2009. Have you scaled back the exposure to your non-core fleet given the volatility in the market?

Yes, and we articulated that on our Q3 results. Actually, in the fourth quarter we had no FFA, we scaled totally back. We had no FFA exposure. Our only exposure was some options that we had that is why they saw this minimal $300,000 loss. And in essence, the discrepancy that you see in our results is that in essence short-term fleet and FFAs as unit, we scaled back as a business because we thought that the volatility, the illiquidity in the market, and the conditions were not providing a prudent decision to be there.

This year we estimate that we will have much less reduced results from our risk management team. The majority of our extra income will come from the COAs, which is in essence are more valuable in this kind of a market environment. So all of FFAs as we are doing actually now is via exchanges and we are very nicely reporting that we concluded all our 2008 FFSA over the counter.

We have collected almost all our money. We have reported a $2.8 million provision for bad losses which we took a very conservative view on that. But on the $1.2 billion of revenues that we had in 2008 and we already have taken that cushion and all our FFAs is via exchanges now from 2009.

Very helpful. Thank you, Angeliki.

Natasha Boyden.

Good morning. Just looking at the new facilities that you have, the $200 million credit facility and the 10-year $120 million. Can you tell us what the covenants that you have under those facilities? Are they the same as your other facilities?

First of all, there is no loan-to-value with these facilities. I would like to repeat that I am very proud of our team. This is a $120 million 10-year facility. It is the only facility that has been produced from any public company in the fourth quarter so it's not a small achievement. This is provided in evidence to our conservative model.

As you realize values may drop, but as we have insured -- as we have chartered out our vessels, and for 10 years and five years, on the 10-years base we receive over $150 million on the vessel. So you realize to take $50 million on that vessel is a very reasonable advance versus the revenues we have. So these 10-year deals they have no longer value, of course, otherwise we would be meaningless and we don't do meaningless things.

Also, the $200 million liquidity facility the Company decided to do that first and get this line because we believe that you should have a lot of liquidity during the delivery of our vessels and newbuilding [problem]. And in this current market environment, even if you don't use them you are better off to have the $200 million staying there to be drawn if necessary. I think this gives flexibility for the Company to use it as necessary at the right moment.

No, no, we actually agree. We were pleasantly surprised to see that you had managed to achieve that. I don't know if you can answer this but can you tell us who the banks were that were these loans?

I think you will see it in our filings, so the 10-year term facility has be given from Deka, which is a German landesbank, and the facility for the additional $110 million is from (inaudible) that provided also for us the $90 million liquidity line earlier in November. So (inaudible) provide the $200 million and Deka Bank, which is a landesbank, a German bank, provided the 10-year term loan.

Okay, great. Thank you. Keeping on the side of the banks, moving on to dividend, I think you had mentioned previously that your banks are able to limit your dividend payouts. Can you just talk about what limitations there are with regards to a dividend and do those limitations apply to share repurchases? Then, lastly, are you comfortable with your current dividend in spite of that?

I am very comfortable. We reviewed the whole company and we are very comfortable with the dividend we now give. It is all most self-financed from the dividends we received from the Navios Partner. We receive on the current run rate of the dividends for the Navios Partner we receive around $18 million. So the current run rate for Navios Holdings is about 24, so it is almost financed from our Navios Partners dividend.

So we are very comfortable on our dividend and also on our loan covenants. We have allowed this $0.24 to be paid at any market conditions so that gives us a very comfortable position. Of course we are always going to be reviewing and this is requirement as the management and you expect us to do that, to do our job, which is to review the market and analyze how we see the situation.

In the current market environment we see it as a very comfortable position. Of course, we have always to review if we -- it depends on what doom scenario we hear or how good of a scenario. So this is something to be reviewed. We have no problem at this level and we have all the time in the world to review our strategy.

Great. Just if I could just move to sort of a more macro question, Chinalco recently invested almost $20 billion in Rio Tinto and there are reports Fortescue that is seeking a large investment from Chinese Investment Corporation. What are your thoughts on dry bulk shipping, if any, do you see occurring as a result of increased Chinese control on mining companies?

I think this is always a fear that is in the market for that, but to be honest I believe our business is far efficient than a lot of other business. We are totally global, nobody can control it. It's over 7,000 vessels so the reality is nobody can really have such a huge effect. As much as everyone believes that they can do, nobody can really corner this kind of market.

As for the negotiations, it's the usual. This will be happening the usual course; there will be posturing from both sides. This is undeniably a buyer's market so whoever has a better negotiating situation, whoever is the buyer has much better positioning.

Right. But you are not concerned about the Chinese sort of getting control of the entire supply chain?

I don't believe that they will be actually able to control an entire chain. Obviously, they need -- to be honest, they are very exposed. We have to realize how much exposed the Chinese are to the commodity prices. And also, you have to understand how is the micro trend. The micro trend is they need the stuff.

So however short term you may -- short to medium term you may be viewing the global financial system negatively, on the medium to long-term you know that China needs this stuff. So some position they have to take because today they are 100% exposed to the commodity prices, more than any other entity.

That is very true. Thank you very much, Angeliki. Much appreciated.

Urs Dur.

Good morning, good afternoon. Questions really have been asked on credit, but I am just interested to see what your opinion is of the COA business going forward. We feel that it hasn't been particularly too profitable in a very high market. What do you feel about the COA business going forward in a much lower rate regime? Is this benefiting you or hurting you?

This is a very good question. To be honest in a high market this is the opposite strategy in a high market. So this actually a COA is one of our -- is a natural short as you realize and this will be -- we have contracts very valuable in that portfolio. Contracts that are five years and 10 years with [valve] steel at $45,000, so this is really now the best asset of our risk management. We believe that this will be much more beneficial for Navios in this 2009 year environment. We ended short 2009 and we are now in a balanced position.

Okay. That is good. So you do foresee that it's possibly more profitable in 2009 over 2008, just given that you will be able to charter in ships at cheaper rates?

100%, sure.

Good, I am just trying to articulate. More of a micro-question on -- and I am not sure if you answered these -- the credit committee and the market committee can you yield as to who informs the quorum on those committees? I mean, whose on the credit committee? Who is on the market committee? I present you and George on the credit committee, but who else?

The whole senior management of Navios from our president to the COO to the entire senior management and legal departments are part of the credit committee. Our market committee is attended every day by our president and COO. It is a very important also because even in this current market environment fixing and assessing when is your rechartering risk is very important.

If you saw some of our movement on our chartering this quarter I am very proud for our teams. We were able in September on a vessel that we delivered -- it was delivered to us in October to do a five-year deal and concluded in an environment that was in the main middle of the crisis. We had a charter-in vessel, Esperanza, which we decided would now place this option, so we matched the entire duration of our exposure to the charter of the four years, which is also very important because for us this a charter-in vessel is a vessel without any capital outlay so any spread you actually secure is fewer cash flow. So we have a $2 million per year so this is directly going into in our bottom line and also we do not take a risk of a market.

On the rest of the charting what our approach has been, we are trying to a do to avoid rechartering risk on the end of 2009 and we take a two-year view as being the most conservative with maximizing our return. Of course, this changes depending on the markets.

Okay. Thank you. That is very helpful and I appreciate it. Thank you. That is all I have.

Seth Glickenhaus.

Good morning. Good luck to you. I want to congratulate you for doing a pretty good job in tough circumstances. The only question I have is how is your -- can you give us some information about your South American operation with the many ships that you have got there? What is the future of that? What are you looking for over a couple of years?

Thank you very much, Seth. This is a good question. I want to report that we have built this on 2008 EBITDA. We are about $28 million, $29 million we have from that division, which a lot of the projects have not been seen on this EBITDA. Our annualized 2009 will be substantially higher from that.

Also, we were hit on a quarterly basis, which also affected our results, from a 30-year biggest drought there. Today that area, in my opinion, is one of our biggest assets because there is no hedge fund, there is no banks, and there is no private equities that are chasing deals. Today Navios with almost one other company that is public there is the only ones that have the ability to grow. The drivers of that business is foodstuff which is available to prices that will grow and is foodstuff to China and India to the Far East, all over the world but mainly drivers are there, and it's minerals.

On both grounds I see very healthy growth. The drought is something that you cannot control, but is a temporary event. The prospects of that area are extremely good, so we see it as one of our key divisions ongoing. Of course, an eventual spin-off monetizing that part will depend on capital markets that you are more an expert than us.

Thank you very much. That was very illuminating.

John Parker.

I noticed unlike your peers you were able to keep your dividend and I am wondering were there any amendments to your term loan agreement or was there a change in spread or anything material change in that agreement?

How many of our peers actually --? I thought that (inaudible) was the only ones.

I said unlike your peers you were able to keep your dividend.

Yes, thank you. So in reality we are in very good terms with our banks and even though there is not necessarily a need, you have to be very proactive with your banks. So, to be honest, we are discussing with our banks and we take a view that we like to review all our covenants and ease the covenants (inaudible) even from any market condition fluctuations from here. So meaning even if you have a much worst-case scenario to be totally okay.

I don't foresee something like that, but we like to be protected on any scenario. And you also try to give them their cost of money in essence, because today LIBOR is very low. So even if you give them a higher spread, you are still paying less interest expense than in 2008. So we are very proactive on our banks and even though there is no problem, we are discussing on a full relief that will increase a little with our margin but in essence give us the maximum flexibility for the longest duration.

Okay, very good. The current environment, can you comment at all on the current environment for South American Logistics? I understand there is the drought and also I would imagine a reduction in other trades down there. Can you give me a general sense of what is going on down there?

To be honest we haven't seen a reduction in flow because our business model is as conservative in the shipping as is also in the South American Logistics. So the majority of our barges, the dry barges, are on five-year contracts to major entities that are substantial entities in the area. Our port operation is on multi-year contracts with grain majors (inaudible), so on those we have not seen a reduction in flow. This is mostly -- what we saw it was mostly from a draft problem on the transportation.

On the cabotage vessel everything is in time charters with oil majors and in that it has been very -- actually, I can say that is very profitable and as the price of oil has been reduced actually we have seen more transportation to Paraguay and further north. So we haven't seen a reduction.

The biggest item that has affected the area has been the drought problem. We have not seen to date a reduction in volumes of transportation apart from the drought that was brought that area in a standstill. Of course, on the iron ore side there will the new reorganizations as the plant of Rio Tinto in that area has been bought by [Valle] so that will create a new situation which we monitor very closely. We are in good relationship with both entities so we are there to assist the new larger [Valle] in each transportation.

Okay. Then, finally, I think you announced two new term charters. If you look at this crash in dry bulk rates, the term -- the level of the term prices hasn't really fallen to the drastic levels of the spot market. Is that market liquid? Is the term market liquid? In other words if you see a price of $12,000 a day for one-year or three-year term charter, can you go out there and get that pretty easily or is it still tough to find the charters at that price?

The one and two-year is very easy and I think today the forward curve is very flat, meaning you can fix for two years the same rate that you do for one. And depending on your view, you may fix two years. This is a very liquid market. What has dried up totally is the long-term charters, five and 10-years; they do not really exist except from very unique situations. The rest is very liquid I can say.

It's very liquid and we are being selective in who we speak to. There are some very good first-class charters out there looking for forward cover, which is a good sign.

All right. Thank you very much for your help.

Chris Wetherbe.

Thanks, good morning. If I could just hit on a debt side again real quick, Angeliki, I think you mentioned that there is no loan-to-value covenants in the new facilities. I just want to understand if there is any kind of net debt to EBITDA or interest coverage covenants in there and what they might be and I guess what they would be on your existing debt levels?

There is no debt to EBITDA, but I mean, as you know, we have a bond outstanding which has -- the debt to EBITDA ratio is applying for further acquisitions, allowing us to do further acquisitions. The reality is -- and I would like to repeat this -- we are not unique in this environment that we can do things that other people cannot do. In essence you have a 10-year contract that the revenue is about over $150 million, I give you an amount, if we say that it is around 40 something.

So you have $150 million of revenues that are AA-class insured. However you are going to see that it's a valuable asset. So to give you $60 million advance on that vessel is not brilliant. It's plainly common sense. It's a AA+ insurance that provides the security of the cash flow of $150 million. You have also the credit-worthiness of the charters that you had the 10 years plus the additional insurance of a AA+.

So the $60 million in that vessel it doesn't mean that I am brilliant. I like to pretend I am. I like that we are the only company getting a 10-year term loan, but it is our strategy that allowed us to do this. It's not that we are some kind of unique people.

Also, another issue that I like to stress to you so that we are aware, the Company if you see it at the end of 2009 with a complete newbuilding program in the water, it will have around $800 million of debt. We have about $200 million in liquidity lines and the $800 million will also include about $80 million that comes from our South American Logistics which we do not guarantee as it is a separate sub. So the Navios Holding it will have about $750 million in loans, term loans.

The $200 million we have is a liquidity lines and in this current market environment I would have been very stupid and very imprudent as a management team if we do not maximize our ability to have lines there, because you don't know what the conditions can be. And as we all know, to access the equity market will be actually diluting all of your shareholders unnecessarily.

So the strength of our model allows us to have this credit line and as a prudent management we had to have them there. Don't forget we also have $150 million in cost. And if you see the collection of our FFA and our receivable during the year as we are reducing the activity in that division, we will generate substantial cash flow even after the delivery of the vessels. So our focus has been very much on our balance sheet and creating flexibility for us and for our shareholders to be able to have the benefits of this.

Certainly makes sense and that is helpful. Just thinking about your repayment, I think you kind of highlight in the slides what you expect to repay principal in '09. Just can you just remind us what your principal repayment schedule is past that, so 2010 get a sense of how much is due?

Our breakeven for 2009 is $[19,550]. In 2010, we will officially bring it out later, but it is around low 20s also. So it is a very minimal difference. So our repayment, our breakevens are very reasonable even with the coverage we have. Also one thing that you see even if you go out as 2012 our secure revenues and in short is almost seamless to the level we have in 2008.

Okay, I just wanted to hit on one thing that I think I heard you say Angeliki and that was regarding operating expenses. When you think about that do you have opportunities to bring those in? I know you guys obviously run at a discount to the overall industry, just get a sense of where that is going forward. Are you just able to maintain it at the current levels better than other players or is there actually the ability to pull that number down as you look forward?

First of all, the operating expenses we believe our shareholders get the advantage as we have technical management in-house and you get the economies of scale, so that is number one. Number two, we believe that the operating expense will be going down as cost overall due to the economic environment will be dropping.

So from what you see and in any cycle I have seen during my career. During that period you can see we calculate internally an increase, but what I will tell you is you usually see 5% and 10% reductions per year.

Okay. That is very helpful. Thanks for the time.

Daniel Burke.

I know it has gone a bit lengthy here. I had just two small questions left. First of all, on the FFA side I think it has been a historical competency. It was my understanding you had backed away from the business as liquidity had really dwindled, but now as exchange-traded volumes have come back into the market am I correct to understand that you are not interested in getting back involved in the FFA market to the extent you once were or over time do you expect to grow that back out?

On the current environment we do not believe that as profit unit it will give us substantial return at the levels they are. So to be honest we have the full team in our office and we follow that market on a daily basis, because also sometimes you may even find that there is a better way of fixing your vessels with the credit-worthiness. So this is not an issue that we are not there, but we don't believe we will be the revenue generating unit as we had it last year.

On annualized last year we had about $19 million from that division so that is not going to happen this year. We believe that this is not going to be the unit that will generate that return.

That is useful, thanks. Then my last question, just more on a macro basis we have watched both the time charter rates and the FFA market make a decent amount of recovery here. Has that recovery been sufficient enough to, in your view, improve the funding outlook for the global newbuild order book?

I believe that the funding -- first of all, the rebalance has more to do with the credit being available for trading. So what you have seen is I don't think we will reach again the November/December lows. Now the problem on the financing is far more serious because the problem is mostly the balance sheet of the banks. There is severe problem I believe in that because you have very few banks that will be able to lend.

The UK banks, which was one of our major suppliers of ship finance, are almost entirely cut out of that market and a lot of the German banks, which were major players, either they merged -- you had like Dresdner and Deutsche Banks merging, which means that they have a huge book -- or they have severe financial problems because of structural -- of their balance sheets and other issues. So I don't believe that you will see -- the problem on the bank financing it will be very severe. It won't rebalance anytime soon.

Okay, great. Well, I really appreciate the color. Thank you.

We have reached the end of our allotted time for Q&A. I would now like to turn the call back over to CEO, Angeliki Frangou.

Thank you very much for attending the call.

This does conclude today's conference call. You may now disconnect.