Navios Maritime Holdings Inc (NM) 2011 Q1 法說會逐字稿

(audio in progress) for joining us for this morning's Navios Maritime Holdings first-quarter 2011 earnings call. With us today from the Company are Chairman and CEO, Ms. Angeliki Frangou; President, Mr. Ted Petrone; and Chief Financial Officer, Mr. George Achniotis.

As a reminder, this conference call is also being webcast. To access the webcast please go to the investors section of Navios Holdings' website, www.Navios.com.

Before I review the structure of this morning's call, I would like to read the Safe Harbor statement. This conference call could contain forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995 about Navios. Forward-looking statements are statements that are not historical fact. Such forward-looking statements are based upon the current beliefs and expectations of Navios Holdings' management and are subject to risk and uncertainties which could cause actual results to differ from forward-looking statements. Such risks are more fully discussed in Navios Holdings' filings with the Securities and Exchange Commission.

The information set forth in this conference call should be understood in light of such risks. Navios Holdings does not assume any obligation to update the information contained in the call. Thank you.

I would like to now outline the agenda for today's call. First, Ms Frangou will offer opening remarks. Next, Mr. Petrone will provide an operational update and an industry overview. Mr. Achniotis will follow, reviewing Navios Holdings' financial results. Finally, Ms. Frangou will offer concluding remarks and then open the call to take your questions.

That said, I would now like to turn the call over to Navios Holdings, Chairman and CEO, Ms. Angeliki Frangou.

Thank you, Laura, and good morning to all of you joining us on today's call. We are pleased to report our results for the first quarter of 2011.

We increased adjusted EBITDA by about 17% to $67.5 million, excluding the expense we realized in refinancing of our secured bonds and the noncash loss realized upon deconsolidating NMA from Navios Holdings. Based on strong results, we declared a $0.06 dividend for the first quarter of 2011 payable on July 7 to shareholders of record on June 15, 2011.

Our conservative approach has served us well. As an example, we took the opportunity of extending our debt maturities by extinguishing the $300 million bond during 2014 and refinancing it with a $350 million bond due in 2019. While we increased the amount of debt slightly, given the substantially lower cost of capital our annual cost was about the same.

I also wanted to give you a status report for Korea Line. As you know, Navios chartered out five vessels to Korea Line. In January, Korea Line Corporation filed for reorganization under bankruptcy law in South Korea. I reported to you in February that we were comfortable and we understood and could manage our exposure.

Our process with Korea Line has concluded and all charters remain in place. We believe that the impact to Navios, taking into account our double-A-plus insurance, is minimal.

Slide 2 reflects our current structure. The value of Navios Holdings primarily consist of the sum of four companies -- the core dry fleet business within Navios Holdings, and three principal operating subsidiaries.

The core fleet business consists of 42 vessels in the water, which are reasonably insulated from market volatility as we have entered in long-term charters with creditworthy counterparties and we also have double-A-plus insurance on these charters. The net result is a dependable long-term cash flow.

For 2011, Navios contracted about 92% of its fleet base, generating more than $300 million in gross revenue. The three principal operating subsidiaries consist of two public companies, the Navios Partners and Navios Acquisition, and one private company, Navios Logistics.

As you can see from some quick math, the value of Navios Holdings' interest in the two public subsidiaries is almost $4 per share. The value of Navios Logistics is growing, as Navios Logistics has been transformed into a key provider of integrated logistics in the Hidrovia region.

Slide 3 reviews the key developments in the first quarter of 2011. As you can see, we have taken additional steps toward building an independent, vibrant logistics business in South America. As you may know, the logistics business is a return to our roots; the name Navios derives from the traditional Spanish name navios, for ships.

Navios was formed when U. S. Steel created a company in the 1950s to service South American trade with the United States. Today, South America is full of activity, being driven primarily by Asia's hunger for mineral and grain commodities.

To promote the growth and stability of Navios Logistics, we raised $200 million through a nonsecured senior note offering due in 2019. The cost of funds is competitive regionally and offers a continuing advantage. The actual funds will allow us to capitalize on the enormous regional opportunities as we grow Navios Logistics.

Navios Acquisition recently issued a $105 million second secured bond due in 2017 with effective interest rate of 8% per annum. The funds are financing the acquisition of the Shinyo Kieran, a newbuilding VLCC expected in June by Navios Acquisition, with a 15-year charter at $48,153 net per day plus profit sharing.

We also sold two vessels to Navios Partners for an aggregate gross price of $130 million, consisting of $120 million in cash plus $10 million in Navios Partners units. These proceeds will be used to reduce debt by $57.7 million and increase the cash on our balance sheet by $62.3 million.

I do note here that, as is typical between the Navios Holdings and Navios Partners, no commission or any other fees were charged.

You can see this strength now. You can turn to slide 4, and you can see the strength of our liquidity. As of the end of the quarter, our net debt to capitalization was about 49%. We have a heavy cash balance of almost $166 million and liquidity of almost $200 million as of the end of the first quarter of 2011.

On a pro forma basis, our net debt to capitalization improved to about 45%. And on a pro forma cash decreases to almost $300 million. This liquidity is more than adequate considering that Navios has completed the newbuilding program, so we are prepared to execute on opportunities should they come our way.

We anticipate that we will also generate very significant cash flow during the 2011, given Navios' low operating breakeven. Slide 5 sets forth Navios' substantial fixed revenue and low operating cost. As you can see over 91% of Navios' revenue is fixed for 2011 at about $26,500 per day. In addition, approximately 50% is fixed for 2012 for about $29,000 per day.

Our total operating cost provides for a low operating breakeven of about $18,300. The net result is that we will be enjoying substantial cash flow during 2011.

Please note that our operating breakeven is a fully loaded number. It includes operating expenses; drydock; charter-in expenses for our charter-in fleet; G&A, including credit default insurance; interest expense; and capital repayment.

And with that I would like to turn the call over to Mr. Ted Petrone, Navios' President, who will take you through the operations and the industry perspective. Ted?

Thank you, Angeliki, and good morning, all. Please turn to slide 6. Our long-charm core fleet consists of 55 vessels totaling 5.8 million deadweight. We have 42 vessels in the water with an average age of 4.8 years, which is considerably younger than the industry average age of approximately 13 years.

The Navios group consists of 95 vessels -- 73 drybulk vessels of 7.7 million deadweight, as well as 22 tankers of 2.9 million deadweight. During Q1, Navios took delivery of two Capesize vessels, the Navios Altamira and the Navios Azimuth, from a South Korean shipyard. Navios also chartered out the Handymax vessel Navios Meridian for one year at $14,250 a day net.

Please turn to slide 7. Navios' average charter-out rate for its core fleet is $26,523 a day for 2011. The average annual rates increased through 2014. The percentage of Navios' fleet that is chartered out is 91.2% for 2011; 58% for 2012; and 39% for 2013.

We will enjoy contracted revenue of about $700 million to the end of 2013. We have also insured our revenue from an EU-backed double-A-plus entity.

As you know, in January 2011 Korea Line Corporation filed for receivership in South Korea. The Navios charters with Korea Line remained in place, affirmed by the South Korean courts on amended terms that, combined with our insurance coverage, allows us to conclude that the Korea Line bankruptcy had only minimal impact on us.

Please turn to slide 8. Through our in-house technical management and economies of scale, we continue to enjoy vessel operating expenses significantly below the industry average in all asset classes. Navios' current daily OpEx is $4,366, 31% below the industry average. The chart on the right demonstrates that Navios' established reputation allows us to charter vessels to high-quality counterparties for long periods at favorable spreads.

Please turn to slide 9. We currently own 27.1% of Navios Partners, including our 2% GP interest. Navios Partners operates a fleet of 18 vessels equaling 1.9 million deadweight with an average age of 4.9 years.

Turning to slide 10, our 27.1% interest in Navios Partners has a market value of about $278.5 million as of May 18. Navios Partners provides significant cash flow to Navios Holdings. We anticipate, based on the current run rate, receiving about $24.5 million in distributions during 2011, more than 100% of Navios Holdings' expected annual dividend.

Please turn to slide 11. We currently have an economic interest of 53.7% in Navios Maritime Acquisition. Navios Acquisition's current fleet consists of 22 tanker vessels totaling 2.9 million deadweight. Acquisition's fleet has 7 VLCC crude tankers, 15 product tankers, and 2 chemical tankers.

Navios Acquisition currently has 10 vessels in the water with an average age of 7.4 years. Navios Acquisition holds options on two LR1 newbuilding product tankers that can be exercised through July of this year. We anticipate that the embedded growth in our modern, high-quality, diverse fleet is in position to take advantage of favorable long-term industry dynamics.

Please turn to slide 12. The Company is summarized on slide 12. Navios Acquisition has a large, modern, and diverse tanker fleet worth more than $1 billion. We have made a commitment to the tanker segment, given the favorable industry dynamics.

We have created long-term contracted revenue that is well above our Company's low operating breakeven. At the same time, we have profit-sharing arrangements in many contracts. These agreements limit our downside risk to the base rate and allow Navios Acquisition to enjoy upside volatility. Our contracts are with strong counterparties, and we have built seasoned management with an established track record.

Please turn to slide 13. Navios South American Logistics, one of the premier logistics providers in the Hidrovia region, has three divisions composed of port terminal operations, barge, and cabotage business.

Please turn to slide 14. The highlights of Navios Logistics are summarized on slide 14. Navios South America integrated dry and wet terminals, along with the large barge and cabotage fleets, offers operating efficiencies for a diverse set of industries within the Hidrovia region.

Economies of scale provide low-cost logistics services to a portfolio of high-quality counterparties, which provide vessel employment with a strong diversified customer base. Strategic relationships and favorable export market fundamentals position Navios South America to capture projected growth in exports of grain and minerals from the region to developing economies.

Please turn to slide 15. Navios Logistics has a very strong Q1. The top section of slide 15 provides aggregate financials, while for the first time earnings highlights for the three divisions are detailed below.

Overall, revenue increased by 23% to $44.3 million. EBITDA increased by 134% to $9.5 million. And we recorded net income of $3.2 million compared to a loss in the seasonally low first quarter.

Please turn to slide 16. Navios Logistics has a strong balance sheet. In Q1 cash and cash equivalents amounted to $36.5 million, as compared to $39.2 million at December 31, 2010, due to capital expenditures, principal repayments, and a one-time working capital variation.

Total assets were $542 million at the end of Q1. Net debt to book capitalization is a very conservative 20.4%. These figures are before the successful $200 million 9.25% senior notes issued in April.

Please turn to slide 17, the drybulk industry. Q1 2011 was unfavorably affected by a number of factors. Severe flooding in Queensland, Australia, constrained coal experts; the state of Karnataka, India, temporarily banning iron ore exports; and Brazil experienced iron ore production declines due to heavy rainfall. Consequently, Australian and Brazilian combined exports fell by more than 50 million metric tons in Q1 compared to Q4 2010, primarily affecting Capesize liftings.

This is a greater reduction in Australian and Brazilian shipments than at the height of the financial crisis. Iron ore prices have continued upward, and coking coal contract prices have surpassed previous record highs. Unlike 2008, the fall in iron ore and coal exports have everything to do with production problems caused by extreme weather as opposed to weaker demand.

We believe the current constraints on producing raw materials available for export and Chinese summer power curtailments will limit potential increases in drybulk shipping in the short term. Japan's reconstruction effort, when it comes, will provide support for the market, as will seasonal factors and expanded mine production.

Turning to slide 18. The drivers for the world GDP growth continue to evolve as emerging economies lead world expansion. As you can see on the left, emerging economies exceed pre-crisis levels by 13.5%.

The IMF's April forecast shows that emerging economies will continue to grow at 6.5% in both 2011 and 2012. Global growth is projected at 4.4% this year and 4.5% next.

This thesis is also supported by the chart on the right, which shows that growth in China and other developing economies contributes a higher percentage to total world growth than the developed economies. The IMF expects these macro trends to continue for the foreseeable future.

Turning to slide 19, since China joined the WTO in 2001, trade in drybulk commodities expanded by 5.5% per year through 2010. Growth for the seaborne bulk commodities in 2011 is estimated to exceed 6%. While the primary engine of trade growth continues to be China, India, Brazil, and other emerging economies add strongly to that growth.

Turning to slide 20. An important long-term driver to expanding drybulk commodity trade is urbanization and industrialization. On the left you can see that the Chinese population is rapidly moving to urban areas at the average rate of about 20 million people per year. This is like building 2.5 New York Cities per year.

China is expected to increase its urban population to over 1 billion by 2030. Chinese crude steel production continued to expand to meet these needs. This compares with the early expansion in steel use seen in the development of Korea and Japan, as shown in the upper right-hand chart. This chart also shows that India and Brazil are just starting to increase the amount of steel used in their expanding economies.

Crude steel production in China through April was 233 million tonnes, up 9% year on year. Note that iron ore imports have increased by 9% year on year to 230 million tonnes in the quarter, and that domestic iron ore production was up 16% to 338 million tonnes. The IMF forecasts Chinese growth to be 9.6% and 9.5% in 2011 and '12, respectively, despite the monetary tightening by the federal government.

Based on analysts' estimates, the growth in Chinese iron ore imports and steel production will be constrained until new iron ore mines and expansion projects come on line beginning in 2012 in Brazil, Australia, and the rest of the world. These expansions will likely increase the tonnes carried and the ton miles in the medium to long term.

Please turn to slide 21. India has taken initial steps to industrialize and urbanize. As you can see in the left-hand chart, India is expected to increase its urban population by over 200 million people in the next 10 years. That means India will also build 2.5 New York Cities per year during that time.

This trend has changed drybulk trading patterns worldwide. As an example, Australia and India historically were the main suppliers of Chinese iron ore imports. However, a few years ago India's internal need for iron ore increased along with its increase in steel production.

Thus less iron ore is sent to China, forcing China to import greater quantities of ore from outside the Pacific Rim. Indian iron ore exports to China declined by more than 10% in 2010 due to increased Indian steel production and iron ore export bans.

Indian coal imports, shown on the right-hand chart, have increased dramatically at a 26% compounded annual growth rate since 2006. According to the Central Electricity Authority of India, substantial demand will continue, as most planned new power generators will be coal-fired.

India now imports more coal per year than the UK, France, and Germany combined. Indian companies are buying coal assets globally to assure future supplies to meet India's projected growth of 8.2% and 7.8% in 2011 and 2012, respectively.

Please turn to slide 22. Scrapping for 2010 was 5.8 million deadweight or over 1% of the fleet. Scrapping this year has already exceeded last year's amount. Through May 13 about 7.7 million deadweight went to scrap. This represents an annual scrapping rate of about 21 million deadweight or almost 4% of the fleet.

We believe that the current combination of low market rates and high scrap prices should lead to significantly higher vessel scrappings than historic averages. About 14% of the fleet is older than 25 years of age, and about 22% of the fleet is over 20 years of age, providing about 121 million deadweight of scrapping potential. At current rates a typical Capesize vessel could return to its owners about $10 million.

Moving to slide 23. 2010 newbuilding deliveries were 77.9 million deadweight against an expected 125.6 million deadweight nondeliveries of 38%. Despite a high slippage in 2010, deliveries established a new record for newbuildings.

The estimated order book for 2011 ballooned from about 120 million deadweight to about 137 million deadweight as statisticians reclassified many ships that were not delivered in 2010 as 2011 deliveries. However, through April, nondeliveries reached about 46% as newbuilding deliveries were 27 million deadweight against an expected 51 million deadweight, according to preliminary data. This demonstrates that nondeliveries continue to be a substantial part of the drybulk order book.

Additions to the fleet this year were on pace to be similar to 2010; but net growth in deadweight should be lower after expected scrapping is taken into account. The order book declines in 2012 and again in 2013.

This concludes my presentation. I would now like to turn the call over to George Achniotis for the Q1 financial results. George?

Thank you, Ted, and good morning, all. Please turn to slide 24 for the review of the financial highlights of the first quarter of 2011. I would like to draw your attention to the fact that as of March 31, Navios Acquisition is no longer consolidated into Navios Holdings. For comparability purposes, we are presenting the consolidated earnings on a pro forma basis to exclude the effect of Navios Acquisition.

EBITDA for the first quarter was affected by the deconsolidation of NNA. On March 30, the effective date of the deconsolidation, our investment in NNA was fair valued and was compared to the initial acquisition cost. This has resulted in a non-cash accounting loss of $35.3 million.

Excluding the effect of this loss, our adjusted EBITDA for the first quarter of 2011 was $67.5 million. This represents a 17% increase over the $57.7 million adjusted EBITDA for the same period of 2010.

The increase is mainly attributable to the delivery of the last two newbuilding vessels to our own fleet in the first quarter of 2011. The available days attributable to the owned vessels increased from 2,118 in the first quarter of 2010 to 2,524 days in the same period of 2011.

During the same period the available days attributable to the charter-in fleet, both short and long term, decreased by approximately 600 days. I want to remind you that we have a higher operating profit margin on the owned vessels versus the charter-in ones, which reflects the difference between the operating expenses versus the charter-in costs.

Another factor that contributed to the increase in EBITDA in the quarter was the significant increase in the results from Navios South American Logistics. EBITDA for the first quarter of 2011 more than doubled to $9.5 million compared to $4.1 million in 2010.

I note that Q1 is a seasonally low quarter for the business. The increase was caused by increased demand at the Port in Uruguay; the delivery of three additional vessels into the cabotage fleet; and the conversion of certain COA contracts into time charter ones. This change in the contracts minimizes the risk of the effect of the water levels and navigational problems in the river.

Net income for the period was also affected by the loss due to the deconsolidation of NNA. In addition, net income was affected by the write-off a $15.3 million of extinguishment fees and $5.9 million of deferred fees incurred in replacing the $300 million 2014 bond with a new $350 million 2019 bond. After adjusting for these items, adjusted net income increased by 81.3% from $10.9 million in Q1 2010 to $19.8 million in 2011.

Please turn now to slide 25, where the balance sheet highlights are presented. With the completion of our capital expenditure program and the delivery of the last of the owned vessels into the fleet, we're accumulated cash generated from our operations. We cash balance including restricted cash as of March 31, 2011, was approximately $200 million compared to $166 million at the end of December 2010. This grows to $262 million when you include the net cash proceeds from the sale of the two vessels to Navios Partners.

Investment in affiliates increased by $220.6 million. This reflects a change in accounting for the investment in Navios Acquisition, which as of March 31 will be accounted for as an affiliate under the equity method.

Deposits for vessel acquisitions have reduced to zero from $80.1 million at the end of December 2010. During the same period, fixed assets have increased by $115.7 million, reflecting the delivery of all newbuild vessels in the first quarter of 2011. Despite the delivery of two vessels in the quarter, the long-term debt including the current portion only increased by $16.7 million.

Senior note increased by $51.3 million, following the issuance of the $350 million note due in 2019. As Angeliki mentioned earlier, following this transaction we don't have any significant debt maturities before 2017.

Net debt to book capitalization remained the same at 49% between the end of Q1 and the end of 2010. The ratio reduces to 45% following the sale of the two vessels to Navios Partners.

Turning to slide 26, the Company continues to provide a return to shareholders through a dividend. A dividend for the first quarter of 2011 of $0.06 per share was declared to common shareholders as of June 15 to be paid on July 7, 2011. The total cash dividend inflows from the two investments in Navios Partners and Navios Acquisition exceed the cash paid out by Navios Holdings through shareholders.

This concludes my review of the financials. At this point, I turn the call back over to Angeliki for your closing remarks. Angeliki?

Thank you, George, and now I would like to open. This concludes our presentation, and we will open the call to questions.

(Operator Instructions) Natasha Boyden, Cantor Fitzgerald.

Can you give some more color as to the strategy behind the two vessels that you picked to drop down into NMM? Looking at the Orbiter, it's at an attractive rate; but the period length is only until 2014. I wondered if you were looking for some kind of balance between high current rates and a long period charter.

We like to have a portfolio. We have right now a much bigger fleet. You have 10-year contracts with a lot of the Capesizes and some of the Panamaxes. We wanted to add some of the Panamax, and that had -- you had a Panamax and a Capesize, so it added to the diversity of the portfolio of Navios Partners, while also creating some staggered expiration.

So if you take it from the Navios Partners' point of view, they don't have any single period leased, but it is a lease target -- or there is a staggered charter-out rate. So I think this was portfolio approach.

Okay, great. Then just in terms of the funding of the vessels, why was the debt portion pretty low at $35 million of the total $130 million value? Was there any particular reason there?

Listen, we are running a conservative approach. You can always lever [adjust]. There is no reason that you cannot lever adjust. This is something that you [digweek] when you have -- at a time when you need to do an interesting other transaction.

I think if you can see it in all Navios' groups we try to keep a conservative approach and we like to keep leverage low, if it is not necessary.

Okay. Just moving quickly to the logistics business, I just really wanted to get a feeling from you. Is that business now running to the point where you feel that it is capable of doing a spin-off? Or do we still have some time to wait for that?

The company now has drawn -- I mean we did -- we made very attractive financing. We have advanced $200 million unsecured. We have taken into consideration the region where you are operating is very attractive financing. That gives us the ability to acquire new assets, add to the EBITDA. And we see a very healthy run rate for 2011, building for 2012.

I think we have been very -- we are ready to, in every respect, when an appropriate capital markets conditions, to do a spin-off or an IPO or whatever we will find that is the most highly accretive for all investors.

Okay, great. Thank you very much. I will turn it over.

Chris Wetherbee, Citigroup.

Yes, thanks. Good morning, guys. Just on the back of that logistics question, maybe if I could ask what the conditions look like they are setting up for the year, as we move further out of the slow season into a busier season for South America.

As you know, the first quarter is a low quarter. So you have $9.5 million EBITDA, which is a low of the quarter. And also as we have already stated we acquired -- with the money we got from the proceeds of the bonds we are acquiring three convoys that they go on a five-year charter -- contract that is like a time charter that will provide very significant EBITDA.

These convoys will be arriving on August down to South America. This will provide us with a second quarter and third [has a rating] growth already. And you will have the additional EBITDA from the acquisition. So you can see that 2011 will be substantially higher than the Q1 numbers.

Okay, that's helpful. When you think about river conditions, obviously it is hard to predict what the weather is going to be. But as we are going into better seasons does it look like we're going to potentially have better operating conditions than we have had the last couple years in South America?

Yes, we have better conditions. And additionally what we have done now is we have created new contracts; we have major clients that in essence they take the river risk away. We started that in Q4 of 2010 with the new time charter that eliminated the risk of the river.

We now have extended with the new convoys, the three new conveys that we are doing in the region. So today Navios South American Logistics calculated the mechanism to eliminate -- limit, very much limit the river level risk.

Okay, that's helpful. That's actually very helpful. When you think about -- just switching gears back to the core fleet again, when you think about the vessels to be delivered, most of them are long-term chartered-in as it stands right now. When you look at the market and the weakness we have seen in rates, are there opportunities, interesting opportunities, to do further purchase acquisitions? To go out and actually buy vessels?

Are there favorable -- are the rates, I guess, or the prices on the assets low enough yet in your opinion to get involved? And maybe is there anything going on with the banks from a distress perspective yet?

We had [viewing] opportunities and we have seen attractive fleets and attractive single vessels. We are sitting -- we on purpose [did] the balance sheet of -- with almost $300 million of cash liquidity because we believe that there is further opportunities.

The weak -- this market gives you the opportunity to additionally do deals. I think there is plenty of room and time to get attractive deals in vessels which [become] distressed owners.

Okay, okay, that's helpful. Then I guess my final question is, when you think about the overall rate environment, obviously it is weak. You have -- your charter coverage drops off a little bit next year and the year after. It is very, very solid this year.

I guess it probably doesn't make sense to think about trying to charter-out some of your available days in 2012 and '13 until you get to a probably arguably much better rate environment. But do you think that is something you could maybe think about as you go in towards the end of this year, end of 2011?

This is something we [don't think until then]. We think it every day, every moment. We have done sensitivity analysis with very worst case scenario. There are [recent] scenarios in very worst case like totally down-side scenarios.

We are seeking this, and in a situation that we can be immune from very severe scenarios. That is why we are careful. We do not risk expansion unless we have a very complete view of how we'd like to protect our entire portfolio. Any acquisition, any portfolio of acquisitions has to reinforce your entire fleet.

So we are not sitting at one moment and waiting the end of Q4 to make a decision for '12. It is something that we are constantly looking. And if we can extend the vessels out to [do] a couple of years or -- this is something we will do at any moment.

Okay, that's helpful. One last question. Just on the overall rate environment, when you think about it, I think Ted mentioned that you could see some potential weakness persist a little bit into the early summer. But I guess what would be your view about a recovery in rates?

Obviously Australia has been off-line. But do you have a sense that you might see a pickup as we move into third quarter? I just wanted to get your near-term outlook on the rate environment.

Without knowing -- having any -- I mean, globally markets are very difficult to predict with random events. I will say that it should at one point have a recovery from today's level.

I mean you have seen that in 10-Q was between 1,100 and now is about 1,300. It should recover. I mean it is at a low level, and we should have some kind of a recovery from 1,300. That I think is a probable scenario and usually doesn't persist for a long period in this low side.

Okay. All right, great. Well, thanks very much for your time, guys. I appreciate it.

(Operator Instructions) Urs Dur, Lazard Capital Markets.

Hello, everybody. George, I think you mentioned -- just to clarify, and I got on the call a little bit late -- that you have no significant debt maturities now at Navios Holdings until 2017. Is that correct?

That's correct. That is when we have the first bond. That is when the first bond matures; and then the other significant one is 2019.

Right. Excellent, excellent. The other one is similar to the market question that you really just addressed. I am in the camp that I think it is going to improve as well from these very low levels, because demand appears suppressed.

But are there any particular points where you think there is going to be a rebound in demand? We were tracking at 7% or 8% growth in drybulk demand globally at the beginning of the year; now it is running at about 5%. That is probably too low. 8% was probably too high.

I mean what are the points of hope that you see of a rebound in demand over the next three to six months?

I think if the weather gets back to normal you will see what we would say is the Capes going back to their normal relationship with the Panamaxes. When you knock out 50 million tonnes of iron ore and coal in Q1, then obviously the Capes had to go down. Nowhere else to go but down.

But it looks like -- okay, Australia hasn't really come back. Queensland, the coal mines are having problems, but eventually they will come back. That is part of the reasoning we are seeing.

We think the Capes will basically come back, maybe into par in the second half of the year with the Panamaxes. But you know on the other side of that you have some now flooding in the States and Canada; so there may be some grain situations on the Panamaxes that may hold them back.

Sounds like good timing. Is that a ship or what?

Yes, we're in a port, guys.

I know, I know. I thought you might be on a ship, though. I might have made the call even more fun. That's great.

Just finally, Ted, do you see anything? I know this is really a trade in micro, but do you see anything that we could identify with possible movement of drybulk goods for the repair of Japan?

No. Did you see that Japan GDP came out? In Q1 it was negative 4% or something. But they are looking to be 1% through the year.

A lot of what we thought was going to be with steamer -- steam coal now looks like it might be LNG. So there will be a positive effect, but I don't think it is what everyone was expecting on the dry side.

Right.

There will be some effect, but not as great as we had hoped.

Just finally what about the steam coal situation in China? Every year they have power outages and cuts and there is a lot of jawboning. So I don't really -- nobody really knows exactly what to expect.

But it does seem that steam coal locally in China is low due to price. If the commodity price comes off could you see them moving an awful lot more at least to maintain power production?

Absolutely. We are not -- this is not a price driven industry. We are volume driven. And if we see the prices start coming off, I think they will be stepping in and taking a lot more steam coal going forward.

Excellent. Thanks for your time.

Michael Pak, Clarkson Capital.

Hello, everyone. Just a couple of quick questions. Regarding the KLC impact, understanding that it is minimal, can you share with us some color in terms of the amendment? Will you be posting any receivables on the balance sheet? Any kind of financial impact details will be quite helpful for modeling purposes.

We have the entire -- if you go to the appendix, there is the rate from our insurance profits, which is a 5% approximately discount. So you can take that for modeling purposes.

The rest will be anyway a claim which will be received. But for your modeling purposes, you have the exact rate that we will be receiving every month.

Excellent. Thank you. The other question that I had related to the drop-downs. Can you share with us the approximate price for the Cape that was valued in the transaction?

There is a combined cash flow. So I mean the analysis was done on multiple days with independent investment banks blending the fairness opinions for the boat. I think it is related to the cash flows of the two contracts.

Okay, thank you. Would you say that the value is closer to a newbuild value that are prevailing today?

Sorry, I don't think you can get this kind of a time charter for 10 years. I mean newbuilding.

Okay.

They could not even get $19,000 or $18,000.

Okay, great.

We are having about $30,000 for 10 years and you have a profit sharing. So it is a totally different kind of situation. In newbuilding you cannot get even, what, today's market, $16,000?

Okay. No, that's very helpful, Angeliki. My last question relates to South America. Could you expand a little further on the opportunities ahead in terms of you've raised some financing here.

Is it a particular side of the business that you think you'd like to focus on? Maybe provide some sort of growth expectation going forward, would be quite helpful.

You can see now on page 15 of our presentation we have actually laid out logistics in a very easy way for all our investors. We have three lines of business, port, river business, and cabotage vessels. So now you can see all lines.

Navios Logistics is the number one or number two in every of the segments. With the money we have raised from the bond we will be investing in the port terminals and river business.

We will further -- we are bringing three convoys on the back of a five-year contract that is very profitable for the river business; as well as we are doing an expansion with a [silo] and the loading [passthrough] of the port in the port business.

So there is going to be growth in these two areas. And of course we don't exclude on bringing more cabotage vessels on the back of a contract.

Thank you very much. That was quite helpful. Thanks for your time, everyone.

Thank you. There are no further questions. I will now turn the call back over to Ms. Frangou.

Thank you very much. This completes our first-quarter results. Thank you.