Navios Maritime Holdings Inc (NM) 2011 Q2 法說會逐字稿

Thank you joining us for this morning's Navios Maritime Holdings second-quarter and first-half 2011 earnings call. With us today from the Company are Chairman and CEO, Ms. Angeliki Frangou; President, Mr. Ted Petrone; SVP of Strategic Planning, Mr. Ioannis Karyotis; Chief Financial Officer, Mr. George Achniotis; and Chief Financial Controller, Mr. Stratos Desypris. George has come down with laryngitis; so although he is in the room with us today, Stratos Desypris, Navios Holdings' Chief Financial Controller, will be reviewing the financial results on the call.

As a reminder, this conference call is also being webcast. To access the webcast, please go to the investor section of Navios Holdings' website, www.Navios.com. Before I reviewed 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 Holdings. 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 risks 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 this call. Thank you.

I would now like to turn a review the outline of today's call. First, Ms. Frangou will offer opening remarks. Next, Mr. Petrone will provide an operational update and an industry overview. Following Mr. Petrone's remarks, Mr. Karyotis will go through an overview, including recent financials for Navios South American Logistics. Then Mr. Desypris will review Navios Holdings' financial results. Lastly, we will open the call to take your questions.

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

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 second quarter of 2011.

We increased EBITDA by about 14% to about $104 million and net income by more than 9% to almost $51 million. As a sign of our continued confidence in our cash flow, we declared a $0.06 dividend for the second quarter. This dividend represents a leap of more than 7.7%.

Slide 2 shows our current structure. The value of Navios Holdings primarily derives from four companies -- the drybulk fleet within Navios Holdings, and three principal operating subsidiaries.

As you can see from some quick math, the value of NM's interest in the two public subsidiaries is $2.92 per share. This means the market is assigning a value of $0.20 to the two remaining businesses.

NM's core drybulk fleet consists of 43 vessels in the water. This fleet has long-term charters with creditworthy counterparties that are all insured by a AA-plus European governmental entity.

For 2011, Navios contracted about 95% of its fleet base and for 2012 about 56% of its fleet base. With a significant long-term coverage, we can operate well above breakeven until 2017 even in very difficult market conditions.

The value of Navios Logistics is growing and has been transformed into a key provider of integrated logistics in the Hidrovia Region. This region has been enjoying significant growth over the past few years and is projected to continue growing well.

As you know from the world news, we are in the middle of a very difficult market. The drybulk industry is driven by global GDP. Leading economies are revising downward estimates for growth in the developed countries. The rate of growth in developing countries appears to be slowing as well.

With these worries in the backdrop, the sovereignty debt crisis in Europe is bubbling over into a potential European banking crisis. The political gridlock in the US led one rating institution to downgrade the US debt; others may follow if the deficit is not appropriately addressed.

The post-World War II global order is being threatened. We live in a very uncertain time, with fear escalating and liquidity disappearing. One has to dig deeply to find some good news.

Our conservative approach serves us particularly well in a fearful environment. Our balance sheet and business posture make us an attractive partner.

As you can see on slide 3, we have excellent liquidity of $412.6 million, of which $361.5 million is cash. Our net debt to book capitalization is relatively modest, to 44.7%.

Of course, liquidity and cash balances must be viewed in terms of future capital requirements. As you can see, we have no significant capital repayment or CapEx until 2017.

In addition to having excellent liquidity and strong cash position, our debt is long-term and stable. Bonds represent more than 60% of our debt on our balance sheet, with no amortization until maturity. These bonds have favorable covenants, allowing us operating and financial flexibility in this kind of market.

In a market featuring declining asset values, perhaps the most important is the absence of any loan-to-value maintenance obligation. And we have continued access to the debt market as the commercial lending market tightens.

Our commercial lenders understand the loan-to-value covenant ratio. As a result, most of our commercial loans base this governance on charter-adjusted values, taking away volatility from declining asset values.

Our policy has always been to secure long-term revenues in appropriate markets, and we have significant long-term coverage. Unique among our peers, we also have obtained a AA-plus insurance on these charters. The net result is a dependable, long-term cash flow.

For 2011, Navios contracted about 95% of its fleet days, generating more than $300 million in gross revenue. We also have secured about 56% of fleet base for 2012, delivering about $217 million in revenues, and about 38% in 2013 for almost $169 million.

There is a major Asian shipping company which has failed to make payments in respect to a single vessel we have chartered out to them. Their [ES] total is about $3.8 million.

It seems reasonably clear to us, from what we can see from within the Navios Group and elsewhere, that this Asian company is attempting to renegotiate binding contracts. Our view is that we can enforce these contracts, and we have taken steps to secure our rights with this counterparty.

We are coordinating these conversations with our insurance company, as a charter contract is covered by a AA-plus insurer. We are reasonably comfortable that we understand and manage the extent of our exposure.

You can see the strength of our liquidity on slide 4. Our net debt-to-capital is about 45%, and cash on our balance sheet is $361 million. This liquidity is more than adequate, considering that Navios has completed its newbuilding program. We anticipate that we will generate significant cash flow during 2011, given Navios' low operating breakeven.

Slide 5 sets forth Navios' substantially fixed revenue and low operating costs. As you can see, over 95% of Navios' revenue is fixed for 2011, at about $26,000 per day. In addition, approximately 56% is fixed for 2012 for about $29,000 per day per vessel.

Our total operating cost provides for a low breakeven of about $18,370 in 2011 and more or less the same for 2012. The net result is that we will be building our cash position during 2011. Please note that we determine the breakeven rate to include all operating expenses --maintenance, CapEx, drydock and charter-in expenses for our charter-in fleet; G&A including credit default insurance; and as well 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 Navios' operations and our industry perspective. Ted?

Thank you, Angeliki, and good morning, all. Please turn to slide 6. Long-term core fleet consists of 56 vessels totaling 5.9 million deadweight. We have 43 vessels in the water, with an average age of five years. This is considerably younger than the industry average of approximately 13 years.

In the second quarter we ordered one Kamsarmax from a Korean yard for $35.5 million. We also agreed to four additional independent purchase options at $35 million each.

The newbuilding is scheduled to be delivered in the second quarter of 2012. The four options are to be declared within the first half of 2012, with deliveries scheduled to start second-half 2013.

Please turn to slide 7. Navios' average charter-out rate for its core fleet is $25,824 a day for 2011, which increases through 2013. 95.2% of the Navios fleet is chartered-out for 2011; 55.9% for 2012; and 37.9% for 2013. In total we have contracted revenue of about $650 million through the end of 2013, and have insured this contracted revenue through an EU-backed AA-plus entity.

Please turn to slide 8. We enjoy vessel operating expenses significantly below the industry average in all asset classes. Navios' current daily OpEx is $4,444 (sic - see slide 8), 30% below the industry average.

Please turn to slide 9. The latest research downwardly revises 2011 trade estimates. However, this is due to the lower than anticipated shipments in the first half of 2011, particularly Q1, where shipments were negatively affected by natural disasters in Japan and Australia.

Pricing strength of both iron ore and coal continues to suggest rising demand. Notably, China, India, and Korea have set new records of steel production so far in 2011.

However we are seeing little influence of this in freight rates. Over the medium to long term, miners are investing heavily in additional production, which ultimately should increase seaboard movements, specifically for iron ore and coal.

Please turn to slide 10. Developing economies contribute a higher percentage to total world growth than the developed economies, and the IMF expects that trend to continue for the foreseeable future. The IMF's June forecast shows that emerging economies will continue to grow at a 6.6% 2011 and 6.4% in 2012.

Despite fears of a Chinese slowdown, China's economy grew at 9.5% in Q2. For 2011 the IMF expects the Chinese economy to grow at 9.6%, and the economic growth is expected to reach 8.2% in 2011. More importantly, global growth is projected to grow at 4.3% this year and 4.5% next year.

Moving to slide 11, the development and urbanization of China should contribute significantly to steel consumption in 2011 and onwards. Growth in the infrastructure and housing construction also underpin development in 2011 and beyond, as China targets an increase in its urbanization rate from 45% in 2010 to just over 51% in 2015. As a comparison, the US has an urbanization rate of over 80%.

As previously mentioned, Chinese crude steel production continues to set records. This compares with the increase in steel used in the development of Korea and Japan as shown in the upper right-hand chart. The chart also shows that India and Brazil are just starting to increase the amount of steel used in their expanding economies.

Growth in Chinese iron ore imports will be constrained until new iron ore mines and expansion projects become operational in 2012 and later in Brazil and Australia and the rest of the world. These expansions will likely increase the tons carried and ton miles.

Turning to slide 12, India has taken initial steps to industrialize and urbanize. As you can see in the lower right-hand chart, India is expected to increase its urban population to 590 million people by 2030. That means India will have to build about 1.5 new cities per year during that time, supporting steel production as shown in the upper right-hand chart.

To keep pace with expanding steel and electricity production, India coal imports -- shown on the left-hand chart -- have increased dramatically, at a 25% compounded annual growth rate since 2006. According to the Central Electricity Authority of India, substantial demand will continue as most plant power generators will be coal-fired. India now imports more coal per year than the UK, Italy, France, and Germany combined.

Turning to slide 13, the confluence of low freight rates, expensive fuel, and high ship scrap prices has led to a surge in scrapping of vessels. In the first half of 2011 more Capesize vessels have been scrapped than in the five-year period 2006 to 2010. The high steel prices mean that a Capesize owner can earn about $11 million $12 million on scrapping the vessel.

Through August 19, 230 drybulk vessels, including 57 Capes, representing 16.3 million deadweight, have been sold for demolition. This deadweight total already surpasses the record 12.3 million deadweight scrapped in all of 1986, and represents an annualized scrapping rate of over 25 million deadweight or almost 5% of the fleet. The current environment should lead to higher scrapping levels, as about 12% of the fleet is older than 25 years of age, and 19% of the fleet is over 20 years of age, providing about 111 million deadweight of scrapping potential. There is a potential to get higher demolition in 2012 as a major new Chinese recycling facility in Dalian is due to enter service.

Moving to slide 14, 2010 newbuilding deliveries were 77.9 million deadweight against an expected 125.6 million deadweight, a slippage of approximately 40%. The order book for 2011 ballooned from about 120 million to 137 million deadweight, as statisticians reclassified many ships that were not delivered in 2010 to 2011 deliveries. However, through Q2 2011 nondeliveries continued to run at about 40%.

Newbuilding deliveries were 43.8 million deadweight against an expected 73.5 million deadweight. This demonstrates that nondeliveries continue to be a substantial part of the drybulk order book.

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

Please turn to slide 15. We currently own 27.1% of Navios Partners, including a 2% GP interest. Navios Partners operates a fleet of 18 vessels equaling 1.9 million deadweight with an average age of 5.1 years.

Please turn to slide 16. Navios Partners provides significant cash flow to Navios Holdings. Through Q2 2011, we received about $65 million in total distributions from Partners. We anticipate, based on the current run rate, receiving about $25.6 million in distributions to -- during 2011. Note that this is more than 100% of Holdings' expected annual dividend.

Turning to slide 17. We have a 53.7% economic interest in Navios Maritime Acquisition. Navios Acquisition's current fleet consists of 26 tanker vessels totaling 3.2 million deadweight. Navios Acquisitions currently has 13 vessels in the water, with an average age of 6.2 years. We anticipate our newbuilding program for product tankers positions us to take advantage of favorable long-term industry dynamics.

Please turn to slide 18. The Company is summarized on slide 18. Navios Acquisitions has a large, modern, and diversified tanker fleet worth more than $1.2 billion. We have long-term contracted revenue that is well above our Company's low operating breakeven, and we have profit-sharing arrangements in many contracts. These agreements limits our downtime risk to the base rate and allow NMA to enjoy the upside volatility. The related cash flow also sustain us for a long period in distressed market conditions.

This concludes my presentation. I would now like to turn the call over to Ioannis Karyotis, Senior Vice President of Strategic Planning for Navios South America Logistics. Ioannis?

Thanks, Ted. Please turn to slide 19. Navios South American Logistics has three segments, each of which enjoys significant growth prospects. This year, we have invested as follows.

In port terminals, we are constructing a new silo of 100,000 tonnes capacity in Uruguay. In barges, we acquired three pushboats and 66 barges to meet the needs of a new long-term agreement, and a floating drydock to improve our operating costs.

In cabotage, we acquired noncontrolling interest in our joint ventures for $8.5 million, taking 100% ownership of four product tankers and two self-propelled barges. This simplifies our business going forward.

Please turn to slide 20. Navios South American Logistics seeks long-term revenue from a diverse portfolio of high-quality clients. Our strategic relationships, investments, and the overall favorable export market fundamentals position us well. Please turn to slide 21.

For the quarter ended June 30, 2011, revenues increased 6% compared to the same period last year to $54.7 million. This increase was driven by the barge and cabotage segments. EBITDA for the same period was $10.5 million, 1% higher compared to the second quarter of 2010.

Cabotage business achieved 67% increase in revenues and 70% EBITDA growth compared to the same period in 2010, mainly because we had two additional vessels for the period.

Barge business revenues increased by 13% and EBITDA increased by 115% compared to the second quarter of 2010. These increases are mainly attributable to improved performance in the iron ore transportation.

Agricultural production impacted the performance of our dry port terminal in the second quarter. Throughput declined 10% year-on-year driven mainly by weaker grain production.

As a result, the segment's revenue dropped 23% to $18.2 million from $23.5 million in the same period last year. EBITDA for the same period was $3.6 million.

Interest expenses in the second quarter increased to $4.7 million from $1 million for the same period in 2010, due to the interest expense generated by the senior notes issued in April 2011.

Turning to the six-month period ended June 30, 2011, revenues increased by 13% compared to the first half of 2010 to $99.1 million. EBITDA grew 39% to $20 million, and net income was $2.5 million, 34% higher compared to the same period in 2010. Two of the three segments achieved significant growth.

Please turn to slide 22. Slide 22 provides selected balance sheet data as of June 30, 2011. Navios Logistics has a strong balance sheet.

In the second quarter, cash and cash equivalents amounted to $136.2 million as compared to $39.2 million on December 31, 2010. Total debt amounted to $253.7 million, and net debt was $117.2 million.

As of June 30, 2011, the cash and the debt balance sheets do not account for the payment of $53.2 million debt in the cabotage business that took place on July 25, 2011. Net debt to book capitalization at the end of the second quarter was a conservative 20.7%.

Now I would like to turn the call over to Stratos Desypris, Navios Holdings' Chief Financial Controller, who will take you through second-quarter and first-half 2011 financial results. Stratos?

Thank you, Ioannis. I am standing in for George Achniotis today, as he has laryngitis; but he will be available during the Q&A period.

Please turn to slide 23 for a review of the Navios Holdings earnings highlights. Revenue during the second quarter of 2011 was approximately $165 million, about the same as 2010. However, revenue from drybulk operations dropped by about $3 million to $110.7 million from $113.8 million in the same period of 2010.

The decrease is caused mostly by a $2,750 reduction in the daily time charter rate, from $26,431 in the second quarter of 2010 to $23,681 in the second quarter of 2011 and a reduction in certain fleet activity. This was mitigated somewhat by a 26% increase in available days of the owned fleet to 2,635 days, because of new vessel deliveries during the first quarter of 2011.

As Ioannis mentioned a moment ago, revenue from the Logistics business increased, which countered the reduced drybulk activities. Revenue for the first half of 2011 increased by $2 million, at $322 million compared to $320 million in 2010.

The trend for the six-month period was the same as for the quarter. Revenue from drybulk vessel operation decreased, whereas revenue from the Logistic business increased.

EBITDA for the quarter was $103.7 million. This was affected by the $38.8 million gain from the sale of two vessels in May. Excluding the gain, adjusted EBITDA was $64.9 million, compared to the adjusted EBITDA of $71.5 million in the second quarter of 2010. The decrease was primarily due to higher direct vessel expenses in both Navios Holdings and Navios Logistics, due to the increased fleet's higher G&A expenses, mainly in Navios Logistics, as the company incurred expenses in preparing for the bond transaction completed in the second quarter, and a negative contribution of $800,000 from Navios Acquisition.

Adjusted EBITDA for the first half of 2011 increased by $3.2 million to $132.4 million compared to $129.2 million in the first half of 2010. The increase was mainly due to an increase in the results of Navios Logistics.

Net income for the second quarter of 2011 was $50.9 million compared with $46.6 million in 2010. After adjusting for the sale of the two vessels, adjusted net income was $12 million compared to adjusted net income of $27 million in 2010. The reduction is mainly due to higher interest costs due to the new bond of Navios Logistics, higher D&A expenses due to the increase in the owned fleet, and higher income taxes from Navios Logistics.

Adjusted net income for the first half of 2011 was $31.9 million compared to $38 million in 2010. Net income in 2011 was adjusted for the sale of the two vessels, $21.2 million of bond extinguishment expenses in the first quarter, and a $35.3 million accounting loss on change of control in Navios Acquisition.

Please turn now to slide 24. We continue our strategy for strengthening our balance sheet and delever the Company. At June 30, 2011, we had $361 million in cash compared to $165 million on December 31, 2010. Post the quarter, about $53 million was paid in July to extinguish debt and for the acquisition of minorities in the fleet of Navios Logistics.

Senior notes increased from approximately $694 million at the end of December 2010 to$945 million at the end of June due to the new notes issued at Navios Holdings and Navios Logistics. Long-term debt reduced to $501 million compared to $614 million at the end of December; and it was further reduced in July by another $53 million following the acquisition of minorities in Logistics.

I would like to remind you that we don't have any significant debt maturities before 2017.

Our net debt-to-book capitalization ratio also reduced from 48.8% to 44.7%. This was achieved despite the prolonged period of depressed rates and vessel values in the drybulk market.

Turning to slide 25, the Company continues to provide a return to its shareholders through a dividend. We declared a dividend of $0.06 per share to common shareholders as of September 22 to be paid on October 6, 2011. I would like to remind you that the total cash dividend inflows from the two investments in Navios Partners and Navios Acquisition is about 151% of the cash paid out by Navios Holdings to its shareholders.

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

Thank you, Stratos. With that, we open the call to questions.

(Operator Instructions) Natasha Boyden, Cantor Fitzgerald.

Thank you, operator. Good morning, everybody. Angeliki, you have been acquiring -- you have got the acquisitions for the four options and the purchase of other ships delivering next year, and you have been focusing on the Kamsarmax and post-Panamax segment, it looks like. Can you just talk a little bit about what your outlook for that vessel class is, in particular, and what you find attractive about them?

To be honest, we were very opportunistic on that vessel. We found a very good shipyard where we acquired the vessel at an attractive price. We already have also arranged financing at attractive terms.

So we felt that the Kamsarmax is one of the -- I mean the Panamax, Kamsarmax is a workhorse of the drybulk. So we thought that was in an attractive asset class.

Now the one other issue that we liked, particularly on this deal, is as they seek to have made that deal to happen we managed to have four optional vessels, four -- one option each vessel. So we have the ability, if that is attractive on pricing, to do option one, option none, four times. So this gives you more optionality, which is something that you always like.

Okay, great. Then just in terms of period charter activity in the Panamax and the Capesize sectors, what are you seeing there? Are you seeing more interest from charterers for longer periods? Or has that still not really come back into the market?

Actually, we have seen a very interesting short-term trend that is happening right now. We have seen a strengthening of the Capesize, which has -- have strengthened in the last two weeks and especially over the last weeks is performing. We see Capes' [port] rate reaching over $15,000, which is quite [expensive] -- of course, coming from a very low level.

I think period charter right now is something that you have to review. You see jumps in rates that have to do with seasonality more so, but also maybe some recovery of iron ore and coal production in Australia. That has created a strengthening of Capesize rate. This is something that is good on a short-term trend, to follow and see how this will play.

Okay, great. Then can you just give us an update on what you are seeing out of Cosco's decision to try and renegotiate or stop payments on some of its charters?

I think we have seen that in every case that came around the world. There was an e-mail from Cosco asking for renegotiation of about 30% of values. I think depending -- Navios has nothing to do with this.

We have a very strong cash flow. We have a contract which they have to honor; and we have insurance for that. So for us, it is irrelevant.

But it depends on liquidity [cost duration] of owners and the overall situation. Some owners maybe may go for that.

Okay, great. Thank you very much.

Christian Wetherbee, Citi.

This is Seth in for Chris. I guess if I could start off, I was just curious. Could you give us an update on your thought process about how you think about maybe doing a share buyback?

Specifically, why not buy back shares over spending more and acquiring some of these options? How do you feel about this level of the share price and the potential for maybe buying back some equity?

We are not shy of doing any or all of that. But number one, as you know, Navios bought -- we bought back almost $48 million worth of shares last year. We have a buyback program that is in place. As you remember, there is remaining about $24.5 million under that program, which we are not shy to use it at the appropriate price.

We have a very strong cash position that you can do your own analysis and see that we have no CapEx and no capital replacements until -- no maturities really of any substance until 2017. And again of cash flows that we have, that give us an ability to really put our money in use.

So it is very important to be calm in a storm. Navios has been always careful of rewarding our shareholders and our stakeholders, and we will do it in an appropriate way.

Okay. Could you remind us how much exposure, either in vessels or percent of revenues, that you may have to Cosco?

We have one vessel, and the outstanding is $3.5 million. We already have security for that.

Okay, and any difference between your contracted rate -- and the renegotiated rate is covered by the charters? Am I understanding that correctly?

Well, no. We don't renegotiate. I am explaining that there is an industry situation where Cosco comes and renegotiates rates to about 30%.

We have nothing to do with the renegotiation. We care less about the negotiation. We can secure a contract with [nimas], and we work very closely with our insurer in order to protect our interests.

Okay, okay. All right. Thank you very much.

Justine Fisher, Goldman Sachs,

Good morning. So the first question that I have is about just taking digging into the insurance repayments little bit more. Because some of the vessels on your fleet list show -- like the Mercator and the Achilles, for example -- they show renegotiated rates with new charterers, while you are claiming insurance on the other charters.

Is that a Cosco situation, or is that another situation where a charterer has stopped making payments so you're receiving payments from insurance?

The vessel you are describing is Korea Line. The exposure with Korea Line was all described. It is all insured.

We received the full amount from our insurance [clausid]. And the negotiated rate is mostly a remedy for the insurance. So we received uninterrupted cash flow, as you know. So this is the Korea Line.

Okay. Can your insurance counterparties, do they -- can they have any say over whether or not you renegotiate a charter? Obviously it makes sense for the industry not to renegotiate, because any capitulation might encourage more renegotiation action. So I think that makes sense.

But can the insurance company say -- well, we would rather you get a lower rate for this vessel from the same counterparties, so you should renegotiate; or are they completely excluded from that process?

No, you insure a rate. If you insure -- let's say you insure $40,000. If you insure that, if somebody comes and tell you $30,000, this is changing your commercial terms.

The reason you have -- first of all you have remedy against the counterparty. And also you are insured for that market. So you will go against both -- you will call on your insurance and go against the counterparty that is renegotiating. Our strategy of not allowing a negotiation is because today you have a commercial -- you have a contract and you want to be rewarded after this contract.

Okay. Then I just have a question about the newbuild Capesizes that you guys ordered. The $35 million price seems a lot lower than I think, I guess, the high $40 millions, low $50 millions that we would have seen for even resale vessels based on recent transactions. Can you give us a bit more color around that situation?

Was the yard in a tough spot that they really needed to close those sales? Or were you taking those contracts over from another shipping company that couldn't pay? Because that is a pretty low mark for a Capesize newbuild.

Justine, I apologize, but this is Kamsarmax, not Cape; and the rate is $35 million. We also have the ability on this contract to have four optional vessels, meaning that if Navios elects -- can exercise an option on the same price, that will bring the vessels delivery for 2013 up to '14. So this gives you an optionality for a long period to exercise that.

We found that that was an attractive rate. Maybe later it will go lower; but $35 million was a good rate and for that asset class which is -- the Kamsarmax is the workhorse of the dry. So we saw that even in today's market with today's charters these vessels will cover, it is going to be a cash-flow positive.

Okay, sorry. My mistake. My mistake, you're right. Can you just give us a pro forma CapEx number including all the options on those Kamsarmaxes?

The options are not exercised. It is Navios' option, and we will declare that as of today Navios Holdings has no CapEx requirements. We already have paid for the equity for these vessels.

Okay, thanks very much.

Urs Dur, Lazard Capital Markets.

Good afternoon, everybody. I had a quick question. If you can just remind us -- and I know we can look this up; but I think the GP units in Navios Partners also add some value. You did a little bit of a quick sum of the parts on the market cap of your investment in Navios Partners and in NNA.

But when is the next increase -- or excuse me, incentivized distribution to the GP units? At what level does that hit from NMM to NM?

Let me tell you we are on the third (technical difficulty) distribution, and --

The next level of the distribution comes off at $0.08 increase in the quarterly distribution. And then we go to the 50-50 splits on the [DHB] interest.

Yes, but at what distribution is the 50-50?

$0.08 above where we are.

All right, so you are on your way. So I mean those GP units have value too in the marketplace. So even the $0.20 you point out is even probably negative at this point, so that is pretty interesting.

On Navios South American Logistics, can you -- and maybe you can't comment necessarily. But can you substitute NNA ships into those contracts? Or do you have to order new ships for the Petrobras contracts?

The Petrobras contracts are based on Brazilian construction.

Okay.

So this is a particularly -- this is a particular trade; but it is very profitable. It makes sense to do it.

One of the things that you said, you pointed very well, is that in the way we calculate it, that from our two publicly traded companies that will have $2.93 per share, it is calculating the GP interest as a regular share, which is not -- as you correctly pointed out that their values might have [all] that.

Right. Thank you for that. Just to clarify -- and just to get a valuable piece of information, but -- and on NSAL, again, you cannot reflag NNA ships to Brazilian flag for that purpose?

No, no. But I mean I think the vessels on NNA is a valuable fleet that we can employ in the open market at attractive rates.

Sure, sure, I was just wondering in terms of employment for NNA. Hey, do you have any -- obviously the equity markets aren't too exciting right now; but any update on your possible timing of a spinoff?

Listen, we are in all respects ready. But of course, this is a market decision that will happen on the appropriate time when markets -- I don't think anyone is thinking about raising money in today's market.

(laughter) Okay. Well that's great. Just wanted to hear it. Thank you.

And at this time I am showing no further questions. I will turn the conference back to Ms. Frangou for any further remarks.

Thank you. This concludes our second-quarter results. Thank you.

Ladies and gentlemen, that concludes our conference for this morning. We appreciate your time. You may now disconnect.