Navios Maritime Partners LP (NMM) 2011 Q4 法說會逐字稿

Thank you for joining us for this morning's call. With us today from Navios Maritime Partners are Chairman and CEO, Miss Angeliki Frangou; SVP of Business Development, Mr. George Achniotis; and Chief Financial Officer, Mr. Efstratios Desypris.

This conference call is also being webcast. To access the webcast please go to the Investors section of Navios Partners' website at www.Navios-MLP.com and you'll see the webcasting link. I'd like to now 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 Partners. Forward-looking statements are statements that are not historical facts.

Such forward-looking statements are based upon current beliefs and expectations of Navios Partners' management and are subject to risk and uncertainty which could cause actual results to differ from forward-looking statements. Such risks are more fully discussed in Navios Partners' filings with the Securities and Exchange Commission.

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

At this time I'd now like to review the agenda for today's call. First, Miss Frangou will offer opening remarks; next Mr. Desypris will provide a review of Navios Partners' fourth-quarter and full-year 2011 financial results. Then Mr. Achniotis will give an operational update and an overview of market fundamentals. Miss Frangou will then offer concluding remarks and will open the call to take your questions.

I'd now like to turn the call over to Angeliki Frangou, Chairman and CEO of Navios Maritime Partners. Angeliki?

Thank you, Laura, and good morning to all of you joining us on today's call. I am pleased with the results for 2011. For the full year we increased net income by 8%, adjusted net income by almost 15% and operating surplus by about 32%. We recently declared the distribution of $0.44 per unit for the fourth quarter representing an annual distribution of $1.76 and a current yield of almost 11%.

As you can see from slide 2, Navios Holdings today owns about 27% of the equity of Navios Partners. With the assistance of our sponsor we built a very vibrant company with a fleet of 18 vessels and market capitalization of about $810 million and an enterprise value of about $1.2 billion.

2011 was a year of uncertainty given the macro environment in Europe. But we used the time well as we developed our business. Slide 3 summarizes our activity.

First, Navios Holdings agreed to extend the management and administrative services agreement for an additional five years through December 2017. Under the agreement we fixed fees for a normalized 3% increase for two years through December 2015. This extended agreement offers Navios Partners visibility into its operating cost and the competitive advantage of one of the leading technical and commercial management teams globally.

We believe that through these services we will continue to enjoy costs well below our competitors. Let's remember that is about 30% below industry average.

2011 also created a great deal of uncertainty in our counterparties. We, along with our insurance company, managed through this very successfully and I'm pleased to say that Cosco has made all payments under the charters. Also Korea Line affirmed the Navios Melodia charter agreement.

In addition, during the recent market volatility we entered into a two-year charter agreement with Navios Apollon with a subsidiary of Navios Holdings. This was truly a win-win for both parties. Navios Partners was able to secure a charter for the medium term with favorable rates plus profit-sharing.

Under the terms of the charter Navios Partners will receive $12,500 net per day for the first year and $13,500 per day for the second year plus 50-50 profit sharing for both years. The charter is effective immediately upon completion of the current employment.

Finally, during the year we raised $90 million through an organized equity offering and used the sales proceeds and cash on hand to acquire two vessels, the Navios Orbiter and the Navios Luz, which contributed annualized base EBITDA of about $20.3 million and aggregate base EBITDA during the course of the charter employment of about $122.5 million. Once again our sponsor was there to support the transaction as Navios Holdings accepted $10 million in equity as part of the sales transaction.

Our consistent performance has enabled us -- continued access to the capital markets and we have thus enjoyed the ability to grow our fleet and profitability. With our growth we have been able to increase distributions over the last year. In fact, we have increased distributions by approximately 5% since January 2010 and we continue to focus on growing the distributions.

At this point I would like to turn the call over to Mr. Efstratios Desypris, Navios Partners' CFO, who will take you through the results for the fourth quarter 2011. Efstratios?

Thank you, Angeliki, and good morning all. I will briefly review our unaudited financial results for the fourth quarter and year ended December 31, 2011. The financial information was included in the press release and is summarized in the slide presentation on the Company's website.

Our growth pattern and increased distribution capacity continued throughout 2011 despite the challenging market conditions. The growth of our fleet and strong cash flow generation enabled us to maintain [overall] distribution [coverage] and declare a dividend distribution of $0.44 per common unit.

Turning to slide 5, revenue increased by 18.8% mainly due to the 266 more available days in the fourth quarter of 2011 compared to the same period of 2010. EBITDA increased by $6.4 million or 19.9% to $38.6 million for the fourth quarter of 2011 as compared to $32.2 million for the same period of 2010.

Net income increased by $0.3 million to $18.7 million. Net income was adversely affected by the $4.7 million increase in depreciation and amortization expense. Of this amount $3.4 million relates to amortizing favorable leases attached to the newly acquired vessels.

This favorable lease component is amortized over the remaining duration of the charter-out contract as opposed to the longest remaining useful life of the vessel. Operating surplus for the quarter ended December 31, 2011 was $31.3 million, 15.5% higher than the corresponding quarter in 2010.

Moving to the 12-month operations, time charter revenue for the year increased by $43.8 million to $187 million. The increase in revenue by 30.6% was mainly due to the increase of available days by 28.1% and was achieved despite the $7.5 million effect of the unscheduled dock hires of two of our vessels during 2011.

EBITDA net income for the year was also adversely affected by the unscheduled new hires of the two vessels. Additionally, they have been affected by the $4 million non-cash charge for writing off intangible assets associated with the Navios Apollon (inaudible) contract which was terminated. Excluding these non-cash terms, adjusted EBITDA increased by $34.7 million or 32.4% to $141.8 million for 2011.

Adjusted net income increased by $8.8 million or 14.5% to $69.3 million. Adjusted net income was further affected by a $22.8 million increase in depreciation and amortization expense due to our larger fleet. Operating surplus for the year ended December 31, 2011 was $115.9 million which is 32.3% higher than the corresponding year in 2010.

Turning to slide 6, I will briefly discuss some key balance sheet data for December 31, 2011. Cash and cash equivalents including restricted cash was $56.5 million. Total assets grew to $910 million. Long-term debt including the current portion increased by $4.6 million reflecting the additional facility of $35 million from the acquisition of the two vessels in the second quarter and the debt repayment of $30.4 million during the year.

The effective average interest rate we paid during 2011 was 2.6%. Net debt to asset value on a charter adjusted basis remained at 35.1% at the end of the period. As of December 31, 2011 Navios Partners was in compliance with the payments and covenants of its credit facilities.

As shown on slide 7, our quarterly distribution is $0.44 per common unit. The distribution run rate on an annual basis is $1.76 per common unit and provides an effective annual yield of approximately 11% based on yesterday's closing price. The record date for the distribution is February 9 and the payment date is February 14, 2012.

Total distributions amount to $24.8 million. We had (inaudible) distribution coverage. Total unit coverage was 1.26 times. For US tax purpose, Navios Partners reported a cumulative annual distribution to common unitholders on Form-1099.

On slide 8, the favorable quarterly pattern of EBITDA, operating surplus and net income are shown for the quarters from Q1 2008 until Q4 of 2011. The consecutive increase primarily reflects increases in the number of operating vessels through accretive drop downs from our sponsors.

Navios Partners has consistently paid out quarterly distributions since its inception in November 2007 uninterrupted by market conditions. Furthermore, we have increased our dividend distribution in eight out of the 16 quarters of operation. Our annual distribution has been growing at an average rate of more than 6.2% per year. This rate of increase exceeds the average US inflation rate by more than 4%.

Slide 9 demonstrates our strong relationship with key participants in our industry. We have quality charters with another remaining period of over 24 years. These charters are spread among a diverse group of counterparties. In addition, we have insured our long-term charter-out contracts for credit default with a AA rated European entity.

As shown on slide 10, our fleet consists of 18 vessels, six Capesizes, 11 Panamaxes and one older Handymax vessel. Our fleet has an average age of 5.6 years as compared to the industry average of 12 years. Currently we have contracted 96.6% of our available days on a charter-out basis for 2012 and 79.3% for 2013. Expiration dates are (inaudible) and the charter durations extend to September 2022.

I will now pass the call to George Achniotis, our Executive Vice President of Business Development, to discuss (inaudible). George?

Thank you, Efstratios. Please turn to slide 11. The drivers for world GDP growth continue to evolve. Developing economies contribute a higher percentage to total world growth than the developed economies. The IMF expects that trend to continue for the foreseeable future.

Current concerns about the sovereign debt crisis in the euro zone have led the IMF to lower its forecast for 2012 world growth to 3.3%. The latest forecasts show emerging economies will continue to grow at 5.4% in 2012 and 5.9% in 2015. The primary engines of trade growth continue to be China, India and Brazil with other emerging countries having strong growth.

Drybulk trade has expanded by an average of 4.7% a year in the last decade since China joined the WTO. Consensus forecasts for 2012 are for drybulk trade to grow in excess of 4%. China's economy grew at 8.9% in Q4. For 2012 the IMF expects the Chinese economy to grow at 8.2%. India's economic growth is expected to reach 7% in 2012.

Please turn to slide 12. In order to continue the urbanization and industrialization China and India continue to invest heavily in infrastructure throughout Latin America, Africa and the Middle East. Both countries are securing supply lines of natural resources with these infrastructure investments to ensure continued growth. This larger portion of world trade results between emerging and developing economies, trade patterns are shifting eastward and southward.

Moving to slide 13. The development and urbanization of the Western and Central parts of China will contribute significantly to steel consumption in 2012 and onwards. Infrastructure, housing construction and consumer spending growth will underpin development in 2012 and beyond.

Crude steel production in China for 2011 was up 9% year on year. China imported 687 million tons of iron ore in 2011, 11% more than 2010. Domestic iron ore production was up 24% to 1300 million tons. In addition, China increased its imports of coal in use in steel making and for power generation by an estimated 13% year on year.

In 2011 worldwide (inaudible) iron ore trade set a new record of 1100 million tons as imports increased for the 10th consecutive year. This increase has been the result of higher demand for more major steel producing countries except Japan.

Going forward the growth in worldwide iron ore imports will be constrained until new iron ore mines and expansion projects become operational. Over the medium- to long-term miners are investing heavily in additional production. That chart on the upper right depicts potential new iron ore mining capacity of over 500 million tons per annum on a cumulative basis through 2014. These expansions will increase the tons carried and tons miles.

Turn to slide 14. India has taken initial steps to industrialize and urbanize. As you can see on 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 one and a half New York City's per year during that time.

To keep pace with expanding steel and increasing production Indian coal imports, shown on the left-hand chart, have increased dramatically at a 25% compound annual growth rate since 2006. According to the Central Electricity Authority of India, substantial demand will continue and 65% of current and planned new power generators will be coal-fired.

India now imports more coal per year than the UK, Italy, France and Germany combined. Indian companies are buying coal assets globally to assure future supplies to meet projected growth. The government recently announced that (inaudible) enterprises are to invest in infrastructure and overseas energy purchases to promote energy security.

Turn to slide 15. Low freight rates, expensive fuel and high ship scrap prices have led to a surge in scrapping of vessels in 2011. In total 362 vessels were sent to scrap including 67 capes. The 22.2 million dead weight tons scrapped last year represents the largest amount in deadweight tons and second largest on percentage terms dating back to the '70s.

The current environment should lead to higher scrapping levels as about 12% of the fleet is 25 years of age or older and 18% of the fleet is over 20 years old, providing about 111 million dead weight tons of scrapping potential. Initial estimate indicates that scrapping could reach 30 million tons by the end of the year if scrap prices remain high and bank lenders appear ready to reenter the scrapping market and a major new Chinese recycling facility in [Dalian] is due to enter service.

Moving to slide 16, 2011 newbuilding deliveries were 95.9 million dead weight tons against an expected 137.3 million tons, (inaudible) of approximately 30%. The order book for 2012 ballooned from about 120 million tons in December to 130 million tons now as statisticians classified many ships that were not delivered in 2011 to 2012 deliveries.

Non-deliveries continue to be a substantial part of the drybulk order book. Additions to (inaudible) this year are on pace to be about the same as 2011, but net growth in deadweight tons should be lower after expected scrapping is taken into account. The order book will decline dramatically starting in 2013.

Please now turn to slide 17. After a rally at the end of 2011 that drove the BDI above 2100, the index has lost well over half of its value dropping below 800 for the first time in three years. Negative seasonal (inaudible) demand together with rising tonnage top-line provides little confidence in any substantial improvement in rates in the near term.

Should historic patterns repeat, lower rates will induce more scrapping enforcing the self correction of the drybulk market while demand for and supply of commodities available for seaborne movement increases over the longer term. Even with slower world economic growth projections, latest research shows increased 2012 drybulk rate estimates over 2011.

Navios Partners continues to operate (inaudible) on long-term time charters to ensure creditworthy counterparties and held (inaudible) charter (inaudible) in 2013. This concludes my presentation. I would now like to turn the call back to Angeliki for her final comments. Angeliki?

Thank you, George. This concludes our formal presentation and we can open now the call to questions.

(Operator Instructions). Natasha Boyden, Cantor Fitzgerald.

Can you talk a little bit about perhaps further acquisitions? Are there still specific vessels that you're looking to drop down for -- and considering that you still have a decent cash balance?

I think one of the -- as you know, the MLP equity market is open so we have seen a lot of equity raisings now, number one. And on the prices, we can see now that today values of vessels with long-term charters, if you were willing to do five years, you can create a creative deal for Navios Partners. So we can easily see vessels that are from (inaudible) to any type of the vessels we are in that can easily justify prices with today's five-year charter.

Okay. And actually I think you just touched on my next question and that was with stock continuing to trade at well above NAV, would you consider going to the equity market here to raise more capital for drop-down?

It it's an accretive deal; I think we are not lacking anything. But if it's an accretive deal to Navios Partners you can say, yes, I mean today's [values] of vessels make it easier that you can do this.

Right. And that kind of leads me on to my third question is what are you seeing in terms of liquidity in the second hand market with asset prices being where they are today? Are vessels moving at these lower prices or do you think sellers are more hesitant to sell?

I think that there is no cash available. I think in today's market it's a buyer's market. You have a unique combination of banks non-existing because -- if we remember from the crisis of 2008 we had -- that banks (inaudible), European banks and the ability of debt being removed. With what happened in the European crisis from second half of 2011 we saw a further severe reduction of banks.

Just to give you an example also how cost has increased. A loan that -- a typical loan that was done last year by a bank today is, just from a pricing perspective, will be at an [8]% discount. So you realize pricing has changed for the regular company and also there is (inaudible). You have a severe -- I mean you had all the French banks being removed from the market, so this creates a buyer's market for whoever has cash.

Okay, great. And then just lastly, the BDI is getting close to levels that we haven't seen since the collapse started in the financial crisis. What do you think is causing this decline and what do we need to see to start to see a rebound?

We have to always remember that the first half, the beginning of the year is always a soft patch for the [dry] in every year. Usually (inaudible) combination, this year we have the Chinese New Year early, it is during this week, so that created a more severe environment now. There was a rash of orders before -- that coincided in December, that's why we are seeing a much better market.

This is -- you will have to assess the market after and also we had some weather problems, you know (inaudible) just now. So I think you will have -- as you go to Q2 you will have a better market. We saw also last year you had a real prolonged -- we had the entire first half of the year was not as severe as now, but you had the entire first half reduced and there we had a much stronger second half with capes moving from as low as 5,000 to 8,000 to 30,000 in the spot market.

This year we have on the one-year time charter you're about 13,000 capes, 11,000 -- you know, approximately at the one year level you have come down to about 13,000 spot market non-existing. But this is a temporary fix. You may have a Q2 better and last year was a fire (inaudible) the years largest in Australia and the tsunami in Japan that prolonged the first half down market. So (inaudible) as we see at this time I don't believe is something that it will forecast the entire year, it's a temporary fix.

Okay, great, well thank you very much for your time, Angeliki.

Justin Yagerman, Deutsche Bank.

I wanted to ask on the Apollon charter, is the charter into Navios Holdings indicative if of no other counterparties in the market willing to take those kinds of durations right now? Or was that a strategic decision of some sort? I'm trying to understand why all of a sudden the related party charter.

We thought -- you know, we thought that -- this is actually something that went through both companies and is a transaction that makes sense on both companies. First of all, you get a nice asset for -- I mean for Navios Partners it has a visibility of two years with a counterparty that (inaudible) -- that you have no questions.

And you have the profit sharing to give you, even though you lock-in that rate at a low, it gives you the profit share, it gives you the possibility that if there is an upside you're not locking in today's environment for two years.

And on the Navios Holding side you get an attractive rate which we take advantage of the lower environment of today. So this is -- it seems like on both sides is a good transaction and in the current situation this was thought from both Boards to be an attractive deal.

When the Prosperity I think comes up this summer for re-charter, if there isn't a suitable counterparty in the market would you consider increasing exposure to Navios Holdings in the counterparty?

I think that this is a decision to be made at that time. Don't forget that Prosperity is opening on Q3. It's a different environment. Just to realize entire exposure on Navios Holdings to Partners is less than 1%, it's 0.7%.

That's fair. How does insurance work on those types of charters?

You know, it is insured (inaudible) the Company.

Curious, I mean you alluded to this in the comments in your answers to Natasha, but it obviously feels like we're going to have to wait until post Chinese New Year. Are you talking to any of your customers about demand post that timeframe? Do you have any indications of what things are going to begin to look like in terms of cargo flows at that point in time? Just curious if you guys have any forward look on the market once we get past this holiday season in Asia?

It seems like the market will recover from where we are. I mean, what we see is that from what we have -- nobody can tell you how (inaudible), but it seems that the weather problems are not as severe as last year and the (inaudible) this week. So -- but (inaudible) are that you will see a recovery somewhere in Q2.

Okay. And then just switching back to the secondhand market and a follow up on Natasha's question. I mean you mentioned that it is a buyer's market and a lot of that is driven by the lack of liquidity that most players have right now. But what I didn't hear was whether or not there are actual ships in the market for you to look at.

Are people selling right now, I guess to ask it a different way? Are there vessels from third parties that you can take? Or I guess -- and not necessarily from conventional third parties, are banks approaching you about vessels from distressed players?

Let me tell you, this is a buyer market with availability, the problem today is that in order to transact is there is no availability of cash. Otherwise is I mean, today I'm not talking about strong companies, but there's a lot of weak companies that we provide to the vessels (multiple speakers).

I guess my question around that is there seems -- whether or not it's just noise and maybe that's what it is -- we've seen a lot of opportunistic funds being created in the last several months and years. We haven't seen a huge amount of transactions out of them. So supposedly they have cash but they're not doing anything. Why if there are vessels and there's cash is nothing moving or are you just saying there literally is no cash and it's all kind of smoke and mirrors out there?

I don't believe -- I mean we saw some funds coming last year. I mean, you remember they were buying -- I think this is most -- we show funds coming in. I don't think there is such a huge amount, people are waiting to see I think where the market will stabilize. I think some of the funds have started early, they may feel that they entered too early in the market.

That's a fair point. All right, I'll turn it over and let someone else have that it. Thank you so much for your time.

Michael Webber, Wells Fargo.

I wanted to jump back towards the charters you guys already signed today. This is by my count the fourth profit share you guys have on your books now. Can you kind of remind us about how you incorporate those variable cash flows into your distribution? As that kind of variable exposure grows do you have a set policy in terms of how you're going to incorporate that? And if not how should we think about it?

(Inaudible) the profit-sharing gives us optionality on the upside of the market. So whatever we are reporting in our books and whatever we include in our projections, everything is based on the base rate. So if their profit-sharing kicks in and if we start realizing some real profits from that this will be included also in our distribution numbers.

Right. No, I guess I'm saying at what point do start actually paying out some of the profits you're getting from the profit share agreement? Obviously it's not a problem now ,but I guess how do you think about that in terms of kind of keeping a sustainable distribution?

I think the most important is to have your base case scenario and if we -- this is a high-class problem I'll have to --.

All right, I'll agree with you there.

(Technical difficulty).

Fair enough, fair enough. I wanted to talk briefly about your insurance and I guess any impact from I guess the sovereign Belgian downgrade on the availability of your insurance and your premium and maybe you can remind us how often those premiums reset?

The premium is set for the duration of the charter.

So it's just a flat premium for the duration of each individual charter?

Yes, yes. We will have to renegotiate it when we will do a new quarter (inaudible) 10 years.

Got you, all right. And I guess we've seen another operator that has similar insurance kind of (inaudible) their counterparty risk insurance effectively canceled and they got a pretty sizable cash payout. Is that something you guys have been approached about? Can you guys maybe differentiate your situation with what happened with [Bosamar] and just kind of lay that out for us?

You have to see the individual requirements of every company. We prefer to -- we have a very good relationship with our insurer and we prefer to continue covering our new charters. One fair comment, if you do a settlement most probably you needed the money because you may have a newbuilding problem, I don't know.

Right. But your impression was that was driven -- that was client driven and not driven by the insurer?

We do not have any negotiations like that.

Okay, all right. Fair enough. And I guess maybe just kind of a general question and Justin kind of touched on it a little bit earlier. But you guys went through a lot of detail on your debt kind of laying out scrapping and your future supply demand expectations. And maybe we see a snapback after Chinese New Year, but I think the general consensus seems to be that 2012 is going to be a pretty weak market.

As you look out over the next two to three years and you see different long-term supply and demand fundamentals come into place, Angeliki, when do you think we could really start to see a cyclical turn in the drybulk space where we really see the trend on rates moving sustainably higher for the duration?

You will have -- the one thing that you will have is that you're going to have also, apart from a cyclical low, you may have seasonality. I just want to remind you that Q2 -- the second half of '11, even though it was a very weak year, you had capes (inaudible) 30,000.

You have to remember that you cannot judge the year -- let's say even 2012 we show the IMF coming out with lower expectations for world GDP. You may have a weak year, it would depend. But you will have the volatility within the year, that you have to understand that.

Now to see that a fully -- a rebalanced portfolio I think we also need to see -- we also need to see a little bit of demand driven. The good thing that I can say is that scrapping may even accelerate substantially this year. So the lower the market becomes the more accelerated is going to be the clean up, which is don't forget that you have 110 million -- over 110 million deadweight tons over 20 years away with the majority of over 25.

This is a very quick mechanism. The most severe it remains the quicker a cleaning mechanism. And I want to say one other thing that now has been reconfirmed by (inaudible) is that you remember there was consideration that the scrapping capacity has a limitation. We saw easily there last year weighed almost 23 million deadweight tons. This year they can go as much as 30 million, there is not really a limitation to the scrapping. This is another type of (inaudible) we should remember.

Right, right, no that's very helpful. That's all I've got, guys, thank you for your time.

[Christopher Cohen], JPMorgan.

Good afternoon. Most of my questions have been asked, but I just want to revisit the Apollon fixture. Can you just add a bit more color and explain what made this option the best? Was it really addressing which risk, was it the counterparty, the profit share duration? Can you give us a little more color as to what made this option better than the next best opportunity on the marketplace?

From the Navios Partners points of view it's a counterparty in the profit sharing. On the Holding side it's that you have the ability to have a charter in this kind of environment.

That's very clear. And your last remark on the scrapping capacity, what has been key development which has lifted that perception in terms of the cap? Is it more physical capacity or is it just the pace?

There was a lot of consideration in the past that there is not going to be enough scrapping yards to accommodate for the scrapping. We have seen the Chinese have moved very quickly in that, a lot of what was considered becoming shipyards, they began scrapping a yard, which doesn't need a lot of investment or technology.

So we showed that there is -- and from all indications we have, we have seen a lot of capacity that we can see that easily can absorb any amount of vessels coming. So just to realize, 23 million deadweight tons is double any deadweight tons we ever had in history.

On a (inaudible) basis one of the high percentages in (inaudible) but on the deadweight tons it's double. So you see the (inaudible) goes up (inaudible). And now common wisdom has begun to see that it can easily surpass that because there is no really limitation in knowledge or you don't need space and you have got it.

Understood. And very lastly, is it safe to assume, based on what you said about a buyer's market, that over the course of 2012 growth at partners is more likely to come from third parties rather than from drop-down opportunities?

In any environment, but we are also seeing third parties. The only thing we do there is counterparties.

Understood. Okay, thank you.

T.J. Schultz, RBC Capital Markets.

Just one thing from me, when we think about the contracts coming up in the second half of 2012, understanding that we could see a better environment, but this is still somewhat uncertain, can you just discuss the potential that maybe you put these on shorter term contracts and wait for a better environment or just in general your thoughts on balancing the length of your contract portfolio versus capturing the best rates?

I think that, as I said before, this is a (inaudible). So in -- as we saw substantially even last year or any year you take you'll see a volatility within the year. We believe that the second half of the year will give better opportunities to charter if we take historical seasonality.

But in case -- I agree with you in case we didn't find something suitable of course we're not going to lock in a very low rate. I mean, that is obviously not the way we will do it. We will do a shorter duration if that's the case.

But this is something that we always viewed also in consideration with an average duration of charters. So we always see -- and don't forget because we now have 18 vessels with also some very long durations that give us flexibility of -- and a cushion on our distributions.

Okay, thank you.

Ben Nolan, Knight Capital.

I actually have a few questions. My first one relates to a comment that I believe you made, Angeliki, in response to something that Natasha said that there -- you're looking at opportunities in the market and the rates of return available on five-year contracts make it somewhat interesting given current asset values.

I guess my question is, is there much liquidity in terms of longer-term contracts in the market? Maybe like for instance on a modern Panamax or (inaudible). Could you just give me a sense of what that -- what those rates might look like relative to say a 1 year rate?

One of the things -- you have to realize that sometimes if I was going to talk only on January 23 -- the week of January 23 in the middle of the Chinese New Year may not be a very viable week. There is some five-year contracts and, of course, you'll have to see it on a more healthy environment and we show this happening end of last year and we see it (inaudible) in any environment.

This is not precise this week. There is nothing you would have done on a five-year. But you can see somewhere around 14,000 on a (inaudible) to 15,000. And if you consider, depending on the price we acquire, this creates opportunities that can be accretive for the Company.

Okay, yes, that's helpful. My other - I guess probably my last question is, you had said that the -- or I believe the Prosperity is coming off contract in July. But that's one of the vessels that you guys have chartered in. If you're unable to secure a time charter that gives you a positive net versus your time charter rate, is that something where you might consider negotiating maybe some sort of a one-time payment with the owners or some way to get out of locking in negative cash flows with respect to that vessel?

We feel very comfortable that we will not have to lock in any negative. I think the rate is attractive enough that I think we will be able to create positive cash flows.

Okay, good. Well, that does it for my questions. Thanks a lot.

Ken Hoexter, Merrill Lynch.

It's Scott Weber in for Ken. Just looking at your unit coverage, it's already relatively high and set to increase. Is your strategy right now to build cash or can we expect the high unit coverage to result in an increase in the distribution even without an acquisition?

Actually, as we have already said in the past, we feel comfortable with distribution coverage being around 115 to 120. So, yes, I agree with you -- momentarily it might go over or under this coverage, but that doesn't change our strategy on the current belief.

So effectively if we were be able to keep this coverage going forward at this high level we'll consider giving back some of this amount. But (inaudible) at a certain time and you have to look at (inaudible) base to see what is the full covenants for the year.

Scott, people are very afraid in this time, so you have to be looking -- I mean, if we see that there is additional coverage of course we will increase. But I think the most important is to make sure that we can deliver consistently.

Okay. And yes, this has been touched on a few times already, but just expanding on one of the last questions -- obviously you mentioned it's a buyer's market. But as far as the nature of deals that are available in the market today and Navios Partners' strategy of buying younger vessels on long-term charters, where do you think we are as far as a cycle is concerned?

When do you think we reach almost a sweet spot where it will be -- it will make the most sense for Partners to grow? Is that sometime -- do you expect that happening sometime this year or is it just too hard to say right now?

I think the good thing about Partners, it makes very disciplined acquisition. If it is accretive you make it. So if you can increase distributions you will do it and it's a very nice disciplined way to make sure that you don't deviate from that. What I believe that there is a change that will show values today at the levels that can create in this environment also to make accretive deals.

Okay, that makes sense. Thanks for your time.

Thank you. That was our final question. I'd now like to turn the floor back over to Miss Frangou for any closing remarks.

Thank you very much for listening to our fourth-quarter 2011 results.

Thank you. This concludes today's conference call. You may now disconnect.