Navios Maritime Partners LP (NMM) 2012 Q3 法說會逐字稿

Thank you for joining us for this morning's third-quarter 2012 earnings conference call for Navios Maritime Partners.

With us today from the company are Chairman and CEO Ms. Angeliki Frangou, EVP of Business Development Mr. George Achniotis, and Chief Financial Officer Mr. Stratios Desypris.

The conference call will be webcast. After the webcast, please go to be the investor section of Navios Maritime Partners website at www.Navios-MLP.com. You'll see the webcasting link in the middle of the page.

I would now 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 Partners. Forward-looking statements are statements that are not historical facts. Such forward-looking statements are based upon the current beliefs and expectations of Navios Partners' management and are subject to risks and uncertainties which could cause the actual results to differ from the 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 the conference call. Thank you.

At this time, I'd like to review the agenda for today's call. First, Ms. Frangou will offer opening remarks. Next, Mr. Desypris will provide an overview of Navios Partners' third-quarter 2012 financial results; then, Mr. Achniotis will give us an operational update and an overview of market fundamentals. Finally, Ms. Frangou will offer concluding remarks and we'll open the call to take your questions.

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

Thank you, Laura. Good morning to all of you joining us on today's call.

I'm very pleased with the results for the third quarter of 2012. Our largest fleet allowed us to increase EBITDA by almost 20% and net income by 33%. We have 21 vessels in the water with an average charter duration of 3.5 years and we recently announced a quarterly distribution of $0.4425 per unit with a record date of November 8, 2012. Our distribution represents an annual distribution of $1.77 and a yield of about 11.5%.

As you can see from slide two, Navios Holdings owns 25% of the equity of Navios Partners. With a system of our sponsor, Navios Partners, have become a key player in the dry bulk industry.

Today, Navios Partners has a market capitalization of about $1 billion and an enterprise value of about $1.2 billion. Navios Partners has a conservative balance sheet and a net debt to charter asset ratio of about 35%, as of the end of the third quarter. Consistent performance has also made Navios Partners' continued access to the capital markets and provided [elements], the ability to grow its fleet, and cash flow.

In fact, since Navios Partners went public, we have increased our fleet almost threefold. Also, Navios Partners increased its per-unit distribution by 26.4%, representing an annual increase of almost 6%. We seek to increase distribution, regardless of the underlying market conditions.

Slide three shows the multiple ways we have been able to grow our fleet and distribution. Today, we have done so with the assistance of our sponsor through various dropdowns. We have also exercised purchase options. We have also made investments.

More recently, we have been active in the Sales & Purchase market and we'll continue to use this market to improve our fleet as opportunities arise. As you will recall, last quarter we acquired three vessels, of which one was from Navios Holdings, our sponsor, and two vessels were from the open market, the Sales & Purchase market. We acquired, in 2009, South Korean-built Ultra Handymax for $20.6 million and, in 2005, Japanese-built Panamax for $20.8 million from the open market. These vessels have low cash breakevens, providing positive cash flow generation for Navios Partners.

Keep in mind that these vessels provide the potential for significant upside. We consider all these acquisitions attractive, but also believe that the Sales & Purchase market for the first time in a while provides attractive entry point. As a result, you can expect us to continue making acquisitions from the open market. Thus, this vessel will not only be able to serve Navios Partners during the current difficult market, but will also present the potential for a significant additional distribution in an improved market.

At this point, I would like to turn the call to Mr. Stratios Desypris, Navios Partners' CFO, who will take you through the results of the third quarter. Stratios?

Thank you, Angeliki, and good morning all.

I will briefly review our annual financial results for the third quarter and nine months ended September 30, 2012. The financial information was included in the press release and is summarized in the slide presentation on the Company's website.

We had another quarter with a strong operational and financial performance. The growth of our fleet enables us to continue to deliver significant increases in our operating metrics. As shown on slide four, revenue increased by 15.6% to $55.5 million, mainly due to the 226 more available days for the third quarter of 2012 compared to the same quarter of 2011.

EBITDA increased by $7 million, or 19.4%, to $43 million for the third quarter of 2012. Net income increased by $5.5 million to $22.1 million. The increase in net income is mostly attributable to the increase in the number of available days and was adversely affected by a $1.3 million increase in depreciation and amortization expense caused by our [Laza] fleet.

Of this amount, $0.6 million relates to the amortization of favorable leases attached to the [aqual] vessels. This favorable component is amortized over the remaining duration of its [aderal] contract as opposed to the longer remaining useful life of the vessel.

Operating surplus for the quarter ended September 30, 2012, was $35.6 million, 21.5% higher than the corresponding quarter in 2011. Our fleet continues to perform well. Vessel utilization for the third quarter was 99.4%.

Moving to the nine months' operations, time charter revenue increased by $16.1 million to $152.6 million, mostly due to the 484 more available days. EBITDA increased by $17 million, or 17.1%, to $116.2 million for the nine months of 2012. Net income increased by $9.1 million, or 19.5%, to $55.8 million. The increase in net income is mostly attributable to the increase in the number of available days and was adversely affected by $6.1 million increase in depreciation and amortization expense previously explained.

Operating surplus for the nine months ended September 30, 2012, was $94.7 million, which is 12.1% higher than the corresponding period in 2011.

Turning to slide five, I will briefly discuss some key balance sheet data for September 30, 2012. Cash and cash equivalents, including restricted cash, was $51.7 million. Total assets grew to $964.7 million, mainly due to the acquisition of Navios Buena Ventura in June and Navios Helios and Navios Soleil in July.

During the third quarter, we completed the $44 million financing for the acquisition of these three vessels. We continue to obtain financing at terms that we consider attractive. Our new facility has a 12-year amortization profile and a spread of 350 basis points over LIBOR.

Following the completion of the new facility, long-term debt including current portion, decreased by $0.2 million due to the $44.2 million of debt repaid during that period.

Net debt to asset value, on a charter-adjusted basis, remains at 35.1% at the end of the quarter. We are able to maintain this relatively low level ratio, despite the decrease in the value of the vessels in the market as we continue to accretively add vessels to our fleet.

As of September 30, Navios Partners was in compliance with the financial covenants of its creditor facilities.

As shown on slide six, we declared distribution for the third quarter of $0.4425 per common unit. This represents a 26.4% increase over our minimum quarterly distribution. The record date for distribution is November 8 and the payment date is November 13, 2012.

Total distributions for the quarter amounted to $27.6 million. Our distribution coverage is comfortable at 1.29 times for the quarter. I have to remind you that for US tax purpose, a portion of our distribution is treated as [an intern] of capital.

For 2011, the percentage of our annual distribution that was considered as intern of capital was 42.3%. Also, we report the cumulative annual distributions to common unitholders on Form 1099.

On slide seven, you can see that Navios Partners has consistently paid quarterly dividend distributions since its inception in November 2007. Furthermore, we have increased our quarterly distributions nine times since 2008, which represents an average increase of almost once every two quarters.

Our current annual distribution of $1.77 provides for an effective yield of 11.6% based on yesterday's closing price.

Slide eight demonstrates our strong relationship with key participants in our industry. We have quality charters with an average remaining period of approximately 3.3 years. These charterers are spread among a diverse group of counterparties. In addition, we have ensured that [if further out] contracts [with current] default with AA-rated European Union insurance companies.

As shown on slide nine, our fleet consists of 21 vessels -- seven Capesizes, 12 Panamaxes, and two Ultra Handymax vessels. Our fleet has an average age of 5.9 years, as compared to the industry average of almost 10.5 years.

Recently, we have chartered out the Navios Libra for at $12,000 net per day, plus 50-50 profit sharing, until September 2015. Following this picture, we have currently contracted 99.3% of our available days for 2012 and 83% for 2015. The expiration dates are staggered and the charter durations extend to 2020 to the latest.

I'll now pass the call to George Achniotis, our Executive Vice President of Business Development, to discuss the industry section. George?

Thank you, Stratios, and good morning all.

Please turn to slide 10. World GDP continues to be driven by developing economies, which now contribute a higher percentage of total world growth than the developed economies, representing over half of the global consumption of most commodities. The IMF expects this trend to continue for the foreseeable future.

The IMF recently lowered its forecast for world growth to 3.3% for 2012 and 3.6% for 2013. Emerging economies are projected to grow at 5.3% in 2012 and 5.6% in 2013. The IMF lowered its forecast due to the continuing euro crisis and a slowdown in China. It now expects the Chinese economy to grow at 7.8% in 2012 and 8.2% in 2013.

India's economic growth is expected to be 4.9% in 2012 and 6% in 2013.

Turning to slide 11, the primary engines of trade growth continue to be China, India, and Brazil, with other emerging countries adding strong growth.

Dry bulk trade has expanded by an average of 5% per year in the last decade since China joined the WTO. Consensus forecast for 2013 and for global dry bulk trade to grow approximately 5% and [term mile] growth of about 7%.

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 this infrastructure investment to ensure continued growth. As a larger portion of world trade is occurring between emerging and developing economies, trade partners are shifting eastward and southward.

Turn to slide 13. Currently, just over 50% of the world's population resides in urban areas. That figure is expected to grow to 67% by 2050, adding approximately 2.8 billion urban residents, with a large portion of urbanization occurring in the Asia-Pacific region.

As you can see on the right-hand graph, growth in incomes support increased metal demand. The rising global incomes and the shift in the global economy towards Asia should support dry bulk trade by increasing movements of raw materials as shipping partners adjust to the new global model.

Moving to slide 14, the development of urbanization of the western and central parts of China will contribute significantly to steel consumption in 2013 and onwards. Infrastructure, housing construction, and consumer spending growth will underpin development in 2013 and beyond.

Crude steel production in China through September totaled 533 million tons, or about 1% more than the same period last year. Restocking activity brought China September iron ore imports to 65 million tons, the second highest market imports ever after the 69 million tons imported in January 2011. Through September, China imported 552 million tons, about 9% more than the same period last year.

Future 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 in additional production. The chart on the upper right hand depicts estimated new iron ore mining capacity from Australia and Brazil, graphed against the decline of domestic Chinese iron ore mining. The substitution of imported iron ore for low-quality domestic production is already occurring, as domestic production increased only 1% while imports have increased 9% year on year through September. This trend is expected to continue and will increase at tons [cried] and ton mines.

Turn to slide 15. 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 2013. That means India will have to build about 1.5 New York Citys per year during that time.

To keep pace with expanding steel and electricity production, Indian coal imports, shown on the left-hand chart, have increased at a 25% compound annual growth rate since 2006. According to the Central Electricity Authority of India, substantial demand will continue as 65% of current planned new power generators will be coal-fired. India currently generates 68% of its power using coal. As a comparison, the US uses coal to generate about 40% to 45% of its electricity.

Turning to slide 16. Low freight rates, expensive fuel, and fast car prices led to a surgence in scrapping in 2011 and so far this year. Scrapping rates for older, less fuel-efficient vessels have continued to accelerate this year. Through October 19, about 27.6 million deadweight tons were scrapped. This represents an annual scrapping rate of over 34 million deadweight tons, or about 5.6% of the fleet.

The current rate environment should keep scrapping levels high as over 7.5% of the fleet is 25 years of age or older and 13% of the fleet is over 20 years old, providing about 87 million deadweight tons of scrapping potential.

Of note is that the current 2012 scrapping totals include 23 ships that were less than 20 years old and one that was less than 15 years of age. Demolition prices appear to depend on overall steel prices and not a supply of vessels.

Moving to slide 17, non-deliveries continue to be a substantial part of the dry bulk order book. Through September, non-deliveries amounted to 27% as newbuilding deliveries were 81 million deadweight tons against an expected 111 tons.

Net fleet growth totaled 15.5 million deadweight tons for Q3, the lowest level since 2009. Fleet additions this year are expected to be similar to last year, but net deadweight ton growth should be lower after high scrapping is taken into account. The order book declines dramatically in 2013 and beyond.

Please now turn to slide 18. An oversupply of tonnage and continued economic weakness contributed to the BDI reaching the lowest quarterly average since 1998. With the IMF again lowering the world's GDP forecast for 2012, weakness in commodity demand should keep freight rates under pressure for the near future.

Conversely, after having had a hit a three-year low, Chinese steel prices are showing signs of recovery and the USDA has increased its forecasted cuts in grain exports. Both bring positive news for dry bulk.

Subsequent to Q3 and in a reversal of recent trends, Capesize rates markedly improved in October and export rates surged to over $15,000 per day. Sentiment initially improved on an announcement of additional Chinese infrastructure spending. More fundamentally, lower iron ore prices have cut China's domestic iron ore production, increasing Chinese import substitution.

In contrast, the Panamax and Handymax rates remain under pressure as a result of reduced US and Russian grain exports and Indian iron ore shipments.

This concludes my presentation. I would now like to turn the call over to Angeliki for her final comments. Angeliki?

Thank you, George. This completes our formal presentation. We open the call to questions.

(Operator Instructions). Michael Webber, Wells Fargo.

Great.

Good morning.

I wanted to jump in and talk a little bit about your distributions and how you see them playing out against the market. Obviously, your distribution coverage is a pretty key focal point and it's certainly fine right now, but based on our numbers, it certainly looks like it drops off pretty significantly in 2013 and 2014, should we see the weak market persist, more 2014 than 2015.

I'm just curious if you can give a little color around how you manage that risk, considering that it is 12 to 18 months off, today without just simply hoping for a market turn. You know, how do you manage the fact that your distribution ratio starts to fall in 2014, given the current rate environment?

As I already have mentioned, we already have a strategy of substituting vessels. Now a run rate for next year will be around 116, which is something that will have some one-off events and a little bit lumpy over distribution, but it will be around 116 for 2013, and it will slightly be low are for 2014.

One of the things that we already have done, and this is -- we did early on, is start acquiring vessels at today's prices and having a creation of $1,000 -- for every $1,000 that rates were improving is about $0.12 over $0.012 accretive to the whole model. Hugely accretive. Just remember the breakeven at that time was $8,700. So from every $1,000 above that, it creates a huge accretion for all (multiple speakers) our unitholders.

Sure, I think that's fair (multiple speakers)

(Multiple speakers). Let me take one step further on this. Because you have to prepare yourself and we have 2.5 years for preparation on this.

Today's rates, you can buy a Capesize today for about $35 million and you can fix it easily. You know, spot may be $20,000, but you can do a three- or five-year build at $15,000. That creates a huge accretive cash flow in today's rate.

So Navios is -- has a strategy it's willing to implement, and we will do it in an orderly manner. Because if you're not going to go in one period to [an at one] moment, you need to do it over a [straight] period. This is a well-defined strategy that makes sense, and don't forget your entire portfolio that was rechartered today at no rate, as they open up -- because they're only fixed for a year or two, for a year and 18 months, this will also provide additional cash flow.

Sure. All right, that makes sense, and you certainly have a fair amount of time to deal with this.

I do want to ask a couple more questions around that. You've been pretty clear by the fact that it is a pretty well-defined strategy, and certainly adding incremental market leverage to any sort of modest uptick could be beneficial to the distribution, provided you could get that uptick. At least within your internal projections, how many more of these kind of one-off deals at low market levels do you need to do to be relatively comfortable? I guess, how many more are you guys planning on doing?

Obviously, it's going to be based on what the market is presenting you, but internally it seems like this is pretty well defined. You know, what level gets you comfortable in terms of adding these deals kind of at market today?

First of all, I want to tell you I think in today's market you have the accretion, so you don't need the recovery. The recovery will give you a tremendous boost.

We will not wait -- we will need a strategy of four to six vessels, which is something we can do more or less, depending of what the opportunity is. We have not done our models, but I don't think that this is something that you want to articulate your entire acquisition strategy.

Sure.

But the other thing that we like to do is we don't like to pick one moment, except if there's an exceptional opportunity. Otherwise, we prefer to spread the acquisition over a period of time so you can pick different moments in the market.

Okay. And if I heard you right, you said four to six, basically, is kind of what you're saying?

It could be more. I mean, what we are foreseeing on the horizon.

And just one more question along those lines, you know, there are other MLPs in this space that face similar circumstances and kind of gear themselves to run at lower levels with the parent or the sponsor on the private side stepping in to kind of subsidize the distribution. Obviously you guys have a lot of runway between there -- here and there, but is that something from a parent level that you think Navios would be willing to do as kind of a backstop, as kind of a way to say, okay, well, this distribution level where we're at right now is going to be the minimum?

I think Navios Partners has the ability to grow increased distribution on its own merits. I don't see any comparison.

Okay, fair enough. One more and I'll turn it over. The Gemini and Libra you mentioned, you just rechartered, I believe it was, the Gemini, and they both run through 2015, 2016. At that point, they're going to be rolling into their early 20s. In your long-term models, are you guys continuing to include those from a cash perspective or are you guys scrapping those at that point?

I mean, when you buy, you don't sell at the same moment, so usually we do a portfolio close for when -- the Gemini is chartered until Q1 of 2014, so at the appropriate time we will think when to replace, and this is not something you usually do at the same moment.

Right, no, I guess what I'm getting at is from a cash flow perspective. When you guys are looking at where your distribution coverage is going to be, are you including a charter for that asset or are you including a liquidation value?

We look at it if you're going to do a liquidation, you will do a substitution. In today's market, we're going to substitute with (multiple speakers) terms of equity on a 10-year younger vessel (multiple speakers), so I don't think that really matters very much (multiple speakers) to the cash flow.

Okay, (multiple speakers). That makes sense. The substitution makes sense. All right. Thank you, guys, for the time. I appreciate it.

Thank you.

T.J. Schultz, RBC Capital Markets.

Hey, guys. I guess just, you know, with your interest to kind of remain active in the S&P market, how do you kind of balance that versus your contract duration, which I guess is -- your comfort zone's around three years and you like to stay above that. Is this something where you would need to couple it with a dropdown as you did in July, or are you willing to kind of take advantage of some of these conditions right now at the expense of maybe duration near term?

This depends on the opportunity and the accretion of a specific deal. You could do a three- or five-year deal on a Cape in today's market. So -- and do a five year, 15, or even higher. So this is not something if you wanted to do duration, but this is a portfolio approach that we will have to see. We can have both, we can have a dropdown from the sponsor and from the market, as we did last time. It depends really on the opportunity we see and the creation of the specific deal.

Okay, great, and I guess just kind of back to the Libra and I guess the decision to extend three years and take the profit sharing. How did you kind of balance that decision versus just kind of extending for even a shorter duration, kind of in the context of that being an older vessel that you may look for a sale at some point?

The longer duration may change on both parties and you have to times the profit sharing. If there is a need for a sale, there's always a way out on a contract. So there's no -- I mean, you can have a substitution basis. So there's not really any limitation to Navios Partners' ability to execute on its strategy.

Okay, great.

(Multiple speakers) substitute another vessel, so there's not really a point that you limit yourself.

Got it, understood. Thanks.

Natasha Boyden, Global Hunter.

Thank you, operator. Good morning, everybody, or good afternoon.

Good morning, Natasha.

I'm wondering if you could -- Angeliki, if you could talk a little bit what you're actually seeing in the S&P market right now in terms of asset values generated across the board. Would you continue to be active at current prices or do you think second-half prices still have further to fall, given the market environment?

Nobody has a crystal ball to know how. I think you're in the correct zip code. I wouldn't know if -- maybe they will drop a little bit, but if you do today's transaction with today's cash flows, and it got accretive for the Company, I think it makes sense. The downside to this is less risky than the upside potential you may have [as big here].

Okay. And you are obviously getting longer-term contracts, but what is the general appetite out there for contracts longer than, say, three or four years? I mean, is there a lot of appetite for sort of five- to 10-year contracts or are you seeing charterers moving more towards the short term?

The majority are shorter duration. On the Capesizes, we will find that there is opportunity. That's why you can see longer durations. You know, for -- in Q3, you almost had the point that there was not period one here, period market. Now it has recovered, and on today's level, especially in the Capesizes, you can do longer-duration contracts.

Great, thank you. And first off, a couple of industry questions. George, you mentioned in your comments that obviously the Cape rate has picked up fairly dramatically in October. And I'm wondering how much of this move up in rates you believe is indicative of a sustainable rebound in earnings, particularly for Capes, or is this just really a seasonal bounce like we saw last year in the fourth quarter?

Well, Q4 is always seasonally the best time of the year, and this is what we see in this year. We also have the restocking of the Chinese and the substitution of the domestic with imported iron ore, which is also helping the Capesizes. This market may go on for a few more weeks until the end of the year.

Okay, and do you think that we'll see sort of the January effect and the Chinese New Year in January kind of having a depressing impact on rates then?

Again, as Angeliki said, we don't have a crystal ball, but traditionally Q1 is the lowest part of -- in terms of rates. We have the holidays over Christmas, then the Chinese New Year holidays, so trade is usually low in Q1.

But one thing that you have to realize, Natasha, is that as United States is going through a leadership change in election, China on the same period is having a leadership change now in November, and there's a commitment on growth on the new government.

So one of the things that we have to always keep in mind is that the capacity of the Chinese economy and government to boost economy, which we showed it happened in Q4, it may be something that may still in 2013.

That definitely makes sense. Thank you. Just lastly, if I may, there's definitely been some concerns that Chinese shipyards will continue to make dry bulk vessels due to support from the government and the needs to keep employment high. Could you talk a little bit about your thoughts on that? Are you worried that China will take more control over its shipping imports in the future?

I don't think today you have new orders. I think what is happening is now is whatever was built and left in shipyards, you have [done] China. We've seen a lot of resales of vessels that was stuck, and because of regulation for classification, these vessels had to be put -- shown to be completed in July of this year.

Some of these vessels will come in -- this was Chinese ordered that got stuck in different yards. Some of these orders are coming and we have seen them coming into the market. I don't think right now you have new vessels and newbuildings built in the dry bulk as much as recirculation of whatever was in the system and trying to find a natural owner.

Okay, great. Thank you very much for your time.

Thank you.

Ben Nolan, Knight Capital.

Good morning (multiple speakers). I have a few questions. First of all, as it relates to sort of the bank debt side, you guys obviously procured financing for the acquisitions that you did, and then also, I guess in July, did a refinance of the existing facility.

One of the things about the refinance in particular was that Commerzbank obviously was -- took a pretty major role, and I guess subsequently have said that they no longer intend to add exposure to the shipping space. Just curious, does that -- I would suspect it doesn't impact the loan that you agree to, but does that shape your thinking or impact, do you think, your ability to secure financing on future transactions, or, I mean, is there (multiple speakers)

Actually, this is a very good question, but actually this is what demonstrates the ability of Navios Partners to have secured finance.

The announcement of Commerzbank's exit from the shipping sector was -- actually coincided with just before we purchased the vessels. In essence, Navios Partners have done a second packet with new bank so we can build on this new pool of assets and create an extended Company. This is actually demonstrated in the worst possible shipping market, as well as a very difficult summer months for the capital markets in every sector. Navios Partners was easily able to secure in the middle of vacation a nice financing in line with previous ones, and we can build actually in that portfolio further.

Okay. So the absence of Commerzbank going forward should not be too material on your ability to finance?

No.

No, that's helpful. I assumed that was the case, but you know, obviously, that's a key name in the space to sort of circle where there is exposure.

My next question, and it sort of gets back to the charter that you did for the Libra, obviously a little bit longer term. I was just curious, that's a little bit of an older ship. Is there any -- is it more challenging to get charterers to agree to vessels -- to agree to charter vessels that are a little bit older like that, when it would appear to be ample number of more modern vessels that would -- may be available to charter? Is there any large distinction being made by charterers based on age?

That's why, in essence, committing to a longer period makes more sense because it is easier to fix on lower rate. A modern vessel will not commit for a longer duration.

Okay, so you're saying, I guess, the owners would not -- of modern vessels wouldn't commit to longer durations, is that (multiple speakers)

Well, I mean, would you like to be actually fixed on the low of the market for a long duration? No.

Right. That sort of leads me to my next question, and this is a little bit more, I don't know, theoretical, I suppose. But to me, anyway, it seems as though there may actually be more value on the freight side of the business than there is on the asset side of the business, i.e., you might be better off if you could charter in a vessel on a long duration at currently low rates than taking the risk that asset values may fall further and acquiring ships at current levels.

Maybe that's not your view at all, but if it is, would there be any potential at all that you guys might look to charter in vessels, if there is any capacity to do that, on longer durations and sort of play the upside a little bit? Or maybe that's better suited for the parent, I don't know, but just curious how you might think of that.

We're going to exclude that, but in essence you have to realize that this is better suited on a more levered and less dividend-driven model because you're going to end up with an actually bigger lever because it's like off balance, it's levered, the chartering, because you're bringing in debt.

If you realize one of the -- if you see one of the reasons Navios Partners has been able to perform and grow its distribution consistently at 6.5% per year, and the reward that our investors and shareholders, has been because we're very careful about the leverage we have. On a charter-by-charter evaluation in today's market, today's level of asset values, we are at 35%.

So going in and getting a large position, yes, and a levered position, as we know, you make more money. But if you are wrong, you're going to really suffer. So our own internal model is conservative, and we prefer to take a more conservative approach because we like to protect our shareholders and the distribution.

Yes, and that makes a lot of sense. And again, it may be more suited for the parent or maybe just a different model entirely, but I guess I'm just curious whether or not you think that there may actually be more value on the freight side than the asset side, you know, independent of how it fits into the partnership?

There will be great value in assets -- in the asset play, and it has always has been, and you can make incredible returns on your investment as it is also in freight. It's a different level of lever.

Okay. All right. That answers my questions. I appreciate it.

Joshua Katzeff, Deutsche Bank.

Good morning, guys. I just wanted to follow up on some of your acquisition discussions. You spoke about the four to six vessels, or potentially more, and that you'd spread it out, but can you give us maybe any more color on timeframe? Are you thinking maybe one vessel or two vessels per quarter, or any more kind of details on that?

We apologize, but I think this is too specific. The strategy is well articulated from beginning of this year, so we will let you [keep] on that as the situation and opportunities arise.

Fair enough. With regard to capacity for acquisitions, there's $50 million of cash or so on the balance sheet. How should we think about funding these acquisitions? And I guess, maybe, would you guys be looking to then have to go to the capital markets again?

This is -- we can find that [delimitation] or we have internal cash we can leverage also and we can easily -- I mean, with today's $20 million values, I mean, the $50 million cash plus 15% finance gives you about $100 million. That is five vessels.

Got it, got it. With regard to the time charters, it looks like the Soleil is being listed at about $9,000 a day, down from $13,000-plus a day, with kind of the same expiry of November 2012. Was there anything going on there?

No, but the effective rate is about $14,000 because there was also a balance bonus. So the time charter is $9,000. Effective rate is $14,000.

Okay, got it. And then, with regard to its charter expiry in November, can you provide any guidance on maybe rechartering, or thoughts on kind of strategy for that? And is there any difference between the Supramax time charter market and the Panamax time charter market?

On the Supramax, we'll be prepared to keep it shorter, to about a year.

I guess with profit share or fixed?

We will try to find the best rate. I mean, the vessel is opening again in a very good Atlantic position, and we have been running this vessel almost for six months at $14,000. So the next thing is to try to do maybe a year because you're going to be in a seasonally strong position with kind of a profit sharing or some kind of an arrangement.

That's all I had. Thank you for your time.

Thank you.

Ken Hoexter, Bank of America Merrill Lynch.

Good morning, it's actually Wilson sitting in for Ken. Most of my questions have been answered, but I just had one clarification. In terms of the, I guess, four to six vessels that you guys are targeting in the S&P market, does the two that you have already purchased this year get included in that four to six count, or is that four to six additional vessels that you're looking to purchase?

It's some additional vessels.

Addition. Okay, great. Thank you.

You have no further questions at this time.

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

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