Navios Maritime Partners LP (NMM) 2013 Q2 法說會逐字稿

Thank you for joining us for this morning's second-quarter and first-half 2013 earnings conference call for Navios Maritime Partners. with us today from the Company are Chairman and CEO, Ms. Angeliki Frangou, Chief Financial Officer, Mr. Efstratios Desypris, EVP of Business Development, Mr. George Achniotis.

The conference call is also being webcast. To access the webcast, please go to the investor section of the Navios Maritime Partners website at www.navios-mlp.com and you will see the webcasting link.

Now 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 Partners. Forward-looking statements are statements that are not historical fact. 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 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 this conference call. Thank you.

At this time I would 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' second-quarter 2013 financial results. Then Mr. Achniotis will give an operational update an overview of market fundamentals. And finally Ms. Frangou will offer concluding remarks and we will open the call to take your questions.

I would out like to turn the call over 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. As many of you know, the drybulk market has been challenged by violent macroeconomic concerns. Uneven growth of China, startling economic activity in Europe and a slowdown in American markets have all played a role in the currently difficult drybulk market. Navios Partners has not been distracted by the notice of this event, but has focused on positioning itself to take advantage of both market peaks and market [slows].

We recently announced a quarterly distribution of $0.4425. This represents an annual distribution of $1.77 and a current yield of about 11.8%. We believe that in time investors will find Navios Partners' yields extremely attractive as it represents more than two times the yield of their [relative NLP] index of about 5.6%.

We are committed toward distributions. To this end we have worked hard over the past six months, engaging novel term loan with fundraising, taking cost out of our system and ensuring low leverage and a flexible chartering strategy. As a result of this hard work, we can assure investors that the current quarterly distribution is secure for the balance of 2013.

In addition, the current quarterly distribution is secure for all of 2014. We think that providing this guidance for the investor community should provide comfort.

We feel the drybulk environment is brightening. Our [Cape] rates have doubled recently. Overall demand for transportation shares has continued to grow and we anticipate that total mines will grow as the price of iron ore moderate.

It will then be [possible] for China to import iron ore [not] to mine it locally. Although record supply weighs heavily on the short-term outlook, scrapping of all the vessels and especially our order book is acting to balance the market.

2012 was a record year for scrapping. And we expect to come close to that amount in 2015. Also the order book is much healthier if less than a dramatic reduction in vessel delivery for 2014 with significant [sleepers] likely for 2013. With this typical recovery on the horizon NMM remains along some of which we are uniquely positioned to take advantage of this market recovery.

As you can see from slide 2, Navios Holdings owns about 23% of the equity of Navios Partners. With Navios Holdings assistance, Navios Partners has become a key player in the drybulk 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 with net debt representing only 26.3% of [capital adjusted valuation] and 18.1% of total capitalization. Consistent performance has enabled Navios Partners access to capital market and provided Navios Partners the ability to grow its fleet and cash flow. In fact, since NMM went public in November 2007, we have increased our fleet more than four times. Today we control 25 vessels with an average charter duration of about 2.7 years.

Slide 3 sets forth for the sum of our efforts to secure the talent distributions for 2013 and 2014. As you may know, we recently completed another transaction of accessing the Term Loan B market where we raised $250 million. This institutional market provides us access to new lenders as traditional sources of [shipment] continue to shrink.

Successfully completing this transaction is just one of many examples of Navios's ability to quickly identify and respond to [paradigm] market shift while maintaining steady access to [ship] capital. We found our initial entry into this market satisfactory.

In these markets we were able to negotiate the following favorable terms. LIBOR plus 425 basis points. A five-year term. Annual authorization of 1%. Higher advanced rate of 70% versus 50% for traditional commercial banks. And relaxed loan to value maintenance requirements of 80%.

The cash servicing requirements for Term Loan B is approximately $17.5 million less annual when compared to an identical amount in the form of a traditional commercial bank loan. Additionally, I also wanted to note that we used about $75 million of the loan process to fund the previously announced transaction of four vessels.

This significantly reduces our cash breakeven to $8,601 per day per vessel and we become accretive to common unitholders by $0.06 in (inaudible) rate.

We have reduced also requirements to the extent possible. We have less than $6 million of debt amortization in the next two years and no debt maturities before 2017 in nonfunded CapEx. We also maintain a low level ratio of 18.1 net debt to capitalization in the last cash filings of about $161.4 million.

Finally, and further proof of our hard work over the past number of months, we negotiated a $13.3 million of advanced payment of charter hire for Navios Melodia. We received this amount without discounting for present value and in a complex transaction revolving around the bankruptcy.

Slide 4 shows our liquidity position. As I have mentioned, we have total cash of $161.4 million and total debt of $345 million. We have a low net debt capitalization of 18.1% and nonsignificant maturities until 2017.

Slide 5 shows the multiples of ways we have been able to grow our fleet and distributions. Since our IPO in November of 2007, we have grown distributions by 26.4% and our fleet capacity by 325%. We have done so with the assistance of our sponsor who values the balance. We have also recognized purchase options and we have -- that we had in charter in vessels.

More recently we have been active in the S&P market and we will continue to use this market to improve our fleet and opportunities arise.

At this point I would like to turn the call to Mr. Efstratios Desypris, Navios Partners' CFO, who will take you through the results of the second quarter of 2013. Efstratios?

Thank you, Angeliki. And good morning, all. I will briefly review our overall financial results for the second quarter and six months ended June 30, 2013. The financial information is included in the press release and is summarized in the slide presentation on the Company's website.

We consistently have strong operational and financial performance. Additionally, as Angeliki also mentioned earlier, we continue to take appropriate measures to solidify our balance sheet and lower our cost breakeven. These actions allow us to remain committed to a minimal distribution of $1.77 per common unit for 2015.

Furthermore, the current quarterly distribution is secure for all of 2014.

Also on slide 6, our revenue increased to $49.2 million mainly due to 264 more of 11 days from the second quarter of 2013 compared to the same quarter of 2012. EBITDA increased by 23.8% or $8.6 million to $45 million, mainly due to the $10 million received in advanced on the management of (inaudible).

Net income has been negatively affected by a $2 million non-cash write-off of the Fed financing fees associated with any financing of our [Greek] facilities and a $3.2 million non-cash write-off (inaudible) release relating to the management of [Via]. Excluding these one-off items, net income would have been $24.7 million, [48.3]% higher than the corresponding period of last year.

Operating expenses for the quarter ended June 30, 2013, was $40 million, 35.6% higher than the corresponding quarter in 2012.

Our fleet continues to perform well. Vessel utilization for the first quarter was 99.9%.

Moving to the six-month operations, time charter revenue increased by $2.3 million to $99.4 million, mostly because of the 578 more available days. EBITDA increased by $8.9 million to $82.1 million, mainly due to the payment received in advance of the management of Via mentioned above.

Net income has been negatively affected by a $2.4 million non-cash write-off of the Fed financing fees associated with the prepayment and refinancing of our paid facilities. And a $3.2 million non-cash write-off of a favorable lease relating to the management of Via.

Excluding this run of items, net income would have been $41.4 million, $7.8 million higher than the same period in 2012. Operating Surplus for the six months ended June 30, 2013, was $71.2 million which is 20.5% higher than the corresponding period in 2012.

Turning to slide 7, I will briefly discuss some key balance data for June 30, 2013. Cash and cash equivalents including restricted cash balances was $161.4 million. As we mentioned earlier, during the quarter, we completed the [transference] of the Term Loan B which was used partially to refinance existing debt and also to finance the acquisition of four vessels.

As a result, long-term debt including current portion increased by $45.4 million. Out of this amount, $98.2 million still remain in escrow and will be released upon the delivery of the new vessels.

Based on our current [distribution], the debt amortization for the remainder of 2013 amounts to $1.3 million and $4.5 million for 2014. Net debt to book capitalization at the end of the quarter reduced to 18.1%.

As of June 30, 2013, we were in compliance with the financial covenants for all our Greek facilities.

As shown on slide 8, we declared distribution for the second quarter of $0.4425 per common unit. Our current annual distribution of $1.77 provides for an effective view of 11.8% based on yesterday's closing price. The record date for the distribution is August 8 and the payment date is August 13, 2013.

Total distributions for the quarter amount to $29.9 million. Our common unit coverage for the quarter was 1.38 times. Our consistent strong financial performance enables us to secure our distributions for 2013 and 2014 and remain committed to a minimum annualized distribution of $1.77 per common unit for 2013.

I have to remind you that for US tax purpose a portion of our distribution is treated as a return of capital. Also, we report the accumulative annual distributions to common unitholders on Form-1099.

Slide 9 demonstrates our strong relationship with key participants in our industry. We have [quality] service with another remaining period of almost three years. This service has paid among a diverse group of counterparties. In addition, we have ensured (technical difficulty) default with either of AA rated insurance company in [EU] or our sponsor-managed Maritime Holdings.

In slide 10, you can see the list of our fleet with the contracted rates and the respective expiration dates per vessel. Our fleet consists of 25 vessels. Eight Capesizes, 14 Panamaxes, and [three Handymaxes].

We have a relatively young fleet with an average age of 6.7 years as compared to the industry average of 9.5 years. We have currently contracted 95.6% of our available days for 2015 and 44% for 2014.

We feel that we have positioned well the Company to take advantage of an expected market recovery with experience (inaudible) durations extend to 2022 related.

I now pass the call to George Achniotis, our Executive Vice President, of business development to discuss the industry section. George.

Thank you. Good morning, all. Please turn to slide 11. World GDP continues to be driven by developing economies which now continue with a higher percentage of total world growth than the developed economies, representing over half of the global consumption of most commodities.

Recently the IMF slightly lowered its forecast for world growth to 3.1% for 2013 and 3.8% for 2014. Developing economies are projected to grow at 5% in 2013 and 5.4% in 2014. The Chinese economic growth was also reduced slightly to 7.8% in 2013 and 7.7% in 2014.

Turning to slide 12. The primary engines of trade growth continue to be China and India with other emerging countries adding strong growth. Drydock rate has expanded by an average of 5.5% per year in the last decade since China joined the WTO. Consensus focus for 2013 have for global travel rate to grow approximately 5% and term line growth of about 7%. A similar growth rate is estimated for net fleet growth, leading to balanced supply dynamics.

Moving 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, having 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, income growth supports increased metal demand. The rising global income and the shift in the global economy towards Asia should support increased [term rights] for world [back] rates.

Moving to slide 14. Iron ore from the major mining companies continues to be the lowest cost, highest quality source of this commodity. With iron ore prices focused to decline to the $100 per ton range, significant Chinese domestic production, which is represented by the red boxes in the lower right graph, will become [un] economic.

The currently planned expansions of mines spitting seaborne iron ore without an additional 205 million tons per year in 2013 and more than double that amount in 2014 with further growth in the following years. While the majority of these expansions are in Australia, over 30% will come from the Atlantic Basin, adding 10 miles.

Turning to slide 15. The continued development of urbanization of China will continue significantly to steel consumption in 2013 and beyond. Infrastructure, housing construction and consumer spending growth will continue to underpin future development. Note that Chinese peaks in asset investments have continued to grow at over 20% year on year through the end of June.

Crude steel production in China in the first half of the year was about 9% more than the same period last year. China imported 385 million tons of iron ore, about 5% more than the amount imported in the first six months of 2012; and imported stockpiles have been drawn down steadily from 98 million tons at the end of August 2012 to 71 million tons at the end of last week -- lows not seen since Q2 2009.

Domestic iron ore production increased 8% year on year, but quality seems to be deteriorating. Its effective [FE] content hovers in the 15% range compared to 63% FE content of imported ore.

Going forward, this substitution of low quality domestic iron ore with imported ore is expected to grow and will increase the tons carried in 10 miles.

The chart on the upper right shows historical and forecasted Chinese coal imports. China was the world's second-largest coal importer last year importing just 1 million tons less than Japan's 179 million tons. This year, China is expected to become the world's largest, importing about 200 million tons.

So far through June, Chinese imports are up 15% year on year over 2012.

Turn to slide 16. Scrapping rates for older, less fuel-efficient vessels have continued at very high rates this year. Through July 19, about 14.1 million deadweight tons were scrapped. If this trend continues, scrapping could exceed 26 million tons in 2013, become the second highest yearly total in deadweight tons ever.

The current rate environment should encourage scrapping of older vessels and about 11% of the fleet is over 20 years old, providing about 76 million tons of scrapping potential. Of note is that the current 2013 scrapping totals already include 14 ships that were less than 20 years old, four of that were less than 15 years of age and one that was 10 years old.

As demolition prices appear to depend on overall steel prices and not only supply of vessels, they are expected to remain high and we believe we will continue to see the scrapping of older, less efficient vessels.

Moving to slide 17. Net fleet additions in 2013 are expected to be significantly lower than last year. Non-deliveries through June amounted to 44%. This combined with high scrapping means that net fleet growth could approximately equal the expected increase in demand during 2013.

The order book is expected to decline dramatically through 2014 and beyond. And it is expected to remain that way as banks continue severe restrictions on new building loans.

Moving to the next slide, slide 18 provides a retrospective on the rate environment and considers the impact of supply demand equilibrium on rate recovery for 2013. As we all know, for any rate recovery to be meaningful and lasting, fleet growth rates need to fall below trade growth rates.

As mentioned earlier, demand for drybulk cargoes is expected to increase in 2013 by about 5%, the same rate as the expected net fleet growth for the year.

However, the rate of change suggests that demand for drybulk vessels will increase in 2013 and beyond, as new building deliveries continue to decelerate and scrapping remains at record levels.

In sum, we note that for the first time in four years, there is an expectation that net demand will equal or exceed supply. Consequently, we could see Panamax and Supramax rate levels pick up during the second half of 2015 to add to the [Cape rates] seen recently. We know this as these conditions were not evident over the past few years.

Please now turn to slide 19. The Baltic Dry Index opened in Q2 at 896 and hit a low of 801 on June 5. Since then, increased export of iron ore, coal and grain out of South America pushed the Index dramatically up to a figure of 1,179 on July 1, its highest level since January 2012.

This increase was concentrated in Cape rates which increased about 200% in June with more gradual increases in the smaller sizes.

Subsequent to its July 1 pick, rates have remained close to similar levels. During the second half of the year, a slowing trend in fleet growth along with significant additional iron ore export capacity in both Brazil and Australia should at least support even though it increased earnings especially in the Capesize sector.

Both the Panamax and Supramax sectors should receive support over the medium to long term by Chinese coal and grain imports. The UN expects China to double grain imports between 2012 and 2022. The further slowdown in deliveries combined with the gradual recovery in the world economy should bode well for improving fundamentals in 2014 and 2015.

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

Thank you, George. This completes the formal presentation. I will turn the call over to questions.

(Operator Instructions). Chris Wetherbee, Citi.

Good morning or good afternoon, guys. When I think about the guidance you gave around the dividend sustainability I guess because maybe the first time I have heard you be so adamant about 2014 -- about the 2014 targets I guess. Is it really just the Term Loan B there and the fact that you have added some incremental vessels at very low breakeven cost? When you think about 2014 how much rate improvement are you factoring? I just want to make sure I understand what the drivers of the surety around 2014 dividend distributions.

Number one, is of course it is a terribly long book, very accretively cash breakeven on the acquisition is now [8006 content]. And now overall cash breakeven came down because we have huge savings and also gave us visibility beyond the three years.

To be honest you are saving about $17.5 million per year from amortization profile, regular amortization.

But the one thing that additional vessels that provide the biggest pool of assets and that serves in a very important point is that growth in accelerated payments advance payments for the Navios Melodia, so we got all the future earnings of the vessel. Until March of 2015 we got it [undiscounted] today.

Last, we have all the mitigating benefits above the floor of $15,000. So you realize we have cash in our balance sheet, all the additional earnings and also another thing, like we see also very positively after negotiating on some of our other vessels with major delineating clash (technical difficulty) charges. We have seen now that they just have essentially moved on the forward fixing forward the [erosions] for two or three years at quite higher levels. And we have seen now for the first time in quite a period a five-year market that is very, very attractive at about $18,000 which is I think something that makes us very positive.

That's helpful. And that was actually going to be my follow-up. We have been hearing the same think that there is getting to be a little bit more depth in the term charter market. So when you think about five years or actually is a bid out there around $18,000 could you even maybe put a little bit of color around the thoughts around the availability of maybe two- to three- and maybe five-year charters out there? And would you be willing to go that long as you start to think about the profile of the ships coming off of contracts and the new ones coming in?

I mean certain vessels, I mean, we will actually benefit from the mitigating levels we already have. So you see that there's a benefit here to be done.

That's helpful. And that's very helpful. Thanks very much for the time. I appreciate it.

Michael Webber, Wells Fargo Securities.

Good morning. I just wanted to quickly piggyback on the other question on the dividend guidance and it definitely seems pretty deliberate and it's the first time you guys have gone out and given some security around the 2014 dividend.

And you may be coming at it from a different perspective. I am sure when you guys were thinking about doing that, either you were thinking about a timeframe and whether or not you would talk to 2014 or 2015, so maybe if we look out beyond 2014 or we look at maybe the 2015 -- to 2015 scenario, what about that portion of the curve and that portion of the market kept you from giving more security more than just kind of the 18 months? With the caveat that the near-term securities obviously are positive, just curious as to what kind of truncated it to 2014?

Let me, Mike, maybe I want to make sure we are committed to our dividend. Easily the second we can give you the visibility because have the cash in our balance and we have fully outlay of our cash commitments and a low breakeven we will have full visibility of what is coming in front of us (multiple speakers) reason of assumption or something.

We are not saying that we are not committed overall, this is something we believe that is important to our investors and shareholders, so it is something that we were permitted, but I don't have a crystal ball to tell you how exactly all earnings will be forever. We believe the environment is even much better. We are talking about having the cash on your balance sheet.

We believe we have no problem of committing of being able to have a strong cash flow and we will have growth and the strategies that it is providing a real benefit. We acquired new vessels, we created Term Loan B which brings you an incredible competitive advantage.

Let's be real, guys. You have a new building Capesize at the cost of $8,600 and you can fix it today on a five-year at 18. So and the Term B Loan market is not like the bank finance market which is limited. We have an incredible ability to really grow the Company.

No, I think that the increased visibility is definitely a positive. Just curious as to the timeframe that was chosen and what went into that decision. But that makes sense.

I want to jump to the Term Loan B, which I agree seems pretty helpful. You mentioned and we are going to go in the opposite direction of everybody. I think there is a caveat in there that the covenants do not restrict you from or don't restrict you continuing to pay the dividend.

Is there any restriction from moving it higher? I know that is not necessarily on the table right now given where the market is, but if we look out four to five years, is there a restriction on moving that?

No. No there is only fixed. I mean it will never have gone with an MLP something that will restrict us. But what I want to repeat and I think this is a very strong statement is think of your breakeven on a new building Capesize of $8,600 and your ability to really our vessels with a capacity of the Term Loan B. And this you can do.

And that will easily provide you about $9,000 to your bottom line if you do it in a five year piece. You realize this is quite accretive for the Company.

And a lot of work that we did, we took the Company rate -- and we rated the Company. We got one of the highest ratings for a drybulk company in shipping that will be and we are working on really stable cash flows forward. So of course, you are not going to fix on the same rates you had before, but you will have largest fleet, a pool of vessels and this is what our strategy was. And that is how we are implementing it.

Right, improves the margin. That makes sense. One more for me and I will turn it over around the Melodia. I know this is -- I mean this has -- I mean, this has been the KLC and you guys have been disclosing for a while that I mean they have obviously been a receivership and that they have been -- the original charter was performing as long as they are paying you directly. And it seems that you pulled forward. It sounds like you pulled forward some value with a floor rate that I think sounded like around $15,000 a day.

Forgive me if this is listed somewhere and I just missed it. Can you talk about that charter? I mean that is a pretty lucrative charter. It is $37,000 a day, I think, to [2022]. Did you give away any sort of tender on that contract when you pulled for the cash or where did that stand exactly?

Well, the remaining charter remains in fact the only good accelerated payments were period of April 2015.

All right. So after April 2015 it goes back to KLC at the original rate, and in the meantime, you guys are running it on your own and they basically pay you the difference between $37,000 and I guess a floor of $15,000?

Yes.

So you guys are actually out there running that asset or chartering that asset in the market right now?

Sure, that's how we clarify it. We have paid the boat $15,000 and we got all the accelerated cash flows, so we have no credit risk and we will deploy the rest in the market.

Right. Okay. That makes sense. That's all I had. Thanks for the time.

Chris Combe, JPMorgan.

Good morning. It is actually Nish on for Chris. Just wanted to follow up real quick with Mike's point about the Melodia. Did you say that the market to the vessel is actually going to be a recharter in the market right now in addition to the $10 million upfront?

Yes. It will get $3.3 million advance payment and we will be fixed in the market so we can recharter it at market.

Okay, great. And it will be rechartered and redelivered to KLC at April of 2015?

Yes.

Great.

2016.

April 2016?

Yes.

And then, just really -- I am going back to the Term Loan B. We notice that for the four vessels you guys levered up a little more to 70% versus 50% with prior guidance. I wanted to get some color on what was the driving rationale there to finance this with less equity?

Overall, we will have a very low lever of 18.1 net debt to [capitalization]. I mean with amortization profile of 1% and a relatively very low cost of LIBOR plus 425, it made sense. On a breakeven basis, actually brought our breakeven down and we could have an additional $10 million of our actual financing from banks. What we would (technical difficulty) taken to we have an advance of a $10 million additional advance less low breakeven.

And do you think this is the structure you could replicate going forward for additional vessel acquisitions as we move into 2014?

Yes, because you have the ability to do add-ons. So you are able to be there with additional cuts while you are (technical difficulty) vessels. And to be honest this is a very attractive alternative to traditional ship lending where you have the restriction of different banks be able to expand their portfolios.

Great. I really appreciate the help. Thanks so much.

Joshua Katzeff, Deutsche Bank.

Good afternoon. I wanted to start off on some of the recent charters that you booked this year. I guess since last quarter it looks like there have been five ships rechartered. They all seem to be at this three-month to one-year time charter range. Can you talk about your near-term chartering strategy?

What we see is that the market is start being able to longer deals. That is why we gave -- we saw the two- and three-year market on the Capesize coming back. The Capesize is the most volatile of the vessels and that is where you see the -- when optimists come back where we see this happening and what we have recently seen. We are seeing also a five-year market.

So I think that this is an extremely positive event and we think we will benefit here and as you move to Q4, which is seasonally stronger, you will have more of this activity.

So, is it -- so, for I guess for those four or five -- four vessels Q4 that come up in Q4, I guess November, December should we expect to see longer terms there? Like one to three years?

Yes, I think we will be able to see longer durations.

Got it. And one more question on the Melodia. Just for accounting purposes, is it going to be still treated at $29,000 per day in the chart or even though you are operating it you [bulk] for the cash? Or for accounting purposes is it going to be accruing at some sort of spot rate?

I thought this was going to take more in detail, but from what I understand it will be a launch time payment and then for the period and then we will [support] earnings.

If you see our accounts, what you will see is that we have already taken in the P&L of the order, the $10 million that we have already received on this settlement. And also we have to write off our portion of the amortization. So that net effect on our net income was approximately $6.8 million.

Going forward, we are going to amortize a small portion of $3.3 million to our P&L on the next two quarters and then we will have only the market rate for accounting purposes.

Got it. And maybe switching to charter coverage. I guess one of the biggest differences between your counterparties in Q1 and Q2 is the absence of SPX being named. Can you maybe talk about your exposure to SPX and what is going on in that process?

We are covered by insurance. So I think this is a nonevent for Navios Partners.

Is the insurance covered by a related party or by -- it is the Navios Partners -- I'm sorry, Navios Holdings -- or is this a third party?

We cannot -- as you know we have a confidentiality. But the nonexempt for us, I mean it was totally estimated so we are absolutely covered.

And one more question regarding that. I guess because we don't know which vessels are on to SPX that that insurance coverage is going through the entire duration or for these charters extending out beyond 2016?

We are covered. If we had something to disclose as will affect the finances, we would already have disclosed it. And you are very familiar with the Company. You already have seen other events and we are always covered.

Got it. I guess that is all I have. Thank you for your time.

Ken Hoexter, Merrill Lynch.

Looking at the -- are there any other customers that are struggling to pay similar to Korea Line? Anything with cost go on their status as they have had some losses for a few years? Just wondering where the market stands on your current position.

We don't see something that would -- I think more clever was default has already happened. I don't see -- we don't see anything that is particularly threatening or something that we see that may -- there may be a (inaudible).

Okay. So, but you did note in one of the slides distressed opportunities may arise. So, looking out at the market why not -- do you see more activity now? Do you see opportunities in the market? Would you choose to lever up even further, given the 18% you mentioned a couple of times?

I think what was -- thinking about the expense of goods don't forget these banks and this -- all of the activity that already exists from -- we are almost five years through the crisis.

So that doesn't mean that you need a defaulted counterparty today. You have a lot of vessels and these are really in essence in the hands of the banks who is the ultimate -- the seasoned maker. So there will we -- we continue to see opportunities and this is something we will be able to consider.

Would you choose to go that distressed route and on the used market or would you look to build new? What would be your primary choice?

I think Navios has been very careful of the way we acquire vessels. Let's take a recent acquisitions we have done. We acquired vessels in the second half of various sizes. And we also acquired new buildings. Japanese building from the [top CPS], at Capesize at $47 million and a Supramax Japanese build at the -- $27.5 million for 2014. So you realize we buy top-quality vessels from top-quality yards and we do care about relative value. We are not just a financial player ordering at any price.

So, how are -- if we are starting to see the turn and I guess given George's commentary about the turn or maybe supply demand equating and the falloff in the order book, how are the yards looking at pricing right now? Do you see extremely attractive new build prices or, I guess, just what is your view on that portion of the market now?

I think on new building vessels you will see mostly -- I mean, Japan, I think you will see some capacity for 2015, 2016. And then you can -- but I refine opportunities while still from resales, people look at stock, I think you can find more attractive opportunities than going and ordering flat forward delivery.

So you are seeing more opportunities on the resale side than from the yards right now?

Yes.

Can you confirm the dates or timing? Is everything still on track with the four vessels?

Yes.

So can you confirm what dates we are looking for for delivery there?

We have Q3 for one Capesize and one Panamax. Q4 for a Panamax and in January it is Supramax.

And, lastly, if I can just drop up with is there anything that you see that goes wrong in this recovery, just looking at George's, again, commentary on how we have moved past the last couple of years and into this recovery and the rebound of the VDI recently. What you see that can trigger this to stall it?

Actually having a -- we think that US is actually moving at a reasonable pace for recovery. I think time has now reconfirmed that the growth will be 7%. So it is not really -- is good news. They confirmed their growth.

I think the most positive event that we have seen on the data release also as today and I mean the news that they are coming from Europe. Europe is on track for a better growth than estimated. And I think this is or was a big question mark in this recovery. Because the US is growing, Japan -- China is growing at 7%. So there's no problem there. Japan is growing well.

And your question, Mark, was really Europe and Europe, I think, the activity is clearing up and we are seeing both Germany, England growing at a better than expected.

Yes, no, I understand that it is growing better than expected. But so there's nothing that -- I am just wondering what could go wrong? What could we wake up and be surprised with in terms of if everything looks like it is marching forward, where would you see something that could surprise? Or is there nothing that you see?

The real question mark is on demand because the supply you see scrapping going well and on deliveries as well. So your question mark will be on the demand if you had a continued recession in Europe.

That will be -- Europe combined is as big as that United States. So this is your biggest question mark and that was year on sales [empty goes lying] mostly. And that will affect also emerging markets. And so there is a major trading partner. So business hears -- it seems to be going away. Hearing much more positive news from Germany. Even France. And we saw unemployment stabilizing in Spain. So the news are better than what we had a couple of months ago.

Appreciate the insight. Thanks.

Ben Nolan, Stifel Nicolas.

There has been a lot of talk about vessel acquisitions and where the market is and that sort of thing. I was just curious in keeping with that how you guys are evaluating where to hold potential acquisitions, either at the holding company or at the partnership. Or how do you really evaluate which is the right entity to make vessel acquisitions?

I think Navios Partners is very clear, you don't have an unfunded -- we always acquire vessels and we don't allow to have an unfunded CapEx. And as you know very well it has to be accretive. So to all unitholders.

So this is something that makes a very clear breakeven (technical difficulty). We made sure that our breakeven today, cash breakevens are lower so we can actually make accretive acquisitions even easier for Navios Partners. And we have a very straightforward mandate to buy vessels that are accretive with not unfunded CapEx.

And how does that vary from the holding company's mandate other than maybe not funding long-term new buildings?

Navios Holdings does not have -- doesn't have the distribution and you don't need to be as accretive. You have a different threshold for Navios Partners. You have the bond, it is a different -- a totally different way that you can use -- you have different models. One is (multiple speakers) distribution and so, very different.

So you can afford maybe to make an acquisition at the holding company that doesn't generate an awful lot of cash flow that maybe has more long-term upside potential or something like that, relative to meeting the cash flow at the partnership and that is the dividing line. Is that how you think about it?

Yes. Take an example of the [SHS], all the JVs we had with the Japanese on -- I mean there is a different kind of a pattern that Navios Holdings will go versus a more straightforward disciplined way of Navios Partners.

Okay. That's helpful. And then I was going to see where you think that your call it your dry powder is after you take delivery of the four remaining new buildings and draw or using the credit facility. How much firepower do you think you have available without having to access additional equity to do more than what is already on the books? Do you think?

Within access we can do an additional to the Term Loan B and we have cash on our balance sheet. I think this, you can easily see that we have the ability to grow. With additional vessels of course we always, as you know, protect our downside. We are careful not to expose our Company to the downside unnecessarily.

Sure. But you don't have like a dollar amount necessarily that you can say it's however much?

But we have articulated with that in view of acquiring vessels. We are one of the few companies I see that will have a history which we have implemented into that. I mean, we have acquired six vessels. So you realize that this is not something that we will stop doing.

Sure. And then the last question is a little bit more market-related. As it relates to acquisitions, though, it seems like we have seen a little bit of a tick up in secondhand asset values. Not substantial, but a move in a positive direction. It seems like also there seems to be a bit more capital available from, call it Wall Street or elsewhere, private owners.

Have you seen there being an increase in the level of competition maybe? Is it any more challenging at all to be able to find really quality acquisitions more easily or in less competitive environments? Or is it still just really a lack of capital available in most cases #and you sort of have your pick of opportunities.

Let's be honest and straightforward. If you are talking about new buildings and just buying a new building that really takes zero energy or knowledge of doing it, I mean this can be done by anyone. And that is where the concentration of where financial players are.

In the case of Navios, we have demonstrated beyond any doubt that we can do multiple strategies as well, acquire secondhand vessels that can be attractive, being able to acquire and see the yield results even with slight movement on the values and being able to really capture new buildings (inaudible) that can be prompted deliveries from the better yards.

So I think, yes, there will be some cash from Wall Street to be invested which is not bad. Actually creates an activity. I don't think that we are competing very much on the kind of deals we are doing.

Okay. So you haven't really seen a material change in the competitive environment for vessel acquisitions, I guess then. Is that right?

Yes.

Okay. All right. Thanks a lot for answering my questions.

Thank you.

That was our final question and now I would like to turn the floor back over to Angeliki Frangou for any closing remarks.

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

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