Navios Maritime Partners LP (NMM) 2014 Q2 法說會逐字稿

Thank you for joining us for this morning's Navios Maritime Partners second-quarter and first-half 2014 earnings conference call. With us today from the Company are Chairman and CEO, Mrs. Angeliki Frangou; EVP of Business Development, Mr. George Achniotis; and Chief Financial Officer, Mr. Efstratios Desypris.

As a reminder, this conference call is also being webcast. To access the webcast please go to the Investors section of Navios Maritime Partners' website at www.navios-mlp.com. You will see the webcast link in the middle of the page and a copy of the presentation referenced in today's earnings conference call will also be found there.

Now let's review the Safe Harbor statement. The 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.

The agenda for today's conference call is as follows. First Ms. Frangou will offer opening remarks. Next Mr. Desypris will review Navios Partners' financial results. Next Mr. Achniotis will provide an operational update and an industry overview. And lastly, we'll open the call to take your questions.

Now I would like to turn the call over to Navios Partners' Chairman and CEO, Mrs. Angeliki Frangou. Angeliki.

Thank you, Laura, and good morning to all of you joining us on today's call. I am pleased with the results for this quarter. In addition to strengthening our balance sheet to recent capital market activities, we also agreed to acquire two container vessels with employment that will be accretive to the cash flow of our Company.

For the quarter we achieved EBITDA of $54.2 million and a net income of $30 million. We announced a quarterly distribution of $0.4425 representing an annual distribution of $1.77 per unit. Navios Partners is committed to this distribution through 2015. This annual distribution provides a current yield of about 9.3%.

We believe that MLP investors will be attracted to Navios Partners because not only that our guidance yield exceeds the Alerian MLP Index yield by about 60%, but it pays a further upside based on [global] and market improvements.

As you can see from slide 2, Navios Holdings owns 20% of Navios Partners and helped Navios Partners become a key player in the drybulk industry. Today NMM has a market capitalization of about $1.5 billion and an enterprise value of about $1.9 million. Navios Partners' conservative business philosophy facilitated its continued access to the capital markets and provides it the ability to grow its fleet and cash flow.

In fact, since NMM went public in November of 2007 it has increased its fleet more than fourfold. Today we control 32 vessels representing about 3.3 million deadweight tons. The average [status duration] of our fleet is about 3.2 years with almost 89% of our contracted revenue coming from charters longer than three years.

Slide 3 highlights our recent agreement to acquire two container vessels. The containers, both 8,200 TEUs and built in 2006 in South Korea, were acquired for a total acquisition price of $117.7 million. The vessels are chartered out for a minimum four years at $34,266 net per day with an investment-grade counterparty.

The vessels' acquisitions were attractive because the $117 million purchase price represents an EBITDA multiple of less than 6.2 times. In comparison to the acquisition multiples of some of our peers, which exceeded 8 times this price is particularly attractive.

In addition, the profitability of this acquisition is such that it will have very little residual value exposure on the completion of the initial charter. Navios Partners will acquire the vessels for only $42 million more than the estimated $76 million of aggregate EBITDA that we earned during the time of the charter. At that point the vessels will have well over 10 years of useful life remaining and a scrap value of about $34 million.

One way to look at this transaction is the $117 million investment of Navios Partners will only have $7 million of exposure at the end of the charters equal to the difference between the purchase price and the total EBITDA scrap value of the vessels.

In addition, Navios Partners will still have many years of productive life in the vessels at that time. Although we have the balance sheet strength to fully finance this transaction with cash, using a 50% debt financing provides at least an additional $150 million of purchasing power for future acquisitions.

Slide 4 dives deeper into the reasoning for acquiring these vessels. We are acquiring vessels with long-term contracts providing us with cash flow visibility. This transaction is accretive to all outstanding units no matter how it is finance.

Reaching a long-term contract with an investment-grade counterparty generates significant cash flow which in turn strengthens our distribution capacity. Importantly the cash generated by this vessel will lower our operating breakeven by $3,695 at the open day for 2015.

Slide 5 shows our liquidity. At the end of the second quarter we had total cash of $184.7 million and a total debt of $530.6 million. We'll have a very low net debt to book capitalization of 26.1% and no significant debt maturities until 2018.

Slide 6 shows the multiple ways we have been able to grow our fleet and our distributions. Since our IPO in November of 2007 we have grown distribution by 26.5% and our fleet capacity by over 400%. We have done so with the assistance of our [sponsor who provides drop] down. And we have also exercised purchase options that we had in our chartering vessels.

More recently we have been active in the sales and purchase market and we'll continue to use this market to improve our fleet as opportunities arise.

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 second quarter of 2014. Efstratios.

Thank you, Angeliki, and good morning, all. I will briefly review our (inaudible) financial results for the second quarter and six months ended June 30, 2014. The financial information is included in the press release and summarized in the slide presentation on the Company's website.

As Angeliki mentioned earlier, we continue to expand our customer generation through accretive acquisitions. We have strong financial performance and we have committed to a minimum annual distribution of $1.77 per common unit for 2014 and 2015.

Moving to the financial results as shown on slide 7. Revenue for the second quarter of 2014 increased by 12.3% to $55.2 million compared to $49.4 million for the respective quarter of last year. The increase is mainly due to the increase in available days by 43.8% and was partially mitigated by the 21.7% decrease in the time charter agreement (inaudible) achieved in the quarter of $19,824 per day compared to $25,318 per day for the same quarter of 2013.

As discussed in the first quarter results, we terminated our third party [credit hold] insurance and are saving approximately $50 million in cash. As a result EBITDA net income for the second quarter of 2014 has been positively affected by $17.9 million accounting effect for the insurance settlement.

Furthermore, second-quarter [2013] EBITDA was positively affected by the $10 million higher payment of the shipping advance on one of our vessels. EBITDA for the second quarter of 2014 increased by $9.1 million mainly due to the increase in operating income items discussed above as well as the increase in revenues. This increase was mitigated mainly by a $3.7 million increase in management fees due to the addition of nine vessels into our fleet compared to the same quarter of last year.

Net income for the quarter was $30 million, $10.5 million higher than the same period last year. (Inaudible) items that affected EBITDA discussed above. Net income for the second quarter of [2013] was negatively affected by a $2 million non-cash write-off of financing fees associated with the prepayment and refinancing of our credit facility and a $3.2 million non-cash item of favorable lease relating to management (inaudible). Operating surplus for the first quarter of 2014 amounted to $41.9 million. Replacement and maintenance CapEx reserve was $55.9 million.

Moving to the six-month operations, time charter revenue for the six months of operations increased by $15.2 million to $112.7 million. The increase was mainly due to the increase of available days by 42.5% which was partially mitigated by the decrease of the time charter agreement achieved in the period by 21.2%.

EBITDA for the first half of 2014 has been positively affected by $47.6 million accounting effect operating (inaudible) I discussed previously. Furthermore, first half [2014] EBITDA has been positively affected by the $10 million payment received in advance on one of our vessels.

EBITDA increased by $41.1 million to $123.2 million mainly due to the increase in other income items discussed above as well as the increase in revenues. This increase was mitigated mainly by the increase in management fees of $7.2 million due to our larger fleet and the increase in G&A expenses by $0.9 million.

Net income for the first half of 2014 amounted to $48.3 million compared to $35.8 million for the same period of 2013. Further to the items that affected EBITDA discussed above, net income for the first half of 2014 has been also negatively affected by the $22 million non-cash item of intangible assets relating to the Navios Pollux.

Net income for the first half of 2013 has been positively affected by the $10 million payment that affected EBITDA and has been negatively affected by a $2.4 million non-cash write-off of deferred financing fees associated with the prepayment and refinancing of our credit facility and a $3.2 million non-cash item of further up lease relating to management of (inaudible).

Operating surplus for the six months ended June 30, 2014 was $98.8 million which is 58.7% higher than the corresponding period in 2013. Our fleet continues its excellent operational performance. Vessel utilization for the quarter was 100%.

Turning to slide 8, I will briefly discuss some key balance sheet data as of June 30, 2014. Cash and cash equivalents was $184.7 million. Even after the acquisition of the two container vessels announced today we will still have a significant cash balance to be redeployed to vessel acquisitions. Total assets (inaudible) over $1.3 billion reflecting the increase of our fleet.

Long-term debt, including the current portion, decreased by $2.7 million mainly reflecting the repayment over the period. Net debt to asset value on a charter adjusted basis at the end of the quarter decreased to 53.1%.

As shown on slide 9, we declared distribution for the second quarter of $0.4425 per common unit. Our current (inaudible) distribution of $1.77 provides for an effective yield of 9.3% based on yesterday's closing price. The record date for the distribution is August 8 and the payment date is August 13, 2014.

Total distributions for the quarter amounted to $35.5 million. Our common unit coverage for the quarter was 1.22 times. Our consistent strong financial performance, (inaudible) coverage ratio and accretive acquisitions enable us to secure distributions and we remain committed to a minimum annualized distribution of $1.77 per common unit for 2014 and 2015.

I would like to remind you that for US tax papers a portion of our distribution is treated as a return of capital. Also we report the cumulative annual distribution to comment unitholders on Form 1099.

Slide 10 shows the details of our fleet. We have large, modern diverse fleet with a total capacity of 3.3 million deadweight tons. Our fleet is relatively young with an average age of 7.3 years, well below the respective industry averages. Our fleet consists of 32 vessels: eight Capesizes, 14 Panamaxes, three Ultra-Handymax and seven container vessels.

Slide 11 demonstrates our strong relationship with key participants in our industry. Our charters have an average remaining contract duration of 3.2 years. More than 89% of our contracted revenue is from charters longer than three years. Our charters are spread among a diverse group of counterparties.

In slide 12 you can see the list of our fleet with the contracted rates and the respective expiration dates per vessel. Currently we have fixed 91.5% of our revenue days for 2014 and 55.9% for 2015. We do not have charter rate exposure to the container sector as our vessels are fixed for an average period of approximately eight years.

On the drybulk vessels we feel that we have positioned the Company well to take advantage of an improving market. The expiration dates are staggered and charter durations extend to 2023 the latest.

As shown on slide 13, we are an efficient, low cost operator. We are benefiting from the economies of scale of our sponsor and we have fixed our operational cost at low level. Our operating expenses are almost 22% below the industry average.

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

Thank you, Efstratios, and good morning, all. Please turn to slide 14. While GDP continues to be driven by developing economies which now [conceive] with a high percentage of total world growth than the developed economies representing over half of the global consumption of most commodities.

The IMF recently reduced projected well growth for 2014 to 3.4% but increased it to 4% for 2015. Developing economies are projected to grow at 4.6% and 5.2% respectively. Chinese economic growth is projected at 7.4% for 2014 and 7.1% for next year.

Turning to slide 15, the primary engines of trade growth continue to be China and India. Their bulk trade has expanded by an average of 5.5% per year in the 12 years since China joined the WTO. Forecasts for 2014 are for global drybulk trade to grow approximately 6% and (inaudible) growth of about 7%. Net feed growth is expected to be at about 5% leading to favorable supply/demand dynamics for the first time in four years.

Moving to slide 16. Iron ore from the major mines outside of China continues to be the lowest cost highest quality source of this commodity. With future iron ore prices forecast to remain in the $100 per ton range, Chinese domestic production, represented by the red boxes in the lower right graph, will become uneconomic.

The currently planned expansions of global iron or mines will add significantly to seaborne bulk commodity movements in 2014 with further significant growth in the following years. While the majority of these expansions are in Australia, this year about 40% will come from the Atlantic basin having ton miles.

Moving to slide 17. The continued development and urbanization of China will contribute significantly to steel consumption for the remainder of 2014 and beyond. Infrastructure, housing, construction and consumer spending growth underpin future development.

Note that Chinese fixed asset investments continued to grow over 17% year on year through June led by railway and social housing construction. The preliminary July PMI of 52, the highest since January 2013, reflects infrastructure as well as manufacturing growth after the losing of reserve requirements in April. This also helped industrial production to grow at 9.2% in June, the highest level since December.

Through June 2014 crude steel production in China was up 5% year on year. Chinese iron ore imports were up 19% year on year. Domestic iron ore production increased 8%, but quality seems to be deteriorating as effective Fe content hovers in the 15% range compared to 63% of imported ore. Based on this data it seems that (inaudible) low-quality domestic iron ore with imported ore is okay. This trend is expected to continue and will increase the tons carried and ton miles.

Please turn to slide 18. Over the past few years there has been a significant change in coal trade. China fell from being a net exporter of coal in 2009 only five years ago to being the world?s largest importer today. As the chart indicates, both India and China seaborne coal imports have grown at least 21% CAGR since 2009.

With the increase in steel production and with the number of planned new coal-fired power generators, coal imports in both countries are focused to grow over the next several years. Just those two countries account for over 35% of all seaborne coal movement worldwide. Turning to slide 19, China's grain imports are expected to double from 2012 to 2022 as the country's per capita income rises leading to an improved diet and increased consumption of poultry and meat.

As noted in the bottom of this slide, it takes about 8 tons of grain to produce 1 ton of beef. Grain shipments, while small relative to iron ore and coal, account for a large portion of vessel demand as measured in vessel days as grain is an inefficient cargo to load and discharge.

Moving to slide 20, through June about 26 million deadweight tons delivered indicating that total deliveries for 2014 are likely to be in the low 50 million deadweight ton range. The non-delivery rate through June was 38%. Once again this year about 58% of the order book was scheduled to deliver in the first half of the year.

Net [feed] additions this year expected to be lower than last year and bet feed growth is expected to be lower than demand growth resulting in an improved rate environment. The order book declines dramatically this year and for each of the next three years.

Turning to slide 21. Scrapping rates of older less fuel-efficient vessels have continued this year. Through July 25 about 8 million deadweight tons was scrapped. The current rate environment should encourage scrapping of older vessels. 10% of the fleet is over 20 years old providing about 73 million deadweight tons of scrapping potential.

As demolition prices appear to depend on overall steel prices and not in the supply of vessels they are expected to remain high. Please turn to slide 22. The BDI fell to an 18-month low on July 22 at 723 led by extreme weakness for Panamaxes which recorded their lowest Q2 time charter average since the 1980s.

An unexpected slowdown in grain and coal shipments which led to lower than usual port congestion have all contributed to depressed earnings for both the Panamax and Supramax sectors. Conversely, stronger unexpected iron ore shipments pushed the average Cape earnings to just under $12,000 per day in Q2 which although slightly down from Q1 represent a 92% year-over-year increase over the same period last year.

A slowing trend in fleet growth for the remainder of this year, along with significant additional iron ore export capacity in both Brazil and Australia, should support earnings especially in that Capesize sector. Both the Panamax and Supramax sectors should receive support over the medium- to long-term by Chinese coal and grain imports as the northern hemisphere grain season gets underway.

Increased Chinese imports of bauxite and nickel may also support the smaller sizes as they drawdown inventory built up in advance of the Indonesian ore export ban.

And 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 the formal presentation. We will open the call to questions.

(Operator Instructions). Michael Webber, Wells Fargo Securities.

Just a couple quick questions on the containership acquisition. At first before we start can you just kind of walk us through how these deals came about? I mean there is a lot of demand in the market for this kind of deal. There is more people looking for charter containership tonnage. So if you can walk us through how you this came to and how you were able to get it at a pretty low acquisition multiple.

As you have very much seen, we are a disciplined buyer. We take -- we negotiate, we know that we are also a very favorable counterparty to transact because this transaction is almost -- is a very (inaudible) counterparties, 7% of the Company belongs to the government of Taiwan so you are talking about an incredibly good counterparty.

And we take the time, they like a company that is able to transact, has the ability to perform and deliver the service. So even though it took us a little bit longer time because we like the terms that we can be fair for both sides, we were able to get a bill that gave us an acquisition of a 6.2 multiple. You have over five years of duration -- four years, sorry, of duration.

And if you really look our residual value risk is minimal. You are generating almost $76 million of aggregate EBITDA. You have a scrap of about $34 million so you are coming to about a $7 million residual value after the charter. With an asset that has I will say about over 10 years well over 10 years, about 13 years of life.

So this [isn't] an attractive transaction. It takes time because you cannot complete quickly. But because you had a lot of counterparties that will be moved because of the (inaudible) system collapse and other counterparties that have balance sheet issues. We are able to really develop this opportunity.

Also a not very important I think issue that, okay, we can fully fund this transaction through cash that we have in our balance sheet. Our intention is to finance this and even financing and completing this transaction we still have at least over $150 million of purchasing power without doing any raising.

So if you look at this transaction, it is accretive reduces our breakeven by about 3,700, creates the ability to increase our distribution and we have firing power to do additional deals. And positioning the Company for 2015 and 2016 is a very good attractive position.

Got you. And before I move on just around that residual value risk, you mentioned a little over $17 million in scrap value per vessel and it looks like it is assuming about $460 per lightweight ton. Is that where you guys are actually depreciating them at through your model?

No, no, this is a -- we use accounting. This is really an evaluation. What we provide you is really how we view the world, how we view our acquisition. We are buying two vessels at 117 million. I mean it actually is 8,200 TEU. These are very attractive assets that can be used in multiple [routes].

So is not an issue that we are associating -- is like how we view the world and how we view risk and how we can build cash flows even beyond this [four-year] charter and that can create -- you have minimum downside risk, ability to recharter and grow the distribution with really -- not really any credit risk on this transaction.

Yes. No, no, that makes sense. And just one more from me and I will turn it over. But along those lines, you earlier -- I think it was last year you came out and publicly supported the distribution at the current level through the end of 2015. This is going to bolster that 2016 coverage ratio to the point where you guys can start thinking about growing the distribution.

How do you think about that and specifically within the context that we have seen from some other marine MLPs recently where they are trying to aggregate growth and disseminate a longer-term growth trajectory to the market. How do you think this deal fits into that kind of scenario and how do you think about that going forward especially around supporting a 2016 distribution at the current level or talking to a growth rate for 2015 and 2016?

The reality is that we are yielding at over 9% and we are at a 60% discount to the Alerian yield. But reality will give you a large map of growth and accretive deals. We have over $150 million of purchasing power that can really further reduce our breakeven.

So it will give us the ability to increase our distribution. This is something that we will view with -- but the one thing we will say is that we have the ability without raising to really grow with hugely accretive deals.

Sure. I think at this point it is about (technical difficulty). Okay, I think that is all I have got. I appreciate the time, guys.

Christian Wetherbee, Citi.

Good morning, this is Seth in for Chris. If I can just follow up on the distribution outlook. Do you guys have like a check list per se? I mean if you think about in order to grow the distribution you need to see a recovery and spot rates or is it the period market and the drybulk market? I mean is it the drybulk market that could be the swing factor for potentially growing the distribution or is it just the --?

I think it is not only the drybulk because as you see our acquisition now in the containers really bring our breakeven down. But it's also really creating this efficient [link] and cushion on the breakeven that will give us that comfort. And the good thing is that we have done -- in the last 18 months we have done quite substantial efforts to really bring that down, to really create that ability for the Company irrelevant to market conditions.

Sure, sure, that makes sense. And I guess with the 8- to 10-year-old tonnage and 6,000 to 8,000 TEU container market, is that still the most accretive place -- the most opportunistic part of the container market or I guess out of all the shipping that you think you are going to continue to look at going forward?

I think we have selected the container segment as an area where we go. I mean the previous deals we did was a little bit smaller TEU. We are now moving to the larger TEU. And importantly, it's cash flow durations and credit worthiness of the counterparty and actually quality of the tonnage. Everything in South Korea and from top CPIs.

Okay, all right, great. That is all I had, I will turn it over.

Ben Nolan, Stifel.

Again congratulations on this deal, it seems like an especially good deal, especially given the strength of the counterparties who are putting two and two together there.

I guess my question relates -- my first question relates to that. When thinking about how you guys are accounting for this acquisition, how much of the total purchase price is allocated towards the value of the contract as opposed to simply the uncharted value of the asset?

I mean we actually bought it at the market. I mean the reality is that a credit worthy counterparty really looks at the ability of Navios Partners to really perform, have the service that they need to be dedicated.

So the real benefit between -- really in the container market is today if you are able to transact, if you have the balance sheet to transact you are able to really acquire vessels at almost market with contracts with creditworthy counterparties.

So this is a real opportunity where we saw and that is why in the last -- from the fourth quarter last year we entered into the container market because we saw that opportunity.

Okay, well, good. Along those lines, given that this is a little bit older asset relative to something that is brand-new. How do you think about allocating a portion of that cash flow towards replacement CapEx? Or I guess another way to ask it, are you allocating a greater percentage of the cash flow towards either debt repayment or the eventual replacement CapEx as a function of the vessels being a little bit older?

I will let Efstratios go through that. But one of the things we have done from day one is we have a replacement CapEx. And this is something we do day one. We provide that and this has been -- in essence we can actually say that some of our drybulk vessels that we acquired brand-new if you remember last year, we're actually being able to do it far more attractive than the replacement of our older vessels we have in that book.

So this is an ongoing process and we see the ability through the cycle to actually acquire the vessels. You have to replacement CapEx through the cycle and also handling the cycle correctly you are able really to acquire the vessel at more attractive even price.

Ben, we have -- the way they that we are calculating the replacement CapEx, this is standard, we have done it for all the vessels that we have in our fleet. So any vessels that we are adding there is always the [evidence] to either a brand new or five-year old vessel.

So irrespective of the age of the vessel that we are buying still at the end of the day what we want is to replace this with another five year old vessel. And if you see all the filing that we have done up to now you see that our operating surplus, our distributable cash flow always excludes this replacement CapEx. So this is a portion that we keep out of our distributions and our coverage ratios.

Okay, okay. So this is no different than -- are you thinking of this in no different way than any of the other acquisitions that you have done in terms of the replacement CapEx?

Yes.

Okay. And then my last one, maybe for you, Angeliki, or George. When looking at the drybulk market in general we have seen a lot of the big mining companies come out with record levels of production of iron ore in June even. And yet we've really not seen any material uplift in Capesize rates. And furthermore we've also seen iron ore prices that have been at least below the theoretical level of where you would see a lot of domestic mines in China not being economic.

Is it simply a function of supply -- or demand needing to catch up to supply or is there something else going on here that is keeping the Capesize market soft. Are there supply and demand gains that are being played or, I don't know. Is there something that you are seeing in the market that sort of explains the difference between what the mining companies are saying and what is actually being translated into with respect to Capesize rates?

Actually in overall we saw that there was -- I don't know but mostly from Australia and that -- net ton mile demand is less than what you get from Brazil. What was estimated at second half is really an increase from Brazilian iron ore that will create more ton mile demand.

As volume -- on Navios fixtures what we're already seeing is that volumes are starting to be healthy, which is a first indication before moving on actually levels of the chartering. So I think this was mostly, I don't know, from Australia versus Brazil.

The other issue that you will say that, yes, if iron ore remains at below certain level this is not an immediate effect, it takes some period. But then the close of mines will happen and that fits also into the team of Chinese government where they do not want to waste assets and mining on nonproductive minds and situation.

So I think overall if the price remains we will provide closure of mines. And what we see from everything available is that second half will be more Brazilian iron ore than the first one.

Okay, great. Well that is very helpful and thank you for that. And again nice acquisition there. So that does it for my questions. Thank you, guys.

Nish Mani, JPMorgan.

Wanted to follow up on the acquisition real quickly and get a sense of what you are thinking about in terms of drybulk acquisition opportunities. Because you have obviously been active in the container space recently, but there has been a relative dearth in drybulk acquisitions by you guys.

And I wanted to get a sense to see if this implied that you thought drybulk asset values could perhaps fall further and you would be able to get better deals. Because we saw a slight run-up in asset values in the first half of the year, but we've seen some slowdown and some pullback actually since then and wanted to see how you guys are thinking about that in the immediate term.

Yes and don't forget we have a large drybulk position, we already did six vessels last year. So it really it really gave us an ability to grow our fleet there. So the focus on containers is because it gives us a better advantage right now on pricing. Because of the reduction of counterparties around we have been able to really attract better deals.

And you can also create a cash flow. So we already have invested in the drybulk the large position overall, we have 25 drybulk vessels and we did transactions if you remember we got delivery last year and beginning of 2014 at very good prices. So the container deals make more sense because of value and cash flows.

Okay, that makes sense. I mean the implication there being that in the drybulk side you aren't seeing many available opportunities of charters attached so like you could actually have that cash flow that above NPB cash flow available, is that correct?

Yes.

Okay. And then turning to the drybulk rate environment more broadly. I mean I think that rates came off probably stronger the summer -- or were weaker this summer in other words and fell farther than most probably expected. And there was kind of a flashback to other both seasonal and fundamental kind of periods of weakness.

You guys have 10 vessels coming open between now and year end. And some of these are fixed and kind of the mid-teens, even closer to $20,000 a day. Are you prepared to take a significant share cut on rechartering those vessels perhaps in the low-double-digits kind of $10,000 to $12,000 range?

I think if you look at it overall as a portfolio it's not very far away from where the current one here. So it is not something that if you see -- if you judge it from that spot market it can look quite significant. But if you see someone here (inaudible) including all quarters, not only the seasonally low, the average rate on the vessels we are chartering are not very far from where is (inaudible). So we don't see a significant risk there.

Okay. And in terms of chartered duration for those vessels, the ones that are coming up between now and the end of the year, are you guys thinking about still kind of that 12-month charter as being the sweet spot so that you don't miss an eventual upside in the cycle?

Yes. But in essence one of our longer-term goals is really to build our duration. So we will see how the market recovers long-term. We are an MLP, we care about distributions, we care about visibility. So our longer-term target is to create the longer durations on the appropriate time.

What we see is with the vessels we have longer charters and the ability to really get these accretive container deals gives us the ability to do it in a relaxed way, in a way that will be more beneficial for our investors.

Okay. Understood. Thank you so much for the time, guys.

Fotis Giannakoulis, Morgan Stanley.

I want to ask you about you have three older vessels that they should come off charter and it seems that these vessels are not going to be able to contribute the same way as in the past. Are there any thoughts of disposing these assets? And I am talking about the vessels that they are around 17, 18 years old.

We already have bought six drybulk vessels in this downturn, so we have the ability to do it. We will do it when it is more appropriate. Don't forget that vessels are very well kept and create cash flow. So this is a matter of the appropriate moment. We are never going to pre-announce a sale or a disposal. But we have already taken position on the drybulk. We already have bought six vessels from resale new buildings to young vessels, five years old.

Thank you. And one last industry question. And if you can explain a little bit further the current weakness and what is going to be the driver? You mentioned earlier the iron ore order out of Brazil, but do you see that this is the only driver and the only reason that the lack of Brazilian iron ore supply that keeps the market weak? Or there is something else going on in the coal market and how do you expect the coal trade to develop the next year?

There is definitely -- there is no way of talking about the Brazilian because we saw the first half being more Australian which has less ton miles. So that together with an increased volume out of Brazil that will increase the ton miles demands in a multiplier effect.

Of course you still have -- there will be -- the coal demand is something that remains there. There is going to be the Indonesian bank recovery. And most importantly I think is as we have seen advanced economies being -- even with a more recent IMS releases -- being weaker than what was estimated. So if you have seen the recent revisions downward, it happened mostly on the advanced economies.

On the supply of the vessels, vessels demand, I mean we have seen that actually we have non-deliveries going well, 30% non-deliveries, scrapping is in line. So net fleet growth is not really a real problem. And demand will be growing at above net fleet growth. So with volatility in between the long-term theme is there but of course you always have the relative volatility.

Thank you very much for your time.

Nick Norstrom, Jefferies.

I was wondering, getting back to the drybulk market, if we should get a nice seasonal rally into year end, if you guys would ever consider monetizing some of your drybulk assets and maybe accelerating the shift to more containership assets given that there is more duration in that market. Is that something that you guys have thought much about at all?

We are here to really create a visible increase on the distribution capability of the Company. So this is something that we view, we like duration and we like assets that can provide that. Of course we like to have a diverse portfolio so we are not (inaudible) reviewing every possible way.

Meaning you may -- this is part of our thoughts and our business planning. I mean we will do whatever is best on increasing the visibility of cash flows and putting this cash into use.

Okay, that is great. Kind of along the lines of that, in the containership market are you strictly focused on secondhand acquisitions and do you feel that that pipeline is pretty full? Or would you at some point ever consider the opportunity for maybe NM to build some new building tonnage and create some drop down visibility for NMM?

I don't -- we cannot talk about the name, but one thing we always care about, if you do third-party acquisitions you will always try to get vessels that are in the water otherwise they create a negative cash flow. Don't forget that Navios Holding has a large fleet and it has vessels that are coming. And we cannot talk about NM's plan but you have a significant -- I mean the sponsor has a strong fleet.

Sure.

And a visible -- I mean somebody can go in and review the ability of vessels that are coming in 2015 -- 2014, 2015 and 2016.

Okay, that is all I have. Thank you very much for the time, guys, thank you.

At this time there are no further questions. I will now return the call to Angeliki Frangou for any additional or closing remarks.

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