Navios Maritime Partners LP (NMM) 2015 Q1 法說會逐字稿

Thank you for joining us for this morning's Navios Maritime Partners first-quarter 2015 earnings conference call. With us today from the Company are Chairman and CEO, Ms. Angeliki Frangou; Chief Financial Officer, Mr. Stratos Desypris, and EVP of Business Development, Mr. George Achniotis. As a reminder, this conference call is also being webcast. To access the webcast please go to 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 and a copy of the presentation referenced in today's earnings conference call -- that will also be there.

Now, let me read the Safe Harbor statement. The conference 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 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 call is as follows: first, Ms. Frangou will offer opening remarks. Next, Mr. Desypris will give his overview of Navios Partners financial results. Finally, Mr. Achniotis will provide an operational updates and an industry overview. Lastly we'll open the call to take questions.

Now, I'll turn the call over to Navios Partners Chairman and CEO, Ms. Angeliki Frangou. Angeliki?

Thank you, Laura. Good morning to all of you joining us on today's call. I am pleased with the results for the quarter. We earned $38 million of EBITDA and $10.9 million of net income. We recently announced a quarterly distribution of $0.4425, representing an annual distribution of $1.77 per unit with annual distribution. This annual distribution provides a guarantee of 13.4%, more than two times of the yield of the Alerian MLP.

Again, this quarter we affirmed Navios Partners commitment to the existing distribution, at least through 2016. We have maintained this distribution even during difficult phases of the cycle of the drybulk shipping and are prepared to increase it when the shipping market stabilizes and the markets reward us with [set-in] ability of this distribution.

Today, Navios Partners is a container-focused MLP, as the container segment is effectively the workhorse of our Company. Since the end of 2013, we acquired eight container vessels. These vessels are expected to generate about 43% of 2015 EBITDA. In total, the containers are expected to generate about $1 billion in revenue, representing 66% of our expected contracted revenue.

The average charter length of our container fleet is about eight years. The average charter duration of our entire is fleet about 3.5 years. In contrast, the drybulk segment where our historical roots are and in which we have material exposure offers Navios Partners significant upside when the drybulk market improves. Recently, the decline in commodity prices, while creating some uncertainty, provided a strong catalyst for growth. Over the past 20 years the container trade has had positive correlation of over 90% with US personal consumption. We believe this correlation is largely attributable to increases in consumer spending supporting greater volumes for consumer goods, a large portion of which are typically transported via container.

NMM will benefit from the economic growth that will occur from this virtual circle emanating from lower oil prices. Consumers spending additional disposable income generated will in turn provides a significant boost to our global economy. NMM starts to benefit from the resulting increased trade, not only from the increased container traffic but also as they increase economic activity, we also stimulate the drybulk sector. As you can see from slide 2, Navios Holdings is the sponsor of Navios Partners and holds 20.1% of Navios Partners. Today, NMM owns 31 vessels and it has a market capitalization of about $1.1 billion and an enterprise value of about $1.5 billion.

Slide 3 provides some of our Company highlights. Our eight container vessels are expected to generate about $1 billion in revenue, representing 66% of our expected contracted revenue.

The average chartered duration of our entire fleet including the drybulk segment is about 3.5 years. Overall, NMM has a good revenue stream of 92.6% of our Company's contracted revenue and through charters longer down three years. NMM has not only maintained a solid distribution through the cycle but also increased distribution by 26.4% since inception.

Slide 4 displays our competitive position within the industry. NMM has minimized rechartering risk with fixing almost 100% of our open days toward 2015, thereby eliminating any drybulk spot market volatility. Our balance sheet has strengthened as evidenced by the 10% reduction in our net debt to book capitalization ratio compared year-end 2014. NMM's container sector exposure provided long-term charters, cash flow stability, and strong distribution coverage. With the additional vessel of the MSC Cristina Navios Partners now has about $850 million in contracted revenue from the container vessels representing 66% of our total contracted revenue.

Slide 5 provides an update of our recent delivery of the 13,100 TEU MSC Cristina; the container vessel was acquired for the price of $147.7 million. The vessel is chartered out for 12 years at $60,275 per day to a strong counterparty. NMM may terminate the charter after year seven, which of course allows NMM to benefit if the future charter market exceeds the contracted rates under the [agreement in total].

The vessel is expected to generate $18.4 million of annual EBITDA and $217.8 million of aggregate EBITDA. In addition, the profitability of this acquisition is such that we will have no residual value exposure on the completion of the initial charter. Upon the expiration of this charter, the vessel will have 10 years of usual life remaining.

The container acquisition is financed using $80 million in debt and the remaining with cash from our balances. The debt financing is at attractive terms with an amortization profile of 13.5 years, interest rates of LIBOR, plus to 2.75% and maturity in 2022.

We also have an option to acquire an additional 13,100 TEU container vessel, similar to the MSC Cristina. The option would not require any payment, is exercisable by June 2015, with expected vessel delivery in the third quarter of 2015. Under the terms of the option agreement if we choose to exercise the option we would only have to make a 10% deposit with the balance due in the delivery of the vessel in the third quarter of 2015.

Slide 6 shows our liquidity. At March 31, 2015, we had a total cash of $101 million and total debt of $529.7 million. We have a loan net debt to book capitalization of 32.4% and no significant debt maturities until 2018.

Slide 7 shows how we have grown our fleet and distribution regardless of where we are in the shipping cycle. Since our IPO in late 2007, we grew our fleet capacity as measured by deadweight tons by 420%. We did this with the assistance of our sponsor and acquisition from the open S&P market.

And at this point, I would like to turn the call to Mr. Stratos Desypris, Navios Partners CFO who will take you over the results of the first quarter of 2015. Stratos?

Thank you, Angeliki, and good morning to all. I will briefly review [Navios'] financial results for the first quarter ended March 31, 2015. The financial information is included in the press release and is summarized in the slide presentation on the Company's website.

As Angeliki mentioned earlier, the Company continues to take actions to solidify distribution and strengthen its balance sheet. We expand our customer generation through the acquisition of container vessels with long-term charters. The containers now represent more than 40% of our expected EBITDA for 2015.

Also during the quarter, we reduced our net debt to book capitalization ratio by approximately 10% through the prepayment of a portion of our debt facilities. Our strong balances balance sheet and accretive expansion of our cash flow has allowed us to reaffirm our commitment for a minimal annual distribution of $1.77 per common unit through the end of 2016. We anticipate the market credit for the durability of this distribution.

Moving to the financial results as shown on slide 8, our revenue for the first quarter of 2015 increased by 1.2% to $56.8 million compared to $57.5 million for the respective quarter of last year. The decrease was mainly due to the 11% decrease in the time charter equivalent rate achieved in the quarter of $18,625 per day compared to $20,785 per day for the same quarter 2014 and was partially mitigated by the increase in available days by 10.6%.

EBITDA for the first quarter 2014 was positively affected by the $29.8 million accounting affect from the insurance settlement. Excluding this item, EBITDA for the first quarter of 2015 decreased by $3.2 million -- 3.2% to $58 million compared to the same period of last year. The main reason for the decrease was the decrease in revenue discussed above.

Net income for the first quarter of 2014 has been affected by the same item that affected EBITDA described above. Also it has been negatively affected by a non-cash write-off of an intangible asset. Excluding these items, net income for the quarter was $10.9 million, $0.3 million higher than the same period of last year.

Operating surplus for the first quarter of 2015 amounted to $27.6 million. A replacement and maintenance CapEx reserve was $3.2 million. Fleet utilization for the first quarter of 2015 was 99.9%.

Turning to slide 9, I will briefly discuss some key balance sheet data as of March 31, 2015. Cash and cash equivalents was $101 million. During the first quarter of 2015, we prepaid $44.6 million in our debt facilities. By doing that, we decreased the Company's leverage by approximately 10%. Net debt to book capitalization was 32.4% at the end of the quarter. The prepayment also resulted in the reducing of our cash needs for the debt service for 2015 by $5.9 million.

Also on slide 10, we declared a distribution for the first quarter of $0.4425 per common unit. Our current annual distribution of $1.77 provides for an effective yield of approximately 13.5% based on prior disclosing price. The record date for this distribution is May 15 and the payment date is May 14, 2015. Our common unit coverage for the quarter is 0.8 times. To provide a more meaningful ratio going forward, we present a pro forma coverage ratio of 1.04 times. This pro forma calculation gives effect to the full quarter run rate operating surplus of the 215,100 TEU container vessels and the normalized revenues on hires of vessels received upfront. The increased exposure to the container segment with a long-term charter duration resulting in a very healthy pro forma coverage ratio going forward.

The stability we have built in our cash flow generation and our coverage ratio allowed us to reaffirm our commitment for a minimum annualized distribution of $1.77 per common unit through the end of 2016. I would like to remind you that for US tax purposes a portion of our distribution is treated as a return on capital. Also, we reported the cumulative annual distribution to common unit holders on Form 1099.

Slide 11 shows the details of our fleet. We have a large, modern diverse fleet with a total capacity of 3.3 million deadweight tons. Our fleet is young, with an average age of 7.8 years, well below the respective industry average. Our fleet consists of 31 vessels -- 8 Capesizes, 12 Panamaxes, 3 Ultra-Handymaxes, and eight container vessels.

Slide 12 demonstrates our strong relationship with key participants in our industry. Our charters have an average remaining contract duration of 3.5 years. Approximately 93% of our contracted revenue is from charters longer than three years. Our charters are spread among a diverse group of contract partners.

In slide 13, you can see the lease of our fleet with the contracted rates and respective expiration dates for the vessel. We have almost eliminated our exposure to the drybulk market. Currently we have fixed 98.4% of our available days for 2015 and we are 58.3% fixed for 2016. We do not have charter-rate exposure to the container sector, as all the vessels are fixed for an average period of approximately eight years. The expiration dates are staggered and the charter durations extend to 2027 at the latest.

As shown in slide 14, we are an efficient, low-cost operator. We are benefiting from the economies of scale of our sponsor and we have fixed our operational costs at low levels. Our OpEx is more than 20% below the industry average.

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

Thank you (technical difficulty) Stratos, and good morning, all. Please turn to slide 16. As Angeliki has already mentioned, Navios Partners has shipping shifted its focus on the container segment where industry fundamentals are improving. As you can see on the charts, there is a strong correlation between annual GDP growth and expanded container traffic in both the US and Europe. With disposable income from lower oil prices, container demand should grow further.

Forecasts are for US personal consumption expenditure to grow 3.8% on average over the balance of the year. Following the recent [country revising], Europe is also expected to recover.

Moving to slide 17, over the past 18 years container freight has expanded at a 7.5% CAGR. The rate of growth has been increasing since 2012, and it's expected to continue to increase by 6% in 2015 and 6.5% in 2016.

Turning to slide 18. At the end of March, the container fleet was 5,134 vessels of 18.7 million TEU capacity. Up to the end of March, 350,000 TEU capacity have delivered -- vessels -- 470,000 projected giving an non-delivery rate of 26%. Scrapping of older vessels has continued and up to end of April 2015, 34 vessels with a capacity of 69,000 TEU have been demolished. The current rate environment should encourage additional scrapping of older, less efficient vessels.

Last year 201 vessels delivered and 171 vessels were scrapped which expanded the TEU capacity by 6.4%. Estimates are that net fleet growth on a TEU basis will be close to demand growth each year at around 6%. Fundamentals improve further in 2016 when net fleet growth is expected to be forecast to be lower than 6.5% estimated increase in container demand.

Moving to slide 19 and the drybulk market fundamentals, the global economy and global GDP continue to grow, creating raw material demand for primary industries particularly steel and energy production. This is especially important in the emerging market regions experiencing rapid urbanization and industrialization such as China, India, and the surrounding Pacific countries.

The rate of world GDP growth is expected to increase from 3.5% in 2015 to 3.8% in 2016. And emerging and developing markets are expected to grow by 4.3% in 2015 and 4.7% in 2016.

Turning to slide 20. Drybulk case has expanded by 5.5% CAGR since China joined the WTO 14 years ago. Forecast for 2015 has the drybulk rate growing between 3% and 4% and [top-line] growth between 4% and 5%. The second half of 2015 is where forecasters expect the bulk of the growth to be for the year, following the downward price adjustments in most major drybulk commodities. At 600 BDI, the drybulk market has risen 28% from the Q1 seasonal low reached in February; however, the market is still suffering in a 30-year cycle low. But charter rates in general are slowly recovering.

Moving to the next slide, currently over 60% of the world's population reside in urban areas. That figure is expected to grow to 67% by 2050. Adding approximately 2.8 billion urban residents. A large proportion of this urbanization trend will occur in the Asia-Pacific region. Of particular importance to drybulk is construction of housing and commercial real estate, infrastructure development, and energy production.

Together, seaborne iron ore and coal shipments make up about 60% of all drybulk movements. China imports almost 70% of all seaborne iron ore. With iron ore prices hovering in the $50 to $60 per ton range, China will continue to substitute expensive low-grade domestic iron ore with high-quality imported ore.

Since the annual Chinese New Year in February, it is apparent that Chinese domestic ore production levels are dropping, confirming this trend. Forecasters expect an 8% increase in Chinese iron ore imports in 2015. Coal has been the least expensive fuel for producing electricity, particularly important to the emerging market leader. The coal market in China is the largest worldwide, consuming about 3.8 billion tons annually. In 2014 and so far and 2015, we have seen the Chinese authorities protecting their domestic coal mining industry. This has caused the global coal price to fall, giving India the opportunity to increase imports. The government of India has made it their priority to provide electricity to all, which will drive growth in electricity consumption for many years to come.

India's domestic coal mining activities are not able to keep up with the pace of growth, giving opportunities to import increasing volumes of coal going forward. As many of the new Indian electricity plants are based near the coast, this trend looks likely to continue. India and China can benefit from the cyclical low international coal prices, lowering the cost of providing energy to their growing consumers. Chinese and Indian combined coal imports are estimated to increase by about 2% in 2015.

Please turn now to slide 22. So far this year about 14.6 million deadweight tons delivered from an expected 24 million, resulting in non-delivery rate of 39%, continuing the pattern of the last several years. Scrapping volumes for older and less fuel-efficient vessels have dramatically increased in 2015. In the whole of 2014, 16 million deadweight tons were scrapped. Through April 24, approximately 13 million deadweight tons were scrapped, including 50 Capesize vessels compared to 24 Capes in the whole of 2014. The current rate environment should encourage further scrapping of older vessels. About 10% of the fleet is over 20 years old, providing about 75 million deadweight tons of scrapping potential. Current projections for the year for scrapping in excess of 40 million deadweight tons which could set an all-time record in deadweight ton basis.

In addition to high scrapping, owners have refrained from ordering. Through Q1 this year, 21 ships of 1.1 million deadweight tons were ordered. As a comparison, during Q1 2014, 365 ships of 31.6 million deadweight tons were ordered.

High scrapping and low ordering will we eventually improve the overall fundamentals for drybulk. Net fleet growth for 2015 is projected at about 2.5%, the lowest in many years. With drybulk demand for the balance of 2015 expected to increase at about 4% to 5%, the improved fundamentals [may can drive] the drybulk market [out of the significant] 30-year low we have experienced for the last four months.

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

Thank you, George. This concludes the Company's presentation, and we will open the call to questions.

(Operator Instructions)

Amit Mehrotra, Deutsche Bank.

Thank you very much. Angeliki, I was somewhat surprised by your comments in the press release about being prepared to increase the distribution if the market stabilizes. Clearly up until now the comments of been sort of a reaffirmation of that commitment as opposed to any sort of perspective increases. So I thought that was interesting and I would appreciate it if you could sort of elaborate on what exactly you mean by the word stabilize. And the implication is clearly that you are more confident about the Company being able to maintain the current commitment. So if you could also talk about some of the sources of that confidence? Thank you.

Good question. If you see the way we have structured the Company right now is that we have moved as of late 2013 in the container segment -- this provided $900 million worth of contracted revenue, eight years of duration -- so we had totally stabilize the Company and you are having -- your long-term cash flows are coming visibly from the container sector. This is an area where we see further expansion.

With that in mind and taking almost 100% out of the spot exposure on the drybulk, we know that the Company is stable, strong, delevered for this quarter, so we have really a very strong balance sheet and the way we are we see that as market, drybulk market recovers, it will give us a further potential as the majority of our vessels is in drybulk to provide additional cash distribution.

Okay. I just would like to follow up on one of the comments. And talk about sort of the drybulk market in general because I think it's fair to characterize your view on the market as less structural and more cyclical in terms of the downturn. But with that being said, the Company did lock up the remaining open days in what is seasonally the weakest period. So was this really just more to balance the visibility with the potential operating leverage upside, or has your view on sort of the drybulk market changed a little bit -- at least in terms of the remainder of 2015?

I think now the spot rate stability is more important than that spot market exposure. So reality is that we had to take that spot market exposure out so we get credit from the market for the cash flows we have on the container segment, [which completely would provide] for the distribution we provide which is quite significant. So we weighted that [distribution] mostly because we waited the ability for investors to see that their distribution is stable and taking the spot market exposure was a beneficial thing. It has nothing to do with our views on the market.

On the drybulk what we see is that drybulk is in a low point and structural low point. With that, you know there will be a recovery. We see that based on significant scrapping. You have -- you will reach the all-time high, I mean, annualized rate -- we are going to go to [44] million deadweight tons, which is 10 million tons more than 2013, which was 32 million. And you are seeing deficit, an actual net deficit of Capesizes this year. We have seen 52, up to now 52 Cape scrap vessels; 34 coming into the water, so you have a net debt deficit of vessels in the Capesize this year and most of next year.

So these are good sentiments. There is a [clear] of the fleet, and at the appropriate moment we may see it recover because at the end of the story scrapping is the way out of this encapsulation of orders.

So for Navios Partners what you care about is having the certainty of the distribution and the visibility, that's why we are fixed.

Okay. Just one follow-up, Stratos, can you just provide the share count or the unit count at the period end of the quarter please?

Yes. At the end of the quarter we had approximately 85 million of total units outstanding -- around 1.6 million of (inaudible) units but you have to take into account of these do not participate on the full quarter because we did a (inaudible), you have to weight average the number of the units.

Great. Okay. Thank you all very much.

Ben Nolan, Stifel.

Thanks. I had a couple of sort of debt balance sheet type questions. You guys mentioned and saw on the cash flow statement that you repaid some debt in the quarter. Is that something that you can draw down upon again if you need to, or once that's been repaid it's no longer available to you? I suppose that's my first question.

If we want to lever up it's not difficult. One of the things we saw that we thought was attractive is that -- important for the balance sheet and certainly for our investors is that values on the drybulk have moved down, and we saw downside pressure. We wanted to make sure that we have a strong balance sheet, having also with an adjustment in the debt to provide a reduction of debt as we saw that created further visibility for the Company. And we view that having the distribution, making sure that this is extremely safe [for our investors] -- protection from [reduction] of debt and the value of the [volatility] is very important.

Okay. That's helpful. And that sort of gets to and answers part of my next question. So with respect to the option that you guys have and given that you have used some of the cash you used in your equity offering to repay the debt, how do you think about exercising that option and the availability for capital that? Do you have enough borrowing capacity and cash on the balance sheet to be able to exercise that option? Or do you think it would require additional equity capital?

We could -- we have the capacity to borrow and be able to do that. The thing that we like about this option is that we have no calls; we don't have to declare it until June, and then we only have to put a 10% deposit when we declare it without payment on the delivery of the vessel.

Okay. Delivery of the vessel would still be relatively short, shortly after though, right?

Yes.

Still a third-quarter event?

Yes, in Q3. Yes.

So just related to your commentary there a second ago, I know in the last conference call it sounded to me at least like the primary focus of growth you are going forward at least in the immediate term was on the container side. And just now you said that it sounds like asset prices are a little bit more -- on the drybulk side asset prices are a little bit more appealing now and maybe that is an area that you would be a little bit more willing to expend capital towards. Is that correct? And if so, how do you think about acquiring assets? Are we at talking just sort of spot assets or doing more sort of, say, leaseback structure deals?

Ben, to be honest, for Navios Partners what I said about the values on drybulk is -- because there was a volatility, we like to make sure that our [declarations] are very appropriate for a Company that provides a nice dividend like NMM. On acquisitions, we will see that we on container segment right now because that's provides visibility of cash flows that our investors will get and also on the contracted revenue that really gives you long periods in duration. So for acquisition of vessels we believe that the strategy for NMM is to be really focused on the container segment, as we have enough drybulk vessels to get an upside when the rates increase.

Okay. Perfect. So it's still container focused with respect to incremental, although I guess sort of corporately you feel that drybulk asset values are now a bit more attractive, although net net that might not be the right fit for NMM. It sounds like what you are playing out there.

Ben, you have a nice portfolio. At the end of the story you have eight containers and two-thirds, on the [numbers], two-thirds drybulk. So you have sufficient position there. What you care about is contracted revenue, durations, and cash flow.

Definitely. I totally understand. All right -- one last question. Could you maybe layout for me -- I know the maturity schedule was laid out in the slide presentation, but Stratos, maybe could you -- following this most recent loan what is the new debt amortization profile look like for the next several years?

Ben, except for this year we had reduced amortization profile by $5.9 million as part of the facility that we will prepaid. You can see that more or less it has reduced slightly by approximately [$1 million over a year], but you can see in slide six of the presentation the final maturities in all our debt facilities and how this has developed after the prepayment that we did.

Right, right, right. Although that's just the maturities, correct? That's not the actual required amortization schedule?

Like I said, it's $5.9 million for this year and a couple of million dollars to $3 million per year after the next (inaudible).

Okay. All right. Very good. Thank you very much for the time.

Christian Wetherbee, Citi.

Good morning, guys. This is Prashant in for Chris. My first question sort of following up on what Ben was talking about, if the -- taking sort of opposite view maybe for a second -- if the recovery is a little bit more slow than we think in the drybulk seg going into 2016, with some of these vessels coming off the chart there at this point -- is disposition of the vessels may be part of this story? How would you think about that in terms of may be rationalizing the drybulk side of the fleet? What would the market need to look like at that point? What are kind of the key levers there if you could just help out thinking about that?

One of the things we are saying is that we have taken almost 100% out of all the spot exposure on the drybulk. So majority of your exposure is about a year from today. We do believe that next year's on the drybulk is going to have a record scrapping this year of 40 million deadweight tons, if you annualized the rates of what we see. And on the demand side we see that demand next year will be more or less the same as this year like last year. So you should come in balance at some point. The thing is that we do not want that uncertainty -- that's why we have taken the spot exposure out.

Got it. Which is excellent. So fundamentals are expected to recover in your view strongly enough that we shouldn't need to see vessel dispositions or rationalization of the drybulk side of the fleet. Then on the other thing that I wanted to ask was -- you talked about the coal in India and China, and I just wanted to get a sense of the economics behind LNG price sensitivity vis-a-vis coal and how that affects the trade for what you see in terms of India and China?

I think on the coal you are seeing a demand in China being more subdued with India being -- which is about the same size of the market having the strong growth. So overall the two markets together provide you with a 2% growth. On the [medium tons] is approximately same size -- if you take it on same size. LNG, I think, is more used, [has demand], big demand. I think coal is what is used on the regular base, and I think the question is mostly between that and high-growth substitution.

Okay. Great. Thanks, guys. That's it for me. I appreciate it.

Shawn Collins, Bank of America.

Good morning. Good afternoon, Angeliki, Stratos, and George. On the container ship side, I wanted to ask what you are seeing in the way of trade activity in Europe and if you are seeing any change there in terms of volume or trade activity and whether that might be positive or negative or neither.

Actually, even though Navios Partners is not in the spot market of containers, I can say that we have seen on our smaller containers that Navios controls very strong growth on the rates and something that has nicely supplies us and is also coming from -- it is really come also from Europe and really is the impact of consumption -- consumption around the world from the US and Europe. We have seen a smaller -- on the container you don't have anything open. But the smaller container -- the 2,500 to 3,500 they are really seeing a nice pickup.

Jon Chappell, Evercore ISI.

Thank you, good afternoon. Angeliki, I wanted to ask a follow-up to Ben's question regarding the option. I understand that you have till next month to exercise it and still only to put 10% down at the time. But in your slide 10, where you talk about the cash distribution and the pro forma common unit coverage it says it reflects the full operation of two container vessels. So am I right to assume that that pro forma number assumes that you will exercise that option?

Yes, I think we see that as an attractive transaction unless we see something that is better positioning -- we like this vessel, we like the cash flows.

Okay. And then just what are the assumptions then to get to that 1.04 times unit coverage? Is there some assumption on 50% debt, 50% equity? All debt -- what are the components to get to that coverage ratio on a pro forma basis?

They use debt of about 70% to 80% and the cash we have.

Okay. That's great. The other question I had was on the maintenance CapEx. It's obviously been marching up as you have grown the fleet and then basically cut in half in the first quarter here, despite taking delivery of the MSC Cristina. So, Stratos, can you just talk about why the maintenance CapEx dropped to the lowest quarterly number it looks like since 2009 and what runway it's run rate we should use going forward for that?

One of the things that -- Stratos will go through the details of that but one of the realities that you have to see is that as a Company we have the capital reserve through the down cycle of the drybulk. Values have dramatically been reduced from the time we have on that acquisition and the volumes on the drybulk have dropped -- even over this year has been dropped quite significantly. So that mostly reflects the capital reserve -- the cap reserve amount that we used to have due to the dry.

Just one clarification, Jon, the MSC Cristina is not a part of the calculation for the first quarter. If you remember the vessel was delivered in April, so it's not part of calculation for the maintenance level for Q1.

Okay. So now that you have taken this the Cristina, what should the run rate be starting in 2Q?

You should expect an increase on approximately $700,000 to $800,000 on an annual basis from the Cristina.

Okay. So we should assume the Q1 rate for the existing fleet, 3.2%, and gets about 4% with the Cristina. And then if you exercise the option on the last container ship, another $700,000 to $800,000?

More unless are the same vessel, so I assume this is correct.

Okay. And then just one must follow-up on another question that was asked earlier as well. About potentially disposing some of your vessels. I do understand that you want to retain some upside for the recovery. However, you have four ships that are 15 years or older -- one that is over 20 years already as well. Obviously, the third-party market for those are not great, but at the same time they are getting pretty expensive from a special survey perspective as well. So at one point when those charters expire do you just start to modernize the fleet by ridding yourself of the 1990s built ships?

Just to remind you, Jon, you remember that we already have both vessels in 2013 the second half, where we both -- we've got delivery of Panamaxes, in terms of maxes, and Cape, so we have already have placement. The disposal of the vessels will be done been we find is the most attractive point.

Okay.

So you already have taken replacement of these vessels. Before that we will do it in the most appropriate -- today you cannot really get a lot on the value of the vessel while [they can steer] so after that at an appropriate time we have no uses of replace -- selling these assets and already rationalizing the fleet.

Understood. Thanks, Angeliki. Thanks, Stratos.

Michael Webber, Wells Fargo.

This is Hillary calling in Mike. Thanks for taking my question. I'm sorry if you've covered this already -- I missed part of the presentation, but you've announced a joint venture to acquire 14 vessels from Nordbank AG recently. I was wondering if there's any cash flow impact or any type of impact that's worth talking about?

Actually, this is not very significant for NMM, as it's a small percent of [donors with these eventuals]. So this is far more significant for NM or NNA. NMM is only participating with 5% but we to believe that this is an attractive transaction, and as we have seen we have already had a press release out. The combination of drybulk vessels and containers provide us a good mixture of vessels of an average age of four years.

Okay. Good. And all my other questions have been answered. Thank you very much.

Ladies and gentlemen, I apologize, but we have reached the a lot of time for questions and answers. I will now return the call to Angeliki Frangou for any additional or closing remarks.

Thank you. This completes the presentation for the first-quarter 2015.

Thank you for participating in the Navios Maritime Partners first-quarter 2015 earnings conference call. You may now disconnect.